Merck, Nycomed stoke European drugs merger

Merck, which earlier this year failed in its bid to buy rival Schering, said it had struck a deal with Serono's founding Bertarelli family to buy their 64.5-percent stake, and would make a public offer for the rest of the shares at the same price of 1,100 Swiss francs a share in cash.

Altana, Merck's German rival, said later in the day that it had sold its drugs unit to unlisted Danish firm Nycomed for around 4.5 billion euros, slightly higher than analysts had expected.

Altana's sale breaks up one of Europe's last surviving drugs-and-chemicals hybrids, but Merck underlined its resolve to retain its lucrative chemicals business even after the Serono deal, which will bulk up its drugs business.

Merck shares ended down 4.7 percent at 74.70 euros on worries that the firm had overpaid. Shares in Switzerland's Serono jumped nearly 18 percent to 1,076 Swiss francs, and analysts said they did not expect a counter-bid.

Merck, Serono and Altana are still family-controlled, like many other medium-sized European drug firms, which industry analysts say has made them slow to change.

Now they are finding that the middle ground in the drugs business is shrinking, as big pharmaceutical companies at one end of the spectrum cozy up to small biotech firms at the other.

"They need to do deals because they cannot compete with the big boys," said Martyn Postle, director of UK consultancy Cambridge Healthcare and Biotech.

Altana's disposal is driven by a desire to focus on chemicals and a realization that the future of its drugs business is limited by a poor pipeline and looming patent expiry on its top drug, ulcer treatment pantoprazole.

In June, Germany's Bayer bought Schering for 17 billion euros, the biggest deal in Bayer's 143-year history and the first major consolidation in Germany's drug industry.