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CIBA-GEIGY $20 MIL. EQUITY INVESTMENT IN CHIRON

Executive Summary

CIBA-GEIGY $20 MIL. EQUITY INVESTMENT IN CHIRON is the first such biotech investment by the firm's pharmaceutical division and will build on earlier relationships between the two concerns. Under an agreement announced Nov. 14, Ciba-Geigy will obtain a 7.9% interest in Chiron through the purchase of 1 mil. newly issued shares. The deal includes neither technology transfer nor representation on the Chiron board. The collaboration between the two companies began in 1984 with an R&D agreement covering insulin-like growth factor, a Chiron-manufactured compound that recently entered Phase I trials. In 1987, Ciba-Geigy and Chiron formed Biocine Co., a 50/50 vaccine joint venture. Biocine has recently begun Phase I testing of an AIDS vaccine in Switzerland as well as a malaria vaccine, and expects to begin clinical trials for a herpes vaccine "in the near future," according to the release. "Our relationship with Ciba-Geigy has proven to be beneficial and rewarding," Chiron Chairman William Rutter, PhD, remarked. "This investment strengthens that relationship, as well as providing capital to Chiron for our strategic growth relationships." Chiron said that the proceeds from the placement will be used to fund product development activities, including clinical trials, process development and manufacturing facilities. In a separate, same-day action, Chiron announced the reacquisition of the rights to human superoxide dismutase (SOD) from joint venture partner Pharmacia, in exchange for a package of "current and deferred compensation" that includes cash, newly issued Chiron stock and future product royalties. "Chiron will hold marketing rights for SOD for the U.S., Canada, South America, Japan and other Asian countries," the release states. "Pharmacia retains the right to distribute SOD products in Norway and Sweden as well as marketing rights for SOD products in cancer-related applications outside Europe." According to the release, Pharmacia's decision was the result of an evolving R&D and marketing strategy precipitated by the company's 1987 acquisition of another Swedish firm, Leo AB. Currently in Phase III study at six U.S. centers for kidney transplant applications, SOD is also being studied for use in heart attacks and strokes. Pharmacia will continue to administer the trials under contract to Chiron. The compound is believed effective in scavenging free oxygen radicals, which are destructive to tissue during reperfusion. "Chiron anticipates establishing relationships with partners both in the U.S. and Japan, especially for cardiovascular indications," the company said. "We are in the midst of negotiations with possible partners in both countries." Preclinical development has been completed for SOD in heart bypass surgery, Chiron noted, with clinicals trials expected to begin "shortly." Chiron, which will take a one-time $5 mil. pre-tax charge to third quarter earnings, said the Pharmacia agreement will not change the status of the European rights to SOD, which were licensed to Gruenthal GmbH in 1985. Gruenthal is currently conducting clinical trials in kidney transplantation and in septic and polytraumatous shock.
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