Novartis Staying Conscious of Cost in Challenging Deal Market

(Bloomberg) -- Swiss drugmaker Novartis AG has said it expects to bring a series of potential blockbuster treatments to market over the next few years, but like many of its fellow pharmaceutical giants, it is under persistent pressure to restock its pipeline.

Flush with the proceeds of selling its stake in Roche Holding AG, Novartis said last year it will buy back as much as $15 billion of its shares. But it has continued to snatch up targets, such as ocular gene therapy company Gyroscope Therapeutics. And last week, Novartis partnered with Alnylam Pharmaceuticals Inc. to develop a liver-disease treatment.

With the JPMorgan Healthcare Conference underway this week, Bloomberg spoke with senior drug-industry dealmakers about what they expect in 2022. This installment features Philip Gotwals, global head of business development and licensing at the Novartis Institutes for BioMedical Research, or NIBR. The interview has been edited for clarity and length.

Bloomberg: What is NIBR’s deal strategy? 

A: We cover all areas of early-stage development. Depending on how you count them, there are eight different disease areas that we cover in five different therapeutic platforms. For each one, we set our external strategy based on the needs of our internal science. 

For areas that we are very strong, it’s going to be just filling in small gaps. For areas where we believe we need to expand our reach, then we’ll do more expansive deals. For example, we’ve done, for us, two reasonable sized acquisitions, of Arctos Medical and Vedere Bio, to establish a gene-therapy program for ophthalmology. On the other side, in targeted protein degradation, where we have a lot of expertise, we’ve done much more targeted types of deals with Orionis Biosciences and Dunad Therapeutics.

Bloomberg: What opportunities excite you?

A: Oncology is always a big play. We are always looking in the cardiovascular area, which in the preclinical space is a challenge. That is an area where we sort of beat the bushes. We’ve done a lot in the ophthalmology space, so maybe we back off a little bit there. But it doesn’t mean we won’t do something if the right opportunity arises.

Bloomberg: How would you describe the current dealmaking environment? 

A: It’s been a challenging market. Prior to Covid, we actually thought the markets were softening. With central banks getting involved and large public investors changing their investment strategies, there was just a flood of cash into the biotech sector.

What helps us is having a very clear strategy or shopping list. We know what we want to do in the external space and therefore for priority areas, we’re certainly willing to offer market deals or even above-market deals. There are other places where we simply would never pay what other pharma peers are willing to. 

Even in areas we’re interested in, if the price tag is too high, it’s not a requirement for us to execute those deals. We’re reasonably disciplined there. We periodically look back over the deals that have been done and make sure that we haven’t missed ones we think we should have competed in. So far we’ve been in pretty good shape. 

Bloomberg: How does the JPMorgan Healthcare Conference going virtual affect your approach?

A: Honestly, it doesn’t change much. We are still having all our meetings. In some respects it’s even easier because we can engage scientists through Microsoft Teams or Zoom that we normally couldn’t in San Francisco. 

Bloomberg: Do you still see value in these types of events? 

A: I personally don’t think so. We’ll see what happens. The genie’s out of the bottle now and it’s going to be very hard to put back. People are going to change their approach. 

Bloomberg: What do you anticipate in the year ahead? 

A: I certainly don’t have a crystal ball, but our friends in the capital markets do see a softening of the markets. Some of the crossover, more public investors are going to less risky assets. 

It may change the dynamic of business development. It may make it more difficult if companies facing inflection points fail to find another round of financing. Of course we will look for bargains in that space. We do keep a list of public companies that we keep an eye on from an M&A standpoint. If a high-value target comes up we’ll certainly take a close look at that. But timing is everything. It depends on what becomes available at what time. 

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