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AstraZeneca agrees to buy CAT in 702 mln stg deal

May 15, 2006

By Mark Potter

LONDON (Reuters) - AstraZeneca has agreed to buy Cambridge Antibody Technology in a 702-million-pound ($1.3 billion) deal, extending a drive into biological medicines as it looks to restock its depleted drugs pipeline.

AstraZeneca said on Monday it would pay 1,320 pence a share in cash for Britain's biggest biotech company, 67 percent above Cambridge Antibody Technology's (CAT) closing price on Friday.

Europe's third-biggest drugmaker, which already owns 19.2 percent of CAT from a research deal in 2004, said buying the rest of the shares would cost it 567 million pounds, and would not alter its earnings guidance for this year, nor affect its share buyback programme.

"This acquisition represents a major long-term strategic investment by AstraZeneca in novel biological therapeutics," AstraZeneca Chief Executive David Brennan said in a statement.

"It is our intention to both expand and broaden the scope of our discovery and development pipeline and we expect that, by 2010, up to a quarter of our candidates for full scale development will be biological therapeutic agents."

CAT specialises in making drugs from antibodies, the body's natural immune defences, which generally have fewer side-effects than conventional, chemistry-based medicines.

Major pharmaceutical firms are battling to strengthen their ability to make so-called biological drugs. As well as a research partnership with CAT, AstraZeneca has a similar deal with U.S. antibody group Abgenix.

By buying CAT, AstraZeneca will not have to share the profits of any drugs resulting from their collaboration.

Collins Stewart analyst Navid Malik said antibody-based drugs were a hot research field, but was concerned that AstraZeneca will have to wait years before any of the projects with CAT reach the market.

"AstraZeneca is buying up all these companies, but I'm not sure they're going to produce much over the next three years," he said, retaining a "sell" rating on AstraZeneca shares.

"What also concerns me is, if these companies are that good, why aren't others trying to buy them? There's no auction."

AstraZeneca is working hard to boost its pipeline of new drugs after a series of failures in late-stage clinical trials, including Exanta for blood clots and Iressa for cancer in 2004, and more recently Galida for diabetes.

In recent months the firm has signed deals potentially worth around $2 billion to bring in new medicines, and new Chief Executive David Brennan has said he is looking for more deals.

However, the earliest any of CAT and AstraZeneca's joint research projects are expected to start clinical trials is 2007, putting any marketable product several years away.

CAT is the latest in a long line of promising British biotechnology firms to be snapped up by large pharmaceutical companies, with Belgium's UCB buying Celltech in 2004 and U.S. group Chiron acquiring PowderJect in the same year.

Shares in CAT, which provided technology used in Abbott Laboratories blockbuster arthritis drug Humira, closed at 791 pence on Friday, valuing it at about 420 million pounds.

AstraZeneca shares closed at 28.57 pounds, giving a market value of about 45 billion pounds.