By Lisa Seachrist

Washington Editor

In an earnings report riddled with one-time charges and profits, Chiron Corp. reported flat revenues for its three divisions with year-end figures for 1997 totaling $1.162 billion compared with $1.101 billion in 1996. Fourth quarter results were similar with 1997 showing $311 million in revenues compared to $313 million in 1996.

The Emeryville, Calif.-based company, which does significant business overseas, recorded increased sales but falling revenue as a result of a strong U.S. dollar and wide fluctuations in foreign currency markets.

Chiron released its earnings report late Thursday. The company's stock (NASDAQ: CHIR) Friday gained $2.06, closing at $20.69, an 11 percent jump.

"We are very unique in the world of biotech," said Jim Knighton, vice president of investor relations for Chiron. "We have a large number of sales overseas; about half of our diagnostics business is overseas."

Chiron Diagnostics reported product sales in the fourth quarter of $155 million in 1997 vs. $158 million in the same quarter in 1996. Had the exchange rate been steady between 1996 and 1997, diagnostic product sales would have been $9 million higher, a 4 percent increase. On an annual basis, diagnostic product sales increased $30 million, to $607 million in 1997 from $577 million in 1996.

Chiron Vaccines reported product sales of $30 million in both the fourth quarters of 1997 and 1996. Again, had the exchange rate remained constant, the division would have enjoyed a 10 percent increase in 1997. For the year, sales of vaccines decreased to $82 million in 1997 from $92 million in 1996.

First Regranex Sales Recorded

Chiron Therapeutics and Chiron Technologies reported a 32 percent increase in product sales during the fourth quarter to $45 million in 1997 from $34 million in 1996. The jump was driven largely by $11 million in sales of recombinant human platelet-derived growth factor (PDGF) to Johnson & Johnson, of New Brunswick, N.J., for the launch of Regranex Gel later this month. Regranex was approved by the FDA in December for the treatment of diabetic foot ulcers.

For 1997, therapeutic product sales increased $15 million to $151 million form $136 million in 1996.

The company also received a $20 million payment from, Novartis AG, of Basel, Switzerland, for co-marketing Aredia, which is used to treat bone cancer. However, Chiron and Novartis ended that agreement as of March 1998. Betaseron (interferon beta 1-b) sales have stopped declining and are beginning to stabilize. Betaseron, for treatment of multiple sclerosis, is manufactured by Chiron and marketed by Berlin-based Schering AG.

"Yes, we are losing revenue from the Aredia agreement," Knighton said. "But we have PDGF to take its place. Our pipeline is so deep that we can ensure our earnings potential. At the end of the day, we are starting to hit our earnings target."

Chiron reported earnings of $0.29 per share for 1997 and $0.19 per share for the fourth quarter of 1997 for continuing operations.

When including discontinued operations in the report, Chiron's 1997 income was $71.2 million or $0.41 per diluted share compared with $55.1 million or $0.33 per share in 1996. For the fourth quarter, the company earned $52.8 million or $0.30 cents per share compared to $15.3 million or $0.09 per share.

Diluted shares are a more conservative way of reporting a company's earnings and the method is preferred by the Securities and Exchange Commission.

The 1997 earnings report was complicated by several one-time charges and profits. The company took a one-time charge of $31 million for closing its Puerto Rican Betaseron plant in the third quarter. In the fourth quarter the company took a $3.3 million charge for restructuring. However, the sale of Diagnostic Quality Control assets to Bio-Rad Laboratories of Hercules, Calif., garnered the company $18.6 million.

In October 1997, Chiron agreed to sell to Bausch & Lomb, of Rochester, N.Y., all assets of Chiron Vision Corp. for $300 million in cash. That transaction is expected to be completed early this year.

Analysts' Reactions Mixed

Analysts offer conflicted advice concerning Chiron. Tim Wilson, with UBS Securities Equity Research in New York, wrote that he expected only modest earnings growth for Chiron as a result of regulatory problems with Myotrophin and DepoCyt and a relatively weak pipeline.

Myotrophin -- a drug for amyotrophic lateral sclerosis developed in collaboration with Cephalon Inc., of West Chester, Pa. -- is under review by the FDA. DepoCyt -- an anticancer drug developed in association with DepoTech, Corp., of San Diego -- failed to win endorsement of the FDA's Oncologic Drugs Advisory Committee.

Peter Ginsberg, of Piper Jaffray in Minneapolis, wrote that Chiron's fourth quarter results were encouraging signs that the company was making progress on a number of fronts especially its restructuring and sales in Regranex. *

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