AstraZeneca Is in Talks to Acquire Biotechnology Firm

AstraZeneca Is in Talks to Acquire Biotechnology Firm

AstraZeneca Is in Talks to Acquire Biotechnology Firm

AstraZeneca  is negotiating to buy Cambridge Antibody Technology, in another sign that traditional pharmaceutical companies are moving further into biotechnology.

The two British companies acknowledged yesterday that they were in talks after The Sunday Times in London reported the possibility of the deal. A transaction would value Cambridge Antibody at more than £600 million, or $1.1 billion, the newspaper said. One person briefed on the deal said an announcement was expected this morning.

The talks come a few days after Merck agreed to pay a combined $480 million to buy two privately held American biotechnology companies, GlycoFi of Lebanon, N.H., and Abmaxis of Santa Clara, Calif.

For both AstraZeneca and Merck, the payoff from the acquisitions would be mainly technology for making biotechnology drugs, not any particular drug under development by the smaller companies.

The talks illustrate how the big pharmaceutical companies and the biotechnology industry are increasingly overlapping in the drugs they develop. The pharmaceutical companies have typically developed drugs made of chemicals that can be taken orally. Biotech companies have developed drugs made of proteins, sometimes called biologics, which are produced in living cells and must be injected.

But the pharmaceutical companies are now moving more forcefully into biologics while some traditional biotech companies like Amgen and Genentech are developing chemical drugs because of their convenience.

Biotech drugs are attractive for the big drug companies because they are becoming more important in treating illnesses like cancer and autoimmune diseases. And for both scientific and regulatory reasons, biologic drugs are fairly immune to the competition from generics that can quickly destroy the profits from a chemical drug.

Some traditional drug companies like Johnson & Johnson, Wyeth and Eli Lilly already have significant sales of biologic drugs, some of them licensed from biotech companies. But neither AstraZeneca nor Merck currently sells such a drug.

Cambridge Antibody has fundamental technology for making monoclonal antibodies, which are versions of the proteins that the body produces to fight germs. Biotech companies can customize antibodies to attack not only germs but also tumors or other disease-causing proteins.

Cambridge Antibody's technology makes antibodies that are essentially identical to human ones, reducing the chances of an immune system attack that can occur with antibodies derived from mice.

The technology was used to develop Humira, a rheumatoid artritis drug sold by Abbott Laboratoriesthat had sales of $1.4 billion last year. But Cambridge gets a 2.7 percent royalty, which has not been enough to make it profitable. Other companies, including Human Genome Sciences, are testing antibody drugs made using Cambridge Antibody's technology, and Cambridge itself has an asthma drug in early trials.

AstraZeneca, based in London, already owns just under 20 percent of Cambridge Antibody from a deal the companies made in 2004 to work together to develop drugs. AstraZeneca's decision to buy all of the smaller company could reflect its satisfaction with the relationship so far.

But another spur could have come from Amgen's recent $2.2 billion acquisition of Abgenix, another company with fundamental technology for making humanlike antibodies. While Amgen mainly wanted full rights to a particular drug, that deal heightened speculation that other antibody companies — like Cambridge Antibody and Medarex— might be acquired.

In addition, AstraZeneca was working with Abgenix to develop cancer drugs. It is conceivable that that relationship might be endangered now that Amgen controls Abgenix, making AstraZeneca place an even higher value on its relationship with Cambridge Antibody.

David R. Brennan, who took over as chief executive of AstraZeneca in January, has done a flurry of drug licensing deals and acquisitions of biotech companies in recent months to bolster his company's drug pipeline, which has suffered some setbacks.

Citing side effects, the company earlier this month discontinued development of Galida, a  diabetes drug that had been in the final stages of clinical trials. The Food and Drug Administration restricted access to its lung cancer drug Iressa last year after the drug failed to prolong survival in clinical trials.

AstraZeneca is also facing challenges to the patents protecting some of its best-selling products, including Toprol-XL for hypertension, Nexium for ulcers and Seroquel for schizophrenia.