Celltech hunts for US acquisition with a price tag of up to $500m

Celltech, the UK's largest biotech company, has begun a search for a giant acquisition in the US. It plans to spend up to $500m (£320m) on a deal that could swell the size of the company by a half.

The move comes hot on the heels of its £101m hostile bid for Oxford GlycoSciences, the UK cancer specialist, where Celltech is favourite to beat a lower all-share offer from Cambridge Antibody Technology.

Now Celltech's chairman-designate, Peter Fellner, and the new chief executive, Goran Ando, have set a much bigger strategic acquisition as a priority. Mr Fellner said: "We are looking for a company with products on the market, a US presence, specialist products, cost overlaps with Celltech and, hopefully, some products in late-stage clinical trials.We have proved ourselves capable of successfully integrating companies and extracting costs, and we would use part of a new company's revenues to support our own research and development costs."

Celltech, which has a market value of £820m, is returning to the acquisition trail after a three-year break and is likely to use its shares as currency. Mr Fellner transformed the company into the UK's biggest biotech player and, for a while, a FTSE 100 member with the acquisitions of Chiroscience in 1999 and Medeva in 2000. It is set to look to the US this time, because the American biotech sector is more advanced.

Celltech uses sales from a portfolio of traditional drugs to pay for development of new biotech products based on cloned antibodies from the human body's immune system. Yesterday it unveiled a profit before tax and goodwill of £50.4m for 2002, up 5 per cent. Its shares, though, were off 6.5p at 298.5p and are now 84 per cent below their peak in 2000.

Mr Fellner said he was confident he could do a deal. "Valuations in the sector have come down, and people are getting used to the new valuation zone we are in."

Celltech is favourite to win control of OGS with its £101m cash bid – which Mr Fellner has always described as "opportunistic". The first deadline for acceptances is due on 31 March. CAT needs a rebound in its depressed share price if it is to be able to increase its offer.

Mr Ando's appointment as chief executive has not yet been confirmed by Celltech, since he is under contract at Pharmacia, where he is president of research and development, until its takeover by Pfizer is formally approved. Mr Fellner said he expected the appointment could be unveiled "within weeks".

Celltech is also set to announce decisions on two key drug development projects in the coming months. It has the option of contributing more to the cost of trials of an asthma drug with its partner Merck in return for a greater share of profits, but is unlikely now to take this option. It is also now almost certain to abandon work on one of its treatments for Crohn's disease, which failed in clinical trials last year.