Is Ambit Biosciences Getting Enough in Its Buyout?

In addition to the acquisition of all the common stock, each stockholder of Ambit will receive one Contingent Value Right (CVR), which will entitle the holder to receive an additional cash payment of up to $4.50 for each share if certain commercialization milestones are reached. The whole transaction is valued at up to $410 million on a fully diluted basis.

Recently the stock has traded at $15.20, which is up 85% from the previous close of $8.20 on Friday. The stock had been rising at a slower rate prior to Monday, up from its low of $4.80 in July.

Ambit’s shares had fallen since nearly a year ago, until it reached its low in July, and have since made a strong recovery.

The primary reason for the acquisition was for Ambit’s experimental drug quizartinib, which treats myeloid leukemia in adults. This type of acute adult leukemia is the most common and reportedly makes up 36% of all new cases in 2014.

When asked about the acquisition, Daiichi Sankyo President and Chief Executive Officer Joji Nakayama said: “The acquisition of Ambit Biosciences further builds our presence in oncology to ensure we are delivering on our goal of providing world class, innovative pharmaceuticals in core areas of unmet medical need.”

The company has a consensus price target of $14.00 and a 52-week trading range of $4.80 to $21.44. It has a market cap of $273 million. Deals with CVRs often trade at a slight premium to a purchase price, and that CVR might not be of value for quite some time — if ever.

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