After years of promising to complete some form of business development activity that would expand its pipeline beyond CellCept, Aspreva Pharmaceuticals Corp. entered an acquisition agreement with Galenica Group.

Stanford Group Co. analyst Han Li called the deal a "nice surprise." During a conference call, he commented that "we all thought you guys were going to acquire somebody, and now you're getting acquired."

The deal came as a bit of a surprise to Aspreva, too. During the call, Chairman and CEO William Freytag said his business development team identified Galenica as a "highly attractive potential licensing partner" because of its renal business. Licensing talks "evolved into joint venture discussions and then ultimately into merger discussions," he said, adding that although the acquisition offer was unsolicited, Aspreva considers it friendly.

Under the terms of the agreement, Berne, Switzerland-based Galenica will utilize a wholly owned Canadian subsidiary to acquire all outstanding shares of Victoria, British Columbia-based Aspreva for $26 per share. The total value of the deal is $915 million, which Galenica financed through committed loan facilities.

The acquisition price represents a 16 percent premium over Aspreva's closing share price on Tuesday. But the stock (NASDAQ:ASPV) jumped up to meet that price on Thursday, rising $3.11, or 13.8 percent, to close at $25.61.

Aspreva's board of directors unanimously approved the transaction, which also must be approved by two-thirds of the company's shareholders. A special shareholder meeting will be held in December to vote on the deal, although the directors, officers and largest shareholder already have pledged their support. If all conditions are met, the acquisition will close Jan. 3, 2008, Aspreva's stock will be delisted and the company will become a subsidiary of Galenica Ltd.

Freytag, who replaced Aspreva's founding CEO Richard Glickman in July, called the deal "bittersweet," explaining that he has "fallen in love" with the company but also has to consider shareholder value. He added that a "market check" conducted after the offer came in, an analysis by a special board committee, and the advice of external financial advisors all contributed to the board's decision to approve the deal.

The primary asset Galenica gains through its acquisition of Aspreva is the small-molecule immunosuppressive drug CellCept (oral mycophenolate mofetil). F. Hoffmann-La Roche Ltd. markets the drug for the prevention of rejection in kidney, heart and liver transplants, but in 2003 Aspreva picked up a license to the rights in autoimmune disease applications. Although CellCept isn't approved for any autoimmune diseases, Aspreva collects revenues on off-label prescriptions.

The CellCept license has been a cash cow for Aspreva, resulting in second-quarter revenues of $63.8 million and third-quarter unaudited revenues of $62 million. But all good things must come to an end. CellCept failed Phase III trials in myasthenia gravis and lupus nephritis, and generic competition may begin to erode U.S. sales as early as 2009. Although Phase III trials in lupus nephritis maintenance and pemphigus vulgaris still are under way, Aspreva cut a quarter of its staff in July. (See BioWorld Today, Oct. 30, 2006, June 28, 2007, and July 27, 2007.)

But Galenica isn't buying Aspreva just for CellCept. Aspreva also offers a healthy cash balance of $323.9 million, as of June 30. Galenica plans to use that money to repay its loans and ramp up clinical development and medical affairs activities, both of which also will get a boost from the expertise Aspreva's team brings to the table.

Galenica's specialty pharmaceutical group, Vifor International, markets Maltofer (iron polymaltose) for long-term iron replacement therapy, Venofer (iron sucrose) for co-administration with erythropoietin in hemodialysis and a second-generation intravenous iron replacement called Ferinject (ferric carboxymaltose). Other products, such as the phosphate binder PA21, are in development.

Although Galenica already had experience in development and marketing, the company plans to use Aspreva's medical affairs capabilities to support investigator-initiated clinical trial programs, target thought leaders and patient advocacy groups, provide continuing medical education and lobby for guideline inclusion for its products. A significant potion of those efforts will be focused on helping Ferinject expand into new markets.

Meanwhile, Aspreva's clinical team will be used to help design the pivotal program for PA21, and its business development group will seek new licensing opportunities. Galenica plans to combine the Aspreva and Vifor International teams with a new sales team, creating a new division known as Vifor Group.

Galenica also has divisions dedicated to health care information, logistical services and retail pharmacy management.