Finally, on takeover premiums. Contrary to what some posters seem to suggest there is no rule saying takeover premiums have to be 200% or less. The takeover premium is a historical measure of the undervaluation of the company at the time of a successful bid. There is no intrinsic limit to how high the takeover premium can be - the buyer ultimately does not care what the takeover premium is, they simply care about purchasing an asset for less than or equal to their own assessment of its worth. As some have pointed out, there are indeed examples of takeover premiums up to 600%. Using historical takeover premiums to calculate Neuren's likely TO price is a meaningless exercise.No, there is no rule saying that takeover premiums have to be 200% or less. But I don’t agree that historical takeover premiums are totally irrelevant. I believe that they can provide some guidance on biotech takeover premium averages, wheteher the average premium is rising or falling, how commonly above-average premiums are paid and how high they have gone.
Using
Biopharma Dive’s database of biotech M&A, I’ve looked at acquisition deals in recent years.
Since the start of 2021 there have been 147 biotech M&A deals completed that were worth >US$50m. This number includes private as well as listed biotechs.
Of the 147 deals, just 19 deals involved takeover premiums of 100% or more.
Of those 19 deals, just 5 involved takeover premiums of greater than 200%.
Of these 5 deals, the highest premium paid was 667%, and this was paid by Astra Zeneca in 2022 to acquire LogicBio. Despite paying the 667% premium, AZ acquired LogicBio for just US$68m.
The next highest was a 335% premium paid by Regeneron in its 2022 acquisition of Checkmate. Despite the high premium, Regeneron paid just US$250m.
Third highest was 273% and this was paid by Sanofi for Provention last year. The acquisition price was US$2.9bn.The fourth highest premium paid, also in 2023, was for Harmony’s acquisition of Zynerba. Again, although a high premium at 225%, only US$60m was paid in total.
The final deal was
Pfizer’s acquisition of Trillium in 2021, at a 204% premium, for US$2.26bn.
Consequently, of the 147 deals done, only two (highlighted in bold) involved premiums >200% and were valued at >US$2bn.
Looking at these two deals more closely
Sanofi was already Provention’s promotional partner for a drug which had received FDA approval just 4 months previously - an immunotherapy drug which was the first drug approved to stall progression of type 1 diabetes. As discussed previously, immunotherapy and diabetes are “hot” areas for pharma and diabetes. In addition, diabetes had long been an area of expertise for Sanofi. Commenting on the deal, one analyst said
The speed of the acquisition, combined with the large premium, suggests a competitive process, whereby Sanofi may have needed to respond to an unsolicited bid from another pharma (company)Perhaps coincidentally, Provention’s share price pulled back by 38% in the 3 months prior to the acqusisition.
Pfizer already had an investment in the early clinical-stage biotech, Trillium, which had recently posted some promising early clinical data. Pfizer was keen to acquire Trillium’s two fusion proteins directed against CD47, the “do not eat me” signal that cancer cells co-opt to shield themselves from macrophage-mediated killing. Pfizer initially offered US$15 per share but was knocked back by the Trillium Board which then sounded out two other potential buyers. Those buyers disappeared and Pfizer sealed the deal with a raised bid of US$18.50.
Despite the 204% premium represented by the US$18.50 per share paid by Pfizer, Trillium had traded at US$20.96 just 8 months previously. Fortuitously for Pfizer, Trillium’s share price almost halved in the 2 months prior to the acquisition.
I note that to achieve a takeover offer of just ~A$50 per share, Neuren would need to achieve a premium of >200% on its current share price (which, for some reason, is ~ 30% less than a month ago). I also note that achieving something like that is exceedingly rare.
(20min delay)