Novartis gets on risk-sharing bandwagon, spins off 3 pipeline drugs into new biotech
- Novartis has spun off three pipeline drugs to a newly formed U.K.-based biotech company, Mereo BioPharma.
- Mereo has raised $119 million from two U.K institutional investors, Woodford Investment Management and Invseco Perpetual.
- The three drugs that have been spun off have already been through proof-of-concept (POC) trials at Novartis. They involves drugs for brittle bone syndrome, acute chronic obstructive pulmonary disease (COPD), and treatment of a testosterone disorder in obese men.
Risk-sharing is a strategy by which companies can take certain drugs from their pipelines and share the risk with another company—generally a company that can focus on that drug or a cluster of drugs, while the larger company continues to focus on its core franchises. The goal in this case was for Novartis to have products that were not correlated by indication, mechanism of action or by market, according to Denise Scots-Knight, CEO of Mereo.
Under the terms of the deal between Novartis and Mereo, Mereo is committed to acquiring drugs exclusively from Novartis's pipeline for a year, however, after that it can acquire drugs from other sources. In return, Novartis will enjoy a certain portion of the returns on the pipeline drugs, assuming the drugs become commercially available. The specifics of that deal have not been disclosed.
By entering into this type of deal, Novartis is doing what other companies are doing to manage risk and deal with their pipelines in a way that will most likely maximize returns. Another good example of this is Avoxant, a company formed to take over development of an Alzheimer's drug initially developed by GSK.
- Market Watch Novartis spins off 3 pipeline drugs into new co.