Novartis set to acquire Advanced Accelerator Applications

BASEL, Switzerland—Advanced Accelerator Applications (AAA) had already been known to be on the auction block for around a month previous, but Oct. 30 brought official word from Swiss pharma giant Novartis that it had entered into a memorandum of understanding with AAA under which Novartis was to commence a tender offer for 100-percent of the share capital of AAA. The cash tender offer was valued at approximately $3.9 billion, representing a 47-percent premium to the 30 volume-weighted trading days prior to the unaffected share price on Nasdaq on Sept. 27.

Saint-Genis-Pouilly, France-based AAA is a radiopharmaceutical company that develops, produces and commercializes molecular nuclear medicines, including Lutathera (177Lu-DOTATATE), a first-in-class radioligand therapy (RLT) product for neuroendocrine tumors (NETs). As Novartis noted in the news release announcing the acquisition plans, radiopharmaceuticals like Lutathera are “unique medicinal formulations containing radioisotopes which are used clinically for both diagnosis and therapy.” Novartis expects the transaction to strengthen its oncology presence with both near-term product launches and a new technology platform with potential applications across a number of oncology early development programs.

“Novartis has a strong legacy in the development and commercialization of medicines for neuroendocrine tumors where significant unmet need remains for patients,” said Bruno Strigini, CEO of Novartis Oncology. “With Lutathera we can build on this legacy by expanding the global reach of this novel, differentiated treatment approach and work to maximize Advanced Accelerator Applications’ broader RLT pipeline and an exciting technology platform.”

Lutathera was approved in Europe in September 2017 for the treatment of unresectable or metastatic, progressive, well-differentiated (G1 and G2), somatostatin receptor-positive gastroenteropancreatic neuroendocrine tumors. Lutathera is under review in the United States with a Prescription Drug User Fee Act date of Jan. 26, 2018.

The potential efficacy and safety of Lutathera were established in a pivotal Phase 3 trial known as NETTER-1. The primary endpoint of the study was progression-free survival (PFS) with secondary endpoints including objective response rates, overall survival, safety and tolerability. The study met its primary endpoint, with Lutathera achieving statistically significant and clinically meaningful 79-percent reduction in risk of disease progression or death compared to the control therapy. At the time of study publication in the New England Journal of Medicine (January 2017), median PFS in the control arm was 8.4 months and had not yet been reached in the Lutathera arm.

In addition to Lutathera, AAA brings a broad set of skills in developing, manufacturing and commercializing radiopharmaceuticals, including the companion diagnostics for Lutathera (NETSPOT and SomaKit TOC). AAA had sales of €109 million in 2016 (approximately $129 million).

Under the terms of the memorandum of understanding, which has been approved by the AAA board of directors, Novartis will commence a tender offer upon completion of works council consultation and AAA’s board recommending the tender offer to AAA shareholders. The proposed transaction is subject to customary transactional regulatory approvals.

“It is with great satisfaction that we announce this proposed transaction with Novartis, who we have long felt would be an ideal partner not only to enhance the launch of [Lutathera] for neuroendocrine tumors, but especially to accelerate the advancement of our unique oncology theragnostic platform,” said Stefano Buono, CEO of AAA. “We recognize the value creation this proposed transaction provides for our shareholders, who have supported our growth over the past 15 years. We believe that the combination of our expertise in radiopharmaceuticals and theragnostic strategy together with the global oncology experience and infrastructure of Novartis provide the best prospects for our patients, physicians and employees, as well as the broader nuclear medicine community.”

As the FiercePharma website noted in a recent article about the deal and the significance of AAA’s NET therapeutic Lutathera, “Novartis sells two therapies for that type of tumor—Afinitor and Sandostatin—and Lutathera would be a quick addition to that portfolio.”

Canaccord Genuity analyst John Newman, in an investor note about the deal when the acquisition was still just a rumor, wrote: “We believe a Novartis acquisition of AAA for Lutathera in neuroendocrine tumors would be highly synergistic with [its] existing franchise, including Sandostatin and Afinitor, making a potential deal very logical.”

As Zacks Investment Research commented about the deal, “The buyout will strengthen Novartis’ presence in cancer space by adding Advanced Accelerator’s radioligand therapy (RLT), Lutathera, in its portfolio. The deal will also expand the company’s pipeline into RLT programs, which has significant sales potential for being an innovative approach to treating cancer.

“We remind investors that Novartis already has a strong oncology portfolio of drugs like Afinitor, Exjade, Jakavi, Zykadia, Tasigna, Jadenu and an improved formulation of Exjade. Also, the FDA recently approved its breakthrough gene transfer treatment, Kymriah suspension, for treating patients up to 25 years of age with B cell precursor acute lymphoblastic leukemia that is refractory or in second or later relapse. The approval of Kymriah is a major boost to Novartis, given its potential in the CAR-T therapy space.”

Motley Fool, in its own observations, noted, “Considering Novartis’ strong focus in cancer, acquiring AAA looks like a good addition, although arguably some of the pipeline drugs will have to come to fruition to justify the price tag.”