No­var­tis CEO Vas Narasimhan cuts loose an old an­chor and sets sail with $8.7B AveX­is buy­out

Vas Narasimhan is start­ing his tenure as CEO of No­var­tis $NVS with a bold move on the gene ther­a­py front.

The phar­ma gi­ant has struck a deal to buy AveX­is for $8.7 bil­lion in cash, scoop­ing up the biotech as it looks to par­lay im­pres­sive ear­ly-stage re­sults for their gene ther­a­py AVXS-101 for spinal mus­cu­lar at­ro­phy in­to a swift FDA ap­proval.

The deal reg­is­ters at $218 a share $AVXS, al­most dou­ble AveX­is’ Fri­day close. And it un­der­scores a few key points about Narasimhan’s man­age­ment style.

First, the phar­ma gi­ant chief is clear­ly will­ing to jump out of its cau­tious sweet spot of $2 bil­lion to $5 bil­lion for bolt-ons, brush­ing off their well tai­lored dis­taste for pay­ing big pre­mi­ums to grab a front run­ner in drug de­vel­op­ment. And Narasimhan, at 41, is serv­ing no­tice that af­ter win­ning an his­toric CAR-T ap­proval, he in­tends to keep No­var­tis out front on cell and gene ther­a­py, come what may.

No­var­tis is play­ing R&D like a big biotech, will­ing to in­vest bil­lions in new tech­nolo­gies to leap out ahead of ri­vals. And that could prove in­flu­en­tial as ma­jor play­ers like GSK and Eli Lil­ly try to blaze new R&D paths of their own in Big Phar­ma. Biotech M&A has been rolling along this year in the wake of deals for Kite and Juno, ri­vals to No­var­tis, as well as a like­ly bid for Shire by Take­da.

No­var­tis’ spot­light­ed its in­ten­tions in lead­ing the gene ther­a­py field with a re­cent $170 mil­lion deal to li­cense ex-US rights to Spark’s Lux­tur­na, which won a land­mark FDA ap­proval for treat­ing RPE65 mu­ta­tion-as­so­ci­at­ed cas­es of reti­nal dy­s­tro­phy.

“The pro­posed ac­qui­si­tion of AveX­is of­fers an ex­tra­or­di­nary op­por­tu­ni­ty to trans­form the care of SMA…,” said Narasimhan in a state­ment. “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.”

In­vestors liked the sound of it. No­var­tis shares surged 0.75% in ear­ly morn­ing trad­ing.

Last No­vem­ber AveX­is riv­et­ed the biotech world with da­ta from a small study on SMA. Of 15 pa­tients in Phase I, all were able to reach 20 months with­out the need for con­stant res­pi­ra­to­ry sup­port, or dy­ing. And many achieved im­prove­ments in mo­tor symp­toms, speak­ing to the po­ten­tial — though still un­proven — of this as a once-and-done ther­a­py for a rare but dire ail­ment.

AveX­is CEO Sean Nolan

AveX­is went on to forge plans to sit down with reg­u­la­tors in Q2 for a pre-BLA meet­ing as they ham­mered out a strat­e­gy to gain the fastest pos­si­ble mar­ket­ing ap­proval for their ther­a­py, which could blow Spin­raza, a new and ex­pen­sive SMA ther­a­py from Bio­gen and Io­n­is, out of the wa­ter. That dis­ap­point­ed some back­ers who had ex­pect­ed the biotech to start a rolling sub­mis­sion at the be­gin­ning of Jan­u­ary with the FDA sig­nal­ing its in­ter­est in snap ap­provals for rare dis­eases.

No­var­tis says that the com­pa­ny ex­pects their deal will close mid-year, set­ting up a BLA fil­ing in the sec­ond half and a mar­ket launch in 2019.

That’s al­so good news for Re­genxbio $RGNX, which ex­pand­ed its tech li­cens­ing deal with AveX­is a few months ago to in­clude an ex­clu­sive li­cense cov­er­ing SMA. Re­genxbio gets $140 mil­lion in cash and near-term fees, $120 mil­lion in mile­stones and roy­al­ties. That was al­so worth a 23% spike in its share price.

If AveX­is de­cides not to go through with it, they would need to pay a $284 mil­lion breakup fee, with No­var­tis on the hook for $437 mil­lion for a re­verse ter­mi­na­tion fine. And some an­a­lysts think that this could still turn in­to a bid­ding war. Notes Jef­feries’ Biren Amin:

There’s been spec­u­la­tion that Bio­gen may need to eval­u­ate Avex­is at some point and may be this will be a trig­ger that forces it to do so. Bio­gen has in­di­cat­ed it has a SMA gene ther­a­py in pre­clin­i­cal de­vel­op­ment, and plans to move in­to the clin­ic in 2018. Ad­di­tion­al­ly, we’ve al­ways felt Roche could have an in­ter­est in AVXS giv­en its de­vel­op­ment pro­gram with RG7916 (an­oth­er oral ad­min­is­tered SMN2 splic­ing mod­i­fi­er) and the fact that AVXS Chair­man Dan Welch was the CEO of In­ter­mune when Roche pur­chased In­ter­mune in 2014 for $8.3B.

For now, though, it’s full speed ahead.

“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, the 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.”


Im­age: Vas Narasimhan. NO­VAR­TIS

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(A)ll the Asserted Claims are invalid as obvious under 35 U.S.C.§ 103. Thus, the Court finds in favor of Defendants on Plaintiff’s remaining infringementclaim, and in their favor on their counterclaims asserting the invalidity of the AssertedClaims under 35 U.S.C. § 103.

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Daniel O'Day (AP Images)

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