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Chiron Agrees to Merge with Novartis
PharmaManufacturing.com
10/31/2005
Chiron Corp. (Emeryville, Calif.) and Basel, Switzerland-based Novartis announced Oct. 31 that they have entered into a definitive merger agreement under which Novartis will acquire all of the shares of Chiron that it does not currently own. Novartis will acquire approximately 113 million Chiron shares, or 58 percent of all Chiron shares, for $45.00 per Chiron share, or a total of approximately $5.1 billion, in cash.
"Chiron has recently made tremendous strides, including returning to the U.S. influenza vaccine market, building a compelling oncology pipeline and extending our growth in the Blood Testing business. We can all be rightfully proud of these achievements," said Howard Pien, chief executive officer of Chiron. "Chiron's non-Novartis directors have unanimously determined that this transaction with Novartis is in the best interests of Chiron's shareholders. We believe that Chiron's businesses will have significant growth opportunities as part of Novartis, which will enable us to continue to bring innovative products to patients."
Chiron's global Vaccines business, the fifth largest in the world and one of the largest suppliers of influenza vaccines, provides Novartis with entry into an increasingly attractive segment of the healthcare market and a promising source of growth. Chiron's Blood Testing business adds a high-value profit driver to Novartis and may offer a potential platform for future developments in molecular diagnostics. Chiron's BioPharmaceuticals business, which includes a portfolio of marketed products for cancer and infectious diseases as well as promising oncology research and development programs, will strengthen Novartis' specialty pharmaceutical portfolio and oncology pipeline.
The suitor's point of view
From Novartis' perspective, the transaction will strengthen Chiron's capabilities to better meet the needs of patients with high-quality vaccines and provide Novartis entry into this dynamic growth market. Dr. Daniel Vasella, Chairman and CEO of Novartis, remarked, "Our plan is to turn around the Chiron vaccines business, which will require investments in R&D and manufacturing to increase quality and capacity, so that we can better meet customer demand and address public health needs. Together with the dynamically growing diagnostics business, vaccines will form a new division, while biopharmaceuticals will be integrated into the existing pharmaceuticals business of Novartis."
Novartis is gaining entry to the global vaccines market, which is expected to experience accelerating growth, more than doubling in sales in the next five years to over $20 billion in 2009 from about $9.6 billion in 2004, according to industry surveys.
Chiron is the world's fifth-largest vaccines business, currently offering more than 30 novel and conventional vaccines for adults and children. The company had 2004 vaccine revenues of $510 million.
Ranked as one of the largest suppliers of influenza vaccines worldwide, Chiron's product portfolio also includes vaccines against meningococcal C, rabies, tick-borne encephalitis, haemophilus influenzae type B (Hib), polio, mumps, measles and rubella (MMR) as well as diphtheria, tetanus and pertussis (whooping cough).
Other growth vehicles
This acquisition also provides access to Chiron's blood testing business, which offers strong near-term growth opportunities and potential for access to the emerging growth segment of molecular diagnostics. Chiron products are used to test more than 25 million blood donations annually in North America, Europe and Asia-Pacific. The Procleix assays and systems incorporate nucleic acid testing (NAT) technology to detect viral RNA and DNA in donated blood and plasma during the very early stages of infection, when those infectious agents are present but cannot be detected by immunodiagnostic tests. Annual revenues reached $494 million in 2004.
Future growth is expected from further geographic expansion outside of the U.S. and through the development of new products with Chiron's partner Gen-Probe Incorporated. Chiron also has a collaboration with Ortho-Clinical Diagnostics to market immunoassay screening and supplemental tests for infectious diseases, including hepatitis and HIV. In addition, Chiron markets recombinant antigens and is working to expand its portfolio of immunoassays.
Novartis intends to integrate the biopharmaceuticals activities of Chiron, which had revenues of $596 million in 2004, into its Novartis Pharma division. Chiron's product portfolio includes the flagship product TOBI (tobramycin solution for inhalation), an antibiotic for infections associated with cystic fibrosis; Proleukin (aldesleukin), the first treatment approved for metastatic kidney cancer and metastatic melanoma; and Betaseron (interferon beta-1b), a multiple sclerosis drug sold by marketing partner Schering AG.
The development pipeline includes several oncology products with research activities targeting the most promising approaches in cancer therapy, including monoclonal antibodies and molecular oncology.
The merger agreement is subject to the approval of the majority of Chiron's shareholders (other than Novartis), U.S. and European regulatory approvals and other customary closing conditions. It is expected to be completed in the first half of 2006.
For more information about Chiron, visit www.chiron.com. For more on Novartis, visit www.novartis.com.