NVS Novartis AG

By Denise Roland and Donato Paolo Mancini 

This article is being republished as part of our daily reproduction of WSJ.com articles that also appeared in the U.S. print edition of The Wall Street Journal (October 19, 2018).

Novartis AG on Thursday said it would pay $2.1 billion for Endocyte Inc., a U.S. company developing a new treatment for prostate cancer, the Swiss pharmaceutical giant's latest move to double down on high-value prescription drugs.

Endocyte specializes in so-called radiopharmaceuticals, a new class of drug that carries radioactive substances directly to cancer cells so they can kill tumor cells at close range. Novartis agreed to pay $24 a share for the company.

The deal will add a prostate cancer radiopharmaceutical to Novartis's late-stage pipeline, bolstering its capability in the field, which it expects to be a key growth driver for its business. The company already sells a radiopharmaceutical directed at a rare form of gut cancer, which it acquired as part of a $3.9 billion deal last year.

Chief Executive Vasant Narasimhan said the early success of that product, Lutathera, had underlined the potential of radiopharmaceuticals. "Now we believe it [Lutathera] will be a blockbuster medicine. We wouldn't have said that even a quarter and a half ago," he said in an interview.

The acquisition is Dr. Narasimhan's latest move to refocus Novartis on high-value prescription drugs since he took the helm in February.

Over the past year, the company has decided to spin off its Alcon eye-care unit -- which deals mainly in tools for lens implant surgery and contact lenses -- and sold its stake in a consumer health-care business -- which makes drugstore staples like toothpaste and painkillers -- to co-owner GlaxoSmithKline PLC for $13 billion. Novartis has also sold parts of its Sandoz generic-drugs unit.

At the same time, Dr. Narasimhan is casting around for deals to bolster the company's innovative-medicines business. In April, Novartis snapped up AveXis Inc., a U.S. gene-therapy company, for $8.7 billion.

Novartis announced the acquisition of Endocyte as it reported rises in third-quarter sales and profit, and raised its full-year revenue outlook.

The company said it now expects sales to grow by a mid-single-digit percentage this year, at constant currencies. It previously expected sales to grow at a low to mid-single-digit rate. It left its profit expectations unchanged, saying it continued to expect core operating income to grow by a mid- to high-single-digit percentage.

For the third quarter, the company reported a 9% increase in core operating income, at constant currencies, driven by strong sales of some of its newer drugs. Group sales came in at $12.78 billion, up 6% from a year earlier at constant currencies, as growth at the company's innovative-medicines division offset a weaker performance from its generic-medicine unit.

Write to Denise Roland at Denise.Roland@wsj.com

(END) Dow Jones Newswires

October 19, 2018 02:47 ET (06:47 GMT)

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