Novartis to acquire GSK’s multiple sclerosis drug in deal that could surpass $1B

Novartis AG agreed to buy the rights to an experimental multiple sclerosis drug from GlaxoSmithKline Plc for as much as $1 billion as it races to catch up with a competing treatment being developed by Roche Holding AG.

Novartis will pay $300 million upfront to Glaxo for ofatumumab, followed by another $200 million after the start of late-stage clinical trials, the Basel, Switzerland-based company said in a statement on Friday. Novartis may pay as much as $534 million more if certain goals are met during the drug’s development.

The drug would compete with Roche’s experimental medicine ocrelizumab, which succeeded in reducing the relapses and disability progression associated with multiple sclerosis in two late-stage studies announced in June. That treatment may reach the market in 2017, while the Novartis drug would be at least two years behind, said Fabian Wenner, an analyst at Kepler Cheuvreux in Zurich.

“It’s a joke,” Wenner said by phone. “Patients either want better convenience than the old drugs or they want better efficacy, and ofatumumab is offering neither of those things. The chances of this being successful in MS and generating any sales are zero in my view.”

Novartis fell 3 percent to 94.55 euros as of 3:35 p.m. in Zurich, amid a decline in European stocks. Shares of Glaxo dropped 1.8 percent.

Fully Human

More than 2.3 million people suffer from multiple sclerosis, a progressive central nervous system disorder that disrupts brain and spinal-cord functioning. Ofatumumab and ocrelizumab attack a type of white blood cell in the immune system that is a key contributor to spinal-cord damage.

Novartis’s drug is a fully-human antibody that may be less likely to cause unwanted immune reactions than Roche’s product, which is derived from an animal and modified to resemble a human antibody, Novartis said in a statement.

Ofatumumab may also “have the potential for better tolerability and safety,” Novartis said, because it’s a lower dose delivered under the skin every month, compared with Roche’s infusion which is given every six months.

Novartis already has an MS treatment called Gilenya, which was the company’s second-biggest seller last year, with sales of $2.5 billion. That drug will lose patent protection as early as 2019. The company needs a successor to “soften the blow,” said Michael Leuchten, an analyst at Barclays Plc in London. Still, ofatumumab will be significantly behind Roche’s product, Leuchten said.

“It fits strategically, but from a timing perspective there’s going to be quite a gap,” he said.

Future Royalties

Novartis will also pay royalties of as much as 12 percent to Glaxo on any future net sales of ofatumumab for autoimmune conditions. Novartis had previously acquired rights to the medicine as a cancer treatment, marketing it under the brand name Arzerra.

Novartis and Glaxo completed a deal in March in which the Swiss company gained cancer drugs and London-based Glaxo added to its vaccines business. The two also created a consumer health joint venture.

24 – August – 2015