Chiron Corp. rejected Novartis AG's offer to acquire the company, calling the valuation of $40 in cash per Chiron share inadequate.

Novartis, of Basel, Switzerland, has been Chiron's biggest shareholder for the last 10 years. It now owns 42 percent of its stock and offered to buy the remaining 58 percent of Chiron - 112 million fully diluted shares - for a total of $4.5 billion. (See BioWorld Today, Sept. 2, 2005.)

Chiron's independent directors - neither employees of Chiron nor Novartis - evaluated and turned down the offer.

Over the years, Chiron has "regularly discussed with Novartis a number of strategic initiatives, including mergers, significant acquisitions and other transactions, including transactions initiated by Novartis," it said through a statement released Monday. "As a result, Chiron has had an ongoing dialogue with Novartis regarding its intentions with respect to its investment in Chiron. After thorough analysis and consideration of Novartis' offer to acquire the shares of Chiron it does not already own for $40 per share in case, the independent directors of Chiron have determined that this offer is inadequate."

A Chiron spokesman declined Tuesday to give specifics on the board's actions.

Whether or not Novartis will counter offer is unclear, but Chiron's stock (NASDAQ:CHIR) moved up Tuesday, rising 72 cents to close at $43.51.

Last week, Chiron, of Emeryville, Calif., said the FDA cleared its Liverpool, UK, manufacturing facility after production was shut down last year because of sterility issues. Chiron was expected to produce half of the U.S. supply of flu vaccine last year, and the idle facility cost Chiron $14 million, another $5 million in legal fees and $8 million in remediation expenses.

Chiron expects to produce 18 million to 26 million does of Fluvirin for the U.S. market for the 2005-2006 flu season, though it has announced it will not provide any Begrivac flu vaccine to the UK or Germany, resulting in a $15 million charge to write off the entire inventory.

With the Begrivac charge and costs related to its Liverpool facility, Chiron's income on a non-adjusted basis was $49,000 for the second quarter, or less than 1 cent per share.

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