U.S. Probe of Chiron Advances

The Justice Department has interviewed several mid-level employees of Chiron Corp.’s flu vaccine operations, a knowledgeable source said Thursday, a sign that the federal probe of the Emeryville, Calif., company is moving ahead.

Investigators have talked in recent weeks with fewer than a dozen employees of Chiron’s vaccine business, which is based in Britain, but interviews with other executives are planned, the source said.

Megan Gaffney, a spokeswoman for the U.S. attorney’s office in New York, declined to comment. Robert Bennett, the Washington attorney who represents Chiron, couldn’t be reached. Chiron has said in the past that it would cooperate with investigators.

Chiron came under scrutiny in October after British regulators shut down its factory in Liverpool, which had produced 50% of the flu vaccine slated for the U.S. British authorities said they found numerous manufacturing lapses and bacterial contamination.

The closure prevented Chiron from shipping its flu shots, and U.S. public health authorities had to ration scarce vaccine.

Chiron said in mid-October that federal prosecutors in New York had subpoenaed documents related to the company’s Fluvirin flu vaccine and its Liverpool factory.

Investigators are looking at, among other things, disclosures that Chiron made before Oct. 5, when British authorities suspended the license of Chiron’s Liverpool plant. Experts say prosecutors could be seeking evidence that Chiron lied to the government or to investors about its ability to supply vaccine.

In the days before the suspension, Chiron offered no public hints that its U.S. vaccine supply was in danger. Chiron Chief Executive Howard Pien told a congressional committee Sept. 28 that the company expected to ship vaccine in a matter of days.

Chiron’s shares have fallen 27% since the suspension was announced, an action that caught U.S. public health authorities off-guard. Pien has called the shutdown “completely unexpected.”

Lost flu vaccine sales have reduced Chiron’s cash flow, and lingering problems at the Liverpool plant could hurt next year’s sales, according to Moody’s Investors Service, which recently lowered some of Chiron’s debt ratings. Chiron’s problems leave it vulnerable to new competitors for the flu vaccine market, Moody’s said.

Besides the federal probe, the company faces several shareholder lawsuits and an informal inquiry from the Securities and Exchange Commission. In addition, the House Energy and Commerce Committee has requested that Chiron produce documents on the factory contamination as it investigates whether the vaccine shortage was preventable.

Chiron’s shares closed Thursday at $33, up 5 cents on Nasdaq.