Belgian pharma company UCB is to buy Germany's Schwarz Pharma for 4.4 billion euros, creating a new mid-sized group with a strong presence in neurology.

The deal contributes to a mini wave of mergers in Europe's pharma industry, being the third in five days to be announced in the sector.

On 21 September, Germanys Merck announced that it would acquire Italian biotech Serono, with Denmark's Nycomed declaring its offer for another German company, Altana, just days later.

UCB says its merger with Schwarz will create a much stronger combined company with revenues in excess of 3.3 billion euros. It says a greater presence in the US and Europe and a strengthened R&D pipeline are among the most compelling reasons for the move.

Another factor is that UCB's second biggest seller, allergy pill Zyrtec will lose its US patent in December 2007 and the company needs new revenue to replace this loss.

It has high hopes for Cimzia, a new monoclonal antibody to treat Crohn's disease, which it expects to generate annual peak sales in excess of $1 billion.

The drug was developed by Celltech, which UCB acquired two years ago, and it hopes Schwarz can similarly provide new blockbusters. Among the most promising in the German company's pipeline is lacosamide, currently in phase III for diabetic neuropathic pain and for epilepsy and a new Parkinson's Disease treatment, rotigotine, the first once-a-day drug delivery patch for the condition.

"The proposed combination with Schwarz Pharma is a leap forward in building UCB into a global biopharmaceutical leader focussed on selected disease areas, especially neurology. Inflammation and oncology," said Roch Doliveux, chief executive of UCB.

UCB say its acquisition of UK biotech company Celltech in 2004 and its subsequent integration into the larger company is proof of the management's ability to successfully complete such deals, and pledged to create a transition board with executives from UCB and Schwarz.

Doliveux said the company had "absolutely not" rushed into the deal because of other mergers and acquisition activity in the market.

"I think the recent consolidation may have started a few weeks ago, whereas we have certainly known each for quite a while and have been discussing for many, many months."

The deal will be financed by a combination of cash and shares.

The Schwarz family owns a 60% share of the company, its chief executive Patrick Schwarz-Schuette, who will join the UCB board, said there was no question of the family talking to any other company.

Schwarz-Schuette added that independent forecasts rated very highly the potential of the new combined pipeline.

"We were looking very recently together at data from analysts [forecasting] peak sales, whether they are probability adjusted or not, of the pipeline of all the biopharmaceutical companies in the world," he said.

"If you put the new combined entity, UCB plus Schwarz together, the peak sales value of this pipeline, probability adjusted or not, comes just second behind Genentech. Ahead of a lot of the other biopharma companies."

Analysts have generally welcomed the deal, although some say the purchase price of 4.4 billion euros is by no means a bargain, representing four times Schwarz's revenues from 2005.

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pharmafocus@wiley.co.uk