Some commentary on Br.Bio / Morphosys
LONDON -- British Biotech PLC and Germany's MorphoSys AG said Monday that they are in merger talks, boosting hopes that Europe's biotechnology sector may be about to see a long-awaited wave of consolidation.
The combined company would bring together MorphoSys's antibody technology and British Biotech's cancer and antibiotic product portfolios. The United Kingdom biotech company also brings with it a cash pile of just over 50 million British pounds ($77.9 million).
British Biotech has a market capitalization of 33 million pounds, while MorphoSys's is higher at 80 million pounds. Given that British Biotech has a much stronger cash position, a merger would likely be one of equals.
A merger would make strategic sense, but both companies are approaching the talks from weak positions, said DZ Bank analyst Thomas Hoeger. Mr. Hoeger said it is difficult to assess what a possible merger would look like without more details.
Neither company would give details on what the combination might look like and both said that discussions are at an early stage and may yet fail.
"M&A generally has been something we've been talking about for eight to nine months as an objective of the company," British Biotech Finance Director Tony Weir told Dow Jones Newswires.
Mr. Weir said talks were preliminary, but "sufficiently advanced" to make an official announcement. He declined to give a timetable for the discussions or any further details. Regardless of any deal, he said British Biotech has cash to last around three years.
Once the darling of the U.K. sector with a peak share price of almost three pounds in the mid-1990s, British Biotech's drug portfolio has failed to live up to expectations. Key cancer drug Marimastat failed in clinical trials, and just this July a drug for acute myeloid leukemia was also dropped.
Meanwhile, analysts say MorphoSys's drug discovery program is on track, but its cash position is at a critical point, after being eroded by litigation costs in ongoing disputes with Cambridge Antibody Technology PLC and Applied Molecular Evolution Inc. (NasdaqNM:AMEV - News) .
Just last week, MorphoSys Chief Executive Simon Moroney said that despite poor market conditions he remained upbeat about the chances of sealing an equity- based deal to improve the company's cash position.
MorphoSys Chief Financial Officer Dave Lemus told Dow Jones Newswires on Monday that he is interested in British Biotech because of its expertise in product development.
A merger would be positive for MorphoSys, providing funds for its evolution from a biotechnology services company into a product development company, said Richard Parkes, analyst at ING Barings. But for British Biotech, the talks are a recognition that its current strategy isn't working, and a deal would at best provide a neutral exit, he said.
"This is the big question: What value is there left in British Biotech?" said Mr. Parkes.
"They've been after a tie-up like this for some time, so I doubt it will take much on the financial side to make it happen," said a trader. If the deal takes the form of an offer by MorphoSys for British Biotech, it's likely to be only at a small premium, if any, he said.
-By Susannah Rodgers, Dow Jones Newswires; 44 20 7842 9269; susannah.rodgers@ dowjones.com |
