If you can follow this..................
Basically the word is to describe it is filth........
"The manufacturing of the spray vaccine, called FluMist, is still done
partly on the same Liverpool campus but that production is now under the
control of MedImmune, which acquired Aviron. "
October 7, 2004
A Biotech Company's Aggressive Move Backfires
By ANDREW POLLACK
oward Pien, the chief executive of Chiron, said he wanted to help meet
America's need for more flu vaccine, while expanding the business of his
company. So Mr. Pien has been sharply increasing the production of flu
vaccine at a British factory Chiron acquired in 2003.
The company had expected that plant to supply about 50 million vaccine
doses to the United States this year, up from 26 million in 2002, when the
plant was owned by another vaccine maker.
But now Mr. Pien's aggressive plan has backfired. Finding contamination
problems, British regulators suspended the license for vaccine production
at the factory on Tuesday, a move that will deprive the United States of
nearly half the flu vaccine it expected for this winter. The suspension has
cost Chiron not only three-quarters of the profit it expected this year,
but also some of its credibility with investors and customers.
Some analysts downgraded Chiron's stock, and Moody's Investor Services said
it was looking at lowering the company's debt rating. Mark Augustine, an
analyst at Credit Suisse First Boston, called Chiron a "broken"
biotechnology stock. Shares of Chiron plummeted 16 percent on Tuesday,
rebounding very modestly yesterday to close at $38.32, up 34 cents.
Vaccines accounted for about $700 million of the company's $1.75 billion in
revenue last year. Fluvirin, the flu vaccine, alone accounted for $219
million. With the big increase in production, analysts had expected more
than $300 million in revenue from Fluvirin this year.
Chiron, anticipating increased revenue, had increased spending in research
and development and other areas of its business. It is also building a new
office for its vaccine business in Philadelphia. Now the company may have
to scale back plans. And prospects for its future flu vaccine business are
Mr. Pien has said that the company remains committed to being a major flu
vaccine supplier next year. But he conceded in a news conference Tuesday
that addressing the problems at the factory might extend past next February
or March, when production would have to begin for next winter.
Mr. Pien, who rose quickly in the management ranks in several major
pharmaceutical companies before becoming chief executive of Chiron in April
2003, did not make himself available for an interview yesterday. He said on
Tuesday that the British regulatory decision was "disappointing and
unexpected, but we respect the regulatory authority's judgment because it
is based on concerns over safety."
One question is whether the contamination problems may have been a
consequence of Mr. Pien's push to increase vaccine production quickly at
the aging factory.
"The problem was they really stressed the system this year to get to that
50, 52 million doses," said Geoffrey C. Porges, an analyst at Sanford C.
Bernstein & Company who formerly worked in the vaccines business at Merck.
David V. Smith, Chiron's chief financial officer, said yesterday that the
company had not expanded its production too fast. About $75 million has
been spent to upgrade the factory in the last five years, the company said.
Chiron said it is committed to spending another $100 million to replace
part of the plant.
The plant, located in Liverpool, dates back to the 1970's and has had a
series of owners and problems in the last decade as pharmaceutical
companies merged and divested assets.
Chiron acquired the owner of the Liverpool plant, PowderJect
Pharmaceuticals, in July 2003 to expand its vaccine business. That merger
was completed shortly after Mr. Pien took over, though the deal had been
planned before he arrived. PowderJect, in turn, had acquired the factory in
2000 from Celltech, which owned it for about seven months.
Contamination problems were not new. Polio vaccines manufactured by Medeva,
another previous owner, at the plant before 1996 were recalled in October
2000 after British authorities said they might be contaminated with BSE, or
mad cow disease. In 1999, the Food and Drug Administration notified Medeva
that there were risks of contamination in the flu vaccine produced at the
Production issues at the plant when it was owned by Medeva also caused
delays for Aviron, the developer of the nasal spray flu vaccine. The
manufacturing of the spray vaccine, called FluMist, is still done partly on
the same Liverpool campus but that production is now under the control of
MedImmune, which acquired Aviron.
"It's an old facility that was sold by Glaxo to Medeva, who spent some
money on it, though probably not in the right spot, then to Celltech, who
didn't give a toss," said one British pharmaceutical executive.
Still, J. Leighton Read, the former chief executive of Aviron, said that he
would not necessarily blame the age of the factory for Chiron's problems.
"Every vaccine plant that's more than a year old that I'm aware of has a
history of challenges in complying with the regulatory regime," said Dr.
Read, now a venture capitalist. "In our extreme concern for safety, which
is largely appropriate, we have evolved systems that are too rigid and
brittle to adapt to circumstances such as this."
Chiron, based in Emeryville, Calif., is one of the nation's oldest biotech
companies, founded in 1981 by three scientists from the University of
California campuses in San Francisco and Berkeley. Perhaps its biggest
claim to fame is the discovery of the hepatitis C virus.
But Chiron has not had as much success in developing biotech drugs as some
of its competitors like Amgen and Genentech. The company has grown in large
part through acquisitions and now has three businesses - drugs, the testing
of donated blood for viruses like H.I.V. and hepatitis C, and vaccines.
The shutdown of its vaccine production could damage Chiron's business
beyond the immediate loss of revenue. Hospitals, clinics and distributors
might be more wary of ordering from Chiron in the future.
The federal government could become more aggressive in acquiring flu
vaccine from additional suppliers next year, or encourage other companies
to enter the business, which would cut Chiron's market share in the future.
Chiron is currently one of two major suppliers of flu vaccine in the United
States this year, the other being Aventis.
It is also possible the government will become more cautious in expanding
its recommendations on who should get flu shots. "I took down my flu
vaccine forecast right through 2012 because of this," said Mr. Porges of
Sanford C. Bernstein.
Investors might also become less trusting of Chiron management. Mr. Pien
gave public assurances, including in Senate testimony last week, that
although the company had detected a limited contamination problem in the
Liverpool factory, it was close to correcting the problem and would be
shipping flu shots early in October.
"It certainly raises eyebrows in the investment community," said Mr.
Augustine of Credit Suisse.
Argeris N. Karabelas, known as Jerry, who was Mr. Pien's boss at SmithKline
Beecham in the 1990's, defended his credibility. "I can tell you there is
nobody more credible that I've ever worked with than Howard Pien," said Dr.
Karabelas, now a venture capitalist in Princeton, N.J. "This guy, if he
said it, he believed it totally."
Mr. Pien, who was born in Taiwan and has an engineering degree from the
Massachusetts Institute of Technology and an M.B.A. from Carnegie-Mellon,
worked at Merck, Abbott Laboratories and SmithKline Beecham, which later
He became head of most of the SmithKline pharmaceutical business at the age
of 40. His last position before joining Chiron was president of
international pharmaceuticals at GlaxoSmithKline when the company, along
with others, dropped a lawsuit aimed at keeping cheap copies of AIDS drugs
out of South Africa.
Heather Timmons contributed reporting from London for this article.