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Buzz grows over Serono auction

Market rumours point to sale of Europe's biggest biotech within the next two months

The decision by Serono to retain global investment banking firm Goldman Sachs to ìexplore strategic alternativesî provides no assurances that the business will be sold, the Swiss biotech firm has maintained.

However, rumours abound that suitors have been requested to submit binding bids for a potential 2006 auction of one of Europe's best-known biotechs.

As a proposition, family-controlled Serono has managed to create a comfortable niche for itself with Rebif, its successful multiple sclerosis treatment. However, the company is not at present top of big pharma's wish list, which, despite Serono's assertions to the contrary, may view it as a one-drug wonder.

Its share price, which is 30 per cent up so far this year, nudged up 1.4 per cent on the speculation.

The Swiss firm, thought to have a market value of approximately £6.3bn ($11bn), remains adamant that its pipeline is ìstrong and deep - with 30 ongoing projectsî, yet analysts fear that it does not have enough to offer a prospective pharma buyer.

Bob Pooler, of Swiss private bank LODH, told the Financial Times: ìWe don't really see big pharma buying Serono. Their pipeline is too thin.î

According to reports, the company itself is very keen to see more new products coming through the pipeline that will offset its heavy reliance on Rebif, which in 2004 accounted for nearly 50 per cent of total sales.

Analysts have estimated that the firm has spent SwFr37m (£16.3m) developing the drug and a top priority is to find new, additional revenue streams; particularly as big pharma firms, including Pfizer, are developing products that will rival Rebif.

In October this year, Serono paid out ?406m ($704m) to buy its way out of a four-year long US government investigation into conspiracy to market an AIDS wasting drugs illegally. Another part of its reprimand is that for the next two years, the company will be subject to an audit of compliance by the office of the Inspector General, as well as an external auditor.

A spokesman confirmed to Pharmaceutical Marketing that four former employees have been indicted.

The company has no comment to make about the speculation surrounding its potential sale, though if reports come to fruition industry sources have named Novartis, GSK, sanofi-aventis, Johnson and Johnson, and Pfizer as potential buyers.

Lombard Odier Darier Hentsch analyst Karl Heinz Koch said he considered Novartis to be the most likely suitor, but it would have to be willing to pay $15bn for the company.

30th September 2008

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