Merck KGaA, fresh from its failed bid to merge with fellow German drugmaker Schering AG, has announced a 10.6 billion euros ($13.5bn) offer to buy a majority share in Swiss biotech Serono from the Bertarelli family.
The deal, if it goes through, would elevate Merck’s position in biologic medicines, boost its product pipeline to include 28 projects and create a company with a research budget in the order of 1 billion euros a year.
Merck has been saying for some time that its drugs business is too small to compete in the global arena, and its need to find a partner became more acute in June after it was forced to abandon development of sarizotan, a candidate drug for Parkinson’s disease.
But investors seemed to greet the announcement with some trepidation, and shares in the German drugmaker were down more than 5.6% in mid-morning trading, at 73.60 euros. Merck has scheduled a conference call later today to explain the rationale of the deal to investors.
Under the terms of the deal, Merck’s branded drugs business will be combined with Serono to form Merck Serono Biopharmaceuticals and will be headed by product portfolios in neurology and oncology. Serono brings its multiple sclerosis drug Rebif (interferon beta-1a) to the table, with Merck contributing fast-growing cancer treatment Erbitux (cetuximab).
Based on 2005 figures, the new Merck group would have pro-forma sales of
7.7 billion euros, including 3.6 billion euros in biopharmaceutical sales.
Taking the Bertarelli’s stake in Serono will give Merck around two thirds of the biotech’s capital and 75% of its voting rights, said the German drugmaker in a statement. Merck has offered 1,100 Swiss francs per share, a 20% premium to Serono’s share price yesterday.
Serono has been looking for a strategic partner for its business since 2005, with both GlaxoSmithKline and Novartis walking away from the table, and seemed to have changed its tack earlier this year when it announced the creation of a $5.6 billion war-chest to fund its own acquisitions.
The market’s reaction to Merck’s offer, arising from the ashes of its failed bid for Schering in June, could be due in part to the fact that Serono has been troubled of late, struggling to bring new products to market in order to reduce its reliance on Rebif.
– Meanwhile, Serono announced this morning that its oral MS treatment cladribine, currently in a Phase III trial due to complete enrolment by end-2006, had been granted a fast-track review by the US Food and Drug Administration.
