Novartis Acquires AveXis for $8.7 Billion

Novartis has decided to move deeper into gene therapy with a deal to acquire AveXis for $8.7 billion that gives the drug maker, based in Switzerland, a treatment for rare disease that is expected to take in billions of dollars and bolsters the company’s technology base.

Acquiring AveXis is the most recent example of a huge increase in interest this year in biotech deals as large pharmaceuticals seek out promising new assets to add to their pipelines.

Announced Monday, the cash deal of $218 per share is a premium of 72% to the 30-day volume weighted average price for AveXis’s stock. The deal is expected to be complete by the middle of 2018.

Novartis CEO Vas Narasimhan, who on February 1 took the reins of the Swiss drug maker, has plenty of cash, having agreed recently to sell the stake the company has in a joint venture of consumer healthcare to GlaxoSmithKline for $13 billion.

Narasimhan is betting on the main drug of AveXis, AVXS-101, made to fight spinal muscular atrophy or SMA, that is deadly, as well as the expertise in gene therapy at the company, which is based in Illinois, to boost the neuroscience business at Novartis, one of the company’s main areas of focus.

This is the second notable deal in gene therapy for Novartis in 2018 after agreeing to pay an upfront amount of $105 million and milestone payments of $65 million for outside the U.S. rights to Luxturna a blindness treatment from Spark.

Narasimhan said Novartis believes that AVXS-101, which has been labeled with breakthrough therapy designation for the U.S. and will be submitted this year to regulators, will have a peak sales potential in the billions of dollars.

Novartis said its acquisition would hit its core operating income very slightly for 2018 and 2019 because of costs for research and development, prior to its expected strong contribution to profit as well as core earnings per share during 2020 as its sales accelerate.

Several rivals of Novartis are also buying up promising drugs to boost growth in sales for the future. Recently Sanofi acquired Bioverativ a hemophilia specialist based in the U.S. for $11.6 billion as well as Ablynx, based in Belgium, for €3.9 billion. Prior to that Celgene, based in the U.S., acquired Juno Therapeutics a specialist in cancer for $9 billion.

Novartis is expected to use proceeds received from the joint venture transaction with GSK to help pay for its acquisition of AveXis.

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