- Lofty biotech valuations and rising competition in fields like gene therapy are pushing Novartis to look at companies earlier in clinical development for potential dealmaking opportunities, executives from the Swiss pharma said Wednesday.
- "Later-stage with clinical data, given valuation levels, becomes harder and harder to come up with sensible acquisitions, which is driving us earlier and earlier," said Novartis CEO Vas Narasimhan at an event hosted by the company in Boston.
- Novartis expects to spend sums of $10 billion, or roughly equivalent to 10% of its market capitalization, a year on M&A. Under Narasimhan, the drugmaker has moved aggressively into gene therapy and other complex therapeutic areas, buying the biotechs AveXis and Endocyte as well as adding the eye drug Xiidra in a recent $3.4 billion deal with Takeda.
Novartis could win approval any day now for its gene therapy Zolgensma (onasemnogene abeparvovec), a treatment for the inherited disease spinal muscular atrophy.
If cleared by the Food and Drug Administration as expected, Zolgensma would reach patients roughly five years after the therapies' pivotal clinical study began and only a year after Novartis bought its maker, AveXis, for $8.7 billion.
Novartis enjoyed a similarly rapid path to market for a radiopharmaceutical drug it bought in a late 2017 deal, which was approved in the U.S. just three months later.
Future deals, however, may more closely resemble a smaller acquisition Novartis announced last month of a biotech called IFM Tre, just days after the company dosed its first patients with its most advanced drug.
"I expect us to have to go earlier because once a company has enough clinical data the valuation starts to run," said Narasimham.
The CEO has staked Novartis to a future more narrowly focused on prescription drugs, spinning out the company's eyecare unit Alcon and shedding a stake in GlaxoSmithKline's consumer health business.
That's coincided with heavier investment in areas like cell, gene and radioligand therapies — fields now seeing greater competition among large pharmaceutical companies. Recent deals for Spark Therapeutics and Nightstar Therapeutics saw multiple interested buyers, for example, before bids from Roche and Biogen, respectively, won out.
"Now there's an intense market for gene therapies and we're trying to get in even earlier with potentially disruptive next-generation therapies," said Jay Bradner, head of the Novartis Institute for BioMedical Research, on Wednesday.
Major acqusitions, such as Bristol-Myers Squibb's $74 billion deal for Celgene, are not of interest, Novartis executives said.
"We are not after big deals," noted Novartis' Chief Financial Officer Harry Kirsch in a separate interview. "We're convinced that large deals most of the time destroy shareholder value."
Novartis' willingness to focus on earlier, often much riskier, deals is helped by a pipeline that the company expects to deliver 10 blockbuster therapies over the next three years, including the recently launched multiple sclerosis drug Mayzent (siponimod) as well as Zolgensma.
In gene therapy, the company has nine clinical and preclinical programs, as well as rights to Spark's Luxturna (voretigene neparvovec) in Europe.
An approval for Zolgensma would give Novartis only the second ever FDA-approved gene therapy for an inherited disorder, putting the company at the front of a field that's expected to grow quickly.
Asked whether Novartis will continue to pursue external deals in gene therapy, Kirsch noted the company is always looking in each of its therapeutic areas.
But he noted that gene therapy comes with pressing questions of whether the expected benefit of a treatment would match what society is willing to pay.
"We only get paid if we have superior, value-creating medicines," he said.
It's a question Novartis will soon face with Zolgensma, which is expected to be one of the most expensive medicines ever launched in the U.S.
The drugmaker has made the case for a value as high as between $4 million and $5 million per patient, but will likely price the therapy "far lower" than that, Narasimhan said Wednesday.