Even though it's roughly the same size as Biogen Idec (NASDAQ:BIIB) or Genzyme (NASDAQ:GENZ), you don't hear a lot about Swiss-based biotech company Serono (NYSE:SRA). That's changed recently, however, as the company has put itself on the block in the hopes of attracting a bid from a larger pharmaceutical company.

Serono's motivations for selling itself will resonate with those who have followed the biotech industry for a little while. The company had good initial success with products like Rebif for multiple sclerosis and Gonal-f for infertility but has found it difficult to build on that success. With Gonal-f sales petering out, Rebif threatened by the possible relaunch of Tysabri from Elan (NYSE:ELN) and Biogen, and a rather uncertain near-term pipeline, this might be the company's last best chance to attract a respectable bid for the next few years.

To be sure, fourth-quarter results weren't exactly stellar. Product sales were basically flat (up more than 3% in constant currency terms), and royalty/licensing income was down about 13%. Profitability was up at both the gross and operating level, but most of the improvement in the latter came from lower R&D spending -- not exactly the sort of growth that biotech investors clamor to see.

What should (and probably does) concern investors in Serono is the fact that Rebif accounts for more than 50% of the company's product sales and Gonal-f accounts for another 20% or so.

Making matters worse, the company's pipeline is a bit questionable, particularly because Serono saw two disappointing clinical failures in 2005 (for a cancer drug and a psoriasis drug). An oral drug for MS (cladribine) has a long and not-so-illustrious history, and I'm similarly not too optimistic on other drugs like zanolimumab (cancer) or Phenoptin (phenylketonuria). That said, Serono still has a fair bit of cash -- cash that could be deployed to license or acquire other new compounds (akin to what Forest Labs (NYSE:FRX) has been doing lately).

While it's been widely thought that GlaxoSmithKline (NYSE:GSK) and Novartis (NYSE:NVS) would be leading contenders to buy Serono, clearly a deal hasn't been reached yet. Maybe these two companies have looked closer and didn't like what they saw, or maybe the controlling family of Serono was asking for too much. Whatever the case, investors should go into this with their eyes wide open -- if a deal to sell the company isn't struck, management is going to have bear down and work hard to keep growing, and that might be more than some shareholders want to bear.

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Fool contributor Stephen Simpson has no financial interest in any stocks mentioned (that means he's neither long nor short the shares).