(June 9): GSK plc agreed to buy Nuvalent Inc in a deal valued at US$10.6 billion ($13.6 billion), adding a biotech firm that’s developing treatments for lung cancer as the British pharmaceutical company seeks to rebuild its oncology franchise.
GSK will pay US$124 a share in cash for Nuvalent, according to a statement on Tuesday, a 40% premium over the Cambridge, Massachusetts-based company’s closing share price on Monday. It marks a significant expansion of GSK’s cancer portfolio, which has been slowly growing since the British drugmaker returned to the disease space in 2019, as well as the first major acquisition for chief executive officer Luke Miels.
Since taking over at the start of this year, Miels has been working to revitalise GSK, which doesn’t have a history of risk-taking and has long struggled to allay investors’ fears about the drugs it has in development.
GSK shares fell as much as 3.9% in London. Shares in Nuvalent, which designs precisely-targeted therapies for oncology patients including with lung cancer, rose as much as 39% to about US$123 in pre-market trading. Its shares had declined by 12% this year, giving it a market value of about US$7 billion.
Miels defended the premium GSK is paying for the US firm, telling reporters on a conference call that the company had “applied a lot of financial discipline both in the negotiating process, but also in terms of integrating and managing the debt”.
The transaction will accelerate GSK’s entry into the lung cancer space and could help offset the looming patent expiry of its HIV drug dolutegravir, Barclays analyst James Gordon wrote in a note. Still, “the deal size is a little larger than we believe the market had been expecting”, he said.
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Two of the medicines GSK is acquiring are in late-stage trials, with the US Food and Drug Administration expected to decide on regulatory approval later this year. Both could be blockbuster medicines if approved, GSK said.
The deal, codenamed “Nashville”, is larger than GSK’s usual bolt-on acquisitions but it sees it as three assets in one, with two drugs close to market. “The risk is essentially largely discharged on the scientific front and we are really looking at clinical finalisation,” Miels said.
GSK spoke with over 300 physicians to better understand the potential of the drugs, becoming convinced that the opportunities with Nuvalent were “substantial and material”, he added.
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The two leading drugs from Nuvalent treat non-small-cell lung cancer patients that have specific mutations. These mutations usually affect people who did not smoke.
One of the drugs, neladalkib, is emerging as a rival to Pfizer Inc’s Lorbrena but Bloomberg Intelligence has pointed to the lack of long-term efficacy data and high liver toxicity as a limiting factor.
Both will compete in mature markets where Lorbrena and Nuvation’s Ibtrozi set a high bar, Bloomberg Intelligence analyst Javier Manso Polo said in a note. The price also “raises the need for strong execution, differentiation and broader label expansion”, he added.
The fortunes of GSK and rival British drugmaker AstraZeneca plc diverged in 2014 as Astra CEO Pascal Soriot worked to make the company a cancer drug powerhouse.
GSK meanwhile divested its oncology portfolio in an asset swap with Novartis in 2014. Miels, a protégé of Soriot, left Astra acrimoniously, with the company suing him in 2017, alleging he was in violation of his employment agreement. The two companies settled, with Miels joining GSK later that year.
Well-liked by investors, the pick of Australian Miels to succeed Emma Walmsley as the CEO was seen as a move that could rejuvenate GSK. The drugmaker, known for its vaccines, has focused on immunology and HIV as vaccine sales have slowed.
In January, GSK agreed on a US$2.2 billion deal to buy US biotech Rapt Therapeutics, which develops treatments for inflammatory and immunologic diseases. The firm secured a pulmonary hypertension drug in another transaction.
The Nuvalent purchase is expected to be completed by the third quarter, pending regulatory approvals. The transaction will be funded mainly through new and existing debt facilities plus cash and won’t affect GSK’s credit rating, the company said.
It won’t impact GSK’s guidance for the year, and it is expected to contribute to revenue growth from 2027.
