Novartis Initiates Acquisition of Avexis for $8.7 Billion – Major Breakthrough Expected in Gene Therapy

Novartis (NOVN.S) plans to buy gene therapy company AveXis (AVXS.O) for $218 per share in a $8.7 billion cash deal, adding a therapeutic breakthrough hopeful for spinal muscular atrophy (SMA) to the Swiss drug manufacturer’s pipeline that is expected to earn billions in annual sales.

SMA (spinal muscular atrophy) is a disease that robs people of physical strength by affecting the motor nerve cells in the spinal cord, taking away the ability to walk, eat, or breathe. It is the number one genetic cause of death for infants. SMA is caused by a mutation in the survival motor neuron gene 1 (SMN1). If you are interested to know more about SMA, please visit https://www.mda.org/disease/spinal-muscular-atrophy.

Vas Narasimhan, who took over as Novartis Chief Executive on Feb 1 this year, is flushed with cash, having just agreed to sell his company’s stake in a consumer healthcare joint venture for $13 billion to GlaxoSmithKline (GSK.L).

The deal announced a few hours back, represents a 72 percent premium to AveXis’s 30-day volume-weighted average stock price, US-based AveXis mentioned in a separate statement.

Narasimhan is banking on AveXis’s primary SMA drug, AVXS-101, as well as its gene therapy expertise and manufacturing capabilities to augment Novartis’s neuroscience business, one of the Swiss company’s pivotal focus areas.

During a conference call with reporters Narasimhan mentioned that the company believed the medicine would have a multibillion dollar peak sales potential. They have been regularly scanning and looking for bolt-in acquisition candidates.

According to Novartis the acquisition would slightly hurt core operating income in 2018 and 2019, due to research and development costs, before it is expected to strongly contribute to profit and core earnings per share in 2020 as sales accelerate.

Narasimhan, who said the total patient population for SMA is 23,500 persons in established markets, elaborated that he plans to use proceeds from the GSK transaction to help pay for AveXis, which is based in Illinois.

GSK shareholders still must approve the company’s purchase of the consumer joint-venture.

According to Novartis, the AveXis transaction is expected to close in the middle of this year. Personally, I am very excited because I have had the privilege of working as part of Professional Services team in implementation of LabVantage Software for both Novartis and GlaxoSmithKline, leaders in the Drugs Manufacturing Industry. There’s a lot to look forward to….