CHIR Chiron (MM)

Chiron Reports 2003 Third-Quarter Pro-Forma Income of 60 Cents Per Share 47 Percent Increase in Revenues Over 2002 Driven by New U.S. Flu Sales EMERYVILLE, Calif., Oct. 29 /PRNewswire-FirstCall/ -- Chiron Corporation today reported pro-forma income from continuing operations of $117 million, or $0.60 per share, for the third quarter of 2003, compared to $88 million, or $0.46 per share, for the third quarter of 2002. Foreign exchange rates, on a pro-forma basis, resulted in a $0.02 increase in earnings per share. On a GAAP basis, Chiron's loss from continuing operations was $20 million, or $0.11 per share, for the third quarter of 2003, compared to income from continuing operations of $83 million, or $0.43 per share, for the third quarter of 2002. The loss was due to the write-off of in-process research and development in the PowderJect acquisition. 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 relevant to gaining an understanding 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 deliver the solid financial results that are a hallmark of the company," said Howard Pien, Chiron's president and CEO. "Looking forward, we expect 2004 to be a year of strong growth in vaccines and blood testing, enabling investment that will further enhance shareholder value and increase our impact on human health worldwide. "We reaffirm our mid-year 2003 pro-forma EPS guidance to be at the upper end of the $1.40-$1.50 range. Our 2004 guidance is consistent with our 20 percent pro-forma EPS growth goal. It is a testament to the strength of the Chiron business model that we can deliver superior earnings and fund worthy investment opportunities across our three business units." 2004 Guidance Chiron expects 2004 pro-forma earnings per share from continuing operations to be between $1.80 and $1.90. In 2004, Chiron expects product sales to be between $1.5 billion and $1.6 billion, with revenues between $1.9 billion and $2.0 billion. Gross margins are expected to be equivalent or down slightly from 2003, while operating expenses are expected to be up approximately 10 percent over the prior year. The tax rate is expected to be at or slightly higher than the 2003 tax rate. Overall Revenues Total revenues in the third quarter of 2003 were $540 million, an increase of approximately 47 percent from $368 million in the third quarter of 2002. Foreign exchange rates resulted in a 6 percent increase in revenues. Net product sales increased 59 percent in the third quarter of 2003, to $433 million from $272 million in the third quarter of 2002. Total third-quarter 2003 revenues for PowderJect Pharmaceuticals, which Chiron acquired during the third quarter of 2003, were $116 million. Excluding PowderJect revenues and foreign exchange effect, all other revenues increased 10 percent in the third quarter of 2003. BioPharmaceuticals The BioPharmaceuticals division reported net product sales and Betaferon(R) interferon beta-1b royalties of $126 million in the third quarter of 2003, compared to $115 million in the third quarter of 2002. The gross profit margin on biopharmaceutical products sold during the third quarter of 2003 was 74 percent, compared to 77 percent in the third quarter of 2002. -- Proleukin(R) (aldesleukin) interleukin-2 sales were $30 million in the third quarter of 2003, compared to $32 million in the third quarter of 2002, with the decrease primarily due to wholesaler ordering patterns, offset by price increases. -- TOBI(R) tobramycin solution for inhalation sales in the third quarter of 2003 were $43 million, compared to $39 million in the third quarter of 2002, with the increase primarily due to greater product penetration in Europe and price increases in both the United States and Europe, which were partially offset by wholesale ordering patterns. -- Sales of Betaseron(R) interferon beta-1b, marketed in Europe as Betaferon, to Berlex, Inc. (and its parent company Schering AG) for marketing and resale were $29 million in the third quarter of 2003, compared to $28 million in the third quarter of 2002. The increase was due to price increases and increased patient demand, partially offset by wholesaler ordering patterns. Royalties from Schering AG's European sales of Betaferon were $16 million in the third quarter of 2003, compared to $10 million in the third quarter of 2002. Vaccines Vaccines net product sales in the third quarter of 2003 were $263 million, compared to $125 million in the third quarter of 2002. PowderJect product revenues were $114 million in the third quarter of 2003. The gross profit margin on vaccines products in the third quarter of 2003 was 58 percent, compared to 60 percent in the third quarter of 2002. -- Sales of flu vaccines were $183 million in the third quarter of 2003, compared to $67 million in the third quarter of 2002. Sales of Fluvirin(R) vaccine, the flu vaccine that Chiron acquired with PowderJect, were $103 million in the third quarter of 2003, the first quarter in which Chiron recorded Fluvirin revenues. -- Sales of Menjugate(TM) conjugate vaccine against meningococcal C disease were $11 million in the third quarter of 2003, compared to $6 million in the third quarter of 2002, with the increase primarily due to sales made to Australia, Spain and France. -- Sales from Chiron's travel vaccines were $11 million in the third quarter of 2003, compared to $16 million in the third quarter of 2002. Travel vaccines include Encepur(TM) vaccine for tick-borne encephalitis, RabAvert(R) vaccine for rabies, and, newly acquired with PowderJect, Arilvax(TM) vaccine for yellow fever and Dukoral(TM) vaccine for cholera. The decrease is primarily due to the seasonality of tick-borne encephalitis, as the first half of the year is typically the prime season for Encepur. -- Sales of Chiron's pediatric and other vaccines products were $58 million in the third quarter of 2003, compared to $36 million in the third quarter of 2002, with the increase primarily due to tender sales of pediatric vaccines and increased sales following the PowderJect acquisition. Blood Testing Total Blood Testing revenues in the third quarter of 2003 were $109 million, compared to $89 million in the third quarter of 2002. 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. -- Sales related to the Procleix(R) System were $54 million in the third quarter of 2003, compared to sales of $36 million in the third quarter of 2002. The increase is 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 $26 million in the third quarter of 2003, compared to $32 million in the third quarter of 2002, with the decrease primarily due to lower profits from U.S. operations. -- Royalties paid by Roche related to NAT blood screening were $19 million in the third quarter of 2003, compared to $13 million in the third quarter of 2002. Pipeline and Products Update Since mid-year, Chiron has seen advances in franchises across all three of its business units. BioPharmaceuticals: Oncology Chiron's oncology franchise has three dimensions: immune-based therapies, monoclonal antibodies and novel cancer agents. -- Over the past year, Chiron has been conducting four clinical trials to evaluate the potential of Proleukin(R) (aldesleukin) interleukin-2 and its second-generation liquid formulation to increase the clinical benefit of monoclonal antibodies in cancer treatments. -- The Phase II study of Proleukin and rituximab in patients with low-grade non-Hodgkin's lymphoma who have failed rituximab therapy continues to enroll patients and should yield sufficient data to allow a decision on next steps by the end of the year. -- The Phase II trial of Proleukin and rituximab in patients with high-grade lymphoma who have failed prior chemotherapy and/or rituximab therapy will not continue due to limited efficacy. -- The Phase I study of liquid IL-2 with rituximab in patients with advanced non-Hodgkin's lymphoma continues to enroll patients and should yield sufficient data to allow a decision on next steps by the end of the year. -- The Phase I study of liquid IL-2 and trastuzumab in patients with metastatic breast cancer met the primary endpoint of determining maximum tolerated dose and will no longer enroll patients. -- Chiron and its collaborator Sirna are seeking a licensee for the further development of ANGIOZYME(TM), a ribozyme that inhibits vascular endothelial growth factor (VEGF) signaling via inhibition of VEGFR-1 expression. A pilot Phase II program studied ANGIOZYME in breast cancer and colorectal cancer. 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. -- As announced separately today, Chiron plans to initiate a Phase III trial for tifacogin in patients with severe community-acquired pneumonia. This indication would fulfill a substantial unmet medical need. -- Chiron inlicensed the antibiotic daptomycin for injection from Cubist Pharmaceuticals, Inc., gaining development and commercialization for the product in multiple countries outside the United States. The FDA recently approved Cubicin for the treatment of complicated skin and skin structure infections caused by Gram-positive bacteria. -- Chiron is further developing TOBI(R) tobramycin solution for inhalation, used by cystic fibrosis patients with chronic pseudomonal lung infection. The company has completed enrollment and dosing for two cohorts of its Phase I trial for the dry-powder formulation and hand-held device for TOBI, which it is developing in collaboration with Nektar Therapeutics. Chiron anticipates results of this phase of the multiyear program in the first half of next year. BioPharmaceuticals: Betaseron(R) Interferon Beta-1b Betaseron continues to distinguish itself in the multiple sclerosis (MS) market through its strong clinical results. Convenience features and new studies will help drive Betaseron growth. -- The FDA approved a new pre-filled diluent syringe for Betaseron, making it easier to use for people with MS. The drug's formulation remains unchanged, continuing to provide patients with the proven efficacy of Betaseron. -- At the 19th Congress of the European Committee for Treatment and Research in Multiple Sclerosis (ECTRIMS) in Milan, Chiron's partner Schering AG announced the completion of the pilot phase of its BEYOND study, with the first clinical outcomes showing that both the approved Betaferon dose and a new, double-dose of Betaferon were safe and well tolerated in relapsing-remitting MS patients, and no new or unpredictable side effects were reported. Vaccines Chiron Vaccines development is focused on its meningococcal franchise and flu cell culture technology. -- Chiron's newly acquired U.S. flu business is on schedule to deliver Fluvirin(R) flu vaccine to reach millions of patients in the United States. -- In the development of vaccines for the five primary serogroups that cause meningococcal disease, Chiron anticipates upcoming advances: -- The Phase III trial in the United States for Menjugate(TM) conjugate vaccine for meningococcal C disease is on track to complete enrollment this year, and Chiron expects to present data to the FDA in 2004. -- Chiron expects to see results from the Phase II trial for a conjugated meningococcal ACYW vaccine in 2004. -- In collaboration with St. Louis University, Chiron has initiated its Phase I trial for a hepatitis C virus (HCV) vaccine. Blood Testing: Procleix(R) System Chiron expects to expand its leadership in blood testing through new geographies and greater market penetration. -- Since its June introduction to customers in the United States on a cost-recovery basis under an IND, the Procleix(R) West Nile Virus Assay has detected hundreds of confirmed samples of blood infected with West Nile virus, preventing those donations from entering the blood supply. Recent Business Milestones Recent business activities underline the value of Chiron's products and intellectual property and the strength of its leadership. -- At the 17th Annual North American Cystic Fibrosis Conference (NACFC) in Anaheim, California, Chiron announced funding for the establishment of the TOBI Foundation, an independent non-profit foundation dedicated to increasing access to TOBI(R) tobramycin solution for inhalation for uninsured and underinsured people with CF. -- Chiron and Children's Hospital and Regional Medical Center of Seattle have settled a patent infringement suit against Roxane Laboratories, a subsidiary of Boehringer-Ingelheim Corporation, regarding Roxane's plans to market a generic equivalent of TOBI. Roxane agreed that it would not seek approval to market the product until the patent expiration in 2014 and dropped its challenge to the patent. -- The federal Centers for Medicare and Medicaid Services recently implemented a reimbursement change that will increase access to Proleukin(R) (aldesleukin) interleukin-2 therapy for certain patients with metastatic renal cancer and metastatic melanoma. -- Chiron announced that, as of the May 2004 annual meeting of shareholders, president and CEO Howard Pien will become chairman of the board, succeeding current chairman Sean Lance. Mr. Lance intends to retire from active service with Chiron and its board of directors as of the same meeting. -- Chiron further strengthened its BioPharmaceuticals senior management team. Following the appointments last quarter of senior vice presidents of BioPharma research and BioPharma commercial operations, Chiron recently filled the role of senior vice president and head of BioPharma development. -- Chiron granted a nonexclusive license to Gilead Sciences for the research, development and commercialization of small molecule therapeutics against certain hepatitis C virus (HCV) drug targets. 3Q03 Earnings Conference Call Chiron will hold a conference call and webcast on Wednesday, October 29, 2003, at 4:45 p.m. Eastern Standard Time (EST) to review its third-quarter 2003 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 webcast 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 1-800-374-0907 (U.S.) or 706-643-3367 (international). Replay is available approximately two hours after the completion of the call through 11:59 p.m. EST, Friday, November 7, 2003. To access the replay, please call 1-800-642-1687 (U.S.) or 706-645-9291 (international). The conference ID number is 3325860. About Chiron Chiron Corporation, headquartered in Emeryville, California, is a global pharmaceutical company that leverages a diverse business model to develop and commercialize high-value products that make a difference in people's lives. The company has a strategic focus on cancer and infectious disease. Chiron applies its advanced understanding of the biology of cancer and infectious disease to develop products from its platforms in proteins, small molecules and vaccines. The company commercializes its products through three business units: BioPharmaceuticals, Vaccines and Blood Testing. For more information about Chiron, visit the company's website at http://www.chiron.com/. 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-Q for the quarter ended June 30, 2003, and the form 10-K for the year ended December 31, 2002, 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 activity 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 and TOBI are trademarks of Chiron Corporation. Betaseron and Betaferon are trademarks of Schering AG. CHIRON CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (In thousands, except per share data) Three Months Ended September 30, 2003 Pro Forma Pro Forma Adjusted (1) Adjustments Actual Revenues: Product sales, net $432,674 $-- $432,674 Revenues from joint business arrangement 26,058 -- 26,058 Collaborative agreement revenues 7,816 -- 7,816 Royalty and license fee revenues 66,237 -- 66,237 Other revenues 7,688 -- 7,688 Total revenues 540,473 -- 540,473 Operating expenses: Cost of sales 174,380 -- 174,380 Research and development 97,519 -- 97,519 Selling, general and administrative 104,736 -- 104,736 Write-off of purchased in-process research and development -- (122,700) 122,700 Amortization expense -- (19,821) 19,821 Restructuring and reorganization charges 1,082 -- 1,082 Other operating expenses 4,779 -- 4,779 Total operating expenses 382,496 (142,521) 525,017 Income from operations 157,977 142,521 15,456 Interest expense (6,222) -- (6,222) Interest and other income, net 5,239 -- 5,239 Minority interest (443) -- (443) Income from continuing operations before income taxes 156,551 142,521 14,030 Provision for income taxes 39,138 4,955 34,183 Income (loss) from continuing operations 117,413 137,566 (20,153) Gain (loss) from discontinued operations 1,174 -- 1,174 Net income (loss) $118,587 $137,566 $(18,979) Basic earnings (loss) per share: Income (loss) from continuing operations $0.63 $(0.11) Net Income (loss) $0.64 $(0.10) Diluted earnings (loss) per share: Income (loss) from continuing operations $0.60 $(0.11) Net Income (loss) $0.61 $(0.10) Shares used in calculating basic earnings (loss) per share 186,685 186,685 Shares used in calculating diluted earnings (loss) per share 200,463 186,685 Three Months Ended September 30, 2002 Pro Forma Pro Forma Adjusted (2) Adjustments Actual (3) Revenues: Product sales, net $272,190 $-- $272,190 Revenues from joint business arrangement 32,356 -- 32,356 Collaborative agreement revenues 4,977 -- 4,977 Royalty and license fee revenues 48,047 -- 48,047 Other revenues 10,911 -- 10,911 Total revenues 368,481 -- 368,481 Operating expenses: Cost of sales 97,432 -- 97,432 Research and development 81,635 -- 81,635 Selling, general and administrative 68,159 -- 68,159 Write-off of purchased in-process research and development -- -- -- Amortization expense -- (7,504) 7,504 Restructuring and reorganization charges -- -- -- Other operating expenses 5,694 -- 5,694 Total operating expenses 252,920 (7,504) 260,424 Income from operations 115,561 7,504 108,057 Interest expense (3,210) -- (3,210) Interest and other income, net 8,696 -- 8,696 Minority interest (477) -- (477) Income from continuing operations before income taxes 120,570 7,504 113,066 Provision for income taxes 32,554 2,024 30,530 Income (loss) from continuing operations 88,016 5,480 82,536 Gain (loss) from discontinued operations (320) -- (320) Net income (loss) $87,696 $5,480 $82,216 Basic earnings (loss) per share: Income (loss) from continuing operations $0.47 $0.44 Net Income (loss) $0.47 $0.44 Diluted earnings (loss) per share: Income (loss) from continuing operations $0.46 $0.43 Net Income (loss) $0.46 $0.43 Shares used in calculating basic earnings per share 188,493 188,493 Shares used in calculating diluted earnings per share 196,547 196,547 (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 and (b) the write-off of purchased in-process research and development related to the PowderJect Pharmaceuticals acquisition. (2) Pro Forma Adjusted amounts exclude the amortization expense on acquired intangible assets related to the acquisitions of PathoGenesis, Chiron Behring and Pulmopharm. (3) Actual results reflect increased cost of sales of $1.9 million (a reduction of $1.4 million in net income) compared to Chiron's earnings press release dated October 23, 2002, related to the results for the three months ended September 30, 2002. There was a corresponding decrease in inventories of $1.9 million at September 30, 2002. CHIRON CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (In thousands, except per share data) Nine Months Ended September 30, 2003 Pro Forma Pro Forma Adjusted (4) Adjustments Actual Revenues: Product sales, net $897,222 $-- $897,222 Revenues from joint business arrangement 79,985 -- 79,985 Collaborative agreement revenues 15,554 -- 15,554 Royalty and license fee revenues 186,537 -- 186,537 Other revenues 18,069 (14,413) 32,482 Total revenues 1,197,367 (14,413) 1,211,780 Operating expenses: Cost of sales 357,389 -- 357,389 Research and development 269,564 -- 269,564 Selling, general and administrative 257,485 -- 257,485 Write-off of purchased in-process research and development -- (122,700) 122,700 Amortization expense -- (35,135) 35,135 Restructuring and reorganization charges 1,757 -- 1,757 Other operating expenses 7,573 -- 7,573 Total operating expenses 893,768 (157,835) 1,051,603 Income from operations 303,599 143,422 160,177 Interest expense (12,523) -- (12,523) Interest and other income, net 31,170 -- 31,170 Minority interest (1,424) -- (1,424) Income from continuing operations before income taxes 320,822 143,422 177,400 Provision for income taxes 80,206 5,181 75,025 Income from continuing operations 240,616 138,241 102,375 Gain (loss) from discontinued operations 3,138 -- 3,138 Net income $243,754 $138,241 $105,513 Basic earnings per share: Income from continuing operations $1.29 $0.55 Net income $1.31 $0.57 Diluted earnings per share: Income from continuing operations $1.25 $0.54 Net income $1.27 $0.55 Shares used in calculating basic earnings per share 186,658 186,658 Shares used in calculating diluted earnings per share 196,935 190,488 Nine Months Ended September 30, 2002 Pro Forma Pro Forma Adjusted (5) Adjustments Actual (6) Revenues: Product sales, net $657,067 $-- $657,067 Revenues from joint business arrangement 78,548 -- 78,548 Collaborative agreement revenues 17,786 -- 17,786 Royalty and license fee revenues 138,419 -- 138,419 Other revenues 28,136 -- 28,136 Total revenues 919,956 -- 919,956 Operating expenses: Cost of sales 239,823 -- 239,823 Research and development 243,938 -- 243,938 Selling, general and administrative 202,022 -- 202,022 Write-off of purchased in-process research and development -- (54,781) 54,781 Amortization expense -- (22,328) 22,328 Restructuring and reorganization charges -- -- -- Other operating expenses 11,176 -- 11,176 Total operating expenses 696,959 (77,109) 774,068 Income from operations 222,997 77,109 145,888 Interest expense (9,498) -- (9,498) Interest and other income, net 41,456 -- 41,456 Minority interest (1,360) -- (1,360) Income from continuing operations before income taxes 253,595 77,109 176,486 Provision for income taxes 68,471 6,028 62,443 Income from continuing operations 185,124 71,081 114,043 Gain (loss) from discontinued operations (320) -- (320) Net income $184,804 $71,081 $113,723 Basic earnings per share: Income from continuing operations $0.98 $0.60 Net income $0.98 $0.60 Diluted earnings per share: Income from continuing operations $0.96 $0.59 Net income $0.96 $0.59 Shares used in calculating basic earnings per share 189,175 189,175 Shares used in calculating diluted earnings per share 192,565 192,565 (4) Pro Forma Adjusted amounts exclude: (a) amortization expense on acquired intangible assets related to the acquisitions of PathoGenesis, Chiron Behring, Pulmopharm and PowderJect Pharmaceuticals, (b) the Biogen and Serono settlements in connection with the McCormick patents owned by Schering's U.S. subsidiary, Berlex Labratories, and (c) the write-off of purchased in-process research and development related to the PowderJect Pharmaceuticals acquisition. (5) Pro Forma Adjusted amounts exclude: (a) write-off of purchased in- process research and development related to the Matrix acquisition and (b) amortization expense on acquired identifiable intangible assets related to the acquisitions of PathoGenesis, Chiron Behring and Pulmopharm. (6) Actual results reflect increased cost of sales of $1.9 million (a reduction of $1.4 million in net income) compared to Chiron's earnings press release dated October 23, 2002, related to the results for nine months ended September 30, 2002. There was a corresponding decrease in inventories of $1.9 million at September 30, 2002. Note: Due to rounding, quarterly earnings per share amounts may not sum fully to yearly earnings per share amounts. CHIRON CORPORATION CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (In thousands) September 30, December 31, Assets 2003 2002 Current assets: Cash and short-term investments $697,698 $874,080 Accounts receivable, net 427,749 278,625 Current portion of notes receivable 1,469 718 Inventories, net 247,641 146,005 Other current assets 150,041 86,294 Total current assets 1,524,598 1,385,722 Noncurrent investments in marketable debt securities 340,308 414,447 Property, plant, equipment and leasehold improvements, net 642,318 373,558 Other noncurrent assets 1,585,221 786,617 Total assets $4,092,445 $2,960,344 Liabilities and stockholders' equity Current liabilities $477,231 $298,636 Long-term debt 923,725 416,954 Capital lease 157,756 -- Noncurrent unearned revenue 49,696 62,580 Other noncurrent liabilities 217,566 81,809 Minority interest 6,633 5,355 Put options -- 19,054 Stockholders' equity 2,259,838 2,075,956 Total liabilities and stockholders' equity $4,092,445 $2,960,344 CHIRON CORPORATION Supplemental Revenue Summary (Pro Forma) USD $ (in thousands) Current Prior Change Quarter Quarter from Change Q3 2003 Q2 2003 Prior QTR % Product Sales Biopharmaceuticals: Proleukin $29,859 $29,381 $478 1.6% TOBI 43,022 38,984 4,038 10.4% Betaseron* 29,010 30,478 (1,468) (4.8)% Other 8,166 8,424 (258) (3.1)% Total Biopharmaceuticals 110,057 107,267 2,790 2.6% Vaccines Flu Vaccines 183,250 3,783 179,467 4744.0% Meningococcus Vaccines 10,642 13,696 (3,054) (22.3)% Travel Vaccines 11,229 23,052 (11,823) (51.3)% Pediatric/Other Vaccines 57,598 45,026 12,572 27.9% Total Vaccines 262,719 85,557 177,162 207.1% Blood Testing Ortho 6,235 7,123 (888) (12.5)% NAT 53,663 45,981 7,682 16.7% Total Blood Testing 59,898 53,104 6,794 12.8% TOTAL PRODUCT SALES $432,674 $245,928 $186,746 75.9% Revenues from Joint Business Arrangement $26,058 $27,475 $(1,417) (5.2)% Collaborative Agreement Revenues 7,816 3,624 4,192 115.7% Royalty and License Fees 66,237 66,876 (639) (1.0)% Other Revenues 7,688 6,369 1,319 20.7% TOTAL REVENUES $540,473 $350,272 $190,201 54.3% Gross Margins Biopharmaceuticals 74% 71% 3% Vaccines 58% 56% 2% Blood Testing 40% 46% (6)% TOTAL GROSS MARGINS 60% 60% 0% *Excludes Betaferon Royalty $15,970 $17,174 $(1,204) (7.0)% Year Ago Change Quarter from Change Q3 2002 Prior Year % Product Sales Biopharmaceuticals: Proleukin $32,088 $(2,229) (6.9)% TOBI 38,971 4,051 10.4% Betaseron* 28,533 477 1.7% Other 6,127 2,039 33.3% Total Biopharmaceuticals 105,719 4,338 4.1% Vaccines Flu Vaccines 66,907 116,343 173.9% Meningococcus Vaccines 6,193 4,449 71.8% Travel Vaccines 16,621 (5,392) (32.4)% Pediatric/Other Vaccines 35,963 21,635 60.2% Total Vaccines 125,684 137,035 109.0% Blood Testing Ortho 4,826 1,409 29.2% NAT 35,961 17,702 49.2% Total Blood Testing 40,787 19,111 46.9% TOTAL PRODUCT SALES $272,190 $160,484 59.0% Revenues from Joint Business Arrangement $32,356 $(6,298) (19.5)% Collaborative Agreement Revenues 4,977 2,839 57.0% Royalty and License Fees 48,047 18,190 37.9% Other Revenues 10,911 (3,223) (29.5)% TOTAL REVENUES $368,481 $171,992 46.7% Gross Margins Biopharmaceuticals 77% (3)% Vaccines 60% (2)% Blood Testing 40% 0% TOTAL GROSS MARGINS 64% (4)% *Excludes Betaferon Royalty $9,622 $6,348 66.0% 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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