AstraZeneca has agreed to buy U.S. company Ardea Biosciences for $1.26 billion, giving it a new gout drug to bolster its weak pipeline in a deal that feeds a wave of M&A in the biotechnology sector.

The $32-a-share acquisition is worth $1 billion after deducting the existing cash held by Ardea, the companies said on Monday.

The planned purchase shows Britain's second-biggest drugmaker delivering on a promise to step up deal-making to fix its drug pipeline. Research head Martin Mackay told Reuters last month he was looking at some acquisitions in the "low billions" of dollars.

The main asset secured by AstraZeneca is an experimental drug called lesinurad, or RDEA594, that is in final-stage Phase III clinical tests for treating patients with chronic gout who have too much uric acid in their blood.

Although gout is not a huge market, independent analyst firm Decision Resources puts sales of drugs for the disease at $1.87 billion in 2019, with Ardea's product - which is likely to be submitted for approval in the first half of 2014 - vying for a sizeable chunk of that business.

AstraZeneca and Ardea said they expected the transaction to close in the second or third quarter, adding that shareholders representing around 30% of Ardea had agreed to vote in favour of the deal.

AstraZeneca is facing competition from cheap generic versions of several key drugs, including its big-selling antipsychotic Seroquel, at a time when its pipeline of new medicines is relatively barren.

Earlier this month AstraZeneca also signed a collaboration deal to jointly develop and sell five biotech drugs currently in Amgen's developmental pipeline.

"We're building up momentum," research head Mackay said on Monday. "We will continue to do these external deals. I think we will be talking about more as the year goes on."

AstraZeneca is more desperate for new products than many of its rivals but other Big Pharma companies are also scouring the biotech landscape for bargains, especially in cases where biotech stocks have underperformed recently.

Britta Holt, a director at Fitch Ratings, believes small to medium-sized acquisitions are likely to continue to be on the agenda of cash-rich Big Pharma companies, which are hungry for new medicines to put through their marketing machines.

Medimmune cloud

For AstraZeneca, the decision to pull the acquisition trigger follows a fallow period in the wake of its 2007 purchase of MedImmune for $15.6 billion - a deal that was slammed by investors and has failed to deliver significant new drugs.

Since then it has bought nothing for more than $400 million. But management is under pressure to do something more than simply slash costs, since it has forecast revenues will fall by more than 10% in 2012, due to patent expiries.

Some shareholders have argued for a management shake-up, including the replacement of David Brennan as CEO - something that could be on the cards when new non-executive chairman Leif Johansson takes over in September.

Analysts at Barclays, who upgraded the stock to equal weight from underweight on Monday, said AstraZeneca shares looked cheap but investors would need patience to see a turnaround.

"The difficulty for management is that success of its new products will not be established instantaneously. Investor distrust around potential M&A is also something that can only be disproven over months and years," they wrote in a note.

AstraZeneca's rivals, meanwhile, have also been actively hunting for bolt-on deals.

GlaxoSmithKline said last week it had offered to buy Human Genome Sciences for $2.6 billion, in a bid rejected by the U.S. firm, while Roche has tried unsuccessfully to buy Illumina for $6.8 billion.

At the same time, Amylin Pharmaceuticals, which spurned a $3.5 billion takeover bid from Bristol-Myers Squibb, has started reaching out to potential buyers, according to sources familiar with the situation.

AstraZeneca, which had cash reserves of $7.6 billion at the end of December, has also been mentioned as a potential bidder for Amylin. Research head Mackay said the company looked at "everything" but declined to comment on Amylin specifically.

Ardea, which also has a cancer drug in Phase I and Phase II trials that is licensed to Bayer, was advised by Bank of America Merrill Lynch. Morgan Stanley acted for AstraZeneca.