By Lisa Seachrist

Washington Editor

The largest biotechnology operation in Europe is getting larger. UK-based Celltech Chiroscience plc and Medeva plc have agreed to merge to create a company worth more than $2 billion.

The merger will create a biotechnology organization combining Slough-based Celltech Chiroscience's discovery and development portfolio with Speke-based Medeva's international marketing infrastructure. The merger has been approved by the boards of both companies and is expected to be completed in January.

Under the terms of the merger, Medeva shareholders will receive 34 new Celltech Chiroscience shares for every 100 Medeva shares, meaning Celltech Chiroscience would pay about $913 million in stock and would own about 56 percent of the combined company. Celltech Chiroscience shareholders will retain their shares.

The offer values each Medeva share at 165 pence, a 16 percent premium to the 142.5 pence closing price on Oct. 21, the day before Medeva announced it was in merger talks.

The market capitalization of the combined company would be about $2.1 billion.

The news of the deal boosted Medeva's stock (NYSE:MDV) slightly to close Thursday at $9.875 a share, down 6.25 cents. Celltech Chiroscience's stock (LSE:CCH) closed at 482.5 pence, down 2.5 pence.

Upon completion of the merger the companies will be called the Celltech Group.

The merger follows the June merger between monoclonal antibody specialist Celltech and chiral chemistry company Chiroscience Group. At that time, Celltech CEO Peter Fellner said the merged company would be seeking other firms with undervalued pipelines as potential take-over candidates. (See BioWorld Today, June 15, 1999, p. 1.)

The Celltech Group will have an extensive pipeline of potential products in addition to the approved drugs Chirocaine for anesthesia and pain, which will be launched in the U.S. in early 2000, and methylphenidate, which is approved in the U.S. for the treatment of attention deficit hyperactivity disorder (ADHD). The extended-release form of the drug will be available in December.

Pipeline products include a modified-release formulation of methylphenidate, which is currently in Phase III trials and is expected to be launched in the first half of 2001.

In addition to the ADHD drugs Medeva brings to the merger, the company also has Hepagene vaccine, a third-generation recombinant vaccine for protection against hepatitis B infection, under review in Europe. That product also is being developed as a treatment for hepatitis B infection and is in Phase III clinical trials. Medeva also brings to the merger ConXn (recombinant human relaxin), which is being developed in conjunction with Connetics Corp. for the treatment of scleroderma; and AAV-CF, which is a proprietary gene delivery system using adeno-associated virus to deliver the cystic fibrosis gene to the lungs of CF patients.

Celltech Chiroscience, for its part, brings to the merger CDP 571, a humanized antibody against tumor necrosis factor alpha (TNF-a) as a treatment for Crohn's disease. This drug has been given fast-track and orphan drug designations by the FDA. In addition the company is developing CDP 870, a modified TNF-a antibody fragment for the treatment of rheumatoid arthritis and CDP 860, an antibody fragment against platelet-derived growth factor (PDGF) designed to prevent coronary restenosis following angioplasty.

Celltech Chiroscience has submitted CMA 676 for review in the U.S. as a therapy for acute myeloid leukemia. CMA 676 is being developed with American Home Products Corp., of Madison, N.J.

Other products in development include: dermal lidocaine, being developed jointly with PowderJect Pharmaceuticals of Oxford, UK; SCH55700, which is in Phase II studies for the treatment of moderate to severe asthma in conjunction with Schering-Plough Corp., of Madison, N.J.; BMS275291 for cancer, which in Phase I studies and partnered with Bristol-Myers Squibb Co., of New York; D1927 for rheumatoid arthritis, which is in Phase I; and D4396, which will enter Phase I studies soon with partner Schering-Plough.

The merger will result in some management changes. John Jackson, chair of Celltech Chiroscience, will serve as chair of the Celltech Group. Medeva's chair, John Backer, will serve as deputy chair in conjunction with Celltech Chiroscience's deputy chair, Hugh Collum. Bill Bogie, currently CEO of Medeva, will become a non-executive director, and will act for two years as a consultant to the Celltech Group. Michael Young, chief scientific officer of Medeva, and Mark Hardy, corporate development and group legal director, will be resigning from the board. Young will continue to provide services to the Celltech Group until the expiration of his contract in September 2001 and Hardy will continue to provide services for at least 12 months.