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Novartis eyes Medicines Co to boost cardio franchise - report

Novartis eyes Medicines Co to boost cardio franchise - report
FILE PHOTO: Switzerland's national flag flies in front of the logo of Swiss drugmaker Novartis in Basel, Switzerland, January 30, 2019. REUTERS/Arnd Wiegmann/File Photo -
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Arnd Wiegmann(Reuters)
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ZURICH (Reuters) – Novartis <NOVN.S> is considering an offer for U.S. biotechnology firm The Medicines Co <MDCO.O>, Bloomberg reported on Tuesday, a deal that could broaden the Swiss drugmaker’s cabinet of heart medicines and shore up growth threatened by patent expirations.

Novartis, which declined to comment on the report, is hunting for a $5 billion (£4 billion) acquisition in the United States, two banking sources told Reuters separately without identifying a target.

New Jersey-based The Medicines Co’s top drug candidate is cholesterol-lowering drug inclisiran for heart patients. Novartis has historically had a strong cardiovascular drug franchise, but lost ground when Diovan, once a $6 billion-per-year seller, lost patent protection in 2012 and left the company without an immediate, innovative follow-up product.

Novartis has since been building up its portfolio, which now includes Entresto, a $1 billion seller for heart failure, as well as an experimental RNA-targeting molecule from Ionis Pharmaceuticals that it licensed earlier this year for $150 million.

The Medicines Co has a market capitalisation of nearly $4.7 billion after the shares have more than tripled in value this year.

Novartis Chief Executive Vas Narasimhan has been pursuing bolt-on acquisitions of up to 5% of the company’s market capitalisation, or $10 billion.

Some analysts have said Novartis’s hunger for deals — it has made several billion-dollar-plus purchases since 2018, including the $8.7 billion buyout of gene therapy specialist AveXis — is borne of necessity.

With patents nearing expiration on Lucentis, for macular degeneration, iron overload medicine Exjade and $3.3 billion-per-year MS drug Gilenya, reliable revenue sources may soon be under siege from generics or biosimilar copies.

“We expect that 50% of 2018 group sales will lose patent protection before 2026,” Bank Vontobel analyst Stefan Schneider said in a note to investors in August. “Since R&D does not provide sufficient growth, bolt-on acquisitions are required.”

Earlier this year, Narasimhan paid up to $5.3 billion for Takeda’s dry eye drug Xiidra. With AveXis, he added the gene therapy Zolgensma, now the highest-priced one-time treatment at $2.1 million, for spinal muscular atrophy.

He also bought U.S.-based Endocyte last year for $2.1 billion, and France’s Advanced Accelerator Applications for $3.9 billion earlier in the year to build out Novartis’s arsenal of medicines to target cancer using radioactive substances.

(Reporting by John Miller in Zurich, Arno Schuetze in Frankfurt, Gregory Roumeliotis in New York and Pamela Barbaglia in London; Editing by Michael Shields and Jane Merriman)

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