Runaway Bride Novartis AG Leaves Gamida Cell At the Altar for Second Time, Will Pay $142M Breakup Fee

Published: Jun 03, 2015

Runaway Bride Novartis AG Leaves Gamida Cell At the Altar for Second Time, Will Pay $142M Breakup Fee
June 3, 2015
By Riley McDermid and Mark Terry, Breaking News Staff

Israeli company Gamida Cell will no longer be acquired by Novartis, the company said today, after Novartis AG decided not to exercise an option to buy the company less than a year after deal terms were announced.

As part of that termination, Novartis will pay a $142 million breakup fee to Elbit Medical, Gamida’s largest shareholder.

This is the second time Novartis has gotten cold feet: In May 2014, Novartis backed out of a $600 million transaction to acquire Gamida. That deal was valued at the time $200 to $300 million in cash and several hundred million more in milestone payments.

Gamida said in a statement that Novartis had informed it that the company would no longer continue the collaboration, though it hopes to partner on other efforts.

“In discussions held between the Novartis representative and the CEO of Gamida Cell, the Novartis representative notified Gamida Cell that, although Gamida Cell has successfully met all of the determined milestones, Novartis does not intend to exercise the option,” the company said. “At the same time, it was further stated that Novartis was interested in continuing to collaborate with Gamida Cell in the development of its products, and will soon explore suitable alternatives with Gamida Cell. Gamida Cell is examining the implications of the notice.”

Last August Novartis, said it would incrementally acquire Gamida in a multi-step deal, subject to a several milestones.

Gamida Cell, located in Jerusalem, makes stem cell population expansion technologies and stem cell therapy products for transplantation and regenerative medicine. It also has a development pipeline of products from sources such as umbilical cord blood.

These products are in development to treat numerous conditions, including blood cancers such as leukemia and lymphoma, solid tumors, autoimmune diseases, non-malignant hematological diseases such as sickle cell disease and thalassemia.

Current treatment for blood disorders involves bone marrow transplants, typically from a relative with similar genetic markers. If a matching donor cannot be found, stem cell transplants are an alternative method.

The company’s largest shareholders are Elbit Medical Technologies Ltd and Clal Biotechnology Industries Ltd, with a 31 percent and 22 percent stake, respectively. Elbit Medical is a holding company whose medical division includes investments in InSightech Ltd and Gamida Cell Ltd. Gamida Cell reported the agreement with Novartis would involve 5 percent of the company’s stock shares. Novartis would also acquire an option to buy all the holdings of Gamida’s shareholders.

One of the major milestones involved in the deal involves Gamida Cell’s NiCord product. Gamida reported a successful Phase I/II study of NiCord in February, which the company describes as “a paradigm shift in cord blood transplantation.” Novartis would be required to pay the remaining shareholders a significant amount of cash along with future payments depending on completion of product development milestones.

The other major product Gamida is developing is StemEx, which is a joint venture with Teva Pharmaceutical Industries Ltd. It passed Phase III trials.

Despite successful completion of the single arm Phase II/III study in July 2014, the FDA advised Gamida Cell to undergo an additional Phase III, randomized, controlled clinical study. StemEx is being developed an alternative treatment for high-risk leukemia and lymphoma who did not have a family-related matched bone marrow donor.

Will PfizerKline Become the Next Pharma Player?
The speculation surrounding a possible bid from Pfizer Inc. for struggling GlaxoSmithKline is heating up, after one closely-watched biotech analyst said in a note last week that Pfizer buying the company would “unlock access to its balance sheet and improve its tax situation.”

Gregg Gilbert, a biotech analyst at Deutsche Bank, wrote in a note to investors “Introducing PfizerKline” that he thinks a deal would be “materially accretive” for both companies. Gilbert estimated that a bid priced at $29.86 a share, via half stock and half cash, which would push up Pfizer’s earnings per share by 10 percent to 16 percent beginning in 2016.

“We believe that the company has a sense of urgency to create value by leveraging the power of its balance sheet to do needle-moving deals,” Gilbert wrote. “Since media reports in the past have pointed to the potential for a Pfizer/GSK combination, we are revisiting that theme.”

We want to know, dear readers, if you agree? Should Glaxo continue going it alone, or might Pfizer buy it and create one of the world’s largest pharma players in history?

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