Chiron Corp., one of biotechnology's top tier companies, reportedrecord earnings for the third quarter, ending Sept. 30, with a netincome more than double the total for the same three months lastyear based on sales of Betaseron and ophthalmic products.

The Emeryville, Calif. company reported net income of $12.5million, or 37 cents per share, compared with $4.9 million, or 15cents, per share for the third quarter of 1993.

Chiron said earnings, along with revenues of $128.2 million, wereboth records. The previous earnings high was 27 cents per share inthe third quarter of 1991.

Despite the company's third quarter performance, analysts saiduncertainties surrounding Betaseron sales for multiple sclerosispresent a troubling picture for 1995 and beyond.

However, Mark Simon, of Robertson Stephens & Co., in SanFrancisco, said what is overlooked in Wall Street's fixation onBetaseron are some new products, including a home test kit forAIDS, that could be marketed next year.

Centocor Loses $17.6M

For Centocor, which is among the 10 largest biotechnologycompanies in the U.S., the third quarter ended with a net loss of$17.6 million, or 34 cents per share, compared with a loss of $15.8million, or 38 cents per share, in 1993.

The Malvern, Pa., company blamed the reduced earnings on lowerdiagnostic sales and contract revenues.

Despite the quarterly performance, Centocor's president and CEO,David Holveck, said he still expects the company to reachprofitability in 1995, but he admitted the goal will be challenging.

Centocor reported revenues for the third quarter of $12.9 millioncompared with $16.7 million for the third quarter of 1993.

Mary Ann Gray, an analyst with Kidder Peabody & Co. Inc., in NewYork, said she didn't share Centocor's optimism for its first-everprofit in 1995. Problem areas, she observed, include ReoPro,targeted for prevention of blood clotting in angioplasty patients, andPanorex, a treatment for colorectal cancer. "My concerns aboutReoPro," Gray said, "are that the market is only for high-riskangioplasty patients, which is 25 percent of the patient population,and the bleeding side effects could limit its use. Plus Centocor onlyrecovers a royalty because the drug belongs to Eli Lilly & Co. [ofIndianapolis]."

Panorex, Gray added, may get on the market some places in Europebut "it has a long way to go to get approved in the U.S." The drughas completed Phase III testing in Germany.

Centocor said Friday the board of drugs for the Swedish MedicalProducts Agency has recommended approval of ReoPro. Thecompany acknowledged that getting ReoPro and Panorex on themarket are key elements for attaining profitability.

Simon observed that for Centocor to get into the black "a lot ofthings have to go their way and not all of them are in the company'scontrol . . . Even if Lilly has ReoPro sales of $75 million, whichwould be solid, it won't be enough to achieve profitability."

Centocor's stock (NASDAQ:CNTO) closed Friday at $16, down 94cents per share.

Chiron credited a major portion of its record-setting performance inthe third quarter to $33.2 million in Betaseron sales and $28 millionin ophthalmic product sales. Overall third quarter product salestotaled $81.8 million compared with $36.1 million for the thirdquarter a year ago.

Analysts said the company's 37 cents per share earnings for thequarter were several cents higher than most estimates. But they alsoobserved that uncertainty about future sales of Betaseron is cause forconcern. Chiron's stock (NASDAQ:CHIR) Friday was down $3.12cents, closing at $59 per share.

Betaseron revenue is derived from shipments of the drug to itsmarketing partner, Berlex Laboratories, a subsidiary of Germany-based Schering AG. The interferon beta drug for multiple sclerosiswas first sold in the U.S. in the third quarter of 1993. The companysaid sales from Betaseron shipments to Berlex in 1994 totaled $61.4million for the first ninth months of the year.

Gray said part of the concern over Betaseron is that sales areexpected to be slower in the first half of 1995 because of an excessinventory from 1994 shipments to Berlex. Gray also said she talkedto patients who have stopped taking the drug because of flu-like sideeffects.

Joyce Lonergan, an analyst with Cowen & Co. in Boston, saiduncertainty over Betaseron also includes potential competition fromCambridge, Mass.-based Biogen Inc.'s beta interferon drug formultiple sclerosis. With successful Phase III trials reported this year,Biogen expects to file for approval in the U.S. and Europe during thefirst half of 1995 and the drug could be on the market by 1996.

Also, Lonergan said, Chiron now gets a lump sum payment fromBerlex that includes manufacturing and royalty fees. If thosepayments are separated next year, it could affect quarterly revenuesfor Chiron.

Simon said that lost in the discussion over Betaseron are two newChiron products in late-stage development. Phase III trials of aganciclovir retinal implant to treat AIDS-related cytomegalovirusretinitis are nearly complete and the company expects to file a newdrug application between December of this year and March 1995.

The product, Simon said, is a home test kit for HIV developed byNew Jersey-based Johnson & Johnson. Chiron has a 50 percentinterest in the kit, which is under review by the FDA and could be onthe market next year. Simon said the kits would be sold for about$25 with projected sales of millions of dollars.n

-- Charles Craig

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