Struggling pharmaceutical company Chiron
Chiron has some tough times ahead of it. The Fluvirin vaccine accounted for 12% of its $1.7 billion in revenues last year, but since most of the sales of vaccines occur in the third and fourth quarters of the year, they actually represented more than a third of revenues in the fourth quarter. The company already wrote off its entire vaccine inventory in October, resulting in a $91 million charge to cost of sales, yet because of its contract with its English egg supplier, it is still on the hook for $25 million worth of eggs each year until 2007.
Earlier this month, CEO Howard Pien noted that a large portion of the company's fortune hinges on getting its Liverpool, England, manufacturing facility back in production by March or April, but even then the company might still lose significant market share. Aventis
In the wake of Chiron's debacle, health authorities began rationing supply and limiting vaccines to those most in need. As is typical of such initiatives, some areas ended up with a surplus while others went wanting. In recognition of the fact that it did a horrible job of doling out the supply, and the obvious need to get the vaccine supply out, the Centers for Disease Control lifted its restrictions. But the move was largely symbolic since nearly half of the states had taken matters into their own hands and lifted the limitations at the start of the new year.
In addition to Aventis, other companies are stepping in to fill Chiron's void. GlaxoSmithKline
While Chiron has seen its share price rebound from the lows it experienced following the vaccine fiasco, it could easily crumble again should its license suspension not be lifted or should manufacturing begin later than April. Despite the heavy legal load it is carrying, the pharmaceutical might then become an attractive takeover candidate. Novartis
Earnings for Chiron will be released after the market's close today, and analysts expect it to report $0.10 per share, a far cry from the $0.29 it reported last year. While a lot of the company's misfortunes have been priced into the stock already -- and some of the hope, too, based upon one bank with an ownership interest upgrading the stock to a "buy" -- any money placed into Chiron now without a clearer picture of its prospects for the near future would simply be gambling, not investing.
Read more about the Fool's coverage of the flu vaccine mess here:
- Chiron's Mythical Flu Vaccine
- Chiron Requests a Second Thought
- Regulators Quarantine Chiron
- Chiron Sneezes, Investors Catch Cold
Fool contributor Rich Duprey wishes he could break his one-a-day scratch-off lottery ticket habit. He does not own any of the stocks mentioned in this article.