Chiron Rejects Novartis’ Offer

Chiron Corp., a U.S. vaccine maker recovering from a manufacturing shutdown, rejected Novartis’ $4.5-billion cash offer as “inadequate” as Chiron’s flu treatment moves closer to returning to the U.S. market.

Novartis’ $40-a-share bid was unsolicited, although the companies have talked about mergers and other transactions, Chiron said Monday in a statement. Novartis, which owns 42.2% of Emeryville, Calif.-based Chiron, offered to buy the rest Thursday to add treatments for flu and cancer.

Novartis, based in Basel, Switzerland, would get access to a vaccine market that may reach $10.4 billion by 2007, according to Lehman Bros. analysts. Chiron said in the statement that the company has had an “ongoing dialogue” with Novartis about a possible investment. Shares of Chiron have remained above the $40 bid price, and analysts say they expect Novartis to offer more.

“In the merger business, it pays not to show your hand on the first offer,” Gbola Amusa, a Sanford Bernstein analyst in London who has a “market performer” rating on Novartis, said Monday. “Novartis can come back at $45 and could go above $50.”

David Weiskopf, a Chiron spokesman, declined to comment beyond the release. John Gilardi, a spokesman for Novartis, also declined to comment Monday.

Chiron shares fell 14 cents to $42.79 on Friday. Novartis shares rose 0.1% to 60.05 Swiss francs Monday in Zurich.

Novartis’ $40-a-share bid is 9.8% more than the U.S. company’s closing price Wednesday, the day before the offer. Novartis’ 42% stake in Chiron may scare off other potential bidders, Amusa said.

“Novartis could go a long way to block an outside bid,” he said. “This is no competitive bidding situation. There isn’t a white knight to come.”

Novartis stock is the worst performing of Europe’s five biggest pharmaceutical companies since January, and Chief Executive Daniel Vasella is spending $13 billion this year to buy drug makers to end reliance on the 8-year-old heart medicine Diovan.

Last month, Chiron said U.S. regulators found the steps it was taking to fix influenza-vaccine production at its British plant “generally acceptable,” moving the company closer to approvals needed to resume flu-shot sales this year.

Chiron’s vaccine unit sells more than 30 products, including treatments for influenza, the meningococcus bacteria, and travel and pediatric illnesses. Its blood-testing business sells equipment for testing products used in transfusions, and the biopharmaceuticals unit focuses on infectious diseases and cancer.

Novartis has a drug business, a consumer-products unit that sells products such as Ex-Lax for constipation, and a generic-pharmaceuticals unit, which is vying with Teva Pharmaceutical Industries Ltd. to be the world’s largest.