Novartis Acquires AveXis for $8.7 Billion in Gene Therapy bet

Novartis AG (NYSE: NVS) announced on Monday that it has entered into an agreement to acquireAveXis Inc. (NASDAQ: AVXS) for $8.7 billion or $218 per share in cash, representing a 72 percent premium. The merger will further enhance Novartis’ vision of gene therapy, also marking yet another major pharmaceutical business ramping up competition by bolstering its pipeline.  

AveXis shares surged by over 80 percent during Monday’s pre-market hours.

Novartis was able to afford the full cash payment acquisition after its recent sale for its stakes in a Consumer Health business joint venture to GlaxoSmithKline plc (NYSE: GSK) for $13 billion.

AveXis was highly attractive to Novartis for its AVXS-101 therapy, which treats spinal muscular atrophy (SMA) Type 1, the leading genetic cause of death in infants. The therapy is currently undergoing clinical studies, but if successful, it could potentially net Novartis billions in sales.

The US Food and Drug Administration has granted AVXS-101 designation for the treatment of SMA including breakthrough therapy designation for SMA Type 1. A biologics license application is expected in the second half of 2018 and to launch in the US in 2019.

“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.” said Vas Narasimhan, CEO of Novartis.

2018 will be a strong year of mergers and acquisitions for many biotech and pharmaceutical companies. Many companies are ramping up operations due to licenses ending or a way to bolster their pipeline against increasing competitors.

The acquisition is expected to complete in mid 2018. Novartis forecasts the acquisition to negatively impact operating income in 2018 and 2019, mainly due to R&D investments, but by 2020, it will in return bolster operating income and EPS.

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