British drug giant GlaxoSmithKline PLC is buying vaccine maker ID Biomedical Corp. of Vancouver for $1.7-billion.
Under the deal announced Wednesday, Canada's main supplier of influenza vaccines will become a wholly owned subsidiary of London-based GlaxoSmithKline.
ID Biomedical shareholders will receive $35 a share, a 13 per cent premium over Tuesday's closing share price and a 30 per cent premium over the 20-day average share price.
At closing, GlaxoSmithKline will also assume $77-million (U.S.) of ID Biomedical's debt.
ID Biomedical CEO Anthony Holler said the deal is the "logical next step" in his company's development.
"Although we are confident we can compete in the flu business, there is no question this is an extremely capital-intensive global product and ID Biomedical would have required significant resources to complete our strategic plans," Mr. Holler told a conference call with analysts.
"This transaction eliminates the need for ID Biomedical to raise several hundred million dollars over the next couple of years. These financings certainly could have diluted our projected future value in terms of share price."
GlaxoSmithKline has also agreed to lend Vancouver-based ID Biomedical up to $120-million to repay term debt and finance cash requirements until the anticipated closing date.
"GSK's proposed acquisition of ID Biomedical reflects its continuing commitment to address the public health need for increased supply of influenza vaccines," GlaxoSmithKline said in a release.
The boards of both companies have unanimously approved the deal, which is still subject to approval by regulators and ID Biomedical's shareholders.
The transaction is expected to close by the end of 2005 or early 2006. Trading in ID Biomedical shares had been briefly halted Wednesday, pending the announcement.
Shares in the company gained $4.37, or about 14 per cent, to $35.35 on the Toronto Stock Exchange after trading resumed.
Earlier this year, ID Biomedical received fast-track designation from the U.S. Food and Drug Administration for its Fluviral injectable flu vaccine, setting the stage for sales to begin in the United States next year.
The company had suggested it was progressing well with its expansion of the Quebec City and Laval, Que., facilities and remains on schedule to apply for the biologics licence application by the end of the year.
By using both facilities to maximize production capacity, the company hopes total production capacity will exceed 75 million doses in 2007.
For the quarter ended June 30, ID Biomedical reported a loss of $32.5 million or 75 cents a share. That compared with a loss of $10.9-million or 26 cents a share for the same period last year. Revenue was $13-million versus year-ago $2.7-million.
At June 30, ID Biomedical had $113.3-million in cash and cash equivalents.