Novartis to Buy Rest of Chiron
Deal Valued at $5.1 Billion
ANITA GREIL / Dow Jones Newswires 31oct2005
ZURICH — Novartis AG said Monday it is buying the 58% of U.S. vaccines maker Chiron that it doesn't already own for $5.1 billion, in a move that analysts say is probably the prelude to more takeovers in the vaccines area.
Concerns about the spread of new diseases, including avian flu, have sparked an increase in vaccine research and a growing move by nations to stockpile vaccines and other treatments.
Chairman and CEO Daniel Vasella
Novartis, Europe's second-largest pharmaceutical company and based in Basel, Switzerland, said Chiron's board of independent directors accepted its increased offer of $45 a share. The deal was reached in New York, early in the European morning after many hours of negotiations. Chiron's board had rejected as too low Novartis's original offer, made in September, of $40 a share, or $4.5 billion.
"Our plan is to turn around the Chiron vaccines business, which will require investments in research and development and manufacturing to increase quality and capacity, so that we can better meet customer demand and address public health needs," said Novartis chief executive Daniel Vasella in a statement.
The takeover of Chiron marks Novartis's third big acquisition this year, following the Basel-based company's purchase of two big generics makers for a total of $8.3 billion. Novartis also paid $660 million for Bristol-Myers Squibb's prescription-free drug brands.
California-based Chiron, which has activities in vaccines, blood testing and biopharmaceuticals, had overall sales of $1.7 billion in 2004 and pro-forma net income of $152 million.
Novartis is using this takeover to enter the global vaccines market, which is expected to more than double sales in the next five years to more than $20 billion in 2009 from about $9.6 billion in 2004.
Chiron currently ranks fifth in the vaccines business with annual vaccine sales of $510 million. It is competing against such powerful rivals as GlaxoSmithKline PLC of the U.K. and Europe's largest pharmaceutical company. Sanofi-Aventis SA of France, Merck & Co. and Wyeth of the U.S. are also significant players.
"Novartis will have to acquire more vaccines makers to make this a decent business," says Karl Heinz Koch, analyst in Zurich at private bank Lombard Odier Darier Hentsch, who has a "buy" rating on Novartis. "Chiron doesn't have much of a pipeline and would have found it difficult to compete alone against such powerful rivals; it needed the help of Novartis's deep pockets." Novartis expects costs savings of $200 million within three years after closing, with about half of that to be achieved in the first 18 months.
Novartis has negotiated a customary merger agreement with Chiron's independent directors that will be subject to approval by a majority of the Chiron shares not owned by Novartis. Regulatory approvals also are required.
For years, Novartis treated its 42% stake in Chiron as a financial investment. The value of that investment dropped dramatically when manufacturing problems surfaced at two plants in Europe, which last year prevented the company from selling its flu vaccine to the U.S. government.
Mr. Vasella said earlier this year, that Novartis will grow the vaccines business by expanding into new markets, and will make sure that the kind of manufacturing problems that hurt the U.S. company won't be repeated.
A year ago, British regulatory authorities abruptly yanked Chiron's license to make the vaccine, Fluvirin, at its Liverpool, England, plant over contamination concerns. The move effectively barred almost 48 million doses from reaching the U.S. market, roughly half the nation's flu-shot supply.
In July, Chiron said that it also had quality-control problems with another flu vaccine at its facility in Marburg, Germany.
The U.S. Food and Drug Administration has subsequently cleared Chiron to resume production of its flu vaccine at its Liverpool facility.
Chiron last week said it would miss this year's earnings guidance due to production delays in its Fluvirin vaccine.
Novartis Buys Vaccine Maker Chiron
Chiron is one of the leading makers of flu vaccines (Keystone)
Swiss pharmaceuticals giant Novartis has raised its bid to buy the remaining stake in the world's fifth-biggest vaccine maker, Chiron, for $5.1 billion (SFr6.5 billion).
Novartis, which plans to revamp Chiron, says the acquisition provides it with growth platforms in the vaccines market and in the molecular diagnostic business.
The Basel-based company, which already owns 42 per cent of the shares in Chiron, increased its bid for the remaining 58 per cent to $45 a share, it was announced on Monday.
This is $5 a share more than the original $4.5 billion offer made back in September, which was rejected by Chiron.
Novartis said that its latest offer was unanimously approved by Chiron's independent directors.
The bid represents a premium of 23 per cent to Chiron's trading price ahead of the first takeover proposal. Novartis' shares rose 0.8 per cent on the news on Monday.
With the Novartis acquisition, changes are expected at California-based Chiron.
The company has been plagued by production problems at a plant in Britain, which has limited its ability to supply flu vaccines to the US. It said last week that it would not reach its full-year earnings forecasts.
"Our plan is to turn around the Chiron vaccines business, which will require investments in R&D [research and development] and manufacturing to increase quality and capacity, so that we can better meet customer demand and address public health needs," said Novartis CEO Daniel Vasella in a statement.
Novartis expects the takeover to result in savings of $200 million within three years.
Analysts said that the valuation was exactly in line with the sector average.
"It is a relatively good deal," Lombard Odier Darier Hentsch analyst Karl-Heinz Koch told Reuters. "You can argue about the strategic fit as Chiron has a number of challenges which have to be addressed."
Chiron, which employs about 5,400 people worldwide, has activities in vaccines, blood testing and biopharmaceuticals. Its overall sales in 2004 were $1.7 billion.
The diagnostics business would be merged with vaccines to form a new division, while biopharmaceuticals would be integrated into the existing pharmaceuticals business, said Novartis.
Global vaccines business
Novartis said that the acquisition would give it entry into the global vaccines business which is expected to experience accelerated growth over the next five years.
Earlier this month the US government awarded a $62.5 million contract to Chiron to pursue its development of an experimental vaccine against the H5N1 strain of the bird flu virus. This variant has killed 62 people across Asia.
Chiron's product portfolio also includes vaccines for disease such as rabies, polio, measles and rubella.
Novartis, which employs around 91,700 people, achieved net sales of $28.2 billion in 2004.
It has already splashed out $8 billion this year on two generic drugs makers and a further $660 million on Bristol-Myers Squibb's portfolio of non-prescription drugs.
swissinfo with agencies
source: http://www.swissinfo.org/sen/swissinfo.html?siteSect=106&sid=6203164&cKey=1130765270000 31oct2005
Novartis Acquires Key Drugs Portfolio
Swiss pharmaceuticals firm Novartis is to strengthen its over-the-counter business by acquiring the rights to produce and market a North American product range.
The deal with New York-based firm Bristol-Myers Squibb is worth $660 million (SFr850 million).
The drugs portfolio includes the widely used painkiller, Excedrin, which had US sales last year of $160 million.
Novartis said it was buying the non-prescription drug range to give it greater "critical mass" in the US market. The brands it is acquiring had combined 2004 sales of $258 million.
The Basel-based firm is one of the leading manufacturers of over-the-counter (OTC) drugs in the world, and is second in Europe. The company saw significant growth in its OTC business last year and recorded revenue of $2 billion.
First US painkiller
The acquisition of the Bristol-Myers Squibb range provides Novartis with its first painkiller tablet for adults in the US. Other brands included in the deal are Comtrex cold and flu products and No-Doz anti-drowsiness tablets.
Novartis’s existing OTC drugs include Voltaren for inflammation, the antifungal lotion Lamisil and Theraflu for coughs and colds.
The transaction still needs the approval of regulatory authorities.
On Thursday, Novartis announced that its net profit rose by 12 per cent for the first six months of this year – a record result.
The company added that it expected the good results to continue for the rest of the year.
swissinfo with agencies
source: http://www.swissinfo.org/sen/swissinfo.html?siteSect=106&sid=5944720 31oct2005