Shrugging off investor concerns that the company was paying too much, Johnson & Johnson (J&J) was all set to announce the acquisition of Alza Corporation, the California-based drug delivery and drug specialist for an estimated $11.9 billion in an all-share transaction. According to sources close to the deal, J&J, one of the 30 companies in the Dow Jones Industrial Average, has offered a fixed exchange rate of 0.49 J&J shares for each Alza share.

News about the impending deal saw the J&J scrip lose 3.2 per cent on fears that the acquisition would dilute the company’s earnings. The deal, the largest by J&J so far, would plug a perceived weakness at J&J, a conglomerate with more than 190 operating companies that has great plans to expand in pharmaceuticals. Alza has promising products under development, and a strong presence in urology and oncology.

While Ernest Mario, Alza's chairman and chief executive, is likely to stay on, company insiders say that several senior executives below him may leave on fears that the company will lose its independence under J&J. One of the attractions for J&J is Alza's expertise in drug delivery, the methods by which patients take medicine. Alza has well developed means of administering biotechnology drugs, which are typically large molecules not in pill form, and these include more comfortable means, such as patches or implants. The acquisition could place J&J well to reap benefit from biotech advances in the long run.