July 10 (Bloomberg) -- Novartis AG, the Swiss drugmaker that faced setbacks to three products last year, took a majority stake in Speedel Holding AG and offered to buy the rest in a deal valuing the company at 1.01 billion Swiss francs ($980 million).

The drugmaker has offered to pay 130 francs for each remaining share, a 94 percent increase over yesterday's close. Speedel's board is evaluating the bid and will make a decision within the next 10 days, Speedel said in a statement.

Novartis Chief Executive Officer Daniel Vasella cut jobs, replaced division heads and bought eyecare company Alcon Inc. because of drug setbacks and the threat of generic copies to its best-selling Diovan hypertension pill. The purchase will save Novartis royalty payments of as much as $700 million on Tekturna, the blood pressure medicine that the companies developed jointly, WestLB analyst Andreas Theisen said, and gives the company other experimental medicines for the disorder.

``We think this deal is sound,'' Theisen said in an interview today. ``They have the partnership anyway, and they are getting Speedel's pipeline on top of that.''

Speedel shares rose as much as 94 percent to 130 Swiss francs and were trading at 128.8 francs as of 11:52 a.m. in Zurich. Novartis shares declined 0.4 percent to 60.1 francs after falling as much as 1.7 percent.

Integration

Speedel, which develops drugs to treat heart and metabolic diseases, bought rights to products -- including Tekturna -- from Novartis and Roche Holding AG to build up its business. Tekturna is the only drug it has on the market right now.

The company's second-most advanced compound, SPP301 to treat kidney disease in diabetics, is in the second of three stages of human trials usually needed for regulatory approval. Speedel last year said it would continue testing the therapy even though it was linked to side effects. The company has two other drugs, including the high blood pressure treatment SPP635, in the same phase of testing.

Integrating Speedel into Novartis would enable Switzerland's second-biggest drugmaker to ``accelerate development of Tekturna/Rasilez, particularly in combination with other medicines, and further advance Speedel's pipeline of novel compounds,'' Joseph Jimenez, head of Novartis' drug unit said in the statement.

Citigroup analyst Amit Roy estimates that Tekturna had second-quarter sales of $51 million.

Struggle

Novartis has struggled with product delays and generic competition to the Trileptal epilepsy therapy and heart treatment Lotrel. The drugmaker said in January that it won't grow faster than peers until the end of the year as generics eat into sales.

The company started to cut costs after U.S. regulators delayed approval for the Galvus diabetes pill, pulled the irritable bowel treatment Zelnorm and rejected the Prexige painkiller.

Speedel Chief Executive Officer Alice Huxley was among the shareholders to sell to Novartis, which bought a 51.7 percent stake, bringing its total holdings to 61.4 percent. Huxley has offered to resign from the company, which she founded in 1998.

``In light of the currently very challenging environment for Speedel -- the upcoming financing needs and the depressed market sentiment -- I have agreed to a solution which promises a solid fundament for the future of Speedel, and further investments in the company's successful research and clinical development programs,'' Huxley said in the statement.

In May, the Swiss company said it had sufficient cash to see it through until the end of 2009.

To contact the reporters on this story: Carey Sargent in Geneva at at csargent3@bloomberg.net

Last Updated: July 10, 2008 06:11 EDT