MAKOR FIRST VIEW - KIADIS PHARMA (KDS NA)
First View
The transaction today follows the announcement in July that SAN licensed KDS’ pre-clinical K-NK004 program for multiple myeloma. The move today will also enable SAN to “restock” its pipeline with promising cancer medications following the aging of some of its blockbuster products. KDS has a proprietary platform based on “off-the-shelf” cancer-seeking NK cells from a healthy donor as well as developing several therapies with the same technology which could lead to cheaper treatments across a range of cancer types. We remind that SAN also completed the acquisition of Principia Biopharma at the end of September.
The transaction has been unanimously approved by the KDS boards. SAN have also secured an irrevocable from Life Sciences Partners with c.18.3% shareholding.
SAN have said they expect to submit a request for the review and approval of the Offer Document at short notice. We anticipate that the Offer could be submitted to the AMF by early-mid Jan 21 and for the Offer to commence by late Jan-early Feb 21. We estimate the KDS EGM will be held in late Feb 21.
The requisite antirust/regulatory approvals have not been detailed but the companies have indicated that the combination is not expected to raise antirust concerns and we anticipate the approvals could be obtained in the first phase.
We think the significant premium and risks associated with any potentially negative announcements on clinical trials prior to the filing of the Offer could partly explain the current 6.70% spread. We also remind that under the Dutch Takeover Code, SAN have up to 12 weeks to submit the Offer Documentation for approval with the AFM. The certainty of funds statement is also not due until the filing of the draft documentation with the AFM. However, we view the agreement by SAN and KDS of the principal terms of a bridge loan facility in the aggregate amount of €28m to be provided by one of SAN’s wholly owned subsidiaries to KDS, to be entered into within five weeks from today (i.e. by 7 Dec) as a positive, indicating SAN’s commitment to the transaction.
The large spread is likely due to the fact that the Offer only becomes irrevocable once it is filed/approved by the AFM. However, in our view, the relatively small size of the deal makes the overall deal price rather inconsequential for SAN and we assume the spread will continue to remain wide until the publication of the definitive Offer Documentation.
The gross spread is currently €0.37 (6.70%), annualizing to 14.91% assuming a 15 April 21 settlement date.