The Wall Street Journal - 21 Feb 1996
Ralph T. King Jr., Staff Reporter of The Wall Street Journal

The purchase will place Chiron among the world's top five vaccine suppliers, and make it especially strong in Germany where the Hoechst unit, Behringwerke AG, is based. Behringwerke's early innovations include the diphtheria vaccine, based on the work of founder Emil von Behring.

The deal also provides wider access to European markets for vaccines in Chiron's rich pipeline. Recently, the biotechnology firm introduced a whooping-cough vaccine in Italy that showed dramatically improved protection in a recent clinical trial. It will soon be under regulatory review elsewhere in Europe and in the U.S.

In addition, Chiron has helped broaden the scope of vaccines to include adolescent and adult infectious diseases, developing the first vaccine for hepatitis B. Its vaccines for genital herpes and cytomegalovirus appear promising in continuing clinical trials.

"Without these new products, this wouldn't be an exciting deal," said Paul Boni, an analyst with Mehta & Isaly in New York. "These technologies are changing the complexion of the industry."

For Hoechst, the sale is part of a streamlining of its health-care operations that it began following its $7.1 billion purchase of Marion-Merrell Dow Inc. in 1995. The German chemical giant has moved to eliminate thousands of overlapping jobs and shed lackluster businesses. Meanwhile, it has scrambled in recent months to form alliances with cutting-edge U.S. biotechnology firms. In fact, as part of yesterday's deal, Hoechst envisions possible research alliances with Chiron in such areas as gene therapy and combinatorial chemistry.

Terms of the transaction give Chiron an option to purchase the remaining 51% stake between 1998 and 2001, for the equivalent of about $125 million on a current basis, giving the acquisition a value of about $245 million. The price, at about 1.4 times Behringwerke's 1995 sales, is reasonable, Mr. Boni said, and reflects the modest profitability of older vaccines relative to other pharmaceutical products.

But the new technology for vaccines is expected to fatten profit margins, especially now that managed-care insurers are beginning to emphasize prevention. For example, the retail price of Chiron's whooping-cough vaccine is about $25 a dose compared with $15 a dose for the traditional version.

Chiron could make a vaccine-related acquisition in the U.S. in the near future now that it has established itself in Europe, noted Jeff Casdin, analyst at Merrill Lynch & Co. The company, based in Emeryville, Calif., has substantial financial resources because it is 49.9%-owned by Ciba-Geigy Ltd. of Switzerland.

---

Stephen D. Moore contributed to this article.

960221
WJ960206

Copyright © 1996 - The Wall Street Journal. Reproduction of this article (other than one copy for personal reference) must be cleared through the WSJ Permissions Desk.

Always watch for outdated information. This article first appeared in 1996. This material is designed to support, not replace, the relationship that exists between you and your doctor.

AEGiS presents published material, reprinted with permission and neither endorses nor opposes any material. All information contained on this website, including information relating to health conditions, products, and treatments, is for informational purposes only. It is often presented in summary or aggregate form. It is not meant to be a substitute for the advice provided by your own physician or other medical professionals. Always discuss treatment options with a doctor who specializes in treating HIV.

Copyright ©1980, 1996. AEGiS. All materials appearing on AEGiS are protected by copyright as a collective work or compilation under U.S. copyright and other laws and are the property of AEGiS, or the party credited as the provider of the content. .