Ablynx soars 60% on Novo’s latest hostile bid; grab a piece of this Belgian biotech because the real action’s just starting.

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The News:

Denmark’s Novo Nordisk A/S (Copenhagen), the world’s biggest insulin maker, went public Monday (January 8, 2018) with a €2.6-billion ($3.1 billion) bid for Belgian biotech group Ablynx NV (Zwijnaarde), seeking a new source of growth by bolstering its treatments for rare blood disorders.

Ablynx summarily rejected Novo’s latest takeover push and, according to Reuters, analysts predict the Danish group, whose new CEO is trying to expand by buying drugs developed by competitors, might face counterbidders and would need to raise its bid.

The unsolicited bid comes at a time of renewed interest by large drugmakers in smaller biotech firms, with US-based Celgene Corp. (Summit NJ) sealing a deal to buy tiny Impact Biomedicines Inc. (San Diego CA) for up to $7 billion and Japan’s Takeda Pharmaceutical Co. (Osaka) agreeing to buy another Belgian biotech group TiGenix NV (Leuven) for $630 million.

Ablynx said in a statement that its board “unanimously concluded that the proposal fundamentally undervalues Ablynx and its strong prospects for continued growth and value creation.”

It later said that Peter Fellner, its chairman since 2013, had decided to resign with immediate effect. It didn’t give a reason. The Belgian group specializes in the research of novel drugs based on nano-bodies found in the immune systems of llamas and alpacas, for which it partners with several of the world’s largest pharmaceutical companies.

The main attraction for Novo is Ablynx’s experimental drug caplacizumab for the rare bleeding disorder acquired thrombotic thrombocytopenic purpura (aTTP), which would complement Novo’s menu of blood products focused on hemophilia.

The $11 billion hemophilia market is facing upheaval and Novo stands to lose sales following approval of a new Roche Holding AG (Basel CHE) drug Hemlibra. Biopharmaceutical treatments, led by hemophilia, make up around 20% of Novo’s sales, with diabetes and obesity products accounting for the remaining 80%.

In its offer, the Danish company said it would pay €28.00 per share in cash for Ablynx and an additional €2.50 in a so-called contingent value right (CVR) if certain conditions related to other drugs in Ablynx’s research portfolio are met. An acquisition would be the first by Novo CEO Lars Fruergaard Jorgensen, who took over a year ago. He has said the firm needs external innovation to broaden its product line-up.

Tax breaks and other incentives have created a thriving biotech industry in Belgium, with many companies spun off from university projects now listed on its stock exchange. Shares in Ablynx closed Wednesday (January 10, 2018) up 64% at €34.76 since last Friday (January 5, 2018), and 14% above the €30.50 per share Novo has officially offered. ($1 = 0.8353 euros)

Steve’s Take:

If this development and the market’s reaction doesn’t smell like a bidding war is now officially in progress, I don’t know what does. And what’s more interesting is the company in play is a tiny Belgian biotech hardly anyone, except Novo Nordisk of course, has heard of it. What a start to 2018; let the games begin!

Seriously folks, what’s going on here.

As Labiotech.eu–Europe’s top news gatherer in the sector and parser of the underlying motives and cross currents–points out, Ablynx’s stock has soared and is now worth 14% more than what Novo just offered. And in a not-so-polite, slap-in-the-face response, Ablynx fired back with a press release indicating that the unsolicited proposal “fundamentally undervalues” the company, its pipeline, its platform and its strong growth prospects.

That little exchange resulted in an explosion of over 60% on both its Euronext Brussels and Nasdaq stock price, surpassing the Novo offer and setting the company’s market cap over €2.6B ($3.12 billion).

Fresh out of the blocks with a promis­ing late-stage asset and a newly com­pleted $200-mil­lion initial public offering, Abl­ynx has eschewed two bids by Novo for a hefty pre­mium of up to $3.1 bil­lion. And just as the smoke is starting to clear, Ablynx has in fact confirmed that the big Danish pharma made a hostile bid of €26.75 on December 7, which was rejected a week later.

Labiotech speculates that the decision by Novo to make this second offer public might have been a tactic to put pressure on shareholders. But Ablynx is anything but impressed, and instead acting a bit piqued. The Belgian firm is clearly affirming its intent (for now, at least) to operate as an autonomous business.

In a recent interview about its rise to the top of European biotech, CEO Edwin Moses told Labiotech:

“For us, the goal is to show our shareholders and stakeholders that the future of an independent Ablynx is extremely interesting, and has great potential. Our business plan revolves around being a sustainable, independent business.”

A few more facts about the asset Novo covets.

Abl­ynx’s drug capla­cizumab tar­gets ac­quired throm­botic throm­bo­cy­topenic pur­pura (aTTP), a dis­or­der that trig­gers low platelet counts. In the Phase 3 study, re­searchers re­ported top-line re­sults that in­cluded a sig­nif­i­cant (re­duc­tion in the time it took for the platelet counts to re­turn to nor­mal for the drug arm–a likely in­di­ca­tor for the pre­ven­tion of mi­crovas­cu­lar throm­bo­sis.

Sanofi re­cently signed up as the lat­est in a lineup of part­ners work­ing with Abl­ynx, at­tracted to a plat­form tech for small “nanobod­ies” which are a sliver of the size of reg­u­lar an­ti­bod­ies–mak­ing them bet­ter built for some dis­eases.

Bottom Line:

Novo Nordisk may not be the only company interested in Ablynx. John Carroll, with Endpoints News, writes,

Sanofi recently signed up as the latest in a lineup of partners working with Ablynx, attracted to a platform tech for small ‘nanobodies’ which are a sliver of the size of regular antibodies–making them better built for some diseases. Baird’s Brian Skorney couldn’t be happier. He expects a bidding war may break out.”

Baird wrote in a note to investors,

“We think this is only the starting point for Ablynx as a target and believe we could see other bidders come in. We think shares will trade above the offer price this morning, with the U.S. shares close to the $30s. We’re reiterating Ablynx as one of our top picks for 2018.”

Despite increased competition and downward pressure on pricing in the diabetes market, Novo Nordisk shares rose 32 percent in the last year, giving it a value of about $136 billion. Novo Nordisk and Ablynx have been involved since 2015 in a research collaboration.

Steve's Take: @NovoNordisk is not the only suitor for @AblynxABLX and is a good buy for a high-risk tolerant #investor. But act soon before there is an offer they can't refuse. Click To Tweet

Ablynx, for its part, appears to be either totally uninterested in a sale, or playing hard to get. It first caught my attention last fall when the company came out a month early with a crucial Phase 3 data readout for caplacizumab in acquired thrombotic thrombocytopenic purpura (aTTP).

The market for this indication is worth around $1 billion and Ablynx has already filed a Marketing Authorization Application (MAA) in Europe based on Phase 2 results. Ablynx immediately seized upon the positive news to launch a US IPO.

As it does so often, the US offering not only provided Ablynx with the financial resources it needed to advance its pipeline, but also put it on the map with crucial visibility among US investors, increasingly seeking promising European clinical-stage biotech companies.

This name reeks of clinical promise and profit, but also is loaded with investment risk. In my view it’s a Buy for the high-risk tolerant, and act quickly before somebody puts forth an offer Ablynx can’t refuse. Not for the risk-averse portfolio.

Steve Walker has no position in any stocks mentioned. MedContent Inc. has no position in any stocks mentioned. MondayMorning.com has a disclosure policy.

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