[July 02, 2014]ZURICH (Reuters) - Roche
Holding AG said it would pay up to $1.725 billion to buy
Seragon Pharmaceuticals, a privately-held U.S. biotech
company that researches breast cancer treatments.
Roche has long dominated the field of breast cancer with drugs such
as Herceptin and recently won approval for Kadcyla and Perjeta, two
treatments for patients whose cancer cells contain increased amounts
of the protein known as HER2.
San Diego-based Seragon was spun out from Aragon Pharmaceuticals
last year when that company was bought by Johnson & Johnson <JNJ.N>.
Seragon is focused on developing a new generation of oral medicines
that it believes offer an improved way of tackling hormone
receptor-positive breast cancer, and potentially other cancers.
Its most advanced experimental drug, ARN-810, is currently in
initial Phase I clinical trials for breast cancer patients who have
not responded to current hormonal agents.
Roche said Seragon's so-called oral selective estrogen receptor
degraders, or SERDs, would complement existing research and
development programmes in breast cancer under way at the Swiss
group's Genentech unit.
The Basel-based drugmaker will pay $725 million in cash and may hand
over as much as $1 billion more if Seragon achieves drug development
milestones.
HIGH PRICE SEEN AS JUSTIFIED
The price Roche is paying for Seragon looks relatively high for a
firm with only one treatment in a Phase I study, but can be
justified because Roche is filling a huge gap for future breast
cancer treatments with the purchase, analysts at Zuercher
Kantonalbank said.
"We assume that Genentech's scientists see considerable potential in
SERDs, because otherwise they would not have accepted this
relatively high price," ZKB said.
Roche shares were up 0.5 percent rose at 0821 GMT, outpacing a 0.3
percent rise in a wider index of European drugmakers.
Since acquiring Genentech for $46.8 billion in 2009, Roche has
earned a reputation as a disciplined acquirer, prepared to walk away
from potential deals rather than overpay.
Chief Executive Severin Schwan abandoned a $6.8 billion deal to buy
U.S gene sequencing company Illumina in 2012 and has snapped up a
couple of smaller diagnostic companies this year instead of pursuing
multi-billion deals.
Roche has also partnered with various companies to develop
antibiotics and said last week it would work with Inception Sciences
Inc and Versant Ventures on a new company to develop therapies for
patients with multiple sclerosis.
Seragon is the second notable acquisition in as many months for
Roche, which bought privately held U.S. gene-sequencing firm Genia
Technologies for up to $350 million in June, securing access to a
technology that should allow it to decipher human genes more quickly
at a cheaper cost.
The acquisition represents a response to investors who wondered how
Roche might use its cash now that its ratio of net debt to assets is
back within its target band of zero to 15 percent after paying down
debt from acquiring Genentech.
The transaction is expected to close in the third quarter of 2014.
(Reporting By Katharina Bart, Caroline Copley and Ben Hirschler;
editing by Tom Pfeiffer)
