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J&J to Buy Crucell for $2.3 Billion to Gain Vaccines

Crucell Surges After Johnson & Johnson’s $2.3 Billion Bid
Crucell now “feels at home in the J&J family of companies,” Crucell Chief Executive Officer Ronald Brus said. Source: Crucell NV via Bloomberg

Johnson & Johnson said it will buy the rest of vaccine maker Crucell NV it doesn’t already own for $2.3 billion, expanding in flu shots to bolster sales after two former top-selling drugs lost patent protection.

J&J’s proposal to pay 24.75 euros a share, a 58 percent premium over Crucell’s closing price yesterday, pushed the Dutch company’s stock up the most in 10 years. Crucell, based in Leiden, Netherlands, will urge investors to sell stock to J&J, owner of an 18 percent stake, the companies said in a statement.

The deal would be the biggest for J&J, the world’s largest health products company, since its 2006 purchase of Pfizer Inc.’s consumer unit for $16.6 billion. J&J, which had $18.9 billion in cash and short-term investments as of June 30, has the resources to make purchases “whatever the cost may be,” Chairman and Chief Executive Officer William Weldon told analysts on a Jan. 26 conference call.

“Crucell would give J&J a vaccine platform at a time when the vaccine business is becoming increasingly attractive because of its cost-effectiveness, limited exposure to generics and growth opportunities,” said Larry Biegelsen, an analyst at Wells Fargo Securities in New York, in a research note today.

Vaccine Market

The global market for vaccines totaled $22.1 billion last year, up from $19 billion in 2008, and will expand 9.7 percent annually in the next five years, said Kalorama Information, a market research company, in an Aug. 12 report. The sector is dominated by five drugmakers, led by London-based GlaxoSmithKline Plc with almost a quarter of the market, Kalorama said.

“If anything, J&J is a little late to the game,” said Jeff Jonas, an analyst at Gabelli & Co. in Rye, New York, in a telephone interview today.

Crucell rose 8.71 euros, or 56 percent, to close at 24.40 euros in Amsterdam trading. J&J, based in New Brunswick, New Jersey, rose 28 cents to $61.57 at 4 p.m. in New York Stock Exchange composite trading.

“There will not be a higher bid,” said Fabian Smeets, an analyst at Rabo Securities in Amsterdam, in an interview. “The shareholder base is very diverse, and it will be difficult to band them together to force a higher bid.”

J&J bought a stake in Crucell in September 2009 for about 300 million euros, forming a partnership for flu shots and therapies eight months after Wyeth abandoned a deal with the Dutch company.

‘Nice Premium’

The transaction would value Crucell at about 57 times this year’s estimated earnings, compared with a median multiple of about 36 times profit in biotechnology deals in the past year.

“This is a nice premium,” said Tom Muller, an Amsterdam-based analyst at Theodoor Gilissen Bankiers NV, who has a “buy” rating on Crucell. “It shows that the company has created value over the past years. The shareholders will be willing to sell.”

J&J has announced completion of 34 deals in the last five years, with an average value of $1.37 billion and an average premium of 40 percent.

Barclays Capital advised Crucell on the transaction. Johnson & Johnson didn’t say whether it used an adviser.

Vaccine companies are gaining from revived interest after last year’s influenza pandemic. Best-selling shots such as Pfizer Inc.’s Prevnar, to fight pneumonia in children, also have kindled drugmakers’ interest in vaccines, once deemed difficult to make and unprofitable.


J&J and Crucell said in September last year they would partner on new influenza shots, including a so-called universal vaccine to prevent most strains of flu, a goal that has eluded scientists for about 60 years.

Crucell now “feels at home in the J&J family of companies,” Crucell CEO Ronald Brus said today on a conference call. The companies expect to complete the deal by the end of the year, Brus said. Last year, after J&J’s initial purchase, Brus said that “for the time being, we’re very happy that we’re independent.”

“The most-important thing is that we know how we work with the J&J management,” Brus said on today’s call. “We are excited about how successful that collaboration was. This is now a time we feel comfortable discussing a full acquisition.” He declined to comment on other potential offers.

Crucell’s Strength

J&J said it plans to keep Crucell’s facilities, retain senior management and maintain employment levels.

“Crucell’s strength in the manufacture, discovery and commercialization of vaccines would create a strong platform for Johnson & Johnson,” the U.S. drugmaker said in a statement today.

Sales of Risperdal, an antipsychotic, reached $4.18 billion in 2006, accounting for 7.8 percent of J&J’s sales. Topamax, a migraine medication, peaked at $2.73 million in 2008, 4.3 percent of total revenue, before it lost patent protection.

With competition from generic copies increasing, “vaccines are increasingly regarded as a key revenue generator” for larger drugmakers, said Giles Somers, an analyst with London- based Datamonitor Plc, in an e-mail. “Backed by J&J’s global sales and marketing capabilities, Crucell could compete more effectively with Big Pharma players already in the vaccine space.”

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