Outstanding breakdown of the M&A valuation dynamics here. The $148-169 per share implied range is probably right, but what makes this particuarly interesting is how RVMD's Royalty Pharma structure givs them such an outsized negotiating position versus typical cash-strapped biotechs. I remember when similar takeover arb setups collapsed in 2023 because sponsors walked after realizing they were buying clinical stage risk at peak multiples. If the trials stumble between now and deal close, AbbVie or Merck could easily renegotiate down or walk entirely, which makes current holders a bit more exposed than the tight spread suggests.
Good callout. The Royalty Pharma structure changes the power dynamics versus past biotech arbs, but I agree it doesn’t make this a ‘locked’ spread. That’s why I’m treating this as an event-driven momentum trade, not a classic arb; upside is there, but so is renegotiation risk.
Outstanding breakdown of the M&A valuation dynamics here. The $148-169 per share implied range is probably right, but what makes this particuarly interesting is how RVMD's Royalty Pharma structure givs them such an outsized negotiating position versus typical cash-strapped biotechs. I remember when similar takeover arb setups collapsed in 2023 because sponsors walked after realizing they were buying clinical stage risk at peak multiples. If the trials stumble between now and deal close, AbbVie or Merck could easily renegotiate down or walk entirely, which makes current holders a bit more exposed than the tight spread suggests.
Good callout. The Royalty Pharma structure changes the power dynamics versus past biotech arbs, but I agree it doesn’t make this a ‘locked’ spread. That’s why I’m treating this as an event-driven momentum trade, not a classic arb; upside is there, but so is renegotiation risk.