Genzyme Slips on Acquisition

The biotech company is buying rival Ilex Oncology for $1 billion.
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Updated from 8:08 a.m. EST

Genzyme

(GENZ)

shares were down Friday after its announcement late Thursday that it would acquire rival biotech

Ilex Oncology

(ILXO)

for about $1 billion, or $26 a share.

San Antonio, Texas-based Ilex is best known for its leukemia drug Campath and is said to have two more promising cancer drugs in its pipeline. Ilex shares gained $3.54, or roughly 17%, to $24.91. Genzyme shares were down $2.76, or about 5%, to $50.52.

Genzyme said that making the acquisition fulfills its "goal of building an oncology business."

The stock-swap deal is expected to close by midyear and represents a 22% premium over Ilex's closing price Thursday.

Cambridge, Mass.-based Genzyme said the deal will dilute earnings in the short term but begin to pay off in 2006.

Genzyme released fourth-quarter earnings last week. Excluding special items and amortization, the company had net income of $86.8 million, or 38 cents, meeting the consensus estimate, according to Thomson One Analytics. That compares to a profit of $74.1 million, or 34 cents a share, in the same period in 2002. Revenue climbed 61% to $482.2 million from $298 million. The company's 2004 guidance was also roughly in line with analysts' estimates.

In its most recent quarter, Ilex had a loss of $17.8 million, or 46 cents a share, compared with a loss of $11.1 million, or 34 cents, in the year-ago period, which beat the consensus estimate. Revenue was flat at $7.25 million.