SEC Drops Probe Into Chiron Flu Shot Crisis
Ending a painful chapter in its corporate history, Chiron Corp. said Tuesday that the Securities and Exchange Commission had dropped an investigation related to the company’s failure to supply flu vaccine in 2004.
The SEC opened an investigation in October 2004 after British regulators closed Chiron’s factory in Liverpool, England, citing sloppy manufacturing practices and contaminated vaccine. The action forced Emeryville, Calif.-based Chiron to scrap its entire production of 52 million doses, half the anticipated U.S. supply. The loss caused public-health authorities to ration shots.
The SEC probe was said to focus on whether Chiron executives misled investors about the company’s ability to supply vaccine. The company had disclosed production difficulties before the shutdown, but Chiron executives also had been optimistic about resolving them and said they were surprised when British regulators closed the factory.
Investors drove Chiron’s shares down 16% after the company announced it was being forced to suspend vaccine shipments.
Also on Tuesday, the SEC dropped an inquiry into Chiron’s restatement of its financial results for the second and third quarters of 2004. The revisions -- which were related to legal expenses, vaccine revenue and taxes -- lowered 2004 net income to 28 cents a share from 32 cents.
There was no indication of the status of a previously disclosed Justice Department investigation of the company, which experts believed was focused on whether the company misled investors or the government. Chiron said it had no comment on the criminal probe, opened in 2004. The Justice Department has never discussed the investigation and typically does not reveal when it closes a case without bringing charges.
However, one expert on white-collar crime said the SEC’s action could be interpreted as a sign that the Justice Department also had decided against pursuing a case against Chiron. The SEC typically waits for the Justice Department to complete any related case before proceeding, said John Fahy, a former federal prosecutor in New Jersey.
“If I were the company, I would feel pretty good about this,” Fahy said.
After investing heavily to bring its plant into regulatory compliance, Chiron resumed shipment of vaccine from Liverpool last year. For the flu season now ending, Chiron delivered 13 million shots to the U.S.
The vaccine debacle left Chiron a much weaker company. It is now in the process of being fully acquired by Novartis, a Swiss drug company that already owns a controlling stake in Chiron. Novartis said it wanted to use Chiron to enter the global vaccine business. Besides flu, Chiron produces vaccines for rabies and polio and is working on shots for the bird flu.
The Federal Trade Commission and the European Commission have approved the $45-a-share takeover. The companies expect to close the deal by June. But four shareholders owning 17.5% of Chiron oppose the Novartis offer as too cheap.
Chiron shares closed at $45.89, up 29 cents.
