Dive Brief:

• Novartis AG said April 9 it will buy the gene therapy-focused biotech AveXis Inc. for $8.7 billion, greatly expanding the Swiss pharma's bet on the promise of treating disease by altering a patient's genetic make-up.
• Per deal terms, Novartis will spend $218 per share to acquire AveXis, paying a steep 88% premium over the closing price of AveXis stock on April 6 to gain access to the biotech's gene therapy platform and a late-stage candidate for spinal muscular atrophy (SMA).
• Novartis said it would fund the deal with proceeds from the March sale of its stake in GlaxoSmithKline plc's consumer healthcare unit for $13 billion.

Dive Insight:

Months into the job as head of one of the world's largest drugmakers, Novartis CEO Vas Narasimhan has traded a sizable stake in the steady business of consumer health for a larger presence in the cutting-edge, but much riskier, gene therapy field.

Buying AveXis gives Novartis access to AVXS-101, an experimental gene replacement therapy for spinal muscular atrophy that could reach the U.S. market in 2019 if all goes according to plan. In addition — and perhaps more importantly in the long term — Novartis will acquire AveXis' gene therapy manufacturing facility and a drug delivery platform based on adeno-associated virus (AAV) 9 technology.

"We believe AveXis' in-house manufacturing capabilities likely played a key role as these provide flexibility and control over future programs and provide operational leverage as more candidates are introduced to the clinic," wrote Leerink analyst Joseph Schwartz in a April 9 note.

AveXis' candidate delivers a functional gene capable of encoding for production of a key protein missing in patients with SMA, an inherited and typically fatal neurodegenerative disease affecting infants.

Trial results published in November in The New England Journal of Medicine showed all 15 patients treated with AVXS-101 were alive at 20 months of age. Among the 12 treated with a higher dose, 11 sat unassisted and nine rolled over — motor milestones not usually reached in SMA patients.

Novartis anticipates filing a Biologics License Application to the Food and Drug Administration for approval of AVXS-101 by the second half of 2018, with a potential launch to follow in 2019.

If OK'd, AVXS-101 would face strong competition from Biogen Inc.'s marketed SMA therapy Spinraza (nusinersen), which earned $884 million in sales last year. Spinraza works differently than AVXS-101, however, boosting production of the needed SMN protein by altering the splicing of messenger RNA from a related gene.

Given the purchase price, Novartis clearly expects AVXS-101 to rival Spinraza and anticipates the deal will "strongly contribute" to core operating income from increased sales by 2020.

AveXis is also developing gene therapy candidates for Rett syndrome and amyotrophic lateral sclerosis, both of which are slated to enter the clinic late this year or early next.

Looking more broadly, AveXis complements Novartis' leading position in CAR-T cell therapy and builds on a January licensing deal for ex-U.S. rights to Spark Therapeutics Inc.'s pioneering gene therapy Luxturna (voretigene neparvovec-rzyl).

For all their promise, however, cell and gene therapy remain a relatively untested commercial proposition. The high prices such treatments command raise questions about how patients and payers will afford to pay for a wave of emerging experimental drugs.

Companies like Novartis might not have any other choice but to bet on the clinical promise, though, as looming competition to aging topsellers and biologic drugs threatens bottom lines across the industry.