Staff Writer

Strong product sales drove second-quarter revenue and earnings growth at Serono SA, MedImmune Inc. and Chiron Corp., prompting the three to forecast positive earnings-per-share growth over the course of the year.

Serono reported net income of $107.7 million for the period ended June 30, a 13.2 percent increase over last year's second quarter. Earnings-per-share income gained 15 percent to $6.81 per bearer share and 17 cents per American depository share.

A nearly 34 percent gain in total revenue to $504.8 million drove the Geneva-based firm's earnings, bolstered by a 33.2 percent increase in product sales to $467.4 million. As a result, Serono raised its full-year guidance to a target of 20 percent total revenue growth and 20 percent net income growth, on a reported basis.

Among its sales figures, Rebif (interferon beta-1a) drove numbers in the neurology division, which notched $205.5 million in worldwide sales. The multiple sclerosis drug accounted for $199 million of the total, a 62.3 percent gain over last year's second quarter. Sales of the drug outside the U.S. surged 42 percent to $156.8 million.

Serono's reproductive health division produced $183.4 million in sales, a 9.7 percent uptick, driven by $139.5 million in sales of Gonal-F (follitropin alfa for injection). Its growth and metabolism hormone products produced total sales of $62.2 million, a 15.5 percent increase.

Development of the company's late-stage pipeline remains busy, with a Phase III trial of onercept for psoriasis scheduled to begin later this year. Serono also expects to begin a Phase IIb study of the same compound for Crohn's disease by the end of the year. The company ended a separate Crohn's program during the second quarter after an interim analysis of a Phase II study of interferon beta-1a, but the drug will enter a Phase IIb trial for ulcerative colitis in the second half of the year.

Serono reported about 15.8 million bearer shares outstanding at the end of the quarter, as well as about $1.1 billion in cash, cash equivalents and short-term securities. Its stock (NYSE:SRA) gained $1.30 Thursday to close at $16.40.

MedImmune Beats Street Estimate, Maintains Guidance

MedImmune's adjusted net earnings increased to $15 million, or 6 cents per diluted share, compared to an adjusted loss of $25 million, or 10 cents per share, in last year's second quarter. The company's earnings beat the Wall Street consensus projection by 3 cents.

The adjusted earnings do not include the full impact of the $1.2 billion charge for the acquisition of MedImmune Vaccines Inc., formerly known as Aviron Inc. The purchase brought on board FluMist, which the FDA approved during the second quarter and which is expected to generate between $120 million and $140 million later this year.

The Gaithersburg, Md.-based firm's total revenues increased 85 percent to $118 million. Sales figures underlying the quarterly revenue were driven by the pediatric respiratory disease product Synagis (palivizumab), which increased 69 percent to $55 million, while sales of the cancer drug Ethyol (amifostine) grew 49 percent to $25 million. On a quarter-to-quarter basis, Synagis sales are down, given lower off-season use of the drug, but were higher than expected nevertheless.

MedImmune upped its year-end revenue guidance to range between $1.1 billion and $1.15 billion, reflecting 30 percent to 36 percent growth over last year. It forecasted sales revenue to increase between 27 percent and 31 percent, courtesy of stronger-than-expected Synagis sales growth as well as first-time revenues from FluMist.

"Over the next 12 months, nothing will be as important to MedImmune as the success of FluMist's launch," Phil Nadeau, an analyst with SG Cowen Securities Corp. in New York, wrote in a research report. "With no other pipeline products within several years of commercialization, it is no exaggeration to say that the future of MedImmune is closely entwined with FluMist's prospects."

He added that launch plans appear ahead of schedule, with 2.5 million units already packaged as part of plans for 4 million to 5 million doses this year. The company's adjusted earnings-per-share guidance is expected to range between 88 cents and 93 cents.

Going forward, MedImmune expects to continue its multiyear stock repurchase program, in part with proceeds from its recently issued $500 million of convertible notes. Also during the second quarter, the company eyed the future of its pipeline with a recently acquired cancer compound from privately held Micromet AG, of Munich, Germany.

MedImmune reported about 258 million shares outstanding at the end of the quarter, with about $1.6 billion in cash and marketable securities. Its shares (NASDAQ:MEDI) lost $1.07 Thursday to close at $39.03.

Chiron Registers Earnings Higher Than Estimates

Chiron reported pro forma income of $67 million, or 35 cents per share, up from $56 million, or 29 cents per share. Wall Street estimates had pegged the firm's earnings at 33 cents per share.

Not surprisingly, surging revenues drove the Emeryville, Calif.-based company's earnings. Chiron's revenue gained 17 percent to $350 million, with net product sales accounting for $246 million of the total.

The company said its 2003 pro forma guidance would inch toward the upper end of a previously predicted range of $1.40 to $1.50.

Increased sales figures in each of its three divisions support such forecasts.

Chiron's BioPharmaceuticals division reported net product sales and Betaferon interferon beta-1b royalties of $124 million, compared to $115 million in the year-ago quarter. Sales of the multiple sclerosis product, marketed in Europe as Betaferon, dipped $3 million to $31 million compared to the second quarter of last year. Chiron attributed the difference to wholesale ordering patterns resulting from last year's launch of the room-temperature stable formulation. Sales of TOBI (tobramycin solution for inhalation) totaled $39 million, a $5 million increase.

The Vaccines division produced net product sales of $86 million for the quarter compared to $73 million last year. Chiron said its vaccines business would continue to grow following its acquisition of PowderJect Pharmaceuticals plc.

Revenues from the Blood Testing division were $106 million, compared to $77 million. Sales related to Procleix reached $46 million, compared to $29 million a year ago.

"Following significant restructurings in 1998 and 1999, Chiron is positioned to leverage top-line growth from new product introductions," Dennis Harp, an analyst with Deutsche Bank in New York, wrote in a research report. "New, more profitable products, including Procleix to ensure the safety of the world's blood supply and TOBI for the treatment of cystic fibrosis, should fuel significant EPS growth for the next several years."

The company reported about 193 million shares outstanding at the end of the quarter, along with cash and short-term investments of about 1.1 billion. Chiron's stock (NASDAQ:CHIR) fell $1.75 Thursday to close at $46.40.