Novartis/Chiron: Validating the Value of Vaccine R&D

01 Sep 2006

• By Cole Werble

Nothing solidifies the emergence of a hot investment sector like a big investment of cash, and Novartis AG provided that with its two-stage $5.7 billion close out of the remaining shares of Chiron Corp. that it did not already own (W#200510159). Novartis bought $300 million worth of Chiron's stock in December 2005 and then closed out the deal with $5.4 billion in April 2006.

Nothing solidifies the emergence of a hot investment sector like a big investment of cash, and Novartis AG provided that with its two-stage $5.7 billion close out of the remaining shares of Chiron Corp. that it did not already own [See Deal]. Novartis bought $300 million worth of Chiron’s stock in December 2005 and then closed out the deal with $5.4 billion in April 2006. That’s a noteworthy price, representing a direct investment to purchase one company in the vaccines sector for a price equal to almost 60% of the total current sales of the whole segment (estimated at about $10 billion currently).

Almost as important as Novartis’ dollars in validating the value of the vaccine business is the rhetoric that the Swiss...