Advanced Accelerator Applications (AAAP) shares launched to a record high Thursday on rumors Swiss drug giant Novartis (NVS) could attempt to take it over — a potential deal one analyst called “very logical.”
The potential deal would fit well with Novartis’ existing franchise including Sandostatin, approved to treat symptoms associated with some tumors, and Afinitor, approved to treat some cancers affecting the breast, kidneys, hormones and nervous system, Canaccord analyst Mark Massaro said.
Advanced Accelerator is working to gain approval for a drug called Lutathera to treat some tumors in the gastrointestinal tract. In December, Lutathera was delayed at the Food and Drug Administration. Approval in the U.S. is now expected in January.
“We expect final European Medicines Agency approval for Lutathera within the coming days, and FDA approval (scheduled for) Jan. 26, 2018, both of which should push shares higher,” Massaro wrote in a note to clients. An expanded access program should help the U.S. launch.
IBD’S TAKE: Cellular therapy, also known as CAR-T therapy, is getting some legs on Wall Street after Novartis gained the first approval earlier this year. Kite Pharma could be next. Head to the Industry Snapshot for a closer look at how these medicines are made.
Massaro expects Lutathera to offer a “long tail” for revenue considering the limited supply of materials that go into it and the drug’s extreme efficiency. He models $407 million in peak U.S. sales by 2024 and $133 million in peak European sales by 2023.
“But we model conservative pricing in line with current therapies despite Lutathera’s significant efficacy advantage,” he said. Massaro kept his buy rating and 60 price target on Advanced Accelerator.
For Novartis, gaining access to Lutathera would be “very logical,” he said. Cancer drugs are a staple in Novartis’ pipeline. Advanced Accelerator also has drugs to treat neuroendocrine, prostate, breast and gastrointestinal cancers in its pipeline.
Novartis just gained approval of a drug called Kymriah, a cellular therapy to treat a form of acute lymphoblastic leukemia in patients up to age 25. But competition is coming. Gilead Sciences (GILD) is working to acquire Kite Pharma (KITE), which is closing in on approval of a similar drug.
Behind Gilead/Kite, Juno Therapeutics (JUNO) and Bluebird Bio (BLUE) are each working with Celgene (CELG) to develop similar cellular therapies to treat blood cancers.