Novartis AG (ADR)(NYSE:NVS) In Deal To Purchase Advanced Accelerator Applications


Swiss pharmaceutical giant Novartis AG (ADR)(NYSE:NVS) will pay approximately $3.9 billion to acquire Advanced Accelerator Applications, a nuclear medicines business based in France. This is the latest move by Novartis to strengthen its cancer treatment efforts which had already been boosted when the drug giant acquired the marketed cancer drugs belonging to GlaxoSmithKline plc (ADR)(NYSE:GSK). Two months ago a gene-modifying treatment of leukemia developed by Novartis was approved.

Advanced Accelerator Applications was initially a unit of Cern, a nuclear research organization based in Europe, before it was spun out one and a half decades ago. The specialty of the nuclear medicines firm is radio pharmaceuticals – a technology which makes use of radioisotopes in diagnosing and treating tumors.

Debt financing

Novartis plans to finance the transaction using debt and the founder of Advanced Accelerator Applications, Stefano Buono, who has an 11% stake will earn over $420 million. The acquisition strategy of the chief executive officer of Novartis, Joe Jimenez, is to pursue targets which cost under $5 billion rather than more expensive deals.

The flagship product of Advanced Accelerator Applications is Lutathera which got the backing of the European Union last month for the treatment of gastroenteropancreatic neuroendocrine tumors.

“Novartis has a strong legacy in the development and commercialisation of medicines for neuroendocrine tumours. With Lutathera we can build on this legacy,” said Novartis Oncology’s head, Bruno Strigini.

Largest prescription-drugs maker

Lutathera, which is already being reviewed by the Food and Drug Administration, makes use of a molecule in order to diagnose cancer as well as in the delivery of treatment which is done by hitting the tumors with high-energy electrons. According to Buono the acquisition deal with largest prescription-drugs maker in the world will support the launch of Lutathera as well as accelerate the development of the French firm’s other therapies.

Besides Buono other shareholders of Advanced Accelerator Applications which went public two years ago include Fidelity which has a 9.1% stake as well as HMB Healthcare Investments. In the deal Advanced Accelerator Applications’ financial adviser was Jefferies LLC.

In Monday’s trading session shares of Novartis AG rose by 1.26% to close the day at $81.74 a share.


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