Nuevolution — Amgen offers SEK32.50/share in cash

Nuevolution — Amgen offers SEK32.50/share in cash

Amgen has announced a recommended cash offer for Nuevolution’s shares of SEK32.50/share, valuing the company at approximately SEK1,610m (US$167m). The offer represents a 169% premium to the closing price (SEK12.10) on 21 May (the day before the announcement) and a 69% premium to the highest trading price (SEK19.26) over the 52-week period (before 21 May 2019). Nuevolution’s board has unanimously recommended that shareholders accept the offer. The offer is not subject to any financing conditions and is funded by cash on hand. The settlement of the offer is expected to take place on or around 15 July. We note the offer represents a 57% premium to our previously published valuation of SEK20.7/share.

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Written by

Nuevolution

Amgen offers SEK32.50/share in cash

Amgen offer

Pharma & biotech

29 May 2019

Price

SEK32.4

Market cap

SEK1604m

SEK9.33/US$; US$1.13/€; SEK10.56/€

Net cash (SEKm) at 31 March 2019

86.2

Shares in issue

49.5m

Free float

55%

Code

NUE

Primary exchange

Nasdaq Stockholm

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

156.1

176.9

88.2

Rel (local)

170.5

174.1

84.8

52-week high/low

SEK32.4

SEK10.7

Business description

Nuevolution is a Copenhagen-based biopharmaceutical company. Its patent-protected Chemetics drug discovery platform enables the selection of drugs to an array of tough-to-drug disease targets. To date it has entered into 17 agreements with major pharmaceutical companies.

Next events

Estimated date for announcement of offer document

12 June 2019

Estimated acceptance period for Amgen offer

13 June – 4 July 2019

Estimated date for settlement of offer

15 July 2019

Analysts

Dr Daniel Wilkinson

+44 (0)20 3077 5734

Dr Susie Jana

+44 (0)20 3077 5700

Dr Sean Conroy

+44 (0)20 3077 5700

Nuevolution is a research client of Edison Investment Research Limited

Amgen has announced a recommended cash offer for Nuevolution’s shares of SEK32.50/share, valuing the company at approximately SEK1,610m (US$167m). The offer represents a 169% premium to the closing price (SEK12.10) on 21 May (the day before the announcement) and a 69% premium to the highest trading price (SEK19.26) over the 52-week period (before 21 May 2019). Nuevolution’s board has unanimously recommended that shareholders accept the offer. The offer is not subject to any financing conditions and is funded by cash on hand. The settlement of the offer is expected to take place on or around 15 July. We note the offer represents a 57% premium to our previously published valuation of SEK20.7/share.

Year end

Revenue (SEKm)

PBT*
(SEKm)

EPS*
(SEK)

DPS
(SEK)

P/E
(x)

Yield
(%)

12/17**

12.2

(123.8)

(2.7)

0.0

N/A

N/A

12/18**

11.0

(107.3)

(2.2)

0.0

N/A

N/A

12/19e

202.4

87.2

1.1

0.0

29.5

N/A

12/20e

336.6

220.9

2.9

0.0

11.2

N/A

Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments. **Restated following change of year end.

Board of directors recommends acceptance of offer

Nuevolution’s board has unanimously recommended that shareholders accept the offer based on Nuevolution’s ‘present strategic and financial position and the Company’s expected potential future development and thereto related opportunities and risks’. Nuevolution’s three largest shareholders (Sunstone LSV Fund I, Skandinaviska Enskilda Banken and Stiftelsen Industrifonden), representing 71% of shares, have agreed to accept the offer subject to certain conditions. The completion of the offer is subject to the acceptance of it by shareholders such that Amgen becomes the owner of 90% of the total number of shares. The offer is conditional on factors that include but are not limited to clearance of all regulatory and governmental requirements.

Valued partnership turns to acquisition

Since 2016, both companies have been involved in a multi-target small molecule drug discovery collaboration valued at $410m per programme. Recently in 2018, Amgen opted in on two separate oncology programmes highlighting its confidence in Nuevolution’s technology. Amgen now aims to deepen this relationship by bringing the business in house to enable closer integration of Nuevolution’s technology and drug discovery expertise. Amgen does not intend to change how the business is operated including the composition of the management team (and key employees) or the business’s location.

Valuation: Offer at 57% premium to Edison valuation

Amgen has offered SEK32.50/share in cash for all of Nuevolution’s outstanding shares. The offer constitutes a 57% premium to our last published valuation of SEK20.7/share (Small molecules, big ambitions) on 19 March 2019.

Exhibit 1: Financial summary

Accounts: IFRS; year-end 31 December; SEK000s

 

 

2017*

2018*

2019e

2020e

Income statement

 

 

 

 

 

 

Total revenues

 

 

12,222

10,973

202,369

336,646

Reported gross profit

 

 

12,222

10,973

202,369

336,646

SG&A (expenses)

 

 

(28,258)

(28,489)

(24,216)

(24,458)

R&D costs

 

 

(107,331)

(90,958)

(91,868)

(92,786)

Adjusted EBIT

 

 

(123,059)

(106,108)

86,286

219,402

Reported EBIT

 

 

(123,059)

(106,108)

86,286

219,402

Finance income/ (expense)

 

 

(778)

(1,183)

958

1,513

Adjusted PBT

 

 

(123,837)

(107,291)

87,244

220,915

Reported PBT

 

 

(123,837)

(107,291)

87,244

220,915

Income tax expense

 

 

6,278

7,568

(30,535)

(77,320)

Adjusted net income

 

 

(117,559)

(99,723)

56,709

143,595

Reported net income

 

 

(117,559)

(99,723)

56,709

143,595

Earnings per share

 

 

 

 

 

 

Basic EPS (SEK)

 

 

(2.7)

(2.2)

1.1

2.9

Diluted EPS (SEK)

 

 

(2.7)

(2.1)

1.1

2.7

Adjusted basic EPS (SEK)

 

 

(2.7)

(2.2)

1.1

2.9

Adjusted diluted EPS (SEK)

 

 

(2.7)

(2.1)

1.1

2.7

Average number of shares - basic (m)

 

 

42.9

45.9

49.5

49.5

Average number of shares - diluted (m)

 

 

43.7

46.8

52.8

52.8

Number of shares outstanding - end period (m)

 

 

42.9

49.5

49.5

49.5

Balance sheet

 

 

 

 

 

 

Property, plant and equipment

 

 

6,340

5,178

5,419

5,648

Other non-current assets

 

 

0

0

0

0

Total non-current assets

 

 

11,674

10,759

11,000

11,229

Cash and equivalents

 

 

114,758

111,101

166,568

308,934

Trade and other receivables

 

 

0

0

0

0

Other current assets

0

0

0

0

Total current assets

 

 

125,084

123,527

178,994

321,360

Non-current loans and borrowings

 

 

2,810

1,813

1,813

1,813

Total non-current liabilities

 

 

2,810

1,813

1,813

1,813

Trade and other payables

 

 

0

0

0

0

Current loans and borrowings

 

 

1,375

1,243

1,243

1,243

Other current liabilities

 

 

3,032

0

0

0

Total current liabilities

 

 

22,857

16,696

15,696

14,696

Equity attributable to company

 

 

111,091

115,777

172,486

316,080

 

 

 

 

 

 

 

Cash flow statement

 

 

 

 

 

 

Profit before tax

 

 

(123,837)

(107,291)

87,244

220,915

Depreciation of tangible assets

 

 

1,770

1,860

259

271

Share based payments

 

 

186

(118)

0

0

Other adjustments

 

 

778

1,183

(958)

(1,513)

Movements in working capital

 

 

101,967

(5,385)

0

0

Net cash from operating activities (pre-tax)

 

 

(19,136)

(109,751)

86,545

219,673

Interest paid / received

 

 

(788)

(1,240)

958

1,513

Income taxes paid

 

 

(12,984)

5,046

(30,535)

(77,320)

Cash from operations (CFO)

 

 

(32,908)

(105,945)

56,967

143,866

Capex (includes acquisitions)

 

 

(1,234)

(266)

(500)

(500)

Other investing activities

 

 

(9)

(28)

0

0

Cash used in investing activities (CFIA)

 

 

(1,243)

(294)

(500)

(500)

Net proceeds from issue of shares

 

 

0

104,201

0

0

Other financing activities

 

 

(1,412)

(1,345)

(1,000)

(1,000)

Cash from financing activities (CFF)

 

 

(1,412)

102,856

(1,000)

(1,000)

Increase/(decrease) in cash and equivalents

 

 

(35,563)

(3,383)

55,467

142,366

Cash and equivalents at beginning of period

 

 

147,682

114,758

111,101

166,568

Cash and equivalents at end of period

 

 

114,758

111,101

166,568

308,934

Source: Edison Investment Research, Nuevolution accounts. Note: *Restated following change of year end.


General disclaimer and copyright

This report has been commissioned by Nuevolution and prepared and issued by Edison, in consideration of a fee payable by Nuevolution. Edison Investment Research standard fees are £49,500 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

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1,185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

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Level 4, Office 1205

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General disclaimer and copyright

This report has been commissioned by Nuevolution and prepared and issued by Edison, in consideration of a fee payable by Nuevolution. Edison Investment Research standard fees are £49,500 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2019 Edison Investment Research Limited (Edison). All rights reserved FTSE International Limited (“FTSE”) © FTSE 2019. “FTSE®” is a trade mark of the London Stock Exchange Group companies and is used by FTSE International Limited under license. All rights in the FTSE indices and/or FTSE ratings vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE indices and/or FTSE ratings or underlying data. No further distribution of FTSE Data is permitted without FTSE’s express written consent.

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Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Myonlineadvisers Pty Ltd who holds an Australian Financial Services Licence (Number: 427484). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

The Investment Research is a publication distributed in the United States by Edison Investment Research, Inc. Edison Investment Research, Inc. is registered as an investment adviser with the Securities and Exchange Commission. Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1,185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1,185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

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