Swiss pharmaceutical giant Novartis has entered into a deal to acquire AveXis at a price of $8.7 billion in a move that gives the drug maker more clout in the gene therapy space. By acquiring a rare-disease treatment which could generates sales amounting to billions in the future Novartis is betting on AveXis to boost its pipeline.
At a price of $218 per share, this was a premium of 72% based on the 30-day volume-weighted average price of the stock. The deal is expected to close mid this year. Currently Novartis is flush with cash as it recently agreed to sell to GlaxoSmithKline a joint venture the two have at a price of $13 billion.
Spinal muscular atrophy
The main drug of AveXis is AVXS-101 used for treating spinal muscular atrophy. AveXis also possesses gene therapy expertise as well as manufacturing capabilities based in the state of Illinois and these could assist in bolstering the neuroscience business of Novartis.
“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’s capabilities and technical development capabilities to be able to advance that portfolio,” said the chief executive officer of Novartis, Vas Narasimhan.
This is the second notable deal in the gene therapy segment that the Swiss drug maker is doing this year. Novartis recently reached an agreement to pay an upfront fee of $105 million and milestone payments of up to around $65 million for the rights to Luxturna, a blindness treatment developed by Spark, outside the U.S.
According to Novartis the acquisition would result in the core operating income of this year and next year becoming slightly dented due to costs associated with research and development. However in 2020 the acquisition would contribute strongly to profits as revenues accelerate.
Novartis is not the only pharmaceutical giant that is acquiring promising drugs from externally in the hopes of boost revenue growth in the future. French drug maker Sanofi reached a deal to acquire Bioverativ, a hemophilia specialist based in the United States at a price of $11.6 billion as well as Ablynx, a Belgium-based firm, at a price of 3.9 billion euros. Celgene, a firm based in the United States, also acquired Juno Therapeutics, a cancer specialist at a price of $9 billion. Takeda Pharmaceutical, a drug firm based in Japan, is said to be considering plans of acquiring Shire whose market capitalization is around $47 billion.