Novartis Acquires Kate Therapeutics in $1.1B Deal

SAN DIEGO – Local gene therapy neuro biotech startup Kate Therapeutics was acquired by Swiss pharma giant Novartis (NVS) in a deal valued up to $1.1 billion. According to the acquisition terms, a cash payment was made at closing and additional amounts will be payable at certain milestones. The transaction gives Novartis access to Kate’s preclinical drug candidates targeting neuromuscular diseases – a group of disorders that mostly impair muscle and nerve function and disrupt nerve signal transmission, causing problems with muscle contraction and movement.

“Our ambition at Novartis is to deliver the next generation of gene therapies for people living with neuromuscular diseases, for which there have historically been few treatment options,” Robert Baloh, Global Head of Neuroscience Research at Novartis told the Business Journal. “We’re excited to combine Kate Therapeutics’ platform and programs with Novartis expertise and capabilities, and look forward to advancing transformative medicines for patients.”

Novartis says the deal enhances its efforts to strengthen it priorities in developing novel gene therapies for patients with inherited neuromuscular diseases by replacing “faulty genes” or blocking the effects of toxic RNA or proteins. Sorrento Valley-based Kate Therapeutics’ preclinical candidates address neuromuscular diseases like Duchenne muscular dystrophy (DMD), facioscapulohumeral dystrophy (FSHD) and myotonic dystrophy type 1 (DM1). According to the University College of London, neuromuscular diseases affect about 14,000,000 people globally of all ages, with symptoms varying from mild weakness or numbness to life-threatening weakness that affects breathing muscles.

“We are delighted to bring Kate Therapeutics’ platform technologies and programs together with Novartis’ scientific expertise and leadership in gene therapy and neuroscience innovation,” stated Fiona Marshall, President of Biomedical Research at Novartis. “We have been highly impressed with the rigor and potential of Kate’s science, and we are confident this acquisition will further enhance our ability to bring forward new therapeutic options for patients living with neuromuscular diseases.”

‘Significant Advances’

Kate Therapeutics emerged from stealth mode in 2023 with a $51 million Series A co-led by founding investor Westlake Village BioPartners and Versant Ventures, with participation from Osage University Partners and UF Innovate Ventures. The company was launched during the pandemic by Kevin Forrest, Ph.D., Eric Wang, Ph.D., Mark Fielden, Ph.D., Alan Beggs, Ph.D. and Sharif Tabebordbar, Ph.D.

“My father lives with FSHD, so I saw firsthand the consequences of this devastating disease on patients and families,” Tabebordbar told the Business Journal in 2023.

The company also announced that it granted Astellas Pharma Inc. an exclusive, worldwide license to develop, manufacture and commercialize one of its drugs –KT430 – to treat X-linked myotubular myopathy, a rare and severe genetic muscle disease.

Since its debut, Kate Therapeutics has used its tech platform to select capsid variants (virus shells that hold genetic material) of so-called adeno-associated viruses (AAVs) that enable potent delivery of a drug to desired tissues, while potentially mitigating off-target effects to other tissues like the liver. The company also selected its drug – KT809 – as a development candidate to treat DMD, and is on track to select development candidates for additional muscle and cardiac programs in the near term. In addition, Astellas has formally advanced KT430 into IND enablement.

“KateTx has made significant advances over the past 12 months,” Kevin Forrest, Ph.D., co-founder, president and CEO of Kate Therapeutics said in May. “These ASGCT (American Society of Gene and Cell Therapy) presentations are a meaningful milestone for the company and demonstrate the potential of our medicines to be the preferred therapies in both DMD and FSHD. We look forward to advancing these differentiated products to patients as quickly as possible.”

Novartis Investments

Founded in 1996, Switzerland-based Novartis is the leading producer of radiopharmaceuticals or radioligand therapies, an emerging type of cancer treatment in which a potent dose of radioactive molecules is dispatched in drug development, leading to several acquisitions over the last year. The company recently acquired Mariana Oncology, a preclinical radiotherapy biotech, for $1 billion upfront. The small firm’s lead candidate is an actinium-based radiotherapy being studied in small cell lung cancer. In a separate deal potentially worth nearly $3 billion, Novartis is working with PeptiDream to design peptide-drug conjugates that use radionuclide payloads.

This September, Novartis announced it invested more than $40 million into a brand-new 10,000-square-foot facility in Carlsbad that’s focused on radioligand therapy (RLT) manufacturing, a type of precision medicine that delivers radiation to targeted cells. The goal is to limit side effects on healthy cells when treating various cancers. The company also said it will help create more than 30 local jobs.

Some highlights from Novartis’ Q3 financial results revealed that Q3 net sales grew to $12.8 billion (+10% cc) with volume contributing 12 percentage points to growth. Novartis shared that generic competition had a negative impact of 2 percentage points and pricing was flat. Operating income was reportedly $3.6 billion (+123% cc), mainly driven by lower impairments and higher net sales, partly offset by higher R&D investments. Core net income was reported at $4.1 billion (+17% cc) and free cash flow from continuing operations amounted to $6 billion (+18% USD), compared with $5 billion in the prior-year quarter.

According to Novartis’ November Management Investor Event in London, the company is focused on four core therapeutic areas — cardiovascular-renal-metabolic, immunology, neuroscience and oncology – with core tech platforms in chemistry, biotherapeutics, xRNA, radioligand and gene and cell therapy. Its four priority geographies are in the United States, China, Germany and Japan. Over the last 2 years, Novartis has signed more than 30 deals with biotech companies to bolster its drug pipeline. It expects net sales to grow +5% cc CAGR 2024-2029 and maintain its core operating income margin guidance of 40%+ by 2027. Beyond 2029, Novartis has more than 30 high-value NME (New Molecular Entity) assets in its pipeline with six expected Phase III readouts and more than ten Phase II readouts in the next five years.

“This [Kate Therapeutics] acquisition builds on our expertise and leadership in neuroscience drug discovery and brings to Novartis talent, expertise and capabilities that are highly complementary to our ongoing internal efforts,” added Baloh. “It reflects our commitment to addressing unmet medical needs in neuroscience and tackling the limitations of existing gene therapies for patients with inherited neuromuscular conditions.”

Novartis
FOUNDED: 1996
PRESIDENT: Victor Bulto
HEADQUARTERS: Switzerland
EMPLOYEES: 76,000+
BUSINESS: Leading producer of radiopharmaceuticals
WEBSITE: www.novartis.com
NOTABLE: Novartis is building its first U.S. manufacturing facility in Carlsbad.

Kate Therapeutics
FOUNDED: 2020
CEO: Kevin Forrest, Ph.D.
HEADQUARTERS: Sorrento Valley, San Diego
BUSINESS: Gene therapy
WEBSITE: katetherapeutics.com
NOTABLE: The company develops AAV-based gene therapies to treat genetically defined muscle and heart diseases. AAV vectors are bioengineered tools that use a non-enveloped virus to transport modified genetic material safely into tissues and cells impacted by otherwise difficult-to-treat conditions.