By Charles Craig
Chiron Corp. reported record revenues of nearly $370 million for the fourth quarter of 1996, but said increased debt and tax payments decreased its net income by 13 percent compared with the same quarter in 1995.
For 1996, the Emeryville, Calif., company posted net income of $55 million, or 31 cents per share, on revenues of $1.3 billion.
Chiron in 1995 recorded a loss of $512 million, or $3.15 per share, based on special charges taken during the first three quarters of that year for its buy out of San Diego-based Viagene Inc. and sale of 49.9 percent of Chiron to Ciba-Geigy Ltd. Ciba has since merged with fellow Basel, Switzerland, drug maker Sandoz Ltd. to form Novartis AG.
Revenues for 1995 totaled $1.1 billion.
In the fourth quarter of 1996, Chiron's record revenues of $369.8 million included $20 million in research funding from Novartis. For the year, it received $72 million from its Swiss partner. In the alliance with Novartis, Chiron can draw as needed up to $250 million in research and development funds over the next two years.
Chiron's net income of $15.3 million, or 9 cents per share, for the last three months of 1996 was 13 percent lower than the $17.6 million, or 10 cents per share, earned during the same period of 1995. Per share figures for 1996 were adjusted to reflect the company's 4-for-1 stock split in August of that year.
Chiron's product sales in the fourth quarter jumped 6 percent over the previous year to $275 million from $260 million in the fourth quarter of 1995. For 1996, sales topped $1 billion compared with $923 million the year before.
The company's biggest selling products are its diagnostics, accounting for nearly half of all revenues. Sales for 1996 increased to $566 million from $541 million in 1995.
In the fourth quarter of 1996, diagnostic sales jumped to $153.9 from $144.7 million in the same quarter of 1995.
Chiron's branched DNA probe for measuring HIV viral load generated revenues of $8.8 million in the fourth quarter of 1996 * more than double the $3.6 million in sales during the last quarter of 1995. Annual sales of the diagnostic increased to $24 million in 1996 from $14.9 million in 1995.
Fourth quarter and yearly sales of Chiron's ophthalmic and vaccine products also increased.
In its therapeutic business, Chiron's revenues rose to $131.3 million from $125.7 million. Betaseron, the multiple sclerosis drug made for Berlex Laboratories Inc., of Wayne, N.J., accounts for more than half of drug sales. Berlex is a subsidiary of Schering AG, of Berlin.
However, Betaseron revenues declined to $17.3 million in the fourth quarter of 1996 from $25 million in the same period of 1995. For 1996, Chiron's Betaseron sales totaled $67.2 million compared with $67.7 million in 1995.
Wall Street analysts expected Betaseron's market share to erode with the launch last year of Cambridge, Mass.-based Biogen Inc.'s Avonex, a competing multiple sclerosis drug. A third drug, Jerusalem-based Teva Pharmaceuticals Inc.'s Copaxone, enters the market this year following its FDA approval in December 1996.
Chiron's fourth quarter and year-end figures were in line with analysts' expectations. The company released its fiscal report after the market closed Tuesday. Its stock (NASDAQ:CHIR) Wednesday gained $0.75, closing at $19.25.
David Crossen, analyst for Montgomery Securities in San Francisco, noted Chiron's proposed leadership change, announced late last month, is viewed as a positive move.
Long-time CEO Edward Penhoet will become vice chairman of the board and a new chief executive will be hired later this year. In addition, Chairman William Rutter will give up some operational responsibilities to the new CEO, but will remain in his current post.
Rutter, Penhoet and Pablo Valenzuela, a senior vice president at Chiron, founded the company in 1981.
"Chiron has had a certain amount of growth problems," Crossen said. "The company has become very large, doing lots of deals. They have to be more disciplined. They also were moving a little too late to resolve issues."
Analysts expect Chiron's diagnostics business to continue its growth in 1997. In the near-term, two drug candidates, Myotrophin and DepoCyt, also are expected to boost product sales significantly. Both will be submitted for FDA review soon.
Myotrophin is insulin-like growth factor-1 developed in partnership with Cephalon Inc., of West Chester, Pa. for amyotrophic lateral sclerosis. DepoCyt is a sustained release form of cytarabine for neoplastic meningitis associated with cancer metastasis. It was developed in collaboration with DepoTech Corp., of San Diego. *