Novartis AG is acquiring U.S. biotechnology company The Medicines Co to the tune of about $9.7 billion, the Swiss pharma giant announced on Sunday, as it seeks to boost its portfolio of cardiovascular disease medicines.
It is expected that the agreement would help strengthen the growth of the company that is challenged by patent expirations. Novartis paid $85 per share in cash, a premium of around 24 percent over the closing share price of $68.55 of The Medicines Co. on November 22.
The firm said the transaction was approved by both the company's board of directors and would be financed by available cash and short-and long-term lending.
New Jersey-headquartered The Medicines Co's most successful drug is the cholesterol-cutting inclisiran for heart patients, which could complement the growing business of Novartis with its heart failure medicine Entresto, a start-up slow-seller that has now crossed the $1 billion annual income threshold.
Novartis said that assuming completion in the first quarter of 2020, it expected inclisiran to begin contributing to sales from 2021 and said it had the potential to become one of the largest money-making products in its portfolio.
The transaction indicates that Novartis was willing to spend billions not only on rare disease medicine, as it did in 2018 when it spent out $8.7 billion to buy gene therapy firm AveXis, but also on heart therapy to potentially help millions of people.
Historically, Novartis had a large cardiac product portfolio, but lost ground after Diovan, which used to generate $6 billion per year in profits, lost patent protection in 2012, leaving the company without a solid and immediate follow-up brand.
The deal fits the goal of Novartis Chief Executive Vas Narasimhan to add bolt-on acquisitions of up to $10 billion to support the group's portfolio of new products or technologies for medicines.
Novartis also said it expected that core margins in the Innovative Medicines division would continue to be expanded in the near term to "mid-thirties" and the medium-term to "mid-to high-thirties."
Meanwhile, the company said it would lay off most of its workers two years ago as it restructured to focus on inclusion development.
Novartis is introducing new drugs such as Zolgensma, a gene therapy targeted at a debilitating muscle disorder which the pharmaceutical firm bought after acquiring rival drugmaker AveXis Inc for $8.7 billion in 2018.
Novartis also purchased Endocyte Inc. for $2.1 billion last year. The firm has sold off the eye-care unit of Alcon Inc. under Narasimhan and scrapped its shares in the consumer health business.
