Swiss pharma giant Novartis NVS entered into a licensing and option agreement with China-based Abogen Biosciences in a bid to expand its presence in RNA-based therapeutics.
The deal gives Novartis exclusive worldwide rights to Abogen's lead candidate, ABO2203, and options to license additional programs developed using Abogen's proprietary RNA platform.
ABO2203 is an investigational messenger RNA (mRNA)-encoded CD19xCD3 T-cell engager being developed for autoimmune diseases. The program is designed to reset B cells by utilizing mRNA to direct the endogenous production of T-cell engagers in vivo.
By redirecting T cells to eliminate B cells, ABO2203 aims to achieve an immune reset that could offer a new treatment approach for patients with B-cell-mediated autoimmune disorders.
Financial Terms of NVS’ Deal With Abogene
Under the agreement, Abogen will receive an upfront payment of $575 million. It is also eligible to receive up to approximately $7.2 billion in potential milestone payments if all options covering additional programs are exercised and the specified development, regulatory and commercial milestones are achieved. Abogen may also receive royalties on future product sales.
The transaction remains subject to customary closing conditions, including required regulatory clearances.
Rationale of the Deal For NVS
The agreement provides Novartis access to ABO2203 as well as potential additional assets from Abogen's proprietary RNA platform. Abogen has developed integrated capabilities spanning mRNA design, lipid nanoparticle formulation and large-scale good manufacturing practice manufacturing. Its pipeline includes programs in oncology, autoimmune diseases and prophylactic vaccines.
For Novartis, the deal offers an opportunity to broaden its immunology pipeline with an innovative approach to B-cell depletion. If successful, ABO2203 could potentially offer a differentiated treatment option across multiple B-cell-mediated disorders.
Recent Setbacks for Novartis
NVS is looking to strengthen its portfolio as generic competition for blockbuster cardiovascular drug Entresto is adversely impacting sales. Oncology drug Promacta is also facing generic competition.
While strong demand for key growth brands, including Kisqali, Kesimpta, Scemblix, Pluvicto and Leqvio, is boosting the top line, NVS’ pipeline needs to deliver.
However, the company has recently suffered back-to-back pipeline setbacks, which have dampened investor sentiment.
Year to date, Novartis shares have gained 2.3% compared with the industry’s growth of 9.4%.
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Shares took a beating after the late-stage study on investigational candidate, pelacarsen, failed.
Novartis secured global rights from Ionis Pharmaceuticals IONS to develop, manufacture and commercialize pelacarsen under a licensing and collaboration agreement.
Ionis Pharmaceuticals discovered pelacarsen and led its early development. In February 2019, Novartis exercised its option to license the rights to develop and commercialize pelacarsen as a targeted cardiovascular therapy.
However, the study did not meet the primary endpoint of reducing the risk of cardiovascular events, a composite of cardiovascular death, non-fatal myocardial infarction, non-fatal stroke and urgent coronary revascularization requiring hospitalization, as compared to placebo.
The late-stage HARBOR study evaluating del-desiran in people living with myotonic dystrophy type 1 (DM1) also failed to meet the primary endpoint.
Results showed that del-desiran failed to demonstrate a statistically significant improvement over placebo on the primary endpoint of video hand opening time, a novel measure of hand myotonia.
While the recent deal with Abogen is promising, ABO2203 is still in clinical development, and its commercial prospects will depend on demonstrating meaningful efficacy, an acceptable safety profile and durable B-cell depletion.
Nonetheless, the deal reflects Novartis' interest in expanding beyond conventional biologic approaches and accessing emerging therapeutic technologies. The option rights to additional Abogen programs provide further opportunities to leverage the RNA platform across potential therapeutic targets without requiring Novartis to license every program upfront.
NVS’ Zacks Rank & Stocks to Consider
Novartis currently carries a Zacks Rank #3 (Hold). A couple of better-ranked stocks in the drug/biotech sector are Precigen PGEN, currently sporting a Zacks Rank #1 (Strong Buy) and AC Immune ACIU, carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Over the past 60 days, estimates for Precigen’s 2026 bottom line have improved from a loss of 2 cents to earnings per share of 24 cents. Over the same period, earnings estimates for 2027 have risen from 25 cents to 73 cents. PGEN shares have gained 101% year to date.
Precigen’s earnings beat estimates in three of the trailing four quarters and missed in the remaining one, with the average surprise being 108.96%.
Over the past 60 days, estimates for AC Immune’s 2026 loss per share have narrowed from 84 cents to 60 cents. Over the same period, earnings estimates for 2027 remained unchanged at 17 cents per share.
AC Immune’s earnings beat estimates in each of the trailing four quarters, with the average surprise being 33.25%.
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This article originally published on Zacks Investment Research (zacks.com).