Novartis plans to purchase U.S. biotech company for $9.7 billion

Just in time for black Friday the Basel-based pharmaceutical group Novartis is going on a shopping spree on the U.S. East Coast. The biotech company called The Medicines Company based in New Jersey is the target. According to Novartis, the leaders of both companies have unanimously decided to trade.

Novartis has offered $85 per Medicines share. The transaction is expected to close in the first quarter of 2020. The acquisition will be financed by existing capital as well as by short and long-term debt.

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Medicines’ most successful drug is cholesterol-lowering Inclisiran for heart patients, which could complement Novartis’ growing business with its heart failure drug Entresto.

If the deal is completed in the first quarter of 2020, Novartis is expecting Inclisiran to generate profits from 2021. It has the potential to become one of the largest medicines in the product range.

Patent expiration gap

The deal fits the strategy of Novartis CEO, Vas Narasimhan, to strengthen the drug portfolio with new products and technologies through acquisitions. The top management expects to expand the core margins in the Innovative Medicines division to “mid-thirties” in the near future and to “mid to mid-thirties” in the medium term.

Novartis had a strong cardiovascular business in the past, but lost ground when Diovan lost patent protection in 2012 and failed to launch an innovative follow-on product to address the $6 billion gap in annual sales.

The deal should help support Novartis’ growth, which is threatened by patent expirations, and help the company remain competitive with similar medicines such as Amgen drug from Amgen and Praluent from Regeneron Pharmaceuticals.

Other major purchases

The Medicines was not the first major purchase by the Novartis: this year, the company paid up to $5.3 billion for Xiidra, a drug to treat dry eyes. Last year, the pharmaceutical company also bought Endocyte, the U.S. based company, for $2.1 billion.

And with last year’s AveXis deal, Novartis added Zolgensma gene therapy to its portfolio. The drug is currently the most expensive single treatment for spinal muscular atrophy, costing $2.1 million.

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(Featured image by Floriane Vita via Unsplash)

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