Novartis Makes Deal With GlaxoSmithKline For Multiple Sclerosis Drug (NYSE:NVS)

Novartis Pharmaceuticals has agreed to a deal with GlaxoSmithKline to buy an experimental multiple sclerosis drug. The drug, ofatumumab, will be used by Novartis to treat cancer, remitting multiple sclerosis, and other autoimmune conditions and will be sold under the name Arzerra. Novartis has agreed to pay up to $1 billion to Glaxo under the deal. The deal is expected to be completed by the end of the year.

The deal gives Novartis all rights to ofatumumab, effectively eliminating the issues that come from the two companies selling the same drug for different uses. Under the terms of the deal, Novartis will pay $300 million upfront and another $200 million after once late-stage clinical trials begin.

Depending on whether development targets are reached, Novartis agreed to pay up to an additional $534 million along with royalties of up to 12 percent on any future net sales of the drug. Ofatumumab was initially developed by Danish biotechnology company Genmab, which receives royalties on sales of the drug.

The deal was part of a broader program between Novartis and Glaxo in which Novartis acquired cancer drugs from Glaxo and Glaxo acquired a considerable portion of Novartis’s vaccine business. Novartis is developing a portfolio of drugs for multiple sclerosis, which includes its blockbuster pill Gilenya, another multiple sclerosis drug called Extavia and a generic version of Teva’s Copaxone.

The market for multiple sclerosis drugs is crowded and competitive right now. The entry of additional drugs in the market and older drugs losing patent protection could limit the sales any new drug. Ocrelizumab, a similar drug being developed by Roche, has the lead on ofatumumab, which is only now ready to enter late-stage clinical trials.

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