Chinese biotech company Abogen said on Friday it has signed a licensing deal worth up to $7.8 billion with Novartis to develop messenger RNA-based therapies, underscoring the Swiss drugmaker's growing focus on an emerging class of treatments.
Novartis has come under investor scrutiny over its dealmaking strategy after setbacks with drugs acquired through previous purchases.
In September, it disclosed two late-stage trial failures that wiped nearly $30 billion from its market value and sparked calls from a major shareholder for tighter board oversight of future acquisitions.
Novartis said its approach to business development has remained consistent over time and that Abogen's ribonucleic acid technology complements its existing approach to autoimmune disease.
Under the deal, Novartis will gain exclusive rights to Abogen's experimental drug, ABO2203, and options to license other therapies based on Abogen's RNA technology. Abogen will receive $575 million upfront with the potential to earn an additional $7.2 billion if the drug advances through development and wins regulatory approval.
"This deal has a better risk profile, as they pay a smaller amount upfront to secure the rights," said Gillian Hollenstein, lead manager at Point Capital Navigator Fund, which has shares in Novartis.
"However, Novartis does need some later-stage deals with a higher level of predictability," she added.
Novartis shares, which have recovered some of the losses triggered by the trial setbacks announced in September, were 0.5% lower by 1250 GMT in a subdued European pharmaceutical sector.
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