For some of you that have followed my views on RVX you know that I think it is worth a lot more than what it is trading at. There are a number of assumptions I have made based on my research into this company and the industry it is in. This is done for my purposes only so as to help me make my investment decisions. We all have our own views based on our own research and that of others. There are no hard pat answers and the final outcome could end up somewhere in a range of variables. I don’t profess to know all the answers; in fact guessing at future outcomes is just that, a guess.

IMO if the science that RVX is pursuing in proving apabetalone works out to be correct then it is my opinion that this drug is worth between $5 and $10 billion dollars and has been for the last few years. To me it does not matter what deals have been done with any parties in the past whether that is Eastern, Hepa, NGN or anyone else. If the science is proven and a BP agrees with the size of the opportunity then a deal can be done, no matter what obstacles need to be cleared. Every party involved is in this or wants to be in this for one reason…to make money. Every deal done is adjusted to suit the median of what each party involved in any deal wants. In most cases everybody wins, some more than others.

Prior to the potential loan announced this morning I was assuming final diluted shares outstanding of 250 million, after this announcement, 210 million. To me this is a big win for RVX this morning, if the financing closes. Now if I plug these numbers into the matrix I come up with a value per share:

$5 billion with 210 million shares equals $23.80 per share

$6 billion with 210 million shares equals $28.57 per share

$7 billion with 210 million shares equals $33.33 per share

$8 billion with 210 million shares equals $38.09 per share

$9 billion with 210 million shares equals $42.85 per share

$10 billion with 210 million shares equals $47.62 per share

My valuation was done based on 5 million people using the drug annually with an annual cost of $2,000 to $4,000 per year and then cutting that number in half to allow for the royalty that is in favor of Zenith Capital Corp. This was done using the potential of a diabetic CVD drug only. Over the last few months the company has mentioned Alzheimer’s 4 or 5 times in news releases while not saying boo about it from the time the Bet on Mace trial started until then. It certainly makes me wonder whether they are seeing something in the data that they do receive that suggests that there is some positive affects on the patients that are 70 years old or older that had to have the Montreal Cognitive Test before during and after treatment with apabetalone. Add to this what they are seeing in that data that they do receive about the affects on renal function and there is a potential for apabetalone to be a Mega Blockbuster drug in 3 separate markets. My definition of Mega Blockbuster is greater than $5 billion in annual sales.

Of course all of the above valuations assume that apabetalone actually becomes a drug that patients with a need can use. The FA/SSA plays a very major role in the future of this drug and RVX in general.

Now I’m into guessing territory big time. What information was Third Eye exposed to to give them enough comfort to lend RVX US$ 30 million dollars and what’s their back-up position. 10% return on a loan, even at 4 times the 10 year government of Canada bond rate is hardly enough risk premium to lend a company like RVX US$ 30 million that will only spend money for the next 3 to 4 years with little or no opportunity for revenue generation. I my mind the payoff is likely in the potential value of the warrants. Using my valuations above, those 3.5 mil warrants are potentially worth between $83.3 million and $166.8 million and that is only the diabetic CVD valuation. Looking at the bio of the founders of Third Eye it says, “Third Eye Capital was formed in 2005 on the strength of its founders experience in successfully building, financing and harvesting companies, and prevailing over various business conflicts and challenges. It is “knowing how” not just “knowing what” that makes us see more”. The principals, Arif Bhalwani, CFA and Dr David Alexander seem to have a good amount of experience in this type of lending and have obviously done okay for themselves as the company has now been around for about 13 years. Arif’s experience intrigued me the most “Arif serves as a member of the CFA Institute, the Canadian Venture Capital and Private Equity Association, the Turnaround Management Association, the Alternative investment Management Association, and the Portfolio Management Association of Canada. He is also a Director of the Commercial Finance Association.” Here is a guy that has exposure to all kinds of opportunities in all kinds of businesses and is able to cherry pick what he thinks his company can do the best with, and they chose RVX. My only thought was did he buy his rose colored glasses at the same place I bought mine? The back-up position could be that if there are challenges with the diabetic CVD part of the trial there could be saviors in renal or alzheimer’s secondary end points.

To me, Third Eye’s involvement with RVX is the greatest validation of my homework so far in my history with this company. Unlike any of the other analysts that have done valuations, these guys have direct skin in the game which makes me pay a lot of attention. IMO if I was researching RVX for the first time and was sitting on the fence as to whether to own shares or not the announcement this morning would be the tipping point for my decision to buy. Since I am already an owner seeing Third Eyes involvement eases many anxieties that I may have had. I sincerely hope that Third Eye concludes this deal with more than US$150 million in profits.

The above are my opinions that I have done for my own purposes. Do your own due diligence and come to your own conclusions.

tada