BioWorld International Correspondent

LONDON - Chiron Corp. plans to acquire PowderJect Pharmaceuticals plc in an agreed-to cash offer valuing the vaccines manufacturer at £542 million (US$878 million).

The bid of £5.50 per share is slightly ahead of Friday's closing price of £5.30 and a considerable premium to Chiron's informal offer of £4.50 per share that PowderJect rebuffed in November.

PowderJect's shares rose 13.5 pence to £5.435 when the news was announced Monday morning.

PowderJect had been looking for an acquisition to broaden its base away from its dependence on Fluvirin, the world's second biggest selling flu vaccine. CEO Paul Drayson said, "The board believes that the offer from Chiron provides the best alternative to achieve that goal."

With an inducement fee of £4.2 million payable by PowderJect if the deal does not go through, it is unlikely that there will be any other offers. Chiron already has acceptances from the PowderJect board, which holds 8.7 percent of the shares in aggregate, and from Drayson family trusts, which own 10.4 percent. Emeryville, Calif.-based Chiron is financing the acquisition from existing cash resources.

Last week, Oxford-based PowderJect proposed the first ever dividend by a UK biotechnology company of 3 pence per share, as it reported pre-tax profits for the year ended March 31 of £25.3 million. That proposed dividend will not be paid while the offer remains open for acceptance.

The two companies said the combination of the world's fifth and sixth biggest vaccines companies would create the world's second largest supplier of flu vaccines, with a combined turnover of more than $1.5 billion. Chiron is the second largest supplier of flu vaccines outside the U.S., while PowderJect is the second largest supplier in the U.S. market. PowderJect also owns the largest FDA flu vaccine manufacturing facility in Europe.

The acquisition will provide a stronger base for development-stage vaccines, including Chiron's flu cell culture and meningitis vaccines, and for PowderJect's powder injection and DNA vaccines programs.

Howard Pien, president and CEO of Chiron, said, "The deal will help us achieve our goal of expanding our global vaccines business quickly in the U.S., while building on our platform for new products."

PowderJect was originally spun out of Oxford University in 1993 to commercialize a needle-free powder injection device. Problems with the development led it to change direction and move into vaccines manufacturing. The company eventually sold the injection technology, retaining rights to use it in powdered vaccines and in DNA vaccines.

Martyn Postle, director at the consulting firm Cambridge Healthcare and Biotech, said the offer is a very good deal for PowderJect. "The £542 million cash offer shows a fantastic return for PowderJect's core technology, plus the key position it has built through its acquisitions of the Evans Vaccines business and the SBL vaccines business, which cost PowderJect $105 million in total."

Postle added, "From Chiron's point of view, it is expensive, but probably the only opportunity to gain a significant position in the European vaccines market as it is dominated by only a few players."