Merck Agrees to Acquire Rosetta In Bid to Enhance Research Arm

Wall Street Journal 11may01

Merck & Co. agreed to acquire biotech research concern Rosetta Inpharmatics Inc. in a stock swap valued at about $620 million.

The acquisition fits Merck's goal of strengthening its internal research capabilities, particularly in the area of genomics, said Anthony Ford-Hutchinson, executive vice president at Merck Research Laboratories, in a prepared statement Friday.

Rosetta, Kirkland, Wash., focuses on informational genomics -- combining informatics and genomics to accelerate and enhance drug discovery as well as improve agricultural products. Through informatics, companies use software to help generate and analyze large amounts of data churned out by the Human Genome Project.

"Joining Merck allows us to move into our next stage of development, which is beyond providing tools and software and into direct involvement with drug discovery," Dr. Stephen Friend, Rosetta's chairman and chief executive, said Friday in a prepared statement.

Merck plans to keep Rosetta's existing plants in Kirkland and Bothell, Wash. Rosetta will continue to operate as a unit of the drug company under the name Rosetta Inpharmatics Inc. Mr. Friend will become president of Rosetta, and vice president of basic research at Merck Research Laboratories.

Under the agreement, each Rosetta share will be converted into 0.2352 shares of Merck. Based on Merck's price of $76.52 at 4 p.m. Thursday on the New York Stock Exchange, each Rosetta share is valued at $18, an 82% premium to the $9.91 closing price Thursday on the Nasdaq Stock Market. The $620 million price tag includes Rosetta's 32.2 million outstanding shares and options.

Merck, Whitehouse Station, N.J., said the deal, which is expected to close in the third quarter, is subject to shareholder and regulatory review. Rosetta shareholders owning about 30% of the company's common stock supported the transaction, Merck said.

Shares in Rosetta, which went public last August, soared $7.34, or 74%, to $17.25 in Nasdaq trading early Friday. Merck shares fell $1.05 to $75.47 on the Big Board.