Biotechnology ETFs led the charge on Monday after Novartis AG (NYSE: NVG) agreed to buy Medicine Co. (NasdaqGS: MDCO) as the Swiss multinational pharmaceutical company moves to expand its treatment for complex conditions.
Among the best performing non-leveraged ETFs of Monday, the SPDR S&P Biotech ETF (NYSEArca: XBI) jumped 4.0%.
Fueling the surge, Medicine Co. shares advanced 22.3% after Novartis agreed to pay $9.7 billion, which includes stock options and convertible debt, for the company’s promising heart drug. MDCO makes up 2.3% of XBI’s underlying holdings.
Medicines Co.’s experimental treatment inclisiran provides a new way to lower bad cholesterol in especially hard-to-treat patients, Bloomberg reports.
Novartis Chief Executive Officer Vas Narasimhan believed that the medicine could moving quickly to the U.S. market where it will compete against existing products from Amgen Inc., Regeneron Pharmaceuticals Inc. and Sanofi.
Moving away from previous blockbuster drugs, drugmakers are now taking a targeted approach to medical conditions and looking into technologies that can set them apart from the rest. The increasingly niche solutions could also provide more room for sales growth and allow them to charge higher prices in an increasingly cost-conscious environment.
Jefferies analyst Maury Raycroft argued that the Novartis and Medicines Co. deal is good news for other companies pursuing the same technology, Barron’s reports. Other companies working on similar treatments known as RNAi drugs include Alnylam (ALNY), which co-developed inclisiran, and Arrowhead Pharmaceuticals (ARWR).
Alnylam shares were 6.0% higher and Arrowhead increased 17.0% on Monday. XBI includes a 2.1% position in ALNY and 2.6% in ARWR.
“Now, w/ safety+proof-of-concept demonstrated across multiple therapeutic areas…as well as having regulators and investors on board, pharma sees oppty and reason to spend for de-risked [clinical]opportunities,” Raycroft said in a note. “We expect the platform potential to pique more interest.”
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