UCB's transformation

Growth at Belgium's UCB Group has been lackluster, with neither its pharmaceutical nor specialty chemical/films groups contributing much upside. Last September, the company brought in Roch Doliveux from Schering-Plough Corp. (SGP) to breathe new life into the company. He made his first big move last week with the proposed acquisition of Celltech Group plc.

If everything works out, the purchase will be the first step in transforming a typical small European pharma company into a top tier biopharmaceutical player, with virtually flat growth over the last two years accelerating to double digits, a diversified product portfolio including both small molecules and biologics, and expanded marketing, manufacturing and R&D capabilities.

Initial success will depend on generating more growth from UCB's existing line of allergy and anti-epileptic products as well as approval and launch of Celltech's anti-TNF biologic CDP 870 for rheumatoid arthritis (RA) and Crohn's disease, and successfully implementing an aggressive U.S. marketing plan.

The combined company would be valued at about $5.9 billion. However, UCB does not yet have the growth potential of a true biopharmaceutical company because it remains burdened by its lower margin specialty chemicals and films business (see "Market Comparisons," A2 & "Pharma vs. Chemicals," A3).

Thus, while UCB says it wants to digest Celltech before making any further moves, more corporate activity looks to be in the cards. The company also will seek to leverage its CNS and primary care sales forces through in-licensing.

The deal

UCB (Euronext:UCB, Brussels, Belgium) will use bank loans to pay £1.5 billion ($2.7 billion) in cash for Celltech (LSE:CCH; CLL, Slough, U.K.), or 550p per CCH share and $19.44 for each CLL ADR. The offer is a 28% premium to CCH's close at 430.5p on May 17, the day before the offer, and a 26% premium to CCH's three-month trading average prior to the offer.

UCB made a cash offer out of necessity. "If they had made a share offer it

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