Although Chiron Corp. posted a profit of $11.8 million, or 7 centsper share, for the third quarter of 1996, Wall Street analysts noted thecompany actually recorded a 4-cent operating loss if partner Ciba-Geigy Ltd.'s research funding and a litigation settlement award aresubtracted from the income statement.

When last quarter's earnings were released, Chiron's stock fell 12percent after investors observed the company's profit turned into aloss by excluding research revenue from Ciba and a one-time cashgain from the sale of a Chiron business division.

This time, analysts said, investors were not surprised.

"People entered the third quarter with low levels of expectations,"said Meirov Chovav, analyst for Salomon Brothers Inc. in New York."Also the company had good expense control."

The result was a $1.625 gain Friday in Chiron's shares(NASDAQ:CHIR) to $20.875. The company released the fiscalreport after the market closed Thursday.

Chovav described Chiron's earnings as "not bad and not good." Sheobserved the company can control the figures by the amount itchooses to draw in research funding from Ciba, which owns 49.9percent of Chiron.

The Swiss pharmaceutical firm, which is merging with fellow Baseldrug maker Sandoz Ltd., contributed $21 million in research fundsfor the third quarter of 1996. In addition, Chiron received about $7million in the settlement of a patent infringement lawsuit with AbbottLaboratories Inc., of Abbott Park, Ill. Subtracting that income, whichrepresents 11 cents per share, leaves Chiron with an operating loss of4 cents.

The company's earnings in the second quarter of 1996 jumped intothe black with $15 million in research funding from Ciba and $12.1million from sale of Chiron's generic chemotherapeutics business.(See BioWorld Today, Aug. 2, 1996, p. 1.)

In its alliance with Ciba, Chiron can take as needed up to about $250million in research and development funds from its Swiss partnerover the next three years.

For the third quarter of 1996, Chiron reported total revenues of$321.5 million compared with $274.7 million in the third quarter of1995. The company recorded a net loss for the quarter a year ago of$145.1 million, or 90 cents per share, based on charges associatedwith the acquisition of San Diego-based Viagene Inc. in September1995.

For the first nine months of this year, Chiron reported revenues of$940 million for net income of $39.9 million, or 22 cents per share.For the same three quarters a year ago, revenues were $774.7 millionwith a net loss of $530 million, or $3.30 per share. The loss for thefirst nine months of 1995 was attributed to charges taken for theViagene buy-out and Ciba's buy-in during the first quarter of thatyear.

Chiron noted the 1995 earnings per share were adjusted to reflect a 4-for-1 stock split implemented in August 1996.

Chiron's product sales in the third quarter of 1996 were consideredflat, increasing 4 percent to $240.5 million from $230.3 millionduring the same three months in 1995.

Most of the product revenue is derived from the company'sdiagnostics division. In the third quarter of this year diagnostics salesincreased to $134.8 million from $131.2 million a year ago. Chironcredited sales of its branched DNA probe for measuring HIV viralload as the major reason for the revenue boost. Sales of the testjumped to $6.1 million from $3.3 million last year.

Ophthalmic products during the third quarter generated $49.9 millionin sales, including $3.3 million from Vitrasert, which was approvedfor marketing in the U.S. in March 1996. Vitrasert accounted formost of the increase over the $45.9 million in sales for the thirdquarter of 1995.

Cancer and vaccine product sales totaled $38 million for the quartercompared with $34 million a year ago.

Betaseron Sales Fall Short

Chiron's revenues from Betaseron (interferon beta-1b) for multiplesclerosis slumped to $16.8 million in the third quarter this year from$18.5 million during the same period last year. Chiron manufacturesthe drug for Berlex Laboratories Inc., of Wayne, N.J., a subsidiary ofBerlin-based Schering AG, and earns revenues from shipments toBerlex and royalties.

Sales of Betaseron, approved in the U.S. in 1993, have fallen short ofexpectations. Some analysts have speculated the drug's revenues willcontinue to erode as Biogen Inc., of Cambridge, Mass., moves itscompeting multiple sclerosis drug, Avonex (interferon beta-1a), ontothe market in the U.S. and Europe.

In Chiron's product pipeline, analysts noted, the company'spostponement of release of Phase III trial results of its herpes vaccinecontinues to be worrisome. Earlier this year Chiron said a reportexpected at the end of 1996 from one of two studies would bedelayed at least until mid-1997 when the second trial is complete.

On the positive side, Chiron expects to file two new drug applicationsthis year with the FDA. In partnership with Cephalon Inc., of WestChester, Pa., Chiron is expected to seek approval of Myotrophin(insulin-like growth factor) for amyotrophic lateral sclerosis, or LouGehrig's disease. The other drug, DepoCyt, is a sustained releaseform of cytarabine for treatment of neoplastic meningitis associatedwith cancer metastasis. DepoCyt is under development withDepoTech Corp., of San Diego. n

-- Charles Craig

(c) 1997 American Health Consultants. All rights reserved.