Novartis slashes ante, inks another Gamida Cell buyout pact in $635M leukemia deal

Novartis is forging ahead with a prospective stem cell biotech buyout, agreeing to pay $35 million to grab a sizable equity stake in Gamida Cell while executing a short term option deal that will allow the pharma giant ($NVS) the right to gobble up the company for another $600 million split up between a $165 million upfront payout with the rest up for grabs in development and sales milestones.

Israel's Globes had the scoop on the approaching deal yesterday, but investors had to wait until today's release to get the details on the terms. Novartis' $35 million buys 15% of the biotech's shares, enough for a front-row seat at the company. Depending on some key milestones, including a pair of Phase I/II trials for a new stem cell treatment for leukemia and lymphoma, Novartis will have the right to buy the Jerusalem-based company for $165 million upfront and $435 million in specified milestones.

It's not an open-ended deal. Unlike other Novartis option deals, this one will be determined by a slate of clinical milestones scheduled next year, and the buyout option expires in the first half of 2016.

Novartis had a $600 million deal in place to buy Gamida Cell last year, complete with a $170 million upfront. But the board of the pharma giant reportedly got cold feet about the deal terms and Novartis subsequently punted the pact. But they didn't lose interest, and now they're back, looking primarily at the second stem cell product in the biotech's pipeline and settling for one of their favored option arrangements as they assess the company's potential.

Gamida Cell is primarily known for two cancer therapies: StemEx--a package of cells extracted from cord blood, amped up with Gamida Cell's platform tech and intended for leukemia and lymphoma patients who can't arrange a matching bone marrow transplant from a family member--and NiCord. Last year the company's plan to seek an early approval of StemEx based on a Phase II/III single-arm study was snubbed by the FDA, which demanded a full late-stage study. By that time Teva ($TEVA) had already decided to pull the plug on its work related to StemEx and Gamida Cell was left searching for a new Big Pharma collaborator to complete the work.

- here's the release

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