ZURICH • Novartis is moving further into gene therapy with a US$8.7 billion (S$11.4 billion) deal for AveXis that gives the Swiss drugmaker a rare-disease treatment seen to reap billions in sales and bolster its technology base.
The acquisition is the latest example of a surge of interest in biotech deal-making this year as large pharmaceutical companies seek promising new assets to boost their pipelines.
The US$218-per-share cash deal announced yesterday represents a 72 per cent premium to AveXis' 30-day volume-weighted average stock price. The transaction is seen closing in mid-2018.
Novartis chief executive Vas Narasimhan, who took over on Feb 1, is flush with cash, having just agreed to sell his company's stake in a consumer healthcare joint venture for US$13 billion to GlaxoSmithKline (GSK).
He is counting on AveXis' main drug, AVXS-101, used to treat deadly spinal muscular atrophy (SMA), as well as the Illinois-based company's gene therapy expertise and manufacturing capabilities, to bolster Novartis' neuroscience business, one of the Swiss company's main focus areas.
This is Novartis' second notable gene therapy deal this year after it agreed to pay US$105 million upfront and up to another US$65 million in milestone payments for rights to Spark's blindness treatment, Luxturna, outside the United States.
We have a robust internal portfolio of gene therapies in ophthalmology and neuroscience in Novartis Institutes for Biomedical Research. And we look forward to using AveXis' capabilities and technical development capabilities to be able to advance that portfolio.
MR VAS NARASIMHAN, Novartis' chief executive.
"We believe the medicine would have a multibillion-dollar peak sales potential," Mr Narasimhan said on a conference call with reporters, of AVXS-101, which has so-called breakthrough therapy designation in the US and is expected to be submitted to regulators this year.
"It also provides us capabilities in gene therapy," he added. "We have a robust internal portfolio of gene therapies in ophthalmology and neuroscience in Novartis Institutes for Biomedical Research. And we look forward to using AveXis' capabilities and technical development capabilities to be able to advance that portfolio."
Novartis said the acquisition would slightly dent core operating income this year and in 2019, due to research and development costs, before it is expected to "strongly contribute" to profit and core earnings per share 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' rivals.
In recent months, France's Sanofi agreed to buy US haemophilia specialist Bioverativ for US$11.6 billion and Belgium's Ablynx for €3.9 billion (S$6.3 billion). Before that, US-based Celgene bagged cancer specialist Juno Therapeutics for US$9 billion.
Japan's Takeda Pharmaceutical is also considering a potential deal for London-listed Shire, which has a market value of about US$47 billion.
Mr Narasimhan, who said the total patient population for SMA was 23,500 people in established markets, plans to use proceeds from the GSK transaction to help pay for AveXis.
SMA is a genetic disease affecting the part of the nervous system that controls voluntary muscle movement, and commonly leads to death in young children.
Mr Narasimhan said the transaction reflected Novartis' strategy of hunting for new medicine and new technologies to buttress the portfolio of drugs it is developing in-house.
More acquisitions are possible as the company remains on the lookout for opportunities, he added.
"Our goal is to continue to build on our core medicine," he said. "With the exit of the GSK stake, our intention was to redeploy capital into our core."
AveXis is also developing gene therapy candidates in Rett Syndrome and inherited amyotrophic lateral sclerosis.