Tuesday, September 1, 2020

Will Nestle Merger Boost Aimmune Therapeutics Health?

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News shaping
the markets today

     

What’s happening: Shares of Aimmune Therapeutics more than doubled on Monday after Switzerland's Nestle S.A. announced plans to acquire the biopharma company in a $2.6 billion deal.

What happened: Aimmune Therapeutics, the maker of the first peanut allergy treatment approved by the US FDA, has been struggling due to a slowdown in the launch of its therapy amid the pandemic.

Through this merger, Nestle is hoping to eliminate peanut allergy in its target market. The acquisition of Aimmune Therapeutics is being made via the Swiss food and drink processing giant’s subsidiary NHSc (Nestle Health Sciences).

Why it matters: Aimmune’s Palforzia is the only treatment approved by the FDA that helps in lowering allergic reactions caused by peanuts in children. The company’s treatment received approval on January 31 from the FDA.

The KitKat chocolate maker’s NHSc unit made an initial investment of $145 million in Aimmune in November 2016, which was gradually increased till January 2020. When making the acquisition offer, Nestle already held a 19.6% stake with voting rights in Aimmune Therapeutics, with its total investment of $473 million.

Nestle will be paying around $2 billion to acquire the outstanding stake in the company. The offer price of $34.50 per share represents a premium of 174% to Aimmune’s closing price of $12.60 on August 28.

Nestle expects the merger to boost its organic growth in 2021 and contribute to cash earnings by 2022/2023. If approved, the companies are expecting the agreement to close in the fourth quarter.

How shares performed so far: Shares of Aimmune Therapeutics jumped 171.6% to close at $34.22 on Monday following the announcement of the deal. The stock has surged 106% over the past three months.

What to watch: Investors will be keeping a close eye on the progress of the deal, which is expected to receive clearance from the concerned authorities. Markets will look out for news related to the progress of the first peanut allergy treatment’s launch, with demand expected to spike once the covid-19 crisis is over.

The Markets Today

     

The Euro will be in focus today, ahead of a basket of economic reports from the region.

Context: The euro closed the month on a strong note versus the US dollar, with the shared currency recording gains for the fourth consecutive month.

Details: The EUR/USD forex pair has been delivering a strong performance driven by the European covid-19 relief package introduced in July and weakness in the US dollar.

The Federal Reserve’s announcement of a shift in its monetary policy to allow interest rates to remain low for a longer period also provided momentum to the euro.

Investor sentiment held up despite Italy reporting a 12.8% economic contraction in the three months ending June 30, versus a revised 5.5% decline in the earlier period. Germany’s consumer prices came in unchanged in August, compared to July’s 0.1% decline.

The EUR/USD closed the previous session at $1.1936, recording a rise of around 1.5% in August. The shared currency also traded higher by 0.5% to $1.1991 during today’s Asian session.

What to watch: Markets await reports on manufacturing PMI, inflation rate and unemployment rate from the Eurozone. The region’s annual inflation rate is expected to decline to 0.2% in August from 0.4% in July, while the unemployment rate is estimated to increase to 8% from the previous month’s 7.8%. Analysts expect a reading of 51.7 for the IHS Markit manufacturing PMI.

Markets will continue to assess the covid-19 numbers, with total cases surging past 25.4 million globally.

Other Markets: US indices trading closed mixed on Monday, with the Dow Jones index and S&P 500 down by 0.78% and 0.22%, respectively, and the Nasdaq 100 gaining 0.68%.

Support & Resistances
for Today

     

market snapshot

     

Futures at 0400 (GMT)

What else to watch today

     

Germany’s unemployment rate, manufacturing PMI and unemployment rate, Spain’s tourist arrivals and manufacturing PMI, Turkey’s manufacturing PMI, Italy’s manufacturing PMI and unemployment rate, France’s manufacturing PMI and new car registrations, UK’s manufacturing PMI, consumer credit, mortgage approvals and mortgage lending, South Africa's Absa manufacturing PMI and total vehicle sales, Russia’s manufacturing PMI, Mexico’s business confidence and manufacturing PMI, Brazil’s GDP, balance of trade and manufacturing PMI, Canada’s manufacturing PMI as well as the US Redbook index, manufacturing PMI, ISM manufacturing PMI, construction spending and API crude oil stockpiles.