Pharma-deal flurry ignites stocks

In one of several deals that energized markets yesterday, Abbott Laboratories said it would pay $6.6 billion for the pharmaceutical business of Belgian chemicals maker Solvay.

The deal is the latest in a string of drug mergers and acquisitions, and one of three announcements yesterday that involved the fast-growing vaccines business.

Also yesterday, Johnson & Johnson Inc. bought an 18 percent stake in the Dutch biotechnology company Crucell NV, which is trying to develop a universal flu vaccine, while competitor Merck & Co. Inc. acquired the rights to sell Australia-based CSL Ltd.'s Afluria flu vaccine in the United States.

By purchasing Brussels-based Solvay, Abbott gains access to emerging markets in Eastern Europe and Asia along with new therapeutic areas, including hormone therapies and vaccines.

Solvay's flu vaccine Influvac gives Abbott an entrant in the burgeoning vaccines market, which is dominated by European pharmaceutical giants such as GlaxoSmithKline and Novartis.

North Chicago, Ill.-based Abbott already holds U.S. marketing rights for Solvay's Trilipix and TriCor, drugs that raise "good" HDL cholesterol while reducing triglycerides and "bad" LDL cholesterol.

Cash-rich pharmaceutical companies are racing to acquire new products amid looming patent expirations. Earlier this year Swiss drugmaker Roche acquired biotech pioneer Genentech after similar deals uniting Pfizer Inc. and Wyeth, and Merck with Schering-Plough.

Analysts said Abbott's purchase was designed to diversify Abbott's revenue stream, more than 35 percent of which relies on the blockbuster drug Humira for rheumatoid arthritis, which will lose patent protection in 2016.

Wall Street appeared to back the deal, sending Abbott shares up $1.25, or 2.6 percent, to close at $48.58.

But Credit Suisse analyst Catherine Arnold had doubts about how much new revenue the deal would generate, considering the patent on Tricor expires in two years.

Morgan Stanley's David Lewis said the deal offered "marginal diversification" but would give Abbott greater access to markets in Europe and elsewhere. More than 25 percent of Solvay's $3 billion in revenue last year came from emerging markets, including Russia, India, and Brazil.

Miles D. White, chairman and chief executive of Abbott, said the deal could add up to $3 billion in additional annual sales, while giving the company more diverse portfolios in cardiology and neuroscience treatment areas.

In the last year, Abbott has bought contact-lens maker Advanced Medical Optics, India-based Wockhart's nutritional business, eye-care company Visiogen, and Evalve, a maker of heart-repair equipment.

Credit-rating service Moody's downgraded the company's outlook to "negative" from "stable" yesterday, saying the string of acquisitions "could reduce Abbott's financial flexibility."

New Brunswick, N.J.-based Johnson & Johnson bought its Crucell stake for $440 million in hopes of developing a universal flu vaccine, the companies said yesterday.

In a statement, the companies said their immediate focus would be on developing a flu treatment in the form of "monoclonal antibodies" - which bind to a target protein, alerting the body's own immune system to attack it.

The Leiden, Netherlands-based Crucell was awarded grants worth up to $69 million by the U.S. government in August to develop monoclonal antibodies for influenza. The company says the antibodies can fight any influenza, including swine flu and bird flu, including strains resistant to Tamiflu - the medicine most often used to slow their progression.

Under Merck's deal with CSL, Merck will handle commercialization of CSL's Afluria vaccine in the United States for six years starting in 2010. The companies did not disclose financial terms.

CSL employs more than 1,000 people in King of Prussia and has partnered with Merck on vaccines for nearly 30 years. A CSL spokeswoman said the deal won't affect employment levels here. CSL will manufacture the vaccine and retains the rights to market it outside the United States.