AstraZeneca confirms to acquire MedImmune for US$15.6bn

AstraZeneca PLC confirmed Monday that it is acquiring the U.S. biotechnology company MedImmune Inc. for US$15.6 billion in cash, a move that would probably help the Anglo-Swedish drugs group emerge from a series of setbacks at its research labs.

Formed in 1999 by the merger of Swedish Astra AB and British Zeneca Group, London-based AstraZeneca said it will pay Gaithersburg, Maryland-based MedImmune US$58 a share, which is 21 percent higher than MedImmune's April 20 closing price of US$48.01.

The transaction values MedImmune, which has more than 2,500 employees worldwide, with facilities in Pennsylvania, California, Kentucky, the United Kingdom and the Netherlands, at $15.6 billion, or $15.2 billion in terms of enterprise value after allowing for $340 million of net cash.

Under the deal, AstraZeneca would add 45 MedImmune projects to its pipeline, enlarging the total pipeline to 163 projects, and increasing the proportion of biotechnology drugs in AstraZeneca's pipeline from 7 percent to 27 percent.

The company will gain MedImmune key pipeline assets, like FluMist influenza treatment which is designed for launch in the 2007-2008 U.S. flu season, and MedImmune's best-selling product, Synagis which is an antibody used to fight respiratory infections for babies. Numax, next generation follow-on to Synagis and Ethyol for reducing chemotherapy side effects are also included in the pipeline.

Out of its total generated $1.3 billion in revenues last year, Synagis brought in $1.1 billion, according to the US biotechnology company that put itself up for sale after pressure from shareholders. AstraZeneca expects the deal to boost cash earnings in 2009 and achieve $500 million in synergies by 2009.

AstraZeneca’s latest acquisition is the biggest move yet by Chief Executive David Brennan, who has been seeking to bolster the company's drug portfolio following a series of product setbacks.

"This acquisition represents a transformational step to deliver our biologics strategy sooner than anticipated. It creates a leading fully integrated biologics and vaccines business with critical mass and enhances AstraZeneca's R&D science base through which we will deliver a stronger product pipeline," Brennan said.

In order to create a fully integrated biologics and vaccine business, AstraZeneca said it will combine MedImmune with another recent acquisition, Cambridge Antibody Technology.

Wyeth, GlaxoSmithKline and Merck were among the other companies that were said to be potential suitors for MedImmune. The biotech company has agreed to pay a termination fee of $450 million in certain circumstances to AstraZeneca if it agrees to a more favorable offer from a rival company.

Besides the acquisition announcement, on Monday AstraZeneca also announced its first-quarter net profit rose to 1.560 billion or $1.02 a share, from $1.43 billion, or 90 cents, a year earlier, while revenue gained 13 percent to US$6.966 billion, beating analysts' estimate of $6.74 billion.

AstraZeneca today dropped an experimental heart medicine, AGI-1067 after the product failed to meet goals in a study, the fourth setback for its laboratories since February 2006. AstraZeneca drew a line under the AGI-1067 project, after a Phase III trial of this heart drug didn't meet its desired outcome, terminating its licensing and collaboration agreement with AtheroGenics at a cost of $83 million.

AstraZeneca shares were down 42 pence or 1.4 percent, to 2,911 pence at 10:07 a.m. in the London Stock Exchange.

The deal that will allow the British company, which develops, manufactures, and sells pharmaceuticals to treat disorders in the gastrointestinal, cardiac and vascular, neurological and psychiatric, infection, respiratory, pathological inflammation and oncology areas, to enter the vaccines market is expected to close in June 2007.