CHIR Chiron (MM)

Chiron Reports 2004 First-Quarter Pro-Forma Results of 22 Cents Per Share 24 Percent Increase in Pro-Forma Revenues Over First Quarter 2003 EMERYVILLE, Calif., April 21 /PRNewswire-FirstCall/ -- Chiron Corporation today reported pro-forma income from continuing operations of $43 million, or $0.22 per share, for the first quarter of 2004, compared to $56 million, or $0.30 per share, for the first quarter of 2003. The decrease in earnings per share for the first quarter of 2004 as compared to the first quarter of 2003 was primarily due to two factors: the seasonal impact of the PowderJect acquisition and the decline in the Betaseron royalty rate. The impact of these factors was an approximate $0.10 decrease in pro-forma and GAAP earnings per share. For the quarter, foreign exchange rates, on a pro- forma basis, resulted in a $0.01 decrease in earnings per share. On a GAAP basis, Chiron reported income from continuing operations of $27 million, or $0.14 per share, for the first quarter of 2004, compared to income from continuing operations of $61 million, or $0.32 per share, for the first quarter of 2003. The PowderJect acquisition had a significant impact on earnings per share for the first quarter of 2004. Revenues of the primary product acquired with PowderJect, Fluvirin(R) influenza vaccine, are heavily seasonal and are recognized primarily in the second half of the year; however, costs associated with PowderJect are incurred throughout the year. Because of this seasonality, Chiron expects that earnings per share for the second half of 2004, as a proportion of earnings per share for the year, will be substantially higher than they were for the second half of 2003. The company expects the range of pro-forma earnings per share in the second half of 2004 to be between 75 percent and 80 percent of total earnings per share for the year. (The company expects the range of GAAP earnings per share in the second half of 2004 to be between 80 percent and 85 percent of total earnings per share for the year.) Chiron management uses pro-forma financial statements to gain an understanding of the company's operating performance on a comparative basis. Pro-forma results exclude special items relating to certain acquisitions and revenues, which may not be indicative of the company's trends or potential future performance. Please refer to the attached tables at the end of this document for more detail on these items and a reconciliation to GAAP financial statements. All references to per-share amounts are per diluted share. "Chiron continues to execute its strategy and investment agenda and deliver solid financial returns," said Howard Pien, Chiron's president and chief executive officer. "We are progressing toward completion of our 20 milestones for growth as outlined at the beginning of the year, with expansion of our Blood Testing business into the Pacific Rim, continued investment in flu vaccine production and development, and development plans in our infectious disease and cancer franchises. "As we build the foundation for future value with these business milestones, we are committed to delivering a strong financial performance. We look forward to an excellent year that, through sound execution, disciplined science and a steadfast commitment to improving human health, will bring value to shareholders and further contribute to the detection, prevention and treatment of diseases worldwide." Overall Revenues Total revenues were $380 million for the first quarter of 2004, compared to $307 million for the first quarter of 2003. Foreign exchange rates resulted in a five percent increase in total revenues. Net product sales were $281 million for the first quarter of 2004, compared to $219 million for the first quarter of 2003. Blood Testing Total Blood Testing revenues were $117 million for the first quarter of 2004, compared to $93 million for the first quarter of 2003. Blood Testing revenues primarily include revenues from the sales of products related to Chiron's Procleix(R) HIV-1/HCV Assay; revenues related to Chiron's joint business arrangement for immunodiagnostics with Ortho-Clinical Diagnostics, Inc. (Ortho), a Johnson & Johnson company; and royalties paid by F. Hoffmann- La Roche (Roche) related to nucleic acid testing (NAT) blood screening. The gross profit margin on blood testing products was 43 percent for the first quarter of 2004, compared to 40 percent for the first quarter of 2003. The increase was primarily due to the amendment, effective January 1, 2004, to the worldwide blood screening collaboration agreement with Gen-Probe Incorporated in order to adopt permanent, fixed revenue shares for each party. -- Sales related to the Procleix(R) System were $62 million for the first quarter of 2004, compared to sales of $42 million for the first quarter of 2003. The increase was primarily due to revenues from the investigation-only use of the Procleix(R) West Nile Virus Assay in the United States, market share gains in the United States and continued penetration into several markets abroad. -- Revenues from Chiron's joint business arrangement with Ortho were $30 million for the first quarter of 2004, compared to $26 million for the first quarter of 2003. The increase was primarily due to increased profitability. -- Royalties paid by Roche related to NAT blood screening were $15 million for the first quarter of 2004, compared to $14 million for the first quarter of 2003. Vaccines Vaccines net product sales were $86 million for the first quarter of 2004, compared to $68 million for the first quarter of 2003. The gross profit margin on vaccines products was 33 percent for the first quarter of 2004, compared to 49 percent for the first quarter of 2003. The decrease was primarily due to the acquisition of PowderJect, as a portion of the facilities acquired was not active in flu vaccine production for a significant part of the first quarter. In addition, the product mix was heavily influenced by the shift of Encepur(TM) vaccine for tick-borne encephalitis sales to the fourth quarter of 2003 from the first quarter of 2004. -- Sales of flu vaccines were $8 million for the first quarter of 2004, compared to $4 million for the first quarter of 2003. The increase was primarily due to additional sales of Fluvirin(R) influenza vaccine, the flu vaccine that Chiron acquired with PowderJect, to the U.S. Centers for Disease Control and Prevention. -- Sales of Menjugate(R) conjugate vaccine against meningococcal C disease were $5 million for the first quarter of 2004, compared to $8 million for the first quarter of 2003, with the decrease primarily due to the timing of outbreaks and vaccination programs in various geographies. -- Sales of Chiron's travel vaccines were $23 million for the first quarter of 2004, compared to $26 million for the first quarter of 2003. Travel vaccines include Encepur(TM) vaccine for tick-borne encephalitis, Arilvax(TM) vaccine for yellow fever, Dukoral(TM) vaccine for cholera, and RabAvert(R) vaccine for rabies. The decrease was primarily due to timing of sales of Encepur, as a portion of sales shifted to the fourth quarter of 2003 from the first quarter of 2004, and was partially offset by sales of Arilvax and Dukoral, which Chiron acquired with PowderJect. -- Sales of Chiron's pediatric and other vaccines products were $50 million for the first quarter of 2004, compared to $30 million for the first quarter of 2003, with the increase primarily due to tender sales of pediatric vaccines, particularly polio vaccines, and increased sales following the PowderJect acquisition. BioPharmaceuticals The BioPharmaceuticals division reported net product sales and Betaferon(R) interferon beta-1b royalties of $140 million for the first quarter of 2004, compared to $116 million for the first quarter of 2003. The gross profit margin on biopharmaceutical products was 76 percent for the first quarter of 2004, compared to 79 percent for the first quarter of 2003. The decrease was primarily due to a combination of a decline in the royalty rate related to the sale of Betaseron that took effect in the fourth quarter of 2003, pursuant to Chiron's agreement with Schering, and increased costs associated with the new pre-filled diluent syringe for Betaseron(R) interferon beta-1b. -- TOBI(R) tobramycin solution for inhalation sales were $53 million for the first quarter of 2004, compared to $41 million for the first quarter of 2003, with the increase primarily due to increased patient demand, price increases, the benefit of foreign exchange rates and wholesaler ordering patterns. -- Proleukin(R) (aldesleukin) interleukin-2 sales were $32 million for the first quarter of 2004, compared to $26 million for the first quarter of 2003, with the increase primarily due to price increases and wholesaler ordering patterns. -- Sales of Betaseron(R) interferon beta-1b for injection, marketed in Europe as Betaferon(R), to Berlex, Inc., (and its parent company Schering AG) for marketing and resale were $30 million for the first quarter of 2004, compared to $29 million for the first quarter of 2003. The sales pattern was essentially level because the contractual decline in the royalty rate related to the sale of Betaseron, pursuant to Chiron's agreement with Schering, and changes in ordering patterns were offset by increased patient demand, price increases, and the benefit of foreign exchange rates. Royalties from Schering AG's European sales of Betaferon were $14 million for the first quarter of 2004, compared to $14 million for the first quarter of 2003. The royalty pattern was essentially level because the decline in Betaferon royalties, pursuant to Chiron's agreement with Schering, was offset by increased patient demand, price increases, and the benefit of foreign exchange rates. Pipeline and Products Update Chiron has seen recent advances in franchises across all three of its business units and expects continued progress throughout 2004. Blood Testing Chiron expects to expand its leadership in blood testing through new assays, new geographies, greater market penetration and expansion into blood safety. -- In February, Chiron announced the initiation of U.S. clinical trials of the Procleix(R) Ultrio(TM) Assay, for the simultaneous detection of HIV-1, hepatitis C virus (HCV) and hepatitis B virus (HBV) in donated blood, plasma, organs and tissue, on the Procleix TIGRIS(R) system, a key enabling technology for individual donor testing. Chiron, in collaboration with its partner Gen-Probe Incorporated, expects to complete the clinical trials for TIGRIS in the second half of 2004 and to file submissions to the U.S. Food and Drug Administration (FDA) for TIGRIS and the Procleix Ultrio Assay later in the year. -- Chiron recently won a contract for the Procleix(R) HIV-1/HCV Assay with a major blood center in Korea, accounting for approximately a third of the nation's annual donations. Vaccines Chiron Vaccines development is focused on its meningococcal franchise and flu cell-culture technology. -- Chiron is on track to initiate a Phase III trial this year for its flu cell-culture vaccine for European registration. The company also recently filed an investigational new drug application (IND) for flu cell-culture in the United States and has begun the dialogue with the FDA on development plans in the United States. -- Chiron recently broke ground for the $100 million expansion of its Liverpool Fluvirin(R) influenza vaccine production facility, which will enable further increases in future production following the record increases experienced last year and additional increases projected for this year. -- Chiron advanced its establishment of commercial operations for vaccines in the United States, appointing a head of the business and positioning it to support strategies for both the flu vaccine and meningococcal vaccines franchises. -- In the development of vaccines for the five primary serogroups that cause meningococcal disease, Chiron recently began clinical trials for its broad-coverage meningococcal B vaccine. BioPharmaceuticals: Infectious Disease Chiron continues to build its portfolio of products to treat and prevent infectious disease. This franchise leverages a significant global commercial infrastructure. -- Chiron is currently meeting with investigators for its Phase III trial for tifacogin in patients with severe community-acquired pneumonia and plans to initiate the trial in May. -- Chiron will meet with the FDA in May to discuss the registration path for cyclosporine solution for inhalation (CSI) as a potential treatment for lung transplant rejection. -- With its partner, Cubist Pharmaceuticals, Chiron soon expects to reach a decision to determine the regulatory path forward for daptomycin in the European Union, in which Chiron has commercial rights. -- Chiron is investing to expand its TOBI franchise in its study of the dry-powder formulation delivered with a hand-held device, which the company is developing in collaboration with Nektar Therapeutics. Chiron now plans to use commercial product and the commercial device in its upcoming Phase III trial, which the company anticipates will delay the start of the trial from the end of 2004 to the beginning of 2005, with minimal anticipated effect on the product launch date. BioPharmaceuticals: Oncology Chiron's oncology franchise has three dimensions: immune-based therapies, monoclonal antibodies and novel cancer agents. -- Chiron announced a collaborative agreement with XOMA Ltd. for the development and commercialization of antibody products for the treatment of cancer. Chiron has successfully identified a number of potential targets and expects the agreement to help generate antibodies against those targets and accelerate their advancement through the development process. -- Chiron is initiating a new Phase II study of Proleukin(R) (aldesleukin) for injection plus rituximab in rituximab-naive patients with low-grade non-Hodgkin's lymphoma to determine the combination's potential in patients receiving rituximab for the first time. -- Chiron has had an abstract accepted for the American Society of Clinical Oncology (ASCO) meeting, to be held June 5-8 in New Orleans, to detail the objective, durable responses found in a specific sub-population of patients in its existing Phase II trial of Proleukin plus rituximab in patients with low-grade non-Hodgkin's lymphoma who have failed rituximab therapy. -- Chiron discontinued further development of tezacitabine, a next-generation nucleoside analog, based on an analysis of the data from a Phase II trial in patients with gastroesophageal cancer. Other Recent Business Milestones Other recent business activities underline the value of Chiron's products and intellectual property and the strength of its leadership. -- Chiron announced the appointment of Rino Rappuoli, Ph.D., to the position of chief scientific officer (CSO). Dr. Rappuoli joined Chiron as head of European vaccines research in 1992 with the acquisition of Italian vaccines company Sclavo SpA, where he served as head of research and development. Dr. Rappuoli is co-founder of the field of cellular microbiology, a discipline combining cell biology and microbiology, and has pioneered the genomic approach to vaccine development termed "reverse vaccinology." -- Chiron was listed at number 769 on the Fortune 1000 list for 2003, up from its debut at number 912 in 2002. 1Q04 Earnings Conference Call Chiron will hold a conference call and webcast on Wednesday, April 21, 2004, at 4:45 p.m. EDT to review its first-quarter 2004 results of operations and business highlights. In addition, the company may address forward-looking questions concerning business, financial matters and trends affecting the company. To access either the live call or the one-week archive, please log on to http://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 800-374-0907 from the United States or Canada or 706-643-3367 from other locations. Replay is available approximately two hours after the completion of the call through 11:55 p.m. EDT, Wednesday, April 28, 2004. 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 6631837. About Chiron Through its global Blood Testing, Vaccines and BioPharmaceuticals businesses, Chiron Corporation addresses human suffering with more than 50 diverse products to detect, prevent and treat disease worldwide. The company's consistent success comes from its pioneering science, skill in delivering innovations in biotechnology and disciplined business approach. Chiron believes that science has the power to improve people's lives and harnesses that power to transform public health. This year, Chiron Vaccines celebrates 100 years of advancing medicine with the anniversary of two founding companies. In 1904, Emil von Behring and Achille Sclavo independently started companies in Germany and Italy, respectively, dedicated to the research, development and manufacture of vaccines to protect humanity from infectious disease. As the fifth-largest vaccine manufacturer in the world, Chiron remains dedicated to the legacies of von Behring and Sclavo to prevent disease and develop new vaccines to improve human health globally. This news release contains forward-looking statements, including statements regarding sales growth, product development initiatives, new product indications, new product marketing, acquisitions, and in- and out-licensing activities, that involve risks and uncertainties and are subject to change. A full discussion of the company's operations and financial condition, including factors that may affect its business and future prospects, is contained in documents the company has filed with the SEC, including the form 10-K for the year ended December 31, 2003, 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 the outcome of clinical trials, regulatory review and approvals, manufacturing capabilities, intellectual property protections and defenses, stock-price and interest-rate volatility, and marketing effectiveness. In particular, there can be no assurance that Chiron will increase sales of existing products, successfully develop and receive approval to market new products, or achieve market acceptance for such new products. There can be no assurance that Chiron's out-licensing activities will generate significant revenue, nor that its in-licensing activities will fully protect it from claims of infringement by third parties. In addition, the company may engage in business opportunities, the successful completion of which are subject to certain risks, including shareholder and regulatory approvals and the integration of operations. Consistent with SEC Regulation FD, we do not undertake an obligation to update the forward-looking information we are giving today. NOTE: Arilvax, Dukoral, Encepur, Fluvirin, Menjugate, Procleix, Proleukin, RabAvert, TOBI and Ultrio are trademarks of Chiron Corporation. Betaseron and Betaferon are trademarks of Schering AG. TIGRIS is a registered trademark of Gen-Probe Incorporated. CHIRON CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (In thousands, except per share data) Three Months Ended March 31, 2004 Pro Forma Pro Forma Adjusted (1) Adjustments Actual Revenues: Product sales, net $281,066 $-- $281,066 Revenues from joint business arrangement 30,361 -- 30,361 Collaborative agreement revenues 6,515 -- 6,515 Royalty and license fee revenues 54,792 -- 54,792 Other revenues 6,938 -- 6,938 Total revenues 379,672 -- 379,672 Operating expenses: Cost of sales 126,701 -- 126,701 Research and development 98,410 -- 98,410 Selling, general and administrative 104,740 -- 104,740 Amortization expense -- (21,332) 21,332 Other operating expenses 2,116 -- 2,116 Total operating expenses 331,967 (21,332) 353,299 Income from operations 47,705 21,332 26,373 Interest expense (5,925) -- (5,925) Interest and other income, net 16,074 -- 16,074 Minority interest (620) -- (620) Income from continuing operations before income taxes 57,234 21,332 35,902 Provision for income taxes 14,309 5,334 8,975 Income from continuing operations 42,925 15,998 26,927 Gain from discontinued operations 12,845 -- 12,845 Net income $55,770 $15,998 $39,772 Basic earnings per share: Income from continuing operations $0.23 $0.14 Net income $0.30 $0.21 Diluted earnings per share: Income from continuing operations $0.22 $0.14 Net income $0.28 $0.21 Shares used in calculating basic earnings per share 187,809 187,809 Shares used in calculating diluted earnings per share 207,816 191,999 2003 Pro Forma Pro Forma Adjusted (2) Adjustments Actual Revenues: Product sales, net $218,620 $-- $218,620 Revenues from joint business arrangement 26,452 -- 26,452 Collaborative agreement revenues 4,114 -- 4,114 Royalty and license fee revenues 53,424 -- 53,424 Other revenues 4,012 (14,413) 18,425 Total revenues 306,622 (14,413) 321,035 Operating expenses: Cost of sales 85,589 -- 85,589 Research and development 82,130 -- 82,130 Selling, general and administrative 73,042 -- 73,042 Amortization expense -- (7,613) 7,613 Other operating expenses 1,691 -- 1,691 Total operating expenses 242,452 (7,613) 250,065 Income from operations 64,170 (6,800) 70,970 Interest expense (3,462) -- (3,462) Interest and other income, net 14,318 -- 14,318 Minority interest (400) -- (400) Income from continuing operations before income taxes 74,626 (6,800) 81,426 Provision for income taxes 18,657 (1,700) 20,357 Income from continuing operations 55,969 (5,100) 61,069 Gain from discontinued operations 1,426 -- 1,426 Net income $57,395 $(5,100) $62,495 Basic earnings per share: Income from continuing operations $0.30 $0.33 Net income $0.31 $0.33 Diluted earnings per share: Income from continuing operations $0.30 $0.32 Net income $0.30 $0.33 Shares used in calculating basic earnings per share 186,649 186,649 Shares used in calculating diluted earnings per share 189,687 189,687 (1) Pro Forma Adjusted amounts exclude the amortization expense on acquired intangible assets related to the acquisitions of PathoGenesis, Chiron Behring, Pulmopharm and PowderJect Pharmaceuticals. (2) Pro Forma Adjusted amounts exclude (a) the amortization expense on acquired intangible assets related to the acquisitions of PathoGenesis, Chiron Behring and Pulmopharm and (b) revenues from the Biogen and Serono settlements in connection with the McCormick patents owned by Schering's U.S. subsidiary, Berlex Laboratories. CHIRON CORPORATION CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (In thousands) March 31, Dec. 31, 2004 2003 Assets Current assets: Cash and short-term investments $550,471 $538,482 Accounts receivable, net 369,508 382,933 Current portion of notes receivable 1,489 1,479 Inventories, net 236,299 199,625 Other current assets 147,721 135,130 Total current assets 1,305,488 1,257,649 Noncurrent investments in marketable debt securities 535,022 560,292 Property, plant, equipment and leasehold improvements, net 707,790 689,750 Other noncurrent assets 1,688,577 1,687,478 Total assets $4,236,877 $4,195,169 Liabilities and stockholders' equity Current liabilities $397,830 $436,913 Long-term debt 929,780 926,709 Capital lease 157,615 157,677 Noncurrent unearned revenue 40,393 45,564 Other noncurrent liabilities 196,631 176,944 Minority interest 7,877 7,002 Stockholders' equity 2,506,751 2,444,360 Total liabilities and stockholders' equity $4,236,877 $4,195,169 CHIRON CORPORATION SUPPLEMENTAL SCHEDULE OF COMPUTATION OF EARNINGS PER SHARE (Unaudited) (In thousands, except per share data) Three Months Ended March 31, 2004 2003 Pro Forma Pro Forma Adjusted Actual Adjusted Actual Computation for earnings per share - continuing operations Income (Numerator): Income from continuing operations $42,925 $26,927 $55,969 $61,069 Plus: Interest on 1.625% convertible debentures, net of taxes 1,570 -- -- -- Interest on Liquid Yield Option Notes, net of taxes 1,760 -- -- -- Income from continuing operations, plus impact from assumed conversions $46,255 $26,927 $55,969 $61,069 Shares (Denominator): Weighted-average common shares outstanding 187,809 187,809 186,649 186,649 Effect of dilutive securities: Stock options and equivalents 4,190 4,190 3,038 3,038 1.625% convertible debentures 7,306 -- -- -- Liquid Yield Option Notes 8,511 -- -- -- Weighted-average common shares outstanding, plus impact from assumed conversions 207,816 191,999 189,687 189,687 Basic earnings per share from continuing operations $0.23 $0.14 $0.30 $0.33 Diluted earnings per share from continuing operations $0.22 $0.14 $0.30 $0.32 Computation for earnings per share - net income Income (Numerator): Net income $55,770 $39,772 $57,395 $62,495 Plus: Interest on 1.625% convertible debentures, net of taxes 1,570 -- -- -- Interest on Liquid Yield Option Notes, net of taxes 1,760 -- -- -- Net income, plus impact from assumed conversions $59,100 $39,772 $57,395 $62,495 Shares (Denominator): Weighted-average common shares outstanding 187,809 187,809 186,649 186,649 Effect of dilutive securities: Stock options and equivalents 4,190 4,190 3,038 3,038 1.625% convertible debentures 7,306 -- -- -- Liquid Yield Option Notes 8,511 -- -- -- Weighted-average common shares outstanding, plus impact from assumed conversions 207,816 191,999 189,687 189,687 Basic earnings per share $0.30 $0.21 $0.31 $0.33 Diluted earnings per share $0.28 $0.21 $0.30 $0.33 CHIRON CORPORATION Supplemental Revenue Summary (Pro Forma) USD $ (in thousands) Current Prior Change Quarter Quarter from Change Q1 2004 Q4 2003 Prior QTR % Product Sales Blood Testing Ortho $6,234 $8,625 $(2,391) (27.7)% NAT 61,886 58,299 3,587 6.2% Total Blood Testing 68,120 66,924 1,196 1.8% Vaccines Flu Vaccines 7,705 141,142 (133,437) (94.5)% Meningococcus Vaccines 4,549 33,672 (29,123) (86.5)% Travel Vaccines (TBE, Rabies, Arilvax and Dukoral) 23,010 27,850 (4,840) (17.4)% Pediatric/Other Vaccines 51,182 58,974 (7,792) (13.2)% Total Vaccines 86,446 261,638 (175,192) (67.0)% Biopharmaceuticals: Proleukin 31,868 29,852 2,016 6.8% TOBI 52,524 49,307 3,217 6.5% Betaseron* 30,136 36,148 (6,012) (16.6)% Other 11,972 4,742 7,230 152.5% Total Biopharmaceuticals 126,500 120,049 6,451 5.4% TOTAL PRODUCT SALES $281,066 $448,611 $(167,545) (37.3)% Revenues From Joint Business Arrangement $30,361 $28,313 $2,048 7.2% Collaborative Agreement Revenues 6,515 3,008 3,507 116.6% Royalty and License Fees 54,792 63,605 (8,813) (13.9)% Other Revenues 6,938 11,044 (4,106) (37.2)% TOTAL REVENUES $379,672 $554,581 $(174,909) (31.5)% Gross Margins Blood Testing 43% 38% 5% Vaccines 33% 49% (16)% Biopharmaceuticals 76% 66% 10% TOTAL GROSS MARGINS 55% 52% 3% * Excludes Betaferon Royalty $13,807 $16,658 $(2,851) (17.1)% Year Ago Change Quarter from Change Q1 2003 Prior Year % Product Sales Blood Testing Ortho $6,408 $(174) (2.7)% NAT 42,123 19,763 46.9% Total Blood Testing 48,531 19,589 40.4% Vaccines Flu Vaccines 4,253 3,452 81.2% Meningococcus Vaccines 7,538 (2,989) (39.7)% Travel Vaccines (TBE, Rabies, Arilvax and Dukoral) 25,700 (2,690) (10.5)% Pediatric/Other Vaccines 30,913 20,269 65.6% Total Vaccines 68,404 18,042 26.4% Biopharmaceuticals: Proleukin 25,983 5,885 22.6% TOBI 40,734 11,790 28.9% Betaseron* 29,300 836 2.9% Other 5,668 6,304 111.2% Total Biopharmaceuticals 101,685 24,815 24.4% TOTAL PRODUCT SALES $218,620 $62,446 28.6% Revenues From Joint Business Arrangement $26,452 $3,909 14.8% Collaborative Agreement Revenues 4,114 2,401 58.4% Royalty and License Fees 53,424 1,368 2.6% Other Revenues 4,012 2,926 72.9% TOTAL REVENUES $306,622 $73,050 23.8% Gross Margins Blood Testing 40% 3% Vaccines 49% (16)% Biopharmaceuticals 79% (3)% TOTAL GROSS MARGINS 61% (6)% * Excludes Betaferon Royalty $13,966 $(159) (1.1)% DATASOURCE: Chiron Corporation CONTACT: Chiron Corporate Communications & Investor Relations, Media, +1-510-923-6500, or Investors, +1-510-923-2300 Web site: http://www.chiron.com/

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