Seeking to beef up its pipeline of promising drug products, Warner-Lambert Co. said Tuesday that it has agreed to buy Agouron Pharmaceuticals of La Jolla for $2.1 billion.
The deal is an indication that large drug companies are continuing to look to smaller biotech firms as a source of new products. Warner-Lambert officials said the acquisition is part of a growth strategy that has seen the company's annual drug sales soar to more than $7 billion from $2.5 billion in 1996.
Agouron is among the dozen largest publicly traded biotechnology companies and one of the few biotech firms that has turned a profit. Its single commercial product is the anti-AIDS drug Viracept, the best-selling product in a class called protease inhibitors, which block the replication of the human immunodeficiency virus that causes AIDS. Since approval in early 1997, sales of the product have climbed to almost $500 million a year.
"For someone like a Warner-Lambert, having a drug with a lot of commercial potential, like the No. 1 protease inhibitor, is good news in the short run," said Vector Securities International analyst Bill Tanner. "In the long run, Warner has gained significant expertise in structure-based drug design that will accelerate the drug discovery process."
New Jersey-based Warner-Lambert said it will exchange about $60 in stock for each share of Agouron. The transaction does not require Warner-Lambert shareholders' approval but must be approved by Agouron shareholders.
The $60-a-share offering price is only a modest premium over Agouron's recent stock price, but the stock has risen sharply in recent months, possibly in anticipation of a takeover offer.
"There have been rumors that Agouron was going to be bought for some time," Tanner said. "A lot of people thought the stock was too expensive based on fundamentals."
Executives from both companies said there are no plans to reduce the work force of either company. Agouron will become one of nine research and development centers within the larger company.
Tanner said the sale may signal that large pharmaceutical companies are becoming more acquisitive.
Agouron has a number of drugs in clinical trials, including another anti-AIDS drug, Remune, which the company is developing with Immune Response Corp. in Carlsbad, Calif. Remune is a killed version of the AIDS virus. The drug is designed to boost the patient's immune system to fight the deadly virus and is expected to be used in combination with other anti-AIDS medications, including Viracept.
Anthony H. Wild, president of Warner-Lambert's pharmaceutical sector, described the novel drug as "very exciting" but also high-risk. If it can pass muster with the Food and Drug Administration, Remune could be marketed as early as 2001.
The company has also been testing a drug that could help stop the spread of cancer by blocking the development of blood supplies to tumors. Agouron has also begun testing a drug it has developed to block the growth of rhinovirus, one of the main causes of the common cold.
Although the deal was announced after the close of markets, shares of both companies closed higher Tuesday: Agouron was up $3.66 to $56.81; Warner-Lambert rose $1.69 to $69.13.