Less than a day after Chiron Corp. announced its Liverpool manufacturing facility could again produce flu vaccine, Novartis AG offered $4.5 billion to acquire the company.
Novartis, of Basel, Switzerland, holds a 42.2 percent stake in Chiron. Its proposal, if accepted, would involve the purchase of 112 million fully diluted shares for $40 each - a premium to Chiron's closing stock price Wednesday. That would give Novartis full ownership of Chiron, a company it would keep as a subsidiary.
Chiron's shares (NASDAQ:CHIR) climbed $6.49 Thursday, or 17.8 percent, to close at $42.93.
"We acknowledge receiving an offer from Novartis, and our board will thoroughly evaluate the offer in due course," said David Weiskopf, vice president of corporate communications at Chiron. "We got the offer late last night and are setting all of the appropriate wheels in motion."
The acquisition is subject to approval by a majority of the Chiron shares not owned by Novartis. Neither company has said when a vote might occur.
Wednesday Chiron said the FDA cleared its Liverpool, UK, manufacturing facility to produce between 18 million and 26 million doses of Fluvirin for the U.S. market this coming influenza season. British authorities suspended production there last year due to sterility issues, and Chiron failed to produce any vaccine for the U.S. market for 2004-2005, causing a severe shortage. The company was expected to provide about half of the country's supply. (See BioWorld Today, Sept. 1, 2005.)
This summer, Chiron worked with the FDA, responding to observations made during inspection. The company received the green light earlier this week to resume production of Fluvirin.
About the clearance, Weiskopf said: "We're very pleased. It's a very positive step forward. We've cleared a major hurdle. We just have a few more bases to touch before reaching our ultimate goal of having Fluvirin shipped to the U.S. market."
But while FDA support of Chiron's remediation plan is a relief for the company, it's not what prompted Novartis to make an offer.
"The timing is not related to that announcement," Novartis spokesman John Gilardi told BioWorld Today. "You have to take a step around and look at it from the other way."
Chiron's four independent directors - not employees of either Chiron or Novartis - approached Novartis earlier this year and asked the company what its plans were for its stake in Chiron. Novartis bought the stake in 1995 as an investment. At the time, it owned 49 percent of Chiron, but that has since been diluted to 42.2 percent.
"We turned around and we said we needed to do due diligence in order to make an assessment," Gilardi said.
Novartis looked at Chiron's books first to understand its financial position before making the offer to acquire the remaining shares.
It has not been an easy year for Emeryville, Calif.-based Chiron. The flu vaccine debacle led to disappointing earnings and higher expenses. In the second quarter Chiron reported an adjusted income of $16 million, or 8 cents per share - only half of the consensus estimate, and a drop from $39 million, or 20 cents per share, the previous year. Chiron's Fluvirin manufacturing facility cost the company $14 million in idle facility and remediation costs, as well as $5 million in Fluvirin-associated legal costs, during the quarter. (See BioWorld Today, July 29, 2005.)
Chiron also announced this summer that it would not provide Begrivac flu vaccine to the German and UK markets due to manufacturing problems. Yet Novartis' offer of $40 per share is a 10 percent premium to the company's closing stock price on Wednesday of $36.44. (See BioWorld Today, July 21, 2005.)
"We think this is a company whose operations are complementary to ours," Gilardi said.
Founded in 1981, Chiron has more than 5,300 employees worldwide. It has more than 50 products to detect, prevent and treat disease, and its 2004 sales were $1.7 billion. The company operates in three business units: vaccines, blood testing and biopharmaceuticals.
Recent events include an FDA approvable letter for the lung transplant drug Pulminiq. The inhaled cyclosporine is intended to increase survival and prevent chronic rejection in combination with standard immunosuppressive therapy.
Chiron ended its second quarter with about $584 million in cash and short-term investments.