By 2027, the group would like to grow by an average of more than four percent a year with innovative medicines.
(Photo: DigitalVision/Getty Images)
Frankfurt The pharmaceutical company Novartis wants to take over the US biotech company Chinook for up to 3.5 billion dollars in order to strengthen its drug pipeline. The Swiss company announced this on Monday. Among other things, Chinook is developing two active ingredients for the treatment of a rare and severe chronic kidney disease, which are currently being tested in advanced clinical studies.
The news was well received on the stock exchange. Novartis shares rose more than 1 percent on Monday morning, but then fell back slightly.
The two active ingredients in Chinook treat IgA nephropathy (IgAN), a rare kidney disease in young people for which there are currently no treatment options. Novartis itself already has a potential treatment drug in the pipeline, and Chinook’s two drugs can strengthen its offering in this disease with different mechanisms of action.
Novartis: Chinook to become new subsidiary
Vontobel analyst Stefen Schneider therefore sees the acquisition as a positive step. In combination with the IgAN drug Iptacopan, which Novartis is developing itself, the company could become a pioneer in this area, he says. Schneider believes that both Chinook drugs have blockbuster potential, i.e. sales of more than one billion dollars.
Novartis will pay Chinook $40 per share in cash, plus an additional $4 in cash upon the achievement of certain regulatory milestones. The premium on the current rate is 67 percent. Chinook is to form a new subsidiary of Novartis. The transaction is expected to close in the second half of the year.
IgA nephropathy is an autoimmune disease in which the protein immunoglobulin A builds up in the kidneys. This is actually an important defense substance in the body against pathogens. The deposits lead to progressive limitations in kidney function up to and including kidney failure.
The active ingredients in Chinook are designed to counteract this. Both have shown promising results in previous studies. One active substance called atrasentan is already being tested in the third and final clinical phase before the application for approval. The second drug candidate, called Zigakibart, is about to enter the third phase of the study.
“IgA nephropathy is a devastating disease that primarily affects young adults and potentially leads to dialysis or kidney transplantation,” said Novartis CEO Vasant Narasimhan on Monday.
Spin-off of generic drug business
The purchase of Chinook fits into the strategy of the manager, who has been in office since 2018, who wants to focus Novartis entirely on innovative, patent-protected drugs and novel therapies. Driven by the realization that focused companies are valued higher on the stock exchange, the group, which was still highly diversified a decade ago, successively divested itself of various business areas.
Narasimhan took the eye care division Alcon public and plans to divest its generic drug business in the second half of the year. The generics subsidiary Sandoz is also to go public. After this move, Novartis would be a pure-play pharmaceutical company.
The manager wants to focus the group entirely on innovative, patent-protected drugs and novel therapies.
(Photo: Bloomberg)
Narasimhan has big growth plans for this company: by 2027, Novartis wants to grow by more than four percent annually with innovative medicines. The group wants to achieve a core margin of more than 40 percent of net sales in the future. In 2022, the company was able to increase its core operating margin by 0.9 percentage points to 33 percent.
However, some analysts viewed these growth plans with skepticism. Among other things, they had doubts about which new products should contribute to the growth of Novartis from 2024. These could now be the two chinook active ingredients if they successfully complete further clinical development and receive approval.
Novartis last delivered positive news earlier this month with its breast cancer drug Kisqali. According to study data presented at the Asco International Cancer Congress, the drug reduces the risk of breast cancer recurring by 25 percent. The study examined patients with early-stage HR+/HER2 breast cancer. This form of breast cancer is the most common subgroup of advanced breast cancer.
With agency material
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