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Novartis (NVS) to Buy Gyroscope, Submits Herceptin Biosimilar to EMA

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Novartis (NVS - Free Report) recently announced that will acquire all of the outstanding share capital of the U.K.-based ocular gene therapy company Gyroscope Therapeutics.

The acquisition will add GT005 to the Novartis portfolio, an investigational, one-time gene therapy currently in phase II for the treatment of people living with geographic atrophy (GA), an advanced form of dry age-related macular degeneration (AMD).

Per the terms, Novartis will make an upfront payment of $800 million and potential additional milestone payments of up to $700 million.

GT005 is designed as an AAV2-based, one-time investigational gene therapy for GA secondary to AMD delivered under the retina.

The safety and efficacy of GT005 for the treatment of GA secondary to AMD are currently being evaluated in a phase I/II study and two phase II studies. The candidate was granted Fast Track designation by the FDA for GA.

The acquisition complements Novartis’ expertise in retinal diseases and gene therapy. Further, it builds a position in ophthalmology gene therapy and optogenetics following the acquisitions of Vedere Bio and Arctos Medical.

Novartis’ Beovu (brolucizumab, also known as RTH258) is also approved to treat wet AMD.

We note that Novartis is looking for strategic acquisitions using the cash proceeds from its stake sale in Roche (RHHBY - Free Report) .

In November, Novartis agreed to sell its 33% stake in Roche for $20.7 billion. NVS has been a shareholder of Roche since May 2001. Last week, Novartis initiated a share buyback of up to $15 billion to be executed by the end of 2023. The buyback is funded through the proceeds from the recent sale of 53.3 million shares of Roche.

The stock has lost 8.9% in the year so far against the industry’s growth of 18.7%.

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Concurrently, Novartis’ generic arm Sandoz announced that it submitted a marketing authorization application for a proposed biosimilar of Herceptin (trastuzumab - 150 mg, for intravenous use) developed by EirGenix, Inc. to the European Medicines Agency (“EMA”). Per the license agreement signed in April 2019, EirGenix, Inc. is responsible for development and manufacturing. Sandoz will have the right to commercialize the biosimilar upon approval in all markets, excluding China and Taiwan.

NVS’ third-quarter results were mixed. Most of the key brands maintain momentum. However, the Sandoz business continues to be affected by pricing pressures. Hence, management has commenced a strategic review of Sandoz and might separate the business.

Novartis currently carries a Zacks Rank #3 (Hold).  A couple of better-ranked stocks are GlaxoSmithKline (GSK - Free Report) and Sarepta Therapeutics, Inc. (SRPT - Free Report) , carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

GlaxoSmithKline’s earnings per share estimates for 2021 have increased from $2.81 to $3.05 in the past 60 days. The same for 2022 has increased from $3.25 to $3.06 in the past 60 days. Shares of Glaxo have risen 18.6% in the year so far.

Earnings of Glaxo beat estimates in three of the last four quarters and missed once, with the surprise being 15.3%, on average.

Estimates for Sarepta have narrowed from a loss per share of $6.95 to $4.99 for 2021 and from $4.83 to $3.61 for 2022 in the past 60 days.

SRPT delivered an earnings surprise of 11.06%, on average, in the last four quarters.