Novartis/Hep C -
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Novartis Can't Say No
Wednesday June 7, 12:14 pm ET
By Stephen D. Simpson, CFA
I'm beginning to wonder whether there are any deals that Novartis (NYSE: NVS - News) hasn't accepted in the past few quarters. In the last few days, the company has sealed three separate deals to add compounds to its pipeline -- at the cost of hard cash.
Today, news broke that Novartis will be buying British biotech company NeuTech Pharma for about $569 million in cash. For that price, Novartis is getting a company focused on treatment-resistant infections, with two late-stage drugs in the pipeline. Mycograb, targeted at dangerous fungal infections, could be submitted for U.S. approval in 2009, while Aurograb (for staph infections) looks like it's about a year later in the queue.
But wait, there's more!
Yesterday, the company announced a deal with Human Genome Sciences (Nasdaq: HGSI - News) for the rights to Albuferon, a hepatitis C treatment. Assuming this drug reaches approval (a phase 3 trial should begin later this year), the companies would cooperate in the U.S. market, while Novartis would handle foreign sales and distribution. Under this deal, Novartis pays $45 million up front and potentially more than $500 million in future milestones.
But wait, there's even more!
Novartis also announced a licensing deal with Genelabs Technologies (Nasdaq: GNLB - News). The deal will cost Novartis about $20 million over two years, and as much as $175 million in potential milestones, if a successful drug comes out of this agreement. The disease in question? Yep, you guessed it -- hepatitis C.
Obviously, Novartis wants to establish a major franchise in hepatitis C, given both of these deals and past agreements with Idenix (Nasdaq: IDIX - News) and Anadys (Nasdaq: ANDS - News). There's certainly a ripe and underserved market here, and I also think that Novartis has a logical underlying philosophy. It's looking at several different and possibly complementary approaches to the disease, with the hope of combining them in different ways to treat various subtypes of the disease and patients who don't adequately respond to existing therapies.
If you're a company with a hep-C drug or a development program in that area, stay by the phone -- Novartis will probably be calling you, too. As for Novartis shareholders, I'm not quite sure what to think. I know it takes money to build a pipeline, but these guys have been doing deals left and right. Then again, we're talking about a strong pharmaceutical company in a weak sector that's still somewhat undervalued -- not exactly the worst story I've seen this week. <<<
