Add another signification biotech acquisition to the list for 2018. After a relatively quiet period for mergers and acquisition in 2017, there has been a flurry of activity so far this year.
Novartis (NVS 0.95%) announced early Monday morning that it plans to buy clinical-stage gene therapy company AveXis (NASDAQ: AVXS) for $8.7 billion, gaining promising spinal muscular atrophy (SMA) candidate AVXS-101. The price tag represented a whopping 88% premium to AveXis' closing price on Friday.
This buyout was obviously great news for AveXis and seems to be good news for Novartis. But is the deal bad news for Biogen (BIIB -0.70%)?
Image source: Getty Images.
A great fit
An acquisition of AveXis looks like a smart move for Novartis. The Swiss drugmaker already has a solid presence in the neuroscience market with multiple sclerosis (MS) drug Gilenya, the company's top-selling drug. However, Gilenya faces the threat of generic competition within the next few years.
Gaining AVXS-101 gives Novartis a potential blockbuster to add to its lineup relatively soon. AveXis reported terrific early-stage clinical study results last year. A pivotal late-stage study is in progress now. If all goes well, the biotech expects to file for regulatory approval of AVXS-101 in the second half of this year. Novartis hopes to launch the gene therapy in 2019.
Paying for the AveXis acquisition isn't a problem for Novartis, either. The big pharma company recently announced that it was selling its consumer business to GlaxoSmithKline for $13 billion. That sale will give Novartis plenty of cash to buy AveXis, although the timing of the two transactions will require the company to use some short-term borrowing in addition to its currently available cash.
But what about Novartis' own SMA candidate, branaplam? AVXS-101 is well ahead of Novartis' internal candidate, which is in a phase 1/2 clinical study that isn't scheduled to wrap up until late next year. Novartis had also halted clinical development of branaplam for a couple of years because of safety concerns. AVXS-101 appears to give the Swiss drugmaker a better candidate overall for entering the SMA market.
A looming headache
While acquiring AveXis looks like a good deal for Novartis, it could present a looming headache for Biogen. Currently, Biogen and partner Ionis Pharmaceuticals (IONS -0.46%) enjoy the SMA market to themselves. Biogen exercised its option to license SMA drug Spinraza from Ionis in August 2016. Spinraza won FDA approval less than four months later, becoming the first drug approved to treat SMA.
Spinraza had a great first year on the market, generating sales of nearly $884 million. Analysts have projected peak annual sales for the drug of $2.5 billion. But with AVXS-101 on track to potentially reach the market in 2019, Biogen's easy money could become much more challenging to make.
Novartis' acquisition of AveXis probably makes the challenge even greater. AveXis would have needed to hire a sales force and ramp up for its first commercial launch if it tried to market AVXS-101 on its own. Novartis brings an established neuroscience sales team and deep financial resources to go head to head with Biogen.
Assuming AVXS-101 does win approval and hits the market next year, Spinraza will still have a competitive advantage for a while, at least. AveXis' late-stage study is targeting only treatment of SMA type 1, while Spinraza treats types 1, 2, and 3 of the rare disease.
Still, though, over half of new cases of SMA are type 1. Also, AveXis is already evaluating AVXS-101 in an early-stage study for treating SMA type 2.
A big bet for Biogen
Where does this leave Biogen? The biotech can still count on Spinraza and its multiple sclerosis franchise to deliver solid revenue over the next several years. However, Biogen's MS franchise faces significant competition. And with huge Novartis on course to market AVXS-101, Spinraza is also likely to see a serious challenge in the near future.
Much of Biogen's fortunes ride on one pipeline candidate -- experimental Alzheimer's disease drug aducanumab. Market research firm EvaluatePharma ranks the drug as the No. 1 pipeline asset in the biopharmaceutical industry. However, Alzheimer's disease has been notoriously difficult to treat, with the landscape littered with once-promising drugs.
Novartis' acquisition of AveXis puts more pressure on Biogen. I suspect Biogen will now be more anxious than ever to make a deal of its own.
