British drugmaker to buy MedImmune

AstraZeneca offers $15.6 billion for Md.-based biotech

Vaccine developer to keep its operations in the state

Purchase

Medimmune Sale

April 24, 2007|By Tricia Bishop | Tricia Bishop,SUN REPORTER

London's AstraZeneca PLC said yesterday that it will pay $15.6 billion in cash to acquire FluMist developer MedImmune Inc. in a deal that highlights how far the pharmaceutical industry is willing to go to shore up its future by tapping into biotechnology.

The $58-per-share price tag is the highest paid for a Maryland-based company. And it's significantly more than most investors had predicted when MedImmune, whose headquarters is in Gaithersburg, announced this month that it was considering a sale.

But analysts say it gives AstraZeneca a fighting chance amid increasing competition from generic drugs, which threaten to eat away at profits from traditional best-sellers like its acid reflux medication Nexium, which brought in $1.3 billion in sales during the first quarter of this year.

As one of the top 10 biotech companies worldwide based on revenue, MedImmune has helped develop the competitive scientific industry in Maryland by setting a leadership example, turning former employees into entrepreneurs and raising $300 million in seed money for new businesses across the country through a venture capital subsidiary.

The sale provides Maryland with its first large pharmaceutical presence, which state officials have been unsuccessfully chasing for years. And it allows MedImmune to continue operating in Maryland, where it employs 1,700 people. The company and Chief Executive David M. Mott will take charge of the British drugmaker's burgeoning biologics program, and local employees will be offered retention grants to stay on board.

"AstraZeneca, I think, is an excellent fit for MedImmune. It gives us greater global resources to continue doing what we love doing and already do very, very well. ... I think our employees will readily see that," Mott said in a conference call.

His 605,000 MedImmune shares will be worth about $35 million once the deal closes. Mott also holds options for more than 5 million additional shares.

MedImmune investors will receive a 21 percent increase over yesterday's opening stock price of $48.01. The deal, reached during the weekend, also reflects a 53 percent premium over the company's share price of $37.84 on April 11.

That was the day before MedImmune's board reversed a commitment to remain a stand-alone company and said it was considering offers to sell the business to appease dissatisfied stockholders. Those investors include billionaire Carl C. Icahn, who is best known as the mastermind behind takeover bids for companies including Texaco Inc. and USX Corp.

Icahn, who owns 2.8 million MedImmune shares and revealed last week that he pressured the board to sell, stands to make a $71 million profit after the deal is done. It's expected to close in June assuming shareholders approve.

The announcement sent MedImmune's stock soaring. It closed up $8.56, or 18 percent, to $56.57 on the Nasdaq, where it was among the day's biggest gainers and the most active stock in both share and dollar volume. AstraZeneca's stock closed down $3.13, or 5 percent, to $55.91 on the New York Stock Exchange.

Industry analysts had estimated MedImmune could command about $45 to $50 per share. Yesterday, they characterized the amount AstraZeneca plans to pay - reached through an intense bidding process involving multiple suitors - as a sign of desperation among pharmaceutical makers.

"There's kind of a land grab going on," said Peter Winter, editorial director for Burrill & Co., a San Francisco merchant bank that finances biotech businesses. "Major biotech companies are being scooped up."

Many companies have also implemented drastic cost-cutting measures, including AstraZeneca. Though the British company said yesterday that its first-quarter sales were $7 billion with a profit of about $2.2 billion, it announced plans in February to lay off 3,000 people, about 4.6 percent of its work force.

AstraZeneca executives said the MedImmune deal, which includes a $15 billion loan supplemented by company cash, is part of a long-term strategy to grow the business.

During the past couple of years, giant pharmaceutical companies have partnered with or acquired smaller biotech companies in the hopes that their development drugs could lead to the next big moneymaker. And though some recent deals have fallen through, or were priced conservatively, MedImmune offers more than most biotechs.

It comes with its own blockbuster drug, infant respiratory treatment Synagis, which had sales of $1.2 billion last year. AstraZeneca will fold the drug into its portfolio, along with the business' manufacturing facilities, vaccine divisions and rich pipeline of treatments under development.

"Strengthening the pipeline has been our highest priority for some time," AstraZeneca Chief Executive David Brennan said yesterday during the conference call. "This business combination ... offers more potential and new technology and new capabilities to improve our product flow over the long term."

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