NOVARTIS ACQUIRES THE MEDICINES COMPANY FOR $9.7 BILLION
Covets global market potential of LDL agent “Inclisiran”
Strategic points of the Novartis and The Medicines Company acquisition
- Novartis invests $9.7 billion to acquire The Medicines Company
- A primary driver of the deal is “Inclisiran”, a yet to be approved cholesterol pharmaceutical agent
- In the last 14 years, Novartis has executed 6 multi-billion acquisitions ranging from $2.6 billion to approximately $60 billion each
Novartis broadening global pharmaceutical therapy portfolio
Novartis (NYSE: NVS) has announced it is acquiring cardiovascular therapy-focused The Medicines Company (NASDAQ: MDCO) for $9.7 billion. Novartis, based in Basel, Switzerland covets The Medicine Company’s “Inclisiran” agent; a small interfering RNA (siRNA) proprotein convertase subtilisin-kexin type 9(PCSK9)compound ( the first and only in its class) being evaluated for its promising ability to lower low-density lipoprotein (LDL) cholesterol (also known as LDL-C or “bad cholesterol”).
It is not on the market yet but after completing its 3 clinical trials, it appears to be well-positioned for approval by the regulator. Inclisiran is expected to have a favorable administration schedule of just 2 doses (by injection) annually.
Inclisiran’s third clinical trial performance details are promising
After successful completion of 2 previous trials, fingers were crossed for the third Inclisiran trial to generate positive results which it did. The study achieved its critical primary endpoints; the percentage change of LDL cholesterol from baseline after 17 months of treatment and time-adjusted percentage change of LDL cholesterol from baseline after three months and 18 months.
Secondary endpoints were also reached; the mean absolute change in LDL cholesterol at 17 months, the average absolute reduction in cholesterol between three months and 18 months and changes in other lipids and lipoproteins. Based on these and other details, including Inclisiran’s ability to reduce LDL cholesterol levels by 56% and demonstrate a good safety profile, Novartis was confident enough to wager almost $10 billion for Inclisiran even before any regulators starting with the U.S. and Europe approved it.
Cholesterol: a competitive pharmaceutical industry battleground
There is a variety of brand and generic pharmaceutical therapies currently in the cholesterol treatment marketplaces. Clinicians have been dispensing several of them for two decades or more. With the exceptions of Livalo and Praluent, each of these products are now available through generic pharmaceutical product manufacturers:
- Atorvastatin (Lipitor — Pfizer)
- Ezetimibe (Zetia — Merck)
- Fluvastatin (Lescol — Novartis)
- Lovastatin (Mevacor — Merck)
- Pitavastatin (Livalo — Kowa |no generic)
- Alirocumab (Praluent — Sanofi / Regeneron | no generic)
- Pravastatin (Pravachol — Bristol Myers Squibb)
- Rosuvastatin calcium (Crestor — AstraZeneca)
- Simvastatin (Zocor — Merck)
Novartis is a worldwide healthcare leader
Novartis is a Fortune 500 company currently ranked at 201. It generates approximately $52 billion in annual sales and employs over 125,000 workers. Its top ten products each generate over $1 billion annually in sales:
- Affinitor/Votubia (palbociclib)
- Cosentyx (secukinumab)
- Galvus (vildagliptin)
- Gilenya (fingolimod)
- Gleevec (imatinib)
- Lucentis (ranibizumab)
- Promacta/Revolade (eltrombopag)
- Sandostatin (ocretride acetate)
- Tafinlar w/Meknist (dabrafenib + trametinib)
- Tasigna (nilotinib)
The Medicines Company has a unique corporate and research & development strategy
The Medicines Company is a clinical development company with a strategy centered on researching compounds that have fallen short of expectations and not able to meet approval standards by the Food and Drug Administration and other regulators in earlier commercial product development ventures.
They revisit the data and assess options to refine certain product attributes as well as clinical trial designs and related approval trial processes to determine if a product can be reinvestigated, entered into clinical trials once again and perhaps be approved.
Novartis commercial organization overview
Novartis (formed from the merger of Ciba-Geigy and Sandoz) with a market capitalization of approximately $207 billion and The Medicines Company were both founded in 1996. Novartis has two primary business units:
- Innovative Medicines (which will house Inclisiran if it is approved)
- Sandoz (Sandoz manufactures generic and biosimilar or biogeneric products)
Divestitures generate cash for Novartis; Xiidra a strategy question mark
Novartis has been assertively working on transforming their organization into a pure pharmaceutical/biotech company. As part of the process in 2018, it sold off its 36.5% stake in a consumer health product joint venture to their partner, GSK, for $13 billion.
In another major asset divestiture exercise, during May 2019 Novartis spun off its blue-chip vision care unit, Alcon, comprised of consumer product brand, prescription drug and contact lens product franchises, into a fully independent company (NYSE and SXC: ALC). Based in Fort Worth, Texas, Alcon’s market capitalization is $28 billion.
Oddly, Novartis had just acquired Xiidra, an eye care drug from Takeda earlier in May for $3.4 billion. Xiidra was not part of the Alcon spinoff product portfolio. Xiidra generates about $400 million in annual sales.
Novartis is a global player in multi-billion dollar healthcare acquisitions
Mergers and acquisitions are almost routine in the healthcare industry. Novartis is well versed in the exercise. Some of their largest deals include:
- In 2018 Novartis made two acquisitions; AveXis for $8.7 billion and Endocyte for $2.1 billion
- Genzyme was bought by Novartis for $21 billion in 2011
- In 2008, Novartis began acquiring Alcon from Nestle for almost $60 billion in two separate transactions
- Chiron was purchased by Novartis in 2006 for $5.1 billion
- Novartis bought Hexal AG for $8.3 billion in 2005
Novartis doesn’t shy away from transforming its global enterprise through acquisitions or making divestitures. Moving forward, they have made a sizable investment to acquire The Medicines Company and its Inclisiran cholesterol treatment agent; the drug’s approval will be highly anticipated by investors and medical professionals.
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