ID Biomedical Corp. is buying the vaccines unit of Andover, UK-based Shire Pharmaceuticals Group plc for $120 million, in an arrangement that includes a loan facility of $100 million from Shire - repayable from future sales - to help get the work under way.
Shares of IDB (TSE:IDB) closed Tuesday at C$15 (US$11.05), up C85 cents.
The deal gives Shire a way out of the vaccines line of work, which the company said it was seeking last July, and gives IDB a strong vaccine edge, especially in the area of influenza. Most importantly, IDB gets a source of antigen batches for its Phase III intranasal flu vaccine, FluINsure.
"We justified the acquisition price almost exclusively on the value of having our own antigen supply," said Anthony Holler, CEO of Vancouver, British Columbia-based IDB in a conference call. Taking over the Shire unit ensures IDB is "not at the mercy of the large multinational flu vaccine manufacturers, who could supply us with antigen, but required exclusive marketing and distribution rights," he added.
Todd Patrick, president of IDB, said the company is paying $30 million in cash at closing (expected at the end of June), and granting subscription receipts - exchangeable into about 5.4 million shares of IDB stock - for about $60 million more in value. On the anniversary of the closing, a second payment of $30 million in cash will be made. The exercise period for the subscription receipts is 18 months, starting the 120th day after closing.
Both parties have certain mandatory repurchase rights, but exercising those "is under the direct control of IDB," Patrick said.
The vaccines business, called Shire Biologics, employs 400 people and has a portfolio that includes two marketed products: Fluviral for influenza and NeisVac-C for meningitis C in Canada, as well as a pipeline of product candidates in streptococcus pneumonia, neisseria meningititidis, Group B streptococcus and Group A streptococcus. Revenues totaled $21.9 million in 2003, with a net operating loss of $21.9 million.
Fluviral has a "clear path to licensure in the U.S. and other international markets," Holler said.
Among the tangible assets, valued at about $111 million, IDB is getting from Shire a 120,000-square-foot vaccine manufacturing and fill-finish facility, which is being expanded to 200,000 square feet, Patrick said, which "should allow for production capacity to eventually reach 40 [million] to 50 million does of flu vaccine per year." The expansion is expected to be finished in 2006.
Globally, the flu market is big and growing fast. In the U.S., that market is estimated at $1.3 billion and is expected to hit $2 billion by 2010. In the U.S., there are only two suppliers of injectable flu products now.
IDB, which employs about 150 people, has a pipeline that includes the lead products FluINsure and the StreptAvax Group A streptococcus vaccine. FluINsure is a nonliving, subunit vaccine consisting of proteosomes formulated with influenza antigen preparations, delivered as a nasal spray. StreptAvax, in Phase II trials, targets infections such as strep throat, impetigo, toxic-shock syndrome and flesh-eating bacteria.
Shire said its profit on disposal of net vaccine assets is expected to be about $25 million. For accounting purposes, $70 million of the loan facility will be taken as an up-front cost, since repayment based on future sales provides no certainty of recovery, and the result for Shire is an expected net loss of around $45 million.