Novartis sells Betaseron manufacturing facilities to Bayer

Novartis agreed to sell its US production facilities for the manufacturing of multiple sclerosis drug Betaseron (interferon beta-1b) to Bayer for $200 million. Under the agreement announced Monday, Novartis will be able to launch its own branded version of interferon beta-1b in the first half of 2009. The deal is expected to close in the third quarter.

As part of the agreement, Novartis will sell equipment and lease certain buildings to Bayer for $110 million, and the German company will also buy related product inventory for about $90 million. Bayer will support Novartis in its filing of a branded-version of interferon beta-1b, and if approved by regulators, Bayer will supply the compound for Novartis' version from 2009 onwards. The German company will be eligible to receive royalty payments from Novartis on sales of the Swiss drugmaker's version of the MS drug. Additionally, Novartis will continue to receive royalties on global sales of Betaseron until October 2008, when the original agreement between the companies expires.

Bayer garnered the global marketing rights for Betaseron through its acquisition of Schering AG in 2006, while Novartis has been responsible for the filing, development and supply of the drug under a 1993 agreement between Schering and Chiron, which Novartis acquired last year. Bayer and Novartis have been in discussions about the transfer of Betaseron's assets, and Bayer stated that the agreement announced Monday resolves all outstanding legal issues between the companies related to the drug.

CEO of Bayer Schering Pharma, Arthur Higgins, added that the deal is expected to save Bayer more than 120 million euros ($159 million) per year. Novartis' CEO, Thomas Ebeling, added that "this agreement gives us an opportunity to strengthen our neuroscience portfolio and build our presence in multiple sclerosis while preparing for the submission" of its experimental MS drug, fingolimod, in 2009.

"This is positive news for Bayer and mildly positive for Novartis," commented Dresdner Kleinwort analyst, Ben Yeoh. "It removes the uncertainty and gives Bayer full control of the drug for a lower-than-expected price." Meanwhile, Vontobel analyst Karl-Heinz Koch suggested that "the deal certainly makes sense because it will help the pre-marketing of Novartis' oral MS drug." Nonetheless, the analyst indicated that the agreement may make it difficult for Novartis to launch a generic version of Betaseron because it will no longer own the Betaseron production facilities.

Betaseron, which is sold as Betaferon outside the US and Canada, had sales of 991 million euros in 2006.

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