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March 19, 2014 5:52 am

Novartis Reportedly in Talks to Acquire Israeli Stem Cell Developer for up to $600 Million

avatar by Joshua Levitt

Gamida-Cell Ltd.

Gamida-Cell Ltd.

Israel stem cell treatment developer Gamida-Cell Ltd. is in talks to be acquired by Novartis, the pharmaceutical giant, for up to $600 million, according to Israel’s Globes business daily, citing sources familiar with the deal.

Gamida-Cell has proprietary technology for growing the number and density of stem cells within a specific blood sample, increasing stem cell activity, Globes said. The company’s work could be used to cure blood cancer in adults.

Gamida-Cell started out strongly, with its first product jointly developed with Israeli’s largest pharmaceutical company, Teva, but a rules change by the U.S. Food and Drug Administration, made the first product too expensive to finish developing.

Gamida-Cell’s current product is undergoing clinical trials, and because of its expected improved efficacy, justifies the high development costs. Because Teva has no rights to this new product, the deal with Novartis became possible, Globes said.

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The newspaper said that under the terms of the deal on the table, Novartis would pay for up to half of the company in a lump sum, and then buy its shares at various milestones as the product is developed, for a total of up to $600 million.

Globes said that 53% of Gamida-Cell is owned by two companies that are controlled by larger companies. Elbit Medical Technologies Ltd. (TASE: EMTC) owns 31%, and it is owned by Elbit Imaging Ltd. (Nasdaq: EMITF; TASE: EMIT), which was owned by Mordechay Zisser, who was bought out earlier this year by York Capital Management LLC and Davidson Kempner Capital Management LLC.

Clal Biotechnology Industries Ltd. (TASE: CBI), which owns 22% of Gamida-Cell, is controlled by Len Blavatnik’s Access Industries Inc.

Prior to the Navartis talks, Gamida-Cell management had been discussing an initial public offering in the U.S., but this direct deal is seen to be at a higher valuation, while the involvement of a major pharmaceutical company in the development phase can add value for Gamida-Cell as its product reaches the market.

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