Novartis reportedly backs out of Cytokinetics deal, denting biotech’s stock

Reuters and The Wall Street Journal have punctured investors’ hopes that Novartis will buy Cytokinetics. Both outlets have reported that the Swiss drugmaker is backing away from the potential deal late in negotiations, deflating the biotech’s share price. 

Cytokinetics rose up the list of desirable takeover targets when it posted phase 3 cardiomyopathy data for aficamten in the final days of last year. The readout established the company as a biotech with a near-approval asset in a blockbuster indication—Bristol Myers Squibb has said sales of its rival cardiac myosin inhibitor Camzyos could peak at $4 billion or more.

One problem for potential buyers is the phase 3 data sent the stock into overdrive. The biotech’s share price bounced around either side of $35 for most of December, before skyrocketing to above $80 after investors got a look at the phase 3 results. Reports of Novartis’ interest pushed the stock above $100.

In the wake of the reports yesterday that Novartis has dropped its pursuit of the biotech, Cytokinetics’ share price fell 16% to below $85, around the price they traded for before the M&A chatter.

A spokesperson for Novartis told Fierce Biotech: “We don't comment on market rumor or speculation.” 

Novartis has consistently stated its preference for smaller targets than Cytokinetics, a biotech that had a market cap of $8.3 billion even after reports of the collapse of takeover talks took some of the wind out of its sales. At the J.P. Morgan Healthcare Conference this week, Novartis CEO Vas Narasimhan said the Big Pharma will “continue to really look at those deals in that sub-$2 billion, sub-$1 billion space.”

Narasimhan set the bar slightly higher at Novartis’ R&D day in November, when he told attendees his focus was on bolt-on deals “typically below the $5 billion range.” The CEO left some wiggle room for bigger acquisitions, noting that Novartis would “evaluate all deal options,” but the leadership team believes the internal pipeline and bolt-on M&A can get the company to its mid-single digit growth target.

Cytokinetics believes it can make a success of aficamten itself. In a presentation at JPM this week, CEO Robert Blum said the size of the market is “within reach of a company like ours with more limited access to capital and not wanting to put in place a very large sales and marketing infrastructure.” Blum believes a sales team of 100 to 150 people can cover the 10,000 U.S. cardiologists who treat most of the patients. 

If Cytokinetics struggles to commercialize aficamten itself, as other biotechs have slipped up in the past, there may be opportunities for Novartis or another buyer to pick up the company at a lower price. For now though, Cytokinetics is riding high, and would-be buyers will need to write a large check to acquire the biotech.

The company told Fierce this morning that it would not “comment on M&A speculation.”