Novartis has clinched a deal to buy neuroscience company Cadent Therapeutics for up to $770 million, to expand its treatment pipeline for cognitive and mood disorders.
As part of the transaction, Novartis (NVS) will acquire all of the outstanding capital stock of Cadent, in exchange for an upfront payment of $210 million and up to $560 million in milestone payments. Cadent and Novartis expect the deal to close during the first quarter of 2021. The acquisition adds two new clinical stage programs to the Novartis neuroscience portfolio, one for schizophrenia and the other for movement disorders.
The agreement also includes a buyout of milestones and royalties for MIJ821, a clinical stage molecule that Novartis licensed exclusively from Cadent in 2015. Novartis is actively developing MIJ821 for treatment resistant depression.
“We are committed to changing the lives of patients suffering from serious neuropsychiatric disorders for which there are limited treatment options,” said Jay Bradner, President of the Novartis Institutes for BioMedical Research (NIBR). “The Cadent acquisition follows a longstanding collaboration and shared ambition to bring forward novel neuropsychiatric medicines targeted at the root cause of disease.”
Cadent Therapeutics, which was founded in 2017 through the merger of Luc Therapeutics and Ataxion Therapeutics, focuses on small molecules targeting neuronal ion channels for the development of therapies for the treatment of cognitive, mood, and movement disorders.
The deal comes amid a flurry of mergers and acquisitions in the pharmaceuticals industry. Earlier this week, AstraZeneca announced a $39 billion deal to snap up US drugmaker Alexion Pharmaceuticals. The UK-based pharmaceutical company said that the buyout will help expand its presence in the rare disease and immunology drug market.
Shares of Novartis are down almost 4% year-to-date, but the stock scores a cautiously optimistic Moderate Buy analyst consensus. That’s based on 2 recent Buy ratings vs just 1 Hold rating. Meanwhile, the average analyst price target stands at $108.45, indicating 19% upside potential lies ahead over the coming 12 months.
Earlier this month, Argus analyst David Toung lifted the stock’s price target to $112 from $100 and reiterated a Buy rating, citing management’s updated guidance, along with the recently approved products and new indications for existing products.
The analyst also raised his FY20 EPS expectation by 5c to $5.80 and FY21 EPS outlook by 10c to $6.40. (See Novartis stock analysis on TipRanks)
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