Novartis bets $3.5 billion on rare disease drugs from Chinook

(Bloomberg) — Novartis AG has agreed to buy Chinook Therapeutics Inc. for $3.5 billion to add two promising treatments in advanced testing for a rare kidney disease.

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The Swiss pharmaceutical company will pay $40 per share in cash for Seattle-based Chinook, 67% more than Friday’s close, it said in a statement. An additional $4 per share could be paid later if the drugs reach certain regulatory milestones.

Prior to Monday’s announcement, CEO Vas Narasimhan had been more active in thinning Novartis rather than bolstering its drug pipeline through acquisitions. Both Chinook drugs could pay off quickly if successful, with one expected to report key results as early as this year.

Companies from AstraZeneca Plc to Amgen Inc. have acquired other in-development treatments for rare diseases because they command higher prices. Investors had been expecting a deal to boost the pipeline since Novartis sold its stake in rival Roche Holding AG, giving it financial firepower.

Both Chinook treatments target a rare, progressive kidney disease called IgAN that primarily affects young adults and currently lacks targeted treatment options. The most advanced is also in development for other rare kidney diseases. The purchase would be the Swiss company’s largest since it bought Medicines Co. for around $9.7 billion in 2020.

Chinook shares rose 66% to $39.86, just below the initial payment, in trading ahead of the U.S. exchanges open. Novartis gained up to 1.5% in Zurich.

The deal comes less than a month after Muddy Waters said he had run out of Chinook shares, sending shares briefly tumbling.

Narasimhan decided last year to spin off the Sandoz division of Novartis, creating Europe’s largest generics and biosimilars company by sales. Novartis is also considering selling some ophthalmology assets and has cut jobs and combined its pharmaceutical and cancer units.

Novartis said it expects to close the deal in the second half of 2023.

(Updates with details on Muddy Waters. A previous version of this story corrected where Chinook is based)

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