Vivalis to buy Intercell in European biotech merger

LONDON/PARIS (Reuters) - France’s Vivalis and Austrian vaccine specialist Intercell are linking up in a rare cross-border deal that shows the need for Europe’s fledgling biotech companies to grow in scale and produce a stronger pipeline to better compete in the quest for lucrative partnership deals.

Vivalis is set to buy Intercell in a deal valuing the Austrian vaccine maker at around 133 million euros ($174 million), and creating an enlarged anti-infectives specialist in the fragmented European biotech industry.

“Today it’s necessary to have critical mass in biotech,” Vivalis Chief Executive Franck Grimaud told Reuters. “Together, we will have all the know-how from drug discovery to product commercialization.”

Both companies are loss-making and the tie-up, billed as a merger of equals, will allow for cost savings of 5 million to 6 million euros a year, the companies said late on Sunday.

The combined group - to be known as Valneva, with listings in Paris and Vienna - also plans to raise 40 million euros via a rights issue to strengthen its balance sheet.

Former Vivalis shareholders will hold approximately 55 percent of the combined entity and Intercell investors 45 percent, immediately after the deal completes.

The combined company will be headquartered in Lyon, France, an establish centre for vaccines and infectious diseases research.

A number of corporate functions will remain at Intercell’s former base in Vienna and Vivalis’ offices in Nantes, north-western France.


The decision to merge with Vivalis follows a difficult period for Intercell, which has a vaccine for Japanese encephalitis on the market but has been struggling to get back on track after a string of product setbacks.

For Vivalis, the acquisition offers an opportunity to accelerate its drive to establish a profitable business based on finished products.

Vivalis and Intercell first held talks over a possible combination a year ago, Franck Grimaud said.

Nomura Code analyst Gary Waanders said the two companies will benefit from merging their research and manufacturing activities as well as combined revenues from vaccines and technology licenses.

“We believe the combination of these companies, each experts in their fields, represents an excellent strategic fit which takes advantage of complementary skills and assets and provides a more resilient base for future growth than either company had alone,” Waanders said.

Intercell shares were trading 18 percent higher at 2.06 euros at 1257 GMT in Vienna, while Vivalis was over 7 percent lower at 6.83 euros on the Paris stock exchange.

A Paris-based trader attributed the Vivalis slump to a risk of dilution from the capital hike, which at 40 million is substantial for a group that will have a combined market capitalization of around 270 million.

“It’s also an interesting opportunity to get out of the stock for investors that bought it when it was worth 5 euros,” the trader added.

The French company’s primary expertise is in using technology based on stem cells from embryonic ducks. It licenses its EB66 cell line to pharmaceutical companies for the production of vaccines and drugs, including antibody-based treatments.

Thomas Lingelbach, the current chief executive of Intercell said the merger would bring together Vivalis’ technological know-how with Intercell’s product development and manufacturing experience.

Lingelbach will become CEO of Valneva, while Grimaud will become its chief business officer.

Under the terms of the deal, Intercell shareholders will receive 13 Vivalis new ordinary shares for 40 Intercell shares, representing a premium of 38.5 percent to the Austrian company’s closing share price on December 14, when the company was valued at 96 million euros, or 31.7 percent above the three-month average.

Intercell shareholders will also get 13 new preferred shares for 40 Intercell, with each preferred share to be converted into 0.481 new Valneva ordinary share in the event of successful approval of Intercell’s experimental Pseudomonas vaccine.

Societe Generale is advising Vivalis and Goldman Sachs International is working for Intercell on the deal, which is expected to be completed in May 2013.

Reporting by Ben Hirschler and Elena Berton, editing by G Crosse