Chiron Revises Full-Year 2004 Pro-Forma Earnings From 70 Cents to 67 C

Chiron Revises Full-Year 2004 Pro-Forma Earnings From 70 Cents to 67 Cents Per Share, GAAP Earnings From 32 Cents to 28 Cents Per Share

    Business Editors/Health/Medical Writers
    BIOWIRE2K

    EMERYVILLE, Calif.--(BUSINESS WIRE)--March 8, 2005--

Chiron Will Restate Second-Quarter and Third-Quarter 2004 Financial Statements
    Chiron Corporation (Nasdaq:CHIR) today announced that it has revised its fourth-quarter and year-end December 31, 2004, financial results, previously released on January 26, 2005. The company also announced that it will restate its second-quarter and third-quarter 2004 financial statements in connection with a revenue recognition adjustment for certain travel vaccine sales. Specifically, the company has determined that certain sales of the 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. The revisions and restatements, which include adjustments to revenues and expenses, and reclassifications of certain balance sheet accounts, were identified during the company's ongoing year-end financial statement review and Section 404 Sarbanes-Oxley review.
    Chiron also today announced that it has identified three material weaknesses in internal controls over financial reporting as of December 31, 2004, one related to the revenue recognition for certain travel vaccine sales described above, one related to booking of entries to tax accounts, including computational errors, and one related to the reporting of legal expense accruals. Chiron will report on its final assessment of its internal controls over financial reporting in its Annual Report on Form 10-K for the year ended December 31, 2004. Chiron's year-end financial statement review and Section 404 Sarbanes-Oxley review are continuing, and there can be no assurance that the company and its external auditors will not identify further material weaknesses. In addition, there can be no assurance that the company will not identify further adjustments to its previously announced financial information.

    Year-End December 31, 2004, Financial Results

    For the year ended December 31, 2004, Chiron reported revised pro-forma income from continuing operations of $127 million, or $0.67 per share, a decrease of $0.03 per share from financial results as reported on January 26, 2005. On a GAAP basis, Chiron reported revised income from continuing operations of $54 million, or $0.28 per share, a decrease of $0.04 per share from financial results as reported on January 26, 2005.
    Revised revenues for 2004 reflect a decrease of $2.5 million from financial results as reported on January 26, 2005 but remain at $1.7 billion after rounding. Chiron has also identified an additional $5 million in expenses incurred in the year ended December 31, 2004 and not included in the results of operations previously announced on January 26, 2005.

    Fourth-Quarter 2004 Financial Results

    For the fourth quarter of 2004, Chiron reported a revised pro-forma loss from continuing operations of $7 million, or a loss of $0.04 per share, consistent with the loss of $0.04 per share reported on January 26, 2005. On a GAAP basis, Chiron reported a revised loss from continuing operations of $23 million, or a loss of $0.12 per share, consistent with the loss of $0.12 per share reported on January 26, 2005.
    Chiron reported revised revenues for the fourth quarter of 2004 of $434 million, an increase of $6 million from financial results as reported on January 26, 2005. Chiron has also identified an additional $6 million in expenses incurred in the fourth quarter of 2004 and not included in the results of operations previously announced on January 26, 2005.

    Second-Quarter and Third-Quarter 2004 Financial Results; Unavailability of Registration Statements

    Chiron will restate the financial statements included in its Quarterly Reports on Form 10-Q for each of the second quarter of 2004 and third quarter of 2004. Chiron's previously issued financial statements included in those reports should no longer be relied upon. In addition, the availability of Chiron's registration statements relating to its 1 5/8% convertible debentures due 2033 and 2 3/4% convertible debentures due 2034 is suspended until such time as Chiron provides the holders with notice that such registration statements are again available.
    Chiron management uses pro-forma financial statements to gain an understanding of the company's operating performance on a comparative basis. Pro-forma amounts exclude certain revenue items and 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 document for more detail on these items and a reconciliation of the pro-forma information to GAAP financial statements. All references to per-share amounts are per diluted share.
    For revised financial results for the year ended December 31, 2004, and for the fourth quarter of 2004, please refer to the tables at the end of this document or visit our website at www.chiron.com. Chiron intends to file amendments to its Quarterly Reports on Form 10-Q for the quarters ended June 30, 2004 and September 30, 2004, to include the restated financial statements mentioned above.

    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, please visit www.chiron.com.

    -- Revised Unaudited Condensed Consolidated Balance Sheets and Statements of Operations and Pro-forma-to-GAAP Reconciliation, Revised Revenue Summary Sheets, Revised Earnings Per Share Table, and Revised Non-FLUVIRIN(R) Influenza Virus Vaccine-Related Reconciliation follow --

CHIRON CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (REVISED) (Unaudited) (In thousands, except per share data)

Three Months Ended December 31, -------------------------------------- 2004 -------------------------------------- Pro Forma Pro Forma Adjusted(1) Adjustments Actual ------------ ------------ ------------

Revenues: Product sales, net $330,467 $- $330,467 Revenues from joint business arrangement 25,336 - 25,336 Collaborative agreement revenues 3,577 - 3,577 Royalty and license fee revenues 68,177 - 68,177 Other revenues 6,838 - 6,838 ------------ ------------ ------------

Total revenues 434,395 - 434,395 ------------ ------------ ------------

Operating expenses: Cost of sales 175,212 - 175,212 Research and development 129,392 - 129,392 Selling, general and administrative 139,651 - 139,651 Purchased in-process research and development - - - Amortization expense - (21,426) 21,426 Other operating expenses 4,804 - 4,804 ------------ ------------ ------------

Total operating expenses 449,059 (21,426) 470,485 ------------ ------------ ------------

(Loss) income from operations (14,664) 21,426 (36,090)

Loss on disposal of assets (2,092) - (2,092) Interest expense (6,653) - (6,653) Interest and other income, net 14,390 - 14,390 Minority interest (385) - (385) ------------ ------------ ------------

(Loss) income from continuing operations before income taxes (9,404) 21,426 (30,830) Provision for (benefit of) income taxes (2,351) 5,356 (7,707) ------------ ------------ ------------

(Loss) income from continuing operations (7,053) 16,070 (23,123) ============ ============ ============

Gain from discontinued operations - - - ------------ ------------ ------------

Net (loss) income $(7,053) $16,070 $(23,123) ============ ============ ============

Basic (loss) earnings per share: (Loss) income from continuing operations $(0.04) $(0.12) ============ ============ Net (loss) income $(0.04) $(0.12) ============ ============

Diluted (loss) earnings per share: (Loss) income from continuing operations $(0.04) $(0.12) ============ ============ Net (loss) income $(0.04) $(0.12) ============ ============

Shares used in calculating basic (loss) earnings per share 186,813 186,813 ============ ============

Shares used in calculating diluted (loss) earnings per share 186,813 186,813 ============ ============

Three Months Ended December 31, -------------------------------------- 2003 -------------------------------------- Pro Forma Pro Forma Adjusted(2) Adjustments Actual ------------ ------------ ------------

Revenues: Product sales, net $448,611 $- $448,611 Revenues from joint business arrangement 28,313 - 28,313 Collaborative agreement revenues 3,008 - 3,008 Royalty and license fee revenues 63,605 - 63,605 Other revenues 11,044 - 11,044 ------------ ------------ ------------

Total revenues 554,581 - 554,581 ------------ ------------ ------------

Operating expenses: Cost of sales 214,508 - 214,508 Research and development 140,242 - 140,242 Selling, general and administrative 121,302 - 121,302 Purchased in-process research and development - 77,400 (77,400) Amortization expense - (21,230) 21,230 Other operating expenses 3,803 - 3,803 ------------ ------------ ------------

Total operating expenses 479,855 56,170 423,685 ------------ ------------ ------------

(Loss) income from operations 74,726 (56,170) 130,896

Loss on disposal of assets (25) - (25) Interest expense (6,581) - (6,581) Interest and other income, net 7,523 - 7,523 Minority interest (329) - (329) ------------ ------------ ------------

(Loss) income from continuing operations before income taxes 75,314 (56,170) 131,484 Provision for (benefit of) income taxes 18,828 5,307 13,521 ------------ ------------ ------------

(Loss) income from continuing operations 56,486 (61,477) 117,963 ============ ============ ============

Gain from discontinued operations 3,837 - 3,837 ------------ ------------ ------------

Net (loss) income $60,323 $(61,477) $121,800 ============ ============ ============

Basic (loss) earnings per share: (Loss) income from continuing operations $0.30 $0.63 ============ ============ Net (loss) income $0.32 $0.65 ============ ============

Diluted (loss) earnings per share: (Loss) income from continuing operations $0.29 $0.59 ============ ============ Net (loss) income $0.31 $0.61 ============ ============

Shares used in calculating basic (loss) earnings per share 187,393 187,393 ============ ============

Shares used in calculating diluted (loss) earnings per share 200,567 205,795 ============ ============

Year to Date December 31, -------------------------------------- 2004 -------------------------------------- Pro Forma Pro Forma Adjusted(3) Adjustments Actual ------------ ------------ ------------

Revenues: Product sales, net $1,268,303 $- $1,268,303 Revenues from joint business arrangement 118,246 - 118,246 Collaborative agreement revenues 18,044 - 18,044 Royalty and license fee revenues 289,561 - 289,561 Other revenues 29,201 - 29,201 ------------ ------------ ------------

Total revenues 1,723,355 - 1,723,355 ------------ ------------ ------------

Operating expenses: Cost of sales 669,667 - 669,667 Research and development 431,128 - 431,128 Selling, general and administrative 465,779 - 465,779 Purchased in-process research and development - (9,629) 9,629 Amortization expense - (84,503) 84,503 Other operating expenses 12,844 - 12,844 ------------ ------------ ------------

Total operating expenses 1,579,418 (94,132) 1,673,550 ------------ ------------ ------------

Income from operations 143,937 94,132 49,805

Loss on disposal of assets (3,247) - (3,247) Interest expense (26,093) - (26,093) Interest and other income, net 56,797 - 56,797 Minority interest (1,968) - (1,968) ------------ ------------ ------------

Income from continuing operations before income taxes 169,426 94,132 75,294 Provision for income taxes 42,357 21,126 21,231 ------------ ------------ ------------

Income from continuing operations 127,069 73,006 54,063 ============ ============ ============

Gain from discontinued operations 24,854 - 24,854 ------------ ------------ ------------

Net income $151,923 $73,006 $78,917 ============ ============ ============

Basic earnings per share: Income from continuing operations $0.68 $0.29 ============ ============ Net income $0.81 $0.42 ============ ============

Diluted earnings per share: Income from continuing operations $0.67 $0.28 ============ ============ Net income $0.80 $0.41 ============ ============

Shares used in calculating basic earnings per share 187,545 187,545 ============ ============

Shares used in calculating diluted earnings per share 190,202 190,202 ============ ============

Year to Date December 31, -------------------------------------- 2003 -------------------------------------- Pro Forma Pro Forma Adjusted(4) Adjustments Actual ------------ ------------ ------------

Revenues: Product sales, net $1,345,833 $- $1,345,833 Revenues from joint business arrangement 108,298 - 108,298 Collaborative agreement revenues 18,562 - 18,562 Royalty and license fee revenues 250,142 - 250,142 Other revenues 29,113 (14,413) 43,526 ------------ ------------ ------------

Total revenues 1,751,948 (14,413) 1,766,361 ------------ ------------ ------------

Operating expenses: Cost of sales 571,897 - 571,897 Research and development 409,806 - 409,806 Selling, general and administrative 380,388 - 380,388 Purchased in-process research and development - (45,300) 45,300 Amortization expense - (56,365) 56,365 Other operating expenses 11,532 - 11,532 ------------ ------------ ------------

Total operating expenses 1,373,623 (101,665) 1,475,288 ------------ ------------ ------------

Income from operations 378,325 87,252 291,073

Loss on disposal of assets (224) - (224) Interest expense (19,104) - (19,104) Interest and other income, net 38,892 - 38,892 Minority interest (1,753) - (1,753) ------------ ------------ ------------

Income from continuing operations before income taxes 396,136 87,252 308,884 Provision for income taxes 99,034 10,488 88,546 ------------ ------------ ------------

Income from continuing operations 297,102 76,764 220,338 ============ ============ ============

Gain from discontinued operations 6,975 - 6,975 ------------ ------------ ------------

Net income $304,077 $76,764 $227,313 ============ ============ ============

Basic earnings per share: Income from continuing operations $1.59 $1.18 ============ ============ Net income $1.63 $1.22 ============ ============

Diluted earnings per share: Income from continuing operations $1.54 $1.15 ============ ============ Net income $1.58 $1.19 ============ ============

Shares used in calculating basic earnings per share 186,835 186,835 ============ ============

Shares used in calculating diluted earnings per share 199,143 193,915 ============ ============

(1) Pro Forma Adjusted amounts exclude (a) 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, Pulmopharm and PowderJect Pharmaceuticals and (b) purchased in-process research and development related to the PowderJect Pharmaceuticals acquisition. Note that in Q4'03, there was a purchase price allocation adjustment to the purchased in-process research and development related to the PowderJect Pharmaceuticals acquisition, upon completion of strategic assessments of the value of certain research and development projects. The adjustment reduced purchased in-process research and development by $77.4 million.

(3) Pro Forma Adjusted amounts exclude (a) the amortization expense on acquired intangible assets related to the acquisitions of PathoGenesis, Chiron Behring, Pulmopharm and PowderJect Pharmaceuticals and (b) the purchased in-process research and development related to the Sagres acquisition.

(4) Pro Forma Adjusted amounts exclude: (a) the Biogen and Serono settlements in connection with the McCormick patents owned by Schering's U.S. subsidiary, Berlex Laboratories, (b) purchased in-process research and development related to the PowderJect Pharmaceuticals acquisition and (c) the amortization expense on acquired intangible assets related to the acquisitions of PathoGenesis, Chiron Behring, Pulmopharm and PowderJect Pharmaceuticals.

Note: Due to rounding, quarterly earnings (loss) per share amounts may not sum fully to yearly earnings per share amounts.

CHIRON CORPORATION CONDENSED CONSOLIDATED BALANCE SHEETS (REVISED) (Unaudited) (In thousands)

December 31, December 31, 2004 2003 ------------- ------------- Assets Current assets: Cash and short-term investments $603,621 $538,482 Accounts receivable, net 392,788 382,933 Current portion of notes receivable - 1,479 Inventories, net 221,154 199,625 Other current assets 167,154 135,130 ------------- ------------- Total current assets 1,384,717 1,257,649 Noncurrent investments in marketable debt securities 409,421 560,292 Property, plant, equipment and leasehold improvements, net 799,415 689,750 Other noncurrent assets 1,702,644 1,687,478 ------------- ------------- Total assets $4,296,197 $4,195,169 ============= =============

Liabilities and stockholders' equity Current liabilities $425,138 $436,913 Long-term debt 936,652 926,709 Capital lease 156,952 157,677 Noncurrent unearned revenue 26,175 45,564 Other noncurrent liabilities 140,226 176,944 Minority interest 9,350 7,002 Stockholders' equity 2,601,704 2,444,360 ------------- ------------- Total liabilities and stockholders' equity $4,296,197 $4,195,169 ============= =============

CHIRON CORPORATION SUPPLEMENTAL SCHEDULE OF COMPUTATION OF EARNINGS (LOSS) PER SHARE (REVISED) (Unaudited) (In thousands, except per share data)

Three Months Ended December 31, 2004 2003 ------------------- ------------------- Pro Forma Pro Forma Adjusted Actual Adjusted Actual ------------------- -------------------

Computation for earnings (loss) per share - continuing operations Income (loss) (Numerator): Income (loss) from continuing operations $(7,053) $(23,123) $56,486 $117,963 Plus: Interest on 1.625% convertible debentures, net of taxes - - 1,574 1,574 Plus: Interest on Liquid Yield Option Notes, net of taxes - - - 1,767 --------- --------- --------- --------- Income (loss) from continuing operations, plus impact from assumed conversions $(7,053) $(23,123) $58,060 $121,304 =======================================

Shares (Denominator): Weighted-average common shares outstanding 186,813 186,813 187,393 187,393 Effect of dilutive securities: Stock options and equivalents - - 5,868 5,868 1.625% convertible debentures - - 7,306 7,306 Liquid Yield Option Notes - - - 5,228 --------- --------- --------- --------- Weighted-average common shares outstanding, plus impact from assumed conversions 186,813 186,813 200,567 205,795 =======================================

Basic earnings (loss) per share from continuing operations $(0.04) $(0.12) $0.30 $0.63 ========= ========= ========= ========= Diluted earnings (loss) per share from continuing operations $(0.04) $(0.12) $0.29 $0.59 ========= ========= ========= =========

Computation for earnings (loss) per share - net income (loss) Income (loss) (Numerator): Net income (loss) $(7,053) $(23,123) $60,323 $121,800 Plus: Interest on 1.625% convertible debentures, net of taxes - - 1,574 1,574 Plus: Interest on Liquid Yield Option Notes, net of taxes - - - 1,767 --------- --------- --------- --------- Net income (loss), plus impact from assumed conversions $(7,053) $(23,123) $61,897 $125,141 =======================================

Shares (Denominator): Weighted-average common shares outstanding 186,813 186,813 187,393 187,393 Effect of dilutive securities: Stock options and equivalents - - 5,868 5,868 1.625% convertible debentures - - 7,306 7,306 Liquid Yield Option Notes - - - 5,228 --------- --------- --------- --------- Weighted-average common shares outstanding, plus impact from assumed conversions 186,813 186,813 200,567 205,795 =======================================

Basic earnings (loss) per share $(0.04) $(0.12) $0.32 $0.65 ========= ========= ========= ========= Diluted earnings (loss) per share $(0.04) $(0.12) $0.31 $0.61 ========= ========= ========= =========

CHIRON CORPORATION SUPPLEMENTAL SCHEDULE OF COMPUTATION OF EARNINGS PER SHARE (REVISED) (Unaudited) (In thousands, except per share data)

Year to Date December 31, 2004 2003 ------------------ ------------------- Pro Forma Pro Forma Adjusted Actual Adjusted Actual ------------------ -------------------

Computation for earnings per share - continuing operations Income (Numerator): Income from continuing operations $127,069 $54,063 $297,102 $220,338 Plus: Interest on 1.625% convertible debentures, net of taxes - - 2,638 2,638 Plus: Interest on Liquid Yield Option Notes, net of taxes - - 7,027 - --------- -------- --------- --------- Income from continuing operations, plus impact from assumed conversions $127,069 $54,063 $306,767 $222,976 ======================================

Shares (Denominator): Weighted-average common shares outstanding 187,545 187,545 186,835 186,835 Effect of dilutive securities: Stock options and equivalents 2,657 2,657 4,339 4,339 1.625% convertible debentures - - 2,740 2,740 Liquid Yield Option Notes - - 5,228 - Put options - - 1 1 --------- -------- --------- --------- Weighted-average common shares outstanding, plus impact from assumed conversions 190,202 190,202 199,143 193,915 ======================================

Basic earnings per share from continuing operations $0.68 $0.29 $1.59 $1.18 ========= ======== ========= ========= Diluted earnings per share from continuing operations $0.67 $0.28 $1.54 $1.15 ========= ======== ========= =========

Computation for earnings per share - net income Income (Numerator): Net income $151,923 $78,917 $304,077 $227,313 Plus: Interest on 1.625% convertible debentures, net of taxes - - 2,638 2,638 Plus: Interest on Liquid Yield Option Notes, net of taxes - - 7,027 - --------- -------- --------- --------- Net income $151,923 $78,917 $313,742 $229,951 ======================================

Shares (Denominator): Weighted-average common shares outstanding 187,545 187,545 186,835 186,835 Effect of dilutive securities: Stock options and equivalents 2,657 2,657 4,339 4,339 1.625% convertible debentures - - 2,740 2,740 Liquid Yield Option Notes - - 5,228 - Put options - - 1 1 --------- -------- --------- --------- Weighted-average common shares outstanding, plus impact from assumed conversions 190,202 190,202 199,143 193,915 ======================================

Basic earnings per share $0.81 $0.42 $1.63 $1.22 ========= ======== ========= ========= Diluted earnings per share $0.80 $0.41 $1.58 $1.19 ========= ======== ========= =========

CHIRON CORPORATION Supplemental Revenue Summary (Pro Forma) (Revised) USD $ (in thousands)

---------------------------------------------------------------------- Current Prior Change Quarter Quarter from Change Q4 2004 Q3 2004 Prior QTR % ---------------------------------------------------------------------- Product Sales Blood Testing Ortho $7,904 $7,098 $806 11.4% NAT 63,705 63,629 76 0.1% ------------------------------------- Total Blood Testing 71,609 70,727 882 1.2%

Vaccines Flu Vaccines 44,015 93,486 (49,471) (52.9)% Meningococcus Vaccines 9,309 8,865 444 5.0% Travel Vaccines (TBE, Rabies, Arilvax and Dukoral) 21,159 26,434 (5,275) (20.0)% Pediatric/Other Vaccines 57,656 44,491 13,165 29.6% ------------------------------------- Total Vaccines 132,139 173,276 (41,137) (23.7)%

Biopharmaceuticals: Proleukin 30,713 31,739 (1,026) (3.2)% TOBI 53,276 55,734 (2,458) (4.4)% Betaseron(a) 33,639 35,171 (1,532) (4.4)% Other 9,091 8,902 189 2.1% ------------------------------------- Total Biopharmaceuticals 126,719 131,546 (4,827) (3.7)%

TOTAL PRODUCT SALES $330,467 $375,549 $(45,082) (12.0)% =====================================

Revenues From Joint Business Arrangement $25,336 $34,017 $(8,681) (25.5)% Collaborative Agreement Revenues 3,577 4,124 (547) (13.3)% Royalty and License Fees 68,177 111,396 (43,219) (38.8)% Other Revenues 6,838 4,450 2,388 53.7% ------------------------------------- TOTAL REVENUES $434,395 $529,536 $(95,141) (18.0)% -------------------------------------

Gross Margins Blood Testing 40% 43% (3)% Vaccines 29% 11% 18% Biopharmaceuticals 70% 67% 3% ------------------------------------- TOTAL GROSS MARGINS 47% 36% 11% -------------------------------------

---------------------------------------------------------------------- (a) Excludes Betaferon Royalty $12,798 $13,374 $(576) (4.3)% ----------------------------------------------------------------------

---------------------------------------------------------------------- Year Ago Change Quarter from Change Q4 2003 Prior Year % ---------------------------------------------------------------------- Product Sales Blood Testing Ortho $8,625 $(721) (8.4)% NAT 58,299 5,406 9.3% ------------------------------------- Total Blood Testing 66,924 4,685 7.0%

Vaccines Flu Vaccines 141,142 (97,127) (68.8)% Meningococcus Vaccines 33,672 (24,363) (72.4)% Travel Vaccines (TBE, Rabies, Arilvax and Dukoral) 27,850 (6,691) (24.0)% Pediatric/Other Vaccines 58,974 (1,318) (2.2)% ------------------------------------- Total Vaccines 261,638 (129,499) (49.5)%

Biopharmaceuticals: Proleukin 29,852 861 2.9% TOBI 49,307 3,969 8.0% Betaseron(a) 36,148 (2,509) (6.9)% Other 4,742 4,349 91.7% ------------------------------------- Total Biopharmaceuticals 120,049 6,670 5.6%

TOTAL PRODUCT SALES $448,611 $(118,144) (26.3)% =====================================

Revenues From Joint Business Arrangement $28,313 $(2,977) (10.5)% Collaborative Agreement Revenues 3,008 569 18.9% Royalty and License Fees 63,605 4,572 7.2% Other Revenues 11,044 (4,206) (38.1)% ------------------------------------- TOTAL REVENUES $554,581 $(120,186) (21.7)% -------------------------------------

Gross Margins Blood Testing 38% 2% Vaccines 49% (20)% Biopharmaceuticals 66% 4% ------------------------------------- TOTAL GROSS MARGINS 52% (5)% -------------------------------------

---------------------------------------------------------------------- (a) Excludes Betaferon Royalty $16,658 $(3,860) (23.2)% ----------------------------------------------------------------------

CHIRON CORPORATION Supplemental YTD Revenue Summary (Pro Forma) (Revised) USD $ (in thousands)

---------------------------------------------------------------------- Twelve Months Ended December 31, Change from Change 2004 2003 Prior Year % ---------------------------------------------------------------------- Product Sales Blood Testing Ortho $27,844 $28,391 $(547) (1.9)% NAT 249,809 200,066 49,743 24.9% ------------------------------------------- Total Blood Testing 277,653 228,457 49,196 21.5%

Vaccines Flu Vaccines 153,413 332,428 (179,015) (53.9)% Meningococcus Vaccines 27,739 65,548 (37,809) (57.7)% Travel Vaccines (TBE, Rabies, Arilvax and Dukoral) 96,864 87,831 9,033 10.3% Pediatric/Other Vaccines 200,948 192,511 8,437 4.4% ------------------------------------------- Total Vaccines 478,964 678,318 (199,354) (29.4)%

Biopharmaceuticals: Proleukin 129,377 115,075 14,302 12.4% TOBI 212,876 172,047 40,829 23.7% Betaseron(a) 130,572 124,936 5,636 4.5% Other 38,861 27,000 11,861 43.9% ------------------------------------------- Total Biopharmaceuticals 511,686 439,058 72,628 16.5%

TOTAL PRODUCT SALES $1,268,303 $1,345,833 $(77,530) (5.8)% ===========================================

Revenues From Joint Business Arrangement $118,246 $108,298 $9,948 9.2% Collaborative Agreement Revenues 18,044 18,562 (518) (2.8)% Royalty and License Fees 289,561 250,142 39,419 15.8% Other Revenues 29,201 29,113 88 0.3% ------------------------------------------- TOTAL REVENUES $1,723,355 $1,751,948 $(28,593) (1.6)% -------------------------------------------

Gross Margins Blood Testing 42% 41% 1% Vaccines 24% 53% (29)% Biopharmaceuticals 72% 72% 0% ------------------------------------------- TOTAL GROSS MARGINS 47% 58% (11)% -------------------------------------------

---------------------------------------------------------------------- (a) Excludes Betaferon Royalty $51,564 $63,768 $(12,204) (19.1)% ----------------------------------------------------------------------

CHIRON CORPORATION Non-FLUVIRIN(R) Influenza Virus Vaccine-Related Reconciliation for 2004 press release (Revised) USD $ (in thousands, except percentages)

---------------------------------------------------------------------- Current Year Change Year Ago from Change 2004 2003 Prior Year % ----------------------------------------------------------------------

TOTAL PRODUCT SALES $1,268,303 $1,345,833 $(77,530) (6)% Fluvirin vaccine sales 2,255 219,240 (216,985) (99)% ----------------------------------------- TOTAL PRODUCT SALES, Excluding Fluvirin vaccine sales $1,266,048 $1,126,593 $139,455 12% =========================================

TOTAL VACCINES PRODUCT SALES $478,964 $678,318 $(199,354) (29)% Fluvirin vaccine sales 2,255 219,240 (216,985) (99)% ----------------------------------------- TOTAL VACCINES PRODUCT SALES, Excluding Fluvirin vaccine sales $476,709 $459,078 $17,631 4% =========================================

FLU VACCINES PRODUCT SALES $153,413 $332,428 $(179,015) (54)% Fluvirin vaccine sales 2,255 219,240 (216,985) (99)% ----------------------------------------- FLU VACCINES PRODUCT SALES, Excluding Fluvirin vaccine sales $151,158 $113,188 $37,970 34% =========================================

Vaccines Gross Margin Vaccines product sales $478,964 Cost of sales 363,243 ----------- Gross Margin $115,721 =========== Gross Margin % 24%

Vaccines Gross Margin, excluding Fluvirin charge of $91,300 and remediation costs of $2,600 Vaccines product sales $478,964 Cost of sales, excluding Fluvirin charge of $91,300 and remediation costs of $2,600 269,343 ----------- Gross Margin $209,621 =========== Gross Margin % 44% ----------------------------------------------------------------------

--30--MC/sf*

CONTACT: Chiron Corporate Communications & Investor Relations Media, 510-923-6500 Investors, 510-923-2300

KEYWORD: CALIFORNIA INDUSTRY KEYWORD: PHARMACEUTICAL MEDICAL BIOTECHNOLOGY EARNINGS SOURCE: Chiron Corporation

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