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April 9, 2018

Novartis to Acquire Gene Therapy Developer AveXis for $8.7B

  • Novartis said today it has agreed to acquire AveXis for $8.7 billion cash, in a deal intended to bolster both the buyer’s neuroscience portfolio and its presence in gene therapy with a promising gene therapy candidate for type 1 spinal muscular atrophy (SMA).

    AveXis’ lead candidate AVXS-101 has already generated positive clinical results: In November, the company published Phase I data in The New England Journal of Medicine showing that all spinal muscular atrophy (SMA) type 1 infant patients who received a one-time intravenous dose of AVXS-101 via an adeno-associated virus serotype 9 (AAV9) vector were alive and event-free at 20 months of age. 

    Based on those positive results, AveXis has advanced AVXS-101 into a pivotal trial in SMA type 1, and launched a Phase I trial of the gene therapy candidate in SMA type 2, both in the U.S.

    On January 30, AveXis said it would proceed with plans to dose all remaining patients in the pivotal trial after a review of early safety and efficacy data from the study’s first three patients, with agreement to do so from the FDA. AveXis said the pivotal trial planned to enroll at least 15 patients with SMA Type 1 who were less than six months of age at the time of gene therapy, and who had one or two copies of the SMN2 backup gene as determined by genetic testing and bi-allelic SMN1 gene deletion or point mutations.

    And in reporting fourth-quarter and full-year 2017 results on February 27, AveXis said it planned to submit a request for a pre-Biologics License Application (BLA) meeting in the second quarter—and anticipated completing enrollment in its ongoing SMA types 1 and 2 studies, as well as expanding its clinical development program into other SMA sub-populations, and programs beyond SMA.

    On April 25, AveXis is set to present two-year data from the Phase I study to the American Academy of Neurology. Novartis and AveXis said today they expect to file the BLA for AVXS-101 with the FDA in the second half of this year, with approval and launch in the U.S. anticipated to occur in 2019.

    AVXS-101 has been granted the FDA’s Orphan Drug designation for the treatment of SMA, and the agency’s Breakthrough Therapy designation for SMA Type 1. AVXS-101 has also received the European Medicines Agency’s PRIority MEedicines (PRIME) designation for treatments meeting an unmet medical need, as well as Japan’s Sakigake designation for breakthrough therapies.

  • Takeover Target

    The company’s clinical progress have fueled months of speculation that AveXis was ripe for acquisition—reflected in AveXis’s presence on GEN’s 10 Takeover Targets of 2018 list, published February 26.

    “The proposed acquisition of AveXis offers an extraordinary opportunity to transform the care of SMA. We believe AVXS-101 could create a lifetime of possibilities for the children and families impacted by this devastating condition,” Novartis CEO Vasant (Vas) Narasimhan, M.D., said in a statement.

    Novartis also said it would also benefit from AveXis’ AAV9 gene therapy manufacturing capabilities and R&D capabilities, which in addition to AVXS-101, includes pipeline treatments for Rett Syndrome (RTT) and a genetic form of amyotrophic lateral sclerosis (ALS) caused by mutations in the superoxide dismutase 1 (SOD1) gene.

    “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 [chimeric antigen receptor T-cell] platform for cancer, to advance a growing pipeline of gene therapies across therapeutic areas,” Dr. Narasimhan added.

    Novartis signaled growing interest in gene therapy on January 24, when it announced it had agreed to pay up to $170 million to license development, registration, and commercialization rights from Spark Therapeutics to voretigene neparvovec outside the U.S., where the treatment was approved on December 19 as Luxturna™ (voretigene neparvovec-rzyl). Novartis agreed to pay Spark $105 million upfront, plus up to $65 million tied to achieving near-term European regulatory approval and initial sales outside the U.S. in certain markets.

    And on August 30, Novartis won the FDA’s first approval for marketing a CAR-T therapy for a type of cancer. Kymriah™ (tisagenlecleucel) is indicated for the second-line (or later) treatment of relapsed or refractory (r/r) patients up to age 25 with B-cell acute lymphoblastic leukemia (ALL).

  • Beyond "Bolt-On" Deals

    Dr. Narasimhan succeeded Joe Jimenez as CEO as of February 1, having been promoted from global head of drug development and chief medical officer. Under Jimenez, Novartis favored smaller, “bolt-on” acquisitions intended to bolster a specific therapeutic area with a specific treatment candidate.

    However, Novartis’ appetite for deals had grown in recent months: On October 30, the pharma giant announced plans to acquire Advanced Accelerator Applications (AAA) for $3.9 billion cash, in a transaction designed to expand the buyer’s neuroendocrine tumor (NET) pipeline with radiopharmaceutical candidates led by the first-in-class RadioLigand Therapy (RLT) Lutathera® (177Lu-Dotatate). Four days after the deal was completed on January 22, the FDA approved Lutathera to treat gastroenteropancreatic neuroendocrine tumors (GEP-NETs).

    Under its agreement to buy AveXis, Novartis has formed an acquisition subsidiary that would launch a tender offer to acquire the gene therapy company for $218 per share—88% above AveXis’ closing share price on Friday, and a 72% premium to the company's 30-day volume-weighted average stock price. Shares of AveXis that have not been purchased in the tender offer will be converted into the right to receive the same cash price per share as paid in the tender offer, other than shares held by stockholders who properly demand and perfect appraisal rights under Delaware law.

    The boards of both Novartis and AveXis have approved the deal, which is expected to be completed in mid-2018, pending the successful completion of the tender offer and all other closing conditions. Those conditions include the tender of at least a majority of outstanding AveXis shares on fully diluted basis, and the expiration or termination of the waiting period under the Hart Scott Rodino Antitrust Improvements Act.

    Novartis cautioned investors that its deal to buy AveXis would be “slightly” negative to core operating income in 2018 and 2019, mainly due to R&D spending. However, as of 2020, Novartis said it expected the acquisition would “strongly” contribute to core operating income and core earnings per share accretion, driven by a “significant” increase in sales.

    On January 24, Novartis offered guidance to investors projecting “mid- to high-single digit” growth of its core operating income this year.

    “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,” AveXis President and CEO Sean Nolan stated. “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.”

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