Taking a stake

Johnson & Johnson invests $444 million in Crucell to develop therapies for influenza and other diseases

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NEW BRUNSWICK, N.J.—Johnson & Johnson is venturing intothe ever-growing vaccine business and increasing its focus on preventivemedicine by taking an 18 percent stake in Dutch biotechnology company CrucellNV.
Under the deal the companies announced in late September,J&J is spending $440 million for new shares of Crucell in a deal aimed atdeveloping monoclonal antibodies and vaccines for the treatment and preventionof influenza and other infectious and non-infectious diseases.
Initially, J&J subsidiary Ortho-McNeil-JanssenPharmaceuticals Inc. and Crucell will focus on the development andcommercialization of a universal monoclonal antibody product (flu-mAb) for thetreatment and prevention of influenza. Crucell and Ortho-McNeil-JanssenPharmaceuticals or its affiliates will share responsibilities to develop auniversal flu-mAb product targeting all influenza A strains, including H1N1strains (which cause seasonal flu and the current pandemic) and the H5N1 oravian strain ("bird flu"). Crucell will be responsible for research anddevelopment through Phase IIa of the influenza antibodies it has alreadydiscovered, as well as newly discovered influenza antibodies that emerge fromthe collaboration. Ortho-McNeil-Janssen Pharmaceuticals or its affiliates willbe responsible for late-stage development of the flu-mAb product from Phase IIbonward.
Crucell will retain the right to market products thecompanies develop jointly in Europe, while J&J will market them in the restof the world. Crucell will receive additional royalties and payments fromJ&J "worth hundreds of millions," Brus says, if the flu therapy ismarketed.
Long-term, the collaboration will also focus on newdiscovery programs leading to the development of monoclonal antibodies and/orvaccines directed against up to three other infectious and non-infectiousdisease targets. In addition, the companies have agreed to developmentmilestones and royalty payments based on the successful development andcommercialization of products in connection with the collaboration.
Both collaborations will leverage the vaccine/antibodyknow-how and technology platforms of Crucell and the broad scientific anddevelopment expertise of Ortho-McNeil-Janssen Pharmaceuticals and itsaffiliates, services that are very complementary, says Paul Stoffels, J&J'sglobal head of pharmaceutical research and development.
"Crucell offers the promising universal monoclonal antibodyagainst flu, the technology for making the booster shots that are required inmany vaccination programs, and an engineered cell line that can generateantibodies at very high yields and provides a potential alternative to thetraditional egg-based vaccine production method," he says. "It is designed toenable rapid scale-up vaccine production in times of emergency, to reduceissues arising from impurities in eggs and to eliminate the risk of allergicreactions to egg albumin in patients receiving the vaccinations."
Stoffels also notes that the future of the drug industrywill rely heavily on building networks where companies come together with anumber of different groups, and come up with solutions to solve differentmedical needs.
"We believe this kind of innovation will fuel theintellectual entrepreneurship and novel collaborations across institutions andgeographies needed to develop solutions to some of the world's most criticalhealthcare challenges and to directly address patient needs in both developedand emerging economies," he says. "Johnson & Johnson's strategy hastraditionally relied on L&A—it has been and will always remain a key partof our strategy. We are building upon this strategy to broaden ourcollaborations with other companies, top universities and research institutionsas part of our commitment to bringing together the best minds, from both withinand outside of the organization, to develop the most innovative therapies forpatients in need worldwide. Collaborations such as with Crucell leverage theexpertise that exists between the two institutions involved."
Crucell CEO Ronald Brus says the deal gives his company "aninjection of capital to invest in the business." 
"We believe that Crucell's culture of innovation,entrepreneurial spirit and independence will be preserved through thiscollaboration," he says.
Influenza causes significant morbidity and mortalityworldwide. In 2008 alone, some 14 million people in the industrialized worldwere diagnosed with influenza, with millions more being diagnosed in developingregions. Annual flu epidemics are thought to result in 3 to 5 million cases ofsevere illness and result in more than 350,000 deaths every year around theworld.
Stoffels pointed out that despite significant advances inprevention and treatment, influenza remains a major health threat, and eachyear, vaccines must be formulated to address the current influenza strain.
"A universal antibody or vaccine that protects against abroad range of strains would be an important advance in helping doctors andnurses manage the annual influenza season and control acute epidemic and pandemicoutbreaks," he said.
Brus says the company's innovative technologies for thediscovery, development and manufacture of antibody products and vaccinesprovide avenues to develop much-needed medical solutions for global healththreats.
"We are delighted that this collaboration with J&J willstrengthen and facilitate our efforts to bring innovation to global health," henotes. "It provides an avenue to accelerate Crucell's existing flu-mAb program,which has already demonstrated the potential to deliver an antibody product forthe prevention and treatment of any type of influenza strain."
While J&J may be one of the top biotech companies, it'snew to the vaccine game. But this summer, it made a similar move by taking astake, also 18 percent, in Irish biotech company Elan Corp. in a collaborationto develop both treatments and a vaccine for Alzheimer's disease—another keymarket for the pharmaceutical industry. J&J will invest up to nearly $1.4billion in that deal.
Analyst Steve Brozak of WBB Securities says J&J islikely to enter similar partnerships and make smaller acquisitions instead ofmega-deals akin to the pending acquisitions of Wyeth by Pfizer Inc. andSchering-Plough Corp. by Merck & Co. Earlier this year, Wyeth tried to buyCrucell 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 lateclinical trials for the antibody influenza vaccine on its own.
In August, Crucell received a contract for up to $69.1million in funding from the National Institutes of Health for the developmentantibodies to treat of seasonal and pandemic influenza.
However, the deal isn't necessarily a portend to J&J'seventual purchase of Crucell, Brus cautions.
"Based on the way we have operated in the past and the waywe will operate in the future, we at Crucell believe we will be able to createsignificant shareholder value, and the deal enables us to accelerate that,"Brus says. "At this moment in time, we are happy we are independent."

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