Suitor for Chiron May Be Ciba-Geigy : Pharmaceuticals: Shares have traded strongly after reports of takeover attempt.
Shares of Chiron Corp. were up again Monday on reports that Switzerland’s Ciba-Geigy is in negotiations with the Emeryville, Calif.-based biotechnology company to buy a significant minority stake for nearly $2 billion.
Chiron, which manufactures drugs used to treat multiple sclerosis, cancer and other illnesses, had disclosed Friday that it was in talks with an unidentified company interested in buying a substantial stake in the firm. Chiron officials have so far failed to disclose the identity of the buyer, but news reports and analysts say the company is Ciba-Geigy, a big pharmaceutical and chemical firm.
Chiron shares closed up $2.75 at $74.25 in heavy trading on Nasdaq, adding to Friday’s huge gains, when the shares jumped $11.75 a share, or 20%.
But analysts speculated Monday that the talks with Ciba may be stuck over price and how much control the Swiss firm would exercise. Officials of Chiron and Ciba declined to comment.
The Wall Street Journal, citing unnamed sources, reported that the companies had discussed a deal in which Ciba would acquire 33% of Chiron’s shares held by the public for $100 each. The newspaper said Ciba would buy another 16% stake--raising its total holdings to 49%--by turning over its diagnostic business to Chiron and giving up its 50% stake in Biocine Co. Formed in 1987, Biocine is a 50-50 joint venture of Chiron and Ciba to develop treatments for genital herpes and for the HIV virus that causes AIDS.
Some analysts said Chiron’s shares may be worth considerably more than $100 a share and speculated that disclosure of the talks with Ciba might attract additional suitors.
“It’s clear that Chiron management feels it needs to do something,” said Jim McCamant, editor of the Medical Technology Stock Letter. Two other likely suitors, he said, are Johnson & Johnson, a partner of Chiron in a blood-screening business called Ortho Diagnostic Systems, and Germany’s Schering, whose Berlex Laboratories markets Chiron’s multiple sclerosis drug, Betaseron.
Analysts consider Chiron to have perhaps the most diversified lineup of new drug treatments in the biotechnology industry--a business in which most companies are heavily reliant on one or two products.
That diversity makes Chiron attractive to a host of big European and U.S. pharmaceutical companies, many of which are suffering from a shortage of promising new products.
For Chiron, such a deal would give it access to capital, which is important in an industry where a new bioengineered drug typically costs $100 million to $150 million to develop.
McCamant estimates that Chiron’s various business lines, if sold separately, would be valued at about $175 a share. Chiron’s shares have traded as high as $96 during the last 52 weeks.
“Chiron has the No. 1 scientific effort and the best product pipeline in the industry, better than Genentech and light-years ahead of Amgen,” McCamant said, referring to two other California biotech leaders.
