Analysts are enthusiastic, but the market hasn't seemed tonotice Chiron Corp.'s announcement Tuesday that it received aU.S. patent for using HIV antigens in diagnostics.

Alex. Brown & Sons analyst Amy Berler, for one, thinks this is"pretty good news for Chiron." But she is "surprised that thestock hasn't responded a little more positively."

Stock in Chiron (NASDAQ:CHIR) of Emeryville, Calif., fell 75cents on Thursday to $50.25.

In a separate event, Chiron redeemed its convertiblesubordinated debentures. Two-thirds of the holders took cash,and one-third converted their debentures into stock, LarryKurtz, Chiron's vice president of corporate communications, toldBioWorld.

"This is a very unusual situation. Generally the stock is belowthe price and you get all redemption for cash or the call's beenmade at a higher price and you get all conversions," he said.The way it turned out, however, both the company and thestockholders benefited.

Some analysts attribute the lackluster performance of Chiron'sstock to the fact that this debenture event overshadowed thepatent announcement and its significance.

Chiron's patent covers recombinant surface antigens from twoHIV strains -- HIV-1 and HIV-2 -- and could give the companycontrol over the majority of all HIV blood screening tests in theU.S. "Almost everybody is using recombinant antigens (in theHIV tests)," said Jim McCamant, editor of the MedicalTechnology Stock Letter.

Abbott Laboratories Inc. of Abbott Park, Ill., currentlydominates the blood testing market, McCamant said, but theChiron-Ortho joint venture -- which is the licensee of the newHIV patent -- is already in second place.

Kurtz explained that the joint venture sells a full line of bloodscreening tests used by blood banks and plasma centers,including hepatitis B surface antigen, hepatitis B core antibody,hepatitis C antibody and HTLV-1; and two HIV tests, a virallysate for HIV-1 and a Western blot confirmatory test.

Gregory Brown, an analyst with Vector Securities International,said that 125 million to 140 million HIV tests are run annually.Brown said the leading product is Abbott's HIV-1/HIV-2 assay,which uses recombinant antigens.

And Alex. Brown & Sons analyst Jonathan Osgood said lastweek in his report on Abbott, "The HIV-1/HIV-2 assay isproving to be a nice addition to the diagnostics division's $100million AIDS testing business."

Now that Chiron has a patent on recombinant surface antigensfor both HIV-1 and HIV-2, said Brown, its diagnostics businesswill "really sizzle. Even if the company just gets royalty fees(from licensing), it's pure profit," adding potentially $5 millionto $20 million to the company's earnings. And "once theydevelop a product, they can add it to the hepatitis C screeningpanel that is already on the market," Brown said. "This couldadd 5 to 20 cents a share in earnings retroactive to 1993."

Kurtz said that Chiron's diagnostics did sales of about $200million worldwide in 1991 and could hit $225 million to $250million in 1992. About 80 to 85 percent of those sales havebeen from hepatitis C products, said Kurtz, which "continue tobe the bedrock of the business."

Chiron-Ortho licensed its hepatitis C technology to Abbott,which pays Chiron a royalty. Whether Abbott will also licensethe HIV patent is yet to be seen.

There is an older patent on HIV, the so-called Harvard patent,based on discoveries by Max Essex and licensed exclusively toCambridge Biotech Corp. (NASDAQ:CBCX) of Worcester, Mass. Itcovers the isolation and characterization of the viral proteingp120 and its precursor, gp160, Christina Pappas, CambridgeBiotech's investor coordinator, told BioWorld.

Chiron's Kurtz said that the Harvard patent "describes theenvelope of the virus. It's not a sequence patent." The Harvardpatent shouldn't present any problem to Chiron, however, sinceChiron has already "cross-licensed with Cambridge Biotech forthe patent," Kurtz explained.

-- Jennifer Van Brunt Senior Editor

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