Crucell's deal with J&J could erode takeover premium


If you want to do a deal with Johnson & Johnson be prepared to hand over a significant portion of your company. With the ink barely dry on their contract with Elan which gave J&J an 18% stake in the Irish group, today’s $440m (€302m) strategic collaboration with Crucell gives the US healthcare giant the same 18% share in the Dutch vaccine maker.

For Crucell, heavily fancied this year as a takeover target given big pharma’s desire for a vaccine technology platform and enhanced by flu pandemic fears, the J&J deal is not the high-premium takeout some investors may have hoped for, although the scope of the deal and the nature of the partner has soothed the dilutive impact of the partnership, which makes J&J their largest shareholder. Crucell’s shares held up reasonably well today before slipping 4% to €15.40 in late afternoon trading as investors digested the implications of this tie-up.

Takeover premium at risk

News in January that Wyeth and Crucell were in so-called “friendly and preliminary stage” discussions about a possible takeover by the American pharma giant caused shares in Crucell to surge 50% (Wyeth courting Crucell, January 8, 2009).

Although Pfizer’s swoop on Wyeth just a few weeks later put paid to those takeover talks, Crucell’s shares have largely maintained this takeout premium pricing ever since. Whilst some experts predicted that the new Pfizer-Wyeth could come knocking on Crucell’s door again once their own house was put in order, the fact that Crucell remained one of the few independent vaccine companies out there of a digestible size for big pharma has also helped to protect their current share price premium (Sanofi move for Shantha could reignite interest in Crucell, July 27, 2009).

However, the deal with J&J now puts this premium at risk. Despite Crucell’s best efforts today to reiterate their “pleasure at remaining independent”, according to chief executive, Ronald Brus, the fact is that the J&J deal effectively takes the vaccine specialist off the market.

Although the collaboration includes a three-year standstill clause to prevent J&J from increasing its interest in Crucell without consent, potential acquirers, Pfizer-Wyeth included, are now likely to be wary of making a move given J&J’s significant stake. As such, J&J would appear to have struck another shrewd bit of business by effectively ring-fencing Crucell for themselves, to be acquired as and when they may see fit.

Potential for flu MAbs

The initial focus of the J&J deal will be on developing Crucell’s monoclonal antibody (MAb) products, which Mr Brus believes have the potential to prevent and treat all types of seasonal and pandemic flu strains.

These are ambitious claims but Mr Brus points to publication of encouraging pre-clinical data earlier this year in support of the potential use of MAbs to prevent and treat flu, which he says caused a flurry of interest from potential partners.

Somewhat surprisingly given the runaway success of MAbs in treating cancers and autoimmune disorders, the development of MAbs for influenza has so far failed to get out of the starting blocks.

Pipeline data from EvaluatePharma below reveals just five MAbs in pre-clinical studies for flu and no candidate has yet been tested in man.

Interestingly, two of these MAb pipeline candidates already belong to J&J following their acquisition last December of OMRIX Biopharmaceuticals. The deal with Crucell will certainly position J&J as a leader in this largely novel field.

Pipeline of monoclonal antibodies for treatment / prevention of influenza
Market Status Product Originator Company
Pre-clinical Avian Influenza Collaboration OMRIX Biopharmaceuticals Johnson & Johnson
Seasonal Influenza OMRIX Biopharmaceuticals Johnson & Johnson
mAb CR6261 Crucell Crucell
Bavituximab University of Texas Peregrine Pharmaceuticals
FGI-101 Functional Genetics Functional Genetics

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