Middlebrook Pharmaceuticals


By Ankit Gupta of  http://www.selectedfinancials.com/Middlebrook Pharmaceuticals

From time to time, we identify individuals that stand out from the crowd. They do something so well and with so much precision that you can’t help but be constantly amazed. Their work isn’t just “work,” but approaches a form of art. They take pride in what they do and never leave a stone unturned. They are easy to identify because they go to any length needed to finish their work. Sometimes they hit it big and people call them lucky, but in reality, they were prepared at the right time and that’s not something many people do.

Today, I’d like to present someone that fits this bill of doing amazing work. He’s an investor that digs into bankruptcies and puts together documentation and even blogs covering these situations. Rodney McFadden has been preparing some amazing research covering Tronox and Chemtura. The document below covers Middlebrook Pharmaceuticals, which already has 2 FDA approved drugs and is in the Chapter 11 process with a $17.1 Million bid from Victory Pharma, a VC-backed firm.

Here’s a round up of hedge funds’ May returns

InvestTyro Absolute Return Fund was down 1.5% for May. The fund's main contributors in May were Super Micro Computer, which gained 1.6%, Shyft Group, which was up 1%, and GCI Liberty, which gained 1%. Detractors in May include Recro Pharma, which fell 2.6%, index shorts and hedges, which declined 2%, and DXC Technology, which was Read More

Middlebrook (MBRK and now MBRKQ) trades around 11 cents per share. Rodney makes the case for a payout floor of 8 cents per share and an estimated payout of 18 cents per share, or about a 60% upside available in a 3-4 month timeframe.

Something interesting to notice is that Victory Pharma made the bid. They’re a VC backed firm and they raised some money in early 2009. VC’s won’t look at deals unless there is a significant rate of return on their investment – 20-30% annually is a good starting place. Their website has news going back to 2005 and so it’s been at least 5 years that they’ve been in operation. Their offer was made 10 days after Middlebrook announced that they entered into bankruptcy. Victory Pharma has clearly been waiting for this and so if a VC backed firm could see enough value to jump on this, the likelihood of others coming in and making a bid is high. VC’s require very large returns and so it’s conceivable that someone else could step in with a higher bid. Victory Pharma seems to be building a portfolio of drugs based on their other press releases and so it’s possible that they’re preparing for an IPO in the next few years.

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MBRKQ Case Summary Updated 07.03.10