Merck, Nycomed stoke European drugs merger

STRING OF DEALS

The two deals are the latest in a string of mergers among mid-sized drug firms, which are struggling to compete against industry giants like Pfizer and GlaxoSmithKline.

Combined, Merck and Serono would rank as one of Europe's biggest drug groups, with a market value of around $30 billion, based on the Serono takeover price, annual sales of almost $10 billion and a research budget of around $1.3 billion.

Private investors Nordic Capital, Credit Suisse Private Equity and Blackstone, the owners of Nycomed, will be playing a role as consolidators through the Altana buy, which creates a business with total sales of over 3 billion euros.

While Altana's sale of its pharma unit was well flagged, the sudden sale of Serono took analysts by surprise.

It came after Serono's chief executive, billionaire sailor Ernesto Bertarelli, said he was looking for takeover targets after abandoning attempts to find a buyer.

"Smaller pharmaceutical companies either have to find a perfect niche or think of ways to secure their future by mergers and acquisitions," said Christopher Kummer, director of the Institute of Mergers, Acquisitions and Alliances at Webster University in Vienna.

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.

STRING OF DEALS