J&J, which already owns a 17.9 percent stake in vaccine maker Crucell, said on Friday its potential cash offer valued Crucell shares at e24.75, a 58 percent premium to Thursday’s closing price.
“We believe the chances for success are high,” KBC Securities analyst Jan de Kerpel said. “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.”
De Kerpel said the potential deal was more proof it was a question of “not if, but rather when” other successful biotech companies with late-stage products would be bought.
J&J and Pfizer have been flagged as possible, but unlikely, rival bidders for US biotech company Genzyme, the target of Sanofi-Aventis, so the bid may signal J&J is out of that race.
A UK-based analyst who did not wish to be named, said that it would be “pretty unlikely” that J&J would bid for both Genzyme and Crucell at the same time.
Crucell chief executive Ronald Brus said the potential deal with J&J, which does not have a vaccine business of its own, meant that the world’s sixth-largest vaccine producer could accelerate its development programme.
“With the help of Johnson & Johnson we can increase our reach throughout the world significantly,” Brus said. “Together we feel we form a very strong team.”
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.
Drug makers have been looking to biotech to refill product pipelines at a time when sales of old blockbusters are falling to generic competition.
Vaccine makers have also become more attractive as their sales and traditionally low margins improve.
J&J is a diversified group that makes prescription drugs as well as Tylenol pain relievers, Listerine mouth wash and Band-Aid adhesive bandages. Company veteran William Weldon has been chief executive since 2002.
It bought its stake in Crucell, one of two major independent vaccine makers in Europe alongside Intercell, in September last year as part of a flu vaccine development deal.
Crucell is on the cusp of sharp sales growth for its paediatric 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. Shantha lost prequalification status to supply the World Health Organisation with its childhood vaccine in July.
The J&J offer for Crucell is at 5.5 times estimated sales.
Rabo Securities analyst Fabian Smeets said he believed the likelihood of a bidding war was small. He 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 drug industry.
J&J said on Friday its due diligence was 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. Brus said the deal could close by the end of the year.