Shares of cancer specialist Endocyte (NASDAQ:ECYT) rose by as much as 51.3% in pre-market trading this morning. The catalyst?
The stock is jumping in response to a $2.1 billion buyout agreement with Swiss drugmaker Novartis AG (NYSE:NVS). This all-cash deal represents a healthy 54% premium compared to where Endocyte's shares finished trading on Wednesday. The deal, if approved by shareholders and regulators, is set to close in the first half of 2019, according to the press release.
What is Novartis getting in this deal? While Endocyte has been gearing up to enter the red-hot CAR-T field later this year, the drug that most likely triggered this merger was the experimental prostate cancer treatment Lu-PSMA-617 (PSMA stands for "prostate specific membrane antigen").
Lu-PSMA-617 is a radioligand therapy currently in late-stage development for metastatic castration-resistant prostate cancer in patients who are PSMA-positive. If things work out according to plan, this novel prostate cancer treatment should be on the market by mid- to late 2020.
Under new CEO Vasant Narasimhan, Novartis has been steadily sharpening its focus around high-margin specialized drugs throughout the course of 2018. As proof, the drugmaker paid a sizable premium to acquire AveXis for its spinal muscular atrophy gene therapy and it sold off its low-margin consumer healthcare business to GlaxoSmithKline earlier this year. This latest acquisition seems to fits in perfectly with Narasimhan's emerging vision for Novartis.
Despite acquiring both AveXis and Endocyte this year, though, Novartis appears set to continue being aggressive on the M&A front moving forward. This top drugmaker, after all, still needs to add some pieces in order to fully flesh out this ongoing pivot to cutting-edge branded therapies.