US healthcare companies Abbott Laboratories and Johnson & Johnson announced deals worth almost 5 billion euros ($7.3 billion) with European rivals on Monday, aimed at securing vaccines and other products key to future growth. Johnson & Johnson, the world's largest health company by market value, and smaller rival Abbott are already the most diversified of the large US and European players.
-- Abbott to buy Solvay unit for $7bn
-- Johnson & Johnson takes 18 pct stake in Crucell
-- Glaxo signs Brazil vaccine deal
But continue to buy up companies and products - often at distressed prices - as part of the industry's resurgent mergers and acquisitions activity. Abbott said it would buy the drugs unit of Belgium's Solvay in a 4.5 billion euro ($6.6 billion) deal, giving it full control of its development partner's cholesterol treatments and exposure to emerging markets. Abbott shares rose 4.6 percent to $49.52, helped by company optimism that the Solvay deal could bolster profits over the next two years beyond its own forecast.
"This is a great use for the assets and a heck of a good return," Abbott Chief Executive Miles White said on a conference call with analysts. White said Abbott has a comfortable amount of debt and was not "financially constrained at all" in pursuing other deals to bring more medicines into its research pipeline. Solvay shares fell 1.1 percent to 73.89 euros.
Abbott had faced competition for Solvay from private equity-owned Swiss drugmaker Nycomed, which made a firm offer for the unit, and Takeda and UCB, which had also expressed some interest, people familiar with the matter said. Johnson & Johnson bought an 18 percent stake in Dutch biotech company Crucell for 302 million euros ($444 million) as part of a flu vaccine development deal, Crucell said. Take-over talks between Crucell and US drugmaker Wyeth broke off in January after Pfizer moved in to buy Wyeth.
Vaccine-makers have been hot M&A targets recently, particularly for large drugmakers eager to secure new products as exclusivity on existing best-selling products nears an end. On Monday, GlaxoSmithKline PLC said it sealed a 1.5 billion euro ($2.2 billion) deal with Brazil to guarantee sales of its pneumococcal vaccine for 10 years. Abbott's deal includes Solvay's vaccines business, whose Dutch cell-based flu vaccine production facility, which can produce both seasonal and pandemic influenza vaccines, was validated earlier this month.
Abbott said it would finance its deal with cash and expected it to add 10 cents to ongoing earnings per share in 2010, doubling to more than 20 cents by 2012 and increasing thereafter, all before one-off transaction items expected in 2010-2012. Abbott had been reviewing a potential Solvay deal for months and had little initial interest, but reversed course over the summer after getting a better understanding of Solvay's drugs and their sales potential, White said.
"We did more homework and made the increased effort," said White, Abbott's long-time chief who has spearheaded four other significant deals this year. The Solvay transaction should help Abbott continue to deliver double-digit percentage earnings growth in coming years, he said.
Johnson & Johnson's transaction will have an estimated dilutive impact of 2 cents to 4 cents on its 2009 adjusted earnings per share. Crucell issued 14.6 million new Crucell shares to Johnson & Johnson, which paid about a 30 percent premium based on the average price of Crucell shares in the past 35 days - or about 20.63 euros per share.
Crucell said the collaboration will focus on developing "flu-mAb," a universal product targeting all influenza A strains. That includes H1N1 strains that cause seasonal flu and the current pandemic flu, along with the H5N1, or avian, strain.
"A universal antibody or vaccine that protects against a broad range of strains would be an important advance in helping ... control acute epidemic and pandemic outbreaks," said Paul Stoffels, global head of pharmaceuticals R&D at Johnson & Johnson. Analyst Ilja Zaanen at SNS Securities said: "This collaboration is a good deal for Crucell. Although the (vaccine) is still in a very early stage, Crucell would not have been able to support the expensive late clinical trials on its own." Crucell's shares were down 3.9 percent at 15.33 euros. J&J shares rose 1 percent to $61.24 on the New York Stock Exchange.