Novartis Needs U.S. Security Nod for Endocyte Under New Rules

(Bloomberg) -- Novartis AG needs approval from U.S. national security officials for its planned takeover of Endocyte Inc., among the first deals to fall under expanded rules for reviewing foreign takeovers of American firms.

The Treasury Department announced last week temporary regulations aimed at heightening scrutiny of deals in certain "critical technology" sectors, including research and development in biotechnology. Investments in such companies are subject to a mandatory review.

The Treasury pilot program implements broader powers Congress granted this year to the Committee on Foreign Investment in the U.S., a panel of officials who review foreign takeover of American firms and can recommend that the president block deals that threaten national security. The committee has become especially tough on Chinese investments as the Trump administration wages a trades war with China.

Jennifer Rie, an analyst at Bloomberg Intelligence in New York, doesn’t expect Novartis, based in Basel, Switzerland, to encounter problems.

"They are being careful," she said. "There’s no national security issue here and they are going to be cleared right away."

Novartis’s $2.1 billion deal for Endocyte would give the Swiss pharmaceutical company a potential blockbuster therapy for prostate cancer. Endocyte, based in West Lafayette, Indiana, makes radioactive drugs coupled with targeting molecules to deliver treatments to tumors.

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