Chiron SC 13E3 Going private transaction

Exhibit 99.(c)(3)

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Project Heron

Presentation to the Board of Directors

PRELIMINARY | SUBJECT TO FURTHER REVIEW AND EVALUATION

October 30, 2005

DRAFT

THESE MATERIALS MAY NOT BE USED OR RELIED UPON FOR ANY PURPOSE OTHER THAN AS SPECIFICALLY CONTEMPLATED BY A WRITTEN AGREEMENT WITH CREDIT SUISSE FIRST BOSTON AND MORGAN STANLEY.

Table of Contents

1.	Situation Overview
2.	Overview of Heron
	A.	Update on Heron Business Situation
	B.	Overview of Trading Performance
3.	Preliminary Financial Analysis
Appendix
•	WACC
•	Other Metrics
•	Business Unit P&Ls

1

1.  Situation Overview

2

Initial September 1 Offer

•On September 1, 2005, the Neptune CEO transmitted a written letter to the chair of the independent committee of the Heron Board

•$40 per share in cash via merger

•No diligence or financing contingencies

•Willing to condition merger on approval of a majority of the public shares

•Body of offer letter:

“In connection with the Heron Board’s consideration of the serious issues Heron faces, you inquired of our plans for our investment in the Company, including specifically whether we had any interest at this time in acquiring the outstanding shares in the Company that we do not already own. We advised you that absent additional due diligence we would not be able to assess any potential change in our position in the Company but that we would be willing to undertake such due diligence if that were acceptable to the Independent Directors. With your agreement we have conducted our due diligence and we now have a deeper understanding of the Company and the pending situation. As Heron’s largest shareholder, Heron’s current situation is naturally a matter of concern to us, and so we have considered how we can best protect our investment in the Company. As is evident from Neptune’s long history with Heron, we have no intention of selling our interest.

Based on our due diligence review, we have concluded that the best result for all concerned, including Heron, its shareholders and Neptune, would be for Neptune to acquire the shares in Heron that it does not already own. We believe that Heron, as a wholly-owned subsidiary of Neptune, would be better positioned to deal with the legal, regulatory and business issues that it is facing. Despite the challenges facing Heron’s vaccine business today, the acquisition would enable us to build a strategic platform in vaccines. Heron’s public shareholders would benefit from such a transaction as it would provide them with an immediate premium for their shares and eliminate their investment risk.

Accordingly, we are pleased to propose a transaction in which Neptune would enter into a cash merger agreement pursuant to which the public shareholders of Heron would receive $40.00 per share in cash. This price represents a 12% premium to Heron’s one week weighted average closing price. As an indication of our confidence that this transaction will be well received by Heron’s public shareholders, Neptune is willing to condition the merger on the approval of a majority of the public shares.

Of course, our proposal is subject to the approval of the Independent Directors and to the execution of definitive documentation. We are prepared to move quickly and to negotiate a customary merger agreement with Heron’s Independent Directors and its advisors. We have substantially completed our due diligence work and our merger terms will not include any due diligence or financing conditions, but only customary and usual closing conditions. We do not anticipate any significant obstacles to negotiating and consummating a mutually beneficial transaction promptly.

As I am sure you appreciate, consistent with our obligations under the U.S. federal securities laws, this letter will become publicly available when we forthwith file it with an amendment to our Schedule 13D.”

3

Illustrative Valuation Matrix

($MM, except per share amounts)

							Unaffected					Neptune
							Price					Offer
Share Price							$	36.44				$	45.00
Premium to Share Price Prior to Annc.	$	36.44					0		%			23		%
Premium to 5-Day Average Share Price	35.90						2		%			25		%
Premium to 10-Day Average Share Price	35.71						2		%			26		%
Premium to 30-Day Average Share Price	36.12						1		%			25		%
Premium to 60-Day Average Share Price	36.04						1		%			25		%
Premium to 180-Day Average Share Price	35.46						3		%			27		%
CALCULATION OF EQUITY AND AGGREGATE VALUE
Shares Outstanding (MM) (1)							187.9					187.9
“In the Money” Options/Warrants Outstanding (MM) (2)							9.9					16.2
WAEP of “In the Money” Options/Warrants (2)							$	29.88				$	34.75
Fully-Diluted Shares Outstanding (MM)							189.7					191.6
Fully-Diluted Equity Value							$	6,911				$	8,620
+ Debt (3)							1,106					1,106
- Cash (3)							(1,018		)			(1,018		)
Fully-Diluted Aggregate Value							6,999					8,708
Value of Non-Neptune Equity							$	4,021				$	5,051
IMPLIED VALUATION MULTIPLES (4)
	Statistic						Unaffected Multiple					Offer Multiple
	Mgmt.			Street			Mgmt.			Street		Mgmt.			Street
Revenue
CY2006E	$	2,222		$	2,182		3.1		x	3.2	x	3.9		x	4.0	x
Earnings
CY2006E	$	1.58		$	1.81		23.1		x	20.1	x	28.5		x	24.9	x
CY2007E	1.91			1.98			19.1			18.4		23.5			22.7
PEG (5)
CY2006E	15.7		%	15.7		%	1.47		x	1.29	x	1.82		x	1.59	x

Note: Unaffected price as of August 31, 2005, the day prior to public announcement of the Neptune letter.

(1) Based on Heron primary shares of 187.9MM from 424 B3 Prospectus dated August 29, 2005.

(2) Based on Heron options schedule from 10-K for the period ended December 31, 2004.

(3) Based on Heron Press Release for the period ended September 30, 2005.

(4) Heron estimates based upon First Call consensus and Heron Management Forecast as of October 2005.

(5) Based on an IBES LTGR of 15.7%.

4

Recent Trading Range and Analyst Price Targets

$

		Implied Premium / (Discount) to Unaffected Share Price ($36.44)
52-Week Trading Range		(20.4)% – 26.2%
Analyst Price Targets (1)	[CHART]	(21.6)% – 7.8%
Affected Analyst Price Targets (2)		9.8% – 31.7%

(1)Reflects analyst price targets pre-announcement of initial Neptune offer as of 8/31/05.  Discounted at 12.0%

(2)Reflects analyst price targets post announcement of initial Neptune offer as of 10/28/05; excludes CSFB and MS equity research price targets as unable to publish updates due to advisory role

5

Heron’s Valuation Parameters

Assessment of Valuation (1)

$

		Implied Premium / (Discount) to Unaffected Share Price ($36.44)
Selected Companies
Multiple-Based: 20.0x – 26.0x 2006 P/E
Company Forecast 2006 EPS $1.58		(13.3)% – 12.7%
Street Forecast 2006 EPS $1.81		(0.7)% – 29.1%
Multiple-Based: 18.0x – 24.0x 2007 P/E
Company Forecast 2007 EPS $1.91		(5.7)% – 25.8%
	[CHART]
Street Forecast 2007 EPS $1.98		(2.2)% – 30.4%
10-Year Discounted Cash Flow Management Projections
Perpetual Growth: 2.0% – 4.0% Discount Rate: 10.0% – 12.0%		11.5% – 29.4% (1.4)% – 51.8%
Sum-of-the-Parts – Management Projections
Perpetual Growth: Varies by Segment (2)Discount Rate: 10.0 – 12.0%		6.6% – 23.5% (5.9)% – 45.9%

(1)Street forecast EPS estimates as of 10/28/05

(2)Assumes perpetual growth rate of 1.0% – 3.0% for BioPharma (midpoint LTM NOPAT multiple of 12.4x), 2.0% – 4.0% for Vaccines (midpoint LTM NOPAT multiple of 15.4x), 2.0% – 4.0% for Blood Testing (midpoint LTM NOPAT multiple of 13.3x) and (2.0)% – 0.0% for Corporate Royalties (midpoint LTM NOPAT multiple of 8.7x); derived from Heron Management

6

2.Overview of Heron

A.Update on Heron Business Situation

7

Heron Business Update - Post-Neptune Offer on Sep 1

Heron Financial Update - 3rd Quarter 2005

Business Review

• On 10/25, Heron announced initiation of phase I/II study of influenza cell culture vaccine in the United States

• On 10/17, Heron announced that it had received all approvals and clearance for FLUVIRIN from the FDA and MHRA, and that it had begun shipment of FLUVIRIN to U.S. customers

• Heron stated to the street that the total number of FLUVIRIN vaccine doses it will produce for the 2005-2006 influenza season will be below its previously stated range of 18-26M doses, due to production delays related to remediation as well as lower output associated with adaptation to new processes and procedures implemented in remediation

• Accordingly, Heron also noted that it expects its financial results to be below its previously stated guidance

• In its 3rd quarter earnings call, Heron indicated that it would have capacity to produce 40M doses for the 2006/07 season

• On 10/13, Heron and Xoma announced initiation of phase I clinical trials for CHIR-12.12 in multiple myeloma

• On 10/5, Heron and Nektar announced initiation of a phase III trial evaluating tobramycin inhalation powder (TIP) in the treatment of lung infections caused by Psuedomonas aeruginosa in cystic fibrosis patients

• On 10/5 Gen-Probe announced that the FDA had informed Heron’s partner, Gen-Probe, that it considered the PROCLEIX TIGRIS system “not substantially equivalent” to the PROCLEIX Enhanced Semi-Automated System for screening donated human blood with the PROCLEIX ULTRIO Assay

• Gen-Probe has discussed this determination with the FDA and is scheduling a series of meetings to resolve the issues

• Heron has stated that it continues to expect approval of PROCLEIX TIGRIS during 1H:06

• PROCLEIX ULTRIO Assay BLA likely to be delayed into 2006 as well

Financial Review

• Biopharma:  Net product sales increased 4% from the comparable year-ago period to $137 million, driven principally by TOBI and Betaseron offset by a decline in Proleukin sales.  Generally in-line with Street expectations.

• Vaccines: Net product sales were generally lower than Street expectations due to the fact that most analysts did not adjust for the suspension in Begrivac sales in 2005.  Net product sales were $153 million, a decrease of 12% from the comparable year-ago period due principally to no Begrivac sales offset by strong sales in most other vaccine lines.

• Blood Testing: Generally in-line with guidance and expectations.  Revenues were $138 million, a decrease of 2% from the comparable year-ago period, driven principally by the introduction of PROCLEIX ULTRIO and PROCLEIX TIGRIS into a number of ex-U.S. markets and an increase in donations in the United States.

8

Heron - Historical Financial Performance

Total Revenue

[CHART]

EBIT

[CHART]

Net Income

[CHART]

Source: Historical public filings

9

Financial Projection Overview

•Heron management has developed its forecast using customary biotechnology financial analysis providing for probabilities of success based on stage of development of individual product candidates

•Only product candidates in clinical development were modeled

•During 1H:05, CSFB and Morgan Stanley conducted a series of meetings with Heron management to diligence projections for the consolidated Company and its major lines of business

•Management presented the projections to the Board of Heron

•Since then, Heron’s business forecast has changed and accordingly additional changes to the management forecast were provided to CSFB and Morgan Stanley

•Revenues from the vaccines business were further reduced due to Begrivac vaccine contamination issues in the summer 2005

•Overall forecast for biopharma were further reduced due to PULMUNIQ setback and increased competition against Proleukin

•CSFB and Morgan Stanley have continued to conduct diligence meetings with Heron

10

Heron Management Forecast - Revenue Contribution

Total Revenue

2006

$2,222MM

[CHART]

2006 Revenues

Biopharma:	$	612MM
Vaccines:	$	921MM
Blood Testing:	$	609MM
Corporate:	$	81MM

2009

$3,184MM

[CHART]

2009 Revenues

Biopharma:	$	852MM
Vaccines:	$	1,340MM
Blood Testing:	$	887MM
Corporate:	$	105MM

2012

$4,254MM

[CHART]

2012 Revenues

Biopharma:	$	1,450MM
Vaccines:	$	1,710MM
Blood Testing:	$	1,008MM
Corporate:	$	85MM

Source:  Heron Management Forecast as of October  2005.

11

Heron Management Forecast - Operating Income Contribution

Operating Income (excludes Corporate & Other)

2006

$427MM (1)

[CHART]

Operating Margins

VX1 -	29.1	%
BT2 -	40.8	%
BT1 -	75.9	%
Total Vx -	17.3	%
Total BT -	49.5	%

2009

$892MM (3)

[CHART]

Operating Margins

BP2 -	52.0	%
BP3 -	75.1	%
BP4 -	49.2	%
BP5 -	19.7	%
VX1 -	32.9	%
VX2 -	24.7	%
BT1 -	43.4	%
BT2 -	74.3	%
Total BioPharma -	7.9	%
Total Vx -	29.4	%
Total BT -	48.5	%

2012

$1,473MM (4)

[CHART]

Operating Margins

BP2 -	54.5	%
BP3 -	72.0	%
BP4 -	46.4	%
BP5 -	64.0	%
VX1 -	33.4	%
VX2 -	42.2	%
BT1 -	37.7	%
BT2 -	71.6	%
Total BioPharma -	28.0	%
Total Vx -	37.5	%
Total BT -	42.2	%

Source:  Heron Management Forecast as of October 2005.

(1) Includes operating loss of ($33MM) from Biopharma, which is comprised of operating incomes of $59MM, $164MM, $77MM, ($56MM), and ($211MM) for Proleukin, TOBI, Betaseron, TFPI, and BioPharma (Remaining), respectively

(2) Comprised of operating incomes of $158MM, ($30MM), and $31MM for Egg Flu, Cell Culture and Vx (Remaining), respectively

(3) Total operating income includes ($199MM) of BioPharma (Remaining)

(4) Total operating income includes ($175MM) of BioPharma (Remaining)

12

Heron – Forecasted Revenue and Operating Profile

Total Revenue

[CHART]

EBIT

[CHART]

Net Income

[CHART]

Source:  Heron Management Forecast as of October 2005.

13

Heron Management Forecast - Consolidated Income Statement

($ and shares in millions, except per share amounts)

Heron

Income Statement

	Fiscal Year Ending December 31
	2006E			2007E			2008E			2009E			2010E			2011E			2012E			2013E			2014E			2015E
Total Revenue	$	2,222.2		$	2,436.6		$	2,675.3		$	3,183.9		$	3,663.4		$	4,010.1		$	4,254.1		$	4,080.7		$	4,161.4		$	4,211.1
% Growth	11.9		%	9.6		%	9.8		%	19.0		%	15.1		%	9.5		%	6.1		%	-4.1		%	2.0		%	1.2		%
COGS	833.8			891.9			971.4			1,132.4			1,221.6			1,345.5			1,417.5			1,446.4			1,483.7			1,405.2
% Growth	15.2		%	7.0		%	8.9		%	16.6		%	7.9		%	10.1		%	5.3		%	2.0		%	2.6		%	-5.3		%
Gross Profit	1,388.5			1,544.7			1,703.9			2,051.5			2,441.8			2,664.5			2,836.6			2,634.4			2,677.7			2,805.9
% Margin	62.5		%	63.4		%	63.7		%	64.4		%	66.7		%	66.4		%	66.7		%	64.6		%	64.3		%	66.6		%
R&D	482.2			503.9			537.7			502.9			514.2			556.1			601.4			603.2			613.7			627.8
% Margin	21.7		%	20.7		%	20.1		%	15.8		%	14.0		%	13.9		%	14.1		%	14.8		%	14.7		%	14.9		%
% Growth	11.0		%	4.5		%	6.7		%	-6.5		%	2.2		%	8.1		%	8.2		%	0.3		%	1.7		%	2.3		%
S&M	300.8			326.1			395.8			439.4			471.8			502.8			509.6			498.0			512.6			526.8
% Margin	13.5		%	13.4		%	14.8		%	13.8		%	12.9		%	12.5		%	12.0		%	12.2		%	12.3		%	12.5		%
% Growth	6.0		%	8.4		%	21.4		%	11.0		%	7.4		%	6.6		%	1.3		%	-2.3		%	2.9		%	2.8		%
G&A	202.0			210.5			223.3			244.9			267.2			290.4			316.2			315.7			328.4			339.7
% Margin	9.1		%	8.6		%	8.3		%	7.7		%	7.3		%	7.2		%	7.4		%	7.7		%	7.9		%	8.1		%
% Growth	-9.7		%	4.2		%	6.1		%	9.7		%	9.1		%	8.7		%	8.9		%	-0.2		%	4.0		%	3.5		%
Other Expenses	14.1			14.5			9.6			1.3			0.4			0.4			0.4			0.4			0.4			0.4
% Growth	40.7		%	2.5		%	-33.5		%	-86.7		%	-66.5		%	-0.6		%	0.0		%	0.0		%	0.0		%	0.0		%
EBITDA	546.8			649.0			701.9			1,048.5			1,367.7			1,515.8			1,621.4			1,435.5			1,432.6			1,535.5
% Margin	24.6		%	26.6		%	26.2		%	32.9		%	37.3		%	37.8		%	38.1		%	35.2		%	34.4		%	36.5		%
Depreciation	127.2			129.8			136.6			159.7			167.0			190.8			205.3			212.1			205.5			220.3
Amortization	30.2			29.5			27.8			25.8			12.4			10.3			7.2			6.3			4.5			4.1
Operating Income	389.4			489.7			537.5			863.1			1,188.2			1,314.8			1,408.9			1,217.1			1,222.5			1,311.1
% Margin	17.5		%	20.1		%	20.1		%	27.1		%	32.4		%	32.8		%	33.1		%	29.8		%	29.4		%	31.1		%
% Growth	25.3		%	25.8		%	9.7		%	60.6		%	37.7		%	10.7		%	7.2		%	-13.6		%	0.4		%	7.2		%
Net Other Income (Expense)	29.1			19.6			11.6			10.1			15.7			41.8			64.8			81.9			89.0			89.0
Minority Interest	(3.0		)	(3.0		)	(3.0		)	(3.0		)	(3.0		)	(3.0		)	(3.0		)	(3.0		)	(3.0		)	(3.0		)
Pre-tax Income	415.5			506.3			546.0			870.1			1,200.9			1,353.6			1,470.7			1,296.0			1,308.6			1,397.1
% Margin	18.7		%	20.8		%	20.4		%	27.3		%	32.8		%	33.8		%	34.6		%	31.8		%	31.4		%	33.2		%
Income Tax Expense	(103.9		)	(126.6		)	(136.5		)	(217.5		)	(300.2		)	(338.4		)	(367.7		)	(324.0		)	(327.1		)	(349.3		)
Effective Tax Rate	25.0		%	25.0		%	25.0		%	25.0		%	25.0		%	25.0		%	25.0		%	25.0		%	25.0		%	25.0		%
Net Income	311.6			379.8			409.5			652.6			900.7			1,015.2			1,103.1			972.0			981.4			1,047.8
Share Outstanding	197.5			198.7			199.5			200.4			202.1			203.5			204.5			205.5			206.4			207.4
EPS	$	1.58		$	1.91		$	2.05		$	3.26		$	4.46		$	4.99		$	5.39		$	4.73		$	4.75		$	5.05

Note: Heron consolidated income statement includes corporate royalties and expenses

Source:  Heron Management Forecast as of October 2005.

14

Street versus Heron Management Forecast

Total Revenues

($ in millions)	2006E			2007E			2008E			2009E			2010E
Piper Jaffray (10/26/05)	$	2,109.9		$	2,314.1		$	2,670.9		$	2,861.4
SG Cowen (10/26/05)	2,290.0			2,565.0			2,857.0			3,102.0			3,292.0
UBS (10/26/05)	2,118.0			2,277.0
Banc of America (10/26/05)	2,098.8			2,323.2			2,564.2
Goldman Sachs (10/26/05)	2,130.0			2,262.0
Merrill Lynch (10/26/05)	2,175.8			2,286.4			2,385.0
Average	$	2,153.8		$	2,338.0		$	2,619.3		$	2,981.7		$	3,292.0
% Growth	16.1		%	8.6		%	12.0		%	13.8		%	10.4		%
Forecast	$	2,222.2		$	2,436.6		$	2,675.3		$	3,183.9		$	3,663.4
% Growth	11.9		%	9.6		%	9.8		%	19.0		%	15.1		%
Variance	$	68.4		$	98.6		$	56.0		$	202.2		$	371.4
% Difference	3.2		%	4.2		%	2.1		%	6.8		%	11.3		%

Operating Income

($ in millions)	2006E			2007E			2008E			2009E			2010E
Piper Jaffray (10/26/05)	$	383.1		$	462.0		$	575.2		$	626.5
SG Cowen (10/26/05)	445.0			568.0			672.0			754.0			841.0
UBS (10/26/05)	407.0			456.0
Banc of America (10/26/05)	370.9			417.7			524.5
Merrill Lynch (10/26/05)	449.6			446.9			451.8
Goldman Sachs (10/26/05)	447.0			498.0
Average	$	417.1		$	474.8		$	555.9		$	690.2		$	841.0
% Growth	98.9		%	13.8		%	17.1		%	24.2		%	21.8		%
Forecast	$	389.4		$	489.7		$	537.5		$	863.1		$	1,188.2
% Growth	25.2		%	25.8		%	9.8		%	60.6		%	37.7		%
Variance	$	(27.7	)	$	14.9		$	(18.4	)	$	172.9		$	347.2
% Difference	(6.6		)%	3.1		%	(3.3		)%	25.0		%	41.3		%

EPS(2)

	2006E			2007E				2008E				2009E			2010E
Deutsche Bank (10/26/05)	$	2.66
SG Cowen (10/26/05)	1.90			2.30				2.65				2.90			3.15
UBS (10/26/05)	1.55			1.78
Banc of America (10/26/05)	1.71			1.89				2.30
Prudential (07/27/05)	1.80			2.21
Goldman Sachs (10/26/05)	1.89			2.09
Merrill Lynch (10/26/05)	1.83			1.86				1.88
Piper Jaffray (10/26/05)	1.61			1.84				2.29				2.50
Citigroup (10/25/05)	1.80			1.90
JP Morgan (10/25/05)	1.71
Average(2)	$	1.76		$	1.98			$	2.28			$	2.70		$	3.15
% Growth	68.4		%	13.0			%	14.9			%	18.4		%	16.7		%
Forecast	$	1.58		$	1.91			$	2.05			$	3.26		$	4.46
% Growth	13.7		%	20.9			%	7.3			%	59.0		%	36.8		%
Variance	$	(0.18	)	$		(0.07	)	$		(0.23	)	$	0.56		$	1.31
% Difference	(10.0		)%	(3.7			)%	(10.1			%)	20.7		%	41.6		%

Revenues

BioPharma

($ in millions)	2006E			2007E			2008E			2009E			2010E
Merrill Lynch (10/26/05)	536.3.			$	553.4		$	561.5
Piper Jaffray (10/26/05)	547.8			566.3			796.5			815.0
UBS (10/26/05)	570.0			612.0
SG Cowen (10/26/05)	595.0			640.0			695.0			735.0			775.0
Goldman Sachs (10/26/05)	515.0			514.0
Average	$	556.9		$	577.1		$	684.3		$	775.0		$	775.0
% Growth	3.5		%	3.6		%	18.6		%	13.2		%	0.0		%
Forecast(1)	$	549.5		$	606.4		$	651.6		$	811.7		$	1,047.8
% Growth	0.3		%	10.4		%	7.5		%	24.6		%	29.1		%
Variance	$	(7.4	)	$	29.3		$	(32.7	)	$	36.7		$	272.8
% Difference	(1.3		%)	5.1		%	(4.8		)%	4.7		%	35.2		%

Vaccines

($ in millions)	2006E			2007E			2008E			2009E			2010E
SG Cowen (10/26/05)	$	845.0		$	1,005.0		$	1,130.0		$	1,250.0		$	1,320.0
Piper Jaffray (10/26/05)	747.6			876.3			965.0			1,061.0
Goldman Sachs (10/26/05)	781.0			865.0
UBS (10/26/05)	745.0			821.0
Merrill Lynch (10/26/05)	782.5			830.4			881.6
Average	$	780.2		$	879.5		$	992.2		$	1,155.5		$	1,320.0
% Growth	37.7		%	12.7		%	12.8		%	16.5		%	14.2		%
Forecast(1)	$	904.6		$	980.8		$	1,077.4		$	1,324.7		$	1,564.7
% Growth	37.1		%	8.4		%	9.8		%	23.0		%	18.1		%
Variance	$	124.4		$	101.3		$	85.2		$	169.2		$	244.7
% Difference	15.9		%	11.5		%	8.6		%	14.6		%	18.5		%

Blood Testing

($ in millions)	2006E			2007E			2008E			2009E			2010E
SG Cowen (10/26/05)	$	380.0		$	420.0		$	485.0		$	535.0		$	585.0
Piper Jaffray (10/26/05)	353.5			419.2			494.0			554.1
Merrill Lynch (10/26/05)	360.6			429.0			474.1
Goldman Sachs (10/26/05)	370.0			413.0
UBS (10/26/05)	337.0			376.0
Average	$	360.2		$	411.4		$	484.4		$	544.5		$	585.0
% Growth	17.9		%	14.2		%	17.7		%	12.4		%	7.4		%
Forecast(1)	$	389.1		$	499.5		$	575.2		$	688.2		$	768.5
% Growth	25.6		%	28.4		%	15.2		%	19.6		%	11.7		%
Variance	$	28.9		$	88.1		$	90.8		$	143.7		$	183.5
% Difference	8.0		%	21.4		%	18.8		%	26.4		%	31.4		%

Source:  Heron Management Forecast as of October 2005 and Street analyst forecasts as indicated

(1)  Forecast represents only net product sales and  blood testing revenues exclude NAT royalties and Ortho Joint Business profits, royalties and contract revenues.

(2)  Average EPS excludes Deutsche Bank estimates.

15

2.     Overview of Heron

B.    Overview of Trading Performance

16

Heron Stock Price Performance – Long Term Perspective

Stock Price Performance - October 28, 2000 - October 28, 2005

[CHART]

17

Heron Stock Price Performance

Stock Price Performance - August 31, 2004 - October 28, 2005

Current Share Price	$	43.40
52-Week High	$	45.07
52-Week Low	$	29.91
52-Week Avg.	$	36.34
3 Months Avg.	$	40.71

[CHART]

Since the Neptune offer, Heron stock has traded principally on the underlying assumption of what Neptune is expected to pay and less on fundamentals

18

Heron Stock Price Performance Compared to Relevant Indices

Stock Price Performance - August 31, 2004 - October 28, 2005

	Performance Since
	8/31/2004		12/31/2004		3/31/2005		6/30/2005
Stock Price Performance
Heron	2.4	%	30.2	%	23.8	%	24.4	%
NASDAQ	13.7	%	(3.9	)%	4.5	%	1.6	%
AMEX Biotech Index	25.3	%	14.1	%	26.1	%	10.1	%
Large Cap Biotech	37.4	%	25.9	%	37.4	%	16.1	%
Large Cap Biotech (excl. DNA)	20.3	%	11.2	%	28.6	%	20.6	%
Large Pharma	(6.6	)%	(0.9	)%	2.2	%	(2.2	)%

[CHART]

Large Cap Biotech includes AMGN, BIIB, DNA, GENZ, GILD, MEDI

Large Pharma includes AZN, BMY, GSK, LLY, MRK, NVS, PFE, RHHBY

19

98% of Heron Shares Traded during the Year Prior to Announcement Traded at or below $45

August 31, 2004 to August 31, 2005 (1 Year prior to Unaffected Date)

[CHART]

	$30.00 - $33.00		$33.00 - $36.00		$36.00 - $39.00		$39.00 - $42.00		$42.00 - $45.00		$45.00 - $48.00
Volume	108,449,920		173,688,768		137,625,856		0		27,976,354		7,314,170
% of Shares Traded	23.8	%	38.2	%	30.2	%	0.0	%	6.1	%	1.6	%
Cumulative % Traded	23.8	%	62.0	%	92.2	%	92.2	%	98.4	%	100.0	%
% of Shares Outstanding (1)	99.9	%	160.0	%	126.8	%	0.0	%	25.8	%	6.7	%
Cumulative Volume	108,449,920		282,138,688		419,764,544		419,764,544		447,740,898		455,055,068
Multiple of Shares Outstanding (1)	1.0	x	2.6	x	3.9	x	3.9	x	4.1	x	4.2	x

(1) Excludes shares held by Neptune. Assumes a total of 187,879,648 shares outstanding less 79,320,078 shares held by Neptune. Neptune share ownership information is from Schedule 13D dated September 1, 2005.

20

Heron Shareholder Analysis

	Institutions (1)
	Primary	% of		% of
Holder	Shares	Primary		Non-Neptune (5)
Smith Barney Asset Mgmt.	23,410,000	12.5	%	21.6	%
Van Kampen Asset Mgmt.	5,013,370	2.7	%	4.6	%
Barclays Global Investors	5,000,000	2.7	%	4.6	%
VA Partners, LLC	4,975,000	2.6	%	4.6	%
Paulson Partners	4,000,000	2.1	%	3.7	%
Sound Shore Management	3,338,471	1.8	%	3.1	%
State Street Corp.	3,300,000	1.8	%	3.0	%
Vanguard Group	3,146,559	1.7	%	2.9	%
T. Rowe Price Assoc.	2,500,778	1.3	%	2.3	%
Centaurus Capital	1,750,000	0.9	%	1.6	%
Morgan Stanley Inv. Mgmt.	1,700,000	0.9	%	1.6	%
Northern Trust Corp.	1,562,039	0.8	%	1.4	%
Sectoral Asset Mgmt.	1,518,000	0.8	%	1.4	%
OZ Management, LLC	1,500,000	0.8	%	1.4	%
Deutsche Asset Management	1,337,249	0.7	%	1.2	%
Fidelity Investments	1,300,000	0.7	%	1.2	%
Primecorp Mgmt. Company	1,065,200	0.6	%	1.0	%
Putnam Investment Mgmt.	1,034,602	0.6	%	1.0	%
Westchester Capital	1,000,000	0.5	%	0.9	%
Sandell Asset Management	1,000,000	0.5	%	0.9	%
Chesapeake Partners Mgmt.	1,000,000	0.5	%	0.9	%
D.E. Shaw	1,000,000	0.5	%	0.9	%
California Public Employees Ret.	778,624	0.4	%	0.7	%
Gruss Partners	675,000	0.4	%	0.6	%
SAC Capital Advisors	648,000	0.3	%	0.6	%
Top 25 Institutions	73,552,892	39.1	%	67.8	%
Remaining Institutional Holders	13,073,078	7.0	%	12.0	%
Total Institutional Holdings	86,625,970	46.1	%	79.8	%

	Insiders & Neptune
Holder	Primary (2) Shares	% of Primary		% of Non-Neptune (5)		Options (2)	FC Total	% of FC
Neptune	79,320,078	42.2	%	—		0	79,320,078	36.9	%
Directors as a Group	292,781	0.2	%	0.3	%	799,211	1,091,992	0.5	%
Executive Officers as a Group	8,462	0.0	%	0.0	%	963,193	971,655	0.5	%
Others	96,390	0.1	%	0.1	%	25,494,888	25,591,278	11.9	%
Total Insiders & Neptune	79,717,711	42.4	%	0.4	%	27,257,292	106,975,003	49.7	%

	Summary of Holdings
	Primary (3)	% of		% of
Holder	Shares	Primary		Non-Neptune (5)		Options (4)	FC Total	% of FC
Institutions	86,625,970	46.1	%	79.8	%	0	86,625,970	40.3	%
Insiders & Neptune	79,717,711	42.4	%	0.4	%	27,257,292	106,975,003	49.7	%
Other Holders	21,535,967	11.5	%	19.8	%	0	21,535,967	10.0	%
Total Shares Outstanding	187,879,648	100.0	%	100.0	%	27,257,292	215,136,940	100.0	%

(1)	Based on Inisfree M&A data as of October 26, 2005.
(2)	Based on Heron Proxy dated May 25, 2005 and Schedule 13D dated September 1, 2005.
(3)	Based on Heron 424 B Prospectus dated August 29, 2005.
(4)	Based on Heron 10-K for the period ended December 31, 2004.
(5)	Excludes 79,320,078 primary shares held by Neptune.

21

Wall Street Perspective

Research		Target
Company	Recommendation	Price
A.G. Edwards	Hold
Banc of America Securities	Neutral	$	45.00
Citigroup	Hold	$	42.00
Deutsche Bank	Hold	$	44.00
Harris Nesbitt	Neutral	$	40.00
JP Morgan	Underweight
Lehman Brothers	Equal Weight / Neutral	$	45.00
Merrill Lynch	No Rating
Piper Jaffray	Market Perform	$	40.00
Robert W. Baird	Neutral	$	40.00
Sanford C. Bernstein	Market Perform	$	48.00
SG Cowen	No Rating
Thomas Weisel	Peer Perform
UBS	Reduce 2	$	40.00

Note: All recommendations post Neptune offer.

Ratings

[CHART]

Source: Wall Street equity research; includes analysts for whom no report was available. Excludes CSFB, Goldman Sachs and Morgan Stanley.

	Banc of America	Bernstein	JP Morgan	Merrill Lynch
Analyst	Lei Zhong, Ph.D.	Geoffrey Porges	Ronald Renaud, Jr.	Eric J. Ende
Latest Report	October 26, 2005	October 26, 2005	October 25, 2005	October 26, 2005
Comments	“Given the recent dynamics of the flu vaccine market, we believe there will be a three-way race with Heron, GSK and Aventis Pasteur.” “We view Heron as a long-term value play in the flu vaccine market. Which is what we believe is behind the Neptune offer, not the near-term relaunch of Fluvirin, but Heron’s future capacity and technology to create the second- generation flu vaccine.”	“We believe this target price [$48] can be supported regardless of Neptune’s actions, but continue to expect a further bid by Neptune at a materially higher price than their initial $40 offer. Given Heron’s improving prospects that bid may now need to be substantially higher.” “Neither our revised estimates, or our price target, or Neptune’s bid, account for the potential value of Heron’s pandemic flu vaccine opportunity, which could provide positive headlines in coming weeks and revenue upside in 2006 and later years.”	“We believe significant uncertainty surrounds 2005 earnings, as Heron awaits US approval of the first batches of Flu vaccine from its UK manufacturing facility. At 44x our 2005 EPS estimate of $1.01, we believe that the stock trades on a premium based on the potential for Neptune to raise its offer. We continue to believe that enough certainty remains in the Heron story to contribute to underperformance relative to our large cap biotech coverage universe over the next 12 months.”	“We continue to believe the parts are worth more than the whole of Heron. Weak revenues across business units and risks to growth drivers such as the Ultrio test in ‘06 and potential excess flu vaccine supply cloud the outlook for Heron if Neptune does not make or Heron does not accept further bids.”
Rating	Neutral	Market-Perform	Underweight	No Rating

Investor community concerned over Heron’s near-term prospects, particularly on its ability to supply flu vaccine; however, long-term prospects are mixed.

22

3.     Preliminary Financial Analysis

23

Recent Trading Range and Analyst Price Targets

$

		Implied Premium / (Discount) to Unaffected Share Price ($36.44)
52-Week Trading Range		(20.4)% – 26.2%
Analyst Price Targets (1)	[CHART]	(21.6)% – 7.8%
Affected Analyst Price Targets (2)		9.8% – 31.7%

(1)	Reflects analyst price targets pre-announcement of initial Neptune offer as of 8/31/05. Discounted at 12.0%
(2)	Reflects analyst price targets post announcement of initial Neptune offer as of 10/28/05; excludes CSFB and MS equity research price targets as unable to publish updates due to advisory role

24

Heron’s Valuation Parameters

Assessment of Valuation (1)

$

		Implied Premium / (Discount) to Unaffected Share Price ($36.44)
Selected Companies
Multiple-Based: 20.0x – 26.0x 2006 P/E
Company Forecast 2006 EPS $1.58		(13.3)% – 12.7%
Street Forecast 2006 EPS $1.81		(0.7)% – 29.1%
Multiple-Based: 18.0x – 24.0x 2007 P/E
Company Forecast 2007 EPS $1.91		(5.7)% – 25.8%
	[CHART]
Street Forecast 2007 EPS $1.98		(2.2)% – 30.4%
10-Year Discounted Cash Flow Management Projections
Perpetual Growth: 2.0% – 4.0% Discount Rate: 10.0% – 12.0%		11.5% – 29.4% (1.4)% – 51.8%
Sum-of-the-Parts – Management Projections
Perpetual Growth: Varies by Segment (2)Discount Rate: 10.0 – 12.0%		6.6% – 23.5% (5.9)% – 45.9%

(1)	Street forecast EPS estimates as of 10/28/05
(2)	Assumes perpetual growth rate of 1.0% – 3.0% for BioPharma (midpoint LTM NOPAT multiple of 12.4x), 2.0% – 4.0% for Vaccines (midpoint LTM NOPAT multiple of 15.4x), 2.0% – 4.0% for Blood Testing (midpoint LTM NOPAT multiple of 13.3x) and (2.0)% – 0.0% for Corporate Royalties (midpoint LTM NOPAT multiple of 8.7x); derived from Heron Management

25

Illustrative Valuation Multiples

($MM, except per share amounts)

	Illustrative
	Price per		Premium				FD		Agg.		Equity Val.		Aggregate Value/				Price/Earnings (4)
			Unaffected		30-Days		Equity		Trans.		Excluding		2006E Revenues (4)				2006E				2007E				2006E PEG (6)
	share (1)		Price (1)		Price		Value (2)		Value (3)		Neptune (5)		Street		Mgmt.		Street		Mgmt.		Street		Mgmt.		Street		Mgmt.
			$36.44		$35.75								$2,182		$2,222		$1.81		$1.58		$1.98		$1.91
Unaffected	$	36.44	0.0	%	1.9	%	$	6,911	$	6,999	$	4,021	3.2	x	3.1	x	20.1	x	23.1	x	18.4	x	19.1	x	1.29	x	1.47	x
Sept. 1 Offer	40.00		9.8		11.9		7,616		7,704		4,443		3.5		3.5		22.1		25.3		20.2		20.9		1.41		1.62
Current Price	43.40		19.1		21.4		8,294		8,382		4,851		3.8		3.8		24.0		27.5		21.9		22.7		1.53		1.76
Current Offer	45.00		23.5		25.9		8,620		8,708		5,051		4.0		3.9		24.9		28.5		22.7		23.5		1.59		1.82

Implied Value Based on Reference P/E Multiples
$	36.20	(0.7	)%	1.3	%	$	6,864	$	6,952	$	3,993	3.2	x	3.1	x	20.0	x	22.9	x	18.3	x	18.9	x	1.28	x	1.46	x
47.06		29.1		31.6		9,041		9,129		5,308		4.2		4.1		26.0		29.8		23.8		24.6		1.66		1.90
31.60		(13.3	)	(11.6	)	5,954		6,042		3,448		2.8		2.7		17.5		20.0		16.0		16.5		1.11		1.28
41.08		12.7		14.9		7,829		7,917		4,571		3.6		3.6		22.7		26.0		20.7		21.5		1.45		1.66

(1)	Heron stock price as of August 31, 2005, the day immediately prior to announcement, was $36.44.
(2)	Based on Heron primary shares of 187.9MM from 424 B3 Prospectus dated August 29, 2005, and options schedule from 10-K for the period ended December 31, 2004.
(3)	Defined as Equity Value plus net debt (cash) of Heron, which was $88.1MM based on Press Release for the period ended September 30, 2005. Includes marketable debt securities.
(4)	Heron estimates based upon First Call consensus and Heron Management Forecast as of October 2005.
(5)	Excludes 79.3MM primary shares held by Neptune.
(6)	Based on an IBES LTGR of 15.7%.

	Implied Price based on 2007E P/E
	Street		Mgmt.
18.0x	$	35.64	$	34.38
24.0x	47.52		45.84

Denotes Driver

26

Heron Trading Multiples Relative to its Peers

2006 P/E Multiples

[CHART]

2006 P/E/G Multiples

[CHART]

27

Heron Trading Multiples Relative to its Peers Over Time

NTM Forward P/E Since 01/01/03

[CHART]

NTM Forward P/E/G Since 01/01/03

[CHART]

Source: FirstCall estimates

As of 10/28/05.

Large Cap Biotech includes AMGN, BIIB, DNA, GENZ, GILD, MEDI

On a NTM P/E basis, Heron has historically traded at a discount to its biotech peers.

28

Selected Companies Analysis

(in millions, except per share amounts)

	Stock		% Of										NOPAT						Long-
	Price		52-Week		Equity		Enterprise		Revenue Multiple				Multiple		P/E				Term		PEG
Company	10/28/2005		High		Value		Value		CY 2006E		CY 2007E		LTM		CY 2006E		CY 2007E		EPS Grw.		CY 2006E		CY 2007E
Large Cap Biotech
Amgen	$	75.78	87.2	%	$	94,959	$	93,360	6.5	x	5.8	x	29.8	x	20.7	x	18.5	x	16.2	%	1.27	x	1.14	x
Biogen Idec	38.49		55.0	%	13,167		11,408		4.3		4.0		23.3		19.5		17.9		14.2	%	1.37		1.26
Celgene	53.82		91.5	%	10,873		10,149		13.5		9.8		NM		54.0		36.4		47.5	%	1.14		0.77
Genentech	87.72		92.3	%	96,269		94,605		11.0		8.6		NM		49.0		37.2		33.4	%	1.47		1.11
Genzyme	71.76		94.2	%	19,836		19,385		6.1		5.4		81.5		26.2		23.3		19.2	%	1.36		1.21
Gilead Sciences	47.12		95.3	%	22,289		20,629		9.0		7.9		33.6		26.3		24.2		19.5	%	1.35		1.24
MedImmune	34.00		95.4	%	8,508		7,638		5.5		4.8		NM		74.4		47.8		24.5	%	3.04		1.95
					Mean				8.0	x	6.6	x	42.0	x	38.6	x	29.3	x	24.9	%	1.57	x	1.24	x
					Median				6.5		5.8		31.7		26.3		24.2		19.5	%	1.36		1.21
					High				13.5		9.8		81.5		74.4		47.8		47.5	%	3.04		1.95
					Low				4.3		4.0		23.3		19.5		17.9		14.2	%	1.14		0.77

(in millions, except per share amounts)

	Stock		% Of										NOPAT						Long-
	Price		52-Week		Equity		Enterprise		Revenue Multiple				Multiple		P/E				Term		PEG
Company	10/28/2005		High		Value		Value		CY 2006E		CY 2007E		LTM		CY 2006E		CY 2007E		EPS Grw.		CY 2006E		CY 2007E
BioPharma & Blood Testing
Abbott Laboratories	$	42.75	85.5	%	$	66,807	$	71,010	3.2	x	3.0	x	22.3	x	15.9	x	14.1	x	9.5	%	1.68	x	1.48	x
Bayer AG	34.63		90.1	%	25,293		33,982		1.0		1.0		24.4		12.3		15.4		7.0	%	1.76		2.20
Johnson & Johnson	62.95		89.9	%	189,437		178,860		3.3		3.1		18.4		16.7		15.2		11.1	%	1.50		1.37
Roche Holdings	149.62		97.0	%	129,228		127,879		4.2		3.7		25.3		24.5		19.7		14.3	%	1.71		1.38
BioPharma & Vaccines
GlaxoSmithKline	$	26.49	99.0	%	$	151,966	$	154,678	3.9		3.7		17.4		17.2		15.6		6.1	%	2.81		2.54
MedImmune	34.00		95.4	%	8,508		7,638		5.5		4.8		NM		74.4		47.8		24.5	%	3.04		1.95
Merck & Co.	27.54		77.9	%	60,541		57,086		2.7		2.7		11.1		11.5		11.4		14.5	%	0.79		0.79
Sanofi Aventis	80.31		88.1	%	109,665		125,902		3.5		3.4		NM		13.3		11.8		9.5	%	1.40		1.25
Wyeth	44.70		95.2	%	60,229		62,415		3.1		2.9		17.2		14.2		13.3		7.4	%	1.93		1.81
					Mean				3.4	x	3.1	x	19.7	x	22.0	x	18.0	x	11.5	%	1.8	x	1.6	x
					Median				3.4		3.2		20.0		16.3		15.3		10.3	%	1.7		1.4
					High				5.5		4.8		25.3		74.4		47.8		24.5	%	3.0		2.5
					Low				1.0		1.0		11.1		11.5		11.4		6.1	%	0.8		0.8

(in millions, except per share amounts)

	Stock		% Of										NOPAT						Long-
	Price		52-Week		Equity		Enterprise		Revenue Multiple				Multiple		P/E				Term		PEG
Company	10/28/2005		High		Value		Value		CY 2006E		CY 2007E		LTM		CY 2006E		CY 2007E		EPS Grw.		CY 2006E		CY 2007E
Blood Testing
Beckman Coulter	$	48.75	66.5	%	$	3,097	$	3,774	1.5	x	1.4	x	15.5	x	16.1	x	13.7	x	14.1	%	1.14	x	0.97	x
Bio-Rad Laboratories	55.69		89.0	%	1,488		1,582		1.3		NA		18.2		15.5		NM		10.0	%	1.55		NM
Biosite	53.89		78.2	%	1,005		876		2.8		2.5		17.1		17.3		16.6		15.8	%	1.09		1.05
Cytyc	24.76		85.2	%	2,851		3,006		5.0		4.2		24.2		20.7		16.7		18.9	%	1.09		0.88
Dade Behring Holdings	34.63		89.5	%	1,584		1,941		1.1		1.1		14.1		23.9		22.8		17.8	%	1.34		1.28
Digene	29.99		93.3	%	610		565		3.1		2.7		79.6		40.1		20.4		30.0	%	1.34		0.68
Diagnostic Products	41.81		72.4	%	1,244		1,171		2.2		2.0		18.3		14.7		12.6		17.4	%	0.84		0.73
Gen-Probe	40.43		76.1	%	2,102		1,899		5.7		4.8		39.7		28.3		22.7		21.6	%	1.31		1.06
Immucor	25.44		70.7	%	1,208		1,176		5.3		NA		50.4		21.8		NM		23.3	%	0.93		NM
Tripath Imaging	6.75		70.9	%	262		241		2.1		1.3		NM		28.4		9.5		37.5	%	0.76		0.25
Ventana Medical System	37.61		83.7	%	1,471		1,425		5.9		NM		57.7		36.0		25.8		26.2	%	1.37		0.99
					Mean				3.3	x	2.5	x	33.5	x	23.9	x	17.9	x	21.1	%	1.16	x	0.88	x
					Median				2.8		2.3		21.2		21.8		16.7		18.9	%	1.14		0.97
					High				5.9		4.8		79.6		40.1		25.8		37.5	%	1.55		1.28
					Low				1.1		1.1		14.1		14.7		9.5		10.0	%	0.76		0.25

Note: Calendarized P/E Multiples and Long-Term EPS Growth Rates are based on I/B/E/S estimates; Projections from Wall Street Equity Research.

29

(in millions, except per share amounts)

	Stock		% Of										NOPAT					Long-
	Price		52-Week		Equity		Enterprise		Revenue Multiple				Multiple		P/E			Term		PEG
Company	10/28/2005		High		Value		Value		CY 2006E		CY 2007E		LTM		CY 2006E		CY 2007E	EPS Grw.		CY 2006E		CY 2007E
Vaccines
Acambis	$	3.81	72.4	%	$	409	$	286	1.9	x	NM		NM		NM		NM	NM		NM		NM
Berna Biotech AG	10.33		94.9	%	388		306		1.7		1.4		NM		51.0		NM	3.0	%	NM		NM
CSL Limited	27.57		90.8	%	5,108		5,318		2.5		2.4		7.0		18.6		NM	16.4	%	1.13		NM
Nabi Biopharmaceuticals	11.75		73.4	%	718		704		4.2		3.0		NM		NM		NM	NM		NM		NM
					Mean				2.6	x	2.2	x	7.0	x	34.8	x	NM	9.7	%	1.13	x	NM
					Median				2.2		2.4		7.0		34.8		NM	9.7	%	1.13		NM
					High				4.2		3.0		7.0		51.0		—	16.4	%	1.13		—
					Low				1.7		1.4		7.0		18.6		—	3.0	%	1.13		—

(in millions, except per share amounts)

	Stock		% Of										NOPAT						Long-
	Price		52-Week		Equity		Enterprise		Revenue Multiple				Multiple		P/E				Term		PEG
Company	10/28/2005		High		Value		Value		CY 2006E		CY 2007E		LTM		CY 2006E		CY 2007E		EPS Grw.		CY 2006E		CY 2007E
Biotech
Allergan	$	88.57	92.8	%	$	12,574	$	11,758	4.8	x	4.4	x	28.7	x	23.6	x	20.1	x	17.5	%	1.35	x	1.15	x
Biogen Idec	38.49		55.0	%	13,167		11,408		4.3		4.0		23.3		19.5		17.9		14.2	%	1.37		1.26
Celgene	53.82		91.5	%	10,873		10,149		13.5		9.8		NM		54.0		36.4		47.5	%	1.14		0.77
Cephalon	45.36		86.8	%	2,660		5,581		3.8		3.8		34.1		14.5		13.2		19.4	%	0.75		0.68
Elan	7.97		26.2	%	3,476		4,042		7.6		6.7		NM		NM		NM		15.8	%	NM		NM
Forest Laboratories	37.35		78.7	%	12,935		11,104		3.3		3.1		14.2		14.5		12.4		13.0	%	1.11		0.95
Genzyme	71.76		94.2	%	19,836		19,385		6.1		5.4		81.5		26.2		23.3		19.2	%	1.36		1.21
Gilead Sciences	47.12		95.3	%	22,289		20,629		9.0		7.9		33.6		26.3		24.2		19.5	%	1.35		1.24
MedImmune	34.00		95.4	%	8,508		7,638		5.5		4.8		NM		74.4		47.8		24.5	%	3.04		1.95
Millennium Pharmaceuticals	8.96		66.3	%	2,781		2,381		4.7		4.1		NM		NM		NM		15.0	%	NM		NM
Serono	16.21		82.7	%	7,171		5,579		2.0		1.7		NM		15.5		13.6		18.0	%	0.86		0.75
					Mean				5.9	x	5.1	x	35.9	x	29.8	x	23.2	x	20.3	%	1.37	x	1.11	x
					Median				4.8		4.4		31.1		23.6		20.1		18.0	%	1.35		1.15
					High				13.5		9.8		81.5		74.4		47.8		47.5	%	3.04		1.95
					Low				2.0		1.7		14.2		14.5		12.4		13.0	%	0.75		0.68

Note: Calendarized P/E Multiples and Long-Term EPS Growth Rates are based on I/B/E/S estimates; Projections from Wall Street Equity Research.

30

Heron Consolidated Discounted Cash Flow Analysis – Summary

[CHART]

31

Heron Consolidated Discounted Cash Flow Analysis

Long-Term Discounted Cash Flow Analysis Heron
Perpetual Growth Rate (%)	2.0									3.0									4.0
Discount Rate	10.0%			11.0%			12.0%			10.0%			11.0%			12.0%			10.0%			11.0%			12.0%
Present Value of (1)
Cash Flows - Year 1	$	36		$	36		$	36		$	36		$	36		$	36		$	36		$	36		$	36
Cash Flows - Year 2-11	3,751			3,549			3,362			3,751			3,549			3,362			3,751			3,549			3,362
Terminus	5,216			4,245			3,501			6,020			4,823			3,928			7,092			5,565			4,462
Aggregate Value	$	9,003		$	7,831		$	6,899		$	9,807		$	8,408		$	7,326		$	10,879		$	9,151		$	7,860
Equity Value (3)	$	8,915		$	7,743		$	6,811		$	9,719		$	8,320		$	7,238		$	10,791		$	9,063		$	7,772
Implied Share Price(2)	$	46.45		$	40.64		$	35.93		$	50.30		$	43.53		$	38.09		$	55.33		$	47.17		$	40.79
Premium over Pre-Announcement	27.5		%	11.5			(1.4		)%	38.0			19.5		%	4.5			51.8		%	29.4			11.9		%
Terminal Value Analysis
% Value in Terminus	57.9		%	54.2			50.7		%	61.4			57.4		%	53.6			65.2		%	60.8			56.8		%
% Value in Cash Flows	42.1		%	45.8			49.3		%	38.6			42.6		%	46.4			34.8		%	39.2			43.2		%
Implied Terminal Multiples
LTM Sales Multiple	3.3		x	2.9		x	2.7		x	3.8		x	3.3		x	3.0		x	4.5		x	3.9		x	3.4		x
LTM EBITDA Multiple	9.0			8.1			7.3			10.4			9.2			8.2			12.3			10.6			9.3
LTM NOPAT Multiple	14.1			12.6			11.4			16.3			14.3			12.8			19.2			16.5			14.5

Source: Heron Management Forecast as of October 2005

(1) Valuation as of 9/30/05 assuming mid-period convention

(2) Based on fully diluted share count and pre-announcement share price of $36.44 as of 8/31/05

(3) Assumes current net debt of $88.1MM as of 3Q05 earnings release

32

Discounted Cash Flow Sensitivity Analysis

Deviation from Midpoint Valuation (1)

$

Overall Company		% from Base Value ($43.53)
Discount Rate -/+1.0% (Base 11.0%)		(12.5)% – 15.6%
Perpetual Growth Rate -/+1.0% (Base 3.0%)		(6.6)% – 8.4%
Portfolio
TFPI Probability 0% – 100% Current Assumption: 61%		(25.4)% – 15.6%
Flu Cell Culture Probability 0% – 100% Current Assumption: U.S. – 30%; Europe – 75%	[CHART]	(8.8)% – 13.1%
Increase U.S. FCC POS to 60%		0.0% – 5.2%
Flu Cell Culture Probability 0% with Increase in Egg Flu Penetration		(5.2)% – 0.0%
Pandemic Stockpile Scenario (2)		0.0% – 8.9%
Pandemic Preparedness Scenario (3)		0.0% – 9.3%

(1) Base DCF value of $43.53 assumes a discount rate of 11.0% and a perpetual growth rate of 3.0%

(2) Assumes additional 160MM doses (2 doses each for 80MM people) of egg flu pandemic stockpile in 2008 and 2011 with price per dose of $9.68 ($5.18 bulk, $3.50 premium, $1.00 fill & finish)

(3) Assumes US flu cell culture accelerated by three years due to government pressure; US POS increased to match EU POS of 75%

Source: Heron Management Forecast as of October 2005

33

Heron Sum-of-the-Parts Analysis

Perpetual Growth Methodology (1)

Sum-of-the-Parts Valuation

$

[CHART]

(1) Assumes a discount rate of 11.0%

(2) As of August 31, 2005

(3) Assumes perpetual growth rate of 2.0% for BioPharma, 3.0% for Vaccines, 3.0% for Blood Testing and (1.0)% for Corporate Royalties

Source: Heron Management Forecast as of October 2005

34

Appendix

35

WACC

36

Weighted Average Cost of Capital

($MM, except per share amounts)

	Stock Price				FD Capitalization (1)						Beta (2)		Cost of (4)				Current		WACC Assuming Varying Levels of Debt/Total Cap (3),(4),(5)
Company	10/28/05		Equity		Equity %		Debt		Debt %		Equity	Asset (3)	Equity		Asset		WACC (3),(4),(5)		0.0%		11.8%		20.0%
Heron	$	43.40	$	8,294	88.2	%	$	1,106	11.8	%	0.994	0.915	11.9	%	11.3	%	10.9	%	11.3	%	10.9	%	10.7	%
Biotech
Allergan Inc	$	88.57	$	12,574	99.5	%	$	57	0.5	%	0.695	0.693	9.7	%	9.7	%	9.7	%	9.7	%	9.4	%	9.2	%
Biogen Idec Inc	38.49		13,167		99.7	%	42		0.3	%	1.526	1.523	15.7	%	15.7	%	15.6	%	15.7	%	15.1	%	14.7	%
Celgene Corp	53.82		10,873		100.0	%	0		0.0	%	1.444	1.444	15.1	%	15.1	%	15.1	%	15.1	%	14.6	%	14.2	%
Cephalon Inc	45.36		2,660		56.0	%	2,090		44.0	%	1.259	0.833	13.8	%	10.7	%	9.4	%	10.7	%	10.4	%	10.1	%
Elan Corp Plc -Adr	7.97		3,476		66.3	%	1,763		33.7	%	1.954	1.470	18.8	%	15.3	%	13.8	%	15.3	%	14.8	%	14.4	%
Forest Laboratories -Cl A	37.35		12,935		100.0	%	0		0.0	%	1.038	1.038	12.2	%	12.2	%	12.2	%	12.2	%	11.8	%	11.5	%
Genzyme Corp	71.76		19,836		97.5	%	499		2.5	%	1.024	1.008	12.1	%	12.0	%	11.9	%	12.0	%	11.6	%	11.3	%
Gilead Sciences Inc	47.12		22,289		100.0	%	0		0.0	%	1.150	1.150	13.0	%	13.0	%	13.0	%	13.0	%	12.5	%	12.2	%
Medimmune Inc	34.00		8,508		94.4	%	505		5.6	%	1.208	1.163	13.4	%	13.1	%	12.9	%	13.1	%	12.6	%	12.3	%
Millennium Pharmaceuticals	8.96		2,781		93.6	%	189		6.4	%	1.883	1.803	18.3	%	17.7	%	17.3	%	17.7	%	17.1	%	16.6	%
Serono Sa -Adr	16.21		7,171		91.6	%	653		8.4	%	0.727	0.686	9.9	%	9.6	%	9.4	%	9.6	%	9.3	%	9.1	%
Median					97.5	%			2.5	%	1.208	1.150	13.4	%	13.0	%	12.9	%	13.0	%	12.5	%	12.2	%
Mean					90.8	%			9.2	%	1.264	1.165	13.8	%	13.1	%	12.8	%	13.1	%	12.6	%	12.3	%
BioPharma & Blood Testing
Johnson & Johnson	$	62.95	$	189,437	98.6	%	$	2,633	1.4	%	0.574	0.569	8.8	%	8.8	%	8.8	%	8.8	%	8.5	%	8.3	%
Abbott Laboratories	42.75		66,807		92.1	%	5,737		7.9	%	0.653	0.618	9.4	%	9.2	%	9.0	%	9.2	%	8.9	%	8.7	%
Bayer Ag	34.63		25,293		74.4	%	8,692		25.6	%	0.867	0.709	10.9	%	9.8	%	9.1	%	9.8	%	9.5	%	9.3	%
Roche Hldgs Ag	149.62		129,228		89.8	%	14,705		10.2	%	0.634	0.590	9.3	%	9.0	%	8.7	%	9.0	%	8.7	%	8.5	%
Median					90.9	%			9.1	%	0.644	0.604	9.3	%	9.1	%	8.9	%	9.1	%	8.8	%	8.6	%
Mean					88.7	%			11.3	%	0.682	0.622	9.6	%	9.2	%	8.9	%	9.2	%	8.9	%	8.7	%
BioPharma & Vaccines
Glaxosmithkline Plc -Adr	$	26.49	$	151,966	95.6	%	$	6,920	4.4	%	0.380	0.369	7.4	%	7.4	%	7.3	%	7.4	%	7.2	%	7.0	%
Medimmune Inc	34.00		8,508		94.4	%	505		5.6	%	1.208	1.163	13.4	%	13.1	%	12.9	%	13.1	%	12.6	%	12.3	%
Merck & Co	27.54		60,541		89.4	%	7,167		10.6	%	0.858	0.797	10.9	%	10.4	%	10.1	%	10.4	%	10.1	%	9.9	%
Sanofi-Aventis -Adr	80.31		109,665		87.9	%	15,044		12.1	%	0.612	0.562	9.1	%	8.7	%	8.5	%	8.7	%	8.5	%	8.3	%
Wyeth	44.70		60,229		88.3	%	7,956		11.7	%	0.635	0.585	9.3	%	8.9	%	8.6	%	8.9	%	8.6	%	8.5	%
Median					89.4	%			10.6	%	0.635	0.585	9.3	%	8.9	%	8.6	%	8.9	%	8.6	%	8.5	%
Mean					91.1	%			8.9	%	0.739	0.695	10.0	%	9.7	%	9.5	%	9.7	%	9.4	%	9.2	%
Large Cap Biotech
Amgen Inc	$	75.78	$	94,959	96.0	%	$	3,952	4.0	%	1.075	1.047	12.4	%	12.2	%	12.1	%	12.2	%	11.8	%	11.5	%
Biogen Idec Inc	38.49		13,167		99.7	%	42		0.3	%	1.526	1.523	15.7	%	15.7	%	15.6	%	15.7	%	15.1	%	14.7	%
Celgene Corp	53.82		10,873		100.0	%	0		0.0	%	1.444	1.444	15.1	%	15.1	%	15.1	%	15.1	%	14.6	%	14.2	%
Genentech Inc	87.72		96,269		97.5	%	2,485		2.5	%	1.237	1.217	13.6	%	13.5	%	13.4	%	13.5	%	13.0	%	12.7	%
Genzyme Corp	71.76		19,836		97.5	%	499		2.5	%	1.024	1.008	12.1	%	12.0	%	11.9	%	12.0	%	11.6	%	11.3	%
Gilead Sciences Inc	47.12		22,289		100.0	%	0		0.0	%	1.150	1.150	13.0	%	13.0	%	13.0	%	13.0	%	12.5	%	12.2	%
Medimmune Inc	34.00		8,508		94.4	%	505		5.6	%	1.208	1.163	13.4	%	13.1	%	12.9	%	13.1	%	12.6	%	12.3	%
Median					97.5	%			2.5	%	1.208	1.163	13.4	%	13.1	%	13.0	%	13.1	%	12.6	%	12.3	%
Mean					97.9	%			2.1	%	1.238	1.222	13.6	%	13.5	%	13.4	%	13.5	%	13.0	%	12.7	%
Overall Median					95.6	%			4.4	%	1.075	1.038	12.4	%	12.2	%	12.1	%	12.2	%	11.8	%	11.5	%
Overall Mean					92.4	%			7.6	%	1.074	1.012	12.4	%	12.0	%	11.7	%	12.0	%	11.6	%	11.3	%

(1) Converts treated as debt.

(2) Based on BARRA research dated September 30, 2005.

(3) Based on marginal tax rate of 35%.

(4) Based on a 20-Year Interpolated U.S. Treasury yield of 4.70% as of October 23, 2005, and equity market risk premium of 7.20%. (Source: Bloomberg and Ibbotson)

(5) Based on 6.0% cost of debt.

37

Other Metrics

38

Other Metrics - Select Biotechnology Precedent Acquisitions

Biotechnology Precedent Transactions

Date			Offer Price		Transaction Value				% Premium from						Aggregate Value / Revenue						Implied P/E
Ann.	Acquiror	Target	Per Share		Equity		Aggregate		1 Day Prior		1 Month Prior		3 Month Prior		LTM		1-yr. Fwd.		2-yr. Fwd.		1-yr. Fwd.		2-yr. Fwd.
9/7/2005	GlaxoSmithKline	ID Biomedical	$	29.54	$	1,428	$	1,506	13.0	%	42.7	%	74.7	%	63.7	x	26.9	x	6.8	x	NM		NM
8/22/2005	OSI Pharma	Eyetech	20.00		935		673		43.0	%	64.1	%	(15.8	)%	5.8	x	2.7	x	1.6	x	NM		21.7	x
7/21/2005	MGI Pharma	Guilford	3.75		178		266		57.5	%	41.1	%	53.6	%	5.3	x	5.8	x	6.3	x	NM		NM
6/16/2005	Pfizer	Vicuron	29.10		1,915		1,788		84.2	%	67.2	%	71.3	%	NM		NM		17.3	x	NM		NM
5/4/2005	Genzyme	Bone Care International	33.00		725		606		38.5	%	26.5	%	11.8	%	8.2	x	6.1	x	5.0	x	46.2	x	29.9	x
4/29/2005	GlaxoSmithKline	Corixa Corp	4.40		300		333		47.7	%	37.5	%	19.9	%	13.3	x	9.9	x	8.8	x	NM		NM
4/21/2005	Shire Pharmaceuticals	Transkaryotic Therapies	37.00		1,570		1,509		13.4	%	54.5	%	43.8	%	19.3	x	15.8	x	14.1	x	NM		NM
4/19/2005	Jazz Pharmaceuticals	Orphan Medical	10.75		125		112		25.7	%	8.8	%	26.3	%	4.7	x	3.3	x	2.5	x	NM		44.8	x
6/14/2004	QLT	Atrix	38.50		787		683		27.2	%	27.9	%	38.8	%	13.6	x	10.0	x	7.3	x	60.0	x	26.8	x
5/18/2004	UCB	Celltech	19.44		2,687		2,413		27.9	%	20.2	%	20.1	%	3.9	x	NA		NA		NM		NM
3/29/2004	Amgen	Tularik	25.00		1,457		1,285		47.1	%	35.9	%	47.1	%	41.9	x	37.7	x	33.4	x	NM		NM
2/26/2004	Genzyme Corp.	Ilex Oncology	26.00		1,050		889		22.0	%	9.0	%	26.3	%	25.6	x	23.8	x	12.8	x	NM		NM
12/21/2003	Pfizer	Esperion	35.00		1,281		1,198		54.2	%	57.6	%	70.6	%	NM		NA		NA		NM		NM
8/4/2003	Genzyme	Sangstat	22.50		611		532		45.4	%	59.0	%	86.1	%	4.2	x	NA		NA		NM		NM
5/19/2003	Chiron	PowderJect	9.00		878		789		6.5	%	32.5	%	40.1	%	3.0	x	3.0	x	2.6	x	21.4	x	15.4	x
2/10/2003	Johnson & Johnson	Scios	45.00		2,351		2,356		6.6	%	25.4	%	52.5	%	30.5	x	12.1	x	8.7	x	NM		NM
12/17/2001	Amgen	Immunex	29.15		16,677		15,660		13.8	%	12.0	%	70.6	%	16.3	x	12.5	x	8.5	x	NM		NM
12/6/2001	Millennium	COR Therapeutics	35.00		2,102		2,069		77.3	%	64.0	%	29.0	%	16.5	x	10.7	x	9.2	x	NM		48.6	x
12/3/2001	MedImmune	Aviron	47.41		1,607		1,392		28.0	%	47.9	%	95.1	%	41.2	x	93.3	x	11.5	x	NM		NM
3/27/2001	Johnson & Johnson	Alza	41.83		12,004		11,000		8.0	%	1.4	%	(3.0	)%	11.1	x	5.7	x	8.1	x	42.3	x	34.0	x
12/11/2000	Shire	BioChem Pharma	37.00		4,004		3,732		39.6	%	52.1	%	89.6	%	17.2	x	16.9	x	18.3	x	NM		NM
9/11/2000	Elan	Dura	35.00		1,757		1,820		22.3	%	49.3	%	155.7	%	5.5	x	5.7	x	5.7	x	53.0	x	47.9	x
9/11/2000	Genzyme General	GelTex	47.50		1,050		938		27.1	%	33.8	%	122.2	%	NM		NM		NM		NM		NM
8/14/2000	Chiron	Pathogenesis	38.50		697		660		17.6	%	38.7	%	96.8	%	8.7	x	7.7	x	6.3	x	NM		60.2	x
3/6/2000	Elan	Liposome Comp.	15.28		742		679		6.3	%	20.4	%	42.1	%	7.6	x	6.8	x	6.5	x	50.2	x	46.9	x
							Mean:		32.0	%	37.2	%	54.6	%	16.7	x	15.8	x	9.6	x	45.5	x	37.6	x
							Median:		27.2	%	37.5	%	47.1	%	12.2	x	10.0	x	8.1	x	48.2	x	39.4	x

Source: FactSet and company filings

39

Other Metrics - Premiums Paid in Minority Squeeze Outs

1 -Day Premiums Paid in Precedent Squeeze Out Transactions

[CHART]

Note: Total number of deals includes some squeeze outs where pre-transaction ownership was not disclosed

Spot Price Premiums at Various Ownership Levels (1)

	All Transactions				<60% Ownership				60-70% Ownership				70-80% Ownership				>80% Ownership
	1-Day		1-Month		1-Day		1-Month		1-Day		1-Month		1-Day		1-Month		1-Day		1-Month
75th Percentile	35	%	42	%	42	%	34	%	26	%	42	%	46	%	52	%	27	%	51	%
Mean	25	%	29	%	34	%	27	%	22	%	33	%	30	%	38	%	21	%	28	%
Median	20	%	25	%	25	%	19	%	20	%	29	%	27	%	27	%	15	%	24	%
25th Percentile	10	%	12	%	18	%	16	%	13	%	19	%	11	%	16	%	4	%	7	%

Note: Boxed items are represented in graph.

(1) Represents acquiror’s pre-transaction ownership in target.

40

Business Unit P&Ls

41

BioPharma Segment P&L

BioPharma PROJECT HERON P&L $MM	POS	2006		2007		2008		2009		2010		2011		2012		2013		2014		2015
REVENUE (Pos-Adj.)
Proleukin	100%	107.0		95.1		87.4		83.6		80.5		78.5		77.2		76.2		76.0		75.5
TOBI	100%	229.2		239.5		175.7		137.0		96.2		83.3		80.9		79.0		77.6		76.6
Betaseron	100%	150.8		182.9		180.9		187.2		177.0		177.5		165.5		113.3		86.0		68.4
TFPI	61%	0.0		0.0		23.5		141.1		356.0		465.2		633.7		635.5		673.7		727.4
258	15%	0.0		0.0		0.0		0.0		3.9		12.3		35.9		54.3		67.5		78.5
12.12	17%	0.0		0.0		0.0		0.0		0.0		8.9		30.1		60.6		84.3		95.1
TIP	75%	0.0		0.0		71.9		120.0		170.7		192.8		205.1		220.4		234.7		256.4
CSI	NA	0.0		0.0		0.0		0.0		0.0		0.0		0.0		0.0		0.0		0.0
Other Products		62.6		88.9		112.3		142.9		163.6		176.2		194.1		206.2		239.1		273.2
Net Product Sales		549.5		606.4		651.6		811.7		1,047.8		1,194.7		1,422.4		1,445.4		1,538.8		1,651.3
Joint Business		0.0		0.0		0.0		0.0		0.0		0.0		0.0		0.0		0.0		0.0
Collaborative Agreements		1.0		1.0		1.0		1.0		1.0		1.0		1.0		1.0		1.0		1.0
Royalties		52.2		35.0		37.9		39.4		35.0		26.4		26.6		26.8		22.5		22.6
Other Revenues		9.2		9.6		9.3		0.3		0.3		0.3		0.3		0.3		0.3		0.3
TOTAL BioPharma REVENUE (Pos-Adj)		612.0		652.0		699.9		852.4		1,084.1		1,222.5		1,450.3		1,473.4		1,562.7		1,675.2
% Growth		-5.2	%	6.5	%	7.3	%	21.8	%	27.2	%	12.8	%	18.6	%	1.6	%	6.1	%	7.2	%
TOTAL BioPharma COGS (Pos-Adj)		158.5		177.3		207.5		235.0		261.2		310.5		359.7		380.6		387.1		396.1
% Growth		3.9	%	11.9	%	17.0	%	13.2	%	11.1	%	18.9	%	15.9	%	5.8	%	1.7	%	2.3	%
TOTAL BioPharma GROSS PROFIT (Pos-Adj.)		453.4		474.6		492.4		617.5		823.0		912.0		1,090.6		1,092.8		1,175.6		1,279.1
% Margin		74.1	%	72.8	%	70.3	%	72.4	%	75.9	%	74.6	%	75.2	%	74.2	%	75.2	%	76.4	%
TOTAL BioPharma Research & Development (Pos-Adj		297.2		305.1		337.6		290.7		287.3		330.5		372.8		389.1		401.3		425.2
% Margin		48.6	%	46.8	%	48.2	%	34.1	%	26.5	%	27.0	%	25.7	%	26.4	%	25.7	%	25.4	%
% Growth		10.7	%	2.6	%	10.7	%	-13.9	%	-1.2	%	15.0	%	12.8	%	4.4	%	3.1	%	5.9	%
TOTAL BioPharma S&M (Pos-Adj)		144.9		162.7		206.9		216.3		222.5		227.6		241.2		253.4		269.6		291.3
% Margin		23.7	%	25.0	%	29.6	%	25.4	%	20.5	%	18.6	%	16.6	%	17.2	%	17.3	%	17.4	%
% Growth		0.4	%	12.3	%	27.2	%	4.5	%	2.9	%	2.3	%	6.0	%	5.1	%	6.4	%	8.0	%
TOTAL BioPharma G&A (Pos-Adj)		31.3		32.3		37.0		42.7		53.6		60.0		69.8		73.5		77.9		82.7
% Margin		5.1	%	5.0	%	5.3	%	5.0	%	4.9	%	4.9	%	4.8	%	5.0	%	5.0	%	4.9	%
% Growth		5.6	%	3.1	%	14.5	%	15.4	%	25.5	%	11.9	%	16.4	%	5.3	%	6.0	%	6.1	%
Other Operating Expenses		12.9		13.3		8.5		0.2		0.2		0.2		0.2		0.2		0.2		0.2
Biopharma Corporate Overhead Allocation		0.0		0.0		0.0		0.0		0.0		0.0		0.0		0.0		0.0		0.0
TOTAL BioPharma OPERATING EXPENSES		486.4		513.4		590.0		549.9		563.6		618.2		684.0		716.3		749.1		799.4
TOTAL BioPharma EXPENSES		644.9		690.7		797.6		784.9		824.8		928.7		1,043.7		1,096.9		1,136.2		1,195.5
BioPharma OPERATING INCOME (LOSS)		(32.9	)	(38.7	)	(97.7	)	67.5		259.4		293.7		406.6		376.5		426.5		479.7
% Margin		NM		NM		NM		7.9	%	23.9	%	24.0	%	28.0	%	25.6	%	27.3	%	28.6	%
% Growth		-173.8	%	17.6	%	152.1	%	-169.2	%	284.0	%	13.2	%	38.4	%	-7.4	%	13.3	%	12.5	%

Source: Heron Management Forecast as of October 2005

42

Vaccines Segment P&L

Vaccines PROJECT HERON P&L $MM	POS	2006		2007		2008		2009		2010		2011		2012		2013		2014		2015
REVENUE (Pos-Adj.)
Egg Flu	100%	545.2		588.3		659.7		598.3		618.3		598.3		476.9		394.0		255.5		116.8
WW Flu Cell Culture	30% US / 75% EU	0.0		0.0		0.0		92.7		125.5		150.3		209.8		253.4		326.6		397.0
Men B NZ	100%	3.0		2.4		2.4		2.4		2.4		2.4		2.4		2.4		2.4		2.4
Men B EU	25%	0.0		0.0		0.0		31.9		100.4		8.1		6.6		5.7		4.9		4.2
Men B US	25%	0.0		0.0		0.0		169.6		276.0		32.9		34.3		19.3		16.6		14.3
Men ABCYW	15%	0.0		0.0		0.0		0.0		0.0		477.9		483.7		283.6		248.4		215.2
Men ABCYW-HIB	NA	0.0		0.0		0.0		0.0		0.0		0.0		0.0		0.0		0.0		0.0
HCV Therapeutic	11%	0.0		0.0		0.0		0.0		0.0		0.0		54.2		60.5		63.6		66.6
HCV Prophylactic	19%	0.0		0.0		0.0		0.0		0.0		0.0		8.6		17.0		65.8		62.5
Other Products		356.4		390.1		415.3		429.8		442.1		416.6		413.0		412.5		415.1		420.2
Net Product Sales		904.6		980.8		1,077.4		1,324.7		1,564.7		1,686.7		1,689.5		1,448.4		1,398.9		1,299.3
Collaborative Agreements		0.0		1.0		0.0		0.0		0.0		0.0		0.0		0.0		0.0		0.0
Royalties		3.9		3.4		2.9		1.4		1.4		1.0		0.0		0.0		0.0		0.0
Other Revenue		12.1		13.1		14.1		13.9		16.4		20.8		20.8		25.8		25.8		30.2
Other Revenues		15.9		17.5		17.0		15.2		17.7		21.8		20.8		25.8		25.8		30.2
TOTAL VACCINES REVENUE (Pos-Adj)		920.5		998.3		1,094.4		1,339.9		1,582.4		1,708.4		1,710.2		1,474.1		1,424.7		1,329.5
% Growth		19.0	%	8.4	%	9.6	%	22.4	%	18.1	%	8.0	%	0.1	%	-13.8	%	-3.4	%	-6.7	%
TOTAL VACCINES COGS (Pos-Adj)		450.2		450.8		467.4		549.3		571.8		600.1		610.7		594.2		599.9		488.4
% Margin		48.9	%	45.2	%	42.7	%	41.0	%	36.1	%	35.1	%	35.7	%	40.3	%	42.1	%	36.7	%
% Growth		15.5	%	0.1	%	3.7	%	17.5	%	4.1	%	4.9	%	1.8	%	-2.7	%	1.0	%	-18.6	%
TOTAL VACCINES GROSS PROFIT (Pos-Adj.)		470.4		547.5		627.0		790.6		1,010.6		1,108.3		1,099.5		879.9		824.8		841.0
% Margin		51.1	%	54.8	%	57.3	%	59.0	%	63.9	%	64.9	%	64.3	%	59.7	%	57.9	%	63.3	%
TOTAL VACCINES Research & Development (Pos-Adj)		150.1		151.5		159.0		169.0		170.2		165.0		167.3		150.8		147.1		136.3
R&D as % of Total Revenue		16.3	%	15.2	%	14.5	%	12.6	%	10.8	%	9.7	%	9.8	%	10.2	%	10.3	%	10.3	%
% Growth		6.0	%	0.9	%	5.0	%	6.2	%	0.7	%	-3.1	%	1.4	%	-9.9	%	-2.5	%	-7.3	%
TOTAL VACCINES S&M (Pos-Adj)		110.7		114.7		133.6		160.4		183.2		206.5		197.8		169.6		163.8		152.2
S&M as % of Product Sales		12.2	%	11.7	%	12.4	%	12.1	%	11.7	%	12.2	%	11.7	%	11.7	%	11.7	%	11.7	%
% Growth		-0.9	%	3.6	%	16.5	%	20.1	%	14.2	%	12.7	%	-4.2	%	-14.3	%	-3.4	%	-7.1	%
TOTAL VACCINES G&A (Pos-Adj)		50.3		53.7		56.3		66.7		73.0		83.9		93.7		83.2		84.7		83.8
G&A as % Total Revenue		5.5	%	5.4	%	5.1	%	5.0	%	4.6	%	4.9	%	5.5	%	5.6	%	5.9	%	6.3	%
% Growth		-6.8	%	6.8	%	4.9	%	18.5	%	9.5	%	14.9	%	11.7	%	-11.3	%	1.9	%	-1.1	%
Other Operating Expenses		0.2		0.2		0.1		0.1		0.0		0.0		0.0		0.0		0.0		0.0
Vaccines Corporate Overhead Allocation		0.0		0.0		0.0		0.0		0.0		0.0		0.0		0.0		0.0		0.0
TOTAL VACCINES OPERATING EXPENSES		311.3		320.0		349.1		396.2		426.5		455.4		458.9		403.6		395.6		372.2
TOTAL VACCINES EXPENSES		761.4		770.8		816.5		945.5		998.3		1,055.4		1,069.6		997.8		995.6		860.6
VACCINES OPERATING INCOME (LOSS)		159.1		227.5		277.9		394.4		584.1		653.0		640.6		476.3		429.1		468.8
% Margin		17.3	%	22.8	%	25.4	%	29.4	%	36.9	%	38.2	%	37.5	%	32.3	%	30.1	%	35.3	%
% Growth		112.3	%	43.0	%	22.2	%	41.9	%	48.1	%	11.8	%	-1.9	%	-25.7	%	-9.9	%	9.3	%

Source: Heron Management Forecast as of October 2005

43

Blood Testing Segment P&L

BLOOD TESTING PROJECT HERON P&L $MM	POS	2006		2007		2008		2009		2010		2011		2012		2013		2014		2015
REVENUE (Pos-Adj.)
NAT
Current Products
Duplex	100%	89.2		23.9		25.6		25.6		23.1		20.6		18.2		15.7		13.2		10.8
dHBV	100%	1.3		0.0		0.0		0.0		0.0		0.0		0.0		0.0		0.0		0.0
Ultrio	100%	229.0		353.5		380.7		383.4		353.8		318.4		271.8		231.1		190.9		151.5
WNV	100%	43.3		57.6		57.6		57.6		53.7		48.0		42.2		36.5		30.8		25.1
Total Current Products Revenue		362.8		435.0		463.9		466.5		430.6		386.9		332.2		283.4		234.9		187.3
New Products
Blood Type Conversion	35%	0.0		0.0		12.7		33.2		61.9		85.7		99.4		111.9		116.1		117.3
Bacterial Detection	NA	0.0		0.0		0.0		0.0		0.0		0.0		0.0		0.0		0.0		0.0
Parvo	75%	0.0		0.3		3.0		13.2		11.8		10.5		9.1		7.7		6.4		5.1
Prion	50%	0.0		37.7		68.8		74.1		83.7		90.5		89.4		90.6		90.6		90.6
Next Generation NAT	100%	0.0		0.0		0.0		74.1		153.2		253.2		308.8		381.9		465.0		548.1
Total New Products Revenue		0.0		38.0		84.5		194.6		310.6		439.9		506.6		592.1		678.1		761.0
Total Instrument & Service Revenue		28.2		16.3		19.7		13.8		9.4		8.3		7.7		6.8		6.0		4.5
Other Plasma Sales		0.0		0.0		0.0		0.0		0.0		0.0		0.0		0.0		0.0		0.0
Total NAT Product Revenue		391.0		489.3		568.1		674.9		750.6		835.1		846.5		882.3		919.0		952.9
Plasma Royalties (Homebrew)		11.0		11.0		18.8		8.3		6.6		6.0		6.0		6.0		6.0		6.0
Whole Blood and Plasma Royalties (Roche)		54.4		50.2		46.0		56.8		18.8		18.8		18.9		18.9		19.0		19.1
Total NAT Royalty Revenue		65.4		61.1		64.8		65.1		25.4		24.8		24.9		24.9		25.0		25.1
Grants for R&D (Other)		1.0		1.0		1.0		1.0		1.0		1.0		1.0		1.0		1.0		1.0
TOTAL NAT REVENUE		457.4		551.5		634.0		741.0		777.0		860.9		872.4		908.2		945.0		979.0
% Growth		26.5	%	20.6	%	15.0	%	16.9	%	4.9	%	10.8	%	1.3	%	4.1	%	4.0	%	3.6	%
ORTHO JOINT BUSINESS
Product Sales		26.3		26.5		26.8		27.1		27.3		27.6		27.9		28.2		28.4		28.7
Hep Retro Amortization (Royalty)		5.0		5.0		5.0		5.0		2.5		0.0		0.0		0.0		0.0		0.0
Contract Revenues		10.1		10.2		10.3		10.4		10.5		10.6		10.7		10.8		10.9		11.0
Joint Business Profits		109.8		107.6		105.4		103.3		101.2		99.2		97.2		95.3		93.4		91.5
TOTAL ORTHO REVENUE		151.2		149.3		147.5		145.8		141.6		137.4		135.8		134.3		132.8		131.3
TOTAL BLOOD TESTING REVENUE		608.6		700.8		781.5		886.8		918.6		998.4		1,008.2		1,042.5		1,077.7		1,110.2
% Growth		13.6	%	15.2	%	11.5	%	13.5	%	3.6	%	8.7	%	1.0	%	3.4	%	3.4	%	3.0	%
TOTAL BLOOD TESTING COGS		225.1		263.8		296.4		348.1		388.6		435.0		447.1		471.5		496.7		520.7
% Growth		23.7	%	17.2	%	12.4	%	17.4	%	11.6	%	11.9	%	2.8	%	5.5	%	5.3	%	4.8	%
TOTAL BLOOD TESTING GROSS PROFIT (Pos-Adj.)		383.5		437.1		485.1		538.7		530.0		563.4		561.1		571.0		581.1		589.5
% Margin		63.0	%	62.4	%	62.1	%	60.7	%	57.7	%	56.4	%	55.7	%	54.8	%	53.9	%	53.1	%
TOTAL BLOOD TESTING R&D		32.1		44.6		38.2		40.3		53.7		57.5		58.2		59.9		61.9		62.7
% Margin		5.3	%	6.4	%	4.9	%	4.5	%	5.8	%	5.8	%	5.8	%	5.7	%	5.7	%	5.6	%
% Growth		2.0	%	39.0	%	-14.4	%	5.4	%	33.2	%	7.1	%	1.2	%	3.0	%	3.2	%	1.3	%
TOTAL BLOOD TESTING S&M		45.2		48.7		55.3		62.6		66.1		68.8		70.5		74.9		79.2		83.4
% Margin		7.4	%	6.9	%	7.1	%	7.1	%	7.2	%	6.9	%	7.0	%	7.2	%	7.3	%	7.5	%
% Growth		7.8	%	7.7	%	13.6	%	13.3	%	5.5	%	4.1	%	2.5	%	6.2	%	5.7	%	5.3	%
TOTAL BLOOD TESTING G&A		4.9		5.2		5.4		5.7		6.0		6.3		6.6		7.0		7.3		7.7
% Margin		0.8	%	0.7	%	0.7	%	0.6	%	0.7	%	0.6	%	0.7	%	0.7	%	0.7	%	0.7	%
% Growth		-2.8	%	5.0	%	5.0	%	5.0	%	5.0	%	5.0	%	5.0	%	5.0	%	5.0	%	5.0	%
Blood Testing Corporate Overhead Allocation		0.0		0.0		0.0		0.0		0.0		0.0		0.0		0.0		0.0		0.0
TOTAL OPERATING EXPENSES		82.2		98.5		98.9		108.6		125.8		132.6		135.3		141.8		148.4		153.7
TOTAL EXPENSES		307.3		362.2		395.4		456.8		514.4		567.6		582.4		613.3		645.0		674.5
BLOOD TESTING OPERATING INCOME (LOSS)		301.2		338.6		386.1		430.0		404.2		430.8		425.8		429.1		432.7		435.8
% Margin		49.5	%	48.3	%	49.4	%	48.5	%	44.0	%	43.1	%	42.2	%	41.2	%	40.1	%	39.2	%
% Growth		9.5	%	12.4	%	14.1	%	11.4	%	-6.0	%	6.6	%	-1.2	%	0.8	%	0.8	%	0.7	%

Source: Heron Management Forecast as of October 2005

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