Novartis bets on China's Abogen in $7.8bn mRNA licensing deal

Novartis (NOVN) has agreed a licensing deal worth up to $7.8bn with China's Abogen to develop therapies based on messenger RNA, underscoring the Swiss drugmaker's growing interest in an emerging class of treatments.

Abogen will receive $575mn upfront and could earn a further $7.2bn if its lead drug advances through development and wins regulatory approval. Novartis gains exclusive rights to the experimental treatment, ABO2203, as well as options to license other therapies built on Abogen's RNA technology.

The agreement comes as Novartis faces questions over its acquisition strategy. In September it disclosed two late-stage trial failures that wiped nearly $30bn from its market value and prompted a major shareholder to call for tighter board oversight of future deals. Novartis said its approach to business development had been consistent over time, and that Abogen's technology complemented its existing work on autoimmune disease.

ABO2203 targets B cells, the immune cells that drive conditions such as lupus and rheumatoid arthritis. It uses mRNA to instruct a patient's own cells to produce a therapy that destroys the disease-causing cells.

Gillian Hollenstein, lead manager at Point Capital Navigator Fund, which holds Novartis shares, said the structure carried "a better risk profile" because of the smaller upfront payment. "However, Novartis does need some later stage deals with a higher level of predictability," she added. Novartis shares, which have recovered some of the ground lost after the September setbacks, were 0.5 per cent lower by midday in London in a subdued European pharmaceutical sector.

The deal follows a run of recent progress for the technology beyond infectious disease vaccines. In August, Moderna (MRNA) and Merck (MRK) reported that their personalized mRNA cancer vaccine reduced the risk of melanoma recurrence and spread in a late-stage trial. The Novartis agreement also fits a broader pattern of Western drugmakers, including AstraZeneca (AZN) and Novo Nordisk (NVO), licensing obesity and other treatments from Chinese companies.

For Abogen, the partnership offers a route to compete globally in treatments for hard-to-treat autoimmune diseases. Novartis is separately advancing remibrutinib, an oral drug that recently succeeded in a late-stage multiple sclerosis study.