Pfizer to buy Coley Pharmaceutical Group

Pfizer Inc., one of the world's largest drug companies announced yesterday that it was buying Coley Pharmaceutical Group for $164 million.

The New York pharmaceuticals giant has been in collaboration with Coley for about two years. Pfizer announced that it has agreed to pay $8 per share for the company which is triple of Coley's closing price of $3 on Thursday. This caused the shares of Coley Pharmaceutical to escalate $4.81, to $7.81 after late afternoon trading on Friday.

Pfizer spokeswoman, Shreya Prudlo, said the company is committed to retaining Coley's employees and maintaining its research programs.

Coley is a biopharmaceutical company based in Wellesley, Massachusetts, specializing in vaccines and drug candidates designed to fight cancers, allergy and asthma disorders, and autoimmune diseases.

Jeffrey Kindler, Chief Executive of Pfizer said that the product candidate portfolio and technology of Coley have the potential to significantly enhance future vaccine and immunotherapeutic approaches to a broad range of diseases including Alzheimers, asthma, infectious disease and oncology.

Pfizer’s shares dropped 0.5%, or 12 cents, to end at $23.17.

A series of setbacks this year had caused the shares of Coley to drop, leaving its future in doubt. Unsuccessful trials of an experimental hepatitis drug caused Coley to suspend tests in January. Also, in June Pfizer had to abandon a development program for a lung cancer treatment it licensed from Coley after a failed clinical trial.

Robert L. Bratzler, chief executive of Coley said the company still has an encouraging lineup of potential drugs, but needs money to continue development. He added that by becoming part of Pfizer, Coley should have the resources to progress with its development work.

Bratzler said that Pfizer was willing to pay a steep premium for Coley's shares because it recognized the long-term value of the firm, while Wall Street is focused on the short-term.

Robert Hazlett, a BMO Capital Markets analyst took a positive view on Pfizer’s move, and said the deal was not out of the norm in the biotech sector.

Hazlett said, “Through their collaboration, Pfizer has better insight into Coley than the marketplace and are willing to pay the high premium to get control of these technologies.”

Hazlett viewed this as an optimistic sign of Pfizer's larger improvement. He said, “I think these aggressive moves to bolster the pipeline are necessary, warranted and I’m increasingly encouraged by the aggressive behavior by the management team.”

The buyout is expected to be completed by early 2008. According to Pfizer, shareholders who hold close to 27% of Coley shares have agreed to sell their shares in the offer.