Novo Nordisk/Ablynx: Ghently does it
Investors should sit tight for what promises to be an elaborate courtship
Alliances may be struck through marriages or money. Queen Victoria spread British influence and haemophilia genes across Europe via matrimony. Cash is the preferred medium of Novo Nordisk, whose treatment for the disease is in decline. The Danish pharmaceuticals group has offered to spend €2.6bn on Ablynx, a Belgian biotech with a new treatment for a rare bleeding illness.
Novo Nordisk has made its approach public, a so-called bear hug, in the hope shareholders will intercede with coy Ablynx. The danger, as with 19th century matchmaking, is of resentment from the dear intended.
One part of Ablynx’s value is in anti-bleeding drug caplacizumab. This has already passed muster in clinical trials, so unhappy researchers would matter little to its prospects. But another chunk of value rests on medicines still in development. Novo Nordisk does not want to upset the folk in white coats by throwing its €114bn weight around.
The bidder has promised not to close Ablynx’s Ghent site. That will limit cost savings. The trade-off is the thriftiness of an offer at €30.5 per share, little better than Jefferies’ valuation of the business as an independent. This includes a peak sales estimate for caplacizumab of $500m, but ignores technology for spotting new drug opportunities.
The premium is 66 per cent above the volume — weighted price over three months. However, the shares have been rising fast — up 95 per cent over six months. Moreover, historic prices matter less to biotech investors than the amount a big pharma group might pay to fatten a pipeline. Novo Nordisk, which is best known for producing insulin, had around €2.6bn of cash on its balance sheet at the last record date. It can go higher.
The Danish group may not choose to, following a public rejection that denies it access to Ablynx’s books. A rival bidder may step in at a higher price. Shareholders should sit tight. The courtship promises to be as elaborate as any masterminded by Queen Victoria. The outcome should be happier for investors than it was for the monarch’s descendants