Danske Markets Corporate Finance

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Danske Markets Corporate Finance

  1. 1. The anatomy of the Financial Crisis May 2009
  2. 2. Danske Markets Corporate Finance Leading Nordic investment banking franchise Introduction Corporate Finance offers a wide range of value-adding investment banking services focused on:  Mergers & acquisitions  Divestments  Equity capital market transactions Long-term client relationships with Nordic and international companies, private equity firms, governments and institutional investors We identify and add long-term value for clients:  Deep knowledge of the Nordic markets in combination with the broad platform of Danske Bank  Extensive transaction experience  Innovative solutions and outstanding execution  More than 50 professionals based in Copenhagen, Helsinki, Oslo and Stockholm  International M&A and ECM partnership networks 1
  3. 3. Danske Markets More than Corporate Finance Corporate Finance Mergers & Acquisitions Equity Capital Markets  Exclusive sales and divestitures  Initial public offerings (IPOs)  Acquisitions  Follow-on offerings  Mergers and restructuring  Private placements  Public takeovers  Privatisations  Private equity and venture capital  Block trades transactions  Share buybacks  Defence advisory  Fairness opinions  Auction processes Equities & Research Trading Financial Markets Debt Capital Markets Rating Advisory Acquisition & Leveraged Finance 2
  4. 4. Danske Markets is a leading investment bank in the Nordic region Mergers & Acquisitions (M&A) and Equity Capital Markets (ECM)  We build client relationships through continuous dialogue with both existing and future clients, and work in partnership with our clients to achieve their strategic goals Danish M&A sell-side advisory 2004-2008 by €m volume Danish ECM transactions 2004-2008 by €m volume Value Value Rank Adviser No. of deals (€ m) Rank Bookrunner No. of deals (€ m) 1 Goldman Sachs 5 1 6 ,2 6 1 1 Danske M arkets 21 2 ,9 2 1 2 Danske M arkets 28 1 3 ,8 5 7 2 Nordea 12 1,948 3 Nordea 15 7 ,8 3 6 3 Morgan Stanley 3 1,448 4 Dresdner Kleinwort 4 5 ,5 3 0 4 Lehman Brothers 2 1,362 5 Deutsche Bank 6 5 ,1 9 7 5 BNP Paribas 1 1,118 6 Credit Suisse 5 4 ,9 8 7 6 Goldman Sachs 4 852 7 Carnegie 27 4 ,5 7 5 7 ABN AMRO 6 781 8 JPM organ 9 4 ,4 3 0 8 Citi 2 632 9 Deloitte 25 3 ,8 3 5 9 SEB Enskilda 7 507 10 M organ Stanley 7 3 ,7 1 6 10 FIH Partners 3 311 Danske Markets ranks #1 by value in both M&A and ECM among Nordic investment banks Sources: Mergermarket; Advising Target/Seller; Completed deals in Denmark since 1/1/2004; Dealogic; Completed deals as bookrunner since 1/1/2004; Values apportioned; Excluding investment management companies and listings on First North 3
  5. 5. The leading investment bank in Nordic Health Care offerings Unparalleled track record within healthcare, pharmaceutical & biotech companies Select healthcare & biotech transactions by Danske Markets  Overview of notable biotech and healthcare related offerings in which Danske Markets has recently participated: SEK 1.5 billion SEK 1.5 billion DKK 409 million DKK 91 million DKK 6.0 billion DKK 90 million Rights issue of Placing of Rights issue of Rights issue of LifeCycle Pharma Rights issue of Buyback of NeuroSearch shares Meda shares Getinge shares shares Pharmexa shares Lundbeck shares Joint Global Sole Lead Manager Sole Lead Manager Joint Bookrunner Sole Bookrunner Joint Bookrunner Coordinator DKK 771 million DKK 360 million DKK 64 million DKK 400 million DKK 557 million DKK 397 million Rights issue of Offering of primary Private placement of IPO of Rights issue of NeuroSearch shares TopoTarget shares new Pharmexa shares IPO of Exiqon LifeCycle Pharma NeuroSearch shares Global Coordinator Joint Bookrunner Joint Bookrunner Sole Bookrunner Joint Bookrunner Global Coordinator 4
  6. 6. ... and is a leading investment bank in Health Care M&A Unparalleled track record within healthcare, pharmaceutical & biotech companies Select healthcare M &A transactions by Danske Markets  Overview of notable biotech and healthcare related offerings in which Danske Markets has recently participated: DKK 108 million EUR 175 million EUR 80 million SEK 875 million EUR 125 million Amount undisclosed BioTie Therapies’ Acquisition of Instrumentarium’s Acquisition of 51% Acquisition of merger with Contral Schering’s divestment Carlsson Research by sale of its optical retail stake in Meddoc by Apoxis Pharma and Carbion of Leiras to Nycomed NeuroSearch division to Pearle Remedium Financial Adviser Financial Adviser Financial Adviser Financial Adviser Financial Adviser Financial Adviser DKK 4.4 billion EUR 210 million EUR 105 million SEK 158 million Amount undisclosed Amount undisclosed Public takeover of Acquisition of Tamro Radiometer by by Phoenix Acquisition of Orion by Public offer for Sale of Carmetec to Sale of AB BIODISK to Danaher Pharmahandel Kronans Droghandel Diffchamb by Raisio NNE bioMérieux S.A. Securities Adviser Financial Adviser Financial Adviser Financial Adviser Financial Adviser Financial Adviser 5
  7. 7. The anatomy of a financial crisis and consequences for biotech What is going on ? Why is this relevant for biotechs ? What will happen next ? 200 Rest of EU 5 largest companies 180 40% 45 160 M ar ket cap. development P/ E 40 140 89 85 84 Upstart & Index market cap development 2001=100 30% 87 120 Venture 35 DKK bn 20% 30 100 72 10% 67 67 71 25 80 67 62 P/ E 0% 20 60 95 100 101 -10% 40 86 15 67 55 53 49 -20% 20 44 43 10 -30% 5 0 06 07 07 07 07 08 08 08 08 09 -40% 0 20 20 20 20 20 20 20 20 20 20 Jan-01 Jul-01 Jan-02 Jul-02 Jan-03 Jul-03 Jan-04 Jul-04 Jan-05 Jul-05 Jan-06 Jul-06 Jan-07 Jul-07 Jan-08 Jul-08 Jan-09 4/ Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 IPO hopefuls /0 28  Credit crisis T  Re-financing crisis FCFt NPVo t  Liquidity crisis 1 WACC Listed t 1  Earnings crisis Companies  Credibility crisis  Share crisis 6
  8. 8. Healthcare pricing development what happening Highlights MSI EU Healthcare P/E Index  Jan 01 –Jul 02  Average PE 30X 40% 45  Increasing Earnings M ar ket cap. development P/ E 40 Index mar ket cap development 2001=100 30%  Jul 02 .- Jan 07 35  Average PE at 22X 20% 30  Increasing earnings 10%  Jan 07 – Jul 08 25 P/ E 0%  Average PE at 18X 20  Zero earnings growth -10% 15  Jul 08- now -20% 10  Average PE at 12X -30% 5  Declining earnings growth -40% 0 Jul-01 Jul-02 Jul-03 Jul-04 Jul-05 Jul-06 Jul-07 Jul-08 Jan-01 Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 7
  9. 9. Price development since 2007 – anatomy of a crisis Highlights Share price development (1/1/2007 – Today)  Jan -07 – Dec 07  Equities decline 150 OMX COPENHAGEN 20 INDEX NASDAQ 100 STOCK INDX  Bonds increase slightly FTSE 100 INDEX NORDIC GOVERNMENT BONDS  Jan 08 - Jul 08 125  Equities decline Jan 0 7 = Index 1 0 0 100  Bonds increase  Aug 08- Dec 08 75  Equities free fall  Bonds decline 50  Jan 09 – now 25  Equities flat  Bonds increase 0 Jan-0 7 Apr -0 7 Jul-0 7 Oct-0 7 Jan-0 8 Apr -0 8 Jul-0 8 Oct-0 8 Jan-0 9 Apr -0 9 8
  10. 10. European biotech – market value development Value under pressure Market Cap. as of 01/01 2007 (DKKbn) Market Cap. as of 28/04 2009 (DKKbn) Market cap European biotech (DKKbn) Acthelion Acthelion Genmab 1 6 .0 3 3 .2 Genmab 9 .7 200 Rest of EU 5 largest companies 3 3 .7 Crucell 9 .9 Crucell 7 .9 180 Intercell 6 .0 Intercell 7 .2 160 Stallergenes 3 .8 Stallergenes 4 .8 140 89 85 84 Basilea 1 0 .0 Basilea 3 .7 87 ALK -Abello 1 4 .8 ALK -Abello 3 .4 120 DKK bn Jerini 1 .7 Jerini 3 .4 72 100 Nicox 7 .4 Nicox 3 .2 67 67 80 71 Transgene 2 .2 Transgene 2 .5 67 62 Morphosys 3 .0 Morphosys 2 .3 60 Biovitrum 3 .9 95 100 101 Biovitrum 2 .3 40 86 Active Biotech 2 .6 Active Biotech 2 .1 67 55 53 49 2 .4 20 44 43 Thrombogenics Thrombogenics 1 .9 AntiSoma 2 .1 AntiSoma 1 .4 0 Bavarian Nordic 4 .3 Bavarian Nordic 1 .4 06 07 07 07 07 08 08 08 08 09 Prostrakan 1 .9 Prostrakan 1 .3 20 20 20 20 20 20 20 20 20 20 NeuroSearch 4 .7 4/ Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 NeuroSearch 1 .3 /0 Medigene 1 .8 Medigene 1 .1 28 Galpagos 1 .6 Galpagos 1 .1 Devgen 2 .5 Devgen 0 .9 Santhera 1 .5 Santhera 0 .8 Conclusions Medivir 0 .7 Medivir 0 .8 Karo Bio 1 .1 Karo Bio 0 .8 Orexo ExonHit 1 .9 1 .6 Orexo ExonHit 0 .7 0 .6  Full group has fallen 43% PhotoCure 1 .3 PhotoCure 0 .6 LifeCyclePharma 2 .6 LifeCyclePharma 0 .6  Top Five companies has fallen 30% Evotec 2 .8 Evotec 0 .5 Exiqon 1 .2 Exiqon 0 .5  Rest has fallen 56% Renovo 2 .8 Renovo 0 .4 GPC Biotech 5 .3 0 .4  1.1.07 4% of companies has MC GPC Biotech Pharming group 3 .0 Pharming group 0 .4 Innate 1 .5 Innate 0 .3 below1 bn DKK W ilex 1 .4 W ilex 0 .3 Cytos 3 .1  Now:47% has MC below 1 bn DKK Cytos 0 .3 TopoTarget 2 .4 TopoTarget 0 .2 Alizyme 1 .6 Alizyme 0 .1 Vernalis 1 .6 Vernalis 0 .1  Approximately 30% of companies Arpida 3 .2 BioXell 1 .5 Arpida BioXell 0 .1 0 .1 trading or below cash position Pharmexa 0 .9 Pharmexa 0 .1 9
  11. 11. Why is Biotech valuations declining NPV formula Illustrative example – Biotech Company Free cash flow (DKKm) 394 381 T FCFt NPVo t t 1 1 WACC 227 137 WACC = Equity cost + debt cost 58 25 = (risk premium*beta+risk free rate)*equity ratio + -19 (risk premium on debt+risk free rate) * debt ratio -48.1 -100 WACC impact on NPV 2006R 2007F 2008F 2009F 2010F 2011F 2012F 2013F 2014F  As WACC decreases NPV increase and vice versa  Above example was valued at DKK 1.9 bn with a WACC of 10%  During the financial crisis both risk premium and beta have increased – leading to a higher WACC  In the meantime equity beta and risk premium on debt have risen from 1.6 to 2.0 and 200 bps to 500 bps respectively – imposing a new WACC of 12.5%  Especially a problem for valuations of companies with long horizon to positive cash flows (such as biotech  The value of the company with the new WACC is DKK 1.4 bn – a decrease of 26% companies), as cash flows will be discounted more 10
  12. 12. European biotech Market Cap. as of 28/04 2009 (DKKbn) Those who have shall get more…….. Acthelion Mar ket Cap. Cash position Cash Bur n Shar e tur nover Genmab 9 .7 3 3 .7 Crucell 7 .9 28/ 04/ 09 Q1 2009 2008 04/ 09 Intercell 7 .2 (DKK bn. 105) (DKK bn. 19) (DKK bn. 10) (liquidity) Stallergenes 4 .8 100% Basilea 3 .7 ALK -Abello 3 .4 Jerini 3 .4 80% Nicox 3 .2 Transgene 2 .5 Morphosys 2 .3 60% Biovitrum 2 .3 Rest Active Biotech 2 .1 Top 5 Thrombogenics 1 .9 40% AntiSoma 1 .4 Bavarian Nordic 1 .4 Prostrakan 1 .3 20% NeuroSearch 1 .3 Medigene 1 .1 Galpagos 1 .1 0% Devgen 0 .9 Santhera 0 .8 Medivir 0 .8 Karo Bio 0 .8 Orexo 0 .7 ExonHit 0 .6 PhotoCure 0 .6 LifeCyclePharma 0 .6  Top five has 58% of market cap, 50% of Cash, 50% Cash burn and 75% of share Evotec 0 .5 Exiqon 0 .5 trading Renovo 0 .4 GPC Biotech Pharming group 0 .4 0 .4  50% of the companies has less than 40 DKK in monthly trading volume in the Innate 0 .3 share W ilex 0 .3 Cytos 0 .3 TopoTarget 0 .2  50% of the companies has less than 230 DKK in cash Alizyme 0 .1 Vernalis 0 .1 Arpida 0 .1 BioXell 0 .1 Pharmexa 0 .1 11
  13. 13. European biotech – Raising public money Raising money more competitive than ever EU biotech sector – now reaching maturity  There are approximately 150 public 160 6.0 EU companies Danish companies EUR bn. raised biotech in Europe today compared to 20 in 20 in 1999 140 5.0  Cash needs have increased Number of list ed companies 120  There are several companies with phase 4.0 EUR bn. raised 100 III programmes  Several companies are profitable/getting 80 3.0 close to profitability 60 2.0 40 1.0 20 0 0.0 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 The profile of the IPO hopefull Increased competition for the biotech money Phase I Phase II Phase III ? 12
  14. 14. Consequences for biotech Upstart & Venture companies IPO Hopefuls Listed Companies  Be realistic: is an IPO achievable and  Conserve cash  Cash is scarce attractive exit for investors?  Focus on partnerships  Venture financing market is facing a  Conserve cash & Focus on core value  Deliver on promises structural crisis  Build company – bloody big is beautiful  Divest non core activities  The trade sale exit will be the exit for more than 90% of start ups  Go public at first opportunity  Grow the company – consolidate  Focus on asset development instead of  Raise truckloads of cash:  Prepare to raise cash at first window company building  Limit Overhang opening  Ensure Share Liquidity  Limit overhang  Financial Strength  Ensure Share liquidity  Financial strength Consolidation needed: Larger companies: Stronger pipelines More efficient use of capital Strengthen management Strengthen cash position Strengthen liquidity and shareholder base 13

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