Schering, the German pharmaceuticals company, is preparing to spend several hundred million euros to secure US manufacturing rights to Betaseron, its top-selling drug used to treat multiple sclerosis, from Swiss rival Novartis.
Negotiations could be tough, however.
Schering will be keen not to overpay, and its Swiss counterpart will be unwilling to do it any favours - Novartis recently declared its ambition to establish itself in the market for treatments of the central nervous system.
Hubertus Erlen, chief executive, called analysts' estimates that the move might cost Schering €1 billion ($1.2 billion) "speculative".
However, he noted that the company was trying to extend existing patent protection, due to run out in two years, to new indications.
Schering pays Chiron, the US drugmaker being bought by Novartis, annual royalties of about $180 million for manufacturing Betaseron in the US until 2008.
But the impending takeover gives it the right to buy back these rights and the production facilities.
At a time when Schering is facing delays in introducing several new products, Mr Erlen said Betaseron sales could grow up to 9 per cent this year after notching up €867 million in 2005.
The pharmaceutical company reckons sales could top €1 billion in the end.
Strong growth in sales of Betaferon, as Betaseron is known in Europe, helped increase Schering's overall sales by 8 per cent to €5.3 billion last year, and operating profit rose by 21 per cent to €926 million.
Mr Erlen said the resulting profit margin of 17 per cent would rise by three points by 2008.
The Berlin-based company said the pay-out to share-holders would rise by € 0.20 to €1.20 and it pledged to buy €500 million of its own stock, its biggest-ever purchase in the course of a year since starting the buy-back programme in 1998.
Mr Erlen said Schering had €1.2 billion of cash and, even after paying for the share buy-backs, it would have enough for acquisitions thanks to strong cashflow this year.
After months of jitters about Schering's product pipeline, investors were responsive to the good news.
On the Frankfurt stock exchange, Schering shares closed 3.3 per cent higher yesterday at €58.29, just off the session's highof € 58.94.
