Novartis eyes Medicines Co to boost cardio franchise: report

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.

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Novartis, which declined to comment on the report, is hunting for a $5 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 capitalization 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 capitalization, 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