No luck for Novo Nordisk

BAGSVÆRD, Denmark & GHENT, Belgium—Going public with an acquisition bid is a common tactic when the target company is reluctant to consider offers, as it can often force management to reconsider bids if the company's shareholders feel the deal is promising. That being said, it is also a risk, because revealing your interest in a company can attract other offers as well, ones that might be higher and more attractive than your own.

That's a gamble that Novo Nordisk A/S is willing to take, to what seems like no avail so far. The company confirmed on Jan. 8 that it had made a second unsolicited conditional proposal on Dec. 22 to acquire all outstanding shares of Belgian firm Ablynx NV for roughly $33.66 per share in cash and one Contingent Value Right linked to two upcoming material events, with total potential cash payments of up to $3.01 per share. The total value of the new proposal is approximately $3.1 billion. According to Zacks, Ablynx's stock rose above 45 percent on the news. The companies have been working together since 2015 on a research collaboration centered around Ablynx's Nanobody platform.

This second offer is roughly 14 percent higher than Novo Nordisk's original proposal, which was made on Dec. 7 and valued Ablynx at approximately $31.57 per share in cash—but not high enough for Ablynx to be interested. Ablynx rejected the initial proposal on Dec. 14, and this second attempt, made on Dec. 22, was rejected Dec. 23. The company noted in a Jan. 8 press release that “The Ablynx board, with the assistance of financial and legal advisors, and taking into account the interests of all its stakeholders, unanimously concluded that the proposal fundamentally undervalues Ablynx and its strong prospects for continued growth and value creation as it implements its long-term strategic plan of becoming a fully integrated biopharmaceutical company.”

“After careful consideration, the Ablynx Board of Directors unanimously determined that Novo Nordisk’s proposal is not in the best interests of the Company and its shareholders as it fundamentally undervalues caplacizumab, the Ablynx pipeline, platform, technology, people and knowhow. The Board sees no merit in ceding control of its assets without full upfront value recognition for shareholders and believes the proposed consideration and a complex instrument like a CVR does not constitute a basis for further discussions at this time,” said Dr. Edwin Moses, CEO of Ablynx.

“With Ablynx’s enormous upside, we are focused on executing on opportunities that have the potential to deliver long-term growth and returns and are confident in our ability to create significant value,” he added. “The very positive results from our HERCULES Phase 3 study and our two ongoing Phase 2 studies validate our ability to execute on our plan to deliver meaningful products to patients that address unmet medical needs where there are currently limited or no therapeutic options. In addition to developing our proprietary pipeline, including preparing for the commercial launch of caplacizumab, we are engaged in a number of exciting strategic collaborations with major pharma companies, further validating the potential of our Nanobody platform. We firmly believe the continued execution of this strategic plan will deliver substantially more value to Ablynx shareholders than Novo Nordisk’s proposal.”

Novo Nordisk doesn't plan on letting itself be so easily rebuffed, however.

"The proposed transaction with Ablynx represents a compelling opportunity for both companies and is in the best interests of all of Ablynx's stakeholders,” Lars Fruergaard Jørgensen, CEO of Novo Nordisk, said in a press release. "Novo Nordisk and Ablynx share a common focus on innovation-driven, patient-centric R&D. Novo Nordisk intends to use its full suite of regulatory, scientific and marketing expertise to complement the existing strong management and medical team at Ablynx in order to optimize the development and global commercialization of caplacizumab for the benefit of patients suffering from aTTP. The proposed transaction is attractive for Novo Nordisk and is in line with Novo Nordisk's stated strategy to invest in its Biopharm operations. Ahead of the rapidly approaching potential EMA approval of caplacizumab, we believe now is the right time to consider a transaction that maximizes value for all of Ablynx's stakeholders."

Ablynx is not the only one to think that even the newer proposal is insufficient, however, as Bloomberg's Chris Hughes says the company is “rightly demanding” a higher price tag for it to consider a deal. While Hughes agrees that linking up with a big pharma partner to commercialize caplacizumab is sensible, adding that “Novo would be a natural choice thanks to its global hematology franchise,” he also points out that “While a partner would accelerate [caplacizumab's] commercialization, the company could plausibly argue that it can bring the treatment to market by itself. Rare diseases don't need the same large-scale infrastructure as more common illnesses. It has partnerships already with a host of big pharmaceutical groups, one of which might also be interested in a takeover.”

He also opines that the potential for the drug argues for a higher valuation of Ablynx.

“A reasonable forecast for [caplacizumab's] peak sales would be about $400 million (334 million euros). Given blood drugs usually offer high margins, Novo could expect at least half of that to drop to the bottom line if it owned the treatment. That already makes its offer, adjusting for Ablynx's small net cash position, look pretty ungenerous—never mind the touted 60-percent premium to the target's share price before Novo's initial approach last month. Add Ablynx's small drug pipeline and attractive R&D operation, and it's clear Novo can justify paying more.”

Analyst Peter Welford of Jefferies Group LLC also expects a bigger offer will be needed if Novo Nordisk hopes to change Ablynx's mind, writing in an investor note that “We envisage Novo needing to hike the offer and could see counter-bids.”

Brian Skorney of Baird shares that opinion, saying in an investors note that “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.”

As there are no approved therapeutics for acquired thrombotic thrombocytopenic purpura (aTTP), the recent promising results of caplacizumab stand Ablynx in good stead in terms of a new foothold in the hematology market—and help explain Novo Nordisk's interest. October saw Ablynx announce that the compound had met its primary endpoint and key secondary endpoints in the HERCULES study, with a “Statistically significant reduction in time to platelet count response, with at any given time patients treated with caplacizumab 50 percent more likely to achieve platelet count response,” according to the press release, and a 74-percent relative reduction in the percentage of patients with aTTP-related death, a recurrence of disease or at least one major thromboembolic event during the study's treatment period. There was also a 67-percent relative reduction in the percentage of patients with disease recurrence during the overall study period.

The company reported in December additional results from its Phase 3 HERCULES study, in which they saw a 38-percent relative reduction in the number of days of plasma exchange, as well as a 41-percent reduction in plasma volume used. In addition, patients admitted to the hospital saw a 65-percent relative reduction in the number of days spent in the ICU, and the overall duration of hospital stays dropped by 31 percent compared to placebo. Ablynx submitted a marketing authorization application to the European Medicines Agency for caplacizumab in February 2017, and was granted Fast Track designation from the U.S. Food and Drug Administration in July 2017.