Novartis has agreed to pay $2.1 billion cash to acquire Endocyte, expanding an ongoing effort by the Swiss firm to develop targeted radiation treatments for cancer.
Under the agreement, Novartis (NYSE: NVS) will pay shareholders of West Lafayette, IN-based Endocyte (NASDAQ: ECYT) $24 per share, which is a 54 percent premium to the closing price of Endocyte’s closing stock price on Wednesday. After the deal was announced Thursday morning, Endocyte’s stock price rocketed up more than 50 percent.
The acquisition gives Novartis access to experimental drugs meant to precisely deliver radiation to a tumor. Endocyte’s experimental treatments attach a radioactive therapeutic atom to a ligand, a molecule that can bind to receptors on the surface of cancer cells. These radioligand therapies are supposed to shrink tumors while sparing healthy tissue from the toxic effects of radiation.
The buyout marks a big turnaround for Endocyte, whose shares were worth just over $1 apiece in September 2017. That turnaround came after Endocyte acquired its lead drug, Lu-PSMA-617, from German company ABX the following month. Its shares have steadily climbed ever since as the company pressed forward with clinical trials. Endocyte is currently enrolling patients in a Phase 3 study testing the drug as a treatment for advanced prostate cancer. The drug targets protein specific membrane antigen, a protein expressed by approximately 80 percent of patients with the disease. Endocyte has another radiotherapy, also for advanced prostate cancer, in preclinical development.
By purchasing Endocyte, Novartis expands its radiotherapy capabilities. Last year, the Swiss drug maker reached a $3.9 billion deal to acquire Advanced Accelerator Applications, which went on to win FDA approval, in January, for lutetium Lu 177 dotate (Lutathera), a radiotherapy for neuroendocrine tumors. Novartis says the Endocyte acquisition would expand its radiotherapy platform with both a potential near-term product launch as well as early-stage clinical development programs. Novartis also plans to see if Endocyte’s lead drug might help treat patients with earlier stages of prostate cancer as well.
Novartis and Endocyte expect to close the deal in the first half of 2019. Endocyte’s board of directors has already approved the buyout, but it still needs approvals from shareholders and regulators. Endocyte is barred from seeking a better offer, and would pay Novartis a $73.5 million breakup fee if it terminates the deal. Novartis would pay Endocyte a $150 million “reverse termination fee,” however, if regulators don’t approve it.
The Endocyte deal is the second multi-billion dollar buyout Novartis has done this year. In April, it paid $8.7 billion to acquire AveXis, which has a gene therapy for spinal muscular atrophy in late-stage testing.
Image of slide prostate cancer by the National Cancer Institute