Crucell Deal Will Expand J&J’s Position in Growing Vaccine Market: Biotech's Latest M&A Activity

by: The Burrill Report

By Marie Daghlian

Johnson & Johnson (NYSE:JNJ) and Crucell (NASDAQ:CRXL) are in advanced negotiations for the pharmaceutical giant to make a public offer for all outstanding shares of the Dutch vaccine maker. The potential deal is valued at $2.3 billion (€1.75 billion), which represents a purchase price of €25.75 per share, a 58 percent premium over Crucell’s closing price on September 16.

Crucell’s shares skyrocketed 58 percent on the announcement, the highest they have been in 10 years. The company is expected to urge shareholders to accept the offer. Johnson & Johnson acquired 17.9 percent of the company in a deal with the vaccine maker last year that brought the two companies together in an effort to develop a universal flu vaccine.

The global vaccine market reached $22.1 billion last year, up from $19 billion in 2008, and is expected to expand 9.7 percent annually in the next five years, according to a recent report from Kalorama, a market research company.
Vaccines are increasingly seen as a revenue generator for pharmaceutical companies seeking to replace revenue lost to patent expirations and generic competition.

Analysts don’t expect any opposition to the deal, who see the offer as a sweet premium for the company. The deal values Crucell at about 57 times 2010 estimated earnings, compared with a median multiple of about 36 times profit in biotechnology deals in the past year, according to Bloomberg analysis.

Crucell will be able to benefit from Johnson & Johnson's expertise and experience in the development and commercialization of pharmaceutical products, while Crucell's strength in the manufacture, discovery and commercialization of vaccines will create a strong platform for Johnson & Johnson in the vaccine market.

If the transaction goes through, Crucell will become the center for vaccines within the pharmaceutical’s group of business. Johnson & Johnson expects to keep the division intact and maintain its headquarters in Leiden, the Netherlands.

While no formal agreement has been reached, there is little doubt among investors and analysts that the deal will be completed, especially since Johnson & Johnson already owns a substantial portion of Crucell and the boards of both companies have authorized them to proceed with negotiations.

Johnson & Johnson’s potential acquisition of Crucell capped a busy week for life sciences deal making and financing that started with the announcement that Genzyme (GENZ) was selling its genetic testing business to LabCorp for $925 million in cash.

The sale follows Genzyme’s May announcement that it planned to seek strategic alternatives for three units as part of a five-year plan to increase shareholder value. Genzyme plans to use the proceeds from the sale of Genzyme Genetics to finance the second half of the company’s $2 billion stock buyback to be completed by May 2011.

Genzyme’s management has rejected a bid by Sanofi-Aventis (NYSE:SNY) to acquire the company for approximately $17 billion as opportunistic and undervaluing the company’s resources. Sanofi’s bid for Genzyme has yet to go hostile.
One ongoing transaction did reached the “hostile” stage with Ramius, a private equity firm that holds a 10 percent stake in Cypress Biosciences (CYPB), deciding to take a sweetened offer directly to shareholders after management rejected a previous offer to buy the company. Shares of Cypress were up 9 percent as Ramius began a tender offer of $4.25 per share in cash, up from a prior offer of $4.00. The Cypress board is reviewing the current offer and has advised shareholders to take no action pending the review.

Ramius had been disappointed with how the company was being run, and shares were at a five-year low when it made its first offer in late July. That offer was soundly rejected by Cypress, which busied itself by entering into two deals to shore up its central nervous system pipeline—with Marina Biotech and Alexza Pharmaceuticals (NASDAQ:ALXA).

Two significant renewable fuels partnerships were struck this week. Ocean Nutrition Canada, the world’s largest supplier of omega-3 fatty acid supplements, entered into a partnership with Canada’s National Research Council, military contractor Lockheed Martin (NYSE:LMT), and technology company UOP to turn algae oil into green jet fuel.

Norway’s Statoil, one of the world’s largest offshore oil and gas producers, entered into a wide-ranging strategic partnership with Berkeley, California-based Bio Architecture Lab for the production of renewable fuels derived from macroalgae grown off the coast of Norway. BAL has extensive expertise growing algae off the coast of Chile and has also partnered with DuPont in a project funded by the U.S. Department of Energy’s Advanced Research Program to convert macroalgae into isobutanol.

Deals for the Week Ending September 17, 2010
Global Venture Financings
Company Location Amount Raised (USD M)) Principal Focus
Relypsa Santa Clara, CA 70.0 Non-absorbed polymeric drugs
Tryton Medical Durham, NC 20.0 Medical devices-Stents
SG Biofuels San Diego, CA 9.4 Renewable fuels
Fitbit San Francisco, CA 8.0 Wellness monitoring
Lantos Technologies Cambridge, MA 1.6 Ocular technology
SonarMed Indianapolis, IN 1.0 Medical devices-Respiratory
Okairos Rome, Italy 20.6 Vaccines
Eddingpharm (Cayman) Shanghai, China 24.0 Specialty pharma
RedHill Biopharma Tel Aviv, Israel 3.5 Biopharmaceuticals
Total Raised US 110.0
Total Raised Non-US 48.1
Grants and Contracts
Company Funding/Contracting Agency Amount Raised (USD M) Principal Focus
QuantaLife NIH NIBIB 6.0 PCR
Fiberight-Blairstown Iowa Power Board Fund 2.9 Renewable fuels
Neovacs (France) OSEO 1.3 Immunotherapy
Applied Genetic Technologies FDA 1.0 Drug delivery
New England Biolabs Fast track SBIR 1.2 Epigenetics
PhysioNetics (ADA Technologies) NIH NICHHD 0.8 Prosthetics
Inovio Pharmaceuticals PATH Malaria Vaccine Initiative N/A DNA vaccines
Cleveland Biolabs US DoD CBMS MITS 14.8 Radiation side effects
Total Grants and Contracts 28.0
Company Ticker Amount
Raised (USD M)
Financing Type
Seegene (Korea) KOSDAQ 16.6 IPO
Guided Therapeutics GTHP 3.0 PIPE
Arno Therapeutics ARNI 15.0 PIPE
Addex Pharmaceuticals (Switzerland) ADXN.SW 19.7 PIPE
Aerocrine (Sweden) STO:AEROB 22.0 PIPE
Sunshine Heart (Australia) ASX:SHC 14.7 PIPE
Volcano VOLC 100.0 Debt
Alere ALR 400.0 Debt
KV Pharmaceutical KV-A 20.0 Loan
Aerocrine (Sweden) STO:AEROB 31.9 New shares and bonds issued to Novo
Non-US 104.9
Acquirer Target Deal Value
Johnson & Johnson Crucell (the Netherlands) 2,300.0 Vaccines
LabCorp Genzyme Genetics (Genzyme) 925.0 Diagnostics
Public Investors Cardinal Health 705.9 Medical devices
Ramius Cypress Bioscience 164.0 Biopharmaceuticals
Proctor & Gamble ConTipi (Israel) 100.0 Medical devices
William Demant (Denmark) Otix Global 49.0 Otic solutions
W.R. Grace Synthetech 19.2 Industrial/Ag
RadNet Image Medical 10.8 Radiology
Santarus Covella Pharmaceuticals 1.8 Inflammatory; autoimmune
Vyteris MediSync Bioservices N/A Drug development services
Biosystems International (France) MicroBioChips (France) N/A Diagnostics
Company/Licensee Company/Licenser Deal Value
RTI Biologics Athersys 37.5 Stem cell technology license
Monsanto AgraQuest N/A Crop traits partnership
Biofortuna TriLink BioTechnologies N/A Diagnostics license
Pfizer Asklepios BioPharmaceutical N/A Technology license
Linnaeus Plant Sciences (Canada) DuPont N/A Crop traits license
Santarus Pharming (the Netherlands) N/A Cardiovascular drug commercialization
PMG Pharma (Chile) Generex Biotechnology N/A Diabetes drug license and distribution
NewBridge Pharmaceuticals Orexo (Sweden) N/A Pain drug license and distribution
Syngenta (Switzerland) Chromatin N/A Crop technology license
Statoil (Norway) Bio Architecture Lab N/A Renewable fuels partnership
Genmab (Denmark) Seattle Genetics N/A Cancer drug license and collaboration
Proximagen Neuroscience (UK) Ligand Pharmaceuticals N/A Preclinical drug target license
Acea Biosciences Cellular Dynamics International N/A Diagnostics partnership
Public/Private Partnerships
Company University/Nonprofit Deal Value
Geron University Campus Suffolk (UK) N/A Stem cell collaboration
AB Sciex University of Melbourne (Australia) N/A Drug development partnership
Merck Beijing Genomics Institute (China) N/A Genomics collaboration
Oslo Cancer Cluster (Norway) Shanghai Institute of materia Medica (SIMM-China) N/A Cancer therapeutics partnership
AstraZeneca (UK) University College London's Institute of Ophthalmology (UK) N/A Stem cell partnership