Novartis Creates New Vaccines Division Following Close of Chiron Deal

Novartis (Basel, Switzerland, www.novartis.com) closed on its$5.4-billion acquisition of Chiron Corporation (Emeryville, CA, www.chiron.com),paving the way for the creation of a new Novartis division focusing onvaccines and diagnostics.

Chiron shareholders approved the merger at a special shareholders' meeting, with the deal officially closing on April 20. Annual cost synergies of $200 million are anticipated within three years after closing, with 50% expected to be achieved in the first 18 months.

With the Chiron acquisition now complete, Novartis is creating Novartis Vaccines and Diagnostics, consisting of two businesses: Novartis Vaccines and a diagnostics business that will retain the Chiron name.

"We are committed to investing the significant skills and capitalneeded to build a global leader in the increasingly important vaccinesand diagnostics markets and contribute to meeting emerging publichealth needs," said Joerg Reinhardt, CEO of Novartis Vaccines andDiagnostics, in a company statement.

Novartis will continue Chiron's current manufacturing-remediationprogram. Novartis says it will focus on continued improvements inquality assurance and make the necessary investments to upgrademanufacturing capabilities while exploring new technologies to increasethe capacity and reliability of the manufacturing process.

Chiron had quality issues at its manufacturing facilities in Liverpool,England, which produced its "Fluvirin," influenza virus vaccine. Itslicense to manufacture the vaccine was temporarily suspended beginningin 2004 and later reinstated in 2005. It also had to reduce supplyexpectations in 2005 for its "Begrivac" influenza virus vaccine becauseof quality issues at its manufacturing facility in Marburg, Germany.

Chiron is supplying the US government with prepandemic influenzavaccine for a stockpile against the H5N1 avian influenza strain. Chironwon a $62.5-million contract in October 2005 and is manufacturing theproduct at its Liverpool facility.

In finalizing the Chiron deal, Novartis also reported that Chiron'sbiopharmaceutical business will be integrated into NovartisPharmaceuticals. Chiron's early-stage research will incorporated intothe Novartis Institutes for Biomedical Research, which will maintainChiron's existing research center in Emeryville, California.