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Novartis (NVS) Offers to Buy French Gene Therapy Manufacturer

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Novartis AG (NVS - Free Report) announced that it has made an offer to acquire French company CellforCure from LFB.

CellforCure is one of the first and largest contract development and manufacturing organizations (CDMO) producing cell and gene therapies in Europe.

Financial Terms of the Transaction

Per the terms, Novartis would acquire the share capital of CellforCure from LFB, including the cell and gene manufacturing facility located in Les Ulis and the related adjacent land. Once the offer is accepted, CellforCure would become a wholly-owned Novartis manufacturing site. The transaction is expected to close in the first half of 2019. Novartis expects to fund the transaction through cash.

Strategic Aspect of the Transaction

The proposed acquisition builds on Novartis’ existing agreement with CellforCure for contract manufacturing of Novartis’ leading CAR-T cell therapy, Kymriah. Novartis had signed an agreement with CellforCure in July 2018 to produce CAR-T cell therapies, including Kymriah, which was the first FDA-approved CAR-T cell therapy.

CellforCure operates a Contract Development and Manufacturing Organization. The company obtained two Good Manufacturing Practice (GMP) certificates from the French Agence Nationale de Sécurité du Médicament et des Produits de Santé (ANSM) in 2016 for the production of innovative experimental and commercial therapy drugs.

This acquisition would strengthen Novartis’ CAR-T cell therapy manufacturing capacity with potential to expand to other cell and gene therapies in the company’s pipeline. The addition of this manufacturing site will expand Novartis’ network of cell and gene sites, including Morris Plains and Stein.

Our Take

Novartis is currently realigning its portfolio. Given the genericization of key drugs, the company is looking to develop its pipeline in other promising areas. Gene therapy has gained a lot of attention of late and promises significant potential.

The company is making efforts to strengthen and expand its cell and gene manufacturing capabilities, given the anticipated demand. Novartis signed a strategic licensing, collaboration and share purchase agreement with Cellular Biomedicine Group (CBMG) to manufacture and supply Kymriah in China. The company also expanded its alliance with the Fraunhofer Institute in Germany to support manufacturing for clinical trials and post approval manufacturing. Also, the company entered into a contract manufacturing collaboration in Japan.

Earlier this year, Novartis acquired gene-therapy company, AveXis, Inc. The European Commission (EC) recently approved Luxturna, a one-time gene therapy, for the treatment of patients suffering from vision loss due to a genetic mutation in both copies of the RPE65gene and who have enough viable retinal cells. Luxturna was developed and is commercialized in the United States by Spark Therapeutics (ONCE - Free Report) . Novartis and Spark Therapeutics entered into a licensing and supply agreement in January 2018 for the development, registration and commercialization rights to Luxturna in markets outside the United States. Per the agreement, Novartis can commercialize Luxturna in the EU/EEA. The company already owns exclusive rights to development, registration and commercialization of the gene therapy in all other countries outside the United States, and Spark Therapeutics will supply it to Novartis.

Shares have gained 4% over a year compared with the industry’s 5.2% growth. 

Novartis intends to spin-off Alcon into a separately-traded standalone company to grow as a medicines company solely and focus better on its legacy drug business. The spin-off is expected to be completed in the first half of 2019. Earlier, Novartis had divested its stake in the OTC joint venture with GlaxoSmithKline (GSK - Free Report) for $13 billion.

Zacks Rank & Another Key Pick

Novartis carries a Zacks Rank #2 (Buy). Another well-placed stock in the healthcare sector is Gilead Sciences, Inc. (GILD - Free Report) , which sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Gilead’s earnings per share estimates increased from $6.65 to $6.93 for 2018 over the past 60 days. Estimates for 2019 are also up by 19 cents.

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