Global Insight Perspective | |
Significance | Wyeth's interest in Crucell could carry a price tag of US$1.35 billion according to media reports. Other firms who could become potential bidders include Novartis and Sanofi-Aventis, particularly as the latter is already a licensing partner to Crucell. |
Implications | If the deal goes through, it could be the second acquisition for Wyeth in the biotech sector in recent months. Wyeth would inherit a strong product development pipeline from Crucell, and could expect biotech contributions to its overall revenue to rise. |
Outlook | Although the firms involved have reiterated that talks are preliminary, there is reason to believe a potential deal will be struck this month. Challenging market conditions in the short term will force global pharma majors to pursue acquisitions aggressively this year. |
Netherlands-based biotech firm Crucell has announced that it is conducting "friendly talks" with U.S. pharma major Wyeth Pharmaceutical for a potential acquisition. The development demonstrates the multinational pharma firm's interest in acquiring biotech firms and widening its presence in the vaccine industry. The Wall Street Journal reports that a potential deal between the two firms could be struck as early as next week, and has put the overall financial consideration of the deal close to 1 billion euro (US$1.35 billion). It is also widely speculated in the media that other bidders could emerge in the next two weeks, thereby challenging Wyeth's potential offer. Big Pharma firms Novartis (Switzerland) and Sanofi-Aventis (France) are understood to be considering a bid for Crucell.
What Crucell Brings to the Deal
Crucell, a biopharmaceutical firm has relative strengths in the vaccine market, and offers expertise in the infectious disease segment. The firm has six marketed products, including Quinvaxem, Hepavax-Gene, MoRu-Viraten and the Epaxal franchise, among others. Its product pipeline offers strengths in areas such as avian influenza and HIV vaccines that, if successful, could present growth opportunities for Wyeth in the long term. Crucell ended the first nine months of 2008 with total revenues of 189.6 million euro, an increase of 38% in year-on-year growth. However, what will interest Wyeth is the firm's debut into profitability in the third quarter of 2008, with profits at 12.3 million euro as against a loss of 4.5 million euro in the same period a year ago. Crucell has established a string of licensing deals with Big Pharma firms, such as Merck & Co and Sanofi-Aventis, for the usage of its proprietary platform technologies PER.C6, AdVac, and Star.
Crucell's Product Pipeline | |
Candidate/Disease Condition | Clinical Trial Stage |
Flavimum | Phase III |
Influenza (seasonal) | Phase II |
Rabies antibody cocktail | Phase II |
Tuberculosis | Phase II |
Malaria | Phase I |
Ebola | Phase I |
HIV | Phase I |
Factor V (L/C) | Pre-clinical |
H5N1 Avian antibodies | Pre-clinical |
Source: Crucell | |
Outlook and Implications
The announcement of talks between the two firms indicates that 2009 will potentially see its first Big Pharma-Biotech acquisition deal in the short term. Crucell has long been considered a potential target for acquisition, mainly because its peers Chiron and Acambis have been snapped up by global pharma majors. The firm offers a strategic fit for Wyeth, which had already expressed interest in pursuing the inorganic route to enhance its topline growth. What is interesting is that if the deal goes through, it will be one of the largest biotech acquisitions for Wyeth, after indulging in the acquisition of smaller companies, namely Thiakis, recently. Also, the inclusion of Crucell will result in further enhancement of non-pharmaceutical contributions to Wyeth's overall sales. The pharma major's chief executive Bernard Poussot was described by the Wall Street Journal as stating that Wyeth expects an increase in the contribution of vaccines, biotech drugs, and consumer products to 75%, from the present 60%, in the next five years. This has set the stage for a major acquisition by Wyeth.
The potential deal also signals the continuing trend among Big Pharma firms to seek avenues of growth at a time when market conditions are deteriorating steadily. Innovative drug majors face several challenges, including: greater presence of the generics drug industry; growing regulatory scrutiny of drugs, both during approval and post-marketing, particularly in the United States; the patent expiry of blockbuster products, and the aggressive nature of generic drug makers to challenge patents resulting in higher costs in litigation and eroding profits. All of the above challenges pertain to Wyeth, and the firm has also incurred higher costs due to product liability lawsuits from its hormone-replacement therapies, Premarin and Prempro. The acquisition is expected to address the expected pressure on revenue growth over the next few years. However, it is anticipated that Wyeth may face some competition while acquiring Crucell.
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