By David Carnevali
(Reuters) -Drug maker Novartis (LON:0QLR) AG is in advanced talks to acquire MorphoSys AG, a developer of cancer treatments that has a market value of 1.6 billion euros ($1.7 billion), two people familiar with the matter said on Monday.
Novartis has so far prevailed over rival drug maker Incyte (NASDAQ:INCY) Corp, which also made an offer for MorphoSys, the sources said.
The sources added that there is no certainty that the deal negotiations will conclude successfully and requested anonymity because the matter is confidential. They declined to give any information about the acquisition price.
Novartis, MorphoSys and Incyte did not immediately respond to requests for comment.
MorphoSys shares rose more than 40% on the news on Monday.
Headquartered in Planegg, Germany, MorphoSys develops drugs to fight deadly forms of cancers such as myelofibrosis, which is a rare type of bone marrow cancer, and certain types of knotty lymphomas.
MorphoSys main revenue generator is a lymphoma drug called Monjuvi, which it sells as part of a profit-sharing agreement with Incyte. MorphoSys said last week that Monjuvi's U.S. net product sales were $92 million in 2023, and that it expected these sales to come in between $80 million and $95 million in 2024. The company has said it expects revenue to go up as Monjuvi is approved for more indications.
One of MorphoSys' most promising drugs, known as Pelabresib, is an inhibitor of proteins implicated in the development and progression of myelofibrosis.
MorphoSys stumbled in November when Pelabresib missed some key goals in clinical trials, but said it was still planning to apply in 2024 for approval to commercialize the drug in the U.S. and Europe.
To slash costs, MorphoSys shut down some of its early-stage research programs at the start of 2023, laying off about 17% of its workforce. It now employs almost 550 people in its U.S. and German offices, according to the company's website.
Novartis has also been cutting jobs and costs, and spun off its generic drugs business Sandoz (SIX:SDZ) last year, part of a focus on fewer therapeutic areas and geographic markets.
Its revenue growth has been driven by its heart failure drug Entresto, its medicine Kesimpta for multiple sclerosis, and breast cancer drug Kisqali.
Revenue gains for Pluvicto, a precision radiotherapy against prostate cancer, eye drug Lucentis and gene therapy Zolgensma against spinal muscular atrophy fell short of market expectations in the fourth quarter of 2023.
In an interview with CNBC last month, Novartis CEO Vasant Narasimhan said the company's overall mergers and acquisitions strategy was focused on deals involving assets valued below $5 billion.