Novartis to Pay $3.9 Billion for Radio-Pharmaceuticals Firm -- Update

Novartis AG has agreed to acquire Advanced Accelerator Applications SA for $3.9 billion, a deal that would boost its oncology portfolio as generic competition eats into sales of blockbuster blood-cancer drug Gleevec.

The Swiss drug giant said Monday it is offering $41 a share in cash for the France-based, New York-listed company, which has recommended the deal to its shareholders.

A deal would hand Novartis AAA's recently-approved Lutathera treatment, which belongs to a small but growing class of therapies known as radio-pharmaceuticals. Such treatments carry radioactive substances directly to tumor cells, allowing them to attack the cancer at close range.

Lutathera targets gastroenteropancreatic neuroendocrine tumors, a rare form of cancer that occurs in the gut and pancreas. It was shown to significantly increase the chances of survival in patients with neuroendocrine tumors that couldn't be removed surgically, when compared with the standard hormone therapy.

The European Medicines Agency gave Lutathera the nod in September, while the Food and Drug Administration is expected to make a decision on the treatment in January.

The treatment is unlikely to become a blockbuster: analysts at Citi estimate Lutathera will generate sales of around $500 million a year at its peak. But it would still help strengthen Novartis's oncology business, which is under pressure after Gleevec, a blood cancer drug that generated nearly $5 billion a year, lost patent protection in 2016.

Novartis is also counting on new drug launches in other disease areas to offset Gleevec's decline. The two most important of these are Cosentyx for psoriasis and certain rheumatoid conditions and Entresto for heart failure.

Bruno Strigini, head of Novartis Oncology, said the acquisition would allow the company to expand the global reach of Lutathera. Novartis already sells a drug called Afinitor that treats a range of cancers including neuroendocrine tumors.

Mr. Strigini also said the acquisition would allow Novartis to build on AAA's technology platform. AAA is in the early stages of developing radio-pharmaceuticals for other types of cancer, including prostate and breast.

Novartis isn't the only large drugmaker to place a bet on radio-pharmaceuticals. Germany's Bayer AG already sells a product called Xofigo that irradiates bone metastases in prostate cancer patients who don't respond to hormone therapy. Bayer is currently testing the same treatment in various other cancer types.

Novartis, which will fund the acquisition with debt, said the deal is subject to the approval of regulators and at least 80% of AAA's shares being tendered.

Write to Denise Roland at Denise.Roland@wsj.com

(END) Dow Jones Newswires

October 30, 2017 08:45 ET (12:45 GMT)