Baxter Acquisition Of NAVA Hinges On Approval of NeisVac-C in U.K.

Baxter's acquisition of North American Vaccine is contingent upon the U.K. approval of NAVA's group C meningococcal conjugate vaccine NeisVac-C.

A U.K. submission for NeisVac-C is expected during the fourth quarter or shortly thereafter. Anticipating an expedited review, NAVA expects to receive approval by the end of the first quarter, and the transaction is expected to close in April 2000.

NAVA has been focusing on NeisVac-C to continue its operations. NAVA stopped production of its diphtheria, tetanus and pertussis vaccine Certiva in order to manufacture NeisVac-C. NAVA started the fourth quarter with only $2 mil. in available cash (¹ (Also see "Abbott Ends Certiva Agreement In U.S.; NAVA Focuses on NeisVac-C for U.K." - Pink Sheet, 11 Oct, 1999.)).

The company is relying on a contract from the U.K to purchase 3 mil. doses of the vaccine in 2000 for a mass vaccination program. The NeisVac-C contract is expected to gross revenues of more than $65 mil. in 2000. NAVA expects the European and U.S. markets for group C meningococcal conjugate vaccines to be approximately $300 mil. per year.

NAVA's April deadline for vaccine approval may be optimistic unless the U.K.' s reviews of subsequent filings are faster than the first U.K. meningococcal approval, Wyeth-Lederle's Menigitech. That review took five months, and Chiron is awaiting approval of an application filed in late August.

NAVA announced Nov. 1 that an unnamed firm had offered financing of $5 mil. to the company as well as a non-binding acquisition proposal. As part of the acquisition agreement Baxter will make an additional $25 mil. line of credit available to NAVA.

Baxter is offering a premium of approximately 17% to the value of NAVA stock with the proposed acquisition. Baxter would pay $7 ($6.97 of Baxter common stock and $0.03 in cash) for each of NAVA's 37 mil. outstanding shares.

As part of the purchase transaction, Baxter will assume $133 mil. in acquisition-related debt. The deal is valued at approximately $390 mil.

BioChem has agreed to sell its 13.2 mil. shares in NAVA to Baxter. The shares will gross approximately $92 mil. for BioChem if the transaction is successful.

NAVA's expertise in bacterial vaccines will complement Baxter's experience with viral vaccines, Baxter said.

Baxter President and CEO Harry Kraemer highlighted NAVA's scientific expertise as a strength. He indicated that NAVA will be folded into Baxter's Hyland Immuno Vaccine Business. Hyland Immuno Division President Thomas Glanzmann and Hyland Immuno Vaccine Business President Friedrich Dorner, PhD, will oversee the integration of NAVA.

Kraemer noted that since acquiring Immuno International three years ago, Immuno's sales have grown 500%, and are expected to exceed $150 mil. this year.

The transaction is not expected to impact Baxter's projections for 2000, including an anticipated 10% growth in sales, an earnings growth rate increase to the low teens, and an operational cash flow of at least $600 mil. The spin-off of the cardiovascular business will continue unaffected by the transaction.

Baxter predicts that vaccine sales will reach $1 bil. by 2010, with Baxter and NAVA each comprising 50% of the sales. Baxter expects to bring one vaccine to market during each of the next eight to ten years.

Currently, all of Baxter's sales from vaccines, estimated at about $70 mil. for 1999, come from outside the U.S. Baxter expects the NAVA acquisition to move the company from a regional niche player in the vaccine market to a global competitor. Baxter predicted that the global vaccine market will grow from an estimated $ 7 bil. in 2000 to nearly $13 bil. by 2005.

The company expects two products to be launched outside of the U.S. in 2000. In addition to the meningococcal C vaccine, the company anticipates its second generation vaccine for tick-born encephalitis, Ticovac, will be launched in the first quarter. The company expects to begin penetrating the U.S. market in 2001, Glanzmann said.

Baxter announced that Kraemer will also assume the position of chairman when Vernon Loucks retires on Dec. 31. Baxter is headquartered in Deerfield, Ill. and employs 42,000 worldwide. NAVA is based in Columbia, Md. and has approximately 300 employees.