Sanofi move for Shantha could reignite interest in Crucell

News that Sanofi-Aventis is effectively buying a majority stake in Indian vaccine group, Shantha Biotechnics, for €550m ($784m) through the acquisition of Mérieux Alliance’s French subsidiary, ShanH, once again turns the spotlight on the interest by big pharma on independent vaccine companies.

Sanofi appears to have made its move as part of a well stated aim to increase its presence in emerging markets but also because of Shantha’s vaccine technology. While the French group may have on this occasion chosen to turn its attention eastwards, the acquisition will once again direct attention on Crucell, which remains the only large independent vaccine company following the takeout of a number of others including Acambis.

Attractive assets

Wyeth has already made an abortive attempt for the group (Wyeth courting Crucell, January 8, 2009), abandoning it only after unveiling its merger with Pfizer. Market rumours have speculated that Wyeth was trying to do all it could to close the deal before it agreed the tie up with Pfizer.

The US group’s alleged keenness to get its hands on Crucell looks sensible given that vaccines offer limited patent risk, higher barriers to entry and fewer competitors than in other therapeutic areas. Crucell itself also has numerous attractions that might have interested Wyeth.

Chief among Crucell’s lure is Quinvaxem, the pentavalent vaccine for diphtheria, tetanus, pertusis (whooping cough), hepatitis B and haemophilia and influenza b, which has driven most of the strong growth at the group enabling it to increase revenues in 2008 by just over 40% to $393m. Sales of the vaccine, which was co-developed with Novartis and is included in Unicef’s mass vaccination programmes, are expected to hit $179m by 2014.

The group also has a decent pipeline (see table) that includes a phase III drug for yellow fever and also five phase II products and three phase I products, including Flupan Vaccine, a flu vaccine that has attracted interest due to its potential to be effective among numerous strains of the influenza virus.

The breadth of its experimental portfolio has led some analysts to speculate that Crucell could deliver one vaccine a year over the next five years. Crucell itself is so confident about the prospects of its developmental drugs it has predicted it will be able to triple sales over the next few years.

If this was not enough there is also the group’s technology platforms, which include the PER.C6 cell based vaccine production process that many believe could become the new standard for vaccine and protein creation. The group’s star technology is also bound to be of interest because it increases the production yields of both antibodies and proteins, which in turn lowers costs, and could play well for those interested in biosimilars and looking to extract healthy margins on any products.

Names in the frame

But as to who might still be willing to buy Crucell is debatable. By buying the controlling stake in Shantha, Sanofi looks to have effectively ruled itself out from any race to buy the Dutch group. Shantha has a competing quinvalent vaccine, SHAH5, which could cause competition issues and force it to divest some of the company that it has only just bought.

Also by buying control of Shantha Sanofi is potentially lining itself up to end the domination over the pentavalent vaccine market that Crucell and Novartis have enjoyed over the last three years. In the third quarter Unicef will decide who gets the 2010-2012 tenders for the pentavalents it uses in its global vaccination programme. Also competing for a slice of the cake is another Indian vaccine maker, Panacea Biotec, and as one of Unicef’s principles is ensuring sustainability of supply through a diverse supplier base, it can be assumed that Crucell may this time round not get all of the market.

Novartis, which has been quieter than its peers in terms of bolt-on acquisitions, appears to have already made its move into the vaccine space through its acquistion of Chiron in 2006 and a growing interest in Intercell, where it has partnerships through the development of Ixiaro, the Japanese Encephalitis Vaccine and a 16% stake in the group.

GlaxoSmithKline already has its own large, profitable childhood and adult vaccines and would therefore be unlikely to take out Crucell, an acquisition that would also go against is stated expansion strategy, leaving only Merck/Schering-Plough and Wyeth/Pfizer as the most plausible groups to snap up Crucell. However, Merck/Schering-Plough, like Pfizer/Wyeth, is struggling with integration and may not want to indulge in M&A again so soon.

The one

While this argument could also apply to Pfizer/Wyeth, it is the least integrated vaccine player amongst its peers and unlike others in the space does not have a range of vaccines and manufacturing capacity scattered round the globe. Instead it largely relies on two vaccines whose sales are predominantly in the US, Prevnar and Prevnar13, a situation that is unlikely to change even after integration thanks to both group’s limited vaccine pipelines.

However, if Wy-Pfi does revisit Crucell with the aim to do a takeout, nothing is likely to happen until the end of the fourth quarter or the beginning of 2010. Investors in Crucell, however, might want to be wary of getting their hopes up of another bid. As no one has used what looks like an ideal time to make a move for Crucell and steal it from under the nose of Wy-Pfi while its attention is elsewhere, perhaps this is really the only deal in town for Crucell.