Staff Writer

First-quarter earnings reports drew attention Thursday as four of the sector's top seven companies in terms of market capitalization released their financial results for the period ended March 31.

The companies were Serono SA, Gilead Sciences Inc., MedImmune Inc. and Chiron Corp.

Serono touted strong revenue growth as integral to a solid first-quarter performance. In particular, the Geneva-based company recorded a 29.4 percent revenue gain to $442.4 million - equivalent to a 17.3 percent gain in local currency.

"We delivered very strong top-line growth and we are on track for our full-year guidance, which is to deliver between 15 percent and 20 percent top-line growth and 15 percent and 20 percent bottom-line growth," Nick Miles, Serono's director of media and public relations, told BioWorld Today. "We have top-line growth of about 30 percent in revenues, which is being driven by Rebif, our MS product, both in the States and in the rest of the world."

Sales grew 52 percent for the drug, which is marketed in the U.S. in partnership with New York-based Pfizer Inc., totaling $175.2 million. A year after launching the product, Miles said Rebif (interferon beta-1a) has gained an 11 percent share of the U.S. market, with stateside sales reaching $40.3 million. Serono, which already has gained a 36 percent foothold in the European market, projects at least a 30 percent share of the U.S. market by 2006.

Basic earnings per share for the first quarter were $3.80 per bearer share, down from $4.32 per share last year, and 9 cents per American depositary share, down from 11 cents last year.

Absent a one-time $25 million charge associated with a payment to Genentech Inc. related to Serono's European regulatory filing of Raptiva (efalizumab), earnings per share totaled $5.12 per bearer share and 13 cents per American depositary share. Consensus estimates called for earnings per share of 15 cents. A European decision on the injectable psoriasis treatment is expected in the first quarter of next year, while South San Francisco-based Genentech said it expects an FDA decision before the end of this year. Genentech is partnered with Berkeley, Calif.-based XOMA Ltd. on the drug.

Miles said Rebif's growing European and U.S. profiles are key to Serono's efforts to meet its full-year guidance. He also pointed to increased sales of its infertility product Gonal-F, which grew 20.5 percent in the quarter to $122 million, as well as a secondary multiple sclerosis product called Novantrone, for which initial U.S. sales reached $12.8 million.

Viread Sales Drive Gilead Growth

Record sales of the HIV drug Viread drove first-quarter revenues at Gilead Sciences to $165.1 million, a 111 percent increase over $78.4 million in the corresponding year-earlier quarter. Sales of Viread (tenofovir disoproxil fumarate) totaled $107.3 million, up from $27.2 million a year ago and $85 million in the fourth quarter of last year.

Excluding a $488.6 million charge associated with its purchase of Triangle Pharmaceuticals Inc., non-GAAP (generally accepted accounting principles) earnings would have totaled $50.5 million, or 24 cents per diluted share, which includes the impact of dilutive stock options. Consensus estimates called for earnings per share of 15 cents. Including the acquisition of Triangle's net assets, Foster City, Calif.-based Gilead's first-quarter net loss grew to $438.1 million, or $2.21 per share, compared to a net loss of $3.9 million, or 2 cents per share, a year ago.

Gilead's operating cash flow totaled $20.9 million, its third straight positive quarter, compared with cash used in operations of $23.1 million for the same period last year.

Future revenue drivers at Gilead include continued sales growth of Viread as well as potential sales of another HIV drug in late-stage development. The $464 million purchase of Durham, N.C.-based Triangle brought on board emtricitabine, an HIV drug Gilead said it hopes to begin marketing by the end of the year. (See BioWorld Today, Dec. 5, 2002.)

Gilead also is looking to revenue growth from Hepsera (adefovir dipivoxil), approved last fall by the FDA for chronic hepatitis B. Its first-quarter sales totaled $5.8 million, up from fourth-quarter sales of $4.7 million. Last month the product was approved in the European Union.

MedImmune Comes In With Record Revenues

Record revenues and net earnings highlighted the first-quarter financial report filed by MedImmune.

Total revenues grew 32 percent over last year's first quarter to $436 million, driven primarily by strong sales of its flagship product Synagis (palivizumab). Its sales grew 34 percent to $392 million, compared to $293 million a year ago. Other revenue growth is attributable to sales of Ethyol, MedImmune's first oncology product, which grew 49 percent to $27 million, compared to $18 million a year ago.

Gaithersburg, Md.-based MedImmune reported net earnings of $110 million, or 43 cents per diluted share, using GAAP figures. Its earnings per share topped consensus estimates by a penny. Its year-earlier-quarter loss totaled $1.1 billion, or $4.54 per share, reflecting the impact of a $1.2 billion charge associated with the acquisition of Mountain View, Calif.-based Aviron Inc. On an adjusted basis, MedImmune's first-quarter net earnings increased 58 percent over last year's first quarter to $113 million, or 44 cents per diluted share.

MedImmune increased its total revenue and product sales guidance for 2003 by $30 million as it now expects Synagis revenue to grow from 20 percent to 24 percent over 2002, rather than its previous guidance of 16 percent to 20 percent. It expects total full-year revenue between $1.08 billion and $1.13 billion - 27 percent to 33 percent growth over 2002. MedImmune also projects full-year earnings per share to range between 84 cents and 89 cents on a GAAP basis.

Down the road the company is projecting second-quarter FDA approval of FluMist and an eventual U.S. launch.

Chiron Beats Estimate By A Penny

Chiron Corp. reported pro-forma income from continuing operations of $56 million, or 30 cents per share, compared to $41 million, or 21 cents per share, for last year's first quarter. Its earnings per share beat consensus estimates by a penny.

On a GAAP basis, Emeryville, Calif.-based Chiron's income from continuing operations totaled $61 million, or 32 cents per share, compared to a loss of $19 million, or 10 cents per share, a year ago. That loss was due to charges resulting from the $61 million acquisition of Fremont, Calif.-based Matrix Pharmaceuticals Inc.

Total pro-forma revenues were $307 million, an increase of about 22 percent from $252 million in last year's first quarter. Net product sales increased 26 percent to $219 million, compared to $174 million in the first quarter of 2002.

Of that, Chiron's biopharmaceuticals division reported total net product sales and Betaferon/Betaseron (interferon beta-1b) royalties of $116 million compared to $104 million a year ago. Net product sales in its vaccines division reached $68 million, compared to $58 million last year. Its blood-testing division revenues grew to $93 million from $57 million a year ago.

"Chiron's diversified business model has allowed the company to overachieve on a number of different fronts," Eric Schmidt and Yaron Werber, analysts with SG Cowen Securities Corp., wrote in a research note. "However, with a projected slowdown in growth going forward, future success is less evident."

Expanded labeling approved by the FDA in the quarter could spur new sales of Betaseron, approved to treat multiple sclerosis. Chiron also plans to increase sales of TOBI (tobramycin solution for inhalation), its antibiotic for cystic fibrosis patients with chronic pseudomonal lung infection that generated $41 million in first-quarter revenue. Chiron charted moderate sales growth of Proleukin (aldesleukin, a recombinant form of interleukin-2).

Still being studied in the pipeline is the developmental cancer drug tezacitabine, obtained in the Matrix acquisition.

Beyond its therapeutic pipeline, Chiron is looking to exploit its relationship with San Diego-based Gen-Probe Inc. for greater market penetration of its Procleix assays, though the SG Cowen analysts were somewhat cautious about the plan.

"With little going in the way of therapeutics, Chiron is banking on sales of its nucleic acid-based blood-screening diagnostics for top-line growth," Schmidt and Werber continued. "We project annual EPS growth of 14 percent through 2007."

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