Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Biotech / Medical : Chiron -- Ignore unavailable to you. Want to Upgrade?

To: fred hayes who wrote (1326)	12/8/2004 10:14:48 AM
From: mopgcw	Read Replies (1) \| Respond to of 1352

Fred, I hear ya, which is why i have been keeping a keen eye on it. but this report gives me pause. Piper: FDA And MHRA Uncover Pervasive QA/QC Problems. We have obtained correspondence between the FDA, the British regulatory agency (MHRA), and Chiron that detail a history of problems at Chiron's Fluvirin plant and reveal an endemic culture of poor manufacturing practice. We outline in this note the issues raised by the regulators, as well as a timeline of inspections, findings, and public announcements. Primary areas of concern highlighted by the regulators were heavily weighted toward poor record- keeping, failure to comply with prior requests, and sub-par responses to bioburden (microbial load) and contamination issues. Chiron cited failure to carry out proper aseptic techniques and faulty aseptic connections as the probable root cause for this year's contamination, which also raised concerns about the integrity of equipment design and layout. * Interpreting The Documents: Near- Term Implications. As a reminder, Chiron will need the blessing of both the FDA and MHRA by the end of March in order to begin manufacturing for next year's flu season. While our knowledge of detailed vaccine manufacturing processes is limited, the documents indicate that key changes to standard operating procedures and modifications to some equipment (such as aseptic connections in formulation suites) may be necessary prior to beginning production. What remains unclear to us is the complexity issues, what the late-December MHRA inspection hopes to uncover, and to what extent the proposed changes will need to be implemented and validated in 1Q05 to get the go-ahead. * Interpreting The Documents: Long- Term Implications. Even with a green light in March to start manufacturing, the documents give us pause for caution. First, while the relative lack of equipment concerns may help Chiron meet its short-term March deadline, the preponderance of process and oversight problems signal deep cultural issues that may be more difficult to fix than simple equipment replacement. In addition, the MHRA believes that the increase in manufacturing capacity from 2003 to 2004 could have been a source of contamination. Chiron's response to this criticism lacks conviction, leading us to believe that the enormous pressure placed on the plant since 2001 to dramatically expand manufacturing capacity (capacity doubled over three years) and to meet aggressive release deadlines may indeed have contributed to poor QA/QC oversight that culminated in unacceptably high levels of contaminants. Thus, we are uncertain of the number of doses that can be manufactured in subsequent vaccine seasons under much stricter operating procedures. Overall, we believe there continues to be significant risk associated with Chiron's ability to sell Fluvirin for the 2005-2006 season. INVESTMENT RECOMMENDATION: We remain cautious on Chiron given risks in meeting expectations for earnings quality, and increasing competition for its Biopharma and Vaccines businesses.