ABLYNX (ABLX BB)
Sanofi announced its intention to launch a voluntary offer on ABLYNX for EUR45 cash per share, EUR310.992 per CB and EUR45 equivalent per ADS. The offer is subject to the following conditions:
· Offer document approval by the FSMA
· 75% acceptance level (Shares, ADS, Warrants and Convertible Bonds aggregate).
· Approval from the FTC under HSR Act and German FCO.
· No MAC that would incur a EUR500M negative impact on NAV of Ablynx excluding general market conditions and any impact of the offer on clients, employees or contracts of the company.
· No financing condition (Financing provided by BNP Fortis NV)
· Offer document expected to be filed by Mid to late Feb,
· Offer period expected to run during Q2 2018 with closing at the end of Q2. If no counter-offer emerges, we would assume a late April, beginning of May closing.
It is unclear whether Ablynx ran a structured sales process prior to accepting and recommending the Sanofi bid but on the Due Diligence side:
· Sanofi confirmed during the conference call that they acted very quickly and there is not so much to say about the competitive process. We underline that Sanofi signed a strategic collaboration contract with Ablynx in July 2017 to develop nanobody product candidates: summary of the agreement is an upfront payment by Sanofi to Ablynx of EUR23m on top of which Ablynx will receive research funding estimated to EUR8m for the initially selected targets. Furthermore, what is more of importance, and this has been subject to long due diligence by Sanofi into Ablynx, Sanofi agreed to pay EUR2.4bn to Ablynx plus tiered royalties up to low double digits on the net sales of any products originating from the collaboration in immune-inflammation. Looking at the other partnerships Ablynx do have (Abbvie, Boehringer, Edding Pharm, Novartis, Novo and Taisho), but none of them represents such a high value compared to Sanofi’s agreement with Ablynx except Ablynx’s partnership with Merck in immuno-oncology which could generate milestones of EUR4.1bn. We are of the view that these agreements represent a sort of poison pill, leaving a doubt about Merck’s reaction
· Material Adverse Change Clause: In the official press release filed with the FSMA, the MAC (“Evenement significatif defavorable”) clearly undermines that the EUR500Mio impact on the NAV excludes in point (iii) any resulting negative effect or arising from the announcement or the anticipated completion of any public offering acquisition including such effects on employees, customers, vendors, suppliers, resellers, partners, creditors, contractors or other third parties. In our view, it confirms that any decision taken by one of the product development partners of Ablynx would not have any negative effect on the deal. Clearly in our view the EUR500m clause relates to any negative event / decision that might arise on the Marketing Authorization and the Fast track approval process of Caplacizumab in Europe and the US.
· Caplacizumab: this is the lead nanobody treatment of Ablynx in the treatment of the rare disease aTTP (Acquired Thrombotic thrombocytopenic purpura).
o In Europe, the MAA (Marketing Authorization Application) has been filed on Feb. 2017 and the process usually takes 240 days for review unless the clock is stopped for further questions. Per the last update on the EMA website (European Medicines Agency), at the last meeting held on 22 January, the clock has been stopped at 180 days and should restart shortly when the company has answered questions asked by the Agency. Any preliminary decision made by the CHMP, (Committee for Medicinal Products for Human Use), regarding marketing authorization should be announced in Mid to late May 2017, assuming the clock is not stopped again.
o In the US, the medicine is under a “Fast Track process”: this process is designed to facilitate the development and expedite the review of drugs to treat serious conditions and fill an unmet medical need. This process has been engaged in July 2017 and allows the company to be in constant discussions with the FDA about the different Phase of the trial (Caplacizumab is actually in the Phase III named Hercules and it should be formally notified to the FDA in Q2 2018: if it receives priority review for fast track designation, this clearly represents an upside in terms of pricing for Ablynx).
Based on the premium paid by Sanofi, we would advise investors to build initial positions in Ablynx not discounting the optionality of the Merck partnership but also to keep some powder dry as any perceived negative news (e.g. announcement of further delays to the EMA or the FDA process) is likely to adversely affect the spread.
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This publication has been prepared by Makor Capital Limited (“Makor Capital”) and is intended for professional or qualified investors only. Makor Securities London Ltd (“Makor Securities”) is distributing this material to its clients who are Eligible Counterparties or Professional Clients under FCA Rules. It may also be disseminated to persons who are Investment Professionals within the meaning of the Financial Services and Markets Act 2000 (Financial Promotion Order 2005). In the United States, Makor Capital only distributes this material to major US institutional investors (as that term is defined in Rule 15a-6 of the Securities and Exchange Act of 1934) and to SEC registered broker-dealers or banks acting in a broker–dealer capacity. This material is not intended for distribution to any other persons. If you do not fall into any of these categories you should disregard it.
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