Chiron to Ship Less Flu Vaccine

Chiron Corp. said Wednesday that it would not deliver as much flu vaccine this year as promised, heightening the possibility of another season of shortages.

The Emeryville, Calif.-based company caused a public health crisis in October when it failed to ship 50 million doses from its troubled factory in Britain, cutting off half the anticipated U.S. supply.

Chiron said continuing problems at its plant in Liverpool meant it would ship 18 million to 26 million doses this year to the U.S., down from its previous estimate of 25 million to 30 million.

“At best, we will have enough vaccine to meet low-normal demand, but we won’t have enough for a bad flu season,” said Geoffrey Porges, an analyst with Sanford C. Bernstein & Co.

Chiron also lowered its earnings estimates for 2005. The company said it now expected to earn 86 cents to $1.11 a share from continuing operations, down from its previous forecast of $1.06 to $1.16.

Its stock closed at $35.47 on Wednesday, down $2.48, or 6.5%.

Hospitals and vaccine distributors also reacted with concern, but many said they had placed vaccine orders with drug companies in addition to Chiron to guard against devastating shortages.

Chiron is one of three flu shot producers that are expected to supply the U.S. this year. Sanofi-Aventis, a French drug company, plans to deliver 50 million shots, and GlaxoSmithKline, a newcomer to the U.S. flu vaccine business, is seeking federal approval to market 10 million shots, analysts said.

Annual demand for vaccine varies depending on the timing and severity of the flu. Experts said it was too early to forecast how the flu season would shape up this year.

During last year’s mild flu season, the U.S. used 57 million shots out of the 61 million that were available. Public health authorities, concerned about the shortage from Chiron, rationed shots last fall and winter so that people with the highest risk of becoming seriously ill from the flu, such as the elderly and patients with chronic diseases, could be vaccinated.

The national Centers for Disease Control and Prevention has set a goal of vaccinating 100 million people, although demand for shots has never exceeded 80 million in any year.

A CDC spokesman said the public health agency was watching the Chiron situation closely.

In May, Jesse L. Goodman, director of the Food and Drug Administration unit that oversees flu vaccine production, told a congressional committee that Chiron’s ability to solve its manufacturing troubles was the “most important single factor” affecting the U.S. vaccine supply.

Regulators in Britain suspended the manufacturing license of Chiron’s factory in October after finding evidence of contaminated vaccine. British authorities reinstated the license in March, but the factory must pass an upcoming FDA inspection before Chiron can sell its shots in the U.S.

Chiron President Jack Goldstein, speaking at an investor conference in Dana Point on Wednesday, attributed much of the delay to the amount of employee training needed to turn the factory around.

The company moved 100 workers from other facilities to Liverpool and made 2,000 improvements to its manufacturing process, he said. But integrating those changes has been more difficult than expected, he said.

Chiron expected to begin shipping its first batches of vaccine to the U.S. in September, Goldstein said, about a month later than usual. The company said customers’ orders would be reduced proportionately.

Chiron said its new vaccine and earnings estimates assumed that demand for flu shots would continue through the end of November, an indication that Chiron might have trouble selling its vaccine if the flu season is mild.

Typically, manufacturers deliver all their flu shots by the end of October. Customers may cancel orders if vaccine is not received by then.

Chiron’s continued problems were expected to damage its relationship with customers, some of whom had no vaccine last fall when Chiron was forced to scrap its entire production.

“Any time a company creates expectations and fails to meet them, it gets hurt,” said Patrick Schmidt, chief executive of FFF Enterprises Inc. of Temecula, which delivers flu vaccine to about half of all U.S. hospitals. The company had placed its entire order with Chiron last year.

Schmidt said he hoped that Chiron would return to the market: “We want to forgive and forget.” But in the meantime, his company has placed orders with all three vaccine producers.

Providence Holy Cross Medical Center in Mission Hills and Providence St. Joseph’s Medical Center in Burbank have gone one step further: They have placed their entire orders with Sanofi-Aventis after being burned by Chiron last year.

And the California Department of Health Services split its order for 650,000 doses of adult vaccine between Chiron and Sanofi-Aventis.

“We have not heard yet whether the reduced estimates today will affect our order, so it’s premature to know how this will affect the state purchase of vaccine,” said Dr. Robert Schecter, a medical officer in the state’s immunization branch.

“There is some reassurance because even last year, when there was no Chiron vaccine available and we ordered all of our vaccine from Chiron, we were still able to get the amount we had ordered redirected from Aventis.”