Sweden’s Biovitrum has announced plans to merge with Swedish Orphan, creating “a new niche specialty pharmaceutical company focused on rare diseases”.

Under the terms of the deal, Biovitrum will make an upfront payment of 3.5 billion Swedish kroner (about $494 million), which will be financed by a rights issue and bank loans. The new entity has pro forma revenues of 2 billion kroner, with an operating margin of 15%.

Swedish Orphan brings two proprietary orphan drugs to the new entity. These are Orfadin (nitisinone), the only available pharmaceutical for hereditary tyrosinemia type 1 and Multiferon, a human multi-subtype interferon alpha approved in Sweden in 1994 for a second-line indication for the treatment of patients who are intolerant to or do not respond to treatment with recombinant alpha-2 interferon.

It also has “a diverse in-licensing portfolio of approximately 50 orphan and niche specialty drugs with significant growth potential,” and over 20 partnerships, with the likes of Cephalon, Lundbeck, PharmaMar and Shire. Biovitrum brings to the party a “strong haemophilia franchise, manufacturing capability, several marketed niche specialty products…as well as a late stage clinical development pipeline within rare diseases".

The new group is looking to realise cost synergies in excess of 100 million kroner from 2011 and has set a sales target of more than 5 billion kroner by 2015. Biovitrum’s chief executive Martin Nicklasson, who will head the combined group, said “the two companies fit like a hand in a glove" and “in one giant leap, we form a company with a leading position within rare diseases and a solid platform for future growth and profitability".