Novartis strikes $9.7B takeover of The Medicines Company

Novartis CEO Vas Narasimhan 2019
Novartis CEO Vas Narasimhan (Novartis)

It's official: After days of rumors, Novartis over the weekend said it had agreed to a $9.7 billion (€8.8 billion) deal to buy The Medicines Company in order to get its hands on next-gen heart drug inclisiran. The takeover represents a big bet that the near-approval cholesterol drug will perform better than rival medicines sold by Amgen and Regeneron and Sanofi—a bet not everyone thinks will pay off.

Medicines Company has brought inclisiran smoothly through phase 3 readouts this year, generating data to show the siRNA safely lowers LDL cholesterol by comparable amounts to Amgen’s Repatha and Sanofi and Regeneron’s Praluent. The data had sent Medicines Company’s stock up around 200% in 2019 even before rumors of a buyout hit full swing last week.

Now, Novartis is set to send Medicines Company’s stock higher still. The Swiss Big Pharma has struck a deal to buy Medicines Company for $85 a share, a figure that represents a 24% premium over the biotech’s closing price on Friday.

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In return for the outlay, Novartis will gain control of a drug that is being prepared for submission for U.S. approval by the end of the year. A filing in the EU is set to follow in the first quarter.

Novartis sees the addition of a near-approval cardiovascular disease drug as a good fit for its efforts to use M&A to deepen its pipeline in key therapeutic areas. If inclisiran wins approval, Novartis will leverage the cardiovascular disease sales infrastructure that turned Entresto into a blockbuster to try to make a better fist of launching the product than Amgen, Regeneron and Sanofi did with their rival anti-PCSK9 antibodies.

The travails of Repatha and Praluent may moderate expectations for inclisiran, but the details of the Medicines Company takeover means Novartis needs the drug to perform if it is to generate a useful return on the acquisition. Medicines Company is set to split profits from inclisiran with Alnylam, the inventor of the drug, increasing the volumes Novartis will need to shift to make the takeover pay.

Novartis will enter the fight to win and expand the market currently fought over by Repatha and Praluent armed with data linking inclisiran to placebo-adjusted drops in LDL-C in excess of 50%. As importantly, the drug appears to be free of the toxicity that has affected some similar therapies.

However, the data generated on the effect of inclisiran on cardiovascular outcomes are mixed, with the encouraging results from one study being offset by the lack of a positive signal in another. The results in both trials came from exploratory endpoints. Novartis will need to wait a long time, until 2023, to get results from a cardiovascular outcomes study. 

Until then, more convenient dosing looks likely to be the main differentiator between inclisiran and Repatha and Praluent, neither of which has hit the commercial highs Novartis will want to get out of its drug.

Analysts at Jefferies were still cautious, saying in a note to clients that it stands by its call that, fundamentally, “the PCSK9i market faces significant headwinds and that a twice-yearly administered product will not fix these fundamental [i.e. compliance and sales] issues,” but commended MedCo for its “tremendous negotiation,” as the price of $85 a share “is more than most would have expected.”

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