On Monday, Swiss drugmaker Roche (ROG.S) said it would buy Telavant, a developer of a new treatment for inflammatory bowel diseases, in a deal valued at up to $7 billion. The pact is the first significant acquisition by newly seated chief executive Thomas Schinecker. It will boost Roche in the lucrative field of digestive tract disorders, where it is lagging behind rivals.
Roivant, a biotech firm started by former Republican presidential candidate Vivek Ramaswamy, will retain commercialization rights outside the U.S. and Japan. It will also continue to develop an experimental anti-inflammatory bowel disease therapy known as RVT-3101, which is at the center of the deal. The companies said Roche will start a global Phase III trial of RVT-3101 as soon as possible.
The deal for RVT-3101, which targets a class of drugs known as anti-TL1A antibodies, is the latest sign that the market for these novel therapies is increasing. Roche bought a similar antibody to ulcerative colitis from InterMune for $5.3 billion in 2014 but has struggled with disappointing clinical trials.
Inflammatory bowel diseases such as ulcerative colitis and Crohn’s are among the fastest-growing markets for new medicines, accounting for around half of worldwide spending on digestive diseases. The conditions affect about 8 million people globally, and 80% cannot find lasting treatments. Roivant sees the potential for a drug to treat these chronic gastrointestinal disorders in a market worth $15 billion annually.
Shares of Roivant rose in after-hours trading following the news. The stock had lost over a third this year, partly because investors were disappointed by a lack of progress on its critical cancer immunotherapy and Alzheimer’s treatment projects.
Roche will pay $7.1 billion upfront to buy the shares it does not already own of Telavant, plus a near-term milestone payment. The Swiss company is paying for the right to develop, manufacture, and commercialize the drug in the U.S. and Japan, while Pfizer will hold commercialization rights in other countries.
The move continues a strategic shift by Roche to diversify away from its aging cancer treatment business, which will account for nearly half of its overall sales in 2022. The Swiss pharmaceutical giant has been buying smaller biotech firms to bolster its pipelines and carve out a presence in new therapeutic areas, including digestive tract diseases. The deal will bring in Roivant’s gastrointestinal team and help it accelerate research and development. It will not impact Roche’s financial targets for this year. The company will report fourth-quarter results on Feb 11.