By Mary Welch

Chiron Corp. reported lower-than-expected earnings as the company earned $24 million, or 13 cents per share, in the fourth quarter, a penny less than the Street's consensus.

"There's a lot of stuff in that earnings figure," said Craig West, an analyst with A.G. Edwards & Sons Inc. in St. Louis. "But if you back all that junk out, it's 13 cents for operating expenses. It came in at our estimation but below the Street."

The Emeryville, Calif.-based company reported adjusted income from continuing operations of $117 million, or 62 cents per share for the 1999 calendar year. This represents a 29 percent increase in earnings per share (EPS) of $87 million, or 48 cents per share, in 1998.

Excluded from the 1999 numbers are net restructuring and reorganization charges, effects of deferred tax assets recognized, and the gain from the sale of an Amsterdam, the Netherlands, facility.

"Without the aggregate one-time gain of $8.4 million, reported earnings would have been 9 cents per share for the quarter and 58 cents per share for the year," Elise Wang, first vice president of PaineWebber Inc. of New York, wrote in a research report. PaineWebber estimated the company would report quarterly EPS of 15 cents and yearly numbers of 63 cents.

Total revenues for last year were $763 million, compared to $737 million in 1998. Total revenues for the quarter ending Dec. 31 were $193.6 million, compared to $224.5 million for the same period in 1998.

On an as-reported basis, Chiron's income from continuing operations for 1999 was $128 million, or 69 cents per diluted shares. Net income for 1999 was $161 million, or 86 cents per diluted share.

The company had a little more than $1 billion in cash.

Although net product sales increased 6 percent to $422 million for the year, product sales of $113 million for the quarter were down 6 percent over the fourth quarter of 1998.

"Chiron is as solid as it has been for the last 12 months," West said. "They're still cooking on all cylinders and their pipeline looks fine."

The biopharmaceuticals segment, which includes Chiron's therapeutics business and supporting research, reported product sales of $188 million in 1999, compared to $202 million in 1998. The gross profit margin on these products for 1999 was 68 percent. Proleukin (IL-2) sales grew 20 percent to $112 million, largely due to vial shipments and pricing increases. Proleukin is approved for renal cell carcinoma and metastatic melanoma. Chiron has fast-track status for the use of Proleukin in HIV-infected patients who are on highly active anti-retroviral therapy. It is now in Phase III trials.

"IL-2 is a nice story," West said. "The HIV indication will be a good addition."

Sales of Betaseron (interferon beta-1b) to Berlex Laboratories Inc., of Wayne, N.J., for marketing and resale increased $3 million to $66 million for the year, beating 1998's figure of $63 million. Chiron is in discussions with the FDA over a supplemental filing submitted in June 1998 for a secondary-progressive multiple sclerosis indication. Last fall, a pivotal U.S. trial was stopped by an independent monitoring board that recommended that all patients in the study receive the drug.

"In our opinion, the FDA may grant a label expansion in this indication for Betaseron by mid-2000," Wang wrote. "We believe this product is highly competitive to Immunex's Novantrone given its better safety and tolerability profile."

Novantrone (mitoxantrone HCL) received a unanimous endorsement from an FDA advisory committee for use in treating patients with progressive multiple sclerosis. It was developed by Immunex Corp., of Seattle. (See BioWorld Today, Jan. 31, 2000, p. 1.)

Chiron's vaccine sales grew $32 million - or 18 percent - to $209 million in 1999, compared to $177 million for 1998. The gross profit margin was basically unchanged from 1998 to 1999.

The blood-testing revenues increased to $113 million - up 14 percent - over 1998's figure of $99 million. The increase was due to $7 million in product sales of its nucleic acid testing business and a $4 million increase in its share of the earnings from its joint immunoassay blood testing business with Ortho-Clinical Diagnostics Inc., of Raritan, N.J., a Johnson & Johnson company.

Wang estimated the potential in the blood-testing business worldwide could range between $400 million and $500 million.

Chiron is expected to decide whether or not to take two products into Phase III in the next several months. Based on Phase II results, the company will decide to bring insulin-like growth factor-1 for severe osteoarthritis, and fibroblast growth factor-2 for coronary artery disease, into Phase III trials.

Chiron's stock (NASDAQ:CHIR) closed Wednesday at $46.125, down $6.875.