GSK Vaccine Portfolio Gets A Shot In The Arm From ID Biomedical Buy

GlaxoSmithKline's proposed acquisition of ID Biomedical, announced Sept. 7, will bolster the drug maker's growing vaccine portfolio with the addition of Fluviral and several pipeline products.

GSK plans to acquire ID Biomedical for $1.4 bil. The CDN $35-per-share price represents a 13% premium over the closing price of the company's shares on Sept. 6 and a 30% premium over the 20-day average.

If approved, the deal would represent the largest pure-play vaccine transaction in history, according to ID Biomedical.

"The proposed acquisition of ID Biomedical is a unique strategic opportunity to increase current capacity of classic flu vaccines, to provide us with increased capacity for next-generation flu vaccines under development and to help GSK prepare for the threat of a flu pandemic," GlaxoSmithKline said.

The Vancouver company's portfolio includes an egg-based injectable influenza vaccine available in Canada and declared eligible for priority review by FDA. ID Biomedical plans to submit a BLA for Fluviral to the agency this year following the completion of clinical trials.

If approved, Fluviral would be GSK's second influenza vaccine. The company's Fluarix cleared FDA Aug. 31 as the first vaccine to receive an accelerated approval from the agency ("¹ (Also see "Fluarix Clears FDA; GSK Buys Vaccine Manufacturing Plant From Wyeth" - Pink Sheet, 5 Sep, 2005.) p. 4).

The vaccine was approved for use under an IND in December following last year's flu vaccine shortage (² (Also see "FDA Approves Use Of Fluarix Under An IND; GSK To Submit BLA In First Half ’05" - Pink Sheet, 13 Dec, 2004.), p. 26).

GSK has been building its vaccine manufacturing capability in anticipation of Fluarix and several additional vaccine approvals expected over the next few years. The firm acquired a vaccine manufacturing facility in Marietta, Penn. from Wyeth on Sept. 1.

The drug maker has said it is aiming to launch five new vaccines in the next five years, including an HPV vaccine targeting cervical cancer, a vaccine against rotavirus and an improved flu vaccine for the elderly.

Now with the addition of ID Biomedical, GSK could be gearing up for the launch of Fluviral in the U.S. in time for the 2006/2007 flu season.

ID Biomedical previously said it anticipated selling 38 mil. Fluviral doses annually in the U.S. beginning in 2007. The company is upgrading its Canadian manufacturing facilities to produce roughly 75 mil. doses of Fluviral a year beginning in 2007.

ID Biomedical has U.S. distribution agreements in place with Henry Schein, AmerisourceBergen and McKesson that could apply to the 2006 season if Fluviral were to be approved by FDA before April 1.

During a Sept. 7 conference call outlining the planned acquisition, ID Biomedical CEO Anthony Holler said the company is highly optimistic that it will meet the April 1 deadline.

"We've started regular communications with distributors to keep them informed as to where we are with the FDA," he said.

If the deadline approaches before Fluviral clears the agency, distributors will have to decide whether to purchase supplies based upon anticipated near-term approval of the vaccine or explore alternative supply arrangements, Holler added.

The merger will eliminate risk for ID Biomedical's shareholders should the Fluviral approval not come through in time for next year's flu season, the exec said. "In addition, we think over the longer term, companies such as GSK may bring new technologies to the flu vaccine industry that could change the market dynamics," he added.

"For example, by combining with GSK we will have access to not only significant capital but to adjuvants and other product improvements such as thimerosal-free formulations, new production technologies and an international and marketing distribution infrastructure that ID Biomedical would have difficulty matching as a stand-alone entity," Holler said.

In addition to Fluviral, ID Biomedical's portfolio includes several pipeline vaccine products, including FluINsure intranasal influenza vaccine, StreptAvax injectable group A Streptococcus vaccine and PGCvax , a Streptococcus pneumonia vaccine.

ID Biomedical would become a wholly-owned subsidiary of GSK. The acquisition is subject to approval by ID shareholders, as well as regulatory clearance. The transaction is expected to close by the end of 2005 or early 2006, the companies reported.

The proposed deal follows a recent consolidation trend in the vaccines market. Within the influenza category, global drug makers are looking to fill the ongoing supply gap.

"GSK has moved quickly over the past few months to meet the growing demand for flu vaccines worldwide and to transform GSK into one of the leading global influenza vaccine manufacturers," the company said.

Novartis also is seeking to position itself in the market. The company announced a bid Aug. 31 to acquire an outstanding 57.8% stake in Fluvirin manufacturer Chiron for $4.5 bil.

That offer was rejected by Chiron's independent directors Sept. 5 as being "inadequate."

The $40-per-share offer represents a roughly 10% premium over Chiron's Aug. 31 closing price of $36.44. Despite the dismissal, the directors noted, "We are pleased by the fact that Novartis continues to recognize Chiron's promising prospects."

Good manufacturing practice violations at Chiron resulted in the closing of its Fluvirin manufacturing facility last year and a flu vaccine shortage.

The company has since been working with FDA to address the issues at its Liverpool, U.K. manufacturing facility and expects to begin shipping Fluvirin in late September or early October, assuming it can surmount several remaining regulatory hurdles.

In June, the Centers for Disease Control & Prevention said it does not anticipate a flu vaccine shortage this season.

In early estimates, the agency predicted in a best-case scenario more than 63 mil. vaccine doses would be produced, with Sanofi Pasteur producing 50 mil. to 60 mil., Chiron producing 25 mil. to 30 mil., GSK delivering 10 mil. and MedImmune producing 3 mil. (³ (Also see "IND Flu Vaccines Not Recommended For Routine Use, CDC Says" - Pink Sheet, 13 Jun, 2005.), p. 26).

As of Sept. 7, FDA said it had released 39 flu vaccine lots, including 27 Fluzone lots from Sanofi Pasteur, seven Fluarix lots from GSK and five lots of the intranasal vaccine FluMist from MedImmune.