Bio-techs merge to cut costs

Idec Pharmaceuticals yesterday agreed a $6.8bn (£4bn) deal to acquire Biogen, part of the continuing consolidation in the biotechnology industry.

The companies said the deal was aimed at cutting out overlapping costs, attracting more research partners and boosting the output of new drugs by combining research budgets. The rate of drugs coming to market has slowed significantly in the past few years and many companies are facing expiry of patents on big sellers.

Idec focuses on cancer drugs while Biogen concentrates on the auto-immune area. The companies said they would have more than $550m in research and development spending a year and 1,000 R&D employees. The company, Biogen Idec, will be the third largest biotech firm in the US, trailing only Amgen and Genentech in sales.

Biogen's biggest drug is the multiple sclerosis treatment Avonex. Idec's biggest seller is the cancer therapy Rituxan.

Biogen investors will receive 1.15 Idec shares for each share they own leaving Idec shareholders with a 50.5% stake in the merged business. The offer is a 2.3% premium to Biogen's closing price of $43.80 on Friday.

Idec chairman and chief executive William Rastetter will be chairman of the group, while his opposite number at Biogen, James Mullen, will be chief executive.

"Biogen and Idec are two remarkably complementary companies in virtually every sense," Mr Rastetter said.

Biogen had $1.55bn in revenues last year and is sitting on $1.5bn in cash. The company separately announced it would miss its second-quarter estimates because of lower than expected royalties from hepatitis drugs.