BioWorld International Correspondent

LONDON - AstraZeneca plc has agreed to buy Arrow Therapeutics Ltd., an antiviral specialist, for $150 million cash.

The company will continue to operate as an independent unit, maintaining its facility in London, with Ken Powell, co-founder and CEO, as its head.

"I'm very pleased. This is an extremely good exit both for investors and for the company," Powell told BioWorld International. "We are not giving up the baby, but allowing it to grow into a teenager."

The company has raised £43 million (US$84.6 million) in three private funding rounds from investors, including GIMV, of Belgium; Atlas Venture of Waltham, Mass.; Alta Partners, of San Francisco; NIF Ventures and ITX, both of Japan; Techno Venture Management, of Germany; and 3i plc, Northern Venture Managers, Scottish Widows Investment Partnership and Unibio, of the UK.

For AstraZeneca, it is the third big ticket deal in two days, following news of a $500 million collaboration with Argenta Discovery Ltd., of Harlow, UK, in chronic obstructive pulmonary disease, and a $310 million agreement with Palatin Technologies Inc., of Cranberry, N.J., in obesity.

The $150 million price tag is not as large as some recent deals, such as the $454 million acquisition by GlaxoSmithKline plc of Domantis Ltd. - the domain antibody company, which had raised $83 million in private funding - or even the $210 million AstraZeneca paid for KuDOS Ltd. in December 2005. The Cambridge, UK-based DNA signaling company had raised the same amount of venture capital as Arrow.

Powell said that the $150 million being paid "is a very sensible price. It is not inflated, but for our investors, it is cash. We're in a situation where much of the value in Arrow is to come. Our value is in what we've shown we can do, which is to go from a platform technology to target discovery, preclinical development and take products into the clinic."

Arrow was founded in 1998 around technology from University College London for the rapid identification of genes that are essential to bacterial or viral survival. It has used these targets as the basis for small-molecule drug discovery in antivirals, and has three products in clinical trials currently.

The lead product, against respiratory syncytial virus, was partnered in a $217 million deal to Novartis AG, of Basel, Switzerland, in July 2005, and is in Phase II trials. Two products against Hepatitis C entered clinical development recently.

The three AstraZeneca deals in the past two days came on top of a large-scale deal with Bristol-Myers Squibb Co., in diabetes and the news of a $100 million investment in anti-infectives research at its research and development facility in Boston, both announced in January.

The London-based company has faced some big setbacks, too, most recently last month when NXY-059 (cerovive), being developed with partner Renovis Inc., of South San Francisco, failed in a 2,300-patient Phase III trial in stroke.

Then in November, AstraZeneca said it would have to carry out a further Phase IIb trial of CytoFab in treating septic shock, following consultation with the FDA and the European regulator European Medicines Agency.

The company and its partner Protherics plc had said earlier that a single Phase III starting in 2007 would be enough for registration.

AstraZeneca also has had notable failures in its in house pipeline, such as the Phase III drug Galida, pulled in May 2006, and the anticoagulant Exanta, which flopped a year ago.

Acquiring biotech assets is a central part of AstraZeneca's strategy for filling its impoverished-looking pipeline, but it has stressed also that it wants to preserve the entrepreneurial culture of companies it acquires.

Although Arrow will be an independent unit, Powell said he hopes not to be too much at arms' length. "We want to get access to the toy box of technology in AstraZeneca. It will allow us to do things we can't at the moment, because we don't have the resources."