The complaint alleges that since August 2003, Chiron has supplied approximately half of the flu vaccines administered in the United States. Chiron manufactures its flu vaccine ("Fluvirin") in Liverpool, England, in a plant it acquired in July, 2003. In 2003, Fluvirin sales accounted for approximately 12% of the Company's overall revenues. During the Class Period, defendants reported impressive revenue growth, driven in material part by sales of Fluvirin during the 2003-2004 flu season.

Chiron was under contract to provide its flu vaccine to the United States for the 2004-2005 flu season and represented that it would provide the U.S. market with more Fluvirin in 2004 than in 2003, as it increased production at the Liverpool plant. Unbeknownst to investors, however, serious problems at the Liverpool plant threatened Chiron's ability to provide the vaccine for the 2004-2005 flu season. Problems with the plant had been documented since 2000 by the Food and Drug Administration ("FDA"). In June 2003, the FDA documented "systemic quality-control issues" at the Liverpool plant and found high levels of bacteria in unfinished vaccines. These, and other problems, which were known to or recklessly disregarded by defendants, signaled to defendants that the plant suffered from serious issues that could lead to unsafe vaccines and/or a serious disruption in the Company's ability to produce the vaccine for the U.S. market. The complaint details additional reasons why the Company's Class Period statements were materially false and misleading.

On October 5, 2004, Chiron announced that "the UK regulatory body, the Medicines and Healthcare Products Regulatory Agency has today temporarily suspended the company's license to manufacture Fluvirin® influenza virus vaccine in its Liverpool facility, preventing the company from releasing any of the product during the 2004-2005 influenza season." In reaction to this disclosure, the price of Chiron common stock plummeted from a closing price of $45.42 per share on October 4, 2004, to a closing price of $37.98 per share on October 5, 2004, a one day drop of 16.3% on unusually heavy trading volume of over 25 million shares.

The Company's last-minute announcement that it would be unable to deliver Fluvirin sparked widespread concern of a U.S. flu pandemic. Numerous articles on the matter reported that significant problems at the Liverpool plant were documented by the FDA in 2000 and June 2003, while the plant was owned by another pharmaceutical company. On October 12, 2004, Chiron received a grand jury subpoena from the U.S. Attorney's office for the Southern District of New York, seeking documents and materials relating to the growing scandal. On October 13, 2004, the Wall Street Journal reported that the SEC has initiated an informal investigation of Chiron, "to determine if the company failed to adequately disclose the extent of problems at the Liverpool, England, facility that made its influenza vaccines."