6. Novartis/The Medicines Company

Novartis headquarters
Novartis' $9.7 billion price for The Medicines Company raised concerns that the Swiss drugmaker might have overpaid. (Novartis)

Novartis/The Medicines Company
Deal value:
$9.7 billion
Date announced: Nov. 24, 2019

Novartis has become quite acquisitive since Vas Narasimhan took over as CEO. After its $8.7 billion deal for gene therapy expert AveXis and a $2.1 billion bolt-on radiotherapy buyout of Endocyte in 2018, the Swiss pharma again made multibillion-dollar acquisitions this year.

Novartis agreed to buy The Medicines Company for $85 per share in a $9.7 billion cash transaction, a price that some say is too high. Though it’s buying the entire firm, the deal is really just about one drug: cardiovascular contender inclisiran.

Just as Sanofi and Regeneron’s Praluent and Amgen’s Repatha do, inclisiran targets PCSK9 to reduce bad cholesterol levels. The difference is, the MedCo drug uses a small-interfering RNA technology developed by Alnylam Pharmaceuticals, while the two marketed drugs are antibodies.

Inclisiran has posted LDL cholesterol-lowering clinical data comparable to those Repatha and Praluent did in their own registrational trials. According to data from the phase 3 Orion-11 trial on 1,617 patients, inclisiran as an add-on to statin therapy cut bad cholesterol by 54%.

Even ahead of the full data disclosure, SVB Leerink analyst Geoffrey Porges has predicted that inclisiran could make “the already challenging market for the antibodies unattractive.”

Inclisiran is given twice a year after two initial lead-in injections, compared with every two weeks or once a month for the two PCSK9 antibodies. Besides the convenience edge, MedCo CEO Mark Timney has also argued that the drug’s administration by a healthcare provider could help improve compliance.

The dosing interval “aligns with when these types of patients visit their physician, and therefore is starting to get these additive benefits such as the ability to control adherence,” he said.

Based on the positive readouts, Novartis at one point even offered $90 per share for the company. However, when it came to the Orion-10 data at the American Heart Association conference on Nov. 18, the drug, while posting a placebo-adjusted drop in LDL cholesterol of 58%, failed to deliver improvement on an exploratory endpoint that examined cardiovascular events.

Numerically, more patients in the inclisiran group had a heart attack or stroke or died of cardiovascular causes. The study was not powered to reach any conclusion on that score, but it did raise doubts about inclisiran's all-important cardiovascular outcomes trial Orion-4, which is expected to read out in 2023.

The same day the data were revealed, Novartis withdrew its $90 offer and told MedCo that it wasn’t worth even $85, according to a Securities and Exchange Commission filing. Still, the Swiss drugmaker kept that $85 per share as its “best and final offer.”

RELATED: Is $9.7B too big a price for The Medicines Company? Novartis itself seems to think so

At least three groups of analysts predicted Novartis will need to work hard to make the deal pay off—and still might not find its investment worthwhile.

Despite previous excitement about PCSK9 inhibitors, Repatha and Praluent have not lived up to the Street’s original expectations. And their recent 60% price cuts are viewed as effectively nixing any megablockbuster sales potential for the PCSK9 class.

“We felt the commercial case—injectable drugs for a ‘silent’ disease, entering a highly-genericized category—would be challenging, and this is how it has played out,” Wolfe Research analyst Tim Anderson wrote in a recent note about the MedCo deal in the context of the slow launch of Repatha and Praluent.

By Evercore ISI analyst Umer Raffat’s calculation, the price Novartis is paying indicates $2.2 billion in inclisiran peak sales. In comparison, the current annualized sales for Repatha and Praluent combined are just $1 billion.

Nevertheless, on a conference call in November, Narasimhan said his company could make it work, what with its 50-years-plus experience in cardiovascular disease.

The company is still in the middle of a successful launch of heart failure combo drug Entresto, whose sales grew 60% to reach $430 million in the third quarter. While they’re in different cardiovascular indications, Entresto prescribers represent about 80% of prescribers of statins or existing PCSK9s in the U.S., Narasimhan noted.

6. Novartis/The Medicines Company