NVS Novartis AG

By Alberto Delclaux 

This article is being republished as part of our daily reproduction of WSJ.com articles that also appeared in the U.S. print edition of The Wall Street Journal (April 10, 2018).

Novartis AG agreed to buy U.S.-based gene-therapy company AveXis Inc. for $8.7 billion, marking the first big bet by the Swiss pharmaceutical giant's new chief as he looks to the deal table to refresh his drug-development pipeline.

Novartis said Monday it will pay $218 for each share in Illinois-based AveXis, an 88% premium to its closing price on April 6. Earlier this year, Novartis Chief Executive Vasant Narasimhan agreed to cash out of its consumer health joint venture with GlaxoSmithKline PLC -- a deal that gives him cash for what he describes as "bolt on" deals to replenish Novartis' drug pipeline, his key focus since taking the reins earlier this year.

That deal gives it the cash to be more flexible acquiring promising outside medicines. Dr. Narasimhan has promised to refocus Novartis on drug development. In a conference call Monday, he said the AveXis deal will be partly funded by the GSK joint-venture sale.

The deal is a bet that at least one promising drug that AveXis is developing for therapies aimed at spinal muscular atrophy will translate into a blockbuster. AveXis is a gene-therapy company conducting several clinical studies for the treatment of spinal muscular atrophy or SMA, an inherited neurodegenerative disease caused by a defect in a single gene, Novartis said. Some form of SMA affects an estimated one out of every 6,000 to 10,000 children born, it said.

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

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

Novartis launched last year a first-of-its kind cancer therapy, known as CAR-T treatment, which involves extracting a patient's disease-fighting blood cells, modifying them to attack cancer cells more vigorously and then reinfecting them in the patient.

AveXis' gene-therapy candidate AVXS-101 has the potential to be the first one-time gene-replacement therapy for SMA, according to Novartis. Dr. Narasimhan said on the conference call the drug promised multibillion-dollar sales potential. AveXis expects to file in the second half of this year for approval from U.S. regulators, with a launch expected in 2019.

"The price tag is higher than what Novartis previously has called bolt-on acquisitions, but if AVXS-101 trumps other SMA agents, we believe there is some sense to this," said UBS analyst Michael Leuchten. The first treatment for the disease, Ionis Pharmaceuticals Inc.'s Spinraza, won approval a year ago.

The payoff isn't a sure thing. Even drugs that are showing promise in late state trials can stumble, failing to live up to sales forecasts.

Novartis said it expects the deal to slightly hit core operating income in 2018 and 2019, due to R&D investments. It said the acquisition should strongly benefit core operating income and core earnings a share as of 2020, however, driven by an increase in sales. Novartis said it expects the deal to close by the middle of the year.

Noemie Bisserbe contributed to this article.

(END) Dow Jones Newswires

April 10, 2018 02:47 ET (06:47 GMT)

Copyright (c) 2018 Dow Jones & Company, Inc.