Wednesday, June 16, 1999 Published at 07:11 GMT 08:11 UK
Business: The Company File
Pharmaceutical giants join forces
The two firms hope to save money by merging
Celltech and Chiroscience have announced a £700m ($1.12bn) merger to create Europe's biggest biotech company.
The deal will bring together more than 400 scientists working on potential medicines to treate a range of diseases including asthma, cancer, osteoporois and arthritis.
The agreed merger, which is subject to approval by shareholders, is widely expected to spark rapid consolidation in the rest of the fragmented biotech industry.
Plan to boost profits
Celltech chairman John Jackson said: "Celltech was the first dedicated biotechnology companies in the UK. This merger between two high quality British companies creates one of Europe's leading biopharmaceutical companies."
Chiroscience investors will receive 62 Celltech shares for every 100 shares they hold in Chiroscience.
Based on Celltech's Tuesday's closing price, the deal values Chiroscience shares at 287p or £324.5m.
The merger will leave Celltech shareholders holding a slim majority - 53% - of the enlarged group, with Chiroscience shareholders owning the remainder.
Chiroscience chairman Hugh Collum said: "We have always advocated that consolidation within our sector of the pharmaceuticals industry was essential to provide the critical mass necessary to build sustainable profits and cashflow."
Celltech's latest results showed the group reporting a pre-tax loss of £3.1m in the year to September 1998. Chiroscience reported pre-tax losses of £16.2m in the year to February 1999.
The merger marks the biggest step to date in the consolidation of Britain's lifescience sector which many analysts have been predicting in recent months.
"It provides a broad platform for technology and skills, overall it looks a good deal," said Stephen McGarry, analyst with Rabobank.
The UK boasts over 200 biotech companies, most of them spun off from research teams in Oxford, Cambridge and Scotland.
But the industry has suffered a series of setbacks in recent years with several high profile clinical failures leading to a sharp decline in investor confidence - and share prices.
Julie Simmons, analyst with Beeson Gregory, said she expected the group to look for opportunities in the US which would complement Chiroscience's existing operations in Seattle.
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