EP Vantage Interview - Intercell mulling big acquisition

As weeks go it has been a sterling one for Austrian vaccine maker Intercell, as its Japanese Encephalitis vaccine Ixiaro not only received approval in the US, but also in Europe, making it the group’s first commercialised product. This major milestone is valuable because it not only provides a revenue and profit stream for the group, through a partnership with Novartis, but also gives important validation of the Vienna-based company’s ability to bring products through from development to the market.

While this also gives reassurance that the group will probably repeat the feat with its next product, a phase II patch based vaccine for travellers’ diarrhoea, it is not only the clinical plans of Intercell that are exciting. In an interview with EP Vantage, Thomas Lingelbach, chief operating officer, said the group is considering M&A that could see it buy a large player or find a merger of equals to create a multi-billion dollar company.

“We would be foolish not to focus on the markets at the moment,” he says, as the valuations of many companies are currently very low. He adds however that the group’s options are constrained by the limited number of vaccine companies available following the recent wave of acquisitions that has seen the likes of Acambis snapped up by large pharma players.

Large acquisition

What the company is not looking for are small companies with early stage products, mainly because of the depth of Intercell’s own pipeline, that includes nine phase II products and three in phase I. “What we would need is someone with top line [products] and there aren’t many left, which would mean a merger structure and that is something we are constantly evaluating,” Mr Lingelbach says.

It is this lack of opportunity, he says, that could force the company to diversify its business and look outside of its core competency of vaccines and move into antibodies, with a focus on anti-infective antibodies, creating a complimentary business to the group’s vaccines. Or even consider non-complimentary products, instead giving it a number of different value streams.

While there may be nothing concrete on the radar in terms of what type of acquisition Intercell might do, it is something that the company is hoping to have made progress on by the end of the year. Intercell is also not afraid to think big. The group, which has a market cap of $1.48bn, has not ruled out using its paper to effect a merger with a company equal to its own size.

“We have still more than €200m ($269m) cash and for something big we could go out and raise more. So I think that it [M&A] could be an opportunity to go even go up to the level we are right now,” he says.

Pipeline progress

Intercell’s determination to achieve its stated aims in terms of corporate strategy is matched by the progress that the group hopes to make with its pipeline this year. With the approval of Ixiaro under its belt the attention is now focused on the group’s traveller’s diarrhoea vaccine.

The product is currently in phase II and was one of the chief reasons why Intercell embarked on its largest acquisition to date; the $189m swoop on Iomai (Intercell's smart move for Iomai, May 13, 2008). The group is confident that Iomai’s technology has overcome most of the common problems associated with transdermal administration, and believe that the product, which fits nicely into its travellers’ product suite, could have peak sales of between €600m-€800m due to its potential to be both self administered and stored without refridgeration.

Phase III trials for the patch will start at the end of this month in Europe and two to three months later in the US. 

The group also has three promising flu programmes in development, including a phase I with Novartis using its IC30 adjuvant to boost the immune response and efficacy in critical populations such as the elderly. The Swiss group is expected to make a decision about which one of the various combinations of its vaccine and Intercell’s adjuvant to take in to phase II by the end of the year.

Partnering discussions

The other two programmes are a pandemic flu vaccine enhancement patch that if successful will cut down the number of shots needed from two to one and give immediate protection, and a pre-clinical classic flu vaccine, also delivered by patch technology.

Phase II trials of the enhancement patch are due to start at the end of April. The group is currently in partnership talks with several big pharma groups, who are expected to provide the flu vaccine used in the patch and also help clinically develop the programme.

Intercell’s products for hospital acquired infection are also progressing through the clinic with a vaccine against Pseudomonas aeruginosa, one of the leading causes of hospital acquired infections, moving into phase II alongside Staphlococcus vaccine V710.

Predator or prey

The continuing success of Intercell has made some start to question whether rather than being acquirers, the company will be acquired. However, Mr Lingelbach says that the group is not ready to give up its independence at this stage and also questions whether they would make an attractive acquisition target for Novartis, which already has a 16% stake in the company and development rights to 10 of the group’s drugs.

“We don’t think that we are obvious acquisition target for Novartis in the short term and when I say short term I mean the next three years or so, because under the strategic partnership with Novartis they have access to our technology and our key programmes and what they would get above and beyond that would never pay off the acquisition price, that’s why I think we are not an obvious acquisition target for Novartis, the same with Merck and some of the other partners we have."

But Mr Lingelbach is shrewd enough to realise that if the group continues to keep delivering on its promises someone might come knocking on Intercell’s door. “In the foreseeable future, that is the next three or five years when our programmes turn into revenue streams, the situation might be different,” he says.

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