Chiron ( CHIR) said Tuesday that it expects to seek shareholder approval in March of a proposed takeover by Novartis ( NVS), the Swiss drug colossus that already owns 44% of its shares. Howard Pien, Chiron's CEO, told investors and analysts that his company must get approval for its merger proxy from the Securities and Exchange Commission before it can set a voting date. Only non-Novartis shareholders can vote. The Emeryville, Calif., company also needs approval by European Union antitrust regulators. The Federal Trade Commission has already cleared the transaction. Pien, who declined to answer questions about the Novartis bid, repeated previous comments that he expects the deal to be completed during the first half of this year. This sliver of updated merger news accompanied Chiron's issuance of fourth-quarter and full-year financial results that beat the comparable periods in 2004. Chiron didn't provide financial guidance for 2006. Novartis has offered to buy the rest of Chiron that it doesn't own for $45 a share, or $5.1 billion. But the Novartis bid is
facing opposition from a significant minority of investors. Four investment management firms owning 17.5% of the total number of Chiron shares, and 30% of shares eligible to vote, say the Novartis offer is too low. Novartis has said it won't raise its bid above $45. The company initially offered $40 a share, but Chiron's board rejected the bid as inadequate. During the last few days, Chiron has traded slightly above $45 a share. It closed Tuesday at $45.61, up 61 cents, or 1.4%. After hours, the stock added another 15 cents. For the three months ended Dec. 31, Chiron earned $144.2 million, or 71 cents a share, when calculated by generally accepted accounting principles. During the same period in 2004, it recorded a GAAP loss of $23.1 million, or 12 cents a share. Fourth-quarter revenue was $615.7 million vs. $434.4 million the prior year.
"We are pleased with our achievements in the past year, particularly our return to the U.S. influenza vaccine market," Pien said in a prepared statement. Manufacturing problems caused Chiron to cancel all sales of its Fluvirin vaccine in the U.S. during the 2004-05 season. Chiron returned to the market during the 2005-06 season, albeit with a reduced supply of vaccine. Chiron
sold 13 million doses of Fluvirin during the current season. Pien said Chiron should have the manufacturing capacity to produce 40 million doses for the 2006-07, but he added that capacity doesn't equal actual sales. Fluvirin sales played a role in the improved fourth-quarter and full-year performance, he said, as did expanded royalty and license revenue. Chiron benefited from an 11% tax rate during 2005 vs. 28% in 2004 on a GAAP basis. The reduced tax rate was caused by lower profits in certain foreign locations and the transfer of some product rights in 2004. Chiron doesn't expect such a low tax rate this year. For all of 2005, the company reported GAAP earnings of $186.6 million, or 97 cents a share, on revenue of $1.92 billion. In the previous year, it earned $78.9 million, or 41 cents a share, on revenue of $1.72 billion. Among major business units, Chiron said vaccine sales rose 18% to $604 million during 2005. Blood-testing revenue gained 12% to $556 million, and drug revenue added 6% to $629 million. Royalty and licensing fees rose 9% to $317 million.