LONDON (Reuters) - GlaxoSmithKline Plc (GSK.L) has agreed to buy privately held heart drug specialist Reliant Pharmaceuticals for $1.65 billion in cash, in a move to boost its flagging drug sales in the United States.
Europe’s biggest pharmaceuticals group has been hit hard in recent months by slumping sales of blockbuster diabetes drug Avandia, following a report linking it to heart-attack risk.
Glaxo said on Wednesday the Reliant deal would be slightly accretive to earnings in 2008, excluding integration costs, and would create additional value in following years.
A spokesman said there was potential for synergies, although it was too early to quantify the financial benefits.
The sale marks a change of tack for U.S.-based Reliant, which had been considering an initial public offering.
The decision to sell the business instead highlights the fact that “big pharma” companies, hungry for promising new products, are often prepared to put a higher value on early-stage firms than stock market investors.
Reliant had been expected to have a post-IPO market capitalization of $1.34 billion, based on the midpoint of the indicated range for the offering.
The group recorded net sales of $341 million in the nine months ending September 30. It has a portfolio of specialty drugs for heart disease, including U.S. rights to Lovaza, an omega-3 treatment for patients with very high levels of triglycerides.
Reliant licensed rights to the product from Norway’s Pronova BioPharma PRON.OL, a world leader in making pharmaceuticals from fish oil — a rich source of omega-3 fatty acids.
Under the leadership of CEO Bradley Sheares, a former Merck & Co Inc (MRK.N) executive, Reliant has focused on licensing and developing drugs, rather than inventing products in-house.
The sale to Glaxo marks a windfall for Alkermes Inc (ALKS.O), which will receive up to $174 million for its stake in Reliant. Shares in Alkermes rose 3 percent in early Nasdaq trade.
In addition to Lovaza, Reliant also markets Rythmol SR, a treatment for abnormal heart rhythms, as well DynaCirc CR and InnoPran XL, two medicines for high blood pressure. It has a sales force of 875.
Glaxo said its main interest was in Lovaza, which the British-based group plans to sell alongside its top heart drug Coreg CR in the United States.
“The addition of Lovaza to the GSK portfolio adds a new driver of sales growth in the U.S. business,” the company’s head of U.S. pharmaceuticals, Chris Viehbacher, said in a statement.
Lovaza — the only omega-3 product approved by the U.S. Food and Drug Administration — had U.S. sales in the first nine months of 2007 of more than $200 million, up 115 percent on a year earlier.
Glaxo said it saw significant opportunity for future growth as Lovaza takes an increasing share of the non-statin dyslipidemia drugs market, which was worth $2.2 billion in 2006.
The acquisition is subject to approval by the U.S. Federal Trade Commission and is expected to conclude before year-end.
Reporting by Ben Hirschler, Editing by Rory Channing and Matthew Tostevin