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Novartis bets big on gene therapy with $8.7 billion AveXis deal

This is Novartis's second notable gene therapy deal this year

Reuters  |  Zurich 

Novartis

Swiss drugmaker is moving further into therapy by buying for $8.7 billion, adding that could reap billions in sales.

The acquisition reflects a surge of interest in biotech deal-making as companies seek promising new assets to boost their pipelines.

The $218-per-share cash deal announced on Monday represents a 72 percent premium to AveXis's 30-day volume-weighted average stock price. The transaction is seen closing in mid-2018.

Vas Narasimhan, who took over on Feb. 1, is flush with cash, having just agreed to sell his company's stake in a joint venture to for $13 billion.

Narasimhan is now counting on AveXis's main drug, AVXS-101 for deadly (SMA), as well as the Illinois-based company's therapy expertise and manufacturing capabilities, to bolster Novartis's business, a focus for the Swiss company.

This is Novartis's second notable therapy deal this year after it agreed to pay $105 million upfront and up to $65 million in milestone payments for rights to Spark's treatment Luxturna outside the

"We believe the medicine would have a multi-billion dollar peak sales potential," Narasimhan told reporters of AVXS-101, which has so-called breakthrough therapy designation in the and is expected to be submitted to regulators this year.

"It also provides us capabilities in therapy," he added. "We have a robust internal portfolio of therapies in ophthalmology and in Institutes for Biomedical Research. And we look forward to using AveXis's capabilities and technical development capabilities to be able to advance that portfolio."

shares were up 0.8 percent at 0830 GMT.

The company said the acquisition would slightly dent core operating income in 2018 and 2019, due to research and development costs, before strongly contributing to profits in 2020 as sales accelerate.

Adding promising drugs from outside to boost sales growth down the road is a strategy being pursued by several of Novartis's rivals.

France's agreed to buy specialist Bioverativ for $11.6 billion and Belgium's for 3.9 billion euros. U.S.-based bagged specialist for $9 billion.

Japan's is also considering a deal for London-listed Shire, which has a market value of about $47 billion.

"WHO'S NEXT?"

Novartis's second bet on therapy in four months will fuel speculation of mergers and acquisitions as and biotech companies remain on the prowl for smaller targets, Jefferies said.

"Clearly is building out in therapy," Yee said. "Who's next?"

Narasimhan, who said the patient population for SMA was 23,500 people in established markets, plans to use proceeds from the GSK transaction to help pay for

SMA affects the nervous system that controls voluntary muscle movement, and commonly leads to death in young children.

So far, a study of AVXS-101, which replaces a faulty gene, shows children achieved many important motor nerve milestones after getting treatment. Additional data is due for release this month, Narasimhan said.

There are existing treatments for SMA - Biogen's and Ionis's RNA-splicing Spinraza, approved in 2016, generated $363 million in the fourth quarter of 2017 - as well as therapies under development by and

"is taking the view that AveXis's ... transgene approach trumps Biogen/Ionis' approved Spinraza and other agents in development," analysts wrote.

Narasimhan said the transaction reflected Novartis's strategy of hunting for new medicines and technologies to buttress medicines it is developing in-house.

"Our goal is to continue to build on our core medicines," he said. "With the exit of the GSK stake, our intention was to re-deploy capital into our core."

is also developing therapy candidates in other rare diseases, and inherited amyotrophic lateral sclerosis, that also sees as good prospects.

Novartis's on the deal was Dyal Co LLC, while AveXis's was

First Published: Mon, April 09 2018. 20:49 IST
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