Novartis Bids for All of Chiron

Novartis last week offered to acquire the shares it does not already own of U.S. vaccines maker Chiron for $40 per share or $4.5 billion in cash. The Swiss drug company currently holds a 42.2% stake in Chiron.

The offer, announced Thursday, capped an up-and-down week for Chiron, which has experienced serious interruptions at vaccine plants in the U.K. and Germany over the past year.

Chiron's report of a favorable FDA inspection of its Liverpool, England, facility, where it manufactures the influenza vaccine Fluvirin for the U.S. market, was followed by word that FDA has approved a competing vaccine, GlaxoSmithKline's Fluarix, for the upcoming flu season. Last week, GSK also announced that it will purchase Wyeth's vaccine plant in Marietta, Pa.

A Novartis spokesman says his firm, which has held its stake in Chiron since 1995, considers vaccines a $10 billion-per-year world market in which there is a potential to develop blockbuster products. "We see a move from commodity vaccines into high-value products--preventative vaccines and therapeutic vaccines in areas such as cancer," he says.

Standard & Poor's analyst David Lugg says Novartis has "always spoken of [its stake in] Chiron as a strategic investment." The bid represents a 10% premium to the company's recent stock price, but Lugg notes that Chiron's stock had reached nearly $60 per share before its manufacturing problems.

Jennifer Chao, a senior analyst at Deutsche Bank, says the 10% premium offered by Novartis "represents the low end of an acceptable range of from $40 to $44 per share."

Novartis has been on an acquisition tear. It recently completed the acquisition of sister generic drugmakers Hexal and Eon Labs and earlier purchased the over-the-counter drug business of Bristol-Myers Squibb. In recent years it also has made overtures to drug industry rivals Aventis and Roche.