Nestle invests $200 million more in Aimmune after peanut allergy drug approval

Published On 2020-02-10 14:35 GMT   |   Update On 2020-02-10 14:35 GMT

(Reuters) - Aimmune Therapeutics Inc said on Wednesday the health science arm of Nestle SA will invest an additional $200 million, days after the drugmaker won U.S. approval for its peanut allergy therapy, touted as a potential blockbuster.

The funding brings Nestle's total investment to $473 million, increasing the Swiss company's stake to 19.9% of Aimmune's outstanding stock and voting power.

Aimmune shares rose 5.7% in early morning trading, after falling 11% on Tuesday. Its therapy, Palforzia, was approved on Friday after markets close.

Read Also: ICMR orders prosecution against Nestle, top Hospitals including Gangaram, Manipal for clinical trial on premature infants

Nestle's investment is an incremental positive for Aimmune's shares, which have seen some weakness due to investor worries over financing, Piper Sandler analyst Christopher Raymond wrote in a note.

"With this additional investment, we think the prospect of an outright take out by Nestle (or anyone else for that matter) has to be factored in more than before," Raymond said.

Nestle has been trying to become a "nutrition, health and wellness" company, with its Nestle Health Science unit playing a pivotal role, as packaged food sales slow amid changing tastes.

The unit invested $145 million in Aimmune in 2016, followed by $30 million as part of the drugmaker's public offering in February 2018, and another $98 million in November 2018.

Aimmune would use the latest Nestle investment to fund the launch of Palforzia, which is the first approved therapy for reducing and potentially eliminating allergic reactions to peanuts in children.

Baird analyst Brian Skorney suspects a potential for short squeeze as some decide to cover rather than wait for the performance of Palforzia in the first couple of quarters against modest expectations.

Read Also: Nestle India to launch nearly three dozen products in 2019, eyes higher exports

Short interest, a measure of how much money is betting on the stock to go lower, in Aimmune stood at nearly 25% of the float, as of Jan. 15, according to Refinitiv data.

Shares of heavily shorted companies can get pushed higher as traders rush to buy stock to cover their short bets, triggering what is known as a "short squeeze".

Separately, California-based Aimmune said it had obtained a worldwide license to an experimental therapy for allergic asthma from Xencor Inc for an upfront payment of $5 million in cash and $5 million in equity.

Tags:    
Article Source : Reuters

Disclaimer: This site is primarily intended for healthcare professionals. Any content/information on this website does not replace the advice of medical and/or health professionals and should not be construed as medical/diagnostic advice/endorsement or prescription. Use of this site is subject to our terms of use, privacy policy, advertisement policy. © 2020 Minerva Medical Treatment Pvt Ltd

Our comments section is governed by our Comments Policy . By posting comments at Medical Dialogues you automatically agree with our Comments Policy , Terms And Conditions and Privacy Policy .

Similar News