UK-Canadian drug merger

Shire hopes the merger will reduce its dependence on certain drugs

UK drugs firm Shire Pharmaceuticals is to merge with Canada's BioChem Pharma, creating an $8.5bn specialty pharmaceuticals company.

BioChem's success can largely be attributed to the success of its Aids and Hepatitis B products.

One of the aims of the merger is to reduce Shire's dependence on drugs that counter hyperactivity, particularly Adderall.

But revenues from Biochem's products have been weak in recent years and this has prompted some investors to sell shares in Shire, as they questioned the logic of a merger.

In late morning trade, shares in Shire were 163 pence or 13% lower at 1066 pence.

The issuance of new shares to facilitate the merger also prompted some investors to sell their stock.

Shire boost

Shire is effecting the merger by an exchange of shares which values BioChem at about $4bn or about $37 per share.

Some analysts say the merger will cement Shire's standing as a second-tier pharmaceutical company.

"We see significant benefits from combining these two companies," Shire chief executive Rolf Stahel said.

"It will further broaden and diversify our revenue base, strengthen our early phase project pipeline and provide greater strength to capitalise on our search and development capability," Mr Stahel said.

BioChem chief executive Francesco Bellini is expected to join the board of the enlarged firm in a non-executive capacity.

"The pharmaceutical industry is rapidly consolidating and new leaders are emerging. In this environment, scale and leadership are increasingly important," Mr Bellini said.

Shire Pharmaceuticals focuses on four therapeutic areas - central nervous system disorders, metabolic diseases, oncology and gastroenterology.

The enlarged group should have $587m in group revenues by the end of this year.

The merger is expected to be completed in the second half of next year.