INDUSTRY NEWS
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Novartis AG (Basel, Switzerland) received regulatory approval from the U.S. Federal Trade Commission for its acquisition of Chiron Corp. (Emeryville, CA). Under the terms of the deal, Novartis will acquire the remaining 113 million Chiron shares that it does not currently own for $45 per share in cash, or a total of approximately $5.1 billion. Novartis expects to complete its acquisition of Chiron sometime during the first half of this year.
Industry analysts believe that Chiron was in a position to be bought, especially after the U.K. Medicines and Healthcare Products Regulatory Agency suspended the company’s license to manufacture influenza vaccines.
“Chiron’s share price had fallen dramatically due to the Fluvirin debacle, not because of its IVD business,” says David K. Lugg, director of healthcare ratings services at Standard & Poor’s (New York). “The company’s board of directors evidently reasoned that the market was not appropriately valuing the company. The logical buyer was Novartis, which already owned about 42% of the shares. Because of this preexisting relationship, this transaction should not be seen as a harbinger for the rest of the IVD industry.”
Novartis officials have publicly stated that the company pursued the acquisition of Chiron primarily to expand its vaccine business. Industry analysts believe that it makes sense for Novartis to acquire Chiron, considering the synergies between the two companies.
“The key to this acquisition certainly was not the blood testing business, but giving Novartis a growth platform in the attractive vaccines business in which Chiron is ranked number five in the world,” says Christian Wenk, director of corporate ratings at Standard & Poor’s. “Novartis’s plan is to integrate Chiron’s biopharmaceuticals business into its ethical pharmaceutical business, and to realize $200 million in cost savings by combining with a company it knew well and already had a large stake in.
“At the same time, this acquisition should not change the face of the IVD industry. Except for Roche and to a lesser extent Bayer and Schering-Plough, the big European pharmaceutical companies are not focusing on diagnostics. If anything, I would expect European drug companies to deemphasize diagnostics and focus even more on ethical pharmaceuticals.”
However, this does not mean that Novartis has no plans at all for IVDs. According to proxy materials filed with the U.S. Securities and Exchange Commission, Novartis plans to establish a new division called Novartis Vaccines & Diagnostics. This division will consist of two business units: Novartis Vaccines and Chiron, which will be the blood testing and diagnostics group. The documents state that “the current blood testing business, combined with some of Novartis’s in-house diagnostic expertise, provides the platform to grow and expand this business unit and to investigate opportunities in molecular diagnostics.”
In addition, it remains to be seen how this acquisition will affect Chiron’s alliances with other IVD companies. For example, Chiron has developed an entire product line of diagnostic assays and instruments with Gen-Probe Inc. (San Diego).
“While Novartis has thus far stated that it is interested in expanding its presence in vaccines, there clearly is also an interest in blood screening,” says Glen P. Freiberg, vice president, regulatory, quality, and government affairs at Gen-Probe. “At this point, we do not know if the impact on Gen-Probe will be status quo, whether Novartis is considering a purchase of Gen-Probe, or if Novartis would accept a reasonable offer from Gen-Probe for the Chiron nucleic acid–testing screening business. All of this will be discussed going forward.”
