Novartis bets $ 8.7 billion on Gene-Therapy Company

Novartis AG

NVS -1.06%

agreed to buy a gene therapy company based in the USA. UU

AveXis Inc

AVXS -3.09%

for $ 8.7 billion, marking the first big bet of the new head of the Swiss pharmaceutical giant as he looks to the negotiating table to update his drug development portfolio.

Novartis said Monday that it will pay $ 218 for each share in Illinois-based Avexis, an 88% premium at its closing price on April 6. Earlier this year, the CEO of Novartis

Vasant Narasimhan

agreed to withdraw money from their joint consumer health company with

GlaxoSmithKline PLC

GSK 0.18%

– an agreement that gives him cash for what he describes as a "deadbolt" of offers to replenish the Novartis drugstore, his key focus since he took the reins earlier this year .

That agreement is the cash to be more flexible by acquiring promising drugs. Dr. Narasimhan has promised to refocus Novartis on drug development. In a conference call on Monday, he said the AveXis agreement will be funded in part by the joint sale of GSK.

Novartis shares rose 1% to 78 Swiss francs in early trading on Monday.

The agreement is a bet at least one promising drug that Avexis is developing for therapies targeting spinal muscular atrophy will result in overproduction. Avexis is a gene therapy company that conducts several clinical trials for the treatment of spinal muscular atrophy or SMA, a hereditary neurodegenerative disease caused by a defect in a single gene, Novartis said. It is said that some form of SMA affects one in every 6,000 to 10,000 children born.

It is also an additional endorsement of gene therapy, a type of treatment that Novartis has already spearheaded in the field of cancer.

"We would gain with the AveXis team another gene therapy platform, in addition to our CAR-T platform for cancer, to advance a growing portfolio of gene therapies in all therapeutic areas," said Dr. Narasimhan.

Last year Novartis launched a first cancer therapy, known as CAR-T treatment, which consists of extracting blood cells that fight the patient's diseases, modifying them so that they attack the cancer cells with greater vigor and then reinfect them in the patient. [19659006] The AveXis AVXS-101 gene therapy candidate has the potential to be the first gene replacement therapy for SMA, according to Novartis. Dr. Narasimhan said in the conference call that the drug promised a multi-million dollar sales potential. AveXis expects to present the approval of US regulators in the second half of this year, with a launch scheduled for 2019.

"The price is higher than what Novartis previously called closed acquisitions, but if AVXS-101 triumphs other agents of SMA, we think this makes some sense, "said UBS badyst Michael Leuchten. The first treatment for the disease,

Ionis Pharmaceuticals
Inc. & # 39; s

Spinraza, won approval a year ago.

The reward is not a sure thing. Even drugs that show promise in the latest state trials may stumble and fail to meet sales forecasts.

Novartis said it expects the agreement to slightly affect key operating income in 2018 and 2019, due to R & D investments. He said the acquisition should strongly benefit basic operating revenues and basic earnings per share from of 2020, however, driven by an increase in sales. Novartis said he expects the agreement to close by mid-year.

-Noemie Bisserbe contributed to this article.


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