BTG has agreed to buy Protherics for about £218 million in a deal that will create one of Britain’s biggest biotech companies.

The tie-up will create a group worth about £400 million and bring about £20 million in annualised savings within three years. The deal should propel the new company into the FTSE 250.

The deal is only the latest in a wave of consolidation that has taken hold in the beleagured sector that has been spurred by small, cash-hungry companies seeking alliances to stretch cash reserves.

Larger pharmaceutical companies seeking new products to pad out their depleted drug development pipelines have also found that small biotech groups are so cheap that it is sometimes better value to snap them up than to pay upfront in a licensing deal.

The deal did not meet with universal approval. A number of analysts said the merger was merely a sign of troubled times in British biotech, as investors lose their appetite for risk and stock plummets.

Paul Cuddon, analyst at KBC Peel Hunt, said: “If it was a more buoyant market maybe there would be more money available for Protherics to develop their own strategy.” He added that investors had hoped for a cash buyout by a giant such as AstraZeneca when Protherics said last month that it had received several approaches. Mr Cuddon said: “A merged company creates less risk, but also less focus.”

Protherics, which has a handful of products on the market including a treatment for rattlesnake bite, has been burning through money as it develops other products. BTG will gain a steady, if small, trickle of royalties from Protherics’s products, while Protherics gains access to more cash to help develop its pipeline, diversifying risk for both sides.

Neil Mackinson, head of European healthcare investment banking at Piper Jaffray, which was joint financial adviser to BTG, said: “BTG wants to become a sustainable business and the way to do that is to have marketable products.” He said some drugs in development were likely to be put on hold or shelved, bringing R&D savings.

Protherics shareholders will receive 0.291 new BTG shares for every one Protherics share held. That values Protherics at 60p a share – a premium of 45.5 per cent to the closing price on September 17 – based on a BTG share price of 206p.

Protherics shares rose 5¾p, or 13.9 per cent, to close at 47p, while BTG stock, which has risen 115 per cent in the past year, fell 30p, or 14.9 per cent, closing at 171p.

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