Thursday, March 5, 2015
- Thinly-traded nano cap Targacept (NASDAQ:TRGT) and privately-held South San Francisco-based Catalyst Biosciences agree to merge. The new entity will be named Catalyst Biosciences and will have the anticipated stock symbol "CBIO." Catalyst CEO Nassim Usman, Ph.D., will be President and CEO of the combined firm.
- Catalyst shareholders will initially own ~65% of the combined company. Targacept shareholders will own ~35% and will receive a dividend of an aggregate of $37M in non-interest bearing redeemable convertible notes and ~$20M in cash. The notes will be convertible into the new entity's common stock at any time within two years after the deal closes, at the noteholders' discretion, for $1.31 per share which is 130% of the negotiated per-share value of Targacept's assets after the distribution of the dividend.
- Catalyst's product development activities focus on hemostasis and complement regulation. Its lead product is CB 813d for hemophilia. Targacept focuses on a class of products called neuronal nicotinic receptors. Its lead product is TC499 for the treatment of diabetic gastroparesis. Both are in Phase 1 development.
- TRGT is down 3% after hours on high volume.
7:04 PM| Comment!
- Johnson Controls' (NYSE:JCI) Global Workplace Solutions manages 1.8B square feet of corporate real estate globally and accounted for about 10% of the company's $42.7B in sales in the fiscal year ending Sept. 2013. Analysts estimate the unit's value at between $600M and $1.5B (pretty wide range!).
- JCI last year put the division on the block as it didn't fit it in with its core operations.
- CBRE's (NYSE:CBG) move comes at a time of increasing deal activity in commercial real estate, with Cushman & Wakefield also up for sale, and FirstService spinning off Colliers International.
- Analysts at Deutsche Bank and Oppenheimer both like the strategic fit of Ikaria with Manllinckrodt's (MNK +4.8%) blended business.
- Deutsche maintains its "Buy" recommendations and raises its 2015 EPS estimate to $7.74 from $7.46 and price target to $130 (+7.4% upside) based on a P/E of 15.7.
- Oppenheimer maintains its "Outperform" rating and raises its price target to $140 based on a P/E of 16.1.
- Previously: Mallinckrodt buys critical care firm for $2.3B (March 5)
- TechCrunch reports Twitter (TWTR -0.3%) has been in talks to buy Periscope, maker of an app (currently in beta) that lets users stream live video via their smartphone cameras. One source says Twitter could pay $100M, but another says the deal is "worth a fraction of that."
- The report comes as Meerkat, a live streaming app that relies heavily on Twitter integration - a tweet is sent out as soon as a user starts a live stream, and any of the user's Twitter followers who have installed Meerkat are immediately notified - sees strong early momentum after launching last month. Live streaming fits with Twitter's efforts to position itself as an ideal platform for staying abreast of what's happening (and is being discussed) the world over in real-time.
- Twitter recently launched a 30-second video platform, and its Vine 6-second video platform now handles over 1.5B video views per day. The company has also rolled out multiple video ad products to court brand advertisers.
- Separately, Twitter has announced an expansion of its partnership with online/offline ad data provider Acxiom (ACXM -0.3%). Twitter advertisers will be able to use 135 Acxiom audience categories (covering ad markets such as retail, auto, and financial services) to target users based on "behavior, life stages, demographics, and household information."
- Acxiom: "Twitter’s behavior targeting will enable auto advertisers to select audiences who are in the market for a new car, and consumer package goods companies can reach audiences who have purchased their product category in the past." Twitter already relies on Acxiom to help advertisers use their existing customer data to target users.
- On its conference call this morning to discuss the acquisition of Pharmacyclics (PCYC +10.6%), AbbVie (ABBV -2.4%) CEO Rick Gonzalez said that three companies were in the final bidding for the Imbruvica maker in an intensely competitive process. He said that a disclosure will be forthcoming that will provide additional details of the bids.
- The transaction will be accretive to earnings beginning in 2017, adding $0.60 to EPS in 2019 and more than $1.00 by 2021. The incremental sales in 2019 are projected to be >$4B.
- Imbruvica sales should be >$1B in the U.S. this year and peak at >$7B (ABBV's portion). Peak global sales may be ~$11.5B, but J&J's (JNJ +1.1%) contribution is its responsibility so no firm forecast is appropriate.
- Peak sales of the oncology portfolio of both companies could be >$20B by the mid-2020s.
- Mr. Gonzalez said that Humira's status had no bearing on the deal. He was confident with his top seller's long-term prospects, citing two new indications and the pending new formulation that will provide patent protection until the early 2030s. He also said AbbVie will vigorously defend Humira's IP against biosimilars.
- The transaction is 58% in cash and 42% in stock. The final number of ABBV shares will be determined at the time of closing in Q2. About 50% of the stock will be sourced from buybacks and half newly issued. The Board has authorized a $5B increase in its share repurchase program. There will be a 20% dilution to current shareholders. Updated 2015 Non-GAAP EPS is now $4.05 - 4.25 from $4.25 - 4.45.
8:52 AMAbbVie's high-priced takeout of Pharmacyclics bodes well for other biotechs with high potential drugs
- AbbVie's (NYSE:ABBV) extraordinarily generous buyout of Pharmacyclics (NASDAQ:PCYC) is a crystal clear example of how keen big pharma is to boost its prospects with biotech drugs with blockbuster potential. The transaction's $20B tab, backing out PCYC's $1B cash balance, values Imbruvica (ibrutinib) at $40B since Pharmacyclics' commercial partner Johnson & Johnson (NYSE:JNJ) gets 50% of Imbruvica's revenue. This implies a multiple of almost 7x Imbruvica's projected peak sales of $6B. By comparison, Amgen's (NASDAQ:AMGN) takeout of Onyx Pharma and Sanofi's (NYSE:SNY) takeout of Genzyme were both at 5x premiums.
- The looming patent expiration for Humira ($12.5B in sales the past four quarters) undoubtedly provided AbbVie extra incentive to get the deal done.
- Adding 50% of Imbruvica's sales to AbbVie's top line should increase its revenue growth 3 - 7% and EPS growth 8 - 11% through 2020.
- According to RBC analyst Michael Yee, other biotechs on the big ticket acquisition radar are: BioMarin Pharmaceuticals (NASDAQ:BMRN), Dyax (NASDAQ:DYAX), Esperion Therapeutics (NASDAQ:ESPR), United Therapeutics (NASDAQ:UTHR), Vertex Pharmaceuticals (NASDAQ:VRTX), Intercept Pharmaceuticals (NASDAQ:ICPT), Juno Therapeutics (NASDAQ:JUNO), Kite Pharma (NASDAQ:KITE), PTC Therapeutics (NASDAQ:PTCT) and Receptos (NASDAQ:RCPT).
- Arrowhead Research (NASDAQ:ARWR) acquires Novartis' (NYSE:NVS) RNA interference (RNAi) R&D portfolio and associated assets, including certain patents and patent applications, an exclusive license to other patents and patent applications owned or controlled by Novartis, the assignment of a third party license and three preclinical product candidates.
- Specific assets include multiple patent families covering RNAi-trigger design rules and modifications that fall outside of competitors' patents which provides Arrowhead freedom to operate for any target or indication, the assignment of Novartis' license from Alnylam (NASDAQ:ALNY) that gives Arrowhead access to Alnylam IP, excluding delivery, covering 30 gene targets and three product candidates with varying amounts of preclinical data.
- Under the terms of the agreement, Arrowhead will pay $10M in cash (includes $7M paid previously) and $25M in ARWR stock within 30 days. Novartis is eligible to receive milestones and single-digit royalties on net sales.
- Arrowhead will host a conference call this morning at 8:30 am to discuss the deal.
- Hain Celestial (NASDAQ:HAIN) acquires the 80% of Empire Kosher Foods it didn't already own.
- The transaction price for the stake was $57.6M.
- Empire is a leader of selling kosher brands at outlets in the U.S. including Whole Foods Market stores.
- Hain expects the deal to be accretive to earnings in FY16.
- Sources say Simon Property Group (NYSE:SPG) has made overtures for rival Macerich (NYSE:MAC) over the past few weeks, in an apparent bid to combine two of the largest U.S. shopping-mall owners.
- It isn’t clear how receptive the $13B Macerich is to a deal; sources say it has been discussing a potential defense with its advisers. REITs like Macerich can be difficult to takeover due to state laws that protect them from unsolicited bids.
- In November, Simon disclosed a 3.6% stake in Macerich, seen by many as the first step in a takeover attempt. MAC shares have risen to new multi-year highs since then, and were +5.25% late last night.
- Previously: Simon Property discloses stake in Macerich; wants more (Nov. 19, 2014)
Wednesday, March 4, 2015
- Both boards have signed off on AbbVie's (NYSE:ABBV) $21B surprise acquisition of Pharmacyclics (NASDAQ:PCYC), announced a short while ago amid speculation that Johnson & Johnson (NYSE:JNJ) (or, earlier, Novartis (NYSE:NVS)) would be the one to acquire the cancer biotech.
- With the deal, AbbVie gets Pharmacyclics' blockbuster Imbruvica drug for hematologic malignancies -- which logged $548M in revenues in 2014 (Q4 earnings) and might go all the way to $5B/year. Imbruvica has received four indications in less than 15 months -- the latest being for Waldenström's Macroglobulinemia at the end of January.
- And with Imbruvica, AbbVie can lessen its reliance on its key drug Humira, an aging rheumatoid arthritis medication.
- The acquisition is expected to close in the middle of the year.
- Question: What happened to Pharmacyclics' Imbruvica partner JNJ on this deal?
- Previously: Pharmacyclics Q4 revenue up 135%, Imbruvica growing exponentially (Feb. 18 2015)
- AbbVie (NYSE:ABBV) says it will be the one to acquire cancer biotech Pharmacyclics (NASDAQ:PCYC), with a surprise bid of about $21B: $261.25/share in cash and equity.
- Pharmacyclics closed up 6.3% today to $230.48 (and gained another 2.9% after hours) on rumors that Johnson & Johnson (NYSE:JNJ) was making a bid for the $17B company.
- Previously: Pharmacyclics up on rumored J&J interest (Mar. 04 2015)
- Previously: Pharmacyclics up on potential buyout (Feb. 25 2015)
- Press release
- Though Semtech (NASDAQ:SMTC) beat FQ4 estimates, it's guiding for FQ1 revenue of $130M-$136M and EPS of $0.27-$0.30, below a consensus of $136.4M and $0.37.
- The analog/mixed-signal chipmaker also announces it's buying Triune Systems, a maker of wireless charging, power management, and battery charger chips, for $45M in cash + performance earn-outs. The deal is expected to be financed via Semtech's credit line, and be slightly accretive in FY16 (ends Jan. '16).
- Shares have fallen to $28.00 AH.
- FQ4 results, PR
- Avago (NASDAQ:AVGO) held "advanced talks" to buy microcontroller/network processor/base station amplifier maker Freescale (NYSE:FSL) before the chipmaker agreed to a $16.7B deal with NXP (NASDAQ:NXPI), Reuters reports.
- Avago reportedly got cold feet after Freescale's shares surged on an NY Post M&A report last month. However, sources state the company is "still looking for an acquisition that could be transformative."
- Over the last 15 months, Avago has struck a $6.6B deal to buy LSI (it later sold parts of LSI to Seagate and Intel), a $309M deal to buy PLX Technology, and (most recently) a $609M deal to buy Emulex, expanding into a number of enterprise hardware markets along the way.
- $31B worth of chip industry M&A deals took place last year, as chipmakers large and small try to reap cost and product synergies by merging with peers.
- Avago rose 0.9% today to $129.40, leaving it close to Monday's all-time high of $130.87.
- M&T Bank (MTB -0.3%) announced the agreement to purchase Hudson City Bancorp (HCBK) nearly three years ago, but the regulatory green-light has been on hold pending approval of the banks' anti-money-laundering compliance program.
- While the stress test and CCAR have nothing to do with money-laundering compliance, analyst Marty Mosby suspects if both banks' capital plans are approved, then a merger approval isn't far behind.
- The current deadline for a closing is April 30.
- The stress tests results are due after the close on Thursday, with the CCAR results six days later.
- A day after slumping to new post-IPO lows and coming within $0.03 of $80, Alibaba (NYSE:BABA) has seen dip-buyers emerge in large numbers. Naturally, Yahoo (NASDAQ:YHOO) is along for the ride.
- The gains come as a Chinese publication reports Jack Ma once said he considered acquiring Yahoo, which plans to spin off its Alibaba stake into a publicly-traded company in Q4. Ma's alleged comments: "The acquisition of Yahoo is something I worked [on] a couple of years ago, this is a political problem, not an economic problem, Yahoo is a media [company], more sensitive."
- There has already been speculation Alibaba will try to buy Yahoo's spinoff (much less politically challenging than buying the whole of Yahoo) at some point. Bloomberg's Matt Levine has noted the spinoff will have to wait a year before a deal occurs, in order to maintain its tax-free status.
- Meanwhile, Alibaba's Aliyun cloud services unit (a giant in the Chinese cloud infrastructure market) has opened a Silicon Valley data center, its first in the U.S. For now, the data center will cater to Chinese companies with U.S. operations, but it plans to go after non-Chinese clients later this year. When it does, Amazon (NASDAQ:AMZN), Google (NASDAQ:GOOG), Microsoft (NASDAQ:MSFT), and a slew of other incumbents will be waiting.
- While rival Royal KPN (OTCPK:KKPNY +1%) is hoping to draw €1B in selling Base, its Belgian mobile division, France's Orange (NYSE:ORAN) -- which has a majority stake in Belgium's No. 2 provider Mobistar -- says it wants to stay in the country.
- Orange's Gervais Pellissier says his company hasn't been contacted about the Base sale but: "Consolidation is necessary in the market and it would make sense for someone already in the country to buy it."
- He expected if Mobistar got involved, in an effort to better take on market leader Belgacom, it would be tough to get the deal approved by regulators.
- Strategic bidders or private-equity funds still seem the likely candidates to buy Base in a market hit by a price war and ripe for consolidation.
- Nielsen Holdings (NYSE:NLSN) has acquired eXelate -- whose technology boosts programmatic ad buying -- for undisclosed terms (but reportedly $200M).
- The deal should smooth automated buying for Nielsen clients who can act quickly on decisions tied to Nielsen ratings info, particularly when programmatic buying moves beyond digital ads into more broadcast programming.
- EXelate has aggregated consumer segments from over 200 data providers.
- Exelon (EXC -0.3%) and Pepco (POM +0.2%) agree to more than double the value of a fund to benefit customers in Maryland, as EXC seeks approval from the state's regulators for its planned $6.8B acquisition of POM.
- Under the plan, EXC raises the level of the customer investment fund to $94.4M from $40M, which state regulators could earmark for benefits such as rate credits, energy efficiency or low income customer assistance.
- The plan also includes an increased commitment to reduce the length and frequency of power outages in the state, as well as non-compliance payments if reliability performance targets during 2018-20 are missed.
- IBM has acquired AlchemyAPI, a provider of software APIs for companies looking to add A.I./deep learning capabilities to their apps. Terms are undisclosed.
- AIchemy offers both cloud-based and on-premise versions of its API offerings, which cover image and text analysis tools. The company asserts its platform "makes it easy to create smart apps that deeply understand the world's conversations, reports and photos."
- IBM plans to integrate Alchemy's deep learning tech with its Watson A.I. hardware/software platform, declaring it will strengthen "Watson's ability to quickly identify hierarchies and understand relationships within large volume data sets." Big Blue also states the deal will "greatly expand the number and types of scalable cognitive computing APIs" available to clients, developers, and partners.
- The IT giant stated last year it wants Watson to produce $10B in revenue within 10 years - all signs suggest it has a ways to go. IBM rolled out the cloud-based Watson Analytics service last year to good reviews, as well as a cloud app development platform (Bluemix) that supports Watson services and APIs. It also bought a virtual assistant startup (Cognea) to help Watson deliver "conversational services."
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