By Mary Welch
Chiron Corp. reported adjusted income from continuing operations of $26 million, or 14 cents per share, for the first quarter of 1999, double the earnings from the first quarter of 1998.
The adjusted results were due to some $3 million of after-tax restructuring and reorganization charges primarily related to the rationalization of its vaccines business in Germany and Italy.
¿It wasn¿t a very strong quarter. Most product revenue was down sequentially vs. Q4 [the fourth quarter],¿ Eric Schmidt, a vice president and analyst at SG Cowen Securities Corp. in Boston, told BioWorld Today. ¿It certainly isn¿t the kind of stellar or strong performance that a biopharma investor would like to see.¿
Shari Annes, vice president of corporate communications for Chiron, admitted some Wall Street analysts were subdued in their reactions.
¿They believe it was a good quarter, but it wasn¿t a dynamite quarter,¿ she said. ¿I think they¿re not disappointed at the financial numbers but rather that we haven¿t made a bold move like a merger or acquisition. It was a solid quarter numbers-wise.¿
Such ¿bold moves¿ are in various stages of discussions, she said. ¿We are evaluating a number of different interesting opportunities to execute a strategic move, such as a licensing opportunity. We have no timetable and we¿re not releasing any details.¿
Schmidt, in a research report, said, ¿With no clear winner in Chiron¿s pipeline, many investors are hoping that the company will in-license a late-stage product candidate. Such an acquisition would almost certainly serve as a near-term trigger for the stock. Chiron¿s management, however, continues to be wary of executing a transaction solely for the sake of doing a deal.¿
Total revenue for the quarter increased 32 percent to $176 million, up from $133 million for the same period in 1998. The acquisition of the remaining 51 percent interest in, and consolidation of, Chiron Behring GmbH, of Marburg, Germany, during the second quarter of 1998 contributed substantially to the increase. (See BioWorld Today, April 2, 1998, p. 1.)
Had Chiron Behring been consolidated in the first quarter of 1998, total revenues in the first quarter of 1999 would have increased about 5 percent over the comparable 1998 period. The company¿s revenues also reflect $16 million in research and development funding from Novartis AG, of Basel, Switzerland. That figure was unchanged from the first quarter of 1998.
¿Revenues overall grew just 5 percent year over year on an apples-to-apples comparison,¿ Schmidt said. ¿However, they did make the bottom-line earnings number of 14 cents, even a penny above our estimate and a penny above the Street¿s. The earnings increase was mainly due to some increased financial income, related to interest income, but they [Chiron] didn¿t provide much more detail. Operating income was lower than we estimated and overall, again, revenues weren¿t very strong.¿
Overall product sales were $93 million, up from $69 million for the first quarter of 1998. The biopharmaceuticals segment, which includes its therapeutics business and supports research, reported sales of $43 million, with the gross profit margin increasing to 71 percent from 63 percent in last year¿s first quarter.
Sales of Proleukin (aldesleukin), a recombinant interleukin-2, totaled $26 million. Sales of Betaseron (interferon beta-1b) to Berlex Laboratories Inc., of Wayne, N.J., for marketing and resale reached $15 million. Royalties from Berlin-based Schering AG for Betaferon were $7 million, but are recorded under royalty and license fee revenues.
Chiron¿s vaccines segment reported product sales of $44 million vs. $14 million in 1998, primarily due to the Chiron Behring acquisition as well as increased sales of influenza vaccine. On the down side, vaccines¿ gross profit margin decreased to 41 percent from 63 percent last year.
Blood-testing revenues for 1999 increased to $25 million from $17 million last year.
¿Chiron is still undergoing a restructuring effort and this quarter may not be the most important thing going on at the company,¿ Schmidt said. ¿The Street is anxiously awaiting better visibility on the pipeline and potentially from product in-licensing deals. If that happens, then maybe the stock can turn itself around. But until then, we¿re on the sidelines with a neutral rating.¿
Chiron¿s stock (NASDAQ:CHIR) closed Wednesday at $23.125, up 68.75 cents per share. n