Swiss food and beverage giant Nestle (OTCPK:NSRGY) is paying more than $2 billion for Aimmune Therapeutics, Inc. (AIMT) to bag the California-based company's drug Palforzia, a peanut allergy medication that was approved by the Food and Drug Administration earlier this year.
Nestle already owned more than 25% of Aimmune. The all-cash deal values the company at $2.6 billion. At $34.50 per share, the price amounts to a 174% premium on Aimmune's closing price as of Friday, as Nestlé said in the news release. The purchase is expected to close in the fourth quarter of 2020.
Adding Aimmune will beef up the nine-year-old Nestle health sciences unit and the company's food allergy offerings, according to an article in FiercePharma. The research firm Evaluate Pharma said Palforzia, the only approved peanut allergy therapy on the market, could hit sales of more than $1.25 billion by 2024.
Analysts have mixed opinions about the drug's potential. Early sales have been slowed by Covid-19 and associated lockdowns, Piper Sandler analysts wrote in a note to clients after the deal was announced. They think that should change when allergy clinics start running at full steam:
"While we understand the uncertainty that Covid-19 disruption presents, we also think as pandemic-related disruption recedes and Palforzia's true demand begins to manifest, it will be deemed that Nestle got itself a bargain here."
Other analysts have offered a different take on the drug's prospects, with some being concerned that uptake could be hindered by the necessity of frequent doctor visits to administer the drug and its gastrointestinal side effects.
In a note to investors in March 2019, a Credit Suisse analyst said physicians were largely positive on the clinical need for Palforzia and questioned how successful the drug will be. At the same time, Credit Suisse thinks there's plenty of interest from physicians and patients and the side effects appear to be "manageable."
Food allergies are not only disruptive to everyday life, but they can also be life-threatening. Up to 240 million people worldwide suffer food allergies, peanut allergy being the most common. "Palforzia offers a long-sought-after solution for peanut-allergic patients other than avoidance," Nesle said.
Nestle appears to be showing renewed interest in the prescription drug business. It was only a year ago that the company sold its dermatology brand to privately held Galderma and spun off its gastrointestinal disease diagnostics and treatment developer Prometheus Laboratories.
But earlier this year, Nestle jumped back into the fray by buying two Allergan (AGN) pancreatic replacement enzymes, Zenpep and Viokace, that the Irish drugmaker needed to divest to get regulatory okay for its $63 billion merger with AbbVie Inc.(ABBV).
With a host of well-known consumer brands, Nestle is still primarily a food and beverage company, the biggest in the world. Yet, the company seems intent on expanding its health sciences unit.
Shareholders must be pleased with Nestle's performance. The stock is trading just shy of its 52-week high of $122.63. The firm, with a market cap of more than $344 billion, pays a dividend of $2.77, yielding 2.30%.
Of the 12 Wall Street analysts who have issued ratings and price targets for Nestle in the past year, two have the stock as a Sell, four as a Hold and six as a Buy.
Disclosure: The author holds no position in any of the stocks mentioned in this article.
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