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Arrow Therapeutics: acquired but autonomous

In February, AstraZeneca bought London-based Arrow Therapeutics. Six months on, how has the acquisition changed the smaller company?

Andrea Chipman

Arrow HQ

The acquisition of small, privately held specialist companies by big pharma is nothing new, but the large degree of independence AstraZeneca has granted its new subsidiary Arrow Therapeutics follows a growing trend within mergers and acquisitions in the industry.

Arrow, with just over 50 employees, develops antiviral therapies, with an emphasis on hepatitis C virus (HCV) and respiratory syncytial virus (RSV). These research lines helped to attract a $150 million bid from AstraZeneca, which had previously announced a strategic shift to make infection and antibacterials a key component of its research and therapies. The two companies closed the deal on 2 March 2007.

“AstraZeneca has spent a lot of time analysing where opportunities are in the pharmaceutical area and decided that antivirals was one area where there was a need,” Arrow Chief Executive Ken Powell told Nature Network London. “They looked at RSV and HCV particularly, and saw Arrow as an ideal opportunity to acquire not only the existing company but also expertise to make them an antiviral group very quickly.”

Hands-off our culture

Powell described how, nine years after its foundation, Arrow had reached a decision stage. Should it list independently on the financial markets, merge with a similar company that was already listed, or team up with a large pharmaceutical company on the acquisition trail? As a venture-capital-funded company, Arrow decided that the acquisition path offered the best chances for its investors to earn sizeable financial returns and make a fast exit.

Along came AstraZeneca. The new parent stated its clear intent on keeping a hands-off approach to Arrow.

“We’ll look to preserve the entrepreneurial culture of Arrow Therapeutics, while at the same time gaining the benefits available to us from applying the breadth and depth of AstraZeneca’s global capabilities,” AstraZeneca Executive Vice President of Discovery Jan Lundberg said following announcement of the deal in February 2007.

It’s a model that AstraZeneca had followed with its earlier acquisition of UK biotech firm Cambridge Antibody Technology and, later, US-based Medimmune.

Others in the industry have also recognized the benefit of acquiring research ‘partners’ who retain a large degree of autonomy: among them, Swiss pharmaceutical company Roche, which purchased a majority stake in California biotech company Genentech in 1990; and Johnson & Johnson, which boasts a family of subsidiary companies.

London location a plus

Since the completion of its acquisition, Arrow has remained a self-contained unit, with its own research pipeline, from compounds to testing to full clinical development.

Although the company has lost several members of senior management—including Chief Financial Officer Ian Garland, who left to take up the Chief Executive post at Cambridge biotechnology company Acambis—it has remained in its research headquarters in London, in a separate location from its parent.

Ken Powell

“Being acquired by AstraZeneca meant we continue to work in London but have a firm foundation behind us,” Powell added. Indeed, Arrow’s London location and ability to attract “a different pool of talent” than companies located in more rural locations was viewed as a plus by AstraZeneca, Powell said, noting that most of the company’s staff previously worked for other pharmaceutical and biotech companies in or around the capital.

“My personal view is that research in very large sites and huge groups does not work well – whenever you grow to over a thousand people, communication becomes logarithmically more difficult,” Powell said. “We’re beginning to see a move from pharmaceutical companies to realize this, and go out and acquire smaller companies that are more focused.”

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