Scios Shares Rise 22% on Reports of Offer From J&J;

Scios Inc.’s shares soared nearly 22% on Friday on reports that pharmaceutical giant Johnson & Johnson might buy the small Sunnyvale, Calif.-based biotechnology firm.

J&J; is said to be willing to pay $2 billion, or $45 a share, for the company. The report pushed up Scios’ shares by $7.51 to $42.20, a 52-week high, on Nasdaq.

Scios, a 23-year-old unprofitable firm with just one product, has an experimental rheumatoid arthritis drug that is generating big buzz in the drug industry. The company confirmed that it has been looking for a deep-pocketed partner to help it develop the compound called SCIO-469.

Scios’ drug would compete with J&J;’s intravenous biotech product Remicade.

This week, Scios Chief Executive Richard Brewer said that he had narrowed discussions to three unnamed candidates, but that no deal was expected before the company’s fourth-quarter earnings announcement Feb. 13. Brewer wasn’t available for comment Friday.

The company’s directors met Friday and couldn’t be reached for comment.

Scios, in a statement, confirmed that it was in talks about partnerships or mergers with various parties, raising the possibility that a bidding war might break out. J&J; declined to comment on its offer, first reported in the Wall Street Journal.

Scios’ experimental pill belongs to a new class of anti-inflammatory medications that could prove useful against diseases including heart disease and cancer. Virtually every large pharmaceutical company has tried to develop such a pill, but no company is as advanced as Scios.

Analysts said Friday that Scios’ drug, if successful, would strengthen J&J;’s franchise in rheumatoid arthritis, a severe joint disease. Remicade did more than $1 billion in sales last year, but because the drug is administered intravenously it can cost patients or their insurance companies up to $24,000 annually.

Brewer has estimated that Scios’ more convenient pill treatment would cost $6,000 to $8,000 annually, posing a threat to rival drugs such as Remicade.

Beyond that, analysts said, Scios and J&J; market complementary drugs for severe heart disease that are sold to hospitals for emergency use. Scios’ existing drug, Natrecor, is used for congestive heart failure patients and is expected to have sales of $170 million this year. J&J;’s drug ReoPro for acute angina is a $300-million drug.

“It’s peanut butter and jelly,” said Mark Monane of Needham & Co of the potential match.

Monane said J&J;’s interest in Scios has been clear for months. At Scios’ meeting with financial analysts in New York last summer, five J&J; representatives sat in the audience listening to the presentation, he said.

Other companies thought to be interested in striking a deal with Scios are Merck & Co. and GlaxoSmithKline, both of which invested in developing an anti-inflammatory similar to the Scios drug. A Glaxo representative declined to comment, and a Merck spokesperson couldn’t be reached.

On Friday, J&J;’s shares fell 28 cents to $51.84 on the New York Stock Exchange.