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Novartis to Invest $35M in Gamida Cell for 15% Equity

Zacks Equity Research

Novartis (NVS) recently entered into an investment and option agreement with Israel-based Gamida Cell, a company which focuses on stem cell expansion technologies and therapeutic products.

As per the terms of the agreement, Novartis will invest $35 million in Gamida Cell. In exchange, Novartis will receive a 15% stake in Gamida Cell and an option to fully acquire the company.

The option for full acquisition is exercisable for a limited period of time following achievement of certain milestones in connection with the development of pipeline candidate, NiCord. These milestones are expected to be achieved during 2015. Novartis will also be required to pay the other shareholders in Gamida Cell approximately $165 million upon exercising the option along with potential milestone payments of $435 million.

We note that Gamida Cell is developing stem cell therapy for the potential treatment of blood cancers, solid tumors, non-malignant hematological diseases such as sickle cell disease and thalassemia, neutropenia and acute radiation syndrome, autoimmune diseases and genetic metabolic diseases as well as conditions that can be helped by regenerative medicine.

The company is currently evaluating NiCord for the potential treatment of hematological malignancies such as leukemia and lymphoma in a phase I/II study using its proprietary NAM technology.

Meanwhile, enrolment is on for the company’s phase I/II study on NiCord for pediatric sickle cell disease.

We remind investors that Novartis has been taking strategic steps to realign its portfolio in order to focus on its core portfolio of pharmaceuticals, eye care and generics. Novartis’ recent deal to acquire oncology products from GlaxoSmithKline (GSK) and the divestiture of the Vaccines business is a step in the right direction.

Novartis, a large-cap pharma, currently carries a Zacks Rank #3 (Hold). Right now, Allergan (AGN) and AbbVie (ABBV) look well positioned among the large-cap pharmas. While Allergan carries a Zacks Rank #1 (Strong Buy), AbbVie is a Zacks Rank #2 (Buy) stock.

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