Novartis has agreed to acquire Chinook Therapeutics for as much as $3.5 billion, taking a chance that a pair of kidney disease drugs the biotechnology company has developed will succeed in late-stage testing.
Under the deal announced Monday, Novartis will acquire Chinook for $40 per share, equivalent to approximately $3.2 billion. The Swiss company could hand Chinook stockholders another $4 per share, or $300 million in aggregate, if one of Chinook’s drugs achieves certain regulatory milestones.
The deal, which has been endorsed by the boards of both companies, is expected to close in the second half of 2023, subject to shareholder approvals and other conditions.
Novartis’ offer represents a 67% premium to Chinook’s closing price on Friday, the eighth-highest of the 16 biotech acquisitions of at least $50 million announced this year, according to BioPharma Dive data. It also extends a recent pickup in deal activity. Ten buyouts have been announced since mid-March, four of which have come since May 10, helping lift a sector that’s been mired in a downturn since late 2021.
The deal hands Novartis two drugs for a type of rare and progressive kidney condition known as IgA nephropathy. The disease, which affects an estimated 130,000 people in the U.S. each year, is caused by the buildup of the protein immunoglobulin A in the kidneys, leading to swelling and potentially organ damage as well as loss of function.
There are no cures for IgA nephropathy. But there are multiple drugs used to manage symptoms. In February, the Food and Drug Administration approved a medicine from Travere Therapeutics, Filspari, based on its ability to lower levels of protein in the urine. Chinook is among the other drugmakers, including Alnylam Pharmaceuticals, that aim to follow with additional options.
Chinook’s two IgA nephropathy drugs each come from deals. The more advanced of the two, atrasentan, was licensed from AbbVie in late 2019. The other, zigakibart, was originally developed by Aduro Biotech, a struggling cancer immunotherapy maker Chinook merged with to go public the following year.
Atrasentan, a pill that blocks the protein receptor endothelin A, is meant to reduce the toxic buildup in the kidneys and preserve function. The drug is currently in late-stage testing for IgA nephropathy, with results expected in the fourth quarter, and earlier testing for other rare diseases. Zigakibart is an infused antibody aimed at a different target, known by the acronym APRIL, that’s also implicated in disease progression. A Phase 3 study is expected to begin in the third quarter.
“We are excited by this unique opportunity to address one of society’s most challenging healthcare issues, with the potential to bring additional much-needed treatment options to patients,” said Novartis CEO Vas Narasimhan, in a Monday statement.
In a note to clients on Monday, Stifel analyst Alex Thompson wrote that it’s notable Novartis chose to buy Chinook ahead of the Phase 3 results, calling the bid a “strong outcome” for stockholders and “further validation” of the earlier results the company accrued. Thompson judged it unlikely that other bidders would come forward before Chinook reports Phase 3 results.
One key question hanging over the deal, however, is whether regulators might see an overlap with iptacopan, one of Novartis’ top pipeline prospects, Thompson wrote. That drug has succeeded in testing for a rare disease called paroxysmal nocturnal hemoglobinuria, but is being tested in IgA nephropathy as well.