What Signal Is Novartis AG (NYSE:NVS) Sending Out With Its Cell Therapy Move?

Novartis AG (NYSE:NVS)’s decision to disband its cell therapy unit and fold it into existing divisions has turned the spotlight on its rivals. Analysts and investors are asking what that move could mean for players that Novartis is leaving in cell therapy world. Will they take a cue from Novartis and start falling one after another or does it mean more breathing space because of reduced competition? Analysts say both are a possibility.

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Shutting gene therapy unit

It seems like something that Novartis has been considering for a long time and was only waiting for an opportunity to make the move. An executive of Novartis called Usman Aman send a letter to the almost 400 staffers at the high-profile CAR-T therapies division telling them of the decision to disband the unit.

The letter quotes Aman talking about the risks of travelling an uncharted path, saying that things don’t always go as expected when you do that. Perhaps that implies that Novartis is exiting gene therapy world because of the challenges it encountered, though the company says it remains committed to push through with the programs it has started to successful completion.

Among Novartis’ CAR-T therapies is a candidate called CTL109, which is being developed as a treatment for blood cancer in children. The company plans to seek regulatory approval of the candidate in 2017.

Focus on rivals

Novartis’ rivals in CAR-T therapies Kite Pharma Inc (NASDAQ:KITE) and Juno Therapeutics Inc (NASDAQ:JUNO) have their own programs. Kite is expected to seek FDA clearance for its own candidate. However, Juno suffered a blow when the regulator put a hold on a clinical trial of its CAR-T candidate early this year.

With Novartis folding up its standalone gene therapy division and merging the operations into existing units, the spotlight is on Kite and Juno. If Novartis is banding its gene therapy arm because of challenges, will Kite and Juno survive for long?

Analysts say implications of Novartis’ move could be positive or negative. On the positive side it signals reduced competition in CAR-T therapy space, which should pave way for the remaining players to flourish. However, on the negative side it signals existence of significant challenges that even big guns such as Novartis are finding difficult to overcome.

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