Gene Therapy, M&A, Pharma

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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Research Scientist - Immunology
Recursion Pharmaceuticals Salt Lake City, UT
Director of Operations
Atlas Venture Cambridge, MA

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