By Mary Welch
Chiron Corp., continuing its transformation into a leaner and more profitable firm, reported net income of $25 million, or $0.14 per share, for the second quarter of 1998 — up substantially from the $15.7 million, or $0.09 per share, for the same period in 1997.
"Six months from now, we'll be a completely reconfigured company," said Jim Knighton, vice president of investor relations and communications. "The quarterly statements don't show the massive changes Chiron is going through. We're reinventing the company. Costs are way down. And the products that we talked about all last year are now here and starting to show some impact and will continue to show more throughout the year."
For the first six months of this year, the Emeryville, Calif., company posted net income of $80 million, or $0.44 per share, vs. $31 million, or $0.18 per share, for the first six months a year ago.
"The figures were close to internal expectations," Knighton said.
Mark Simon, managing director of Robertson Stephens & Co., in San Francisco, described the quarter as "uninspiring. People are waiting for the restructuring to accelerate," he said, "in particular, what will happen to the diagnostic business. Do I think this company will be completely different by year's end? Yes, I do — and that's good. It'll probably be a good stock by year's end, as we watch the restructuring and as Sean Lance's plans become public."
Lance became Chiron's president and CEO in March after a 14-month search to replace Edward Penhoet, a co-founder of the company. (See BioWorld Today, March 24, 1998, p. 1.)
Total revenues for the second quarter were $306 million vs. $281 million for the second quarter of 1997, an increase of $25 million, or 9 percent. Total revenues for the first six months were $574 million compared with 1997 six-month revenues of $561 million.
Contributing to the bottom line was an increase in the vaccine division's sales to $44 million in the second quarter from $17 million a year ago. The jump in revenues followed Chiron's $115 million takeover of Chiron Behring GmbH & Co., of Marburg, Germany, from joint-venture partner Hoechst AG, of Frankfurt. Chiron already owned 49 percent of the stock. Chiron Behring posted 1997 sales of $175 million. (See BioWorld Today, April 2, 1998, p. 1.)
R&D, GSA Spending Trimmed
Chiron's cost-cutting continued from last year as research and development expenses decreased by $2 million in the second quarter and $5 million for the first half of the year. General, selling and administrative expenses were cut by $4 million during the quarter and $7 million for the first six months. Those cuts do not include reductions in spending at Chiron Behring.
Chiron's diagnostics division, excluding the blood screening business, posted quarterly product sales of $142 million, down from last year's $149 million. The decrease was attributed to the 1997 closure of the diagnostic quality controls and electrophoresis business, which contributed $6 million to second-quarter 1997 sales, and from foreign currency exchange rates. The blood screening side's revenues were $24 million, down from $31 million in the second quarter of 1997.
Showing up big on the revenue side was ACS:180, which posted quarterly sales of $66 million. ACS:180 is an immunoassay system used for detecting breast cancer and other diseases. Other product sales included $47 million from critical blood analysis systems, $13 million from branched DNA probe systems, and $11 million from chemistry products.
"The sales of ACS:180 have been wildly successful, and we just introduced this quarter our next generation, the ACS: Centaur. We expect to feel the impact later this year," Knighton said.
As part of Chiron's restructuring, the company has said it may seek partners for its diagnostics business. Simon speculated Chiron will "do something" with the diagnostics division, such as sell it, spin it out, or line up a major alliance.
Sales Jump 49 Percent In Therapeutics, Technologies
Chiron's therapeutics and technologies divisions reported a combined 49 percent increase in product sales during the second quarter to $47 million, up from $32 million in 1997.
Sales of Proleukin, (interleukin-2) for patients with mestastatic melanoma and kidney cancer, were $23 million, up from $15 million in 1997's second quarter. Proleukin is now in 45 countries. The drug also is about to enter, or is in, Phase III trials for three other indications, including cancer and infectious diseases.
"We expect Proleukin to do $100 million this year and we expect to see significant growth of 25 to 30 percent next year," Knighton said.
Betaseron (interferon beta-1), a drug for multiple sclerosis marketed in the U.S. by Berlex Laboratories Inc., of Wayne, N.J., posted revenues of $17 million. Berlex is a subsidiary of Schering AG, of Berlin. Chiron's revenues from Schering's European sales of Betaseron, marketed as Betaferon, totaled $8 million for the second quarter of 1998.
Chiron earned $5 million from sales of Regranex, which was approved by the FDA in December 1997 and is marketed by partner Johnson & Johnson, of New Brunswick, N.J., for treatment of diabetic foot ulcers. Regranex's active ingredient is platelet-derived growth factor.
Chrion's stock (NASDAQ:CHIR) closed Wednesday at $16.875, down $0.625. *