Medicines Co. (NASDAQ: MDCO) shares shot up on Monday after it was reported that Novartis A.G. (NYSE: NVS) will be acquiring the firm. The transaction was unanimously approved by the boards of directors of both companies.
Under the terms of the agreement, Medicines Co. will be acquired for $85 per share in an all-cash transaction, implying an equity value of $9.7 billion. The transaction price implies premiums of 57.7% and 122% from the 50-day ($53.89) and 200-day ($38.21) moving averages, respectively.
This transaction is expected to close in the first quarter of 2020, pending the successful completion of the tender offer and other customary closing conditions. Until that time, Medicines Co. will continue to operate as a separate and independent company.
Novartis appears to be targeting Medicines for its top drug candidate, a cholesterol-lowering drug for heart patients called inclisiran.
Historically, Novartis has had a strong cardiovascular drug franchise, but the firm lost ground when Diovan, once a $6 billion-per-year seller, lost patent protection in 2012, leaving the company without an immediate, innovative follow-up product.
Apart from this, Novartis has been building up its portfolio, which now includes Entresto, a $1 billion seller for heart failure, as well as an experimental RNA-targeting molecule from Ionis Pharmaceuticals that it licensed earlier this year for $150 million.
Alexander J. Denner, Ph.D., Chairman of Medicines Co, commented:
This $9.7 billion transaction is a great outcome for shareholders of The Medicines Company. Not so long ago, The Medicines Company was at a crossroads due to the loss of its key revenue driver. I am proud of the company’s transformation under a reconstituted board into a lean, highly focused team successfully advancing an exciting new therapy and creating tremendous value for patients and shareholders.
Shares of Medicines Co. traded up about 22.5% to $84.00 Monday morning, in a 52-week range of $16.69 to $84.10. The consensus price target is $69.77.
Novartis was relatively flat at $90.70 a share. The 52-week range is $73.54 to $95.00, and the consensus price target is $101.00.