UCB Set to Buy U.K. Biotech Firm

UCB Group, the Belgian specialty chemical and pharmaceutical conglomerate, will acquire British biopharmaceutical company Celltech Group for $2.7 billion. Industry analysts say that the deal, which will create Europe's second largest biopharma company after Novo Nordisk, signals UCB's likely exit from chemicals.

The acquisition will combine UCB's small-molecule drug business with Celltech's biotech research capabilities and pipeline. In particular, UCB obtains exclusive worldwide rights to develop and commercialize Celltech's lead drug candidate, CDP870, which is currently in Phase III clinical trials for arthritis and Crohn's disease.

Celltech, the largest biopharma concern in England, will be the latest in a wave of British biotech companies acquired by drug firms with the development and commercialization heft needed to introduce new drugs.

According to Christophe Van Vaeck, a stock analyst with Belgium's KBC Bank & Verzekering, acquiring Celltech will be a coup for UCB. "In the future, it will be important even for midsized pharma companies to have both small and large molecules."

He says the acquisition will almost certainly result in the sale of UCB's specialty chemical operation, which currently accounts for half of the firm's sales but only 15% of its profits. Van Vaeck says UCB, which will finance the acquisition entirely through bank loans, will need to sell the chemical business to meet its goal of paying down debt in four years.

Arnaud Denis, head of investor relations at UCB, says the company has no current plans to exit chemicals, noting that UCB paid $500 million to acquire Solutia's resins, additives, and adhesives business at the end of 2002. Denis acknowledges, however, that UCB may choose to do so in the future. "We have reached critical mass, which will allow us to go in various directions if we decide to give more support to pharmaceuticals," he says.