(Bloomberg) -- Novartis AG agreed to buy Chinook Therapeutics Inc. for as much as $3.5 billion to add two promising treatments in advanced tests for a rare kidney disease.

The Swiss drug company will pay $40 a share in cash for Seattle-based Chinook, 67% more than Friday’s close, it said in a statement. Another $4 a share could be paid later if the medicines achieve certain regulatory milestones.

Chief Executive Officer Vas Narasimhan had been more active in slimming Novartis down rather than boosting its drug pipeline through acquisitions before Monday’s announcement. The two Chinook medicines could pay off quickly if they’re successful, with one expected to report key results as early as this year. 

Drugmakers from AstraZeneca Plc to Amgen Inc. have targeted companies developing treatments for rare diseases because they command higher prices. Amgen is trying to buy Horizon Therapeutics Plc for about $28 billion in its biggest-ever acquisition. Even Novo Nordisk A/S, the Danish firm behind some of the world’s best-selling obesity and diabetes drugs, said it aims to build a pipeline of transformative drugs for patients with “rare and devastating diseases” last year when it announced its takeover of US biotech Forma Therapeutics Holdings Inc. 

Overall, health-care acquisitions are up up 24% to $157 billion this year, data compiled by Bloomberg show. Investors had been expecting a pipeline-boosting transaction from Novartis since the company sold its stake in rival Roche Holding AG, giving it financial firepower.

Kidney Treatments

Chinook’s two treatments target a progressive, rare kidney disease called IgAN that mostly affects young adults and currently lacks targeted treatment options. The most advanced one is also in development for other rare kidney diseases. The purchase would be the Swiss company’s largest since it bought Medicines Co. for about $9.7 billion in 2020.

Chinook shares rose as much as 58% to $37.98, below the upfront payment, in New York trading. Novartis rose as much as 1.5% in Zurich.

The deal comes less than a month after Muddy Waters said it was short Chinook’s shares, briefly sending the stock tumbling.

Narasimhan decided last year to spin off Novartis’s Sandoz division, creating the largest European generic and biosimilar drug company by sales. Novartis is also considering selling some ophthalmology assets and it has cut jobs and combined its pharma and cancer units.

Novartis said it expects to complete the deal in the second half of 2023. 

--With assistance from Liana Baker.

(Updates shares in seventh paragraph. A previous version of this story corrected where Chinook is based)

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