The FINANCIAL — Nestle agreed to buy Aimmune Therapeutics Inc. for $2.6 billion, adding a promising peanut allergy treatment to its portfolio of coffee, snacks and water. The Swiss owner of Nespresso will pay $34.50 a share for the U.S. biotech firm, almost triple its last closing price. Aimmune makes a therapy to help reduce allergic reactions to peanuts in children and teens by exposing them to tiny doses over time. FDA approved Aimmune Therapeutics’ Palforzia which makes it the first medication approved for food allergies in teens and children.
Nestlé and Aimmune Therapeutics, Inc. a biopharmaceutical company developing and commercializing treatments for potentially life-threatening food allergies (Aimmune), have entered into a definitive agreement pursuant to which Nestlé Health Science (NHSc) would acquire Aimmune. Aimmune’s Palforzia is the first and only FDA-approved treatment to help reduce the frequency and severity of allergic reaction to peanuts, including anaphylaxis, in children aged 4 through 17. The acquisition is an extension of NHSc’s food allergy portfolio, creating a broader spectrum of solutions for children living with food allergies.
Nestle plans to pay $2 billion to gain full ownership of peanut allergy treatment maker Aimmune Therapeutics, as the Swiss company expands its fast-growing health science business. Known for its KitKat chocolate bars and Nescafe instant coffee, Nestle set up Nestle Health Science (NHS) in 2011 to open up a new area of business between food and pharma. Nestle said in a statement that its offer for Aimmune values the California-based biopharmaceutical firm, which it has been working with since 2016 and in which it already has a stake of around 25.6%, at $2.6 billion, CNBC reported.
Food allergies are not only disruptive to everyday life, they can be life threatening. Up to 240 million people worldwide suffer with food allergies, peanut allergy being the most common. Palforzia offers a long sought-after solution for peanut-allergic patients other than avoidance.
“This transaction brings together Nestlé’s nutritional science leadership with one of the most innovative companies in food allergy treatment,” said Nestlé Health Science CEO Greg Behar. “Together we will be able to offer a wide range of solutions that can transform the lives of people suffering from food allergies around the world.”
NHS head Greg Behar told Reuters in an interview that Aimmune has $261 million in cash and $134 million in debt. With their prior investment of $473 million in Aimmune, they’ll be making a cash payment of under $2 billion. Behar said that Aimmune’s Palforzia peanut allergy treatment, which recently gained U.S. approval for children, has sales potential of $1 billion and the deal is expected to add to organic growth in 2021 and to cash earnings by 2022-2023. The NHS business was on track to more that double sales by 2022, from $2.2 billion in 2014 and was expected to close 2020 at 3.3 billion Swiss francs, according to Greg Behar. Palforzia has 12 years of exclusivity, global rollout will follow and they have the technology platform for other food allergies in development, – he added.
The deal is Nestle’s biggest push yet into health science. Chief Executive Officer Mark Schneider has stoked Nestle’s interest in the field while shedding slower-growing businesses in areas such as bottled water and sweets. The deal is a “significant milestone in Nestle Health Science,” said Jean-Philippe Bertschy, an analyst at Bank Vontobel in Zurich. “Nestle has been very vocal lately in its intention to strengthen its position with acquisitions.” Aimmune’s treatment, called Palforzia, exposes patients to small doses of peanut protein and won approval from the U.S. Food and Drug Administration in February. Analysts estimate its revenue may exceed $1 billion in 2025. Nestle has had a research partnership with Aimmune for five years and first bought shares in the company in 2016. The agreed price is 7% below Aimmune’s 52-week high, and Covid-19 has had a big impact on the business, which began selling Palforzia just as the U.S. was entering lockdowns. Behar estimates the treatment will exceed $1 billion in revenue within five to six years, according to Bloomberg.
NHSc currently has a total investment in Aimmune of USD473 million, an approximate 25.6% equity ownership stake. Around 19.6% is voting common stock and the balance non-voting preferred stock. NHSc made its initial investment of USD145 million in Aimmune in November 2016, followed by further investments of USD30 million in February 2018, USD98 million in November 2018 and USD200 million in January 2020.
Under the terms of the merger agreement, Nestlé S.A.’s wholly-owned subsidiary, Société des Produits Nestlé S.A., will commence a cash tender offer to acquire all outstanding shares of Aimmune common stock that are not already owned by NHSc for USD34.50 per share in cash, representing a total enterprise value, including the shares of Aimmune held by NHSc, of approximately USD2.6 billion. The USD34.50 per share acquisition price represents a 174% premium to Aimmune’s closing share price on August 28, 2020 of USD12.60.