Swiss pharmaceuticals giant Novartis is buying US gene therapy pioneers AveXis for $8.7 billion, in a bid to boost its leadership in neuroscience treatment.

The two struck a cash deal for $218 a share, a large 88% premium on Nasdaq-listed AveXis’s closing price on Friday.

Illinois-based AveXis has been developing a breakthrough drug AVXS-101, for the treatment of spinal muscular atrophy.

If approved by the US drug regulators, the FDA, the drug would be a one-time treatment for the root genetic cause of spinal muscular atrophy, effectively replacing the defective gene, Novartis said in a press release.

The Novartis share price climbed at the market open this morning.

Novartis share price

Source: Google Finance

Novartis Chief Executive Vas Narasimhan, who took the helm in February this year, said there are around 23,500 spinal muscular atrophy patents throughout established markets.

In a conference call with reporters Narasimhan said:

We believe the medicine would have a multi-billion dollar peak sales potential.

We’ve been regularly scanning and looking for bolt-in acquisition candidates

He added that a recent deal with London-based pharmaceuticals company GlaxoSmithKline to sell a $13 billion stake in its consumer healthcare joint venture would help bankroll its latest acquisition.

The transaction was agreed by the AveXis board of directors and is expected to be completed in mid-2018.

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Basel-based Novartis said that research and development costs from the acquisition would dent the company’s operating income in the first few years until 2019, before sales accelerate to contribute to core earnings and overall profits by 2020.

Paul Hudson, CEO of Novartis’ pharmaceutical division, said:

Bringing AveXis on board would support both our ambition to be a leader in neurodegenerative diseases and our Neuroscience franchise priorities to strengthen our position in devastating pediatric neurological diseases such as SMA.

We relish the opportunity to leverage our expertise, our 70-plus year heritage in neuroscience and our global footprint to help AVXS-101 benefit high-need SMA patients around the world.