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

From Reuters - April 9, 2018

ZURICH (Reuters) - Novartis (NOVN.S) is moving further into gene therapy with a $8.7 billion deal for AveXis (AVXS.O) that gives the Swiss drugmaker a rare-disease treatment seen reaping billions in sales and bolsters 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 $218-per-share cash deal announced on Monday represents a 72 percent premium to AveXiss 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 companys stake in a consumer healthcare joint venture for $13 billion to GlaxoSmithKline (GSK.L).

Narasimhan is counting on AveXiss main drug, AVXS-101, for deadly spinal muscular atrophy (SMA), as well as the Illinois-based companys gene therapy expertise and manufacturing capabilities, to bolster Novartiss neuroscience business, one of the Swiss companys main focus areas.

This is Novartiss second notable gene therapy deal this year after it agreed to pay $105 million upfront and up to another $65 million in milestone payments for rights to Sparks blindness treatment Luxturna outside the United States.

We believe the medicine would have a multi-billion dollar peak sales potential, Narasimhan said, on a conference call with reporters, of AVXS-101, which has so-called breakthrough therapy designation in the United States 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 AveXiss capabilities and technical development capabilities to be able to advance that portfolio.

Novartis said the acquisition would slightly dent core operating income in 2018 and 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.

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