Born from frozen camel blood, biotech firm Ablynx is target of US$3b bid

[LONDON] It began almost three decades ago with a container of frozen camel blood in Belgium, took a detour through Morocco and progressed to a stock listing in New York last year. The latest chapter in Ablynx NV's story: a takeover bid worth about US$3.2 billion.

The biotech company now targeted by Danish diabetes-drug maker Novo Nordisk stemmed from an accidental discovery. A group of students at the Free University of Brussels in the late 1980s needed animal tissue for a project and found a sample of camel blood in the freezer, said Serge Muyldermans, a researcher who helped found Ablynx.

Mr Muyldermans and his colleagues noticed something unusual that sparked their curiosity. The animal's immune-system proteins were noticeably simpler and smaller - and therefore able to squeeze into tighter spots - than the human version. Yet, as the group zeroed in on the antibodies of camels and llamas, few of their peers took them seriously, Mr Muyldermans recalled.

"Instead of going to animals closer to humans, we went to animals further away," said the scientist, who still owns a small number of shares and isn't involved in running Ablynx.

"In the beginning, people were laughing at us."

Determined to continue their studies, the researchers found a Moroccan university willing to procure a camel, Mr Muyldermans said. When that animal inexplicably disappeared, a lab worker in Belgium who had ties to the North African country began travelling back and forth, bringing samples from an uncle's camel, he said.

The persistence paid off when Ablynx engineered a new kind of antibody treatment, called nanobodies. Based on a discovery by Raymond Hamers, then a Free University professor, nanobodies are just one-tenth the size of the human protein. Formed in 2001, the biotech is awaiting approval to launch its first product, a treatment for a rare bleeding disorder.

Since October, when Ablynx published results of a late-stage clinical trial, the shares have tripled, closing at 37.12 euros Friday in Brussels. The company burst into the limelight earlier this month when Novo went public with an offer of 28 euros a share in cash upfront and potential additional payments of as much as 2.50 euros per share if two other experimental drugs meet business goals. Ablynx refused the offer.

Van Herk Investments, the target's top owner with more than 10 per cent of the stock, says the nanobody technology deserves more, and higher bids should be considered.

"The concept is very innovative," Dharminder Chahal, a biotech adviser to Van Herk, said in an interview this month.

"It's a platform also that has the promise of delivering a whole line of new drugs."

Novo is preparing a sweetened bid, and may present it as early as this week, Bloomberg reported Friday, citing people with knowledge of the matter. Ablynx is seeking more than 40 euros a share and reaching out to other potential suitors including Sanofi, Roche Holding and US-based Merck & Co to gauge interest, the people said.

Ablynx is aiming nanobodies at a range of conditions including inflammation, respiratory disorders and cancer. Its lead drug candidate is caplacizumab, developed to treat a rare and life-threatening disorder called acquired thrombotic thrombocytopenic purpura. The disease causes clots to form in small vessels that can block blood flow to the brain and heart, according to the US National Heart, Lung and Blood Institute.

About 7,500 people are struck annually in North America, Europe and Japan, according to Ablynx. Untreated, the condition kills about 90 per cent of patients. The current therapy, a form of blood exchange, can reduce the death rate to less than 20 per cent.

The recent surge in Ablynx's stock began when the Ghent, Belgium-based company released results in October from a clinical trial called Hercules showing that caplacizumab, when added to standard therapy, was superior to the conventional approach alone, with an overall reduction in deaths related to purpura, recurrences and clots. Novo has said it began bidding for the biotech in early December.

In Novo's hands, annual sales of caplacizumab may climb to as much as 900 million euros (S$1.5 billion), according to Sanford C Bernstein & Co analysts led by Wimal Kapadia. In an interview in November, Ablynx chief executive officer Edwin Moses said a takeover might lead to the loss of key people and its culture. Ablynx has a range of partnerships with companies including Novo, Sanofi, Novartis and Merck, and has opened an office in Philadelphia to lead the roll-out of caplacizumab. The company has filed for approval in the EU and said it intends to file in the US.

"We have a plan as an independent company," Mr Moses said in London. "It's not our job to stop ourselves being acquired, but it's our job to give shareholders and people at the company a reason for wanting to be with Ablynx rather than being a little part of something else."

Ablynx would be Novo's biggest-ever purchase, and would strengthen a relatively small unit that sells medicines for blood disorders. It's too early to speculate on potentially raising the bid, Novo's chief financial officer Jesper Brandgaard said in an interview this month. That usually depends on gaining more information through board discussions, which Novo at the time was seeking, he said.

"Once you get into those negotiations, a price that is meaningful to both seller and buyer tends to be found, and that price tends to be higher than the initial offer," he said.

Bernstein values caplacizumab at as much as 3.2 billion euros, with even modest success in other assets adding 1.3 billion euros. Ablynx, which went public in 2007 in Brussels, raised US$230 million in October in a US share sale.

Mr Muyldermans wouldn't be surprised if the company, born by chance from a Belgian freezer, is sold.

"If you're growing, sooner or later you are going to be taken over by a larger company," he said. "As long as they pay a good price, it's fine."

BLOOMBERG