Ciba-Geigy Ltd. has reached an agreement in principle toacquire a majority interest in the vaccine business of SclavoSpA of Italy, Ciba-Geigy announced Wednesday in tandem withChiron Corp. Ciba-Geigy and Chiron plan to build a worldwidevaccine business by the mid-1990s via The Biocine Co., a jointventure they formed in 1987 to focus on adult vaccines forinfectious diseases.

Chiron, of Emeryville, Calif., has the right to acquire an equalinterest in the Sclavo vaccine business through the Biocineagreement. However, Ciba-Geigy will make a greater initialinvestment, and Chiron expects to equalize its investment overa four- or five-year period, said Larry Kurtz, a Chironspokesman.

The amount of Ciba-Geigy's initial investment in Sclavo wasn'tdisclosed, although the company paid more than book value inorder to gain tax benefits. Ciba-Geigy, headquartered in Basel,Switzerland, has options to acquire up to 100 percent of Sclavoin stages over 10 years. Sclavo is a privately held companycontrolled by Guelfo Marcucci.

Chiron anticipates making an initial investment of between $25million and $30 million, giving it an equity stake in Sclavo of20 percent or less. That makes the total deal worth a minimumof $125 million, said David Stone, a biotech analyst at Cowen &Co. in Boston. Ciba-Geigy could be putting in as little as $40million to give the two companies a majority stake in Sclavo,Stone said.

The investment in Sclavo will have no short-term impact onChiron's earnings, said Stone. In the long term, it gives thecompany a European marketing outlet, he added. Theinvestment will decrease Chiron's interest income by about $2million, said Kurtz.

Chiron common stock (NASDAQ:CHIR) closed at $60 onWednesday, down $3.13.

Biocine expects to begin marketing vaccines in the mid-1990s.The company has a therapeutic vaccine for herpes simplex 2 inPhase II clinical trials, and has begun Phase I clinicals on anAIDS therapeutic vaccine, ENV2-3. In May or June, Biocineplans to file an investigational new drug application for trials ofa true AIDS vaccine based on native gp120, the envelopeprotein of the AIDS virus.

Sclavo's vaccine business generated approximately $45 millionin revenues in 1990, mainly from the sale of pediatric andadult vaccines in Europe. These revenues comprised about 33percent of Sclavo's total revenues. The business is onlymarginally profitable, said Stone.

Ciba-Geigy and Chiron are purchasing all of Sclavo's vaccineproducts, research and technology, plus production facilities inRosia and Siena, Italy. The deal is subject to certain conditionsand regulatory approvals, and the negotiation and execution ofdefinitive agreements.

-- Karen Bernstein BioWorld Staff

(c) 1997 American Health Consultants. All rights reserved.