Sanofi to acquire Ablynx for $4.8bn

BY Richard Summerfield

French pharmaceutical multinational Sanofi is to acquire Belgian rival Ablynx for $4.8bn, its second multi-billion dollar deal this month.

Sanofi will pay €45 per share in cash for Ablynx, a premium of 21 percent over its closing price on Friday 26 January, and more than double the price before Novo Nordisk – a rival Danish firm which made an unsolicited takeover offer for Ablynx – went public with its initial bid for the company earlier this month. The Sanofi deal, which has been approved by the boards of both companies, is expected to close by the end of the second quarter 2018. Sanofi’s bid is 48 percent above Novo’s unsuccessful offer.

Novo made a €2.6bn unsolicited offer for Ablynx in January, however that offer was rebuffed and the company reconsidered its options due to “unrealistic premiums”. The pharma space has become an increasingly competitive market of late. With companies looking to bolster their product pipelines and generate growth, acquisitions of smaller competitors has become common practice. Last week Sanofi announced it had agreed to acquire Bioverativ for $11.6bn, its biggest deal for seven years.

In a statement announcing the deal, Sanofi’s chief executive Olivier Brandicourt said: “With Ablynx, we continue to advance the strategic transformation of our Research and Development, expanding our late-stage pipeline and strengthening our platform for growth in rare blood disorders. This acquisition builds on a successful existing partnership. We are also pleased to reaffirm our commitment to Belgium, where we have invested significantly over the years in our state-of-the-art biologics manufacturing facility in Geel. We intend to maintain and support the Ablynx science center in Ghent.”

Ablynx’s chief executive Edwin Moses said: “Since our founding in 2001, our team has been focused on unlocking the power of our Nanobody technology for patients. The results of our work are validated by clinical data. As we look ahead, we believe Sanofi’s global infrastructure, commitment to innovation and commercial capabilities will accelerate our ability to deliver our pipeline. Our board of directors feels strongly that this transaction represents compelling value for shareholders and maximises the potential of our pipeline to the benefit of all stakeholders.”

One of the key drivers of the Sanofi/Ablynx deal was the Belgian company’s experimental drug caplacizumab, which is used to treat the rare bleeding disorder acquired thrombotic thrombocytopenic purpura.

News: Sanofi beats Novo to buy Ablynx for $4.8 billion in biotech M&A boom

The future’s bright – IMF

BY Richard Summerfield

The International Monetary Fund has predicted an upturn in the global economy in its latest World Economic Outlook Update.

The global economy is expected to have grown by 3.7 percent in 2017, 0.1 percent faster than the IMF projected last autumn and half a percent higher than in 2016. The pickup in growth has been broad based, with notable upside surprises in Europe and Asia. The report says 120 economies – both developed and emerging – accounting for three-quarters of global economic activity, saw an improvement in 2017.

Looking ahead, recent reforms to the US tax regime will also have a positive impact on global growth over the next two years, the IMF has suggested.

“The effect on US growth is estimated to be positive through 2020, cumulating to 1.2 percent through that year, with a range of uncertainty around this central scenario,” the report noted. Yet, the IMF argued that the impact of the reforms will not be long lasting “due to the temporary nature of some of its provisions, the tax policy package is projected to lower growth for a few years from 2022 onwards".

Global growth forecasts for 2018 and 2019 have been revised upward by 0.2 percent to 3.9 percent. Advanced economies, where growth is now expected to exceed 2 percent in 2018 and 2019, will be responsible for the majority of the growth.

The eurozone is also expected to see improved growth. The IMF has revised its predicted growth rates for Germany, Italy and the Netherlands, based on improved momentum in domestic demand and higher external demand. However, Spain, which has been performing admirably in recent years, has seen its growth forecast for 2018 revised down, in light of the perceived effect that increased political uncertainty will have on confidence and demand.

UK growth will be 1.5 percent in 2018 and 2019. In October, the IMF reported that the UK’s estimated growth in 2019 would be 1.6 percent, however Brexit and its potential implications for trade barriers and regulatory realignment may dampen UK growth moving forward.  Of the G7 nations, the UK s projected to outgrow Italy and Japan over the next two years, but lag behind the rest of the group.

Emerging and developing Asia will see growth of around 6.5 percent in 2018 and 6.6 in 2019, the IMF estimates. Emerging and developing Europe will see growth of 5.3 percent in 2018 and 2019.

Report: World Economic Outlook Update, January 2018

Financial inclusion set to unlock $200bn in revenue, claims new report

BY Fraser Tennant

Improving financial inclusion for micro, small and medium enterprises (MSMEs) in 60 emerging countries could generate incremental global annual revenue of $200bn, according to a new report by EY.

In ‘Innovation in financial inclusion: revenue growth through innovative inclusion’, EY states that the availability of affordable, accessible and relevant financial products will generate sizeable economic benefits – equivalent to 20 percent of emerging market (EM) banks’ 2016 revenues. Greater financial inclusion will also boost GDP by up to 14 percent in developing economies such as India, and 30 percent in frontier markets such as Kenya.

Furthermore, more than 40 percent of MSMEs in the least developed countries reported challenges in obtaining financing. This compares to 30 percent in middle-income countries and 15 percent in high-income regions. Traditionally, banks operating in EMs have not viewed financially excluded individuals and MSMEs as profitable target customer segments.

“There is a multitude of opportunity for banks to increase profits by being more financially inclusive,” said Jan Bellens, EY global banking & capital markets emerging markets leader. “Not only does financial inclusiveness have a positive impact on financial institutions’ bottom line, but it is also good for local economies and individuals as inclusiveness tends to smooth income trends, grow local businesses, protect against natural and man-made disasters and helps individuals to save for important life events.”

EY notes that banks’ financial inclusion growth opportunities will be the greatest in markets that embrace technology-led innovation and that have a clear and supportive policy framework for financial stability. Drivers of technology infrastructure include mobile adoption and e-payments, national digital identity systems, credit data infrastructure, open access to digital data and currency digitisation. Policy and systemic drivers include strong customer safeguards, responsible financial literacy programmes, bankruptcy regimes, regulatory incentives for banks, diverse financial ecosystems and interoperable financial systems.

The report also suggests that banks which focus on the following three actions will be most successful in the realm of financial inclusiveness: (i) customise offerings to raise relevance and deepen account adoption; (ii) innovate channels to reach more customers at lower cost; and (iii) creatively manage risk to address absence of credit histories.

According to the report, “institutions that act now to increase financial inclusion will be well-placed to dominate retail and MSME banking in EMs for years to come".

Report: Innovation in financial inclusion – Revenue growth through innovative inclusion

US VC investment exceeds $84bn in 2017 following strong Q4, highlights new report

BY Fraser Tennant

Building off the “optimism and momentum” that has returned to the US and global markets in recent months, venture capital (VC) investment in the US rose to almost $24bn in Q4 2017, according to data published this week by KPMG.

In its ‘Venture Pulse Q4 2017: Global analysis of venture funding’ report, KPMG states that the level of VC invested in Q4 ($23.75bn) – up from $21.24bn in Q3 2017 – helped to make 2017 the strongest year of VC investment since the dotcom bubble.  

The strong VC investment in Q4 2017 was aided by the $1bn-plus funding rounds of three US-based companies: ride-hailing company Lyft ($1.5bn), cancer-screening biotech Grail Technology ($1.2b) and the automotive company Faraday Future ($1bn). 

“In 2018, we expect VC activity in the US to build off the optimism and momentum that has returned to the US and global markets,” said Brian Hughes, national co-lead partner, KPMG LLP’s Venture Capital Practice in the US “This should also be helped by stronger exit markets in both IPO’s and M&A activity for VC-backed companies.”

The report also notes that deal volume declined in Q4 2017 – down from 1997 in Q3 2017 to 1778 deals in Q4 2017 – as investors focused on placing bigger bets on a smaller number of companies that they believed had a stronger path to profitability.

In addition to the three $1bn-plus funding rounds, the US also saw numerous $100m-plus rounds, with the top 10 deals accounting for more than one quarter of the total investment during the quarter.

In terms of sectors and industries, VC and corporate investor interest in healthtech and biotech grew significantly in 2017, with a number of large deals completed in Q4 2017. Healthcare companies also topped the charts in terms of exits, which helped boost overall activity.

“While there is no indication that we will return to the level of IPO activity we saw in 2015, there is a likelihood that 2018 will see an increased number of IPOs,” said Conor Moore, national co-lead partner, KPMG Venture Capital practice in the US. “However, the secondary market is poised to see even greater growth as many companies choose to remain private for longer.”

As far as global VC investment is concerned, a strong Q4 2017 across the Americas, Asia and Europe helped propel the global VC market to a record level of annual investment for 2017 of $155bn.

Report: Venture Pulse Q4 2017’ – Global analysis of venture funding

Carillion collapse could cause supply chain woes

BY Richard Summerfield

With debts of around £1.5bn – including a £600m pension deficit – construction powerhouse Carillion Plc has entered liquidation, threatening the jobs of around 43,000 people worldwide, including 20,000 in the UK, and thousands more in the firm’s global supply chain.

Critics have suggested that Carillion’s expansion plans in recent years were too ambitious and its overreliance on debt were the two the most telling elements of its collapse. According to Bloomberg data, net debt to equity doubled between 2012 and 2016, from 15 to 30. While Carillion did attempt to cut costs and dividends, the company’s efforts were too late, beginning in earnest in 2017.

The liquidation of the UK’s second biggest construction company on Monday has created a crisis in the UK’s construction industry, with the future of major projects, including as yet unfinished hospitals, currently in doubt.

Carillion’s collapse came after talks between the firm, its lenders and the government came to conclusion with no deal in place to save it. Companies working for the firm on purely private sector deals will only have two days of government support, according to Cabinet Office Minister David Lidington. In 2016 Carillon spent £952m working with local suppliers, and according to the trade body Build UK, anywhere between 25,000 and 30,000 small businesses are owed money by the company.

Carillion is responsible for hundreds of public sector projects in the UK and is a provider of a number of key public services, including the management of military bases for the Ministry of Defence, providing facilities management for hospitals, courts and schools, and is a key partner in a number of nationally important infrastructure projects, such as the new HS2 railway line.

The company had hoped to receive a bailout from the government in the region of £20m, a sum which it hoped would encourage banks to follow suit. However, the government was unwilling to intervene. As a result, Carillion was plunged into liquidation, rather than administration, as it had very few sellable assets.

PwC will be providing six ‘special managers’ to advise David Chapman, a civil servant working for the Insolvency Service, who has been appointed as the company’s liquidator. The company’s shareholders will receive nothing as a result of the collapse.

Carillion ran into financial difficulties last year after issuing three profit warnings in five months and writing down more than £1bn on the dwindling value of contracts in the UK, the Middle East and Canada. Yet, despite these warnings, the company continued to receive lucrative contracts from the government, prompting some serious questions of the government’s sourcing practices.

News: Britain's Carillion collapses