Novartis offers $4.5bn for control of Chiron

By Phil Taylor

- Last updated on GMT

Related tags: Chiron, Influenza vaccine

Novartis has offered to buy the remaining shares it does not
already own in US headquartered Chiron for $4.5 billion, laying to
rest speculation in the marketplace that it had been eyeing up
Germany's Schering AG.

The move will give Novartis a significant stake in the global vaccines market, as well as products in blood testing and biopharmaceuticals, and comes on the back of an acquisitive period by Novartis, albeit mainly via its generics subsidiary Sandoz which has been buying up firms in what has become something of a generics sector 'land grab' along with arch rival Teva Pharmaceutical Industries.

In 2005, Novartis has spent $8.0 billion to acquire Hexal and Eon to build up its generic portfolio, while the company also bought the over-the-counter medicines operations of Bristol-Myers Squibb for $600m.

The Swiss company has offered to acquire the remaining 57.8 per cent of Chiron for $40.00 a share in cash valuing the vaccine specialist at $7.8 billion. Novartis bought 42.2 per cent of Chiron in 1995.

Chiron has seen its shares slump over the last months, after production problems emerged at its vaccines facility in Liverpool, UK, which led to shortages in the supply of flu vaccines in the 2004/5 flu season.

The news came immediately after the US Food and Drug Administration issued a favourable opinion on Chiron's responses and proposed corrective action relating to the Liverpool plant. It also follows the UK's Medicines and Healthcare products Agency's conclusion in March that Chiron could resume operations.

However, the US firm cautioned that it will still need to receive supplemental approvals from the FDA before it can start supplying Fluvirin to the USA again, and Chiron is still at risk of losing market share to other vaccine manufacturers, including GlaxoSmithKline, which has just bought a new facility to make flu vaccines from Wyeth. Meanwhile, Chiron also warned recently that it had problems at another plant, in Germany, serving the UK and domestic markets with flu vaccine.

Chiron issued a statement saying that its board of directors - excluding three members from Novartis - "will thoroughly evaluate the offer in due course."​ For its part, Novartis said it hoped that the transaction "could be completed promptly, but there can be no assurance that an agreement will be reached."

Analysts from Deutsche Bank said Novartis may have to pay more for Chiron than the 10 per cent premium, despite the manufacturing problems at the company. The deal gives Novartis a leading position in the growing vaccines business at a stroke. Lehman Brothers suggests that the global vaccines market may reach $10.4 billion (€8.3 million) by 2007.

Related topics: Markets & Regulations

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