Chiron reports second quarter 1995 results.

EMERYVILLE, Calif.--(BUSINESS WIRE)--Aug. 8, 1995--Chiron Corp. (NASDAQ:CHIR) today reported that for the three months ended June 30, 1995, the company had net income of $830,000 or two cents per share on revenues of $281,752,000 versus net income of $5,110,000 or 15 cents per share on revenues of $100,111,000 for the same period a year earlier. For the six months ended June 30, 1995, Chiron had a net loss of $384,949,000 or $9.60 per share on revenues of $499,997,000 versus net income of $9,927,000 or 29 cents per share on revenues of $191,492,000 for the same period a year earlier.

Quarterly and year-to-date revenues increased substantially compared to last year following the purchase of Ciba Corning Diagnostics Corp. and interest in The Biocine Co. and Biocine S.p.A. from Ciba-Geigy Ltd. as part of a partnership transaction completed Jan. 4, 1995. Each of these businesses as well as Chiron's historical diagnostics and therapeutics businesses had strong performances for both the quarter and year to date compared to the prior year. Second quarter 1995 revenues also include results from the IOLAB surgical division, an ophthalmic business purchased from Johnson & Johnson in March 1995.

Chiron's second quarter and year-to-date results were achieved despite a significant decrease in collaborative research agreement revenues from Ciba and decreased year-to-date revenues attributable to a change in the terms of the Betaseron (Interferon beta-1b) supply agreement with Schering AG of Germany. As part of the Chiron-Ciba partnership agreement, Ciba has agreed to provide research funding to Chiron of at least $250 million over the next five years, but Chiron has not utilized any funding under this agreement during the first and second quarters of 1995.

Chiron's 1995 second quarter results include the write-off of in-process technology and restructuring charges totaling $3.2 million. Without these charges, Chiron's operating income would have been $9.5 million for the second quarter of 1995 compared to $7.1 million for the second quarter of 1994.

Chiron's 1995 year-to-date results include first quarter charges of $349 million for the write-off of in-process technology, restructurings, the Ciba transaction, research collaboration funding payments and investments in existing and new collaborative partnerships.

Net product sales increased to $248.3 million for the second quarter of 1995 from $60.3 million for the second quarter of 1994, and to $432.2 million for the six months ended June 30, 1995, from $105.8 million for the six months ended June 30, 1994, largely because of the strong performances of the acquired businesses.

Ciba Corning revenues, which were not included in 1994's results, were $129.2 million in the second quarter, an increase of 22 percent compared to the prior year, and $249.3 million for the six months, an increase of 21 percent over 1994. Both of Ciba Corning's major product lines, critical blood analyte systems and immunodiagnostics, had increased sales compared to a year ago. Favorable currency rates accounted for nine percent of the second quarter increase in Ciba Corning's product sales, and seven percent of the year-to-date increase.

Biocine S.p.A. vaccine sales, which also were not included in 1994's results, were $19.6 million for the second quarter of 1995, an increase of approximately $6.1 million over sales in the second quarter of 1994, and $35.4 million for the first six months of 1995, an increase of approximately $10.8 million compared to the first six months a year ago.

Chiron Vision product sales increased to $52.4 million in the second quarter of 1995 from $24.8 million in the second quarter of 1994 due to the effect of the acquisition of IOLAB at the end of the first quarter, the acquisition in May 1994 of Domilens SA, a manufacturer of intraocular lenses, and favorable currency rates, which contributed approximately $2 million to ophthalmic sales in the second quarter of 1995.

Chiron Vision product sales increased to $76.8 million for the first six months of 1995 from $46.7 million for the first six months of 1994, due to the IOLAB and Domilens acquisitions, and due to favorable currency rates, which contributed $3.0 million to the year-to-date increase. Increases in sales of cataract surgery products were offset partially by lower sales of radial keratotomy surgery products as Chiron Vision exits from this business.

Sales of oncology products by Chiron Therapeutics in the United States and Europe increased to $15.2 million for the second quarter of 1995 from $11.4 million for the second quarter of 1994, and to $27.9 million for the first six months of 1995 from $19.5 million for the first six months of 1994. Sales of Proleukin(R) (Aldesleukin) increased in both markets due to increases in sales volumes and average selling prices as well as a $1 million impact from favorable currency exchange rates in Europe in the second quarter of 1995, and a $2 million impact for the first six months of 1995.

Sales of bDNA probe tests and equipment by Chiron Diagnostics increased to $4.0 million in the second quarter of 1995 from $2.4 million in the second quarter a year ago, and to $8.0 million for the first six months of 1995 from $3.7 million for the first six months of 1994, due to higher shipments of Quantiplex(TM) HCV tests to Chiron's Japanese partner, Daiichi Pure Chemicals. Chiron also receives royalties on sales by Daiichi, which are included in other revenues. Daiichi began commercial sales of Quantiplex HCV tests in Japan in late 1994.

Due to a first quarter 1995 change in the terms of its original Betaseron supply agreement with Schering AG of Germany for commercial shipments of Betaseron to its marketing partner, Berlex Laboratories, the United States affiliate of Schering, Chiron now receives a partial payment upon shipment to Berlex and a subsequent final payment based on net sales of the product by Berlex. During 1994, Chiron received substantially all of its revenue from Betaseron upon shipment to Berlex.

Betaseron revenues were $22.4 million for the second quarter of 1995 compared to $17.5 million for the second quarter of 1994. During the first quarter of 1995, Chiron made no commercial shipments of Betaseron to Berlex; Betaseron sales for the first half of 1995 were $24.2 million compared to $28.2 million for the first half of 1994.

Equity in earnings of unconsolidated joint businesses, which consists principally of Chiron's 50 percent share of pretax profit from its joint blood screening business with Ortho Diagnostic Systems, increased to $21.4 million in the second quarter of 1995 from $15.6 million in the second quarter of 1994, and to $39.5 million for the first six months of 1995 compared to $31.1 million for the first six months of 1994. Chiron's share of the profit from its joint business with Ortho increased to $20.9 million for the second quarter of 1995 from $14.6 million for the second quarter of 1994, and to $38.9 million in the first half of 1995 from $29.7 million in the first half of 1994.

Collaborative agreement revenues decreased to $5.0 million in the second quarter of 1995 from $18.4 million in the second quarter of 1994, and to $10.5 million for the first six months of 1995 from $40.8 million for the first six months of 1994. Prior to the acquisition of Ciba's interest in The Biocine Co. by Chiron in January 1995, Ciba provided its 50 percent share of the joint venture's funding and, in 1993 and 1994, up to $15.0 million annually of Chiron's share, which Chiron recorded as collaborative agreement revenues. In the first and second quarters of 1995, Chiron has not utilized any of the research funding that Ciba has agreed to provide to Chiron as part of their partnership agreement.

Other revenues, which consist primarily of product royalties, government grants and service fees, increased to $7.1 million in the second quarter of 1995 from $5.8 million in the second quarter of 1994, and to $17.7 million for the first half of 1995 from $13.7 million for the first half of 1994.

The second quarter increase in other revenues over last year's second-quarter results is due primarily to increased royalty revenues from the sale of hepatitis B vaccine, recominbant human insulin, and from Daiichi for initial Japanese sales of Quantiplex HCV tests, and increased service revenues from the bDNA probes reference laboratory. The increase in the first half of 1995 compared to the first half of 1994 results from sales fee income received in the first quarter from Ciba for Aredia(TM), which Chiron began marketing for Ciba in the second quarter of 1994, increased insulin royalties and revenues from the reference laboratory.

Research and development expenses increased to $71.9 million in the second quarter of 1995 from $37.1 million in the second quarter of 1994 due to the inclusion of Ciba Corning and Biocine S.p.A. research and development expenses totaling $21.3 million, as well as increased expenses in Chiron's vision, biological therapeutics and vaccines programs. Research and development expenses increased to $171.0 million for the first six months of 1995, including $42.4 million for Ciba Corning and Biocine S.p.A. and $31 million in first quarter expenses related to various collaborations, from $75.5 million for the first six months of 1994. Chiron also recognized $1.5 million in expense in each of the first two quarters of 1995 for the purchase of an option to participate as an equal partner in the results of a home-access HIV testing business being developed by Johnson & Johnson.

Cost of sales increased consistent with the increase in product sales. The gross profit margin on a consolidated basis increased to 56 percent in the second quarter of 1995 from 52 percent in the second quarter of 1994, and to 54 percent for the first six months of 1995 from 52 percent for the first six months of 1994 as the addition of Ciba Corning and Biocine S.p.A.'s high-margin products more than offset the decline in the Betaseron product margin that occurred as a result of the reversion to the original supply agreement, and a decline in the product margin for Chiron Vision.

Selling, general and administrative expenses increased to $88.4 million in the second quarter of 1995 from $26.1 million in the second quarter of 1994, and to $173.3 million for the first six months of 1995 from $49.6 million for the first six months of 1994, substantially all of which is due to the impact of the acquisitions of IOLAB, Domilens, Ciba Corning and Biocine S.p.A.

In the second quarter of 1995, Chiron had a $1.8 million write-off for the acquisition of in-process technologies from its purchase of an additional 25 percent equity interest in Technolas GmbH, a German company that supplies excimer lasers to Chiron Vision, bringing Chiron's ownership to 75 percent and allowing consolidation of the Technolas financial results into those of Chiron. Chiron also recorded an additional $1.4 million of restructuring charges in the second quarter of 1995 related to the delayed expansion of its Emeryville Life Sciences Center.

In the first quarter of 1995, Chiron had charges of $270 million related to the Chiron-Ciba partnership transaction, including $220 million for the write-off of in-process technology and other transaction-related charges totaling $50 million for legal and investment advisor fees, employee payments and related tax liabilities. In the first quarter of 1995, Chiron expensed $27 million related to the acquisition of the IOLAB surgical division from Johnson & Johnson, including $10 million for the write-off of in-process technology and $17 million for costs associated with the restructuring and integration of IOLAB operations with those of Chiron Vision. Also in the first quarter of 1995, Chiron expensed $21 million for the idling of Chiron's Puerto Rico manufacturing facility, the scale-back of manufacturing operations in its Amersterdam facility, the write-off of costs for certain facilities that are duplicated elsewhere in the company and a charge resulting from the postponement of plans to expand the company's Emeryville Life Sciences Center.

On June 30, 1995, Chiron held cash, cash equivalents and investments in marketable debt securities totaling $268.6 million. During the first six months of 1995, Chiron consumed approximately $125 million of cash and investment assets, largely for the acquisition of IOLAB, but also including capital expenditures of $49.1 million. Chiron's long-term debt and other noncurrent liabilities totaled $443.6 million on June 30, 1995, compared to $357.5 million on Dec. 31, 1994. Chiron also had $98.0 million in short-term borrowings on June 30, 1995, compared to none on Dec. 31, 1994, $40.0 million of which represents the first utilization of a debt guarantee provided by Ciba as part of the partnership agreement between the two companies.

Chiron Corp., headquartered in Emeryville, applies biotechnology and other techniques of modern biology and chemistry to develop products intended to improve the quality of life by diagnosing, preventing and treating human disease. Chiron participates in four markets: 1) diagnostics, including immunodiagnostics, critical care diagnostics and quantitative bDNA probe tests; 2) therapeutics for cancer and infectious disease; 3) adult and pediatric vaccines, and 4) ophthalmic instruments and devices used for the surgical correction of vision. Additional research programs are underway in gene therapy and gene transfer, combinatorial chemistry, cardiovascular disease and critical care. -0-

                           Chiron Corp.
               Consolidated Statement of Operations
                           (Unaudited)
              (In thousands, except per share data)

                            Three Months Ended    Six Months Ended
                          June 30,    June 30,   June 30,    June 30,
                             1995       1994       1995       1994
Revenues:
 Product Sales            $ 248,333  $  60,332  $ 432,242  $ 105,816
 Equity in earnings of
 unconsolidated joint
 businesses                  21,360     15,621     39,538     31,108
 Collaborative agreement
 revenues                     4,956     18,373     10,522     40,835
 Other revenues               7,103      5,785     17,695     13,733
  Total revenues            281,752    100,111    499,997    191,492

Expenses:
 Research and development    71,904     37,090    170,959     75,499
 Cost of sales              108,547     28,729    198,829     50,453
 Selling, general and
 administrative              88,364     26,057    173,259     49,575
 Write-off of purchased
  technologies                1,759        --     232,415        --
 Costs related to Ciba
  transaction                   (43)       --      49,478        --
 Restructuring charges        1,414        --      39,055        --
 Other operating expenses     3,512      1,109      5,791      2,015

  Total expenses            275,457     92,985    869,786    177,542

Income (loss) from
 operations                   6,295      7,126   (369,789)    13,950
Other income (expense), net  (2,110)       427     (3,499)       709
Income (loss) before income
taxes                         4,185      7,553   (373,288)    14,659

Provision for income taxes    3,355      2,443     11,661      4,732

Net income (loss)         $     830  $   5,110  $(384,949) $   9,927

Net income (loss) per
share                     $    0.02  $    0.15  $   (9.60) $    0.29

Weighted average number of
shares used in computing
per share amounts            40,895     34,068     40,086     34,334

                           Chiron Corp.
                    Consolidated Balance Sheet
                          (In thousands)

ASSETS
                                           June 30,      December 31,
                                             1995           1994
                                          (Unaudited)

Current assets:
 Cash and cash equivalents               $    82,147     $    84,876
 Short-term investments in marketable
  debt securities                             71,436         137,619
  Total cash and short-term investments      153,583         222,495
 Accounts receivable                         265,631         140,476
 Inventories                                 163,781          47,592
 Other current assets                         43,711          23,252
  Total current assets                       626,706         433,815
Noncurrent investments in marketable
 debt securities                             115,017         171,328
Property, equipment and leasehold
 improvements, at cost:
 Land and buildings                          200,472          60,930
 Laboratory, production and office
  equipment                                  256,151         140,438
 Leasehold improvements                       90,649          82,145
 Construction in progress                     48,122          78,998
                                             -------         -------
                                             595,394         362,511
 Less accumulated depreciation and
  amortization                               112,440          76,337
  Net property, equipment and leasehold
   improvements                              482,954         286,174
Intangible assets, net                       163,950          85,803
Investments in equity securities and
 affiliated companies                         49,800          51,425
Other assets                                  51,626          21,197
                                           ---------         -------
                                         $ 1,490,053     $ 1,049,742

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
 Accounts payable                        $    65,140     $    27,778
 Accrued compensation and related
  expenses                                    48,355          24,010
 Short-term borrowings                        97,956             --
 Current portion of unearned revenue          19,978           1,544
 Current portion of long-term debt             3,265           3,461
 Taxes payable                                26,678          10,060
 Other current liabilities                   122,562          52,788
  Total current liabilities                  383,934         119,641

Long-term debt                               406,548         338,061
Other noncurrent liabilities                  37,101          19,409

Stockholders' equity:
 Common stock                                    402             334
 Additional paid-in capital                1,603,892       1,161,942
 Accumulated deficit                        (960,185)       (575,236)
 Cumulative foreign currency translation
  adjustment                                   4,010          (1,719)
 Unrealized gain (loss) from investments      14,351         (12,690)
  Total stockholders' equity                 662,470         572,631
                                           ---------         -------
                                         $ 1,490,053     $ 1,049,742

CONTACT: Chiron Corp., Emeryville

Larry Kurtz, 510/601-2476