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Deal frenzy continues

UCB's agreed takeover of Schwarz Pharma adds to the flurry of recent deals, giving analysts plenty to talk about

Consolidation among European mid-tier pharma firms gathered pace with news that UCB Pharma of Belgium has agreed a Ä4.4bn takeover of Germany's Schwarz Pharma.

Odds had already shortened on the prospect of a frenzy of European pharma M&A activity in the run-up to Christmas. Two other significant mergers have already been announced; Merck KGaA's takeover of Serono and Nycomed's acquisition of Altana Pharma.

Despite the close timing of the transactions, analysts were cautious to stress the varying natures of the deals and said that companies embarking on M&A were often motivated by different factors. While some commentators believe that the sales of Serono and Altana smack of desperation after failed auctions, the UCB-Schwarz tie-up is seen as more strategic.

Pharma analyst at UBS Warburg, Richard Purkiss, told PMLive that he could envisage a rash of mid-tier consolidation in Europe. ìUnderlying fundamentals in the pharma industry are not tremendous,î he said. ìPipelines are not producing what they used to in terms of new products. Consequently, the rising cost of R&D and the sporadic nature of new approvals mean that mid-tier firms, and to some extent large cap pharmacos, are having to look for rationalisation to fund their growth.î

As part of the Schwarz deal, UCB will pay Ä50 per share in cash and 0.87 UCB shares for each Schwarz share, valuing each at Ä91.1. The offer represents a 20 per cent premium on Schwarz's closing share price on September 22.

The merged company, which will focus on neurology, inflammation and oncology, will keep the UCB name, have a combined revenue of Ä3.3bn and an R&D spend of Ä770m. UCB chief executive, Roch Doliveux, said the transaction would bring in attractive late-stage products to UCB's targeted disease areas and a strengthening of the business in the US and Europe.

30th September 2008

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