Merger Arbitrage Mondays – Three Healthcare Deals Announced at JPMorgan’s Healthcare Conference

Merger Arbitrage activity increased last week with five new deals announced and three deals closing.

JPMorgan Chase CEO Jamie Dimon said in an interview last week that its Annual Healthcare Conferences are a “birthplace of a lot of deals”.

Three health care sector deals were announced on the first day of JP Morgan’s 41st annual Healthcare Conference that took place between January 9, 2023 – January 12, 2023. All three deals involve contingency payments, a strategy for risk-mitigations and a way to sweeten the deal to get it over the finish line. We have had mixed results with contingent value rights (CVRs) and like to participate in them when they are like a free lottery ticket as discussed in our November 2022 mid-month update.

The three target companies – Cincor, Amryt and Albireo received significant premiums at a time when their stocks were in decline. Considering cross-border deal issues, it is important to keep in mind that all three acquirers are European companies.

The Acquisition of CinCor Pharma (CINC) by AstraZeneca (AZN)

On January 9, 2023, CinCor, a clinical-stage biopharmaceutical company entered into an agreement to be acquired by UK based AstraZeneca for a transaction valued at approximately $1.3 billion, representing a 121% premium to its closing price on January 6, 2023.

CinCor’s stock plummeted in November 2022, when its Phase 2 HALO trial for antihypertensive agent baxdrostat did not meet the main goal. Baxdrostat (CIN-107) is CinCor’s lead asset. The drug, an oral small molecule inhibitor of aldosterone synthase, is in clinical development for the treatment of hypertension and primary aldosteronism.

Under the terms of the merger agreement, ‘AstraZeneca is obligated to initiate a tender offer by January 23, 2023 to acquire all of CinCor’s outstanding shares for a price of $26.00 per share in cash at closing plus a non-tradable contingent value right of $10.00 per share in cash payable upon a specified regulatory submission of a baxdrostat product. The Total consideration including the contingent value right, if the milestone is achieved, would be approximately $1.8 billion and a 206% premium over CinCor’s closing market price on January 6, 2023.’

Marc de Garidel, Chief Executive Officer at CinCor, said: “We are excited about the proposed acquisition of CinCor Pharma by AstraZeneca as we believe it offers the prospect of accelerating the development timeline and expanding the breadth of benefits patients with cardiorenal diseases might obtain from baxdrostat, if approved.“

The Acquisition of Amryt Pharma (AMYT) by Chiesi Farmaceutici S.p.A.

Amryt Pharma, a commercial-stage biopharmaceutical company, entered into a definitive agreement to be acquired by Italy-based Chiesi Farmaceutici on January 8, 2023. Under the terms of the agreement, Chiesi will acquire Amryt at US$14.50 per ADS, plus Contingent Value Rights of up to an additional US$2.50 per ADS based on certain Filsuvez® milestones being achieved. The transaction value represents a premium of 107% to Amryt ADS’ closing price on January 6, 2023.

Amryt focuses on treatments to help improve the lives of patients with rare and orphan diseases. Filsuvez, one of Amryt’s designated orphan drugs, recently received approval in Europe for the treatment of epidermolysis bullosa (EB), an inherited skin disease. Other approved treatments of Amryt include Mycapssa (octreotide), a treatment for acromegaly, Metreleptin, a treatment for partial lipodystrophy (PL), and Lomitapide, a lipid-lowering medication for familial hypercholesterolemia (HoFH).

The deal is expected to be completed in the first half of 2023. According to the merger agreement, ‘CVRs of up to US $2.50 per ADS are payable if certain milestones related to Amryt’s product Filsuvez® are achieved before December 31, 2024, consisting of US$1.00 per ADS upon FDA approval of Filsuvez® and US$1.50 per ADS upon successful receipt of a Priority Review Voucher from the FDA.’

The Acquisition of Albireo Pharma (ALBO) by Ipsen

Albireo Pharma, a rare disease company focused on the development of novel bile acid modulators to treat pediatric and adult liver diseases entered into a definitive merger agreement to be acquired by French biopharmaceutical company, Ipsen on January 9, 2023.

Bylvay (odevixibat), a potent, non-systemic ileal bile acid transport inhibitor (IBATi) was approved by the FDA in 2021.

Under the terms of the agreement, ‘Ipsen will initiate a tender offer to acquire all outstanding shares of Albireo at a price of $42.00 per share plus one contingent value right (CVR) per share. Each CVR will entitle its holder to deferred cash payments of $10.00 per CVR payable upon the U.S. Food and Drug Administration (FDA) approval of Bylvay in the Biliary Atresia indication at the latest by 31 December 2027, allowing for a potential increase in the number of patients in the BOLD study. The $42.00 per-share cash consideration represents a premium of 104% compared to Albireo’s 1-month volume-weighted average price of $20.60 preceding announcement of the transaction.’ The deal is expected to be completed by the end of the first quarter of 2021.

You can find all the active deals listed below in our Merger Arbitrage Tool (MAT) which automatically updates itself during market hours.

Merger Arbitrage

Deal Statistics:

New Merger Arbitrage Deals:

1. The acquisition of Amryt Pharma (AMYT) by Chiesi Farmaceutici S.p.A. for $1.25 billion. Under the terms of the merger agreement, Chiesi will purchase all outstanding shares of Amryt for a purchase price per American Depositary Share of Amryt, which each represent 5 Amryt ordinary shares, of US$14.50 (or US$2.90 per ordinary share) in cash, plus Contingent Value Rights of up to US$2.50 per ADS (or up to US$0.50 per ordinary share) payable if certain milestones related to Amryt’s product Filsuvez® are achieved.
2. The acquisition of Albireo Pharma (ALBO) by Ipsen for $952 million. Under the terms of the agreement, Ipsen will acquire all outstanding shares of Albireo at a price of $42.00 per share in cash at the closing of the transaction plus one contingent value right (CVR) per share. Each CVR will entitle its holder to deferred cash payments of $10.00 per CVR payable upon the U.S. Food and Drug Administration (FDA) approval of Bylvay in the Biliary Atresia indication at the latest by 31 December 2027, allowing for a potential increase in the number of patients in the BOLD study.
3. The acquisition of CinCor Pharma (CINC) by AstraZeneca (AZN) for $1.3 billion. Under the terms of the agreement, AstraZeneca is obligated to initiate a tender offer by January 23, 2023 to acquire all of CinCor’s outstanding shares for a price of $26.00 per share in cash at closing plus a non-tradable contingent value right of $10.00 per share in cash payable upon a specified regulatory submission of a baxdrostat product.
4. The acquisition of Paya Holdings (PAYA) by Nuvei Corporation (NVEI) for $1.3 billion or $9.75 per share in cash. We added PAYA as a potential deal to the Deals in the Works section on June 17, 2022, and the price after the news of the potential deal came out was $5.37.
5. The acquisition of Duck Creek Technologies (DCT) by Vista Equity Partners for $2.6 billion or $19.00 per share in cash.

Deal Updates:

1. On January 9, 2023, Vivint Smart Home (VVNT) and NRG Energy (NRG) announced that the applicable waiting period under the HSR Act will expire on January 19, 2023.
2. On January 9, 2023, Maverix Metals (MMX) announced that the deadline for shareholders to elect to receive either “all cash” or “all shares” as their form of consideration under the Plan of Agreement involving Maverix and Triple Flag Precious Metals (TFPM) has been extended to January 11, 2023.
3. On January 10, 2023, MaxLinear (MXL) CFO Steve Litchfield said at a Needham conference that the company’s planned purchase of Silicon Motion Technology (SIMO) is on track to be completed by mid 2023. He said, “Everything seems to be on track or moving as expected. Most of these deals are taking close to 12 months and that’s why we set the time frame where it is and it seems to be playing out that way.”
4. On January 10, 2023, First Brands Group launched its tender offer with respect to its merger agreement with Horizon Global Corporation (HZN). The tender offer will expire on February 6, 2023.
5. Coupa Software Incorporated (COUP) and Thoma Bravo filed their respective notification and report Forms with the FTC and the Antitrust Division of the DOJ on December 21, 2022. They also made the required filings with Germany, Austria, and South Africa.
6. On January 10, 2023, Standard General highlighted in a press release, that it has a broad and strong support for its pending acquisition of TEGNA (TGNA).
7. On January 12, 2023, Velodyne Lidar (VLDR) announced that independent proxy advisory firm Glass, Lewis & Co. has recommended that shareholders vote “FOR” the proposed merger with Ouster (OUST) at the company’s upcoming Special Meeting of Stockholders, scheduled for January 26, 2023.
8. On January 13, 2023,  JetBlue (JBLU) set January 25, 2023, as the record date for the January 2023 prepayment to Spirit (SAVE) stockholders of $0.10 per Spirit share, with payment of the January 2023 Additional Prepayment to occur on January 31, 2023. Pursuant to the Merger Agreement, Spirit stockholders as of the January 25, 2023, record date will be entitled to receive the January 2023 Additional Prepayment.
9. January 13, 2023: The Canadian House of Commons industry and technology committee is planning to initiate another study of the proposed Rogers (RCI) Shaw (SJR) merger. Conservative MP Rick Perkins and New Democrat MP Brian Masse confirmed to The Canadian Press that the committee plans to meet on January 25 to review the proposed transaction.
10. On January 13, 2023, Standard General sent a letter to Sen. Elizabeth Warren (D-MA) seeking to meet regarding her comments on the Tegna (TGNA) deal.

Approvals

1. On January 6, 2023, Myovant Sciences (MYOV) and Sumitovant Biopharma announced that waiting period under the HSR Act expired on January 2, 2023.
2. On January 9, 2023, Umpqua Holdings Corporation (UMPQ) and Columbia Banking System (COLB) received approval from the Federal Deposit Insurance Corporation. The merger is expected to be completed by the end of February and the outside date has been extended to March 11, 2023.
3. On January 12, 2023, shareholders of ForgeRock (FORG) approved the company’s merger with Thoma Bravo at a special meeting of shareholders.
4. On January 12, 2023, Shareholders of Maverix Metals (MMX) approved the company’s merger with Triple Flag Precious Metals Corp. (TFPM). Maverix also received clearance from the Canadian Competition Bureau.
5. On January 13, 2023, Yamana Gold (AUY) received positive recommendations from both Institutional Shareholder Services and Glass, Lewis & Co. in support of its merger agreement with Pan American Silver Corp (PAAS) and Agnico Eagle Mines Limited (AEM).

Hurdles:

1. On January 11, 2023, Sen. Elizabeth Warren (D-MA) urged the Federal Communications Commission to block TEGNA’S (TGNA) planned sale to Standard General due to competition concerns.
2. January 12, 2023: According to Bloomberg, Google (GOOG) and Nvidia (NVDA) have expressed concerns to the FTC about Microsof’s (MSFT) acquisition of Activision Blizzard (ATVI), adding fuel to the government’s case against the $69 billion deal.

Shareholders Meeting Schedule:

1. Apollo Endosurgery (APEN) – February 9, 2023
2. Limestone Bancorp (LMST) – February 23, 2023
3. Malvern Bancorp (MLVF) – February 23, 2023

Closed Deals:

1. The acquisition of Imago BioSciences (IMGO) by Merck (MRK) on January 11, 2022. It took 51 days for this deal to be completed.
2. The acquisition of UserTesting (USER) by Thoma Bravo and Sunstone Partners on January 12, 2023. It took 77 days for this deal to be completed.
3. The acquisition of Sierra Wireless (SWIR) by Semtech Corporation (SMTC) on January 12, 2023. It took 163 days for this deal to be completed.

Terminated Deals:

1. On January 9, 2023, Frontline (FRO) announced that it no longer pursues a combination between Frontline and Euronav (EURN) and has terminated the combination agreement.

Weekly Spread Changes:

The table below shows weekly spread changes between January 6, 2023, and January 13, 2023.

Top 10 Merger Arbitrage deals with the largest spreads:

Please do your own due diligence on deals with large spreads. Some of these large spreads might be related to regulatory issues or because of the way the deal is structured. We classify some of these deals as “special situation” deals in our merger arbitrage tool and provide additional details to help with the analysis. There may be unique situations related to special dividends, spinoffs, proration, etc. that need to be accounted for when looking at these spreads.

Deals In The Works

Three new potential Merger Arbitrage deals were added to the ‘Deals In The Works‘ section last week.

1. On January 5, 2023, Boxed (BOXD) announced that its Board of Directors has launched a process to explore strategic alternatives, including, among other alternatives, a possible sale of the company.
2. On January 9, 2023, Bloomberg reported that CVS Health Corp. (CVS) is exploring an acquisition of Oak Street Health Inc. (OSH).
3. On January 10, 2023, The Wall Street Journal reported that, Franchise Group (FRG), the investment firm that owns retailers including Vitamin Shoppe, is considering going private.

Updates

1. January 11, 2023: According to Bloomberg, Univar Solutions (UNVR) has attracted interest from potential bidders including Apollo Global Management (APO) and Platinum Equity

SPAC Arbitrage

SPAC IPO

1. On January 13, 2023, Israel Acquisitions Corp (ISRLU) announced pricing of $125 Million Initial Public Offering.

SPAC Business Combination

1. On January 6, 2023, iCoreConnect Inc., a SaaS company with an enterprise and healthcare workflow platform, and FG Merger Corp. (FGMC), entered into a business combination agreement.
2. On January 9, 2023, Calidi Biotheraputics and First Light Acquisition Corp (FLAG) entered into a definitive merger agreement.
3. On January 9, 2023, Psyence Group and Newcourt Acquisition Corp (NCAC) entered into a definitive business combination agreement.
4. On January 13, 2023, World View, a global leader in stratospheric exploration and flight, and Leo Holdings Corp. II (LHC) entered into a definitive business combination agreement.

Terminated

1. On January 6, 2023, IG Acquisition Corp. (IGAC) terminated its business combination with mobile gaming platform PlayUp and will instead liquidate its trust.

List of all pending Merger Arbitrage deals:

Disclaimer: I have long positions in Activision Blizzard (ATVI), Spirit Airlines (SAVE), Atlas Air Worldwide (AAWW), First Horizon (FHN), Tower Semiconductor (TSEM) and TEGNA (TGNA). Please do your own due diligence before buying or selling any securities mentioned in this article. We do not warrant the completeness or accuracy of the content or data provided in this article.