• E-mail
• Print
• Comment
• Font Size
• Digg
• del.icio.us
• Discuss article

Chiron Reports Second-Quarter 2005 Adjusted Earnings of $0.08 Per Share, GAAP Earnings of Less Than $0.01 Per Share; 10 Percent Increase in Revenues Over Second-Quarter 2004

Posted on: Wednesday, 27 July 2005, 18:00 CDT

Chiron Corporation (Nasdaq:CHIR) today reported financial results for the second quarter of 2005.

HIGHLIGHTS

-- Chiron reported adjusted income from continuing operations of

$0.08 per share and GAAP income from continuing operations of

less than $0.01 per share for the second quarter of 2005.

-- On July 21, 2005, the U.S. Food and Drug Administration (FDA)

completed an on-site inspection of Chiron's Liverpool

facility, which manufactures FLUVIRIN(R) influenza virus

vaccine. Consistent with FDA process, at the conclusion of the

on-site inspection, Chiron received a list of observations on

a Form 483. Chiron expects to complete its response to these

observations in early August. Chiron is not in a position to

characterize the results of the inspection until the FDA

delivers its final conclusion.

-- Chiron continues to expect 2005 income from continuing

operations to be between $1.20 and $1.45 per share on an

adjusted basis and between $0.86 and $1.11 per share on a GAAP

basis.

Chiron reported adjusted income from continuing operations of $16 million, or $0.08 per share, for the second quarter of 2005, compared to $39 million, or $0.20 per share, for the second quarter of 2004. Chiron reported GAAP income from continuing operations of $49,000, or less than $0.01 per share, for the second quarter of 2005, compared to $23 million, or $0.12 per share, for the second quarter of 2004.

The costs associated with remediation of Chiron's Liverpool manufacturing facility, which produces FLUVIRIN vaccine, had a material impact on the financial results for the second quarter of 2005. Chiron incurred an increase in idle facility costs compared to the second quarter of 2004 of $14 million as a result of limited FLUVIRIN vaccine production in the second quarter of 2005 and incurred FLUVIRIN vaccine remediation costs of $8 million. In addition, Chiron incurred legal costs associated with the FLUVIRIN vaccine-related developments of $5 million. Chiron expects costs for the FLUVIRIN remediation and legal costs related to the FLUVIRIN developments to continue to impact financial results in successive quarters in 2005.

The financial results for the second quarter of 2005 were also impacted because, as the company reported on July 20, 2005, due to a product sterility issue Chiron has written off the entire BEGRIVAC(TM) influenza virus vaccine product inventory in the second quarter of 2005, resulting in a $15 million charge to cost of sales. Chiron will not supply any BEGRIVAC vaccine this influenza season. Chiron has been working closely with the German regulatory agency, the Paul Ehrlich Institute (PEI), toward Chiron's goal of returning to the market with BEGRIVAC vaccine next year.

Foreign exchange rates resulted in an approximate $0.01 decrease in adjusted earnings per share and an approximate $0.01 decrease in GAAP earnings per share for the second quarter of 2005.

"While the loss of the BEGRIVAC supply is a disappointment, we had a sound quarter, with revenue up 10 percent," said Howard Pien, chief executive officer of Chiron.

Chiron uses adjusted financial statements to gain an understanding of the company's operating performance on a comparative basis. Adjusted amounts exclude special items relating to certain acquisitions, which may not be indicative of the company's trends or potential future performance. Please refer to the tables at the end of this press release (which are also located at www.chiron.com in the Investors section under Financial Reports) for more detail on these items and a reconciliation of the adjusted financial information to GAAP financial information. All references to per-share amounts are per diluted share. Selected Financial Highlights (Amounts are both GAAP and adjusted) --------------------------------------------------------------------- Second- Second- Quarter Quarter ($ millions) 2005 2004 Change --------------------------------------------------------------------- Net product sales $304 $281 8% Total revenues 419 380 10% Cost of sales 178 129 Gross profit margin 42% 54% Research and development 107 100 7% Selling, general and administrative 128 107 20% ---------------------------------------------------------------------

Net product sales for the second quarter of 2005 increased 8 percent compared to the second quarter of 2004, primarily due to increases in sales of travel vaccines, meningococcal vaccines, BETASERON(R) interferon beta-1b, PROCLEIX(R) NAT products and TOBI(R) tobramycin inhalation solution offset by declines in sales of influenza vaccines, pediatric and other vaccines, and PROLEUKIN(R) (aldesleukin) for injection.

Revenues increased 10 percent primarily due to increases in product sales and royalty and license fee revenues. For the second quarter of 2005, foreign exchange rates resulted in a 1 percent increase in total revenues.

Gross profit margin declined primarily due to $14 million in incremental costs associated with the idle capacity of Chiron's Liverpool facility, $8 million in remediation-related costs for the Liverpool facility, and a $15 million charge as a result of the write-off of the BEGRIVAC vaccine product inventory. Also contributing to the decrease was a reduction in the BioPharmaceuticals gross profit margin, primarily due to increases in planned idle facility time and ongoing process improvement efforts over the second quarter of 2004.

Research and development expenses increased primarily due to the cost of development efforts in the oncology franchise, meningococcal franchise and for CUBICIN(R) (daptomycin for injection). This increase was partially offset by eliminated costs from research and development programs that were discontinued prior to the second quarter of 2005. In addition, the second quarter of 2004 included higher costs for the Phase III CAPTIVATE trial for tifacogin, which commenced in the second quarter of 2004, due to production of clinical materials.

Selling, general and administrative expenses increased partially due to $5 million in legal costs associated with the FLUVIRIN(R) influenza virus vaccine-related developments and $2 million due to the effect of foreign exchange rates. In addition, marketing and pre-launch programs for the CUBICIN product and PULMINIQ(TM) (cyclosporine, USP) inhalation solution, investment in geographic penetration, and corporate governance costs contributed to the increase.

BLOOD TESTING

Total Blood Testing revenues were $133 million for the second quarter of 2005, an increase of 16 percent compared to the second quarter of 2004. Selected Blood Testing Revenues ---------------------------------------------------------------------- Second- Second- Quarter Quarter ($ millions) 2005 2004 Change ---------------------------------------------------------------------- Ortho-Clinical Diagnostics $8 $7 21% PROCLEIX(R) NAT products 66 61 9% ------------------------------ Blood Testing net product sales 74 67 10% Revenues from joint business arrangement 31 29 9% Royalty and license fee revenues 26 16 60% Total Blood Testing revenues (1) $133 $115 16% ---------------------------------------------------------------------- (1) Total Blood Testing revenues consist of net product sales from Chiron's joint business contractual arrangement with Ortho-Clinical Diagnostics and from Chiron's PROCLEIX NAT product line, revenues from Chiron's joint business arrangement with Ortho-Clinical Diagnostics, collaborative agreement revenues, royalty and license fee revenues, and other revenues. Totals may not sum due to rounding and the inclusion of only selected financial information.

-- PROCLEIX NAT products: The increase in sales for the second

quarter of 2005 compared to the second quarter of 2004 was

primarily due to the introduction of the PROCLEIX(R)

ULTRIO(TM) Assay outside of the United States and continued

penetration into several markets abroad.

-- Joint business arrangement with Ortho-Clinical Diagnostics:

The increase in revenues was primarily due to higher

profitability realized by the joint business.

-- Royalty and license fee revenues related to NAT blood

screening: The increase was primarily due to recognition of

the Blood Testing share of the September 2004 settlement with

F. Hoffmann-La Roche (Roche) related to a U.S. patent directed

to NAT methods for HIV and various settlements subsequent to

the second quarter of 2004, including Chiron's settlement

agreement with the Scottish National Blood Service. In

addition, Roche royalties increased due to rate increases

resulting from certain countries entering the European Union

and an increase in reported donations.

The gross profit margin for Blood Testing products was 40 percent for the second quarter of 2005, compared to 42 percent for the second quarter of 2004. The decrease was primarily due to additional PROCLEIX(R) TIGRIS(R) System support and service.

VACCINES

Vaccines net product sales were $97 million for the second quarter of 2005, an increase of 12 percent compared to the second quarter of 2004. Selected Vaccines Revenues ---------------------------------------------------------------------- Second- Second- Quarter Quarter ($ millions) 2005 2004 Change ---------------------------------------------------------------------- Influenza vaccines $0 $8 - 106% Meningococcal vaccines 14 5 171% Travel vaccines 45 26 71% Pediatric and other vaccines 39 48 - 18% -------------------------------- Vaccines net product sales 97 87 12% Total Vaccines revenues (2) $102 $94 8% ---------------------------------------------------------------------- (2) Total Vaccines revenues consist of net product sales, collaborative agreement revenues, royalty and license fee revenues, and other revenues. Totals may not sum due to rounding and the inclusion of only selected financial information.

-- Influenza vaccines: The decrease in influenza vaccines sales

for the second quarter of 2005 compared to the second quarter

of 2004 was due to a manufacturing upgrade.

-- Meningococcal vaccines: The increase in meningococcal vaccines

sales was primarily due to sales of MENZB(TM) meningococcal B

vaccine to the Ministry of Health in New Zealand.

-- Travel vaccines: The increase in travel vaccines sales was

primarily due to an additional $17 million in sales of

ENCEPUR(R) tick-borne encephalitis vaccine driven by overall

market growth and a number of marketing initiatives. In

addition, increased demand for rabies vaccines in the United

Kingdom, primarily due to a product recall from a competitor,

contributed to the increase.

-- Pediatric and other vaccines: The decrease in pediatric and

other vaccines sales was primarily due to a decrease in sales

of measles, mumps and rubella (MMR) vaccines. In the second

quarter of 2004, MMR product sales reflected sales from a

tender for a large-scale MMR vaccination campaign. Sales of

polio vaccines were also down due to a decrease in tenders.

These decreases were partially offset by increased sales of

Chiron's diptheria, tetanus and pertussis vaccine.

The gross profit margin for Vaccines products was 7 percent for the second quarter of 2005, compared to 34 percent for the second quarter of 2004. The decrease was primarily due to Liverpool incremental idle facility costs of $14 million and FLUVIRIN(R) influenza virus vaccine remediation costs of $8 million, which were charged to cost of sales because the facility had limited production in the second quarter of 2005. In addition, Chiron wrote off the entire BEGRIVAC(TM) influenza virus vaccine product inventory in the second quarter of 2005, resulting in a $15 million charge to cost of sales.

BIOPHARMACEUTICALS

BioPharmaceuticals net product sales were $132 million for the second quarter of 2005, an increase of 4 percent compared to the second quarter of 2004. Selected BioPharmaceuticals Revenues --------------------------------------------------------------------- Second- Second- Quarter Quarter ($ millions) 2005 2004 Change --------------------------------------------------------------------- TOBI(R) tobramycin inhalation solution $57 $51 10% PROLEUKIN(R) (aldesleukin) for injection 32 35 - 10% BETASERON(R) interferon beta-1b 38 32 21% BioPharmaceuticals net product sales (3) 132 127 4% BETAFERON(R) interferon beta-1b royalties 17 12 46% Total BioPharmaceuticals revenues (4) $154 $147 5% --------------------------------------------------------------------- (3) Net product sales include sales from TOBI, PROLEUKIN, BETASERON and other products. (4) Total BioPharmaceuticals revenues consist of net product sales, collaborative agreement revenues, royalty and license fee revenues, and other revenues. Totals may not sum due to the inclusion of only selected financial information.

-- TOBI: The increase in TOBI product sales for the second

quarter of 2005 compared to the second quarter of 2004 was

primarily due to increased patient demand in both the United

States and Europe and price increases, offset by wholesaler

ordering patterns.

-- PROLEUKIN: The decrease in PROLEUKIN product sales was due to

decreased patient demand in the United States as a result of

increased competition, a government rebate adjustment and

wholesaler ordering patterns, partially offset by price

increases.

-- BETASERON: The increase in BETASERON product sales to Berlex

Inc. (and its parent company Schering AG) for marketing and

resale was primarily due to inventory ordering patterns and

price increases.

-- BETAFERON royalties: The increase in royalties was primarily

due to price increases and increased patient demand.

The gross profit margin for BioPharmaceuticals products was 68 percent for the second quarter of 2005, compared to 74 percent for the second quarter of 2004. The decrease in gross profit margin was primarily due to increases in planned idle facility time and ongoing process improvement efforts over the second quarter of 2004.

ROYALTY AND LICENSE FEE REVENUES

Total royalty and license fee revenues include royalties and license fees attributed to Blood Testing, Vaccines and BioPharmaceuticals. These revenues also include other royalty and license fees, which consist primarily of royalties from Roche, Roche Molecular Systems and Bayer HealthCare AG for clinical diagnostic products. Selected Royalty and License Fee Revenues --------------------------------------------------------------------- Second- Second- Quarter Quarter ($ millions) 2005 2004 Change --------------------------------------------------------------------- Blood Testing $26 $16 60% Vaccines 1 0 N/A BioPharmaceuticals 20 15 30% Other 30 24 26% Total royalty and license fee revenues (5) $77 $55 39% --------------------------------------------------------------------- (5) Totals may not sum due to rounding.

-- Total royalty and license fee revenues: In addition to the

increases in Blood Testing, Vaccines and BioPharmaceuticals

royalty and license fee revenues for the second quarter of

2005 compared to the second quarter of 2004 as explained

above, other royalty and license fee revenues also increased.

The increase was primarily due to revenues from the settlement

with Roche in the third quarter of 2004 relating to Chiron's

U.S. patent for HIV technology used in clinical diagnostics

and blood-screening products. In the second quarter of 2005,

$8 million of the settlement amount received from Roche became

non-refundable and therefore was recognized as revenue. The

blood-screening portion of the non-refundable amount is $3

million and is classified as Blood Testing royalties and

license fees, and the remaining $5 million relates to clinical

diagnostics and is classified as other royalty and license fee

revenues.

PIPELINE AND PRODUCTS UPDATE

Blood Testing

-- Several studies of the PROCLEIX(R) ULTRIO(TM) Assay and the

PROCLEIX(R) TIGRIS(R) System were presented at two symposia at

the European regional congress of the International Society of

Blood Transfusion, held in Athens. The data included a

presentation from Dr. Emma Castro, of the Spanish Red Cross in

Madrid, who described the detection of two hepatitis

B-positive blood donations out of 20,000 tested by the

PROCLEIX ULTRIO Assay that would have gone undetected by

previously approved blood-testing assays.

Vaccines

-- As Chiron reported on July 20, 2005, due to a product

sterility issue the company will not supply any BEGRIVAC(TM)

influenza virus vaccine doses during the 2005-2006 influenza

season. BEGRIVAC vaccine is manufactured at Chiron's facility

in Marburg, Germany. Chiron had expected to supply

approximately 12 million doses of BEGRIVAC vaccine to

customers outside of the United States. Chiron is working to

mitigate the impact by reallocating non-U.S. vaccine doses

among affected markets, including incremental extra production

from its facility in Siena.

-- In June 2005, Chiron announced revisions to its production

estimates for FLUVIRIN(R) influenza virus vaccine for the

2005-2006 influenza season. Chiron estimates that it will

produce between 18 million and 26 million doses of FLUVIRIN

vaccine for the 2005-2006 influenza season. The number of

doses Chiron will produce will depend upon the success of its

remediation efforts, upon encountering no further adverse

manufacturing developments or regulatory decisions by the U.S.

Food and Drug Administration (FDA) or the UK Medicines and

Healthcare products Regulatory Agency (MHRA), and upon the

major factors that determine production -- volumes, yields and

timing.

BioPharmaceuticals

-- Chiron received an action letter from the FDA stating that the

company's New Drug Application (NDA) for PULMINIQ(TM)

(cyclosporine, USP) inhalation solution is "approvable" but

that an additional pre-approval study is required to confirm

the efficacy of the drug. Chiron is evaluating possible next

steps for PULMINIQ.

-- Cubist Pharmaceuticals Inc. announced that its Phase III

Staphylococcus aureus endocarditis and bacteremia trial of

CUBICIN(R) (daptomycin for injection) at 6 mg/kg once daily

met its primary endpoints of non-inferiority in the

intent-to-treat and per protocol populations. Chiron has

licensed the right to develop and commercialize CUBICIN in

certain territories, including Western and Eastern Europe, and

has submitted a Marketing Authorization Application (MAA) to

the European Medicines Agency (EMEA) under the European

Union's Centralized Procedure for approval to market CUBICIN

for the complicated skin and soft-tissue infection (cSSTi)

indication.

-- Chiron announced its Phase I program of CHIR-258 in multiple

myeloma, a type of cancer.

Other Recent Events

-- The National Academy of Sciences (NAS) elected Rino Rappuoli,

Ph.D., for membership in the academy as a foreign associate.

Dr. Rappuoli is the chief scientific officer of Chiron and

head of research for Chiron Vaccines. Election to NAS

recognizes distinguished and continuing achievements in

original research and is considered one of the highest honors

a scientist or engineer can receive.

SECOND-QUARTER 2005 EARNINGS CONFERENCE CALL

Chiron will hold a conference call and webcast on Wednesday, July 27, 2005, at 4:45 p.m. EDT to review its second-quarter 2005 results of operations and business highlights. In addition, the company may address forward-looking questions concerning business and financial matters and trends affecting the company.

To access either the live call or the one-year webcast archive, please log on to www.chiron.com/webcast. Please connect to the website at least 15 minutes prior to the conference call to ensure adequate time to download any necessary software. Alternatively, please call (800) 819-7026 from the United States or Canada or (706) 643-7768 from other locations. Replay by phone is available approximately two hours after the completion of the call through 11:55 p.m. EDT, Wednesday, August 3, 2005. To access the replay, please call (800) 642-1687 from the United States or Canada or (706) 645-9291 from other locations. The conference ID number is 7207333.

ABOUT CHIRON

Chiron delivers innovative and valuable products to protect human health by advancing pioneering science across the landscape of biotechnology. The company works to deliver on the limitless promise of science and make a positive difference in people's lives. For more information about Chiron, please visit www.chiron.com.

Download financial information in PDF format:

http://www.chiron.com/investors/4077/chiron_financial.pdf

View financial information online:

http://www.chiron.com/investors/finreports/index.html

This news release contains forward-looking statements, including statements regarding earnings and sales growth, supply of influenza virus vaccines that Chiron expects to deliver in future influenza seasons, improvements to manufacturing facilities, product development initiatives, new product indications, new product marketing, and clinical trials that involve risks and uncertainties and are subject to change. A discussion of the company's operations and financial condition, including factors that may affect its business and future prospects that could cause actual results and developments to differ materially from those expressed or implied by these forward-looking statements, is contained in documents the company has filed with the SEC, including the Form 10-K for the year ended December 31, 2004, and the Form 10-Q for the quarter ended March 31, 2005, and will be contained in all subsequent periodic filings made with the SEC. These documents identify important factors that could cause the company's actual performance to differ from current expectations, including, among others, additional adverse developments resulting from the suspension of Chiron's UK license to manufacture FLUVIRIN(R) influenza virus vaccine from October 5, 2004, through March 2, 2005, the announcement of such suspension and the litigation and investigations relating to those matters, the outcome of clinical trials, regulatory review and approvals, manufacturing capabilities, intellectual property protections and defenses, litigation, stock-price and interest-rate volatility, marketing effectiveness and the severity of the 2005-2006 influenza season. In particular, there can be no assurance that additional issues with respect to BEGRIVAC(TM) influenza virus vaccine or FLUVIRIN vaccine or Chiron's manufacturing generally will not arise in the future, or that Chiron will be able to cover vaccine shortfalls, successfully address matters raised in a warning letter from the FDA with respect to its FLUVIRIN vaccine manufacturing facilities, resume sale of FLUVIRIN vaccine for the 2005-2006 influenza season or BEGRIVAC vaccine for the 2006-2007 influenza season, increase sales of existing products, successfully develop and receive approval to market new products, or achieve market acceptance for such new products. In addition, the company may face additional competition in the influenza market in the future and challenges in distribution arrangements as a result of the recent BEGRIVAC and FLUVIRIN vaccine developments. In addition, the company may engage in business opportunities, the successful completion of which is subject to certain risks, including approval by Novartis AG, stockholder and regulatory approvals, and the integration of operations.

Chiron does not undertake an obligation to update the forward-looking information the company is giving today.

NOTE: BEGRIVAC, ENCEPUR, FLUVIRIN, MENZB, PROCLEIX, PROLEUKIN, PULMINIQ, TOBI and ULTRIO are trademarks of Chiron. BETASERON and BETAFERON are trademarks of Schering AG. TIGRIS is a trademark of Gen-Probe Incorporated. CUBICIN is a trademark of Cubist Pharmaceuticals.

CHIRON CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (In thousands, except per share data) Three Months Ended June 30, 2005 -------------------------------- Adjusted (1) Adjustments Actual ----------- ----------- ------- Revenues: Product sales, net $303,575 $ - $303,575 Revenues from joint business arrangement 31,003 - 31,003 Collaborative agreement revenues 3,453 - 3,453 Royalty and license fee revenues 76,522 - 76,522 Other revenues 4,204 - 4,204 -------- -------- -------- Total revenues 418,757 - 418,757 -------- -------- -------- Operating expenses: Cost of sales 177,569 - 177,569 Research and development 107,472 - 107,472 Selling, general and administrative 128,492 - 128,492 Amortization expense - (20,613) 20,613 Other operating expenses 2,056 - 2,056 -------- -------- -------- Total operating expenses 415,589 (20,613) 436,202 -------- -------- -------- Income (loss) from operations 3,168 20,613 (17,445) Interest expense (8,094) - (8,094) Interest and other income, net 26,298 - 26,298 Minority interest (662) - (662) -------- -------- -------- Income from continuing operations before income taxes 20,710 20,613 97 Provision for income taxes 5,118 5,070 48 -------- -------- -------- Income from continuing operations 15,592 15,543 49 ======== ======== ======== Gain from discontinued operations - - - -------- -------- -------- Net income $ 15,592 $ 15,543 $ 49 ======== ======== ======== Basic earnings per share: Income from continuing operations $ 0.08 $ - (a) ======== ======== Net income $ 0.08 $ - (a) ======== ======== Diluted earnings per share: Income from continuing operations $ 0.08 $ - (a) ======== ======== Net income $ 0.08 $ - (a) ======== ======== Shares used in calculating basic earnings per share 187,532 187,532 ======== ======== Shares used in calculating diluted earnings per share 188,968 188,968 ======== ======== Three Months Ended June 30, 2004 Restated (2) ------------------------------- ------------------------------- Adjusted (1) Adjustments Actual ----------- ----------- ------ Revenues: Product sales, net $281,221 $ - $281,221 Revenues from joint business arrangement 28,532 - 28,532 Collaborative agreement revenues 3,828 - 3,828 Royalty and license fee revenues 55,196 - 55,196 Other revenues 10,975 - 10,975 -------- -------- -------- Total revenues 379,752 - 379,752 -------- -------- -------- Operating expenses: Cost of sales 129,228 - 129,228 Research and development 100,326 - 100,326 Selling, general and administrative 106,857 - 106,857 Amortization expense - (21,179) 21,179 Other operating expenses 4,644 - 4,644 -------- -------- -------- Total operating expenses 341,055 (21,179) 362,234 -------- -------- -------- Income (loss) from operations 38,697 21,179 17,518 Interest expense (6,452) - (6,452) Interest and other income, net 19,809 - 19,809 Minority interest (459) - (459) -------- -------- -------- Income from continuing operations before income taxes 51,595 21,179 30,416 Provision for income taxes 12,899 5,295 7,604 -------- -------- -------- Income from continuing operations 38,696 15,884 22,812 ======== ======== ======== Gain from discontinued operations 12,459 - 12,459 -------- -------- -------- Net income $ 51,155 $ 15,884 $ 35,271 ======== ======== ======== Basic earnings per share: Income from continuing operations $ 0.21 $ 0.12 ======== ======== Net income $ 0.27 $ 0.19 ======== ======== Diluted earnings per share: Income from continuing operations $ 0.20 $ 0.12 ======== ======== Net income $ 0.27 $ 0.18 ======== ======== Shares used in calculating basic earnings per share 188,275 188,275 ======== ======== Shares used in calculating diluted earnings per share 190,985 190,985 ======== ======== (a) Less than $0.01 per share. (1) Adjusted amounts exclude the amortization expense on acquired intangible assets related to the acquisitions of PathoGenesis, Chiron Behring, Pulmopharm and PowderJect Pharmaceuticals. (2) Chiron determined that certain sales of a travel vaccine recorded as revenues in the second quarter of 2004 should not have been recorded as revenue at that time, and that portions of those sales should have been recorded as revenues in the third and fourth quarters of 2004 and possibly in later quarters. On a GAAP and adjusted basis, as a result of the restatement, for the three months ended June 30, 2004, product sales were reduced by $13.9 million, cost of sales were reduced by $1.5 million and income taxes were reduced by $3.1 million. This resulted in a $9.3 million reduction in income from continuing operations and net income and a $0.05 reduction of diluted income from continuing operations per share ($0.12 per share instead of the $0.17 per share as previously reported on a GAAP basis and $0.20 per share instead of $0.25 per share as previously reported on an adjusted basis). Note: Due to rounding, quarterly earnings (loss) per share amounts may not sum fully to yearly earnings (loss) per share amounts. CHIRON CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (In thousands, except per share data) Six Months Ended June 30, 2005 ------------------------------- Adjusted (3) Adjustments Actual ------------ ----------- ------ Revenues: Product sales, net $580,738 $ - $580,738 Revenues from joint business arrangement 67,061 - 67,061 Collaborative agreement revenues 7,980 - 7,980 Royalty and license fee revenues 156,583 - 156,583 Other revenues 13,751 - 13,751 -------- -------- -------- Total revenues 826,113 - 826,113 -------- -------- -------- Operating expenses: Cost of sales 340,529 - 340,529 Research and development 217,311 - 217,311 Selling, general and administrative 260,400 - 260,400 Amortization expense - (41,876) 41,876 Other operating expenses 9,202 - 9,202 -------- -------- -------- Total operating expenses 827,442 (41,876) 869,318 -------- -------- -------- (Loss) income from operations (1,329) 41,876 (43,205) Interest expense (15,173) - (15,173) Interest and other income, net 47,745 - 47,745 Minority interest (1,192) - (1,192) -------- -------- -------- Income (loss) from continuing operations before income taxes 30,051 41,876 (11,825) Provision for (benefit of) income taxes 7,453 10,385 (2,932) -------- -------- -------- Income (loss) from continuing operations 22,598 31,491 (8,893) ======== ======== ======== Gain from discontinued operations - - - -------- -------- -------- Net income (loss) $ 22,598 $ 31,491 $ (8,893) ======== ======== ======== Basic earnings (loss) per share: Income (loss) from continuing operations $ 0.12 $ (0.05) ======== ========= Net income (loss) $ 0.12 $ (0.05) ======== ========= Diluted earnings (loss) per share: Income (loss) from continuing operations $ 0.12 $ (0.05) ======== ========= Net income (loss) $ 0.12 $ (0.05) ======== ========= Shares used in calculating basic earnings (loss) per share 187,321 187,321 ======== ========= Shares used in calculating diluted earnings (loss) per share 188,652 187,321 ======== ========= Six Months Ended June 30, 2004 Restated (4) -------------------------------- Adjusted (3) Adjustments Actual ------------ ----------- ------- Revenues: Product sales, net $562,287 $ - $562,287 Revenues from joint business arrangement 58,893 - 58,893 Collaborative agreement revenues 10,343 - 10,343 Royalty and license fee revenues 109,988 - 109,988 Other revenues 17,913 - 17,913 -------- -------- -------- Total revenues 759,424 - 759,424 -------- -------- -------- Operating expenses: Cost of sales 255,929 - 255,929 Research and development 198,736 - 198,736 Selling, general and administrative 211,597 - 211,597 Amortization expense - (42,511) 42,511 Other operating expenses 6,760 - 6,760 -------- -------- -------- Total operating expenses 673,022 (42,511) 715,533 -------- -------- -------- (Loss) income from operations 86,402 42,511 43,891 Interest expense (12,377) - (12,377) Interest and other income, net 35,883 - 35,883 Minority interest (1,079) - (1,079) -------- -------- -------- Income (loss) from continuing operations before income taxes 108,829 42,511 66,318 Provision for (benefit of) income taxes 27,207 10,628 16,579 -------- -------- -------- Income (loss) from continuing operations 81,622 31,883 49,739 ======== ======== ======== Gain from discontinued operations 25,304 - 25,304 -------- -------- -------- Net income (loss) $106,926 $ 31,883 $ 75,043 ======== ======== ======== Basic earnings (loss) per share: Income (loss) from continuing operations $ 0.43 $ 0.26 ======== ======== Net income (loss) $ 0.57 $ 0.40 ======== ======== Diluted earnings (loss) per share: Income (loss) from continuing operations $ 0.43 $ 0.26 ======== ======== Net income (loss) $ 0.56 $ 0.39 ======== ======== Shares used in calculating basic earnings (loss) per share 187,952 187,952 ======== ======== Shares used in calculating diluted earnings (loss) per share 191,402 191,402 ======== ======== (3) Adjusted amounts exclude the amortization expense on acquired intangible assets related to the acquisitions of PathoGenesis, Chiron Behring, Pulmopharm and PowderJect Pharmaceuticals. (4) Chiron determined that certain sales of a travel vaccine recorded as revenues in the second quarter of 2004 should not have been recorded as revenue at that time, and that portions of those sales should have been recorded as revenues in the third and fourth quarters of 2004 and possibly in later quarters. On a GAAP and an adjusted basis, as a result of the restatement, for the six months ended June 30, 2004, product sales were reduced by $13.9 million, cost of sales were reduced by $1.5 million and income taxes were reduced by $3.1 million. This resulted in a $9.3 million reduction in income from continuing operations and net income on a GAAP and an adjusted basis. The restatement also resulted in a $0.05 reduction of diluted income from continuing operations per share on a GAAP basis ($0.26 per share instead of the $0.31 per share as previously reported) and a $0.04 reduction of diluted income from continuing operations per share on an adjusted basis ($0.43 per share instead of the $0.47 per share as previously reported). Note: Due to rounding, quarterly earnings (loss) per share amounts may not sum fully to yearly earnings (loss) per share amounts. CHIRON CORPORATION CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (In thousands) June 30, December 31, 2005 2004 -------- ------------ Assets ---------------------------------------------- Current assets: Cash and short-term investments $ 583,983 $ 603,621 Accounts receivable, net 338,168 402,094 Inventories, net 238,894 221,154 Other current assets 174,415 167,154 ---------- ---------- Total current assets 1,335,460 1,394,023 Non-current investments in marketable debt securities 435,287 409,421 Property, plant, equipment and leasehold improvements, net 808,378 799,415 Other non-current assets 1,562,360 1,702,644 ---------- ---------- Total assets $4,141,485 $4,305,503 ========== ========== Liabilities and stockholders' equity ---------------------------------------------- Current liabilities $ 424,312 $ 434,444 Long-term debt 938,248 936,652 Long-term portion of capital lease 156,828 156,952 Non-current unearned revenue 31,568 26,175 Other non-current liabilities 108,333 140,226 Minority interest 10,258 9,350 Stockholders' equity 2,471,938 2,601,704 ---------- ---------- Total liabilities and stockholders' equity $4,141,485 $4,305,503 ========== ========== CHIRON CORPORATION SUPPLEMENTAL SCHEDULE OF COMPUTATION OF EARNINGS PER SHARE (Unaudited) (In thousands, except per share data) Three Months Ended June 30, 2005 2004 Restated ------------------- ------------------- Adjusted Actual Adjusted Actual --------- --------- --------- --------- Computation for earnings per share - continuing operations Income (Numerator): Income from continuing operations $ 15,592 $ 49 $ 38,696 $ 22,812 ======== ========= ======== ======== Shares (Denominator): Weighted-average common shares outstanding 187,532 187,532 188,275 188,275 Effect of dilutive securities: Stock options and equivalents 1,436 1,436 2,710 2,710 -------- -------- -------- -------- Weighted-average common shares outstanding, plus impact from assumed conversions 188,968 188,968 190,985 190,985 ======== ========= ======== ======== Basic earnings per share from continuing operations $ 0.08 $ - (a) $ 0.21 $ 0.12 ======== ========= ======== ======== Diluted earnings per share from continuing operations $ 0.08 $ - (a) $ 0.20 $ 0.12 ======== ========= ======== ======== Computation for earnings per share - net income Income (Numerator): Net income $ 15,592 $ 49 $ 51,155 $ 35,271 ======== ========= ======== ======== Shares (Denominator): Weighted-average common shares outstanding 187,532 187,532 188,275 188,275 Effect of dilutive securities: Stock options and equivalents 1,436 1,436 2,710 2,710 -------- -------- -------- -------- Weighted-average common shares outstanding, plus impact from assumed conversions 188,968 188,968 190,985 190,985 ======== ========= ======== ======== Basic earnings per share $ 0.08 $ - (a) $ 0.27 $ 0.19 ======== ========= ======== ======== Diluted earnings per share $ 0.08 $ - (a) $ 0.27 $ 0.18 ======== ========= ======== ======== (a) Less than $0.01 per share. CHIRON CORPORATION SUPPLEMENTAL SCHEDULE OF COMPUTATION OF EARNINGS (LOSS) PER SHARE (Unaudited) (In thousands, except per share data) Six Months Ended June 30, 2005 2004 Restated ------------------ ------------------- Adjusted Actual Adjusted Actual --------- --------- --------- --------- Computation for earnings (loss) per share - continuing operations Income (loss) (Numerator): Income (loss) from continuing operations $ 22,598 $ (8,893) $ 81,622 $ 49,739 ======== ========= ======== ======== Shares (Denominator): Weighted-average common shares outstanding 187,321 187,321 187,952 187,952 Effect of dilutive securities: Stock options and equivalents 1,331 - 3,450 3,450 -------- -------- -------- -------- Weighted-average common shares outstanding, plus impact from assumed conversions 188,652 187,321 191,402 191,402 ======== ========= ======== ======== Basic earnings (loss) per share from continuing operations $ 0.12 $ (0.05) $ 0.43 $ 0.26 ======== ======== ======== ======== Diluted earnings (loss) per share from continuing operations $ 0.12 $ (0.05) $ 0.43 $ 0.26 ======== ======== ======== ======== Computation for earnings (loss) per share - net income Income (loss) (Numerator): Net income (loss) $ 22,598 $ (8,893) $106,926 $ 75,043 ======== ========= ======== ======== Shares (Denominator): Weighted-average common shares outstanding 187,321 187,321 187,952 187,952 Effect of dilutive securities: Stock options and equivalents 1,331 - 3,450 3,450 -------- -------- -------- -------- Weighted-average common shares outstanding, plus impact from assumed conversions 188,652 187,321 191,402 191,402 ======== ========= ======== ======== Basic earnings (loss) per share $ 0.12 $ (0.05) $ 0.57 $ 0.40 ======== ======== ======== ======== Diluted earnings (loss) per share $ 0.12 $ (0.05) $ 0.56 $ 0.39 ======== ======== ======== ======== CHIRON CORPORATION Supplemental Revenue Summary (Adjusted) USD $ (in thousands) Change Current Prior from Quarter Quarter Prior Change Q2 2005 Q1 2005 QTR % ------------------------------- --------- --------- -------- -------- Product Sales Blood Testing Ortho $ 7,988 $ 6,462 $ 1,526 23.6% NAT 66,104 64,431 1,673 2.6% -------- -------- ------- -------- Total Blood Testing 74,092 70,893 3,199 4.5% Vaccines Influenza Vaccines (492) 3,571 (4,063) (113.8)% Meningococcus Vaccines 13,605 9,153 4,452 48.6% Travel Vaccines (TBE, Rabies, Arilvax and Dukoral) 45,014 43,759 1,255 2.9% Pediatric/Other Vaccines 39,127 30,493 8,634 28.3% -------- -------- ------- -------- Total Vaccines 97,254 86,976 10,278 11.8% Biopharmaceuticals Proleukin 31,727 29,535 2,192 7.4% TOBI 56,600 52,935 3,665 6.9% Betaseron (b) 38,132 26,634 11,498 43.2% Other 5,770 10,190 (4,420) (43.4)% -------- -------- ------- -------- Total Biopharmaceuticals 132,229 119,294 12,935 10.8% TOTAL PRODUCT SALES, NET $303,575 $277,163 $26,412 9.5% ======== ======== ======= ======== Revenues From Joint Business Arrangement $ 31,003 $ 36,058 $(5,055) (14.0)% Collaborative Agreement Revenues 3,453 4,527 (1,074) (23.7)% Royalty and License Fees Revenues 76,522 80,061 (3,539) (4.4)% Other Revenues 4,204 9,547 (5,343) (56.0)% -------- -------- ------- -------- TOTAL REVENUES $418,757 $407,356 $11,401 2.8% -------- -------- ------- -------- Gross Margins Blood Testing 40% 44% (4)% Vaccines 7% (3)% 10% Biopharmaceuticals 68% 72% (4)% -------- -------- ------- -------- TOTAL GROSS MARGINS 42% 41% 1% -------- -------- ------- -------- ------------------------------- --------- --------- ------- -------- (b) Excludes Betaferon Royalty $ 16,943 $ 15,477 $ 1,466 9.5% ------------------------------- -------- -------- ------- -------- Change Restated from Quarter Prior Change Q2 2004 Year % -------------------------------------------------- -------- -------- Product Sales Blood Testing Ortho $ 6,608 $ 1,380 20.9% NAT 60,589 5,515 9.1% -------- ------- -------- Total Blood Testing 67,197 6,895 10.3% Vaccines Influenza Vaccines 8,207 (8,699) (106.0)% Meningococcus Vaccines 5,016 8,589 171.2% Travel Vaccines (TBE, Rabies, Arilvax and Dukoral) 26,261 18,753 71.4% Pediatric/Other Vaccines 47,619 (8,492) (17.8)% -------- ------- -------- Total Vaccines 87,103 10,151 11.7% Biopharmaceuticals Proleukin 35,057 (3,330) (9.5)% TOBI 51,342 5,258 10.2% Betaseron (b) 31,626 6,506 20.6% Other 8,896 (3,126) (35.1)% -------- ------- -------- Total Biopharmaceuticals 126,921 5,308 4.2% TOTAL PRODUCT SALES, NET $281,221 $22,354 7.9% ======== ======= ======== Revenues From Joint Business Arrangement $ 28,532 $ 2,471 8.7% Collaborative Agreement Revenues 3,828 (375) (9.8)% Royalty and License Fees Revenues 55,196 21,326 38.6% Other Revenues 10,975 (6,771) (61.7)% -------- ------- -------- TOTAL REVENUES $379,752 $39,005 10.3% -------- ------- -------- Gross Margins Blood Testing 42% (2)% Vaccines 34% (27)% Biopharmaceuticals 74% (6)% -------- ------- -------- TOTAL GROSS MARGINS 54% (12)% -------- ------- -------- --------------------------------------------------- ------- -------- (b) Excludes Betaferon Royalty $ 11,585 $ 5,358 46.2% ----------------------------------------- -------- ------- -------- CHIRON CORPORATION Supplemental YTD Revenue Summary (Adjusted) USD $ (in thousands) Six Months Ended Change June 30, from 2004 Prior Change 2005 Restated Year % ------------------------------- -------- --------- --------- ------- Product Sales Blood Testing Ortho $ 14,450 $ 12,842 $ 1,608 12.5% NAT 130,535 122,475 8,060 6.6% -------- -------- -------- ------- Total Blood Testing 144,985 135,317 9,668 7.1% Vaccines Influenza Vaccines 3,079 15,912 (12,833) (80.6)% Meningococcus Vaccines 22,758 9,565 13,193 137.9% Travel Vaccines (TBE, Rabies, Arilvax and Dukoral) 88,773 49,271 39,502 80.2% Pediatric/Other Vaccines 69,620 98,801 (29,181) (29.5)% -------- -------- -------- ------- Total Vaccines 184,230 173,549 10,681 6.2% Biopharmaceuticals Proleukin 61,262 66,925 (5,663) (8.5)% TOBI 109,535 103,866 5,669 5.5% Betaseron (b) 64,766 61,762 3,004 4.9% Other 15,960 20,868 (4,908) (23.5)% -------- -------- -------- ------- Total Biopharmaceuticals 251,523 253,421 (1,898) (0.7)% TOTAL PRODUCT SALES, NET $580,738 $562,287 $ 18,451 3.3% ======== ======== ======== ======= Revenues From Joint Business Arrangement $ 67,061 $ 58,893 $ 8,168 13.9% Collaborative Agreement Revenues 7,980 10,343 (2,363) (22.8)% Royalty and License Fees Revenues 156,583 109,988 46,595 42.4% Other Revenues 13,751 17,913 (4,162) (23.2)% -------- -------- -------- ------- TOTAL REVENUES $826,113 $759,424 $ 66,689 8.8% -------- -------- -------- ------- Gross Margins Blood Testing 42% 42% 0% Vaccines 2% 34% (32)% Biopharmaceuticals 70% 75% (5)% -------- -------- -------- TOTAL GROSS MARGINS 41% 54% (13)% -------- -------- -------- ------------------------------- --------- --------- -------- ------- (b) Excludes Betaferon Royalty $ 32,420 $ 25,392 $ 7,028 27.7% ------------------------------- -------- -------- -------- -------

Source: Business Wire

More News in this Category