StemCell Therapy

- By Barry Cohen

Novartis AG (NYSE:NVS) is expanding its gene therapy footprint by acquiring a venture capital-backed company focusing on treating vision loss that can lead to blindness.

The Swiss pharmaceutical giant will pay shareholders of Vedere Bio $150 million upfront, which could be boosted by $130 million more if the Cambridge, Massachusetts-based company's programs achieve several development milestones.

Novartis has made huge strides aimed at beefing up its gene therapy program. In 2018, the company bought AveXis for $8.7 billion, inheriting its spinal muscular atrophy therapy Zolgensma, and this year established partnerships with Dyno Therapeutics and Sangamo Therapeutics Inc. (NASDAQ:SGMO).

Vedere is trying to take naturally occurring, light-sensing proteins and use a special gene therapy method to inject them into a certain part of the eye. Once there, they will be sent to retinal cells that are still healthy to help improve the vision of patients, according to an article in BioPharma Dive.

Novartis thinks this approach has much broader uses. The company said the proteins, in conjunction with Vedere's delivery tools, could "vastly expand" the number of treatable patients with vision loss from photoreceptor death.

Investors should keep in mind that the Vedere treatments are still in the pre-clinical stage so a great deal of development still needs to be done. Working with the acquisition's scientists, Novartis is preparing to promptly begin human testing.

There could be an even bigger population the Vedere platform could address, beyond inherited eye disorders. That would be a new way to treat geographic atrophy, one of the more advanced forms of an age-related vision loss called dry age-related macular degeneration. The American Academy of Ophthalmology notes an estimated 15 million people in North America have AMD, the vast majority with the dry form.

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Following the close of the deal, Vedere Bio II will operate as a wholly independent entity from Novartis and Vedere Bio.

Novartis decided to get out of one area of the eye-care business when it spun off Alcon Inc. (NYSE:ALC) last year. The company said it wanted to concentrate on treating diseases of the eye, not eye-care products.

Novartis' eye drugs include Xidra, treating dry eye disease, and Beovu, which was recently approved for the wet form of AMD. Its third eye drug and the biggest producer is Lucentis, which had sales of $515 million in the third quarter. Xidra and Beovu combined to bring in revenue of about $151 million. Novartis' biggest competitor is the Regeneron Pharmaceuticals Inc. (NASDAQ:REGN) drug Eylea, a multibillion-dollar annual seller.

The Novartis faithful are hoping for better days ahead. At about $90, the company's shares are pretty much where they were five years ago. On the plus side, its dividend yields nearly 4%.

Despite the stock being stuck in neutral, Wall Street seems to think Novartis is a good investment, with three recent buy ratings and just one hold. Analysts give it an average target price of more than $106, according to TipRanks

UBS analyst Laura Sutcliffe last month upgraded the stock to buy from hold, calling its valuation "compelling." She thinks new products in the pipeline will boost the company's annual earnings growth to a healthy 9%.

Disclosure: The author has no positions in any of the stocks mentioned in this article.

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This article first appeared on GuruFocus.

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Novartis Expands Presence in Gene Therapy With Acquisition - Yahoo Finance

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