( CHIR) said Monday that it is acquiring

Matrix Pharmaceutical

(MATX) - Get Report

for $61 million in cash to expand its portfolio of early-stage experimental cancer drugs.

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Wall Street has been expecting Chiron to make an acquisition because the Emeryville, Calif.-based biopharmaceutical firm is in desperate need of strengthening its drug pipeline after the failure in November of its experimental sepsis drug. U.S. drug regulators have also

delayed the approval of Chiron's NAT blood-testing system, which was supposed to happen by the end of 2001, according to the company.

Whether the purchase of Matrix helps Chiron's growth story remains unclear. Matrix is still recovering from a major setback in September when an FDA advisory panel voted against its experimental head and neck cancer treatment, IntraDose. Matrix continues to pursue the drug's approval in Europe.

But Chiron seems more interested in another early-stage cancer drug, tezacitabine, that Matrix is developing. Matrix just started Phase 2, or mid-stage, testing of the drug in patients with solid tumors. Once it acquires Matrix, Chiron says it will continue this testing program.

Chiron says it expects to close the Matrix deal in the first quarter. The boards of both companies have approved the merger. The $61 million deal values Matrix at $2.30 a share, based on the 25.6 million Matrix shares outstanding.

Matrix shares were falling nearly 16% in recent trading to $2.18. Chiron shares were lower as well, off 72 cents, or 1.6%, to $44.