Novartis to buy U.S. biotech The Medicines Co. for $9.7 billion

UNITED STATES – Swiss multinational pharmaceutical company Novartis AG has revealed that it is buying U.S. biotechnology company The Medicines Co for about $9.7 billion even as it seeks to expand its portfolio of medicines against cardiovascular disease.

Novartis is paying $85 per share in cash, an approximately 24% premium over The Medicines Co.’s closing share price of $68.55 on Nov. 22, 2019 and the deal is expected to help shore up the company’s growth threatened by patent expirations.

The company said the deal had been approved by the boards of directors of both companies and would be financed through available cash and short- and long-term borrowings.

The Medicines Co’s inclisiran, a top cholesterol-lowering drug for heart patients, would as a result of the acquisition complement Novartis’s heart-failure medicine Entresto, a slow-seller at the start which has now crossed the $1 billion annual revenue threshold. 

Assuming completion in the first quarter of 2020, Novartis said it expected inclisiran to start to contribute to sales from 2021 adding that it had the potential to become one of the largest products by sales in its portfolio.

The deal shows that Novartis is willing to spend billions on not only rare disease treatments, as it did in 2018 when it paid out US$8.7 billion to buy gene therapy specialist AveXis, but also for cardiovascular treatments aimed at helping potentially millions of patients.

Novartis has historically had a strong cardiovascular drug franchise, but lost ground when Diovan, once a US$6 billion-per-year seller, lost patent protection in 2012 and left the company without an immediate, innovative follow-up product.

The deal to acquire The Medicines Co fits Novartis Chief Executive Vas Narasimhan’s aim of securing new acquisitions of up to US$10 billion to bolster the group’s portfolio of medicines with new products or technologies.

Novartis also said it expected to continue to expand core margins in the Innovative Medicines division to “mid-thirties” in the near term, and to “mid-to high-thirties” in the medium term.

Novartis International AG is one of the largest pharmaceutical companies by both market capitalization and sales.

For the fiscal year 2018, Novartis reported earnings of US$12.6 billion, with an annual revenue of US$53.2 billion, an increase of 6.05% over the previous fiscal cycle.

Novartis shares traded at over $91 per share, and its market capitalization was valued at over US$209.7B billion in February 2019.

Some of the drugs manufactured by the swiss company include clozapine (Clozaril), diclofenac (Voltaren), carbamazepine (Tegretol), valsartan (Diovan), imatinib mesylate (Gleevec/Glivec), ciclosporin (Neoral/Sandimmun), and letrozole (Femara).

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