Chiron had its manufacturing licence to make Fluvirin suspended last October by the UK Medicines and Healthcare products Regulatory Agency (MHRA) after bacterial contamination problems were uncovered at the plant. As a result, the firm was unable to ship the 48 million doses of Fluvirin destined for the US market, fully half the country's total requirement, and the halt in production led to shortages in the 2004-2005 flu season.
The MHRA gave Chiron the green light to resume production in early March, after ruling that the measures put in place to bring the Liverpool facility back into regulatory compliance were adequate. Chiron said in April that it would be able to deliver 25 to 30 million doses before the 2005-2006 flu season. But yesterday the company said its output would be lower - in the 18 to 26 million dose range - and that this would have a material impact on its earnings in 2005.
The suspension last year has already contributed to a $304 million dollar reduction in sales at the firm last year. Chiron also had to write off the entire Fluvirin vaccine product inventory in the third quarter of 2004, resulting in a $91 million charge to cost of sales. Now, the company says it has had to reduce its 2005 earning forecasts from $1.06-$1.16 to $0.86-$1.11 per share.
In a statement, Chiron said the shortfall had been caused by "delays in start-up procedures for ramping up to full production and normal manufacturing issues inherent to the complexity of influenza vaccine production."
Last year, the US Food and Drug Administration cited violations of bacterial contamination of vaccine batches; inadequate cleaning procedures; microbial growths on equipment used to fill vaccine vials; unacceptable levels of bacterial toxins in some vaccine preparations; and contamination in some viral seed cultures used to produce the vaccine. The agency is scheduled to inspect the Liverpool plant next month and rule whether it will be able to ship Fluvirin to the US for the coming flu season.
Vaccines are often more costly to produce than drugs because of the complexities involved in dealing with live viruses. Making a vaccine can require hundreds of steps, each subject to stringent sterility guidelines, and this cost of production can often mean that the margins in the vaccine business are much smaller than for chemical drugs.
Chiron's problems provide a further opportunity for two other companies, GlaxoSmithKline and MedImmune, to consolidate their positions in the US market for flu vaccines, formerly split evenly between Chiron and French pharmaceutical company Sanofi-Aventis.
GSK supplied around 1 million doses of its Fluarix vaccine to the US government last season under emergency procedures, and could send 10 times that many over this year if full approval of the product is granted by the FDA. Meanwhile, MedImmune's nasal flu vaccine FluMist, which is approved in the US, benefited from a government order for 3 million doses.