Celera Buys Axys to Help Stock Its Shelves

Celera Genomics(CRA Quote - Cramer on CRA - Stock Picks) is bolstering its drug development efforts by acquiring Axys Pharmaceuticals(AXPH Quote - Cramer on AXPH - Stock Picks) today in a $174.4 million stock deal.

Celera, best known as the company instrumental in mapping the human genome, has made no secret of its desire to build a more lucrative drug development business. Axys specializes in drug chemistry and early-stage drug testing, skills needed to identify, then develop, new drugs based on genetic research.

Terms of the deal call for Axys shareholders to receive $4.65 per share in Celera common stock. Based on Axys' 37.5 million outstanding shares, the deal is valued at $174.4 million. The $4.65 per share purchase price is a 34% premium to Axys' closing price Tuesday.

In Wednesday trading, shares of Celera were up 40 cents to $42.15. Shares of Axys rose 91 cents, or 26%, to $4.36.

In a morning research note, Banc of America Securities analyst James Reddoch said "Axys has a solid base of expertise in chemistry and screening on which Celera can build a powerful drug discovery program." Reddoch rates Celera a strong buy and his firm hasn't done banking for the company.

Reddoch adds that the Axys acquisition helps Celera look more like Millennium Pharamaceuticals(MLNM Quote - Cramer on MLNM - Stock Picks), another genomic research firm turning to drug development, although Millennium is still further ahead.

In addition to its overall drug chemistry expertise, Axys also has a small stable of experimental cancer drugs yet to be researched. Celera has said previously that it wants cancer research to be one of its main priorities.

Axys also has existing partnerships with large pharmaceutical companies like Merck(MRK Quote - Cramer on MRK - Stock Picks), Aventis (AVE Quote - Cramer on AVE - Stock Picks) and Bayer AG.

"As Celera continues its development as a therapeutic and diagnostic company, we will evaluate opportunities to achieve our goals," said Tony White, CEO of Applera, the parent company of Celera. "We believe the merger with Axys is a very important step in this process."