That represents a sharp premium to the Medicines Company's closing stock price on Friday, $68.55 a share.
Investors kicking themselves for not seeing the higher potential valuation shouldn't be all that upset.
"Our company's singular, relentless focus and the unwavering commitment of our employees have led to this opportunity to unlock the intrinsic value of inclisiran (a drug meant to lower cholesterol) for patients and to maximize value for our shareholders", Mark Timney, CEO of The Medicines Co., said.
These clinical data have made it abundantly clear that inclisiran can target PCSK9 and lower LDL cholesterol via RNAi just as efficiently as the marketed anti-PCSK9 MAbs, Amgen's Repatha and Sanofi/Regeneron's Praluent. Blocking the production of this protein protects against cardiovascular disease because the protein increases the blood levels of low-density lipoprotein cholesterol, an unhealthy form of cholesterol that increases the risk of cardiovascular disease. It is the first and only in the small-interfering RNA (siRNA) class. The twice-yearly dosing schedule provides a great advantage to the candidate over the existing treatments in the market.
The only approved drugs that use the gene silencing approach come from Alnylam, which licensed rights to inclisiran to Medicines Co.
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.
Medicines Co gives Novartis entry into a realm where at least one drug, Repatha, is forecast to achieve blockbuster status by 2021.
Novartis can also justify the premium with a higher profit margin than The Medicines Company would likely be able to manage.
If the transaction is completed, inclisiran will be added to Novartis's current cardiovascular products, including its heart-failure treatment Entresto, which saw its sales soar 61 percent year on year to £334.18 million ($430 million) during the third quarter this year.
A quicker launch and higher peak sales in the hands of Novartis should also benefit Alnylam Pharmaceuticals (NASDAQ:ALNY), which discovered inclisiran and is due sales milestone payments and royalties of up to 20% on sales of the drug.
The acquisition, which still needs a green light from antitrust authorities, is expected to be finalised during the first quarter of 2020.
TMC says that inclisiran represents a near-term product launch opportunity and is expected to contribute to Group sales from 2021, as the company is expecting to file regulatory submissions in the United States in the fourth quarter of 2019 and in Europe in the first quarter of 2020.
Takeouts have always been a major source of upside in biotech, but investors have to be careful buying shares exclusively for that reason.