Chiron Corp. (CHIR.O), a maker of
drugs to treat infectious diseases and cancer, announced plans on
Monday to buy PathoGenesis Corp. (PGNS.O),
which makes an antibiotic used by cystic fibrosis patients, for
about $700 million in cash.
Chiron said the acquisition would expand its franchises in
biopharmaceuticals, vaccines and blood testing, but the deal was
greeted tepidly on Wall Street and Chiron's shares fell 1-15/16 to
close at 46-11/16 on Nasdaq.
Shares of Seattle-based PathoGenesis rose 5-7/32, or 16
percent, to close at 37-31/32, just shy of Chiron's all-cash
tender offer of $38.50 per share.
"It is very unusual that a company like Chiron would use
essentially half of their cash to purchase a speculative company
like PathoGenesis,'' said Charles Engelberg, an analyst at AmeriCal
He described PathoGenesis' sole commercial product, TOBI, or
tobramycin solution for inhalation, as a "niche drug'' that so far
has proven ineffective as a treatment for other types of lung
infection, such as chronic bronchitis.
Chiron, based in Emeryville, Calif., said the deal gives it an
expanded therapeutic focus in infectious diseases, a theme that
threads through the company's three business units:
biopharmaceuticals, vaccines and blood testing.
"The unified research and commercial focus of the combined
company provides Chiron an opportunity to leverage our infectious
disease franchises in biopharmaceuticals, vaccines and blood
testing while augmenting our already established oncology
presence,'' said Sean Lance, Chiron's chief executive officer.
Chiron's flagship product is Proleukin, the first treatment
approved for metastatic kidney cancer and melanoma. The company's
other major product is Betaseron, a treatment for multiple
Last month, Chiron pulled the plug on testing of rhIGF-I, its
experimental treatment for osteoarthritis after weak results from
two mid-stage clinical trials.
Although TOBI is PathoGenesis' only commercial product, the
company has a rich preclinical pipeline and is still exploring
expanding the label for TOBI for other indications, said Chiron
spokeswoman Shelley Schneiderman.
"They may have some promising products in early-stage
development, but we like to be able to really kick the tires of
new products,'' Engelberg said. "We are unwilling to put our
clients' money on the line without substantial clinical activity.''
Chiron said the deal boosts the number of its clinical
development programs to 15 and gives it enhanced research and
development capability in bacterial genomics and small molecule
therapeutics to allow development of anti-infectives.
Schneiderman also noted that Chiron will be able to use
PathoGenesis' proprietary technology for inhaleable therapeutics
as a platform to grow its other products.
"With TOBI, we can expand our presence in products to fight
infectious diseases,'' she added.
Chiron currently has a product for sepsis and another for HIV
in late stage clinical development.
The acquisition is expected to close in the third or fourth