S&P downgrades Chiron

Standard & Poor's said it lowered its ratings on biotechnology firm Chiron Corp., including the corporate credit and senior unsecured debt to BBB+ from A-.

The ratings remain on CreditWatch with negative implications, where they were placed Oct. 5, 2004 when Chiron's Fluvirin brand influenza vaccine was removed from the market because of manufacturing compliance issues in the company's Liverpool, U.K., facility.

S&P said the downgrade reflects the decreasing amount of explicit financial support provided by Chiron's 42% owner, Novartis AG (AAA/stable/A-1+). In January, Novartis' predecessor, Ciba-Geigy AG, purchased 49.9% of the common stock of Chiron and entered into a series of agreements. These agreements specified a variety of support measures, including partial funding of Chiron's research and development efforts and a combination of debt guarantees or mandated equity investments.

The R&D funding was exhausted several years ago and the debt guarantees expire in less than three years, on Jan. 1, 2008. Novartis will continue to have a strong representation on Chiron's board and would likely take steps to protect its substantial investment. Nonetheless, this imputed support alone is a less substantial benefit to Chiron's credit profile than the combination of explicit and imputed support, the agency said.

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