European Event-Driven Analyst

Jesus Rodriguez Aguilar

Event-Driven

Swedish Orphan Biovitrum AB / Event-Driven

A <a href="https://www.smartkarma.com/entities/swedish-orphan-biovitrum-ab" target="_blank" data-smartkarma-citation="entities:22487:1" rel="noopener">Swedish Orphan Biovitrum Ab (SOBI SS)</a> takeover had been rumoured for years. In 2015, SOBI ended talks on a possible offer after reports that Biogen and Pfizer were among interested parties.
On 1 September, Advent International Corporation and GIC Special Investments Pte. Ltd. <a href="https://agnafit-offer.com/app/uploads/2021/09/Offer-announcement-press-release.pdf" target="_blank" rel="noopener">made an offer</a> to acquire SOBI for SEK 69.4 bn, or SEK 235/share. The deal, once completed, could be the largest-ever LBO in Sweden and the largest LBO of a European healthcare company in five years.
The biding consortium is interested in SOBI’s product portfolio and focus on rare diseases.
There are irrevocable undertakings, 43.41% in aggregate, from Investor AB (36.45%) and Fjärde AP-Fonden (6.96%).  However, their agreement would lapse if another bid comes in at SEK 251/share and is recommended by the Board.
There is a minimum acceptance condition of 90% plus one share (necessary to initiate a compulsory acquisition procedure in respect of the remaining shares in the Company under the Swedish Companies Act). This means that the bidding consortium needs acceptances from 82.3% of the float, which although quite high, is achievable. It must be noted that the five largest holders own 58.65% of the share capital, whilst the 100 largest shareholders own 88.7% of the share capital.
<a href="https://www.smartkarma.com/entities/investor-ab-c8e86ae3-ba55-41f0-9edf-fd461533b72b" target="_blank" data-smartkarma-citation="entities:24796:1" rel="noopener">Investor AB (INVEA SS)</a> does not seem overly excited by the offer, unless a competing bid comes north of SEK 251/share.
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SOBI has been consistently trading above the offer price. The shares closed at SEK 242 on 10 September, c. 3% above the offer price.
The offer values SOBI at 15.6x EV/Fwd EBITDA, vs. a median multiple of 30x for takeovers of biotech firms announced over the past year, according to Bloomberg, and a median of 20x for takeovers carried out since 2010, according to data compiled by S&amp;P Market Intelligence.
Median implied valuation across multiples (both LTM and NTM) of SOBI is SEK 246.71/share, c. 5% above the offer price, and just 1.7% below the threshold at which the irrevocable undertakings would cease to apply.
On this basis, I believe that the offer from the bidding consortium may be sweetened; the market thinks alike. Recommendation is long SOBI SS, TP SEK 246.7. Further upside could come from a competing bid.
</div>

A Swedish Orphan Biovitrum Ab (SOBI SS) takeover had been rumoured for years. In 2015, SOBI ended talks on a possible offer after reports that Biogen and Pfizer were among interested parties.
On 1 September, Advent International Corporation and GIC Special Investments Pte. Ltd. made an offer to acquire SOBI for SEK 69.4 bn, or SEK 235/share. The deal, once completed, could be the largest-ever LBO in Sweden and the largest LBO of a European healthcare company in five years.
The biding consortium is interested in SOBI’s product portfolio and focus on rare diseases.
There are irrevocable undertakings, 43.41% in aggregate, from Investor AB (36.45%) and Fjärde AP-Fonden (6.96%).  However, their agreement would lapse if another bid comes in at SEK 251/share and is recommended by the Board.
There is a minimum acceptance condition of 90% plus one share (necessary to initiate a compulsory acquisition procedure in respect of the remaining shares in the Company under the Swedish Companies Act). This means that the bidding consortium needs acceptances from 82.3% of the float, which although quite high, is achievable. It must be noted that the five largest holders own 58.65% of the share capital, whilst the 100 largest shareholders own 88.7% of the share capital.
Investor AB (INVEA SS) does not seem overly excited by the offer, unless a competing bid comes north of SEK 251/share.

SOBI has been consistently trading above the offer price. The shares closed at SEK 242 on 10 September, c. 3% above the offer price.
The offer values SOBI at 15.6x EV/Fwd EBITDA, vs. a median multiple of 30x for takeovers of biotech firms announced over the past year, according to Bloomberg, and a median of 20x for takeovers carried out since 2010, according to data compiled by S&amp;P Market Intelligence.
Median implied valuation across multiples (both LTM and NTM) of SOBI is SEK 246.71/share, c. 5% above the offer price, and just 1.7% below the threshold at which the irrevocable undertakings would cease to apply.
On this basis, I believe that the offer from the bidding consortium may be sweetened; the market thinks alike. Recommendation is long SOBI SS, TP SEK 246.7. Further upside could come from a competing bid.


Advent & GIC/SOBI: Awaiting a Sweetened Offer

Technical Analyst, Vermilion Research

Joe Jasper

Technical Analyst

Technical and Quantitative Research

Vermilion Research

Vermilion’s objective is to deliver timely, actionable, and unique technical research to professional investors through the application of our various technical indicators.

Our research strategists seek to highlight securities which we believe are at major inflection points, based on our various technical and quantitative indicators, and offer asymmetric risk/return profiles. Our unique research methodology, centered on relative strength, enables our strategists to deliver superior investment recommendations.

Our process begins by organizing the universe of actively traded stocks into discrete sectors, then into industry groups. We then apply our technical and quantitative tools to identify developing price trends. Once attractive trends are identified within a selected sector or group, we screen for individual stocks which we believe offer the best risk/reward profile. We provide a historical perspective that often reveals, through our long-term charts, how price patterns often repeat themselves over time.

Technical Analysis

The Hang Seng, EURO STOXX 50, MSCI ACWI ex-US, and MSCI EAFE display bearish short-term inflections. Additionally, 10-year yields in the US and Germany are breaking down below key support. These deteriorating market dynamics raise concerns of a deeper pullback, however other indicators remain largely positive. As a result, we continue to see a mixed, but overall constructive market. Actionable themes highlighted in today's report include Health Care and Real Estate.

The Hang Seng, EURO STOXX 50, MSCI ACWI ex-US, and MSCI EAFE display bearish short-term inflections. Additionally, 10-year yields in the US and Germany are breaking down below key support. These deteriorating market dynamics raise concerns of a deeper pullback, however other indicators remain largely positive. As a result, we continue to see a mixed, but overall constructive market. Actionable themes highlighted in today's report include Health Care and Real Estate.

Global Equity Strategy: Mixed Market Environment Continues As Yields Break Down

Global Special Situations & Strategy, SR Services Ltd

David Lepper

Global Special Situations & Strategy

SR Services Ltd

SR Services provides Strategic Knowledge and Solutions services for Family Offices and Corporate Business. 

We deliver this via advisory services, strategic planning, opportunity analysis/sourcing, as well as solution implementation. 

Whilst, we create intellectual discipline and operational leverage for your projects or daily activities, our ultimate objective is to empower whilst enhancing your decision making. 

Strategic Knowledge and Solutions

<ul>
<li>
Elliot Advisor's activist campaign has put some pressure on GSK. The "New GSK" Investor Day on 23rd June was the first public event since the campaign broke in the mainstream media. </li>
<li>
The Investor Day was always expected to form a key defence forum for management to justify the board's and management’s strategy. As expected, the CEO and loyal lieutenants came out swinging.</li>
<li>
While some good data points were presented at the briefing around the embedded value behind the stock and the progress of the Vaccine and Speciality Business, management made some strategic missteps in the briefing.  </li>
<li>
Look for three items to benefit GSK's share price in the coming quarters. Firstly, a greater focus from the market on the value which exists within. Secondly, a strong likelihood that Elliot Advisors won't be the last activist making demands on GSK. Thirdly, good potential for an acceleration of fundamentals.</li>
<li>
We walk through the good, bad, and the ugly from the briefing, and highlight why Activist presence is but one key reason why GSK is set to break out of a long term trading range and upside to a fair value of GBP21.25/share or US$59.00/ADR is increasingly likely. </li>
<li>Our note builds off the Investment thesis and review of Elliot's campaign in <a href="https://www.smartkarma.com/insights/gsk-gsk-l-why-activism-might-be-the-right-medicine" target="_blank" data-smartkarma-citation="insights:53323" rel="noopener">GSK (GSK.L) Why Activism Might Be the Right Medicine.</a>
</li>
</ul>



Elliot Advisor's activist campaign has put some pressure on GSK. The "New GSK" Investor Day on 23rd June was the first public event since the campaign broke in the mainstream media. 

The Investor Day was always expected to form a key defence forum for management to justify the board's and management’s strategy. As expected, the CEO and loyal lieutenants came out swinging.

While some good data points were presented at the briefing around the embedded value behind the stock and the progress of the Vaccine and Speciality Business, management made some strategic missteps in the briefing.  

Look for three items to benefit GSK's share price in the coming quarters. Firstly, a greater focus from the market on the value which exists within. Secondly, a strong likelihood that Elliot Advisors won't be the last activist making demands on GSK. Thirdly, good potential for an acceleration of fundamentals.

We walk through the good, bad, and the ugly from the briefing, and highlight why Activist presence is but one key reason why GSK is set to break out of a long term trading range and upside to a fair value of GBP21.25/share or US$59.00/ADR is increasingly likely. 
Our note builds off the Investment thesis and review of Elliot's campaign in GSK (GSK.L) Why Activism Might Be the Right Medicine.



GSK (GSK.L/GSK.N) Activists Likely to Question the Spin-Off

Asian Insight Provider - Actionable ideas, CrossASEAN Research

Henry Soediarko

Asian Insight Provider - Actionable ideas

CrossASEAN Research

At CrossASEAN Research we strive to produce unbiased and differentiated on the ground insights on companies across South East Asia. Our Research is produced for the most part after face to face meetings and conversations with company management to dig deep into the long term vision and strategy of the companies we cover. We seek to deliver investable and actionable themes on sectors and markets across SE Asia, often in collaboration with other Insight Providers across the region, pooling the vast experience of the analysts within the Smartkarma Ecosystem. We also offer bespoke work and tailor made trips for our clients. 

Insights across South East Asia

Equity Bottom-Up

<a href="https://www.smartkarma.com/entities/airports-of-thailand-pcl" target="_blank" data-smartkarma-citation="entities:239:1" rel="noopener">Airports of Thailand (AOT TB)</a> path to recovery is quite clear - vaccine, borders reopening, and shorter or abolishment of the quarantine requirement. The first two are in the works with countries around the world racing against each other for a higher and faster vaccination. Shorten or abolishment of quarantine requirement may be difficult, even for those who are already fully vaccinated, until the next quarter at least. The Phuket reopening sandbox will be a proof of concept of whether 1) Thailand's health infrastructure is ready to accept foreign tourists and 2) people are ready to travel again once vaccinated.
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/212/121/original/image_17443488521623225592751.png?1623225593" class="editor-image img-responsive" data-smartkarma-image-id="212121"></figure>
source: Reuters

Airports of Thailand (AOT TB) path to recovery is quite clear - vaccine, borders reopening, and shorter or abolishment of the quarantine requirement. The first two are in the works with countries around the world racing against each other for a higher and faster vaccination. Shorten or abolishment of quarantine requirement may be difficult, even for those who are already fully vaccinated, until the next quarter at least. The Phuket reopening sandbox will be a proof of concept of whether 1) Thailand's health infrastructure is ready to accept foreign tourists and 2) people are ready to travel again once vaccinated.

source: Reuters

Airport of Thailand (AOT): Phuket Sandbox

IPOs and Catalysts/Events, Global Equity Research Ltd

Arun George

IPOs and Catalysts/Events

Uncompromised, Independent, Conflict-Free Research

Global Equity Research Ltd

Global Equity Research was started in 2017 by a group of experienced research professionals. It was founded on a passionate belief in the importance and the need for uncompromised, independent, conflict-free research. We aim to provide differentiated and actionable primary and bottom up fundamental research.

Equity Capital Markets

Betta Pharmaceuticals   / Equity Capital Markets

<a href="https://www.smartkarma.com/entities/betta-pharmaceuticals-co-ltd" target="_blank" data-smartkarma-citation="entities:25883:1" rel="noopener">Betta Pharmaceuticals (300558 CH)</a> is a biopharma company in China focused on the development, manufacture and commercialization of innovative therapies. Betta’s drug pipeline consists of two marketed therapies, five late clinical-stage or NDA-stage candidates, and more than twenty early clinical- and preclinical-stage candidates that address critical therapeutic targets. Betta listed its A Shares on the Shenzhen Stock Exchange in 2016 raising net proceeds of RMB657.35 million. In December 2020, Betta raised RMB995.4 million through a placing of 10.1 million A Shares. Betta is pre-marketing an H Share listing to raise $800 million, according to press reports. <div class="content-highlight">Despite efforts at diversification, Betta is highly dependent on a single product, icotinib, which was launched in 2011. The recent commercial launch of ensartinib will provide revenue diversification and a new growth engine. However, icotinib continues to face challenges and it will take some time for ensartinib to post meaningful market share gains (post-NRDL inclusion at the end of 2021). In combination with the weak underlying margin and cash generation, we are inclined to give this listing a pass.  </div>

Betta Pharmaceuticals (300558 CH) is a biopharma company in China focused on the development, manufacture and commercialization of innovative therapies. Betta’s drug pipeline consists of two marketed therapies, five late clinical-stage or NDA-stage candidates, and more than twenty early clinical- and preclinical-stage candidates that address critical therapeutic targets. Betta listed its A Shares on the Shenzhen Stock Exchange in 2016 raising net proceeds of RMB657.35 million. In December 2020, Betta raised RMB995.4 million through a placing of 10.1 million A Shares. Betta is pre-marketing an H Share listing to raise $800 million, according to press reports. Despite efforts at diversification, Betta is highly dependent on a single product, icotinib, which was launched in 2011. The recent commercial launch of ensartinib will provide revenue diversification and a new growth engine. However, icotinib continues to face challenges and it will take some time for ensartinib to post meaningful market share gains (post-NRDL inclusion at the end of 2021). In combination with the weak underlying margin and cash generation, we are inclined to give this listing a pass.  

Betta Pharmaceuticals IPO Initiation: One Step Forward, One Step Back

United Kingdom

AstraZeneca PLC operates as a holding company. The Company, through its subsidiaries, researches, manufactures, and sells pharmaceutical and medical products. AstraZeneca focuses its operations on eight therapeutic areas, including gastrointestinal, oncology, cardiovascular, respiratory, central nervous system, pain control, anaesthesia, and infection.

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AstraZeneca (AZN SS)

Advent & GIC/SOBI: Awaiting a Sweetened Offer

Median implied valuation across multiples is SEK 246.71/share, c. 5% above offer price. I believe that the offer from the bidding consortium may be...

Jesus Rodriguez Aguilar

Global Equity Strategy: Mixed Market Environment Continues As Yields Break Down

The Hang Seng, EURO STOXX 50, MSCI ACWI ex-US, and MSCI EAFE display bearish short-term inflections and 10-year yields in the US and Germany are...

Vermilion Research

GSK (GSK.L/GSK.N) Activists Likely to Question the Spin-Off

Good data points were presented at the #GSK briefing around the embedded value, but strategic missteps by management may question the spin-off...

David Lepper

Airport of Thailand (AOT): Phuket Sandbox

The Phuket reopening sandbox will be a proof of concept of whether 1) Thailand's health infrastructure is ready to accept foreign tourists and 2)...

Henry Soediarko

Betta Pharmaceuticals IPO Initiation: One Step Forward, One Step Back

Betta is pre-marketing an H Share listing to raise $800 million, according to press reports. Overall, we think that Betta faces several challenges...

Arun George

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