By Randall Osborne
In a surprise move to create the largest biotechnology operation in Europe, with a market capitalization of more than $1 billion, U.K. firms Chiroscience Group plc and Celltech plc said they will join forces ¿ merging more than 400 scientists, with an annual research and development budget of more than $79 million.
The deal is expected to be completed by way of an all-share offer to be made by Celltech for the all-share capital of Chiroscience, trading 62 new Celltech shares for every 100 shares of Chiroscience. After the takeover, Celltech shareholders will own about 52 percent of the merged firm, and Chiroscience shareholders about 47 percent.
This values each Chiroscience share at 293 pence, and Chiroscience¿s issued share capital at about #331 million (US$527 million), based on Celltech¿s share price of #4.72. The combined market capitalization will be about $1.12 billion.
¿There will be great benefits, in terms of the portfolio, new opportunities arising from the joint [research and development], and financial strength,¿ said Peter Fellner, CEO of Slough-based Celltech, who will become CEO of the new company, to be called Celltech Chiroscience plc.
Celltech, the longest-established biotechnology company in the U.K., is focused on monoclonal antibodies. Chiroscience, of Cambridge, was founded as a chiral chemistry company, but since has developed broader drug-discovery capabilities, having acquired Seattle-based Darwin Molecular Inc. in 1996.
Fellner said the new company will be shopping for other firms with undervalued pipelines.
¿Clearly, creating a large company of this type does give us potential opportunities to make acquisitions,¿ he said, and enlarging the portfolio still more, rather than diversifying the technology, will be the main goal.
The two firms already enjoy synergy on many levels, Fellner said.
¿For example, Chiroscience has a very valuable gene-related novel target division, while we have antibody technology that can be used to develop agonists or antagonists to the targets,¿ he said.
Celltech Chiroscience¿s portfolio will include Chirocaine, an approved anesthetic for which Chiroscience also disclosed marketing agreements; three more products in advanced stages of development; and eight more in clinical or preclinical stages, a number of which are partnered with pharmaceutical companies.
The Chirocaine deals are with Norwalk, Conn.-based Purdue Pharma LP, which will market the product in the U.S., and Abbott International (a division of Abbott Park, Ill.-based Abbott Laboratories), which will market Chirocaine outside the U.S.
Most R&D Staff To Be Retained
Most of the research and development staff from both companies will be retained and no facilities will be closed, Fellner said. Headquarters of the new firm will be in Slough, and it was unclear whether any support staff would be laid off.
Fellner would not comment on when the joint firm might move into profitability, but Celltech Chiroscience will collect revenues from the chiral-chemistry business and will get royalties from Celltech¿s Boss patents, which cover technology used in the production of genetically engineered antibodies.
For the six months ended March 31, Celltech recorded a loss of #5.7 million, and had net assets of #36.5 million. For the year ending in February 1999, Chiroscience showed a loss of #17.2 million, with net assets of #37.1 million.
Celltech has agreements with Madison, N.J.-based American Home Products Corp. for cancer therapeutics; with Genentech Inc., of South San Francisco, for engineered antibodies; with Schering-Plough Corp., of Madison, N.J., for asthma therapy; and with Zeneca plc, of London, for a gelatinase-inhibiting compound.
Among Chiroscience¿s ventures are deals with Bristol-Myers Squibb Co., of New York, in oncology; and with Powderject Pharmaceuticals plc, of Oxford, U.K., for anesthetic delivery.
On completion of the merger, Chiroscience CEO John Padfield will leave the company and become CEO of London-based Nycomed Amerhsam plc¿s imaging division. n