Celltech, Britain's biggest biotechnology firm, today agreed to be bought by Belgium's UCB for £1.5bn.
The cash deal will create Europe's second biggest bio-pharmaceutical company behind Denmark's Novo Nordisk, and bolster UCB against potential cheap competition to its top-selling allergy and epilepsy drugs.
UCB, best known for its Zyrtec treatment for hayfever, will also get the rights to Celltech's most promising drug, CDP870 for rheumatoid arthritis. Analysts think CDP870, to which UCB signed the rights, could become a "blockbuster" drug, achieving over $1bn (£566m) a year in sales.
Goran Ando, Celltech's chief executive, said the deal would allow the British firm to see through the development of CDP870, and that the combined firm would have the resources to develop and market its own drugs without the need for partners.
Celltech had licensed CDP870 to Pharmacia in one of the European biotechnology sector's most lucrative deals, but the agreement fell apart after the US drugmaker was bought by Pfizer last year.
Mr Ando said the deal on CDP870, which is not dependant on UCB's acquisition of Celltech, was "at least as good" as the one struck with Pharmacia, but declined to reveal the terms.
The acquisition is the latest in a string of deals in the fast-growing healthcare sector as firms look for global reach. French drugmaker Sanofi-Synthelabo agreed last month to buy Franco-German rival Aventis for about €51bn (£34.6bn)
Tim Roberts, a fund manager at Cavendish Asset Management which owns Celltech shares, said UCB's offer was consistent with recent biopharmaceutical deals in the US, but was a disappointing end to Britain's biggest biotechnology hope.
"If you bought into Celltech two or three years ago, you might have hoped to get more out of it than this," he told Reuters. Some analysts also questioned whether UCB would have the muscle to take on big US rivals with CDP870, which is likely to be the fourth drug in its class to reach the market.
Celltech, employing some 1,900 people, has long been viewed as too small to survive on its own, particularly after a series of clinical trial flops left it reliant on CDP870. Analysts said previously rumoured suitors, Switzerland's Serono and US group Biogen, were the most likely rival bidders if any were to emerge.
In March, Celltech announced pre-tax losses of £83m last year, up from £43m in 2002, as it poured extra funds into research. It also took a £40m exceptional charge, which included the costs of closing a research facility in Seattle and restructuring its European sales force to focus on the specialist doctors who will be the main market for CDP870.
Roch Doliveux, chief executive of UCB Pharma, said the two firms had complementary product offerings, and the combined firm would be particularly strong in treatments for central nervous system disorders, inflammation and rheumatology.
UCB is being advised by Lazard, while Morgan Stanley and JP Morgan are acting for Celltech.
