Novartis said today it intends to acquire Advanced Accelerator Applications (AAA) for $3.9 billion cash, in a deal 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), now under FDA re-review.

Novartis said the deal would also boost its oncology portfolio, both short-term through product launches and long-term through a new technology platform it said had potential applications across a number of oncology early development programs.

Lutathera, which is designed to treat NETs, last month won European Commission approval for the treatment of unresectable or metastatic, progressive, well-differentiated (G1 and G2), somatostatin receptor-positive gastroenteropancreatic neuroendocrine tumors (GEP-NETs).

In the U.S., the FDA has set a Prescription Drug User Fee Act (PDUFA) target decision date of January 26, 2018, for Lutathera. It’s the second review for Lutathera. The first review in December 2016 ended with a Complete Response Letter directing AAA to:

  • Conduct subgroup analyses for gender, age, and racial subgroups, as well as other stratification factors and “important” disease characteristics.
  • Provide a safety update on clinical and nonclinical studies.
  • Improve the format, traceability, uniformity, and completeness relating to clinical data—including from the Phase III NETTER-1 trial, which generated positive results.

Novartis noted in its announcement today that the NETTER-1 trial demonstrated a 79% reduction in the risk of disease progression, with an interim median progression-free survival rate of 8.4 months that had yet to max out.

“Novartis has a strong legacy in the development and commercialization of medicines for neuroendocrine tumors where significant unmet need remains for patients,” Bruno Strigini, CEO of Novartis Oncology, said in a statement. “With Lutathera, we can build on this legacy by expanding the global reach of this novel, differentiated treatment approach and work to maximize AAA's broader RLT pipeline and an exciting technology platform.”

That pipeline includes prostate cancer treatment candidates 177Lu-PSMA-R2 and its companion diagnostic 68Ga-PSMA-R2; 177Lu-NeoBOMB1, a new-generation antagonist bombesin analog targeting gastrin-releasing peptide receptor (GRPR)-expressing malignancies, and its companion diagnostic, 68Ga-NeoBOMB1; and Annexin V-128, a single-photon emission computed tomography (SPECT) diagnostic candidate for assessing apoptotic and necrotic processes present in a number of oncology and cardiovascular disease conditions, as well as in autoimmune disorders.

AAA also markets two drug kits for radiolabeling somatostatin analog peptides to help diagnose somatostatin receptor-positive NET lesions, Netspot® (formerly known as Somakit-TATE) and Somakit TOC™.

“Theragnostics is a very straightforward proposition for physicians dealing with nuclear medicine,” AAA CEO and founder Stefano Buono told GEN in 2015. “This approach attaches radioisotopes to therapeutic molecules to deliver therapeutics and imaging in one injection. “The isotopes don’t change the nature of the chemical entity, and they don’t change the ability for targeting.”

Declining Afinitor Sales

Novartis’ marketed drugs for neuroendocrine tumors include Afinitor® (everolimus), which generated $1.516 billion in net sales last year, down 6% from $1.607 billion in 2015. Afinitor, marketed in some countries as Votubia®, is approved for indications related to advanced breast cancer, advanced kidney cancer, advanced pancreatic neuroendocrine tumor—and as of February 2016, for adults with progressive, well-differentiated, nonfunctional NETs of gastrointestinal (GI) or lung origin that are unresectable, locally advanced, or metastatic.

However, as Novartis acknowledged in its 2016 Annual Report, the new indication could not compensate for a sales decline in Afinitor “due to new treatment options in advanced breast cancer and renal cell carcinoma in the U.S.”

Also marketed by Novartis for NETs is Sandostatin® LAR® Depot (octreotide acetate for injectable suspension), whose sales increased 1% year-over-year, to $1.646 billion in 2016.

Headquartered in Saint-Genis-Pouilly, France, near the Swiss border, AAA saw its net loss widen in 2016 to €25.294 million ($29.370 million), compared with €17.001 million ($19.741 million) in 2015, despite a 23% year-over-year jump in sales to €109.325 million ($126.953 million). For the first six months of 2017, AAA reported a net loss from continuing operations of €24.181 million ($28.078 million), up from €4.408 million ($5.118 million) in January–June 2016, though sales rose nearly 27%, to €69.165 million ($80.306 million).

Novartis’ offer for AAA comes out to $41 per ordinary share of AAA and $82 per American Depositary Share (ADS; each representing two ordinary shares of AAA) subject to certain conditions. The deal price represents a 44% premium over AAA’s market cap of $2.7 billion on September 28, the day Bloomberg News reported that Novartis was interested in acquiring the radiopharma company.

Novartis said it plans to launch its tender offer for all of AAA’s share capital following completion of consultation with the acquired company’s works council, and after AAA’s Board of Directors recommends the offer to its shareholders. AAA’s senior management and directors have agreed to tender their shares to Novartis, the pharma giant said.

The deal is also subject to the valid tender of at least 80% of ordinary shares (including ordinary shares in the form of ADSs) of AAA representing, as well as customary transactional regulatory approvals and other customary closing conditions. Novartis said it would fully fund the transaction through external short- and long-term debt.

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