Novartis’ up to $1.1 billion acquisition of gene therapy specialist Kate Therapeutics fits with the pharma’s plan to expand its new modality pipeline to ensure long-term business sustainability.
Ahead of its investor event Thursday, Novartis revealed it is acquiring California-based biotech Kate Therapeutics, a move that “compliments” the pharma’s push to deliver innovative treatments for neuromuscular disorders and deepen its expertise in gene therapy.
Novartis announced the deal in a press release for the investor event, though the company did not provide supporting details, including financial considerations and timeline. In an interview with Endpoints News, however, management confirmed that the buyout could hit $1.1 billion in both upfront and milestone payments.
The pharma will continue to actively look for complementary businesses to acquire, though contracts are unlikely to exceed $3 billion, according to Endpoints.
Kate, which debuted in June 2023 with $51 million in series A financing, is advancing a pipeline of gene therapies targeting various neuromuscular conditions, including Duchenne muscular dystrophy and facioscapulohumeral dystrophy. One of its most mature candidates, KT430, is being developed in partnership with Astellas for X-linked myotubular myopathy. Kate also has earlier-stage candidates for cardiomyopathy and myotonic dystrophy.
With Thursday’s acquisition, Novartis will also gain ownership over Kate’s proprietary DELIVER capsid engineering platform, which allows it to “evolve” adeno-associated virus capsids, resulting in more potent and selective gene therapy delivery. Meanwhile, Kate’s cargo technology enables better tissue or cell targeting or “de-targeting” of its payloads, in turn boosting the efficacy and safety of its gene therapies.
The Kate acquisition follows Novartis’ potential $745 million license deal with Ratio Therapeutics earlier this week. The partners will collaborate on the preclinical work for an investigational radiotherapy that targets somatostatin receptor 2. Under the terms of the agreement, Novartis can select a candidate to take forward into the clinic, at which point the pharma will take charge of its development.
During Thursday’s investor event, Novartis leadership also announced that it is raising its projected sales compound annual growth rate (CAGR) to 6% from 2023 through 2028, up from a previously announced rate of 5%. The pharma is also maintaining its core operating margin of 40% by 2027 and expects mid-single-digit sales growth in the long-term.
According to BMO Capital Markets analyst Etzer Darout, Novartis is looking to grow its currently approved treatments to offset sales losses from impending generic entry, particularly for Entresto, Tasigna, Xolair and Jakavi, which are all set to lose key patent protections by 2029. Novartis increased peak sales projections for Cosentyx to $8 billion, Kesimpta to $6 billion, Pluvicto to $5 billion and Leqvio to $4 billion.
Additionally, Novartis has lined up more than 15 near-term submission-enabling data drops through 2026, which it expects to help shore up its earnings in the medium term.
For the long-term sustainability of its business, Novartis “continues to expand its new modality pipelines,” Darout said, particularly highlighting cell and gene therapies, radioligand therapies and xRNA assets. In Thursday’s company presentation, Novartis projected an approximately $55 billion market opportunity by 2030 for its cell and gene therapy platform, whereas xRNA and radioligands could hit $30 billion and $29 billion, respectively.
