Novartis Backs Out of $600 Million Purchase of Gamida Cell

Elbit Meeical shares decline 35 percent as anticipated pharma deal disappears.

Test tubes of enriched umbilical stem cell blood.

Six weeks after Elbit Medical and Clal Biotechnology Industries reported that Novartis, the major Swiss-based multinational pharmaceutical company, planned to acquire full ownership of Gamida Cell, a Jerusalem-based stem cell technology firm, the sale is now off, Gamida's parent company said on Thursday.

Novartis was due to buy Gamida Cell, which is jointly owned by Elbit Medical, Clal Biotechnology as well as other firms including Teva Pharmaceutical Industries, at a price tag of up to $600 million.

The transaction called for Novartis to make an immediate payment of $170 million. The termination of the deal is a particular blow to Elbit Medical, which has a 28% stake in Gamida, and Clal Biotechnology, which owns a 22% share. Gamida Cell’s Stem Ex product is designed for treatment of leukemia and lymphoma patients. Another product, Nicord, is designed for patients with non-malignant blood diseases.

In a statement, Elbit did not provide further details of the termination of the possible purchase but it said that along with Gamida, it was evaluating the consequences.

The major shareholders will now have to resume their search for a buyer for the company and to fund its operations, which this year alone are expected to require $10 million. That’s particularly problematic for Elbit Medical, which following major financial problems, was turned over to its creditors at the end of last year.

Gamida is developing a pipeline of products to treat a wide range of conditions, including blood cancers and solid tumors. Its StemEx treatment is being tested as part of a transplant regimen for patients with high risk leukaemia and lymphoma.

Other Gamida shareholders include Amgen, Denali Ventures, Auriga Ventures and Israel Healthcare Venture.

Elbit Medical is 86 percent owned by Elbit Imaging.

Elbit Medical's shares were down 35 percent at midday in Tel Aviv, while Elbit Imaging's shares were 13 percent lower and Clal Biotech's shares were losing 10 percent.