Chiron Corp. posted a net loss for the third quarter of$145 million, or $3.59 per share, based mostly on acharge for acquiring San Diego-based Viagene Inc. inSeptember 1995.

While Wall Street analysts were not surprised by theearnings report, they said huge charges for the Viagenepurchase and other deals, which have resulted in a nine-month net loss of $530 million for 1995, make it difficultto assess Chiron's actual earnings potential.

"The problem," said David Crossen, an analyst withMontgomery Securities in San Francisco, "is adjustingthe picture between future expectations and currentearnings reality."

Emeryville, Calif.-based Chiron's stock(NASDAQ:CHIR) dropped $6.25 Wednesday to $84.75,a 7 percent decline.

Without charges of $148.9 million, Chiron's earnings forthe third quarter were 9 cents per share, lower than the 15cents projected by most analysts. The charges included$132.5 million for the Viagene acquisition and $16.4million for expenses related to a collaboration with WestChester, Pa.-based Cephalon Inc. on Myotrophin for LouGehrig's disease

"In the third quarter, trends were fine for the diagnostic,vision and vaccine divisions," Crossen said. He noted,however, sales of Betaseron, Chiron's beta interferonproduct for multiple sclerosis, were disappointing andthose revenues are a primary driving force behind thecompany's earnings.

Confusion over Chiron's growth potential, Crossenobserved, has kept the stock trading up and downbetween $80 and $90 per share recently.

Expectations for Myotrophin, which proved successful inPhase III trials in June and earlier this week, along withother products in late-stage development fueled adramatic rise in Chiron's stock during the second half ofthis year.

The day before the first positive Phase III Myotrophintrials were reported, Chiron was trading at $54.87.Tuesday the stock hit $91 on Cephalon's release ofsuccessful Myotrophin data from a second Phase III trial.

None of the new products, including Myotrophin, isexpected to affect earnings until 1997. Income in 1996still will be dependent on Betaseron, which is marketedby Germany-based Schering AG and its subsidiary BerlexLaboratories Inc., of Wayne, N.J.

"Those [product candidates] will allow for growth, buthow much growth is there?" Crossen asked. "That's whypeople go back and forth. Enthusiasm drives the stock upand sober reflection drives it back down."

The net loss of $530 million, or $13.18 per share, for ninemonths ending Sept. 30, 1995, was based on $500 millionin charges. In addition to the $148.9 million in chargesfor the third quarter, Chiron took a $349 million charge inthe first quarter based mostly on expenses for itspartnership with Switzerland-based Ciba-Geigy Ltd.,which owns 49.9 percent of Chiron.

Revenues for the third quarter of 1995 totaled $275million compared with $128 million for the same period ayear ago. Net income in the third quarter of 1994 was$12.6 million, or 37 cents per share. Nine-monthrevenues of $775 million in 1995 were more than doublerevenues of $320 million the previous year. Net incomefor the first nine-months in 1994 totaled $22.5 million, or66 cents per share.

The substantial revenue increases, Chiron said, werebased on product sales that tripled, thanks to severalacquisitions. Chiron received ownership of Ciba CorningDiagnostics Corp. and Biocine Co. in the Ciba allianceand purchased the IOLAB Surgical Division of Johnson& Johnson, of New Brunswick, N.J.

Research and development expenses doubled to $88.6million in the third quarter this year compared with $44million a year ago. For nine months in 1995, research anddevelopment costs increased to $259.6 million from$119.5 million last year. n

-- Charles Craig

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