Questions Arise Over Chiron Flu Vaccine Production Capabilities for Next Season
Chiron CEO and Chair Howard Pien said Wednesday in a conference call with investors that the company must design a plan to address sterility and quality control problems at its vaccine manufacturing plant in Liverpool, England, and receive input from British and U.S. regulators before announcing whether it would be able to produce enough influenza vaccine in 2005 to meet U.S. demand, the New York Times reports (Pollack, New York Times, 10/21).
The California-based company, which manufactures half of the U.S. supply of flu vaccine, on Oct. 6 announced that this year it would not ship vaccine doses manufactured at the Liverpool facility. The British Medicines and Healthcare Products Regulatory Agency suspended the manufacturing license held by Chiron for the Liverpool facility because of "issues with systems and processes," according Pien. Prior to the announcement, the United States expected to have 100 million flu vaccine doses for the current season, compared with 87 million last season. A weeklong U.S. investigation into the British decision to suspend Chiron's manufacturing license found that none of the flu vaccine made there is safe for use (California Healthline, 10/20).
Pien said Chiron's "remediation plan" includes examining the manufacturing process at the company's Liverpool plant, including the system used to prevent bacterial contamination and maintain quality. Pien said the company has had "two fruitful meetings" with British regulators and plans to contract with outside consultants to fix the problems (Gellene, Los Angeles Times, 10/21). The company also hopes to meet with FDA officials soon. Both FDA and MHPRA have said they will work to help the Chiron plant resume operations as soon as possible. However, Pien said he could not guarantee that the company will resume production by March, the point at which the manufacturing process would have to begin for the next flu season.
The indication that Chiron is "only now" taking steps to resolve manufacturing problems "suggests there is a long way to go," according to the New York Times. If Chiron is not able to supply vaccine next year, the United States could experience another shortage. Federal government officials are seeking new suppliers (New York Times, 10/21). However, Chiron "remains a better bet" because there might not be enough time to license new suppliers before production should begin, USA Today reports (Hopkins, USA Today, 10/21).
Citing litigation, Pien said he could not make any specific comments on the company's progress until early January, when the license suspension will be lifted (New York Times, 10/21). Pien said, "We are determined, dedicated and resolute in our commitment to take appropriate actions to resolve problems identified at our Liverpool facility and return to the U.S. market as a reliable supplier of flu vaccine as soon as is feasible" (Silber, Contra Costa Times, 10/21). However, a Chiron spokesperson said she could not assure the company would resume production next year "or ever" (New York Times, 10/21).
Sanford C. Bernstein analyst Geoffrey Porges said, "As I feared, the company has a pretty long list of things it has to remedy to get the facility running" (Los Angeles Times, 10/21). He added, "The confident statements they were making two weeks ago about their ability to return to the market next year after their three-month suspension weren't conveyed in this call" (New York Times, 10/21). Deutsche Bank analyst Jennifer Chao said Pien's statements were "more legalese, which is appropriate given the state of affairs" (USA Today, 10/21).
Chiron is the target of a Department of Justice investigation, an informal inquiry by the Securities and Exchange Commission and at least seven shareholder suits alleging that the company misled investors about its ability to supply the vaccine this year (Los Angeles Times, 10/21). Chao said, "There's no question that the company is tarnished. This is not just an issue of lost profit, but lost confidence by the public. Depending on how Chiron reacts will give us some sense of what they're made of" (Contra Costa Times, 10/21).
Harris Nesbitt analyst Thomas Shrader said Chiron is being cautious because of the company's legal concerns and in an effort to appease British and U.S. regulators. Shrader said, "[Pien] is bending over backwards to get regulators to tell him what he needs to do" (Los Angeles Times, 10/21). He added, "It's a one-time disaster." Schrader expects that the company will manufacture about 30 million to 40 million doses of vaccine for the 2005-2006 flu season (Contra Costa Times, 10/21).
Chiron posted a $91 million third-quarter expense to write off the value of the lost vaccine inventory. The company did not record any flu vaccine sales in the third quarter, which reduced quarter earnings by about 36 cents per share. As a result, the company's revenue decreased to $523 million from $540 million. In the third quarter of 2003, flu vaccine sales accounted for $103 million in revenue. Chiron earlier this month lowered its estimated operating earnings for the year to between 70 cents and 80 cents a share from an estimated $1.80 to $1.90 per share (Tam, Wall Street Journal, 10/21).
For the third quarter, Chiron earned $23.5 million, or 13 cents per share, compared with analysts' estimates of 26 cents per share one month ago (Lohse, San Jose Mercury News, 10/21). In the third quarter of 2003, the company posted a loss of $20 million, or 11 cents per share, in part because of its acquisition of PowderJect Pharmaceuticals, the company that owned the Liverpool factory. Chiron said it might lower its earnings guidance for the year to reflect additional expenses related to the Liverpool plant suspension and remediation (New York Times, 10/21). Porges said analysts anticipated a larger write-off of about $130 million. Chiron recorded about $46 million in revenue from a settlement in a patent dispute with a unit of Roche, which increased earnings by about 18 cents per share (Wall Street Journal, 10/21).
A provision included in the corporate tax bill (HR 4520) would allow people who contend they were injured by the flu vaccine to apply for compensation from the federal Vaccine Compensation Fund before bringing a lawsuit against vaccine manufacturers. The provision was "quietly "added to the bill -- which passed Congress this month -- in an effort to help enact an HHS recommendation that children ages six months to 23 months and their caretakers be vaccinated against the flu, CongressDaily reports.
Congress adds an excise tax on each dose of vaccine that is included on an HHS list of recommended vaccines and directs that money into the federal Vaccine Compensation Fund. An HHS advisory committee earlier this year added the flu vaccine to the list of recommended vaccines for children. Under the provision, a 75-cent tax would be charged to manufacturers for each dose of flu vaccine. The Bush administration has said that fear of lawsuits has prevented more companies from getting into the vaccine market. The flu vaccine provision was estimated to provide revenues of $75 million on a projected 100 million doses; however, the number of sellable doses will be significantly less than that projection because of the Chiron shortage. The bill must be signed by President Bush before it is enacted.
Sen. Evan Bayh (D-Ind.) said Wednesday that he is seeking to pass two bills (S 2038 and HR 3758) that are designed to prevent future flu vaccine shortages. The bills would require CDC officials to estimate the number of flu doses needed for the national supply each year and buy back from manufacturers any unused doses left over from that amount. The bills also would authorize $100 million for government research (Heil, CongressDaily, 10/20).
In addition, the measures would offer vaccine and biotechnology companies a 20% tax credit to encourage new suppliers. The bills would authorize $10 million annually for public awareness and outreach programs to educate the public about the flu vaccine and methods to prevent contracting the flu (CQ Today, 10/20). Bayh said the measures would reduce financial risk for vaccine manufacturers by ensuring a market for their products. Bayh hopes to pass the legislation in the lame duck session (CongressDaily, 10/20). He said, "This is an issue that cannot wait to be addressed. We have to act now" (CQ Today, 10/20).
U.S. military troops currently serving in Iraq and Afghanistan and those being deployed will receive flu vaccinations, Pentagon officials said Tuesday. Aventis has shipped 680,000 doses to the military and expects to deliver an additional 620,000 doses in four to eight weeks. The Pentagon is also negotiating with MedImmune to receive 50,000 doses of its inhalable vaccine FluMist. Most vaccine doses will be distributed to troops in South Korea and those serving under the U.S. Central Command, which includes Southwest Asia and most of the Middle East. Some service members who are considered at low-risk of contracting the virus or who are not considered "key operational forces" will not receive a shot.
Pentagon officials planned to have 3.7 million doses of the vaccine this season to inoculate troops, their dependents and other beneficiaries. The flu vaccine normally is mandatory for all military personnel (Martz, Atlanta Journal Constitution, 10/21). Pentagon representatives said the military "is working on an agreement with Aventis to close that gap," the AP/Las Vegas Sun reports. William Winkenwerder, assistant secretary of defense for health affairs, said, "We believe that we're well positioned to fully take care of and respond to the flu vaccination needs of the people who need the vaccine" (Burns, AP/Las Vegas Sun, 10/21).
Rep. Christopher Shays (R-Conn.) sent a letter to U.S. Capitol attending physician John Eisold to voice his reservations about the doctor's recent recommendation that all members of Congress receive the flu vaccine. Shays wrote, "I am concerned about reports that members of Congress continue to receive flu shots while residents of our districts who are considered part of the at-risk population may not be able to receive them this year" (Hathaway, Hartford Courant, 10/21).
Shays added, "It seems to me members of Congress who are not at risk should not receive the vaccine ahead of the general public" (Sherman, AP/Las Vegas Sun, 10/20).
Several broadcast programs reported on the flu vaccine shortage:
- APM's "Marketplace": The "fundamental problem[s]" are the United States' dependence on only two manufacturers for all its flu vaccine and its failure to organize a flu vaccine market that offers investors a competitive rate of return while responding to public needs, former Clinton administration Labor Secretary Robert Reich says in a commentary on the program(Reich, "Marketplace," APM, 10/20). The complete segment is available online in RealPlayer.
- CBS' "Evening News": The segment includes comments from Rep. David Dreier (R-Calif.), Sen. Joseph Lieberman (D-Conn.) and HHS Secretary Tommy Thompson (Orr, "Evening News," CBS, 10/20). The complete segment is available online in RealPlayer.
- NBC's "Nightly News": The segment includes comments from Arthur Caplan, chair of the Department of Bioethics and director of the Center for Bioethics at the University of Pennsylvania School of Medicine, and Thompson (Bazell, "Nightly News," NBC, 10/20). The transcript and complete video of the segment in Windows Media are available online.
- NPR's "Day to Day": The segment includes comments from Richard Evans, pharmaceutical industry analyst with Sanford C. Bernstein; Chris Jennings, former Clinton administration health policy adviser; Thompson; and Jim Young of MedImmune (Rovner, "Day to Day," NPR, 10/20). The complete segment is available online in RealPlayer.
- NPR's "Day to Day": The segment includes comments from Thompson (Knox, "Day to Day," NPR, 10/20. The complete segment is available online in RealPlayer.
- NPR's "Morning Edition": The segment includes comments from Dr. Walter Ornstein of Emory University and Dr. John Treanor, director of the Vaccine Evaluation Unit at the University of Rochester Medical Center (Knox, "Morning Edition," NPR, 10/21). The complete segment is available online in RealPlayer.
- WBUR's "Here & Now": Guests on the program included Diedtra Henderson, science writer for the Associated Press; Paul Kemp, senior editor of the Harvard Business Review; and Dr. William Schaffner, chair of the Department of Preventive Medicine at Vanderbilt University Medical Center (Young, "Here & Now," WBUR, 10/20). The complete segment is available online in RealPlayer.