Large pharmaceutical companies are often on the lookout for small strategic acquisitions of companies that have a promising pipeline candidate in their portfolio. Sometimes, acquiring a company with a promising early-stage candidate makes sense instead of developing a product from scratch, which involves a lot of time.

Swiss oncology major Roche (RHHBY – Analyst Report) is all set to acquire a privately held biotechnology company, Adheron Therapeutics. Based in Berkeley, CA, Adheron has developed a revolutionary technology that disrupts cell adhesion to treat a variety of inflammatory and autoimmune diseases, such as rheumatoid arthritis (RA) and fibrotic diseases through a cell surface protein called Cadherin-11.

Details of the Acquisition

Per the terms of the agreement, shareholders of Adheron will receive an upfront cash payment of $105 million along with additional contingent milestone payments of up to $475 million.
The acquisition will give Roche access to Adheron’s lead candidate, SDP051, a humanized monoclonal antibody targeting Cadherin-11, which is a protein that acts as an adhesive between cells. Cadherin-11 is a key mediator of joint destruction in RA. Adheron has completed a phase I trial on SDP051, which assessed the safety and tolerability of the compound in healthy volunteers.

Our Take

We note that Roche has a strong presence in the oncology market backed by products like Herceptin, Perjeta and Kadcyla. The Adheron acquisition is a step toward Roche’s efforts to develop its portfolio beyond oncology to immunology. The company’s Actemra/RoActemra is already approved for the treatment of RA, a disease which affects 40 million people around the world.

Roche currently carries a Zacks Rank #3 (Hold). Some better-ranked health care stocks are Sanofi (SNY – Analyst Report), AbbVie Inc. (ABBV – Analyst Report) and Novo Nordisk A/S (NVO – Analyst Report). All three stocks carry a Zacks Rank #2 (Buy).

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