The fate of a $1 billion Novartis vaccine facility in Holly Springs came into focus Monday after Australian pharmaceutical company CSL Limited announced it will buy the advanced lab as part of a $275 million acquisition of Novartis’ influenza business.
CSL, which employs more than 13,000 people worldwide, said that combining Novartis’ money-losing flu vaccine business with its own bioCSL vaccine-pharmaceutical line will create “the No. 2 global player” in the $4 billion global influenza vaccine industry.
The vaccine manufacturing plant in Holly Springs, about 20 miles southwest of Raleigh, employs 550 people and received federal approval this summer to produce seasonal flu vaccine. The 5-year-old facility was assiduously courted by officials here and qualified for more than $40 million in state and federal economic development incentives.
“Holly Springs is a first-class facility and an important part of the manufacturing network,” CSL spokeswoman Natalie de Vane said. “While we see synergies in the businesses, we don’t see any major headcount reductions.”
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Novartis could disclose additional details about the deal on Tuesday when the Swiss drugmaker issues its third-quarter earnings.
Holly Springs Mayor Dick Sears characterized the corporate transaction between global pharmaceutical companies as a name change in the office window as far as the town was concerned.
“There’s a degree of uncertainty and that’s typical whenever a company is bought and sold,” Sears said. “But will they move their plant? I don’t think there’s a chance of 1 in 5,000 that would happen.”
The Novartis lab is one of three federally designated Centers for Innovation in Advanced Development and Manufacturing; it was short-listed last week by the U.S. government as a potential candidate to produce anti-Ebola drugs, but Novartis hasn’t announced whether it would participate in the program, which would ultimately be handed off to CSL with the sale.
Damien Conover, a health care analyst with Morningstar, said Novartis lacked the critical mass in the vaccines industry to generate higher performance margins that would be needed for the unit to thrive.
The Novartis sale was long expected and continues a reshuffling of North Carolina’s drug-development landscape as major players divest and swap business units. Novartis, which employes 135,000 globally, announced in April that it planned to refocus its business and sell the vaccines unit and other under-performing assets.
The Novartis flu vaccine business lost $200 million in 2013, but CSL executives said they expect to start turning a profit within several years when combined with their own operations.
Novartis disclosed that CSL’s purchase price of $275 million is below the book value of the business unit and would trigger an “exceptional impairment charge” of about $1.1 billion to Novartis.
“This opportunity doesn’t come along very often,” CSL CEO Paul Perreault said in a conference call. “They have invested a lot of money in that business.”
CSL’s expanded manufacturing capacity in the United States, United Kingdom, Germany and Australia is expected to generate nearly a quarter of global vaccine revenues, approaching $1 billion annually, within five years.
As part of the corporate reorganization announced in April, Novartis is also selling its animal health division, which has its U.S. headquarters in Greensboro, to Eli Lilly for $5.4 billion. GlaxoSmithKline is buying Novartis’s non-flu vaccine business for up to $7.1 billion, and Novartis is buying GSK's oncology business for up to $16 billion.
The Holly Springs plant spans 475,000 square feet, and about half its cost was covered by the federal Biomedical Advanced Research and Development Authority, or BARDA. It received approval from the U.S. Food and Drug Administration in June to make commercial supplies of Flucelvax, a flu vaccine made from cell cultures instead of chicken eggs. The plant also produces pandemic influenza vaccines for the national stockpile.
The 185-acre Holly Springs site has six buildings linked by a central corridor, including bulk production, viral pilot plant, quality control testing and office space.
This is not the first foray CSL has made into North Carolina’s pharmaceutical sector. In 2010 the Australian company made a $3.1 billion bid for Talecris in Research Triangle Park, but the acquisition faltered after U.S. regulators raised antitrust concerns.