“Novartis AG” (Ticker NYSE:NVS) dominated news headlines in the pharmaceutical space when she wanted to buy Avexis, Inc. (Nasdaq:AVXS) for $218 for a total amount of $8.7 billion. Premium of about 80 percent on AVXS stock is amazing. The next question is whether the NAF shares to grow?
Forecasts Novartis a slightly negative effect on basic earnings for the next two years, but by 2020, the acquisition will have a positive impact on results. Even if the acquisition extends the research production of novartis and potential products in the next few years, the price of mind.
Premium price to perfection, leaving little room for any delays, obstacles and disappointments. The chances are high that shareholders of novartis will suffer a write-off of goodwill, if Avexis is not performing as expected.
Big Pharma’s ransom back, starting with NVS stock
Novartis-Avexis the deal has similarities with Alexion Pharmaceuticals (Nasdaq:ALXN) purchase Synageva in 2015, $8.4 billion of net cash. The ransom was due to the addition of more than 30 different programs under your belt Alexion. But it is one of the worst deals in the history of biotech acquisitions.
Similarly, Novartis pays for everything in cash for the company, whose products are not even close to getting on the market. Competition for AAV vector production (using viruses for gene therapy) is very low.
Novartis is now faced with the competition from reputable companies that include Ionis Pharmaceuticals, Inc. (Nasdaq:ions) and Biogen Inc. (NASDAQ:BIIB). These billion dollars of the cost, companies like abeona therapy Inc. (Code Nasdaq:, ABEA), with a market capitalization of approximately $670 million, even after a 16 percent intraday rally on 9 APR, look cheap to value investors.
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Latest transactions in 2018 included getting AAA, signed a licensing agreement with spark in January to license Luxturna, together with the agreement on the transfer of assets of the OTC, a joint venture with GlaxoSmithKline PLC (indexGSK), agreed with the company refocusing its core activities. Going forward, the company wants to focus medications that are powered by digital or data.
In his presentation of the merger, Novartis stressed the importance of AAV9, or adeno-associated virus Platform 9, platform of gene therapy. A more detailed point on AAV9 is that it is able to cross the blood-brain barrier, potentially giving more options for the treatment of CNS diseases.
Treatment of SMA opportunity
SMA, or spinal muscular atrophy, has a potential market of 23,500 patients. Sincerely, the patients suffer from this disease, but the income potential for treatment is limited. The hope for investors is that clinical studies will be successfully proved the safety and efficacy of gene therapy will lead to the development of drugs.
It is the hope of a big one and brings a lot of risk for NVS stock if the company fails to bring the product to market. Risks for AVXS-101 is particularly egregious when one considers how early the product is in clinical trials.
Avexis redesigned its manufacturing process to gear up for the approval of the drug. At the same time, the company will make a submission to the bla and prepare for pre-license inspection.
Avexis two other drugs in phase 1B. One asset, CGF166 studying the treatment of hearing loss. CPK850 is intended for Retinitis pigmentosa. In addition, the company has three other studies in the preclinical phase. Their testimony is for rett syndrome, inherited ALS-SOD1, and one in ophthalmology and Hematology.
Shareholders of Novartis is optimistic the deal strengthens the company. The stock rose the next day. In the medium term, Avexis is little space to deal with any delay in clinical trials. Plus, any disappointing results of the research will take the growth potential of novartis.
It’s too early to worry about these risks and the P/E of about 14 times, NVS stock on a lot of money and credit to Finance the acquisition.
Disclosure: author does not own shares in any companies mentioned.