Novartis on Christmas Shopping Spree

Acquisition of Ziarco Group expected to expand skin care portfolio

n1Swiss pharma giant Novartis International AG (NYSE: NVS) is on a major acquisition drive after its most recent quarterly earnings report showed that FY16 revenues are expected to be hurt by the impact of generic competition, primarily for blockbuster cancer treatment Gleevec. In Q3 FY16, core profits fell for the seventh straight quarter as generic competition eroded sales of Gleevec. Headquartered in Basel, Switzerland, Novartis now has to rely heavily on newer treatments like heart medicine Entresto and psoriasis drug Cosentyx for future growth.

Acquisition of Ziarco Group to expand skin care portfolio

n2To spur growth, Novartis has sharpened its focus on strategic opportunities while stepping up the pace of acquisitions in high-growth areas that are aimed at addressing a significant unmet medical need for a large patient population. As part of this strategy, Novartis is buying privately held drugmaker Ziarco Group for an undisclosed sum to gain access to its investigational eczema medicine, as reported by Reuters on December 16th, 2016. The acquisition adds UK-based Ziarco’s once-daily oral H4 receptor antagonist, ZPL389, which is being developed for the chronic, itchy inflammatory skin condition to Novartis’s existing portfolio of approved and investigational dermatological drugs.

Eczema is a common, relapsing, inflammatory skin disorder that affects 18-25 million people in the US alone. In the past 15 years, there have been no new drugs approved for eczema, and crisaborole could address a significant unmet medical need. In May 2016, drug behemoth Pfizer Inc. (NYSE: PFE) acquired California-based Anacor Pharmaceuticals Inc. (NASDAQ: ANAC) for $5.2 billion to gain access to Anacor’s non-steroidal topical gel crisaborole, which is currently under US Food and Drug Administration (FDA) review for the treatment of eczema.

Novartis strikes deal with Encore Vision

Continuing with its shopping spree, Novartis announced on December 20th, 2016, that it has reached a definitive agreement to buy Fort Worth, Texas-based Encore Vision, which is focused on developing a novel treatment in presbyopia, or far-sightedness. Currently, there is a large need for innovative, effective and safe treatment options for people with presbyopia, and there is no disease-modifying treatment available at all.

Focus on NASH therapies

Novartis announced on December 19th, 2016, that it has signed a licensing deal to co-develop a fatty liver disease drug with Conatus Pharmaceuticals Inc., under which the small US company will receive $50 million up front. The agreement will enable the companies to jointly develop the Conatus drug emricasan, an experimental first-in-class oral treatment for non-alcoholic steatohepatitis (NASH) with advanced fibrosis and cirrhosis. NASH is an incurable fatty liver disease closely linked to obesity. The deal assumes significance since there are no current approved treatments for NASH, which affects more than 15 million Americans. NASH involves the accumulation of fat in the liver that is not caused by alcohol; it can lead to cirrhosis, liver transplants or liver cancer.

In addition to the upfront payment, Conatus is eligible to receive significant payments for certain development, regulatory and commercial milestones, and would get tiered double-digit royalties on emricasan single-agent sales and tiered single- to double-digit royalties on sales of combination products containing emricasan, the companies said. Conatus has the option to co-commercialize emricasan in the United States.

Under the collaboration, Conatus will conduct multiple Phase IIb clinical trials with emricasan in NASH. If those succeed, Novartis would conduct Phase III studies of emricasan and begin development of the drug in combinationn3 with its own experimental treatment for chronic liver disease, known as an FXR agonist.

Rush for NASH

Several drugmakers are pursuing treatments for NASH, a chronic, progressive fatty liver condition involving inflammation and scarring that is seen as a huge unmet need with a potentially enormous patient population. Experimental NASH drugs being developed by Gilead Sciences Inc. (NASDAQ: GILD) have similar sales potential and that treatments being studied by Intercept Pharmaceuticals Inc. (NASDAQ: ICPT) and others also have blockbuster sales potential. Other major contenders in the race to develop a drug to treat NASH include Conatus Pharmaceuticals Inc. (NASDAQ: CNAT) and Galectin Therapeutics Inc. (NASDAQ: GALT). Currently, liver biopsies are required to confirm NASH, but less-invasive diagnostic tests should be available by the time the first NASH treatments reach the market, or soon after.

Irish drugmaker Allergan Inc. (NYSE: AGN) announced on September 20th, 2016, that it would pay up to $1.7 billion for Tobira Therapeutics Inc. (NASDAQ: TBRA) to get a leg up in the race to develop therapies for NASH.

Sun Pharma to buy Odomzo for $175 million

In a recent development, Sun Pharmaceutical Industries Ltd., India’s largest drug maker by market value, announced on December 22nd, 2016, that it will acquire branded oncology drug Odomzo (Sonidegib) from Novartis for an upfront amount of $175 million and additional milestone payments. Odomzo has marketing approval in over 3 countries globally including the US, Europe, and Australia. The drug was approved by the FDA in July 2015 and is a hedgehog pathway inhibitor indicated for the treatment of adult patients with locally advanced basal cell carcinoma that has recurred following surgery or radiation therapy. Over 70% of the prescribers for Odomzo are dermatologists; according to IMS Health, the hedgehog inhibitor class of drugs grew at a whopping 40% during January 2016n4 to October 2016.

Will Ribociclib make the cut?

Novartis, which is in the midst of a massive restructuring of its global operations to streamline its R&D efforts and contain costs, hopes that the acquisitions will pay off in the long term even as it faces intense competition from generic drugs and biosimilars. Apart from its restructuring efforts, Novartis is pinning its hopes on Ribociclib, its experimental breast cancer drug, cut the risk of worsening or death by 44% in a recent study. This in turn paves the way for the Company to seek regulatory approval in the U.S. and Europe by the end of 2016, following the FDA’s decision in August 2016 to designate ribociclib as a breakthrough therapy. Novartis is targeting to win the first approval for ribociclib by the end of June 2017.

The ribociclib study results assumes significance since Novartis is trying to compete with Pfizer, whose rival medicine Ibrance may generate sales of $2.16 billion in 2016, as per industry experts. Sales of ribociclib, or LEE011, may reach $1 billion by 2020, according to forecasts.

Stock Performance

n5Novartis’s stock stood at $72.84, gaining 0.55%, at the close on Friday, December 30th, 2016, having vacillated between an intraday high of $73.36 and a low of $72.59 during the session. The stock’s trading volume was at 3,674,944 for the day. The Company’s market cap was at $190.22 billion as of Friday’s close.

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