Novartis Snaps Up Vedero Bio In $280M Deal; Street Says Buy

Swiss drugmaker Novartis announced the acquisition of ocular gene therapy company Vedere Bio for a total consideration of $280 million.

Under the terms of the deal, Novartis (NVS) has paid Vedero Bio shareholders $150 million upfront with another $130 million due upon meeting milestone payments, taking the total transaction value to $280 million. The deal closed in September. Vedero Bio is working on preclinical protein-based optogenetic therapies that are deployed to the retina intravitreally, that is via a shot into the eye, to restore functional vision in patients with photoreceptor-based vision loss.

“The medical need for new therapies to treat blindness is unambiguous,” said Jay Bradner, President of the Novartis Institutes for BioMedical Research. “Vedere Bio’s innovative technologies expand the potential for gene therapy to improve the lives of patients facing vision loss due to photoreceptor death attributable to a number of prevalent eye diseases.”

Vedero Bio was formed in June 2019 with a $21 million series A financing and began lab operations where it advanced its lead photoreceptor-protein-based optogenetics program. Prior to the acquisition, a pipeline of earlier-stage vision restoration and vision preservation therapies leveraging the company’s ocular gene therapy toolbox were spun out into a newly formed entity – Vedere Bio II. Following the transaction, Vedere Bio II will operate as a wholly independent entity from Novartis and Vedere Bio.

Shares of Novartis have dropped 10% over the past month and are down more than 17% year-to-date, but the stock scores a firmly bullish Strong Buy Street consensus. That’s with 3 recent Buy ratings vs just 1 Hold rating. Meanwhile, the $106.64 average analyst price target indicates 36% upside potential lies ahead over the coming 12 months.

UBS analyst Laura Sutcliffe last month upgraded the stock to Buy from Hold with a $108 (38% upside potential) price target, even as NVS has underperformed its peers.

“We think the valuation argument is compelling,” Sutcliffe wrote in a note to investors. The analyst expects new products in the pipeline to drive the company’s annual earnings growth at an above-average 9%.

The analyst estimates sales growth will boost Novartis’ free cash flow from its 2019 level of $6.9 billion, to $13.6 billion in 2025. (See Novartis stock analysis on TipRanks)