The joint immunodiagnostics business of Chiron Corp. and OrthoDiagnostics Systems Inc. (a unit of Johnson & Johnson) has beenawarded an exclusive contract worth roughly $120 million tosupply the American Red Cross with four of five mandatoryblood virus ELISA screening tests for a three-year periodbeginning March 1, 1994. In doing so, the Chiron/Ortho jointventure has unseated Abbott Laboratories, which hadmonopolized the business for 20 years.
The agreement, announced Wednesday, assured that theChiron/Ortho joint business will be the only supplier to the RedCross of tests to screen for hepatitis C virus (HCV) antibodies,hepatitis B virus surface antigen, hepatitis B virus coreantibodies and antibodies to HTLV-1, a retrovirus.
The joint business will also supply the Red Cross with a seriesof confirmatory tests, including its RIBA HCV test (an FDA-approved strip immunoblot assay intended to provide morespecific information on specimens found to be reactive in HCVantibody screening procedures).
Chiron/Ortho had already been supplying the Red Cross with itsHCV test, but Abbott has had the contract for the other tests.Both contracts expire December 31. Abbott will apparentlycontinue to supply the Red Cross with its combination HIV-1and HIV-2 assay (which screens for two strains of the AIDSvirus), for which it received licensing approval in February1992.
Abbott has had an exclusive contract with the Red Cross since1970, when blood screening tests first became available. Thediagnostics giant didn't begin to lose ground until 1990, whenthe Chiron/Ortho HCV assay became available. AndChiron/Ortho has been supplying the Red Cross with all itsrequired HCV screening tests since March 1992, when itsimproved, more sensitive assay became available. (TheChiron/Ortho joint venture was formed in 1986.)
"This is the first time that Abbott's lost its Red Cross contract,"explained Joyce Lonergan, an analyst with Boston-based Cowen& Co. For Chiron/Ortho to unseat Abbott as supplier to thelargest blood-screening customer in the world, and to "win thebid" on competitive pricing, the companies "must have decidedthat the increased volume in product sales was attractiveenough to realize a profit," Lonergan told BioWorld. After all,the Red Cross collects about half of the units of whole blooddonated annually in the U.S. -- that's 7 million units -- and itall has to be screened.
In fact, the Chiron/Ortho joint business is already realizing ahandsome profit just from sales of the hepatitis C virusdiagnostics. For its part, Chiron of Emeryville, Calif., brought in$74 million in pretax profits in fiscal 1992, and $39.2 millionfor the first six months of 1993, said Larry Kurtz, Chiron's vicepresident of corporate communications. Cowen & Co.'s Lonerganestimates that Chiron (NASDAQ:CHIR) will reap $19 millionfrom third quarter 1993 sales of HCV products (the thirdquarter results are due next week, she added) and $80 millionin fiscal 1994. The diagnostics component of Chiron's businessis and will remain for some time the company's "single biggestprofit generator," Lonergan told BioWorld.102893CHIRON/ORTHO
-- Jennifer Van Brunt Senior Editor
(c) 1997 American Health Consultants. All rights reserved.