AstraZeneca paid a hefty premium to take over Britain's biggest biotechnology firm, Cambridge Antibody Technology, in a £702m deal yesterday, in the latest attempt to fill its threadbare drugs pipeline.
CAT's chief executive, Peter Chambre, who is leaving, is in line for a windfall of up to £2.2m from his 29,100 shares and share options in various incentive schemes.
Shares in AstraZeneca, Europe's biggest drug maker, closed down 7p at 2,850p yesterday amid investor concerns about the cost, which was £100m higher than expected.
The Anglo-Swedish company already owns 19.2 per cent of CAT under a £75m research alliance signed in 2004 and will splash out £567m for the rest of the company after agreeing to pay 1,320p a share in cash. The price represents a 67 per cent premium to CAT's closing price on Friday. The loss-making biotech firm is a world leader in developing drugs from antibodies, the body's natural immune defences. The deal gives AstraZeneca a drug in Phase II clinical trials and another in Phase I.
AstraZeneca wants to make CAT its centre for developing biological drugs to treat cancer, nervous diseases and asthma, and will make unspecified payments to retain the company's 300 scientists in Cambridge. The market for antibody-based drugs is forecast to more than double by 2010 from $14bn (£7.5bn) in 2005.
John Patterson, AstraZeneca's executive director of development, said: "Up to one in four of our later-stage molecules by 2010 will be from a biologicals background, whereas previously we've had little or no capability."
Unlike some of its rivals, AstraZeneca has been slow in investing in biological medicines, a fast-growing market.
David Brennan, AstraZeneca's chief executive, reiterated his priority to replenish the pipeline of new medicines, and said the company would continue to look for acquisitions. That signals a determination to remain independent despite persistent speculation that it is a takeover target.
The group has spent £1.5bn, including the CAT deal, in the past six months buying in new drugs. But some critics say the deals are expensive and risky.
CAT joins other large British biotechs in selling up: Celltech was snapped up by Belgium's UCB two years ago while in 2002 Powderject sold out to Chiron, now part of the Swiss group Novartis.