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Taking a stake
November 2009
by David Hutton  |  Email the author
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NEW BRUNSWICK, N.J.—Johnson & Johnson is venturing into the ever-growing vaccine business and increasing its focus on preventive medicine by taking an 18 percent stake in Dutch biotechnology company Crucell NV.  
 
Under the deal the companies announced in late September, J&J is spending $440 million for new shares of Crucell in a deal aimed at developing monoclonal antibodies and vaccines for the treatment and prevention of influenza and other infectious and non-infectious diseases.  
 
Initially, J&J subsidiary Ortho-McNeil-Janssen Pharmaceuticals Inc. and Crucell will focus on the development and commercialization of a universal monoclonal antibody product (flu-mAb) for the treatment and prevention of influenza. Crucell and Ortho-McNeil-Janssen Pharmaceuticals or its affiliates will share responsibilities to develop a universal flu-mAb product targeting all influenza A strains, including H1N1 strains (which cause seasonal flu and the current pandemic) and the H5N1 or avian strain ("bird flu"). Crucell will be responsible for research and development through Phase IIa of the influenza antibodies it has already discovered, as well as newly discovered influenza antibodies that emerge from the collaboration. Ortho-McNeil-Janssen Pharmaceuticals or its affiliates will be responsible for late-stage development of the flu-mAb product from Phase IIb onward.  
 
Crucell will retain the right to market products the companies develop jointly in Europe, while J&J will market them in the rest of the world. Crucell will receive additional royalties and payments from J&J "worth hundreds of millions," Brus says, if the flu therapy is marketed.
 
Long-term, the collaboration will also focus on new discovery programs leading to the development of monoclonal antibodies and/or vaccines directed against up to three other infectious and non-infectious disease targets. In addition, the companies have agreed to development milestones and royalty payments based on the successful development and commercialization of products in connection with the collaboration.   Both collaborations will leverage the vaccine/antibody know-how and technology platforms of Crucell and the broad scientific and development expertise of Ortho-McNeil-Janssen Pharmaceuticals and its affiliates, services that are very complementary, says Paul Stoffels, J&J's global head of pharmaceutical research and development.  
 
"Crucell offers the promising universal monoclonal antibody against flu, the technology for making the booster shots that are required in many vaccination programs, and an engineered cell line that can generate antibodies at very high yields and provides a potential alternative to the traditional egg-based vaccine production method," he says. "It is designed to enable rapid scale-up vaccine production in times of emergency, to reduce issues arising from impurities in eggs and to eliminate the risk of allergic reactions to egg albumin in patients receiving the vaccinations."  
 
Stoffels also notes that the future of the drug industry will rely heavily on building networks where companies come together with a number of different groups, and come up with solutions to solve different medical needs.
 
"We believe this kind of innovation will fuel the intellectual entrepreneurship and novel collaborations across institutions and geographies needed to develop solutions to some of the world's most critical healthcare challenges and to directly address patient needs in both developed and emerging economies," he says. "Johnson & Johnson's strategy has traditionally relied on L&A—it has been and will always remain a key part of our strategy. We are building upon this strategy to broaden our collaborations with other companies, top universities and research institutions as part of our commitment to bringing together the best minds, from both within and outside of the organization, to develop the most innovative therapies for patients in need worldwide. Collaborations such as with Crucell leverage the expertise that exists between the two institutions involved."
 
Crucell CEO Ronald Brus says the deal gives his company "an injection of capital to invest in the business." 
 
"We believe that Crucell's culture of innovation, entrepreneurial spirit and independence will be preserved through this collaboration," he says.  
 
Influenza causes significant morbidity and mortality worldwide. In 2008 alone, some 14 million people in the industrialized world were diagnosed with influenza, with millions more being diagnosed in developing regions. Annual flu epidemics are thought to result in 3 to 5 million cases of severe illness and result in more than 350,000 deaths every year around the world.
 
Stoffels pointed out that despite significant advances in prevention and treatment, influenza remains a major health threat, and each year, vaccines must be formulated to address the current influenza strain.  
 
"A universal antibody or vaccine that protects against a broad range of strains would be an important advance in helping doctors and nurses manage the annual influenza season and control acute epidemic and pandemic outbreaks," he said.  
 
Brus says the company's innovative technologies for the discovery, development and manufacture of antibody products and vaccines provide avenues to develop much-needed medical solutions for global health threats.  
 
"We are delighted that this collaboration with J&J will strengthen and facilitate our efforts to bring innovation to global health," he notes. "It provides an avenue to accelerate Crucell's existing flu-mAb program, which has already demonstrated the potential to deliver an antibody product for the prevention and treatment of any type of influenza strain."  
 
While J&J may be one of the top biotech companies, it's new to the vaccine game. But this summer, it made a similar move by taking a stake, also 18 percent, in Irish biotech company Elan Corp. in a collaboration to develop both treatments and a vaccine for Alzheimer's disease—another key market for the pharmaceutical industry. J&J will invest up to nearly $1.4 billion in that deal.  
 
Analyst Steve Brozak of WBB Securities says J&J is likely to enter similar partnerships and make smaller acquisitions instead of mega-deals akin to the pending acquisitions of Wyeth by Pfizer Inc. and Schering-Plough Corp. by Merck & Co. Earlier this year, Wyeth tried to buy Crucell for $1.35 billion, but opted for the Pfizer deal instead.
 
"This is absolutely the right thing to do" for J&J, Brozak says. "This is a sign of things to come."
 
"The collaboration with J&J is a good deal for Crucell," agrees Ilja Zaanen, an analyst at SNS Securities who rates Crucell at "hold." She adds that Crucell wouldn't have been able to support the expensive late clinical trials for the antibody influenza vaccine on its own.  
 
In August, Crucell received a contract for up to $69.1 million in funding from the National Institutes of Health for the development antibodies to treat of seasonal and pandemic influenza.  
 
However, the deal isn't necessarily a portend to J&J's eventual purchase of Crucell, Brus cautions.  
 
"Based on the way we have operated in the past and the way we will operate in the future, we at Crucell believe we will be able to create significant shareholder value, and the deal enables us to accelerate that," Brus says. "At this moment in time, we are happy we are independent."
 
Code: E110903

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