Sunday, October 01, 2006

Hit #115 (Serono)

Serono (SRA), the Swiss biotech, is being bought by Merck KGaA (of Germany) in a cash deal valued at $13.3 billion. The offer, of $21.98/share represents a gain of 39.7% over my average cost per share of $15.73.

I had bought a few shares of Serono after its earlier attempt to sell itself fizzled. A buyout was still in the cards if only because the majority holder, the founding/controlling family, wanted to cash out, and they were unlikely to do so without a fight for a significant premium, which they have now received.

As I have said in the past, biotech remains in the M&A sweetspot, with big pharma desperate to do something to replace empty pipelines, dwindling sales and competition from generics. Expect more, aggressive, deals over the next few months. Just within the last 2 weeks, we have seen atleast 3 multi-billion/cross-border deals, and the pace is set to continue, if not accelerate as more dog-fights erupt over fewer/juicier targets.

Cambridge Antibody Technology (CATG) was a recent hit (#96) in this sector. In addition, I have these on my current watchlist - Acambis (ACAM), Skye Pharma (SKYE) and Qiagen (QGEN). I own shares of Acambis and Qiagen, and will be looking to add to my positions.

Previous hit - Symbol Tech (#114)


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