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Zurich: Novartis plans to buy its research partner, Swiss biotech company Speedel, for about $880 million to speed up development of potential blockbuster blood-pressure drug Tekturna, it said yesterday.
Speedel shares surged more than 90 per cent to the offer price after the latest in a string of big pharma acquisitions of promising start-up drug development companies.
Cash-rich major drugmakers have been queuing up to invest in medicines to fill their thinning pipelines - and the biotech sector has been hit by the global downturn in equity markets, fuelling takeover speculation.
Shares in Novartis, which is keen to shore up its franchise in treating high blood pressure as its top-selling Diovan faces generic competition when it loses exclusivity in 2012, fell slightly as markets viewed the buy as expensive.
Strategic deal
"The deal makes some sense in terms of strategy, pipeline and products," a Zurich-based trader said. "On the negative side is the high purchase price of close to 1 billion Swiss francs."
The 94 per cent premium to Speedel's closing price on Wednesday compares with an average of 63 per cent in recent biotech buys, according to Credit Suisse data.
In a first step, Novartis raised its stake in Speedel by 51.7 per cent to 61.4 per cent by buying shares from major shareholders, including 21.5 per cent from Speedel Chief Executive Alice Huxley, for 130 Swiss francs per share in cash.
Novartis said it would offer the same price in cash to shareholders for the remaining stake and it expected the full acquisition to cost about 907 million Swiss francs ($882.3 million).
The Speedel deal marks the latest example in a string of biotech takeovers such as Merck KGaA's buy of Serono and AstraZeneca Plc's MedImmune acquisition, and highlights the difficulties in developing new medicines.
Drug companies' increased spending on research is yielding fewer new compounds due to a combination of poor productivity, a tighter regulatory environment and rising patent risks, which allows more competition from cheaper copies known as generics.
Tekturna, known as Rasilez in Europe, is the first Speedel drug to reach the market and was co-developed with Novartis.
Speedel's shares were trading just below the bid price at 128.50 francs by 0921 GMT, up 91.5 per cent on the day and more than wiping out losses of 48 per cent in the year to date before yesterday.
Novartis shares fell 0.8 per cent to 59.90 francs.
"The price Novartis is paying for Speedel essentially reflects the value of Tekturna," said Vontobel analyst Andrew Weiss.
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