A laboratory researcher at Crucell's headquarters in Leiden, Netherlands.
U.S. health care company Johnson & Johnson is in talks to pay €1.75-billion ($2.3-billion U.S.) to buy Dutch biotech firm Crucell as it seeks to catapult itself into the global vaccine market.
J&J, which already owns a 17.9 per cent stake in vaccine maker Crucell, said Friday its potential cash offer valued Crucell shares at €24.75, a 58 per cent premium to Thursday's closing price.
However, Crucell shareholder Van Herk Group, which holds a 9.6 per cent stake in the company to be its second biggest investor after J&J, said the intended offer was "meagre and too early." Analysts and bankers said a bidding war for Crucell was unlikely
J&J, the U.S.-based diversified health care giant, would be the latest large pharmaceutical company to invest in vaccines, an area once disdained as a low-margin, commodity business.
But several vaccines have become blockbuster products that address new conditions, while they are importantly viewed as having lower patent risk. The vaccine market has tripled over the past five years, according to market analysis company Datamonitor.
"It's another big drug maker trying to get involved in the vaccine market, primarily because vaccines seem to be much more resilient in terms of patent longevity," said Matt Duffy, a health care analyst with BDR Research.
Vaccines also stand to provide an entry for drug makers into emerging markets, a focus for the drug industry as growth wanes in established countries.
"As companies look toward the international markets, vaccines become a more important play and I think that's why we're seeing this level of interest from J&J and we've seen other companies interested in the space," Noble Financial Capital analyst Jan Wald said.
Crucell shares jumped 55.2 per cent to €24.36, lifting other Dutch biotech stocks and shares in Austrian vaccine maker Intercell which climbed 9.1 per cent. J&J shares were down 4 cents at $61.25 on the New York Stock Exchange.
"We believe the chances for success are high. The bid price on the remaining shares can be considered as a knock-out price and is substantially higher than the analysts' consensus target price," analyst Jan de Kerpel at KBC Securities said.
But Van Herk managing director Gertjan van der Baan said he had been in contact with other shareholders who share Van Herk's views and that he would be contacting other investors as well as Johnson & Johnson to discuss the potential offer.
Van der Baan, who said Crucell's low risk nature and strong cash generation were undervalued by the market, said no decision had been taken yet on whether to tender the group's shares to a Johnson & Johnson offer, if it eventually emerges.
Johnson & Johnson and Pfizer have been flagged as possible, but unlikely, rival bidders for U.S. biotech company Genzyme - the target of Sanofi-Aventis - so the bid may signal J&J is out of that race.
Crucell chief executive Ronald Brus said the potential deal with J&J, which does not have its own vaccine business, meant the world's sixth-largest vaccine producer can accelerate its development program.
"With the help of Johnson & Johnson we can increase our reach throughout the world significantly," Mr. Brus told reporters. "Together we feel we form a very strong team."
Mr. Brus said he intended to stay on and did not expect any lay-offs at Crucell, which produces vaccines against flu and childhood diseases and is developing products against yellow fever alongside research into tuberculosis and malaria vaccines.
Should the deal close, J&J said it would keep Crucell as its centre of vaccines and maintain Crucell's headquarters in Leiden, the Netherlands.
New Jersey-based Johnson & Johnson, which makes prescription drugs and medical devices as well as Tylenol pain relievers and Band-Aid adhesive bandages, has seen its reputation take a hit in recent months over a spate of recalls of its consumer medicines for children and adults.
Indeed, the Crucell deal comes on the heels of J&J's announcement on Thursday of the retirement of its long-time head of consumer products.
J&J bought its stake in Crucell, one of two major independent vaccine makers in Europe alongside Intercell, in September, 2009, as part of a flu vaccine development deal.
Crucell is on the cusp of sharp sales growth for its pediatric vaccine Quinvaxem after a production failure at rival Shantha Biotechnics, which was bought by Sanofi-Aventis last year for 6.1 times its annual sales.
The J&J offer for Crucell is at 5.5 times estimated sales.
Shantha lost prequalification status to supply the World Health Organisation (WHO) with its childhood vaccine in July.
Two industry bankers said the offer was unlikely to spark a bidding war for Crucell, given that rivals would have had the chance to bid for the Dutch company when it was up for sale roughly two years ago.
"People would have realized that it was available back then, and have not come in," one banker said.
Rabo Securities analyst Fabian Smeets said Britain's GlaxoSmithKline and Sanofi-Aventis, who have their own vaccine operations, were unlikely to bid as Swiss firm Novartis could then break a partnership in which it supplies components for Crucell's childhood vaccines.
But brokerage Jefferies International said Novartis and Pfizer might still be potential bidders. Takeover talks between Wyeth and Crucell broke down last year after Pfizer bid for Wyeth in a series of mega-mergers in the pharma industry.
J&J said on Friday its due diligence is largely complete, but any deal remained subject to negotiation of a definitive agreement and customary pre-offer conditions, including consultation with Crucell's works council and trade unions.
Mr. Brus said the deal could close by the end of the year and Crucell's supervisory and management boards would recommend shareholders tender their shares to the offer.