Novartis agrees AveXis acquisition

BY Richard Summerfield               

Swiss drug manufacturer Novartis AG has agreed to acquire boutique gene-therapy company AveXis Inc for $8.7bn.

The deal will see Novartis pay $218 in cash for each AveXis share held, a 72 percent premium to AveXis’s 30-day volume-weighted average stock price. The deal is expected to close in mid-2018.

“The commitment, drive and expertise of the entire AveXis team has created significant stockholder value, and we are pleased that Novartis recognizes that value in the potential of AVXS-101, our first in class manufacturing capabilities and our gene therapy pipeline, all of which serve to transform the lives of people devastated by rare and life threatening neurological diseases such as SMA, Rett syndrome and genetic ALS,” said Sean Nolan, president and chief executive of AveXis. “With worldwide reach and extensive resources, Novartis should expedite our shared vision of bringing gene therapy to these patient communities across the globe as quickly and safely as possible.”

Since Mr Narasimhan became CEO of Novartis International, the company has refocused its efforts on expanding into new areas. Focused medicines and gene therapy have become key areas for the company. Earlier this year Novartis made a $170m deal with Spark for rights to use its blindness treatment, Luxturna, outside the US.

According to a statement announcing the deal, AveXis has several ongoing clinical studies for the treatment of SMA, an inherited neurodegenerative disease caused by a defect in a single gene.

“The proposed acquisition of AveXis offers an extraordinary opportunity to transform the care of SMA. We believe AVXS-101 could create a lifetime of possibilities for the children and families impacted by this devastating condition,” said Mr Narasimhan. “The acquisition would also accelerate our strategy to pursue high-efficacy, first-in-class therapies and broaden our leadership in neuroscience. We would gain with the team at AveXis another gene therapy platform, in addition to our CAR-T platform for cancer, to advance a growing pipeline of gene therapies across therapeutic areas. We look forward on the closing of the deal to a smooth transition for AveXis employees and welcoming them to Novartis.”

Paul Hudson, chief executive of Novartis Pharmaceuticals, said: “Bringing AveXis on board would support both our ambition to be a leader in neurodegenerative diseases and our Neuroscience franchise priorities to strengthen our position in devastating pediatric neurological diseases such as SMA. We relish the opportunity to leverage our expertise, our 70-plus year heritage in neuroscience and our global footprint to help AVXS-101 benefit high-need SMA patients around the world.”

Novartis will likely fund the deal through the $13bn it recouped for selling its stake in a consumer healthcare joint venture with its partner GlaxoSmithKline. The deal, which was announced in late March, saw GSK take control of a number of products, including Sensodyne toothpaste, Panadol headache tablets, muscle gel Voltaren and Nicotinell patches.

News: Novartis bets big on gene therapy with $8.7 billion AveXis deal

2018 a strong year for PE – report

BY Richard Summerfield

Building on an impressive 2017, 2018 looks set to be another strong year for the private equity industry, according to the Akerman 'PErspectives on U.S. Middle Market Private Equity' report, based on data from PitchBook.

Not only did the industry accumulate record levels of dry powder in 2017, but the US tax reform and persistently low interest rates were also beneficial, helping to drive record or near-record buyout and exit activity. The report also notes near-historical highs in several other categories for sub-$500m US buyout funds, including the number of deals and add-on deals closed, number of closed exits and fundraising.

Furthermore, US funds with less than $500m under management set record-highs in 2017 for total deal value, add-on deal value and deal exit value.

Overall fundraising for funds between $500m and $1bn grew last year. The sector raised a record $39bn , up from $35bn in 2016, and a total of 117 funds closed. Fundraising is expected to continue to grow in 2018, provided that the economy remains healthy.

Deal activity was down slightly in 2017, with 1133 transactions completed worth a combined $44.8bn, from 1258 deals worth $51.2bn in 2016. However, dealmaking is  expected to grow in 2018, particularly in the mid-market, due to “heightened interest in Section 1202 of the Internal Revenue Code, which allows PE funds to avoid the 23.8 percent federal capital gains tax on dispositions of qualified portfolio companies”, according to Carl Roston, co-chair of Akerman’s Corporate Practice Group.

“In today’s market environment, PE fundraising and transaction volumes have maintained healthy levels thanks to a host of favorable market dynamics. Factors driving this PE activity include low interest rates, a growing economy, the reduction in marginal federal income tax rates, the relative outperformance of domestic middle market private equity compared to other asset classes, benign credit markets, and the rebalancing of portfolios by institutional investors,” said Mr Roston.

He added: “With growing competition and robust valuations for quality buyout targets, increasingly there is a premium on sophisticated deal sourcing through industry relationships, as well as on cost-effective and efficient processes that facilitate closed deals, collaborative relationships with management teams and prudent risk management.”

Report: PErspectives on U.S. Middle Market Private Equity

Power generator FirstEnergy Solutions files for Chapter 11

BY Fraser Tennant

In a move designed to improve the viability of its operations and restructure more than $1bn of debt, power generator FirstEnergy Solutions (FES) has filed for voluntary petitions under Chapter 11 of the Federal Bankruptcy Code.

The filing by FES with the US Bankruptcy Court in the Northern District of Ohio also includes FirstEnergy Nuclear Operating Company (FENOC) which, like FES, is a subsidiary of parent company FirstEnergy Corp. However, FirstEnergy Corp. and its other subsidiaries are not part of the Chapter 11 process.

"The six million customers of our regulated utilities will continue to receive the same reliable service, while our regulated generation facilities will continue normal operations, with the same longstanding commitment to safety and the environment,” said Charles E. Jones, president and chief executive of FirstEnergy Corp. “We will remain focused on creating long-term value for customers, employees and shareholders."

Collectively, Chapter 11 filers FES and FENOC own and operate two coal-fired plants, one dual fuel gas/oil plant, one pet-coke fired plant and three nuclear power plants in the competitive, or non-regulated, power-generation industry. Furthermore, FES and FENOC believe that the $550m-plus they have is sufficient liquidity to continue normal operations and meet post-petition obligations to employees, suppliers and customers.

In addition, FES has stated that it will continue seeking legislative and regulatory relief at the state and federal level. The relief is being sought under Section 202(c) of the Federal Power Act, which gives the secretary extraordinary powers to address emergencies.

"Given the prospective timing of federal and state review and our ongoing cash needs and debt service obligations, the FES and FENOC boards of directors determined that the Chapter 11 filing represents our best path forward as we continue to pursue opportunities for restructuring, asset sales and legislative and regulatory relief,” said Donald R. Schneider, President of FES.

Serving as legal counsel to FES and FENOC is Akin Gump Strauss Hauer & Feld LLP. Lazard Freres & Co. is serving as investment banker and Alvarez & Marsal North America, LLC is serving as restructuring adviser. Chief restructuring officer for both entities is Charles Moore.  

Mr Schneider concluded: “We believe that the decision to facilitate an orderly financial restructuring under Chapter 11 will best serve our customers, employees and business partners."

News: Coal Generator That Trump Tried to Save Files for Bankruptcy

Oil giants Concho and RSP merge in $9.5bn deal

BY Fraser Tennant

In a deal which creates the largest crude oil and natural gas producer from unconventional shale in the Permian Basin, Concho Resources Inc. is to acquire RSP Permian, Inc. in a transaction valued at approximately $9.5bn.

Under the terms of the definitive merger agreement, shareholders of RSP will receive 0.320 shares of Concho common stock in exchange for each share of RSP common stock. Upon closing of the transaction, Concho shareholders will own approximately 74.5 percent of the combined company and RSP shareholders will own approximately 25.5 percent.

The deal is also expected to: (i) expand Concho’s strategic portfolio in the Permian Basin to approximately 640,000 net acres; (ii) drive significant operational synergies through development optimisation, shared infrastructure and capital efficiencies, with a present value of more than $2bn; (iii) realise over $60m in annual corporate level savings; (iv) enhance Concho’s three-year annualised production growth outlook within cash flow from operations; and (v) reinforce Concho’s leadership position as the premier Permian pure-play company.

The transaction has been unanimously approved by the board of directors of each company.

“I am extremely proud of the RSP team and the high-quality position we built in the Permian Basin,” said Steve Gray, chief executive of RSP. “As RSP has grown and we have seen the resource play develop in the Permian, we have come to recognise that combining with a company with the scale, investment grade balance sheet and operational excellence of Concho will unlock even more value for shareholders. The combined company will have the vision and necessary financial strength to efficiently develop the tremendous resource potential of these assets with large-scale projects.”

Expected to be completed in the third quarter of 2018, the transaction is subject to the approval of both Concho and RSP shareholders, the satisfaction of certain regulatory approvals and other customary closing conditions. Upon closing, Concho’s board will be expanded to 11 directors and will include one independent member of the RSP board.

Concho will continue to be headquartered in Midland, Texas.

Tim Leach, chairman and chief executive of Concho, said: “This combination allows us to consolidate premier assets that seamlessly fold into our drilling programme, enhance our scale advantage and reinforce our leadership position in the Permian Basin, all while strengthening our platform for delivering predictable growth and returns.”

News: Oil producer Concho to buy rival RSP in Permian push

Rise of the cryptojackers

BY Richard Summerfield

2017 saw the emergence of cryptojacking as the latest cyber security challenge to be overcome, according to Symantec’s 2018 Internet Security Threat Report.

The report analyses data from the Symantec Global Intelligence Network, the largest civilian threat collection network in the world, which tracks over 700,000 global adversaries, records events from 126.5 million attack sensors worldwide, and monitors threat activities in over 157 countries and territories.

Cryptojacking, where computers are unknowingly co-opted for the use of mining cryptocurrencies, increased 8500 percent in 2017, with 1.7 million attacks registered in December alone.

Cyber criminals are increasingly turning to cryptojacking due to its low barriers to entry; indeed, only a few lines of code are required to infiltrate a machine. Cryptojackers are able to use coinminers to steal a device’s processing power and cloud CPU usage in order to mine cryptocurrency. Once a device has been hijacked, it will slow down, overheat and in some cases, be rendered unusable.

On an organisational level there are additional issues caused by cryptojacking. According to the report, “Corporate networks are at risk of shutdown from coinminers aggressively propagated across their environment. There may also be financial implications for organisations who find themselves billed for cloud CPU usage by coinminers.”

“Cryptojacking is a rising threat to cyber and personal security,” said Mike Fey, president and chief operating officer of Symantec. “The massive profit incentive puts people, devices and organisations at risk of unauthorised coinminers siphoning resources from their systems, further motivating criminals to infiltrate everything from home PCs to giant data centres.”

“Now you could be fighting for resources on your phone, computer or IoT device as attackers use them for profit,” said Kevin Haley, director of Symantec Security Response. “People need to expand their defences or they will pay for the price for someone else using their device.”

Software supply chain attacks also boomed in 2017. An increasing number of attackers are injecting malware into supply chains. Last year saw a 200 percent increase in such attacks – the equivalent of one attack every month, up from the four attacks a year recorded previously.

Mobile malware is also continuing to grow. The number of new mobile malware variants increased by 54 percent last year. ‘Grayware’ applications are also affected mobile users, though grayware is not entirely malicious, it can be problematic and it is becoming increasingly common. Grayware use increased by 20 percent in 2017.

Report: 2018 Internet Security Threat Report