BASEL, Switzerland—Spring is a time of new growth and reinvigoration, out with the old and in with the new, and pharma giant Novartis is keeping to that theme. In addition to selling its consumer business to GlaxoSmithKline at a price tag of $13 billion, the company is also looking to expand its holdings in neuroscience and gene therapy with the acquisition of Bannockburn, Ill.-based AveXis Inc., a clinical-stage gene therapy company.
Per the terms of the agreement, Novartis will acquire AveXis via a newly formed acquisition subsidiary, Novartis AM Merger Corp. The subsidiary will commence a tender offer to purchase all outstanding AveXis shares for $218 per share, for a total deal value of $8.7 billion. Once the tender offer is completed, Novartis will consummate a merger in which shares of AveXis not tendered into the offer will be converted into the right to receive the same cash price per share as the tender offer. Both the offer and the merger are subject to customary closing conditions, including the tender of a majority of outstanding shares on a fully diluted basis and the expiration or termination of the waiting period under the Hart Scott Rodino Act.
Completion of the deal is expected in the middle of this year, and while no direct plans were shared regarding AveXis’ facilities and employees, Novartis noted in a press release that it plans “a smooth transition of operations and the integration of AveXis’ talented and dedicated employees to continue the mission of bringing AVXS-101 to patients worldwide.” Should the deal be completed at the forecast time, Novartis expects the impact to be slightly negative to its core operating income this year and next year, but expects a strong positive contribution to core operating income and core earnings per share by 2020.
AveXis is advancing its gene therapy platform in several indications, particularly spinal muscular atrophy (SMA), a hereditary neurodegenerative disease caused by a defect in the survival motor neuron (SMN1) gene. SMA type 1 is the leading genetic cause of infant mortality, with nine out of 10 infants with SMA type 1 either being permanently ventilator-dependent or not living past the age of one. AveXis’ lead candidate, AVXS-101, has produced promising clinical data in treating this disease subtype: a clinical study showed that in 15 infants treated with AVXS-101, all 15 were event-free at 20 months, compared to an event-free survival rate of 8 percent in a historical cohort (NEJM, November 2017). The compound has received Orphan Drug Designation from the U.S. Food and Drug Administration for the treatment of SMA, and Breakthrough Therapy Designation for the treatment of SMA type 1. It has also been granted orphan designation by the European Medicines Agency. It is expected that a BLA filing will be made for AVXS-101 in the second half of this year, with U.S. approval and launch expected next year.
“The proposed acquisition of AveXis offers an extraordinary opportunity to transform the care of SMA,” Vas Narasimhan, CEO of Novartis, said in a press release. “We believe AVXS-101 could create a lifetime of possibilities for the children and families impacted by this devastating condition. The acquisition would also accelerate our strategy to pursue high-efficacy, first-in-class therapies and broaden our leadership in neuroscience.
“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. We look forward on the closing of the deal to a smooth transition for AveXis employees and welcoming them to Novartis.”
Acquiring AveXis also nets Novartis state-of-the-art AAV9 gene therapy manufacturing capabilities, as well as additional pipeline candidates for Rett Syndrome and a genetic form of amyotrophic lateral sclerosis (ALS) caused by mutations in the superoxide dismutase 1 gene. In addition, AveXis recently began a Phase 1 clinical trial of AVXS-101 in SMA type 2.
“The commitment, drive and expertise of the entire AveXis team has created significant stockholder value, and we are pleased that Novartis recognizes that value in the potential of AVXS-101, our first-in-class manufacturing capabilities and our gene therapy pipeline, all of which serve to transform the lives of people devastated by rare and life-threatening neurological diseases such as SMA, Rett syndrome and genetic ALS,” said Sean Nolan, president and CEO of AveXis. “With worldwide reach and extensive resources, Novartis should expedite our shared vision of bringing gene therapy to these patient communities across the globe as quickly and safely as possible.”
Investor and analyst response to the deal has been generally positive. Novartis’ shares rose 1.58 percent on April 9, when the news of the deal broke, while AveXis’ shares jumped 83.8 percent in pre-market trading session, according to Zacks Equity Research. Sumant Kulkarni, a healthcare analyst at Canaccord Genuity, commented that “We believe that a lot of things have to go right from here for the deal to work. That said, [Novartis], with its global presence and significant depth of resources, may have the muscle to pull off this deal, especially if AVXS-101 cleanly navigates through regulatory and reimbursement pathways in the U.S. and abroad. [AveXis] also has some earlier-stage products that we do not include in our model that could factor into deal valuation.”
Keith Speights of Motley Fool notes that the acquisition will likely help to offset the looming generic competition Novartis will face in coming years for Gilenya, its top-selling multiple sclerosis drug. In addition, he points out, SMA is not a new field for the company; Novartis has an SMA candidate of its own in branaplam, though AVXS-101 is more advanced, in part because Novartis “halted clinical development of branaplam for a couple of years because of safety concerns.”