Biotechs Rise Again in Busy Deal-Making Week

Author(s):

J&J's bid for vaccine maker Crucell capped a busy week for life sciences deal-making. Chelsea Therapeutics shares soared on positive trial data on its experimental Parkinson's drug, but an FDA panel's rejection of Arena Pharmaceutical's weight-loss drug hammered its shares.

This article published with permission from The Burrill Report.

Johnson & Johnson (NYSE: NJN) and Crucell NV (NASDSAQ: CRXL) announced they were in advanced negotiations for the pharmaceutical giant to make a public offer all outstanding shares of the Dutch vaccine maker. The potential deal is valued at $2.3 billion (€1.75 billion), which represents a purchase price of €24.75 per share.

Crucell’s shares leapt 58 percent on the announcement, the highest its shares have traded in 10 years. The company is expected to urge shareholders to accept the offer. J&J acquired 17.9 percent of the company in a deal with the vaccine maker last year that brought the two companies together in an effort to develop a universal flu vaccine.

Analysts don’t expect any opposition to the deal, who see the offer as a sweet premium for the company. The deal values Crucell at about 57 times 2010 estimated earnings, compared with a median multiple of about 36 times profit in biotechnology deals in the past year, according to Bloomberg analysis. Early Monday, J&J shares were at $61.57, and Crucell’s American depositary shares were at $32.02.

J&J's potential acquisition of Crucell capped a busy week for life sciences deal-making and financing that started with the announcement that Genzyme Corp. (NASDAQ: GENZ) was selling its genetic-testing business to Laboratory Corp of America Holdings (NYSE: LH) for $925 million in cash. (Learn more about the deal here.)

The sale follows Genzyme's May announcement that it planned to seek strategic alternatives for three units as part of a five-year plan to increase shareholder value. Genzyme plans to use the proceeds from the sale of Genzyme Genetics to finance the second half of the company’s $2 billion stock buyback to be completed by May 2011. Genzyme’s management has rejected a bid by Sanofi-Aventis SA to acquire the company for approximately $17 billion as opportunistic and undervaluing the company’s resources. Sanofi’s bid for Genzyme has yet to go hostile.

One ongoing transaction that did reach the “hostile” stage was Ramius LLC, a hedge fund that holds a 10 percent stake in Cypress Bioscience Inc. (NASDAQ: CYPB), which decided to take a sweetened offer for Cypress directly to shareholders after management rejected a previous offer to buy the company. Shares of Cypress were up 9 percent as Ramius began a tender offer of $4.25 per share in cash, up from a prior offer of $4. The Cypress board is reviewing the current offer and has advised shareholders to take no action pending the review. The sweetened bid values Cypress at about $163 million. In early trading, Cypress shares were at $3.83.

Ramius had been disappointed with how the company was being run, and shares were at a five-year low when it made its first offer in late July. That offer was soundly rejected by Cypress, which busied itself by entering into two deals to shore up its central nervous system pipeline -- with Marina Biotech Inc. (NASDAQ: MRNA) and Alexza Pharmaceuticals Inc. (NASDAQ: ALXA). (Read more about the offer here.)

In other market moving news:

The biotechnology sector maintained its upward trend last week, though blue-chip biotech companies had mixed performances. Amgen Inc. (NASDAQ: AMGN) saw its shares rise 1.7 percent last week after it announced a planned two-part $1.5 billion debt sale. Amgen’s shares were at $55.20. And Gilead Sciences Inc.’s (NASDAQ: GILD) shares rose 0.5 percent after it posted positive news about its four-in-one HIV treatment, which met key goals in a mid-stage study. Its shares were at $34.78.

Chelsea Therapeutics International Ltd. (NASDAQ: CHTP) shares jumped nearly 50 percent in early trading Monday after it said patients treated with its experimental Parkinson’s drug Northera saw a significant improvement in symptoms associated with neurogenic orthostatic hypotension, a chronic drop in blood pressure upon standing. Its shares were at $7.50.

Alkermes Inc. (NASDAQ: ALKS) shares climbed 5 percent after a U.S. Food and Drug Administration panel recommended approval of addiction drug Vivitrol, to treat patients who abuse opoids. The final approval date is expected by Oct. 12. Its shares were at $14.84.

But Arena Pharmaceutical Inc.’s (NASDAQ: ARNA) shares plunged nearly 40 percent after an FDA advisory committee rejected its proposed weight-loss drug lorcaserin. The reviewers expressed concern that potential risks of long-term use outweighed its benefit of modest weight loss. Arena shares were at $1.97.