Chiron Chief Executive to Step Down

Chiron Corp. on Thursday unexpectedly announced that Chief Executive Sean Lance will be stepping aside after five years and would be succeeded by Howard Pien, a high-ranking executive at GlaxoSmithKline.

Pien, 45, is likely to join Chiron in April. Lance, 55, will remain chairman of the Emeryville, Calif.-based biotech concern, Chiron said.

Chiron’s shares dipped 17 cents Thursday, closing at $38.61 in Nasdaq trading. The Swiss pharmaceutical firm Novartis owns 48% of the company.

Analysts said the change was probably good for Chiron, which has a solid business in vaccines and blood-testing equipment, but lacks strong drug candidates to drive future revenue.

“Chiron has shown pretty solid growth, but the question has been where is Chiron going from here?” said Jennifer Chao of RBC Capital Markets. Stocking the company’s drug pipeline will be a priority for Pien, she said.

When Lance was hired as chief executive, his goal was to energize what was then an undisciplined company better known for science than products. Almost immediately, Lance, a former chief operating officer of Glaxo, sold Chiron’s diagnostics business to German drug maker Bayer for $1.1 billion. And he organized Chiron’s business around three key markets: infectious disease, blood-testing equipment, and cancer.

During Lance’s tenure, Chiron’s annual revenue nearly doubled to $1.3 billion. Last year, Chiron and development partner Gen-Probe of San Diego received Food and Drug Administration approval to market a test for the viruses that cause AIDS and hepatitis C that is used by nearly all U.S. blood banks. The test is a key product for both firms.

At the same time, Chiron has suffered painful setbacks in its drug-development program, including the failure of a much-anticipated drug for septic shock still in late-stage human testing. Analysts said Chiron needs a stronger portfolio of biotech drugs because it is too dependent on vaccines and blood tests, which are subject to low-margin government contracts.

“He did a good job of refocusing the company, but they have had disappointments in clinical trials,” said James McCamant, an editor with Medical Technology Stock Letter in Berkeley. “The pipeline is a little thin at this point.”

Analyst Chao said Pien, head of Glaxo’s international business, appears to have the background and contacts needed to build Chiron’s drug business. Lance and Pien’s tenure at Glaxo did not overlap.

Chiron spokesman John Martin said Lance alone made the decision to step aside. Martin said Lance always intended to leave his CEO post when he completed the reorganization. Neither Lance nor Pien was available for interviews Thursday.

“I think he and the board understood that this was not a 10-year project,” Martin said.