What happened
Shares of The Medicines Company (MDCO) jumped by as much as 22.7% right out of the gate this morning. The drugmaker's stock skyrocketed in response to a buyout agreement with Swiss pharmaceutical giant Novartis (NVS 0.72%) valued at $9.7 billion on a fully diluted basis. As of 10:13 a.m. EST, The Medicines Company's shares are up by 22.4% in the wake of this news.
So what
Novartis' $85-per-share all-cash tender offer represents a healthy 25% premium compared to where The Medicines Company's shares finished trading last Friday. The deal is expected to close sometime in the first quarter of 2020, according to the press release.
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The big deal is that this transaction adds yet another potential megablockbuster product to Novartis' rapidly growing lineup of cutting-edge products. Specifically, the Swiss pharma titan will gain the rights to the experimental cholesterol-lowering medicine inclisiran -- an RNA-interference therapy originally developed by Alnylam Pharmaceuticals and later licensed out to The Medicines Company. The Medicines Company shepherded the drug through a successful late-stage program, setting the stage for a regulatory filing in the U.S. before year's end and another regulatory submission in the EU in early 2020.
Now what
If approved, inclisiran would compete directly against Amgen's (AMGN -1.33%) Repatha and Regeneron and Sanofi's (SNY 5.90%) Praluent. Inclisiran's competitive edge, in theory, stems from its ability to be dosed far less frequently than these first-generation therapies.
That's key, because Amgen and Regeneron/Sanofi's respective drugs have both run into compliance problems since launch due to their inconvenient biweekly to once-a-month dosing schedules. Inclisiran, by contrast, can be administered just once every six months -- a feature that could significantly boost adherence rates.
That being said, Novartis is undoubtedly paying a steep price for an experimental drug set to enter a crowded space, with even more competition on the way.
