Novartis to Take 15% of Gamida Cell Plus Option to Buy Rest

Deal value for developer of stem-cell therapies, including milestone payments, could surpass $600 million.

Test tubes of enriched umbilical stem cell blood.

In a stunning turnaround from an apparently failed deal last spring, Swiss drugmaker Novartis agreed to take a stake in Gamida Cell, a developer of stem-cell therapies, in a deal that could reach a value of more than $600 million.

Closely held Gamida’s two parent companies -- Elbit Medical Technologies and Clal Biotechnology -- told the Tel Aviv Stock Exchange on Tuesday that Novartis had agreed to invest $35 million in Gamida for a 15% stake and took an option to acquire the rest of the company.

Should it exercise the option, Novartis will pay $165 million in cash, Elbit and Clal said. Beyond these amounts, future payments could reach another $435 million if Gamida achieves certain development and regulatory milestones for of its NiCord drug as well as sales of its products.

The announcement comes five months after Elbit Medical and Clal Biotechnology said they had received a buyout offer from a global pharmaceutical firm, which was believed to be Novartis. But talks on the deal, which the two parents said at the time was valued in the hundreds of millions of dollars, ended in May.

In March, sources identified the buyer as Novartis. They said then that the deal would include an up-front payment of more than $150 million, followed by additional payments estimated to bring the total value to $550 million.

Shares of Elbit Medical, which owns 30.8% of Gamida Cell, were up 2.4% at 17.1 shekels ($4.85) in Tel Aviv Stock Exchange trading, while shares of Clal Biotechnology, with a 22% holding, rose 0.8% to 8.24 shekels.

Earlier this week, the two companies reported that Novartis was again in talks about Gamida Cell. On Tuesday, the companies didn’t mention the earlier failed agreement and they warned that they couldn’t guarantee that the Swiss drugmaker would exercise the options it acquired.

The buyout option is conditioned on Jerusalem-based Gamida Cell achieving milestones relating to the development of NiCord, which Gamida said it expected to reach next year. The option expires in the first half of 2016.

NiCord, which is now in two Phase I/II trials, was developed to treat patients suffering from hematologic malignancies such as leukemia and lymphoma. In addition, the company is readying a Phase I/II study of NiCord for pediatric sickle-cell disease.

After the deal closes and before the exercise of the option, Elbit Medical’s stake in Gamida Cell would drop to 24.7% and Clal’s to 19%.

Other major Gamida holders include Teva Pharmaceutical, the U.S. pharmaceutical company Amgen, and the Israeli venture-capital funds Denali Ventures, Auriga Ventures and Israel Healthcare Venture.

Apart from NiCord, Gamida Cell’s other main product is Stem Ex, which is designed to treat leukemia and lymphoma patients. The company says its pipeline of stem-cell therapy products is derived from “non-controversial sources,” like umbilical-cord blood.