The Australian biopharmaceutical company CSL Ltd. today announced plans to buy Novartis's flu vaccine business for $275 million in a deal that includes the latter company's costly new cell-based vaccine plant in North Carolina.
CSL said the purchase, expected to be completed in late 2015, will make it the second leading player in the $4 billion global flu vaccine market, with facilities in the United States, United Kingdom, Germany, and Australia.
The purchase includes Novartis's cell-based manufacturing facility in Holly Springs, N.C., the first of its kind for flu vaccine in the United States. Its cost was paid in part by $487 million from the US Department of Health and Human Services (HHS) as part of pandemic preparedness efforts.
Designed for pandemic production
The facility was designed to produce up to 150 million doses of vaccine within 6 months of the declaration of a flu pandemic, or 50 million doses of trivalent seasonal flu vaccine annually. Cell-culture technology is seen as a somewhat faster and more flexible way to produce flu vaccines than the traditional egg-based method, because the cells can be banked and there is no need for an egg supply.
Novartis's cell-based flu vaccine, Flucelvax, was first approved for use in the United States in 2012. The Holly Springs plant was approved by the Food and Drug Administration in June, and Novartis spokeswoman Elizabeth Power said it has been making Flucelvax for this year's flu season, but she couldn't specify how many doses. (Flucelvax is also made at a Novartis plant in Marburg, Germany.)
Novartis said in July that it planned to make a total of 30 million doses of two vaccines, Flucelvax and Fluvirin, for the US market this flu season. CSL estimated that it would produce 16.5 million doses of its Afluria vaccine for US distribution this year.
News of the intended transaction follows Novartis's announcement in April that it would sell its non-flu vaccine operations to GSK in exchange for GSK's cancer products. The Novartis moves have been described as part of an effort to focus on the company's best assets. The two companies also announced at that time that they would merge their consumer health products divisions.
CSL said Novartis has one of the world's largest flu vaccines businesses, with net sales of $527 million in 2013, along with "state-of-the-art manufacturing facilities and a diversified, late-stage product pipeline."
In Novartis's announcement of the sale plan yesterday, it said the book value of its flu vaccine assets exceeds the selling price. Under the International Financial Reporting Standards (IFRS), this fact "triggers the recognition of an exceptional impairment charge of approximately USD 1.1 billion," which is described as a "non-cash accounting impact."
When construction of the Holly Springs vaccine plant was completed in 2009, Novartis said it represented a total investment of close to $1 billion, including testing and validation costs. The company was one of five firms that were awarded large HHS contracts in 2006 to develop cell-culture technology for making flu vaccines for pandemic preparedness.
Besides making Flucelvax, said Power, the plant has made an H5N1 flu vaccine for HHS and has made small amounts of an H7N9 flu vaccine for clinical testing. The facility also makes Novartis's proprietary vaccine adjuvant, MF59, she noted.
She said the plant employs about 550 people, adding, "We expect the vast majority of them will be working for CSL once the transaction closes. That's not expected until the second half of 2015."
The CSL announcement noted that phase 3 clinical trials of two quadrivalent (four-strain) formulations of Flucelvax are under way. In addition, the vaccine, now approved only for adults, is being tested for children ages 4 through 17.
Oct 27 CSL press release
CSL investor presentation on the purchase plan
Oct 26 Novartis press release
Oct 27 Reuters story
Jun 16 CIDRAP News story
July 29 CIDRAP News story
Nov 24, 2009, CIDRAP News story