Novartis announced Monday plans to buy Advanced Accelerator Applications for $3.9 billion in cash, strengthening the company's oncology portfolio. Under the deal, Novartis will gain Advanced Accelerator's radiopharmaceutical treatment for neuroendocrine tumours Lutathera (177Lu-Dotatate).
Lutathera was approved in Europe in September for the treatment of unresectable or metastatic, progressive, well differentiated, somatostatin receptor positive gastroenteropancreatic neuroendocrine tumours. The radioligand therapy (RLT) is also under review in the US with the FDA set to make a decision on the application by January 26, 2018.
"Novartis has a strong legacy in the development and commercialisation of medicines for neuroendocrine tumours," remarked Bruno Strigini, CEO of the Swiss drugmaker's oncology unit. "With Lutathera we can build on this legacy by expanding the global reach of this novel, differentiated treatment approach and work to maximise Advanced Accelerator Applications broader RLT pipeline," Strigini added.
In the Phase III NETTER-1 study, Lutathera achieved a significant and clinically meaningful 79-percent reduction in the risk of disease progression or death compared to Novartis' Sandostatin (octreotide). Baader Helvea analyst Bruno Bulic said that Novartis will likely replace Sandostatin, whose patent has expired, with Lutathera. "We see the more sophisticated technology to Lutathera commanding a premium price to Sandostatin and estimate peak sales potential at $2 billion," Bulic added.
According to Novartis, Advanced Accelerator's pipeline of RLT programmes includes 177Lu-PSMA-R2, which is entering Phase I/II development for prostate cancer. Advanced Accelerator also markets companion diagnostics for Lutathera and generated sale of 109 million euros ($126 million) last year.
Under the deal, which has been approved by Advanced Accelerator's board of directors, Novartis will make a cash offer of $41 per share for the company's ordinary stock and $82 per American depositary share. The transaction represents a 47-percent premium to Advanced Accelerator's 30 volume-weighted trading days prior to the company's share price on September 27, when rumours of a deal with Novartis first surfaced.
Commenting on the price of the deal, analysts from Vontobel said it "appears expensive" given Advanced Accelerator had sales of $78 million in the first half of 2017. For related analysis, see ViewPoints: One-two punch for Advanced Accelerator as it goes nuclear on gut tumours.