Chiron Corp.'s stock soared Friday 19 percent, first on rumors of atakeover, and then on confirmation from the company that it wasnegotiating a "potential strategic alliance" with a partner who wouldget a minority interest.
Speculation is focused on either Switzerland-based Ciba-Geigy orJohnson and Johnson, of Brunswick, N.J., as the probable minorityinvestor. Both big pharmaceutical companies have joint ventureswith Chiron; Ciba-Geigy in the area of vaccines and Johnson andJohnson in the field of diagnostics.
Chiron would not identify the company with whom it's talking andsaid "no agreement has been reached."
Friday morning Wall Street rumors of a $100-a-share takeover bidby either Ciba-Geigy or Johnson and Johnson pushed Chiron's stockup to $77.75, or $18, before trading was halted about 11:30 a.m.(Eastern Time).
Trading resumed about an hour and a half later following Chiron'sstatement squelching the takeover speculation. The stock(NASDAQ:CHIR) closed Friday at $71.25, up $11.50.
In the press release confirming discussions on a strategic alliance,Chiron, of Emeryville, Calif., said the potential deal "would includethe other company acquiring a very substantial minority equityinvestment in Chiron."
Officials of Ciba-Geigy and Johnson and Johnson could not bereached for comment.
David Stone, of Cowen & Co., in Boston, said Ciba-Geigy appears tobe the more likely candidate for the partnership.
"Ciba-Geigy and Chiron have a past pattern of doing things togetherand going out and buying businesses," he said. Stone observed theypurchased the vaccine business of the Italian drug company, SclavoSpA. The acquisition was made through the Biocine Co., which is a50-50 joint venture between Chiron and Ciba-Geigy.
Stone also noted that Ciba-Geigy and Chiron had indicated aninterest in purchasing the vaccine business of American CyanamidCo., of Wayne, N.J. That idea was dropped after American HomeProducts (AHP), of Madison, N.J., made a successful $9.7 billiontakeover bid for American Cyanamid in August.
"The two have an interest in building up their vaccine business,"Stone said. "A minority interest doesn't make sense unless theywould use the cash to buy something else."
However, Mark Simon. of Robertson Stephens & Co., suggestedChiron's alliance will involve Johnson and Johnson purchasing a 49percent interest in Chiron for $100 per share.
"It's pure speculation," he added. "But Johnson and Johnson alreadyhas three deals with Chiron and the leadership of each one has a lotof respect for the other."
Simon also suggested that a deal with Johnson and Johnson wouldalter Chiron's relationship with Ciba-Geigy.
"That deal will be redone," he said, referring to the Biocine Co. "Itwon't be 50-50. Either Chiron will take it over or Ciba-Geigy willtake it."
Simon speculated that Chiron's stock would hit $80 "very quickly."
A number of other major biotechnology companies apparently werepulled up in the wake of Chiron's stock surge. Amgen Inc., ofThousand Oaks, Calif., was up $1.50 to close at $58 and Genentech,of South San Francisco, closed at $47.50, up $1.
Also, Biogen Inc., and Genzyme Corp., both of Cambridge, Mass.,got a boost. Biogen closed at $39.87, up $1.12, and Genzyme endedFriday at $30.50, up 75 cents.
In another development, AHP said Thursday it was selling itsdiptheria and tetnus vaccines to Chiron and Ciba-Geigy for anundisclosed amount. The sale followed a Federal Trade Commissionorder, forcing AHP to divest itself of the vaccines as part of itstakeover of American Cyanamid. AHP said sales of the vaccines in1993 totaled $9.6 million. n
-- Charles Craig Straff Writer
(c) 1997 American Health Consultants. All rights reserved.