The Battle for Your Heart is On

The rumors are confirmed. Novartis AG (NOVN) has no plans of sitting out the lucrative heart treatment race. The Swiss biopharma giant made its presence known via a $9.7 billion takeover of The Medicine Company (MDCO), putting Sanofi SA (SNY), Amgen (AMGN), and Regeneron Pharmaceuticals (REGN) on high alert for some major league rivalry.

This takeover signifies the latest attempt by Novartis to redirect the future of the company, which currently has a market value of $203 billion through a number of takeovers, mergers, and disposals.

Novartis will be paying $85 in cash for every share, marking a 24% premium over The Medicine Co.’s recent closing price. In return, Novartis will gain control of the smaller biotech’s experimental cholesterol-lowering injection Inclisiran. This breakthrough treatment is currently being prepared for US approval by the end of 2019. Meanwhile, the company will mark the first quarter of 2020 with an EU filing for the treatment.

 

The pricey bid puts Novartis at the forefront of a market where at least one drug, high cholesterol treatment Repatha, is projected to give Amgen another blockbuster by 2021. Another similar challenger is Sanofi and Regeneron’s joint cholesterol-lowering drug Praluent. So far, these companies have been pounding away to carve out markets with steep prices.

Unfortunately, payer resistance fueled by the estimated patient population affected has been dragging their sales revenue. To add to that, prices for both medications have been limited to somewhere around $6,000 annually.

This is where Novartis’ partnership with The Medicines Company comes in handy.

To be effective, Inclisiran is only needed to be injected twice yearly to patients. This is a far cry from the 26-injection procedure required by both Amgen’s Repatha and Sanofi and Regeneron’s Praluent. The key to Inclisiran’s potency is a technology involving gene silencing or RNA interference, which basically limits “bad cholesterol” production.

Needless to say, Novartis offers an attractive option to over 58 million patients in the United States alone who cannot keep their “bad cholesterol” at bay given the current standard of care. If it gains approval, the company is looking at annual peak sales of roughly $4 billion, with Inclisiran expected to start contributing to their revenue by 2021.

Apart from that, Inclisiran is anticipated to complement Novartis’ existing combination heart failure drug Entresto, which topped the $1 billion yearly revenue threshold in 2018.

Entresto isn’t the only foray of Novartis in the cardiovascular market. Prior to this blockbuster drug, the company led the sector with high blood pressure medication Diovan, which used to rake in $6 billion annually until 2012 when it lost its patent protection.

Now, Novartis appears to be ensuring that history does not repeat itself. That is, the company has been actively seeking acquisitions in an effort to bolster its drug pipeline and portfolio with promising products and groundbreaking technologies.

While this latest deal with The Medicines Company sounds promising, Novartis remains on guard as it looks for alternatives, especially with the upcoming patent expirations of some of its main moneymakers like eye medication Lucentis, genetic blood disorder drug Exjade, and multiple sclerosis treatment Gilenya.

This deal with The Medicines Co fits hand-in-glove with the type of diversification and development projects that Novartis has been pursuing as of late. These deals include the $8.7 billion AveXis (AVXS) agreement, which allowed Novartis access to a landmark gene therapy for spinal muscular atrophy.

Prior to that, the giant biopharma acquired nuclear medicines business Advanced Accelerator Applications (AAAP) for $3.9 billion in 2017. A $2.1 billion deal with target cancer therapy maker Endocyte (ECYT) followed in 2018. Earlier this year, Novartis completed its $5.3 billion acquisition of dry eye treatment Xiidra from Takeda Pharmaceutical (TAK). So far, the Swiss giant has already spent $27.5 billion in its deal spree -- and the company isn’t going to stop anytime soon.

I know I’ve said this already, but keep buying (NOVN) on dips.