Novartis nears $9bn deal to buy cholesterol drugmaker

Via Financial Times

Novartis is nearing a $9bn deal to buy The Medicines Company, betting that the US drugmaker will come good on a new drug designed to control cholesterol levels, people close to the talks said.

Novartis has agreed to pay around $85 per share, one person said, a sharp premium to the New Jersey-based company’s stock price just days ago when Bloomberg reported that it was exploring a sale.

At $85 per share, the deal would value The Medicines Company at $9.1bn according to analysts at Evercore ISI, which takes into account its fully diluted share count.

The company’s shares closed on Friday at just below $70 each, having jumped from $52 before news of a sale first emerged. The Wall Street Journal reported earlier on Saturday that the companies were nearing a deal.

A takeover would mark the latest attempt by Novartis chief executive Vas Narasimhan to reshape the Swiss pharmaceutical company, which has a market value of $203bn, through a series of disposals and takeovers.

Big pharma companies including Novartis are looking at acquisitions as the primary means of restocking their drug pipelines rather than relying on homegrown research and development.

The Medicines Company earlier this month presented the results of successful late stage trials of its cholesterol-lowering drug Inclisiran. It reduced the so-called ‘bad cholesterol’, suffered by tens of millions of Americans, by up to 58 per cent. The drug is an injection, administered every few months, rather than the current treatment of a statin pill daily.

The drug, which has yet to be approved, works by silencing a gene and reducing a protein that controls the production of so-called ‘bad’ cholesterol. This method of gene silencing — known as RNA interference — has been explored for decades but become more successful in the last couple of years.

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The company has partnered on the drug with Boston-based Alnylam Pharmaceuticals, which has received approval for two drugs using a similar mechanism to silence genes, called RNA interference. One, approved by the Food and Drug Administration just this week, treats porphyria, the rare disease which King George III suffered from, and the other, for treating the nerve damage associated with another rare disease, was approved last year.

The Medicines Company is led by Mark Timney, who joined last year after being chief executive of Purdue Pharma, the maker of OxyContin. Before that, he worked at Merck. The Medicines Company, which has just 62 employees, did not respond to a request for comment. Novartis also declined to comment.

Earlier this year Dr Narasimhan said he was aiming to limit M&A spending to about 5 per cent of Novartis’s market capitalisation, as he sought to boost total shareholder returns.

Dr Narasimhan, who since taking the helm almost two years ago has sought to dispose of parts of the company unrelated to its core innovative medicines business, pointed to its acquisition of IFM Tre, a biopharma company focused on immunology, as an example of “a much more focused” acquisition strategy.

Among its key acquisitions last year was the $3.9bn purchase of the French nuclear medicines business Advanced Accelerator Applications and, for $2.1bn, US-based Endocyte — both specialising in targeted radiopharmaceutical cancer treatments. Meanwhile, in cell and gene therapy, an area where the company is a leader, it bought AveXis for $8.7bn, acquiring a treatment for spinal muscular atrophy, a disease for which there is no cure.

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However, the company has faced controversy this year, following the disclosure that some data was manipulated from early testing of the spinal muscular atrophy drug Zolgensma. The episode, which the company had been investigating internally, was not publicly disclosed until after the drug had been approved by the Food and Drug Administration. Two senior executives at AveXis were replaced. The FDA approval was unaffected.

Interviewed by the FT in April, Dr Narasimhan made clear that Novartis would be looking for companies that would either help it reap greater rewards from these various technologies, or supplement drugs in the disease areas on which it has already chosen to focus. Dr Narasimhan said: “If it doesn’t fit that framework then we don’t really want to play in it.”