Johnson & Johnson sets its sights on full ownership of Crucell

Companies report they are in “advanced negotiations” for an all-cash public offer of about $2.3 billion

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NEW BRUNSWICK, N.J., and LEIDEN, the Netherlands—Johnson & Johnson and Crucell N.V. announced Sept. 17 that they are in advanced negotiations for a potential public offer by Johnson & Johnson or an affiliate for all outstanding ordinary shares of Crucell for $32.30 per share, or a total of about $2.3 billion.

Through an affiliate, J&J already holds approximately 17.9 percent of the outstanding shares of Crucell. It is unclear yet whether, in buying the remaining shares, it will be J&J itself doing the purchasing or one or more affiliates. J&J has submitted a statement on Schedule 13D to the U.S. Securities and Exchange Commission in connection with its change in investment intent with respect to Crucell. Should everything go as planned, it would be an all-cash transaction.

In accordance with customary Dutch practice, and to adequately protect the interest of any minority shareholders, Johnson & Johnson expects to retain two independent supervisory directors after closing for such time as is necessary for J&J to acquire all of the outstanding equity of Crucell.

The companies report that this transaction "would enable Crucell to benefit from Johnson & Johnson's expertise and experience in the development and commercialization of pharmaceutical products," and they expect that Crucell's strength in the manufacture, discovery and commercialization of vaccines would create a strong platform for Johnson & Johnson in the vaccine market.

Current plans call for J&J to maintain Crucell's existing facilities, to retain Crucell's senior management and to more or less maintain current employment levels. Johnson & Johnson also intends to keep Crucell as the center for vaccines within the Johnson & Johnson pharmaceutical group, and to maintain Crucell's headquarters in Leiden.
Both companies says that Crucell, as Johnson & Johnson's vaccine center, would likely "retain its entrepreneurial culture that has fostered innovation and growth."

"So, one more big Pharma enters the vaccines space—following the example of Pfizer (through the acquisition of Wyeth) and AZ (through the acquisition of MedImmune)," notes Giles Somers, a senior healthcare analyst at Datamonitor. "Strategically, J&J has already made a number of acquisitions in infectious diseases, so the fit is very good."

With looming "patent cliffs" and increasing pressure from generics, Somers says, "vaccines are increasingly regarded as a key revenue generator for Big Pharma, as they are generics-proof," adding that Datamonitor estimates that the vaccines market approximately tripled over the past five years.
"However, since the sector is a very oligopolistic industry that follows rules very different to those for other pharmaceuticals, expertise will be key for these new players in order to compete with the established vaccine companies like GSK, Sanofi Pasteur or Merck; hence the value of this deal to J&J," Somers says.

"Johnson & Johnson is a large pharmaceutical company that doesn't have a vaccine branch and vaccines are our claim to fame, so for us, its a very encouraging start for us to start spreading our wings," says Ronald Brus, Crucell's CEO, who would continue to run the company if it does indeed become J&J's vaccine division.
(There are even more developments, and some who might be resistant to the deal. Read up on that, and comment if you like, at our blog, by clicking here.)

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