Subject: Ciba-Geigy Invests in Biotechnology
Date: Published: 11/15/88 79 lines
Source:  Wall Street Journal.  Copyright Dow Jones & Co. Inc. 

    Technology:  
    Ciba-Geigy Invests in Biotechnology,
    Buying 7.9% of Chiron for $20 Million
    ----  
    By Brenton R. Schlender
    Staff Reporter of The Wall Street Journal

    EMERYVILLE, Calif. -- Chiron Corp., sidestepping sluggish
 public equity markets, said it is selling a 7.9% stake to
 Ciba-Geigy Ltd.  for $20 million.
    Ciba-Geigy's investment is its first in a biotechnology
 company.  The Swiss pharmaceutical concern, however, has
 participated in a venture with Chiron to develop a vaccine
 for the acquired immune deficiency syndrome virus since 1984.
    Under the agreement, Ciba-Geigy will buy one million newly
 issued Chiron shares for $20 each, a 51% premium over
 Friday's closing price of $13.25.  The new shares will
 increase Chiron's total shares outstanding to about 12.7
 million.  In national over-the-counter trading yesterday,
 Chiron closed at $14.25 a share, up 75 cents.
    "It's a sign of the times," said Kathleen Behrens, a
 securities analyst who follows the biotechnology industry for
 Robertson, Colman & Stephens in San Francisco.  "Since last
 year's {stock-market} crash it has been very difficult to go
 to the markets to finance biotechnology companies," she
 added, noting that only one biotechnology company has made an
 initial public offering in the past year.
    Chiron officials said it wasn't so much market conditions
 as the chance to strengthen relations with Ciba-Geigy that
 prompted the private placement.  "A private placement is often
 very attractive regardless of market conditions because you
 don't have to pay investment-banker fees and you often get a
 premium," said a Chiron spokesman.  Besides, he added, "the
 combination of private and public is something companies have
 been doing since the industry started in the 1970s."
    Chiron, which specializes in using recombinant-DNA
 techniques to develop vaccines and diagnostics for infectious
 diseases, already has a major corporate partner in Johnson &
 Johnson of New Brunswick, N. J. Johnson, a maker of
 pharmaceuticals and consumer health-care products, holds
 718,000 Chiron shares -- a 5.7% stake after the Ciba-Geigy
 investment.  Like Johnson, Ciba-Geigy won't be represented on
 Chiron's seven-member board.
    Ciba-Geigy's relationship with Chiron goes back several
 years.  In April 1987, Chiron and Ciba-Geigy expanded joint
 research efforts to develop an AIDS vaccine, by starting a
 joint venture called Biocine Co. This year, Biocine started
 human clinical trials in Geneva of its genetically engineered
 vaccine, called insulin-like growth factor, or IGF-1.
    Chiron also is selling or developing vaccines or
 diagnostic tests for various strains of hepatitis and
 malaria.  Chiron's vaccine for hepatitis-B, which is being
 produced and marketed in an agreement with Merck & Co. of
 Rahway, N. J., was the first vaccine produced by gene-splicing
 to be approved by the U. S. Food and Drug Administration.
    "Chiron is the best at recombinant vaccines in the
 business right now," said Ms. Behrens.
    Separately, Chiron said it reacquired from Sweden's
 Pharmacia AB the rights to market in the U. S. superoxide
 dismutase, or SOD, an enzyme used to help organs recover from
 the interruption of blood flow because of heart attack or
 surgery.
    Chiron didn't disclose the terms of the transaction.
 Chiron and Pharmacia have been working jointly to develop SOD
 since 1986.  In addition to marketing rights for SOD products
 in the U. S., Chiron holds rights for Canada, South America,
 Japan and other Asian countries.  Pharmacia will retain the
 rights to market SOD products in Norway, Sweden and other
 selected markets.  Gurenenthal GmbH of West Germany, holds
 market rights in other European countries.

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