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[MEDICAL] Chiron's CEO - Howard Pien

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  • madchinaman
    HOWARD PIEN - CEO & Chairman / CHIRON http://www.chiron.com/aboutus/execbios/hpien.html - Please note that all media inquiries for Chiron Corporation and its
    Message 1 of 1 , Mar 20, 2005
      HOWARD PIEN - CEO & Chairman / CHIRON


      Please note that all media inquiries for Chiron Corporation and its
      business units are addressed through our corporate offices in
      Emeryville, California. International inquiries will be directed to
      appropriate local contacts as necessary.

      Phone: (510) 923-6500
      Fax: (510) 923-3376


      Mr. Pien was appointed chief executive officer of Chiron Corporation
      in April 2003. He was appointed chairman of the company's board of
      directors in May 2004. Mr. Pien joined Chiron from GlaxoSmithKline
      (GSK), where he assumed the role of president, pharmaceuticals
      international, in January of 2001. He was also a member of GSK's
      corporate executive team.

      Previously, Mr. Pien held the position of president,
      pharmaceuticals, SmithKline Beecham, where he had responsibility for
      the commercial operations of the company's worldwide pharmaceuticals

      Before assuming that role in May 1998, he held key positions in
      SmithKline Beecham's pharmaceuticals business in the United States,
      the United Kingdom and North Asia. Prior to joining SmithKline
      Beecham in 1991, Mr. Pien worked six years for Abbott Laboratories
      and five years for Merck, with assignments in sales, market
      research, licensing and product management.


      Howard Pien
      President and Chief Executive Officer, Chiron Corporation

      Pien was appointed President and Chief Executive Officer of Chiron
      Corporation in April 2003. He is also a member of the company's
      Board of Directors. Pien joined Chiron from GlaxoSmithKline (GSK),
      where he assumed the role of President, Pharmaceuticals
      International, in January of 2001.

      He was also a member of GSK's Corporate Executive Team.

      Previously, Pien held the position of President, Pharmaceuticals,
      SmithKline Beecham, where he had responsibility for the commercial
      operations of the company's worldwide Pharmaceuticals business.
      Before assuming that role in May 1998, he held key positions in
      SmithKline Beecham's Pharmaceuticals business in the United States,
      the United Kingdom and North Asia.

      Prior to joining SmithKline Beecham in 1991, Pien worked six years
      for Abbott Laboratories and five years for Merck, with assignments
      in sales, market research, licensing and product management. Pien
      holds a B.S. degree from Massachusetts Institute of Technology and
      an M.B.A. from Carnegie-Mellon University.



      Chiron strives to be a leading biotechnology company by creating
      products that transform human health worldwide. We aim to prevent
      and treat diseases and improve people's lives.

      We will accomplish our mission through technological leadership,
      product-oriented research, superior manufacturing, and commercial
      strategies that create and expand markets.

      We adhere to the highest legal and ethical principles in the conduct
      of all aspects of our business. We are committed to adhering to
      proven standards of financial and operational performance.

      Our purpose is to find solutions to human suffering caused by
      disease. Because disease does not wait for solutions, we are driven
      by a sense of urgency. As a result, our environment is intense,
      challenging, and focused on creating value for those who use our
      products and delivering sustained profitable growth for those who
      invest in our company.

      Our goal at Chiron is to deliver quality products and services on
      time to all customers, internal and external. We provide employees
      with training and resources to meet or exceed customer requirements.
      We monitor processes and products to identify opportunities for
      continuous improvement.

      The Code of Conduct is an expression of Chiron's expected standards
      of behavior for everyone who conducts business on behalf of the
      Company. The Code establishes compliance responsibilities, supports
      applicable laws and regulations, and reinforces corporate policies
      and procedures.

      The Commitment to Ethical Conduct is a supplemental code applicable
      to the members of the Board of Directors, Executive Officers and
      senior financial officers, that affirms their commitment to
      upholding ethical and lawful business conduct, while recognizing the
      unique responsibilities of those individuals in assuring proper
      accounting, financial reporting, internal controls and financial

      Any waiver of a requirement of the above Codes for an Executive
      Officer or Board member must be approved by the Board of Directors,
      and shall promptly be disclosed to stockholders in accordance with
      applicable law and regulation.


      Howard Pien

      The defining image of Howard H. Pien's horrible year is no doubt the
      crowds of elderly Americans camped out for hours at clinics, trying
      desperately to get their annual flu shots. Many of them were never
      vaccinated, because Chiron Corp. (CHR ) -- one of only two major flu
      vaccine providers -- was prohibited from releasing doses produced at
      the Liverpool (England) plant that makes the treatment. British
      regulators suspended the plant's license in October, citing
      contamination problems, and Pien had to apologize for failing to
      provide any vaccine to U.S. patients.

      Pien hoped the flu would be Chiron's ticket to the pharmaceutical
      big leagues. In 2003, just months after Pien was named chief
      executive of the 23-year-old Emeryville (Calif.) company, Chiron
      acquired British vaccine maker PowderJect Pharmaceuticals PLC and
      increased the efficiency of its Liverpool plant, helping it to make
      50% more flu vaccine than it had the previous year. Pien planned to
      boost production by an additional 37% this year. He promised to
      build Chiron into a global powerhouse capable of producing vaccines
      for a host of illnesses beyond the flu, and he vowed to boost
      research in potentially more profitable biotech drugs.

      Now critics wonder if Pien dropped the ball on quality. Without the
      vaccine, Chiron will take an estimated $300 million hit to its 2004
      revenues, finishing the year with $1.8 billion, analysts predict.
      Chiron expects to report earnings of no more than $78.5 million --
      less than half what it earned in 2003. Chiron's stock has fallen 30%
      since October, to $32. The Securities & Exchange Commission has
      launched an informal probe, and the U.S. Attorney's Office is
      investigating the company. "We are fighting our way out of this
      situation with the goal of remediating our facility," Pien says. "We
      will continue to act responsibly in the service of public health."

      In November, Pien told the U.S. House of Representatives that he had
      a plan to get Chiron back in gear for the 2005-06 flu season. But to
      sickened patients and investors, that's a long time to wait to see
      if Pien can keep his promise.


      Statement Presented To Committee on AgingUnited States Senate By
      Howard Pien President and CEO Chiron Corporation September 28, 2004

      Mr. Chairman, Members of the Committee:

      Thank you for the opportunity to provide a statement to the
      Committee on Aging at today's hearing. I am Howard Pien, president
      and CEO of Chiron Corporation, a global biotechnology company
      headquartered in Emeryville, California with 2003 revenues of $1.75

      Founded in California in 1981, Chiron is composed of three business
      units: BioPharmaceuticals, Blood Testing and Vaccines. Chiron is
      dedicated to research andinnovation addressing global public health
      challenges. Through Chiron'sbreakthrough research discoveries in the
      fields of hepatitis B virus, humanimmunodeficiency virus and
      hepatitis C virus, millions of potentially fatal infectionshave been

      Overview of Chiron Chiron is the fifth-largest vaccines producer in
      the world, with sales of $678 millionin 2003. Chiron Vaccines
      produces pediatric and adult vaccines to prevent life-threatening
      illnesses. These vaccines, which are sold throughout the world, have
      protected millions of people globally from N. Meningitidis Group C,
      polio, measles and other potentially fatal diseases.

      Chiron is a leading supplier of oral polio vaccine,producing more
      than 800 million doses annually to support global polio eradication
      efforts. Our rich heritage in vaccines is traced to the three
      European manufacturers Chiron has acquired over the past two
      decades, all of which were founded 100 or more years ago.

      The company has production facilities in Liverpool, UnitedKingdom;
      Siena, Italy; Marburg, Germany; and Ankleshwar, India; and it
      carries out research in Siena, Marburg and Emeryville. Chiron has a
      successful record of product development, including the launch of
      the first recombinant vaccine against pertussis,the first adjuvanted
      influenza vaccine and a conjugate vaccine against N.
      MeningitidisGroup C.

      Chiron currently has two vaccines licensed in the United States:
      Fluvirin® influenza vaccine, one of only two injectable influenza
      vaccines approved by the U.S. Food andDrug Administration (FDA), and
      RabAvert ® rabies vaccine, approved by the FDA in 1997. Fluvirin® is
      indicated for immunization against the influenza vaccine
      strainscontained in the vaccine for persons of 4 years of age and
      older. Chiron also supplies diphtheria and tetanus (DT) concentrate
      to GlaxoSmithKline for use in its DT-containing vaccines licensed by
      the FDA.

      In addition, Chiron has initiated Phase III studies in the United
      States with the aim of licensing its conjugate vaccine against
      N.Meningitidis Group C, Menjugate

      Chiron and Influenza Vaccines
      Chiron's $878 million acquisition of PowderJect Pharmaceuticals and
      its influenza vaccine Fluvirin in July 2003 represents a major
      commitment to ensuring that an adequate supply of vaccine is
      available to meet the needs of the United States.

      The principle driver for the acquisition was Fluvirin, produced at
      the company's FDA-licensed facility in Liverpool. Approximately 90
      percent of the production from thefacility is delivered to the
      United States, with most of the remainder going to the United
      Kingdom.1Infanrix (DtaP) & Pediarix (DtaP-HepB-IPV) 2Menjugate® has
      been licensed in Europe via the Mutual Recognition Procedure and is
      also approved in other countries, including Canada and Australia.

      Prior to its acquisition of PowderJect, Chiron was the third-largest
      producer of influenza vaccines globally and the second-largest
      supplier of influenza vaccine outside the United States. Today,
      Chiron is the second-largest producer of influenza vaccines in the
      world, with production of approximately 85 million doses annually.

      Chiron produces influenza vaccines at its facilities in Liverpool,
      Marburg and Siena and offers a number of influenza vaccines. The
      acquisition of PowderJect represented a change in strategy for
      Chiron. Prior to this event, Chiron was unable to commit the
      resources required to enter the U.S.influenza market. However, over
      the last few years, significant changes in thedynamics of the U.S.
      influenza market have occurred.

      The key changes are:
      • The recommendations of the Advisory Committee on Immunization
      Practices(ACIP) on influenza immunization were broadened to include
      individualsbetween 50 and 64 years of age and healthy children
      between 6 and 23 monthsof age, significantly expanding the potential
      market for influenza vaccine.
      • Pricing of influenza vaccines has reached a level that allows
      manufacturers toinvest in maintaining facilities to meet FDA
      standards and in expandingmanufacturing capacity in order to meet
      increased demand.
      • Reimbursement rates for providing influenza injections have been
      increased to levels at which physicians are encouraged to
      proactively immunize patients.

      These changes in market dynamics were key factors in Chiron's
      decision to acquire PowderJect and expand its strong presence in the
      influenza market to include the United States. The shift in dynamics
      has also had a significant impact on investmentdecisions and
      capacity. Over the past five years, investments of approximately $70
      million in both primary (bulk) and secondary (fill/finish)
      manufacturing have been made to increase the production capacity of
      the Liverpool facility.

      This investment was reflected in the purchase price of PowderJect
      and it has resulted in a significantincrease in the amount of
      Fluvirin® supplied to the United States. The amount of Fluvirin
      supplied to the United States on an annual basis more than
      quadrupled from 12 million doses in 2000 to 46-48 million doses in
      2004, in addition to a two milliondose supply for the Centers for
      Disease Control and Prevention (CDC) strategicreserve.

      Building on recent investments to increase manufacturing capacity at
      the Liverpool facility, Chiron is committing an additional $100
      million dollars to replace its existinginfluenza bulk manufacturing
      facility with a new "state of the art" facility3to complement the
      secondary manufacturing facility opened in 1998.

      This commitment is being made to ensure that Chiron is in a position
      to continue to supply Fluvirin tothe United States and to add
      incremental capacity until sufficient cell-cultureproduction
      capacity is available to meet the market needs in the United States.

      It should be recognized that changes in market dynamics,
      specifically the increase inprice that has occurred over the past
      three years, have reversed the trend of decreasingmanufacturing
      capacity. Producers are investing in capacity increases,
      upgradingfacilities and licensing cutting-edge technologies for the
      U.S. market. Chiron manufacturing investments are not unique in the
      industry, suggesting that the growing U.S. influenza market is an
      important public health priority that the private sector must ensure
      is addressed. However, given the nature of biologics manufacturing
      thereis inevitably a lag between the decision to invest and improved
      capacity as a result ofthat investment. The United States is only
      now beginning to see the impact of the positive changes in market
      dynamics that occurred a few years ago with regard toexpanded
      investment in manufacturing capacity.

      Influenza Vaccine Production
      Currently, all influenza vaccines marketed in the United States are
      produced inembryonated hens' eggs from designated chicken flocks.
      Individual lots of each of the three virus strains are grown in the
      eggs and harvested. The harvested virus isinactivated (killed),
      purified and separated from the egg proteins, usually by high-speed
      ultra-centrifugation. The whole virus concentrates are then further
      purified and split (split vaccine) or purified, as for Fluvirin,
      such that the vaccine containspredominately only the hemagglutinin
      and neuraminidase virus coat proteins (surface antigen or sub-unit).
      The monovalent (single-strain) antigen lots are sterile-filteredand
      quality control and potency tested. The monovalent lots are then
      formulated intotrivalent vaccine (following FDA release), filled
      into the final containers and packed.

      The final run of primary antigen production in eggs is usually
      completed bySeptember to allow time for processing, FDA potency
      assignment, vaccineformulation, packaging, quality assurance release
      and shipping to have completed release of the product into the
      marketplace by October or November.

      In addition to its conventional egg-based influenza vaccines, Chiron
      is pursuingdevelopment of a cell culture–based subunit influenza
      vaccine using the Madin-Darby Canine Kidney (MDCK) cell line.
      Chiron's influenza cell-culture research programhas completed Phase
      II clinical trials, with licensure in Europe projected sometime
      during the latter half of the decade. A Chiron influenza cell-
      culture production facility for full-scale production of the vaccine
      exists in Marburg. Chiron has submitted an Investigation
      al New Drug Application to the FDA and is committed tolicensure of
      its influenza cell-culture vaccine in the United States.

      While there do not appear to be significant clinical advantages to
      cell-culture vaccinesas compared with the current egg-based vaccines
      in terms of safety and efficacy, the cell-culture production process
      offers several potential advantages. The overall process is more
      flexible and can be more easily adapted to increases in
      marketdemand. Additionally, the fermentation process is a closed
      system highly compliantwith Good Manufacturing Practice (GMP).

      In the event of an influenza pandemic, the cell-culture production
      process offers the promise of significant benefits compared to the
      conventional process, including:
      • Cell culture production allows increased production capacity via
      faster initiation of continuous manufacture.
      • Cell culture production is not dependent on a supply of eggs,
      which could be a key rate-limiting step in meeting an urgent public
      health crisis. Productioncan start at any time and can easily be
      expanded to full-year production.
      • Cell culture production can reduce lead-time by six to eight
      • Cell-culture production, unlike egg-based production, is a closed
      process that can be easily upgraded to Class III bio-safety
      standards that may be required for the management of a pandemic
      • Cell-culture production is suited to producing vaccines for
      influenza of avianorigin, which will not grow on eggs without
      genetic modification.

      Overview of Egg-Based Influenza Vaccine Production
      Influenza vaccine usually contains three different influenza strains
      that are recommended by the World Health Organization (WHO) and the
      FDA. The WHO and the FDA select the influenza strains and industry's
      role in the public health partnership is to manufacture the
      designated product. From continuous surveillanceby the WHO and the
      FDA, select strains to match the families of influenza
      virusesexpected to be circulating each winter. The vaccine has a new
      composition each year, and the vaccine therefore cannot be
      stockpiled but must be made to order annually.

      In addition, influenza vaccine is a seasonal product, with the
      majority of immunizationsoccurring in the September-to-November time
      frame in the United States. If there issurplus vaccine that is
      unused at the end of the season, it cannot be reused the following
      year and must therefore be destroyed. The requirement for Southern
      Hemisphere influenza vaccine in the January to March season is
      comparatively small and usually of a different composition.

      Vaccine manufacturers try to match annual supply and demand,
      ensuring enoughdoses are available to meet demand while avoiding
      wasteful destruction of unused vaccine at the end of the season. The
      inability to carry over inventory into thefollowing season means
      that the margin of error is much smaller than for othervaccines.

      Forecasting demand accurately is complicated by the fact that it is
      notpossible to assess the severity of the epidemic and then adjust
      production volumes; additional capacity cannot be added at short
      notice and must be planned at least one season in advance. In fact,
      almost all the influenza vaccine manufacturing iscompleted before
      the influenza season begins.

      The cycle time for vaccine production means that demand must be
      predicted based on historical data, without an indicationof the
      severity of the current influenza epidemic.

      Supply of Influenza Vaccine for the 2004/2005 Influenza Season
      On August 26th, Chiron Vaccines announced that in conducting final
      internal release procedures for its Fluvirin® influenza virus
      vaccine, our quality systems identified asmall number of lots that
      did not meet product sterility specifications. Chiron therefore
      announced that it had delayed releasing any Fluvirin® doses until it
      hadcompleted additional release tests, a process that will delay
      release until October.


      Chiron has held regular updates on the supply situation via
      teleconference with representatives fromthe CDC, National Vaccine
      Program Office, Advisory Committee on Immunization Practice,
      AmericanAcademy of Family Practitioners, American Academy of
      Pediatrics and the American MedicalAssociation


      As of September 27th, it remains Chiron's expectation that between
      46 million and 48 million Fluvirin® doses will be delivered to the
      U.S. market beginning in early October as compared to the 50 million
      doses projected in July. Since the original announcement Chiron has
      worked closely with key stakeholders to keep them abreast of the
      status of the testing. The planned late-season delivery of 2 million
      Fluvirin doses for a national stockpile held by the U.S. Centers for
      Disease Control andPrevention (CDC), not included in the totals
      above, remains on schedule. The results of the tests are entirely in
      line with the company's expectations that the variance wasconfined
      to the initial scope identified.

      Following compilation and formal sign-off of the test data, Chiron
      expects to report its conclusions to regulatory authorities and,
      upon confirmation, proceed with releasing Fluvirin® to the U.S.
      market in early October. As October and November are the primary
      months when influenza vaccine is given,the impact of the delay on
      the 2004-2005 influenza vaccination season should beminimal.
      Furthermore, as in past years, CDC urges continuation of Influenza
      vaccination into December and beyond if vaccine is available and
      therefore ample time will exist to immunize individuals at risk from
      the disease.

      Chiron is extremely proud of the dedication displayed by its staff
      in working continuously these past fewweeks to develop and execute
      the formal retest program making possible the deliveryof a safe and
      effective vaccine in time to for the influenza season. It is
      important to note that the 46-48 million doses of Fluvirin®
      projected for delivery during the 2004 /05 influenza season
      represents an increase of more than 25% compared to the amount of
      influenza vaccine Chiron supplied to the United States last season.

      Overall, the CDC estimates that there will be roughly 100 million
      doses of influenza vaccine available representing an increase of
      approximately 15% comparedto the 87 million doses of influenza
      vaccine available last season. In addition, inresponse to the supply
      shortage that occurred last year, the CDC has worked with influenza
      vaccine manufacturers to establish a "strategic reserve" of over 4
      milliondoses of influenza vaccine delivered in November and

      Chiron, as mentioned previously, will deliver two million doses to
      the late season stockpile. Chiron welcomed the opportunity to work
      collaboratively with the CDC to developthe program securing a
      strategic reserve that did not create the unintended consequence of
      detrimentally impacting the private market. Therefore, despite the
      delay in availability of Fluvirin®, it does not appear that there
      will be a shortage of influenza vaccine this season as manufacturers
      will be supplying the United States with 13 million doses more than
      last year. The key challenge for the 2004/05 influenza season will
      most likely not be managinga supply shortage but, rather, ensuring
      that all of the doses of influenza vaccineproduced end up in the
      arms of individuals.

      Last year a milestone was reached: The estimated 83 million
      Americans immunized represented the highest immunization rate ever
      for influenza and almost all the injectable inactivated influenza
      vaccine wasused. Prior to 2003, immunization rates had remained
      relatively static, and unusedvaccine had to be destroyed. For
      example, it is estimated that approximately 12 million doses were
      destroyed in 2002. Therefore, despite the delay in availability of
      vaccine, ensuring that demand exists for the additional influenza
      vaccine availablethis season is crucial in the context of planned
      increased production capacity for future seasons. If demand this
      season remains static, or returns to levels seen in 2002,supply will
      again exceed demand.

      Depending on the magnitude of the shortfall indemand it may lead to
      a reduction in supply in future years as supply of the vaccine
      isclosely aligned with projected demand based on historical trends.
      Influenza 5Inactivated influenza vaccine and live-attenuated vaccine
      immunization stakeholders in both the public and private sector are
      working togetheron activities to reassure the general population
      about the availability of vaccine,encourage influenza immunization
      and attempt to extend the influenza immunization season into

      In summary, as mentioned previously, 2003 represented the highest
      number of people ever immunized, and there is no guarantee that the
      same levels will be achieved in the event of a less severe epidemic
      or a public perception of a supply shortage. We should therefore not
      be complacent and assume that because excess demand existed in2003,
      it will automatically spill over and absorb the additional 13
      million doses that will be available this season. Protection of the
      Aging Population Against Influenza Vaccination of persons at risk
      from the complications of influenza is a key public health strategy
      in preventing morbidity and mortality in the United States.

      The influenza epidemic is an annual event, which was estimated
      during the 1990s to havecaused an average of approximately 36,000
      deaths annually and 114,000 hospitalizations in the United States
      with 90% of the mortality occurring in adultsaged 65 years of age
      and older6. A more recent study has suggested that the rate
      ofhospitalizations related to influenza may be even higher with over
      200,000 hospitalizations occurring annually7.

      Over the last decade the United States has hadsuccess in raising
      immunization coverage rates for individuals above 65 years of
      age.Data analyzed from the Behavioral Risk Factor Surveillance
      System (BRFSS) in 1993 indicated that 50% of respondents reported
      having received influenza vaccinecompared to 66% in 20028.

      This represents significant progress but is still below the 90% goal
      set for non-institutionalized adults in the Healthy People 2010
      Objectives9and has remained level since 199710. Continued investment
      in patient education and ensuring access to vaccine will be required
      if coverage rates are to continue toincrease for individuals 65
      years of age and older.

      Achieving higher coverage rateswill increase in importance over the
      next few years as influenza is expected to have an increasingly
      serious impact in the United States due to the aging population.

      Therefore having effective strategies in place to prevent the
      disease throughimmunization will become increasingly important if
      the burden of disease is not toincrease.

      In addition to strategies that increase awareness of the need for
      prevention and accessto the vaccine, setting appropriate
      reimbursement rates for vaccine purchase andadministration is
      important, particularly through Medicare. The majority of the
      population 65 years of age and older receive vaccine from their
      primary health care provider and therefore ensuring incentives are
      in place for providers to actively immunize patients is important.
      The increases in the administration rates in 2003 bythe Centers for
      Medicare and Medicaid Services (CMS) by roughly 90% to between six
      and eight dollars from less than four dollars has served to
      encourage physicians toactively seek out immunization in their

      In addition to adequate administration fees, maintaining
      reimbursement rates that accurately reflect the acquisition cost of
      influenza vaccine creates an incentive for physicians to acquire the
      vaccine. In recognition of this, the Senate provided leadership in
      crafting the Medicare Modernization Act to ensure that influenza
      vaccine would be reimbursed at 95 percent of the Average Wholesale
      Price (AWP)and, equally important, that the Center for Medicare and
      Medicaid Services (CMS)continue its current practice and update this
      reimbursement rate on a quarterly basis. We understand that CMS will
      be sending a Transmittal to the Medicare Carriersreflecting this
      policy by the end of the month. Any change to the
      currentreimbursement system will have a negative impact on coverage
      rates if it leads to areduction in reimbursement for physicians. By
      setting adequate reimbursement ratesand administration fees CMS has
      created an incentive for physicians to activelyimmunize their
      elderly patients against influenza. Any future changes to MMA
      through legislation or regulation must not create a disincentive for
      physicians toactively immunize their patients. Individuals aged
      between 50-64 years old are another population that benefit
      significantly from influenza immunization as this population has an
      increasedprevalence of high-risk conditions.

      In 2000, approximately 42 million persons in the United States were
      aged 50–64 years, of whom 12 million (29%) had one or more high-risk
      medical conditions. In 2000 the Advisory Committee on Immunization
      Practices (ACIP) broadened the universal recommendations for
      influenza vaccine to include individuals between 50-64 years of age
      because of the prevalence of high-risk conditions in this group.

      Influenza vaccine was recommended for this entire age group to
      increase the low vaccination rates among persons in this age group
      withhigh-risk conditions. Age-based strategies are more successful
      in increasing vaccine coverage than patient-selection strategies
      based on medical conditions.

      In addition,individuals aged between 50 and 64 years without high-
      risk conditions also receive benefit from vaccination in the form of
      decreased rates of influenza illness, decreased work absenteeism,
      and reduced need for medical visits and medication. For example a
      reduction in the use of antibiotics to which antimicrobial
      resistance is an increasingproblem.

      Furthermore, fifty is an age when other preventive services begin
      andtherefore the timing is appropriate. Despite the universal
      recommendation being in place for several seasons only 36% of
      respondents between 50-64 years of age in the 2002 BRFSS reported
      having receivedinfluenza vaccine during the previous 12 months, well
      below the level of respondentsabove 65 years of age. Significant
      efforts need to be invested in reaching this age group for the
      following reasons.

      First, as stated in the previous paragraph, roughly one third of the
      individuals in this age group are estimated suffer from conditions
      such aschronic disorders of the pulmonary or cardiovascular systems,
      including asthma andmetabolic diseases such as diabetes that put
      them at higher risk of complications dueto influenza. Second, in the
      longer term, achieving high influenza coverage rates inthis age
      group will translate to future higher coverage rates in the 65 and
      older population. It is likely that an individual who is in the
      habit of getting an annualinfluenza vaccine is likely to continue to
      do so as they age.

      Chiron believes that substantial and innovative efforts need to be
      undertaken to raise influenza immunization coverage rates in
      individuals aged 50 and above. Specific efforts should be targeted
      at reducing disparities between geographic areas and racial / ethnic
      groups. For example, coverage rates are lower for Hispanics and non-
      Hispanicblacks as compared to non-Hispanic whites11. The variation
      in influenza vaccine coverage observed among geographic areas
      suggests that opportunities exist to apply lessons from high
      coverage areas such as the New England States to raise rates in
      lowcoverage areas. These efforts can have the biggest impact through
      collaborationbetween the public and private sector.

      Chiron believes that key stakeholders (manufacturers, distributors,
      the public health community, providers and insurers) should form
      public private partnerships to address the following:
      • Raising awareness of the immunization recommendations among the
      medicalcommunity and general population.
      • Dispelling some of the myths about influenza vaccine that exist (I
      can get influenza from the vaccine)
      • Encouraging immunization by highlighting the benefits of
      immunization anddeveloping innovative programs for facilitating
      access to the vaccine.
      • Extending the immunization season into December to ensure all
      doses areused and to potentially increase the window in which
      vaccine could besupplied to the market.

      These efforts must not be limited to the coming influenza season but
      need to becontinued for the long term if the Healthy People 2010
      goals of 90 percent coveragerates of non-institutionalized adults 65
      years of age and older and 60 percent coveragerates of high-risk non-
      institutionalized adults 18-64 years of age are to be attained.

      While these goals are ambitious, they are achievable if both the
      public and privatesector join forces in a multi-year effort. The
      National Influenza Vaccine Summitorganized by the American Medical
      Association in collaboration with the CDC thatbrings together key
      stakeholders in the private and public sector is a vehicle that is
      already working on these goals and Chiron is actively involved in
      the Summit and believes it can provide the leadership required to
      champion initiatives aimed at raising coverage rates for influenza.

      The success of such partnerships in raising immunizationrates for
      pediatric vaccines demonstrates how this approach can achieve
      positiveresults. It is recognized that there are differences between
      influenza vaccination andthe pediatric immunization situation, where
      school entry mandates played animportant role in raising coverage

      Nevertheless, it is felt that some of the lessons learned would be
      applicable. Immunization of contacts of high-risk individuals
      represents an additional strategy forprotection of persons at high-
      risk for complications from influenza. Persons who are clinically or
      sub-clinically infected can transmit influenza virus to persons at
      high riskfor complications from influenza. Decreasing transmission
      of influenza fromcaregivers and household contacts to persons at
      high risk might therefore might cause a reduction in influenza-
      related deaths and hospitalization among high-risk populations.
      Health-care workers (HCWs), due to the nature of their occupation,
      are often in contact with high-risk individuals and therefore the
      ACIP and other major medical groups and nursing organizations have
      recommended that HCWs should bevaccinated against influenza.

      Despite the recommendations coverage rates among HCWs are less than
      40%. Chiron believes that significant efforts need to be devoted to
      increasing immunization coverage rates in this group. First,
      improving coveragerates will protect health-care workers, their
      patients, and communities. This will improve prevention, patient
      safety, and reduce the disease burden. Second, health care workers
      are an important source of information on immunization to the
      general population and must lead by example. An unvaccinated
      healthcare worker is not a credible advocate for immunization and
      therefore a first step to convincing the general public to get
      immunized against influenza is ensuring health care workers

      In order to raise coverage rates among health care workers Chiron
      believes thefollowing is needed:
      • HCWs should be provided with easy access to influenza vaccine
      • Resources should be committed to institutionalizing immunization
      of HCWsin their workplace
      • Professional health care organizations should develop policies to
      support HCW immunization and encourage constituents to educate HCWs
      about thebenefits of immunization
      • Health-care workers' influenza immunization rates should be
      regularlymeasured and reported.

      In this context Chiron supports the recommendations made by the
      National Foundation of Infectious Disease in its call to action
      Influenza Immunization Among Healthcareworkers and encourages
      professional health care organizations and institutions to follow
      them. As Immunization of contacts of high-risk individuals
      represents an additional strategyfor protection of persons at high-
      risk for complications from influenza, Chiron waspleased to see that
      the ACIP had added language to its Recommendations onPrevention &
      Control of Influenza stating that " ACIP plans to review new
      vaccination strategies for improving prevention and control of
      influenza including the possibility of expanding recommendations for
      use of influenza vaccines".

      At presentroughly 60% of the United States population are covered by
      the recommendations asit is estimated that 185 million individuals
      fall into the required categories. Therefore moving to a universal
      recommendation is not that great a leap. The experience of the
      Canadian province of Ontario in implementing a universal
      recommendation isencouraging as coverage rates were increased in
      both the general population and inhigh-risk groups.

      Pandemic Influenza
      A universal recommendation for influenza immunization would offer
      significantbenefits for pandemic preparedness, as it would increase
      demand and therefore thesupply of influenza vaccine available in the
      event of a pandemic. An influenza pandemic occurs when there is a
      major change (shift) in the influenza virus such that the majority
      of the world's population has not been previously exposed to the
      strainand is therefore extremely vulnerable to the virus. Influenza
      pandemic is a major public health threat with the potential to cause
      a rapid increase in morbidity and mortality. Three pandemics
      occurred in the 20th century, the first in 1918.

      It is estimated that approximately 500,000 deaths due to influenza
      occurred in the UnitedStates between September 1918 and April 1919
      and that the pandemic caused 20million deaths worldwide. The 1918–
      1919 pandemic was the worst pandemicrecorded, and mortality in more
      recent pandemics has been lower. The Asianinfluenza pandemic of 1957
      is estimated to have caused approximately seventythousands deaths in
      the United States while the Hong Kong influenza pandemic of 1968 is
      estimated to have caused 33,000 deaths. Immunization of individuals
      with a pandemic strain specific vaccine is likely to be the most
      important public health intervention for preventing morbidity and
      mortality from pandemic influenza. Therefore during the inter-
      pandemic period it is important to takethe required steps to ensure
      that a pandemic vaccine can be developed as quickly aspossible in
      the event of an influenza pandemic.

      Chiron welcomes the steps theNational Institute of Allergy and
      Infectious Diseases (NIAID) has taken as part of the NIAID Influenza
      Pandemic Preparedness Plan to support the manufacture and production
      of a candidate vaccine against a pandemic strain of avian
      influenza.Chiron is contributing to this effort through
      participation in two projects.

      It is producing pilot lots of investigational H5N1 vaccine at its
      Liverpool facility using the production process used for its
      marketed flu vaccine, Fluvirin®. Chiron Vaccines will produce 8,000
      doses of the H5N1 vaccine for the NIAID, who will conduct clinical
      studies exploring the safety profile and immunogenicity of two
      different doses.

      It is also producing pilot lots of an investigational vaccine based
      on an H9N2 at its Siena facility. Different dosages of the vaccine,
      based on an inactivated strain of the virusdeveloped by the CDC,
      will be prepared. Some dosages will contain Chiron's MF59 adjuvant—a
      substance designed to boost the vaccine's protective effect. Chiron
      willfirst test the general safety of these different formulations in
      laboratory animals and,based on its findings, will then produce
      4,000 single-dose syringes of each for clinical evaluation in
      healthy adults. NIAID will perform a Phase I trial, currently slated
      forearly next year, to test the safety and effectiveness of each
      formulation in humans.

      Chiron believes that these sorts of partnerships are crucial to
      ensure the availability to the public of safe and effective vaccines
      against avian influenza as soon as possible and that additional
      investments should be considered once the results of these trialsare

      The draft Pandemic Influenza Preparedness and Response Plan recently
      published by the National Vaccine Program Office addresses the issue
      of pandemic vaccineresearch and development in the inter-pandemic
      period. Chiron supports the recommendations of the report on the
      enhancements that can be made to the vaccinedevelopment
      infrastructure during the inter-pandemic period particularly the
      creation of libraries of reassortant influenza viruses suitable as
      reference strains for vaccine production, the use of new molecular
      techniques such as "reverse genetics" toproduce high growth
      reassortant viruses, evaluation and licensure of an influenza
      vaccine that includes an adjuvant and development of new
      technologies such as flucell culture. In addition, Chiron believes
      that support for the research prioritiesoutlined in the report will
      encourage investigation into the development of new influenza
      vaccines that are not based on the current antigens or production

      This research may not only lead to a better pandemic vaccine but may
      also lead to avaccine that provides better or longer term protection
      in the inter-pandemic period.

      Vaccine Supply in a Pandemic
      From the perspective of an influenza vaccine producer, planning for
      a pandemicrepresents a significant challenge due to the nature of
      influenza vaccine production.

      Essentially, the following factors limit the ability to rapidly
      expand supply in the face of a pandemic under current circumstances:
      • Production capacity—Influenza vaccine production capacity is
      aligned withannual demand for vaccine under normal circumstances,
      i.e., betweenpandemics, and therefore little or no surge capacity
      exists to meet pandemicdemand.
      • Inability to stockpile—Stockpiling of vaccine in preparation for a
      pandemicis not a viable strategy, as it is not possible to predict
      the vaccine strain that will cause the pandemic.
      • Supply of primary production material — Currently, vaccines are
      produced using eggs, and ensuring an adequate supply of eggs to
      significantly increase production during a pandemic represents a
      significant challenge.
      • Specialized production facilities—Additional quantities of vaccine
      could not be readily produced in facilities used for other vaccines,
      as production andpurification equipment and facilities are
      specifically designed for influenzavaccines.

      In the event of a pandemic, Chiron will strive to fulfill its
      responsibility to supplyvaccine to the United States and
      international markets. Chiron has plans to maximizeproduction of
      influenza vaccine at its Liverpool, Marburg and Siena facilities to
      help overcome these challenges in the event of a pandemic.

      The following steps would beundertaken to increase vaccine
      • Year-round production—Influenza vaccine production would be
      runcontinuously over the whole year as opposed to the current
      seasonal production cycle. However, it should be noted that this
      assumes thatadditional egg supply will be available to keep the
      facilities running yearround.
      • Monovalent vaccine—A monovalent vaccine containing the pandemic
      strainonly would be produced as opposed to the standard trivalent
      vaccinecontaining three strains. Manufacturing capacity would
      therefore be increased by a factor of three, assuming that the
      vaccine contains the same amount of antigen as the conventional
      influenza vaccine. Any increase in the antigen content of the
      pandemic vaccine would result in a proportional reduction in the
      number of doses that could be produced.

      At present, the clinical data availableto support the definition of
      the pandemic vaccine is limited. 16It should be noted that studies
      of experimental vaccines produced in response to the avian influenza
      A outbreaks in Hong Kong suggest that a greater dosage or an
      adjuvanted vaccine may be required. Therefore, whether this
      assumption will turn out to be valid is open to question. Chiron
      estimates that implementing these two steps in the event of a
      pandemic wouldmore than triple its influenza vaccine manufacturing
      capacity, of which 50 percent would be produced at its FDA-licensed
      facility in Liverpool, assuming the pandemicvaccine contains the
      same amount of antigen as the normal vaccine.

      By the end of the decade, under its current plan, Chiron anticipates
      being able to increase its pandemicvaccine production by an
      additional 50 percent due to expanded production capacityin
      Liverpool and the availability of a cell-culture facility in Marburg
      producing its MDCK–based cell-culture vaccine. It is important to
      note that the current regulatory approval process would have to
      beexpedited in order for manufacturers to rapidly convert to
      producing a monovalent pandemic vaccine in a timely fashion.

      Under the present system, obtaining regulatory approval could be a
      bottleneck in supplying pandemic vaccine. Chiron believes that
      discussions and planning should occur now between manufacturers and
      the FDA in order to determine the regulatory pathway for approval of
      a vaccine, including anyamendments to official release requirements
      in the event of a pandemic.

      This would be of significant value to expedite the availability of
      supply should the pandemicoccur. In the face of a potential
      influenza pandemic, switching production to a monovalentpandemic
      vaccine imposes a significant financial risk: If the predicted
      pandemic failed to materialize, there would be no demand for the
      monovalent vaccine, andChiron would be forced to destroy the
      vaccine. Therefore, Chiron would be unlikely to make the decision to
      switch production from trivalent vaccine to a monovalent pandemic
      strain without a guarantee that its production would be purchased
      whether or not the pandemic materialized.

      Chiron would be unable to assume this risk without financial
      guarantees being in place due to the severe consequences of losing
      an entire year's revenues generated from the production of influenza
      vaccine. Therefore, inorder to trigger a switch to pandemic vaccine
      production as quickly as possible in the event of a potential
      pandemic, governmental contract authority to purchase pandemic
      vaccine production by an agreed-upon mechanism of compensation
      should be in place prior to a pandemic.

      Such a contractual agreement between vaccine manufacturers and the
      government implies a limited role for the private sector in the
      marketing of avaccine in the event of a pandemic. National
      governments will procure the vaccine,be responsible for its
      distribution and determine the priority of immunization.

      Based on these considerations, Chiron assumes that in the event of a
      pandemic, the marketfor influenza vaccine will be almost exclusively
      a public-sector market, with nationalgovernments purchasing vaccine
      from producers. Chiron recommends that a mechanism for indemnifying
      manufacturers, similar to thatfor smallpox and swine flu, be
      established in advance of a pandemic situation.

      The United States Government must indemnify and hold harmless
      producers of influenza vaccine if they are to manufacture the
      vaccine in the event of a pandemic. Under section 304 of the
      Homeland Security Act of 2002, "covered persons,"
      includingmanufacturers, are deemed to be PHS employees, so that the
      United States is the exclusively liable party under the FTCA for any
      injury or death arising out of theadministration of a "covered
      countermeasure" against smallpox during an "effective period"
      defined by HHS declaration.17It is vital that Congress enact a
      similarprovision for manufacturers producing influenza pandemic

      Despite a potential increase in the supply of vaccine by a factor of
      greater than three,there will be a global shortage of influenza
      vaccine in the event of a pandemic.Demand for influenza vaccine
      would increase dramatically compared to normal circumstances due to
      the need to immunize most of the global population and a potential
      increase in the number of doses required per person to provide
      immune protection from one to two.

      Current global influenza vaccine production capacity,estimated at
      roughly 300 million doses in a typical year,18will most likely be
      unable to cope with global demand, and therefore a shortage of
      vaccine is expected to occur.

      Chiron is committed to maintaining supply to the United States in
      the event of a pandemic.However the current location of Chiron's
      influenza manufacturing facilities outside of the United States
      imposes constraints on its ability to ensure thisoccurs, as it is
      not clear how global allocation of the vaccine will take place in
      the event of a pandemic. Where demand outstrips supply, it is
      possible that national authorities will impose constraints on the
      allocation of influenza vaccine bymanufacturers under their

      One of the constraints that may be imposed bynational authorities is
      that producers be required to give priority to meeting national
      demand before shipping vaccine supply to traditional markets. For
      example, Chiron could be asked to give precedence to the United
      Kingdom in allocating vaccinesupply from its Liverpool facility, as
      it is the only domestic source of supply for thatcountry.

      Furthermore, once the needs of the United Kingdom were met, priority
      might be given to other European countries before allowing vaccine
      to be made available to the rest of the world. In addition,
      manufacturers with facilities located inEuropean Union countries may
      be required by their national authorities to give precedence to the
      needs of other EU member countries once domestic needs havebeen met
      before vaccine can be exported outside of the EU, particularly for
      those member states that do no not have domestic production

      These variables arereal and uncharted. Chiron believes it is
      important for the United States, United Kingdom and EU authorities
      to engage in discussions on pandemic influenza vaccinesupply in
      advance of an outbreak in order to clarify supply priorities for its
      Liverpool facility and would welcome the opportunity to participate
      in the discussions.

      The draft Pandemic Influenza Preparedness and Response Plan recently
      published by the National Vaccine Program Office also provides
      encouraging signs for increasingcapacity. Chiron fully supports the
      statement contained in the document that "Implementing strategies to
      increase annual vaccine demand and use during the inter-pandemic
      period will encourage manufacturers to respond with increased supply
      thus increasing production capacity which will contribute directly
      to pandemic preparedness".

      Chiron is committed to investing to increase its production
      capacityif demand for influenza vaccine in interpandemic years
      continues to increase.However, investment in increasing the supply
      of vaccine will follow increaseddemand. 17See 42 U.S.C. § 233(p)(1)-
      (2), (7). 18Chiron internal estimate.

      In conclusion, an influenza pandemic will represent a significant
      challenge to Chiron, as it will need to rapidly expand influenza
      vaccine at the expense of other products in its portfolio.
      Recognizing this challenge, Chiron is committed to supporting global
      pandemic preparedness efforts prior to the inevitable occurrence of
      a pandemic.

      Chiron believes that over the past year the United States Government
      has taken significant steps towards addressing some of the key
      issues identified below andrecommends that the Congress and the
      Public Health Service focus on the following critical priorities
      after the November elections.
      • Strategic public education programs to increase demand for
      influenza vaccineduring interpandemic years to assure increased
      supply of influenza vaccinesfrom year to year, thus increasing
      supply in a pandemic situation.
      • Research and development efforts to determine whether or not
      pandemicvaccine supply can be expanded by adjuvantation of the
      • Identifying the regulatory pathway for approval of a pandemic
      vaccine,including any amendments to official release requirements in
      the event of apandemic, as well as assurance to manufacturers that
      there will be flexibilitywithin the regulatory process to rapidly
      advance clinical trials to coincide withthe influenza cycles so that
      clinical testing will not be delayed.
      • Implementing mechanisms to trigger the switch to production of a
      monovalentpandemic vaccine, whether or not the pandemic
      materializes, through anagreed process.
      • Establishing in advance of a pandemic situation a mechanism to
      indemnifyinfluenza manufacturers and provide for a compensation
      program forrecipients of the pandemic vaccine should it prove

      In summary, Chiron has invested heavily in ensuring that the United
      States has asupply of influenza vaccine in inter-pandemic years,
      which will contribute toprotecting the elderly against morbidity and
      mortality due to the disease. Chiron is committed to providing
      leadership in the U.S. influenza market.Chiron isshouldering the
      necessary risks to expand its ability to increase supply and is
      bringingcutting-edge technologies in influenza cell-culture
      production to the U.S. market. Fundamental to Chiron's success in
      realizing its commitments is the ability to work collaboratively
      with Congress, the Administration and public health officials to
      reachthe immunization rates established in Healthy People 2010 while
      incentivizing the private sector to transition to new technologies
      in influenza immunization.

      These priorities are of critical importance if we are to effectively
      protect the population as itagainst influenza as it continues to age
      and position the United States for preparednessfor a global
      influenza pandemic. Thank you for the opportunity to present the
      views of Chiron Corporation. I am happy to answer any questions you
      may have for me.


      SmithKline Beecham's Howard Pien Elected to Fox Chase Cancer Center

      PHILADELPHIA (July 29, 1998) -- Howard H. Pien, president,
      Pharmaceuticals, of SmithKline Beecham, has been elected to the
      board of directors of Fox Chase Cancer Center.

      As a member of the Fox Chase board, Pien will help promote the
      Center's $38 million campaign to add new research programs related
      to cancer prevention and build the Prevention Pavilion to house Fox
      Chase's comprehensive prevention initiative, the Research Institute
      for Cancer Prevention. He has been appointed to the board's
      strategic planning committee.

      Pien, 40, who lives in Cherry Hill, N.J., has more than 18 years of
      experience in the pharmaceutical industry, including six years with
      Abbott Laboratories and five years with Merck and Co.

      He has held key positions at SmithKline Beecham, one of the world's
      leading health-care companies with U.S. headquarters in Philadelphia
      and world headquarters in London, since joining the company as vice
      president of U.S. new product development in 1991. The following
      year, he was appointed vice president of U.S. product marketing,
      heading the arthritis, cardiovascular and vaccine groups. He became
      vice president of U.S. marketing in 1993 with direct responsibility
      for marketing all SB pharmaceuticals in the United States.

      In 1995, Pien assumed the position of managing director and senior
      vice president for the pharmaceutical business in the United
      Kingdom. He then served as senior vice president for the China and
      Korea region in 1997 before becoming president for the North America
      division that same year. He now is responsible for the company's
      worldwide pharmaceutical and vaccine business, which has sales of
      more than $7 billion.

      "I'm delighted to be invited to serve on Fox Chase's board of
      directors," Pien said. "Fox Chase is one of the exemplary centers of
      intellectual excellence in the Philadelphia area. I welcome this
      opportunity to make a contribution to Fox Chase's ability to extend
      and expand its record of excellence."

      Born in Taiwan, Pien holds a bachelor of science degree from the
      Massachusetts Institute of Technology and a master's in business
      administration from Carnegie-Mellon University. He and his wife,
      Diane, have two daughters.

      Fox Chase is one of 34 National Cancer Institute-designated
      comprehensive cancer centers. Its activities include basic and
      clinical research; prevention, detection and treatment of cancer;
      and community outreach programs.


      The defining image of Howard H. Pien's horrible year is no doubt the
      crowds of elderly Americans camped out for hours at clinics, trying
      desperately to get their annual flu shots. Many of them were never
      vaccinated, because Chiron Corp. -- one of only two major flu
      vaccine providers -- was prohibited from releasing doses produced at
      the Liverpool (England) plant that makes the treatment. British
      regulators suspended the plant's license in October, citing
      contamination problems, and Pien had to apologize for failing to
      provide any vaccine to U.S. patients.

      Pien hoped the flu would be Chiron's ticket to the pharmaceutical
      big leagues. In 2003, just months after Pien was named chief
      executive of the 23-year-old Emeryville (Calif.) company, Chiron
      acquired British vaccine maker PowderJect Pharmaceuticals PLC and
      increased the efficiency of its Liverpool plant, helping it to make
      50% more flu vaccine than it had the previous year. ...
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