Novartis to Intercell: "Gimme All Your Vax."

Last week, Novartis forked over $364 million for an opt-in deal to co-develop current and future vaccines in the pipeline at Austrian biotech Intercell. No sooner had the ink dried on the new partnership than rumors were sparked that the Swiss drug giant had upped its share of Intercell stock to 16 percent and was planning a takeover bid. At press time, both companies were mum on the matter.

Analysts mostly shrugged off talk of a takeover, pointing out that licensing deals with biotechs are a cheaper, less risky approach for Big Pharma. "This has been a more successful model than buying the company whose development program you want," says Les Funtleyder, healthcare specialist at Miller Tabak. "Novartis clearly likes what it sees in the Intercell pipeline, but the 15 projects are all in early stages. And given the high attrition rate of vaccine compounds, Novartis doesn't want to jump the gun. It can always come back later with an acquisition offer."

The opt-in arrangement lets Novartis Vaccines and Diagnostics select the lookers from Intercell's pipeline. Once the biotech completes Phase II tests, Novartis will step in to do the heavy lifting, including running Phase III trials and commercialization. Intercell will retain the right to profit-share with Novartis or receive milestone payments and royalties for each of its compounds Novartis develops.

"This is the most comprehensive R&D agreement in the vaccines industry to date," said Eric Althoff, head of global communications at Novartis Vaccines and Diagnostics. "It will allow Novartis the opportunity to unlock the potential value that exists in Intercell's vaccine candidates, while allowing Intercell to continue fostering its entrepreneurial environment."

The deal is a two-way street, allowing each company to opt out of a particular licensing agreement. Intercell has separate development deals with Merck and other drug companies, says Funtleyder, while Novartis has dibs on projects all across the biotech industry.

The package includes some tasty rights to commercialize Intercell's novel IC31 adjuvant for influenza vaccines. "IC31 is a next-generation complementary to Novartis' MF59, which has the potential of enhancing the immunogenic response of various vaccine candidates," Althoff says.

Other prospects Novartis is eyeing are IC43, a Phase II candidate to prevent hospital-acquired pseudomonas and related infections, and IC47, a preclinical prevention for pneumonia and ear infections in the elderly and infants.

The Intercell deal is only the latest activity in what has been a busy season at Novartis' vaccine division. Two of its anti-influenza agents, Focetria and Optaflu, won FDA approval this year, while a green light for the pre-pandemic vaccine, Aflunov, is due before 2008. Althoff notes that the firm is also stocked up on vaccine supply for the fall flu season, with 40 million doses--30 percent more than last year.

And on Monday, Novartis said that it would pony up $500 million to license an experimental vaccine to help smokers kick the habit. The vax, developed by Swiss biotech Cytos, coaxes the body to produce antibodies that bind to nicotine and prevent its uptake in the brain.