Ebb & Flow

Chiron's six independent directors clearly opened the door to Novartis' proposed acquisition of the 58% of CHIR it doesn't already own. However, NVS can hardly have failed to notice that CHIR is looking very inexpensive. Indeed, since 1999, the company's market cap to revenue ratio has steadily decreased (see "A Bargain").

The sinking ratio does not reflect flagging revenues, which will have more than doubled from 1999 if CHIR's 2005 revenues come in at the Street's estimate of $1.9 billion. In 1999, the company posted revenue of $763 million. Instead, the stock has slid as CHIR has had repeated problems with vaccine manufacturing. In October 2004, it shut down the Liverpool facility that manufactures Fluvirin flu vaccine because of contamination. That product should be back this year, as the facility passed FDA inspection last week and is producing vaccine for the 2005-06 flu season. But the company recently disclosed it will not supply its Begrivac influenza vaccine to non-U.S. markets for the 2005-06 season because some lots did not meet sterility specifications. That vaccine is manufactured in Marburg, Germany. ...