ECYT Endocyte, Inc. (delisted)

By Denise Roland and Donato Paolo Mancini 

Novartis AG on Thursday said it would pay $2.1 billion for Endocyte Inc., a U.S. company developing a new treatment for prostate cancer, the Swiss pharmaceutical giant's latest move to double down on high-value prescription drugs.

Endocyte specializes in so-called radiopharmaceuticals, a new class of drug that carries radioactive substances directly to cancer cells so they can kill tumor cells at close range. Novartis agreed to pay $24 a share for the company.

The deal will add a prostate cancer radiopharmaceutical to Novartis's late-stage pipeline, bolstering its capability in the field, which it expects to be a key growth driver for its business. The company already sells a radiopharmaceutical directed at a rare form of gut cancer, which it acquired as part of a $3.9 billion deal last year.

Chief Executive Vasant Narasimhan said the early success of that product, Lutathera, had underlined the potential of radiopharmaceuticals. "Now we believe it [Lutathera] will be a blockbuster medicine. We wouldn't have said that even a quarter and a half ago," he said in an interview.

The acquisition is Dr. Narasimhan's latest move to refocus Novartis on high-value prescription drugs since he took the helm in February.

Over the past year, the company has decided to spin off its Alcon eye-care unit -- which deals mainly in tools for lens implant surgery and contact lenses -- and sold its stake in a consumer health-care business -- which makes drugstore staples like toothpaste and painkillers -- to co-owner GlaxoSmithKline PLC for $13 billion. Novartis has also sold parts of its Sandoz generic-drugs unit.

At the same time, Dr. Narasimhan is casting around for deals to bolster the company's innovative-medicines business. In April, Novartis snapped up AveXis Inc., a U.S. gene-therapy company, for $8.7 billion.

Novartis announced the acquisition of Endocyte as it reported rises in third-quarter sales and profit, and raised its full-year revenue outlook.

The company said it now expects sales to grow by a mid-single-digit percentage this year, at constant currencies. It previously expected sales to grow at a low to mid-single-digit rate. It left its profit expectations unchanged, saying it continued to expect core operating income to grow by a mid- to high-single-digit percentage.

For the third quarter, the company reported a 9% increase in core operating income, at constant currencies, driven by strong sales of some of its newer drugs. Group sales came in at $12.78 billion, up 6% from a year earlier at constant currencies, as growth at the company's innovative-medicines division offset a weaker performance from its generic-medicine unit.

Write to Denise Roland at Denise.Roland@wsj.com

(END) Dow Jones Newswires

October 18, 2018 08:35 ET (12:35 GMT)

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