Novartis has entered a memorandum of understanding with Advanced Accelerator Applications (AAA) under which Novartis intends to commence a tender offer for 100% of the share capital of AAA subject to certain conditions. Advanced Accelerator Applicationsis a radiopharmaceutical company that develops, produces and commercializes Molecular Nuclear Medicines including Lutathera (177Lu-DOTATATE), a first-in-class RLT product for neuroendocrine tumors (NETs).
Radiopharmaceuticals, such as Lutathera, are unique medicinal formulations containing radioisotopes which are used clinically for both diagnosis and therapy. The transaction would strengthen Novartis' oncology presence with both near-term product launches as well as a new technology platform with potential applications across a number of oncology early development programs.
"Novartis has a strong legacy in the development and commercialization of medicines for neuroendocrine tumors where significant unmet need remains for patients," said Bruno Strigini, CEO, Novartis Oncology. "With Lutathera we can build on this legacy by expanding the global reach of this novel, differentiated treatment approach and work to maximize Advanced Accelerator Applications broader RLT pipeline and an exciting technology platform."
Lutathera was approved in Europe in September 2017 for the treatment of unresectable or metastatic, progressive, well differentiated (G1 and G2), somatostatin receptor positive gastroenteropancreatic neuroendocrine tumors (GEP-NETs). Lutathera is under review in the U.S. with a Prescription Drug User Fee Act (PDUFA) date of January 26, 2018.
The efficacy and safety of Lutathera were established in the pivotal Phase III trial known as NETTER-1. The primary endpoint of the study was progression free survival with secondary endpoints including objective response rates, overall survival, safety and tolerability. The study met its primary endpoint with Lutathera achieving statistically significant and clinically meaningful 79% reduction in risk of disease progression or death compared to the control therapy (hazard ratio 0.21, 95% confidence interval: 0.13-0.33, p<0.0001). At the time of study publication in the New England Journal of Medicine (January 2017), median PFS in the control arm was 8.4 months and had not yet been reached in the Lutathera arm.
In addition to Lutathera, AAA brings a broad set of skills in developing, manufacturing and commercializing radiopharmaceuticals, including the companion diagnostics for Lutathera (NETSPOT and SomaKit TOC). AAA had sales of EUR 109 million in 2016.
Under the terms of the memorandum of understanding, which has been approved by AAA's Board of Directors, Novartis will make a cash offer of $41 per ordinary share of AAA and USD 82 per American Depositary Share (each representing 2 ordinary shares of AAA) subject to certain conditions. This offer values AAA's equity at $3.9 billion.
The transaction to acquire AAA is planned to be fully funded through external short- and long-term debt.
Novartis will commence a tender offer upon completion of works council consultation and AAA's Board of Directors recommending the tender offer to AAA shareholders. The senior management and Directors of AAA have, in their capacity as shareholders of AAA, undertaken to tender their shares into the proposed tender offer. The transaction is additionally subject to (i) the valid tender pursuant to the tender offer of ordinary shares (including ordinary shares in the form of American Depositary Shares) of AAA representing at least 80% of the outstanding ordinary shares on a fully diluted basis and (ii) receipt of customary transactional regulatory approvals and other customary closing conditions.
The tender offer will be implemented in accordance with the terms and conditions of the binding memorandum of understanding between Novartis and Advanced Accelerator Applications. In addition to the offer terms, the memorandum of understanding contains representations, warranties and undertakings by Novartis and Advanced Accelerator Applications typical in similar transactions. The memorandum of understanding may be terminated by Novartis or Advanced Accelerator Applications under certain circumstances prior to the commencement or completion of the tender offer, including, for example, a material breach by either party of the terms and conditions of the memorandum of understanding prior to the commencement of the tender offer, the Board of Directors of AAA not issuing their positive recommendation following successful completion of the works council consultation, or amending its recommendation in a manner adverse to Novartis, non-receipt of customary transactional regulatory approvals and certain other circumstances. The parties have further agreed on certain expense reimbursement and termination fees payable by AAA to Novartis under certain circumstances, including, if the Board of Directors of AAA determines not to issue a positive recommendation following completion of the works council consultation or subsequently changes or withdraws its recommendation.