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GSK new favourite to land Serono

British firm mulling over a lower bid for biotech firm with strong MS portfolio

GlaxoSmithKline (GSK) is considering whether to snap up Swiss biotech firm Serono for a cut-price $12bn (£7bn).

Potential purchasers for the 62 per cent stake held by the family of Ernesto Bertarelli, chief executive of Serono, have been thin on the ground since the biotech firm called in investment bank Goldman Sachs to explore ìstrategic alternativesî late last year.

The ensuing auction in January failed to find a willing buyer at the $15bn asking price.

However, according to reports at the weekend, GSK has resumed talks with Serono over a potential deal for less money.

Analysts see Serono as a relatively mature company whose products are coming under increasing competition and whose drug pipeline is looking particularly thin. There is much disagreement within the market whether Serono would constitute a good fit for GSK.

Many see such an acquisition as nothing more than a 'bolt-on' deal that would give GSK a presence in the multiple sclerosis market, complementing its existing central nervous system portfolio, without distracting it from the top priority of making sure its current pipeline of new drugs delivers.

ìIf GSK could get [Serono] for $11bn or $12bn, I think people would be fairly relaxed about it,î said analyst Mike Ward of Nomura Code Securities. ìI don't think it will make a huge amount of difference as far as the progression of GSK earnings is concerned.î

Navid Malik at Collins Stewart argued that at $15bn, Serono would not be a strategic fit for the British company: ìIt's (Serono) not a great pipeline story, but that doesn't mean at the right price it wouldn't make sense.î

Both firms have refused to comment on the speculation.

Serono's top-selling product is injectable MS drug, Rebif, which could face competition in the future as firms continue to work on developing more convenient oral therapies. Serono also has its own oral MS pill Mylinax, which it hopes to file for approval in 2008.

Novartis had been mooted as the favourite to acquire Serono, but chief executive Daniel Vasella has made it clear that his firm is not interested in an acquisition.

30th September 2008

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