Chiron Uncertain About Next Flu Season but Pushes Ahead

With an April deadline looming, Chiron Corp. has launched a massive effort to reopen its British vaccine factory in time to deliver shots to the U.S. for next fall’s flu season. But the company doesn’t know whether it will be enough, its chief executive acknowledged Wednesday.

In his first interview since British regulators shuttered the Liverpool plant Oct. 5 because of bacterial contamination, CEO Howard Pien said there was no way to forecast how many doses Chiron might sell this year, if any. He said it was possible that Chiron could capture half the U.S. market if the plant cleanup went smoothly and the company beat competitors to market.

“We will try, but we may not succeed,” he said.

And he didn’t rule out the possibility of future problems at the plant and in regaining Chiron’s share of the market. “If we succeed, we may not sustain,” he said. “And if we sustain, we may not have the market share.”

The Emeryville, Calif.-based company has said that it will need to start production in March to deliver vaccine in the fall. In December, the British Medicines and Healthcare Regulatory Agency extended its suspension of the Liverpool plant’s license until early April, but Chiron hasn’t given up, noting that the license suspension could be lifted anytime and that an April start-up might be early enough.

Pien said a team of 70 experts was implementing a “remedial plan” calling for broad changes that go beyond addressing U.S. and British inspectors’ findings.

“Truthfully, this has taken a lot out of us, and it would be horrendous if we ever had to live through this again,” Pien said. He was interviewed at his hotel in San Francisco, where he made a presentation Wednesday to investors at the J.P. Morgan Healthcare Conference.

Some analysts are somewhat optimistic about Chiron’s prospects. Jennifer Chao of Deutsche Bank upgraded Chiron’s shares to a “buy” on Jan. 3, saying she thought it could deliver at least 35 million doses next season.

Chiron’s shares, which have fallen 22% since Oct. 5, rose 75 cents Wednesday to $35.29 on Nasdaq.

Chiron is under investigation by the Justice Department, which is looking into disclosures that the company made about its ability to supply vaccine last year. Chiron also faces an informal inquiry by the Securities and Exchange Commission and a slew of shareholder lawsuits.

Pien said he was concerned about perceptions of Chiron as a greedy company that was in the flu vaccine business “only ... to make more money.” In fact, he said, “nothing could be further from the truth.”

Chiron ramped up vaccine production in 2003 and 2004 because of its “deep, long-term commitment to public health,” he said. It has said it produced 38 million doses in 2003, 50% more than in 2002, and attempted to make 52 million doses in 2004 to meet estimates of demand by public health officials.

Government inspectors have linked Chiron’s problems in Liverpool to the ramp-up.

Problems began last summer, when the company discovered bacteria in finished vials of vaccine. Chiron said in August that it would probably throw out 4 million doses of total production of 52 million doses. Pien said at the time that the cause was probably “human error.”

Chiron completed its investigation Sept. 27 and concluded from internal tests that 46 million to 48 million doses were safe to use. The next day, the MHRA began a two-day inspection.

Pien was shocked, he said, when the British regulators suspended Chiron’s license.

Before the Oct. 5 license suspension, Pien said, Chiron had been in regular contact with British authorities and the U.S. Food and Drug Administration. In fact, he said, the company sent British regulators an advance news release on testimony Pien planned to provide to a congressional committee Sept. 28. At the hearing, Pien told the Senate Special Committee on Aging that Chiron had completed its internal tests and expected to ship 46 million to 48 million doses of vaccine soon.

After the suspension was announced, the FDA conducted its own inspection of the Liverpool facility and endorsed the actions of British regulators.

Pien suggested that the results of the British inspection might have influenced the FDA’s inspection. “Whether or not the conclusion of the FDA, if there had not already been an inspection by the MHRA, would have been that we were out of compliance, I do not know,” he said. “By then, the die had been cast.”

In Liverpool, the remedial plan is being implemented in stages. Pien said it involved new construction, employee training, an overhaul of manufacturing systems and procedures and changes in safety testing.

At each stage, British inspectors will review the changes, along with observers from the FDA. Pien said the first inspection took place before Christmas and took 2 1/2 days.

When asked how long such an extensive remediation plan would take under ideal conditions, Pien declined to say. He noted that companies in similar situations “have taken years” to bring factories up to snuff.

Many of the 70 members of the remediation team were assigned to Liverpool from other parts of Chiron or are outside consultants, Pien said. Some are working 17-hour days and have gone for three to four weeks without seeing their families.

Pien, who flew to Liverpool to have dinner with the team leaders before Christmas, recalled the case of one person who was miserable because the assignment kept him from attending his 6-year-old daughter’s first concert.

“The hours are long and there are moments of great sadness, but truthfully, I am almost perversely actually uplifted by this experience,” Pien said. “It has revealed a great deal about the spirit of our people and the intensity of a sense of mission.”