Private equity firm Advent International and Singapore wealth fund GIC have agreed to buy drugmaker Swedish Orphan Biovitrum AB for 69 billion kronor ($8 billion) in the largest buyout of a Nordic company in more than five years.
Investors will receive 235 kronor in cash for each share, the companies said. That’s 35% higher than the closing price Aug. 25, the day before Bloomberg reported that Advent was exploring an acquisition of the Swedish biotech firm, which is developing treatments for rare diseases.
Advent and GIC said the company will benefit from leaving the stock market because it needs substantial investments to develop its new drugs. Sobi’s hemophilia business is facing price pressure and the company has accumulated debt after a number of acquisitions. The offer spurred speculation another bidder could emerge as takeover talk has surrounded Sobi for several years.
Sobi shares rose as much as 25% to 240.30 kronor in Stockholm Thursday, trading above the bid, which Handelsbanken analyst Mattias Haggblom said is low. It values Sobi at 17.5 times its earnings before interest and taxes in the past 12 months, compared with a medium multiple of 34 times for takeovers of biotech firms announced over the past year, according to data compiled by Bloomberg.
The transaction highlights private equity’s appetite for investments as the health-care sector is seen as a safe haven amid the pandemic. Clayton, Dubilier & Rice agreed to buy UDG Healthcare Plc for about $3.9 billion in June, while a consortium of private equity firms, including Blackstone Inc. and Carlyle Group Inc., agreed to buy medical-supply company Medline Industries Inc. for $30 billion in one of the biggest leveraged buyouts of all time.
Therapies for rare diseases have lured drugmakers including Sanofi, Takeda Pharmaceutical Co. and Roche Holding AG in recent years because they can charge more for unique life-saving drugs than for routine medicines. Sobi has said the so-called orphan drug market — for diseases that have no existing treatment — may expand to $242 billion by 2024 from $131 billion in 2018 as more drugs get approval. The rush has created a more competitive market, especially in Sobi’s field of hemophilia.
About 300 million people worldwide are affected by rare diseases, and 95% of those ailments have no treatments.
Sobi suffered a setback in November, when a European Union regulatory panel reiterated its rejection of the experimental medicine emapalumab to treat children with a rare inflammatory disease. The drug has been approved for use in the U.S. as the first therapy for that ailment. Other candidates in the pipeline are for a form of gout, amyotrophic lateral sclerosis and a rare blood disease known as PNH.
The billionaire Wallenberg family, which is Sobi’s largest investor, is supporting the deal. Investor AB, their investment vehicle, controls about 35% of the biotech company and said it would use the proceeds to reinvest in other companies. However, its agreement would lapse if another bid comes in at 251 kronor a share or more.
The bid may open the door to a rival bid from a drugmaker, said Per Colleen, head of fundamental equities at Swedish state pension fund Fjarde AP-Fonden, which owns about 7% of the biotech firm. Fjarde also supports the deal, provided a bid doesn’t emerge at 251 kronor per share or more.
“Industrial players can pay more because they have synergies that financial players don’t,” Colleen said.
In 2019, Sobi bought Dova Pharmaceuticals Inc. for almost $1 billion to expand in hematology. A year earlier, it agreed to buy the U.S. rights to the respiratory medicine Synagis from AstraZeneca Plc. Upon completion of that deal, Astra gained an 8.1% stake in the Swedish company.
A Sobi takeover has been on the cards for years. In 2015, Sobi ended talks on a possible offer after reports that Pfizer Inc. and Biogen Inc. were among interested parties.
JPMorgan and Evercore Partners International LLP advised Advent and GIC. Morgan Stanley advised Sobi.