Genentech has agreed to buy US monoclonal antibody specialist Tanox for $20 a share, valuing the firm at around $919 million.

The agreement gives Genentech access to Tanox’ product pipeline, including a much-fancied compound for HIV/AIDS in Phase II testing, as well as the latter’s stake in Xolair (omalizumab) for asthma, a drug developed in a three-way collaboration between Genentech, Tanox and Novartis.

Since July 2003, Genentech has marketed Xolair in the USA, giving Tanox royalties on sales, and by taking over Tanox the biotechnology major will boost its revenues from a product that brought in $107 million in the third quarter of 2006, up 30% year-on-year.

“Genentech will improve its financial results for Xolair by eliminating the royalty it currently pays to Tanox and by obtaining Novartis' profit share and royalty payments to Tanox,” said the company in a statement. Tanox booked $10 million in royalties from Xolair sales in the third quarter, as well as $2.6 million in manufacturing revenues related to the drug.

Heading Tanox’ development pipeline is TNX-355, which is designed to block the entry of HIV into cells. Unlike other drugs that use this approach, notably Roche’s already-marketed Fuzeon (enfuvirtide), the antibody blocks CD4 receptors, the primary site of HIV binding.

This step occurs prior to binding with the CCR5 and CXCR4 co-receptors that have been targetted by other drugs, so should be more efficient, and should be less prone to mutation than the other approaches, claims Tanox, which believes combining TNX-355 with Fuzeon would be a particularly effective strategy.

Tanox reported a delay to its TNX-355 programme in August after the US Food and Drug Administration said it would need to see another clinical trial of the drug, although this would be short and could be considered pivotal as part of a registration programme for TNX-355 in HIV treatment-experienced patients.

It also has a drug for Hodgkin’s lymphoma, an anti-interleukin-13 antibody called TNX-650, in Phase I testing, as well as TNX-832 targeting Tissue Factor in Phase I/II testing which could play a role in treating acute lung injury/acute respiratory distress syndrome (ALI/ARDS).

Genentech has not been known as a particularly acquisitive company, preferring to grow through the fruits of its internal R&D efforts, so the deal to acquire Tanox came as something of a surprise, said analysts.