By Charles Craig

Chiron Corp.'s product sales in the second quarter of 1997 increased less than 1 percent over the same period a year ago, net income was up 2 percent and earnings per share were unchanged at 9 cents.

The Emeryville, Calif., company's sales totaled $256.37 million for the second quarter of 1997, compared with $254.15 million in the second quarter of 1996. Total revenues were $333.76 million, compared with $315.73 million during the same period a year ago.

Chiron's net income of $15.74 million for the second quarter of this year was $350,000 more than the $15.35 million in 1996. The company's earnings benefited from the addition of $29 million in license fees and research funding from Novartis AG, of Basel, which owns 46 percent of Chiron.

Under the 1995 strategic alliance with Novartis, Chiron can draw as much as $300 million over the last five years of the decade from the pharmaceutical firm. In 1995 and 1996 Chiron received a total of $119 million. After 2000, the company can either reimburse Novartis or grant it marketing rights to products being developed with the funds.

Chiron's 9-cent earnings per share for the second quarter of 1997 was 2 cents lower than most Wall Street analysts predicted.

Eric Schmidt, analyst with UBS Securities, of New York, said Chiron's manufacturing difficulties with its vaccine division in Italy, which contributed to decreases in those product sales, were in part to blame for the lower than expected earnings. Chiron said unfavorable foreign currency exchange rates also contributed to the flat performance.

The company has told analysts 1997 earnings should be in the low 40-cent range, which Schmidt said conforms to his estimate of 41 cents per share. Chiron earned 31 cents per share in 1996 on total revenues of $1.3 billion.

For the first six months of 1997, Chiron's net income increased 11 percent to $31.07 million, or 18 cents per share, from $28.09 million, or 16 cents per share, in 1996. Total revenues for the first half of this year reached $664.04 million, compared with $621.48 million last year.

The company's business divisions include diagnostics, therapeutics, ophthalmics and vaccines. Chiron officials said product sales in the second quarter of this year increased in diagnostics and therapeutics compared to the same period a year ago. However, in addition to decreases in vaccine sales, ophthalmic revenues were lower.

Diagnostics are Chiron's best-selling products, accounting for 60 percent of total sales for the second quarter of 1997. The company said revenues from its branched DNA probe for measuring HIV viral load grew by $7 million over the second quarter of last year, an 87 percent jump.

In therapeutics, Betaseron for multiple sclerosis and Proleukin for metastatic kidney cancer provide the most revenues. The company manufactures Betaseron for sale by Berlex Laboratories Inc., of Wayne, N.J., which is a subsidiary of Schering AG, of Berlin.

Chiron has three new drug applications at the FDA and has applied to expand the label of Proleukin to include metastatic melanoma.

Earlier this year an FDA advisory panel recommended approval of Regranex, a gel form of recombinant human platelet-derived growth factor, for treatment of diabetic skin ulcers. The drug was developed with partner Johnson & Johnson, of New Brunswick, N.J.

The other two products under review by the FDA are DepoCyt, a sustained-release form of cytarabine for neoplastic meningitis associated with cancer metastasis, and Myotrophin, recombinant insulin-like growth factor-1, for amyotrophic lateral sclerosis (ALS). Chiron developed DepoCyt in partnership with DepoTech Corp., of San Diego, and Myotrophin with Cephalon Inc., of West Chester, Pa.

Prospects for Myotrophin suffered a setback in May when an FDA advisory panel rejected the drug, saying clinical trials failed to provide substantial evidence of Myotrophin's effectiveness. The FDA is not bound by the advisory panel's recommendations. The six-month review deadline for a Myotrophin decision is Aug. 10.

Schmidt said he believes Myotrophin has a chance for approval without evaluation in another Phase III trial.

He said Chiron revealed the FDA may extend the deadline to give it time to examine more data on Myotrophin from the company, Cephalon, ALS patients and doctors.

Chiron issued its fiscal report after the market closed Wednesday. Its stock (NASDAQ:CHIR) ended Thursday at $20.25, down $0.438. *