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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
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Form 10-K

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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

FOR THE FISCAL YEAR ENDED DECEMBER 31, 1998

COMMISSION FILE NO. 0-27698

CHIREX INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

DELAWARE 04-3296309
(STATE OR OTHER JURISDICTION OF (IRS EMPLOYER IDENTIFICATION NUMBER)
INCORPORATION OR ORGANIZATION)

300 ATLANTIC STREET, SUITE 402 06901
STAMFORD, CONNECTICUT (ZIP CODE)
(ADDRESS OF PRINCIPLE EXECUTIVE OFFICE)

(203) 351-2300
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)

TITLE OF EACH CLASS OF SECURITIES
REGISTERED PURSUANT TO SECTION 12(g)
OF THE SECURITIES EXCHANGE ACT NAME OF EXCHANGE
OF 1934 ON WHICH REGISTERED

-------------------------------- --------------------------------

COMMON STOCK, $.01 PAR VALUE THE NASDAQ STOCK MARKET'S NATIONAL
MARKET
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE SECURITIES EXCHANGE
ACT OF 1934: NONE.

Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No []

Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]

The aggregate market value of the voting stock held by non-affiliates of
the registrant was approximately $269,122,158 as of February 19, 1999.

APPLICABLE ONLY TO CORPORATE REGISTRANTS

As of February 19, 1999 there were 11,894,902 shares outstanding (excluding
as of such date 1,872,043 shares of common stock issuable upon exercise of
options with a weighted average price of $11.98 per share).

DOCUMENTS INCORPORATED BY REFERENCE

Items 7 and 8 of Part II incorporate by reference the Registrant's
1998 Annual Report to Stockholders. Part III incorporates by reference the
Registrant's Proxy Statement for the 1999 Annual Meeting of Stockholders.
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CHIREX INC.

TABLE OF CONTENTS

PAGE

PART I

ITEM 1. BUSINESS....................................................................... 1
ITEM 2. PROPERTIES..................................................................... 34
ITEM 3. LEGAL PROCEEDINGS.............................................................. 34
ITEM 4. SUBMISSIONS OF MATTERS TO A VOTE OF SECURITY HOLDERS........................... 34

PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS........................................................................ 35
ITEM 6. SELECTED HISTORICAL FINANCIAL DATA............................................. 35
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
AND FINANCIAL CONDITION........................................................ 37
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.................................... 37
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE........................................................... 37

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT............................. 38
ITEM 11. EXECUTIVE COMPENSATION......................................................... 38
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT................. 38
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS................................. 38

PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K............... 39

PART I
ITEM 1. BUSINESS

GENERAL

ChiRex is an integrated outsourcing company that provides an extensive
range of services to pharmaceutical and life science companies. Our services
span from the early stages of post-discovery drug development to full scale
manufacturing of active ingredients. As a customer develops a new molecule for
possible drug therapies, the creation of the compound goes through a number of
phases, any one or all of which are suitable for outsourcing to third parties
such as ChiRex, including:

. design, development and synthesis of molecules, including process
development;

. evaluation, analysis and scale-up activities; and

. full scale production in accordance with current Good Manufacturing
Practices ("cGMP") at two FDA inspected sites.

We are one of only a few outsourcing companies to offer all of these
services in-house in addition to offering proprietary process technologies. By
offering integrated services, we are able to minimize the risks, costs and time
associated with our customers bringing new drugs to market. Specifically, we
provide contract process research and development and pharmaceutical fine
chemical manufacturing services, while also offering our customers access to our
extensive portfolio of proprietary technologies. Our contract manufacturing
services, developed over the past 30 years, include process research and
development, hazard evaluation, analytical methods development, clinical
quantity production and both pilot-scale and commercial scale manufacturing. In
addition, we utilize our proprietary technologies to solve process development
challenges for our customers and reduce drug development time.

Prior to our initial public offering in March 1996, we were primarily a
contract manufacturing organization with a single facility in Dudley, England.
Since completing our initial public offering, we have taken steps to become a
high-quality, full-service outsourcing company. For example, we (i) optimized
our Dudley facility and disposed of non-core products, primarily our
acetaminophen business; (ii) opened our research and development laboratories
and an associated pilot plant (collectively, the "Development Center") at the
Dudley site that has allowed us to develop products successfully for our
customers, many of which products are

based on our proprietary process chemistry technologies; (iii) purchased a cGMP
facility in Annan, Scotland, in the fall of 1997 from Glaxo Wellcome and entered
into a five-year supply agreement with Glaxo Wellcome which we estimate will
provide for approximately $450 million in aggregate sales; and (iv) redesigned,
reconfigured and upgraded the Annan facility to manufacture products under the
Glaxo Wellcome supply agreement and to increase the general flexibility of the
facility to produce products for other leading pharmaceutical and life
science companies. In addition, in April 1999 we plan to open our new process
development facility, the ChiRex Technology Center (the "CTC"), in Boston,
Massachusetts. The CTC will expand our capacity to assist our customers in the
design, development and synthesis of molecules during clinical and pre-clinical
phases, work which was previously performed to a limited extent at our
Development Center. The CTC will enable us to capitalize on our capabilities to
serve customers at the earliest stages in the development of new compounds and
allow us to further develop our proprietary technologies.

Currently, we manufacture in excess of 50 products on a commercial scale at
two world-class, cGMP facilities located in Dudley, England, and Annan,
Scotland. We have approximately 45 U.S. patents and several patent applications
with respect to our technologies. Our customers currently include Glaxo Wellcome
plc, Sanofi S.A., Rohm and Haas Company, Pharmacia & Upjohn Inc., Astra AB,
Bristol Myers-Squibb Company, Eli Lilly and Company, Pfizer Inc. and SmithKline
Beecham plc.

INDUSTRY TRENDS

Recent trends in the industry are resulting in the increased outsourcing of
drug design, development and manufacturing. Pharmaceutical and life science
companies are under pressure to deliver new drugs to market in the shortest
period of time in order to capture market share, accelerate the realization of
revenues and maximize the impact of the limited life of patent protection. As a
result, they have increasingly focused their resources on the discovery of new
drugs and sought to outsource more and more services. We believe this trend
towards outsourcing drug design, development and manufacture will continue
for the following reasons:

. the development of new technologies that have resulted in the
identification of a larger number of promising therapeutics,
increasing the demand for the services which we offer;

. the pressure to reduce drug development time in order to enhance
competitive position and maximize return on investment;

. the continuing cost containment pressures in the consumer market, led
by health maintenance organizations and other health insurance
intermediaries, resulting in pharmaceutical companies shifting more of
their fixed cost base to variable cost alternatives through
outsourcing;

. the increasing complexity of the chemical synthesis used to produce
new drugs, particularly in commercial quantities; and

. the growth of the biotechnology industry, in which many companies
do not have the chemical expertise and capabilities needed to conduct
their own process development, scale up work or commercial sale
manufacture.

BUSINESS STRATEGY

Our strategy is to increase shareholder value by capitalizing on our
technological strengths and manufacturing capabilities to be the preferred
partner to major pharmaceutical and life science companies in the design,
development and synthesis of new drugs and for the manufacturing of active
ingredients. The key elements of our strategy are as follows:

Provide Integrated Services/"One Stop" Shopping

We believe that significant opportunities exist for a company that provides
a broad range of outsourcing services. With the CTC, we will now be able to
offer our customers a complete and integrated package of services throughout the
life cycle of a product. By providing process development expertise, pilot plant
capacity and full scale manufacturing facilities, we will be able to offer a
convenient and seamless solution to our customers' outsourcing needs. Our
integrated approach offers technical and commercial synergies and the potential
to reduce the time and decrease the costs and risks associated with the
development of new drugs.

Commercialization of Proprietary Technology

With the CTC, we will capitalize on the industry trend for drug companies
to outsource the timeline. The CTC will expand on our accumulated expertise
established at the Development Center. Through the addition of the CTC, we will
focus on assisting customers in the early stages of process development to
devise manufacturing processes that will be viable and cost efficient for scale-
up and full scale commercial production. The CTC will further strengthen our
ability to use our proprietary technologies to solve process development
challenges for our customers and to reduce drug development time. The CTC is
intended to:

. advance the commercialization of a variety of our technologies, with an
initial emphasis on our kinetic resolution process technology developed
by Professor Eric Jacobsen which enables the production of single-isomer
pharmaceutical chiral intermediates;

. provide process development services that will serve as a source of new
commercial-scale product opportunities for our manufacturing
facilities;

. develop and market non-regulated, proprietary chiral building blocks to
innovative pharmaceutical companies to save them time and money and to
infuse the benefit of our technologies into their development
pipelines;

. serve as a source of licensing revenues derived from our technologies
where our customer has other manufacturing capacity, the technology is
being used for non-pharmaceutical purposes, or capacity constraints
prevent us from offering manufacturing services; and

. enhance our presence in the United States, the world's largest
pharmaceutical market.

The CTC will be initially staffed with approximately ten research
scientists under the direction of Professor Eric Jacobsen, Professor of
Chemistry and Chemical Biology at Harvard University.

Focus on Manufacturing High-Margin, Value-Added Products

We intend to continue focusing on manufacturing high-margin, highly-
engineered, value-added products which are manufactured using a variety of
technologies. Because of the high level of development engineering and synthesis
design required for these products and because these products must be made in
strictly controlled FDA inspected facilities, they require the expertise of a
company such as ours and offer the potential for higher margins than specialty
chemicals and non-regulated fine chemicals. In addition, once full production of
these products is commenced, the commercial relationship for such products is
generally stable due to the significant costs of transferring production to a
new facility.

Continue Developing Significant, Long-Term Relationships with Industry
Leaders

We intend to expand our customer base by developing significant, long-term
relationships with a few major pharmaceutical and life science companies. We
believe that the CTC will be a valuable platform for forging new relationships
as customers seek the benefits of our proprietary technologies. In addition, our
Annan facility has substantial available capacity which we are marketing to
potential customers.

Pursue Selective Acquisitions/Affiliations/Expansions.

We intend to expand our business activities through selective
acquisitions, strategic affiliations and internal expansion, including:

. in the technology area, we intend to seek opportunities to acquire or
license complementary technologies and to collaborate or form alliances
with third parties with valuable, complementary technology;

. in the development business, we intend to pursue strategic acquisitions
in North America and extend our geographical presence and customer base
by acquiring or building development capability near the CTC; and

. in manufacturing operations, we intend to pursue strategic, value-added
acquisitions to add to our geographic scope or customer base.

COMPETITIVE STRENGTHS

We believe we have a strong competitive position in our industry, which is
attributable to a number of factors:

Full Complement of Integrated Services

We believe that our ability to address our customers' outsourcing needs at
each stage in the chemical development process allows us to compete effectively
for the entire range of outsourcing arrangements that customers require. In
addition, we believe we will have a competitive advantage because we can
internally transfer technology throughout the product lifecycle, saving time and
money and reducing risk. Our ability to provide services at the earliest stages
of the drug development process should give us a competitive advantage during
clinical trial and full scale manufacturing.

Leading Proprietary Technologies

In addition to our expertise in classical chemical transformation
technologies, we hold numerous licenses and patents in chiral process
chemistries, including an exclusive license with Harvard University for the
application of kinetic resolution. Based on industry estimates, more than two-
thirds of pharmaceuticals currently in development are chiral molecules. We
believe that utilizing our technologies, and in particular our chiral
technologies, in the production process may allow us to achieve higher margins
than possible with non-proprietary technologies. Also, we have found that our
customers value suppliers who invest in technology as such investment allows
customers to reduce their drug development time and provides unique solutions to
their process development challenges. In addition, we can leverage our
proprietary technologies to forge relationships for our high-margin,
manufacturing operations.

World-Class Manufacturing Facilities

Since January 1, 1996, we have invested over $200 million to acquire
and upgrade our two world-class cGMP facilities. The manufacturing operations at
Dudley are flexibly designed so that they can be used for a large number of
products. The Annan facility is a modern state-of-the-art pharmaceutical
manufacturing facility with substantial space to expand future production.

Relationships with Industry Leaders

Our reputation for high quality manufacturing and process development
capabilities and innovative proprietary technologies have enabled us to
establish relationships with leading pharmaceutical and life science companies,
including Glaxo Wellcome, Sanofi, Rohm and Haas, Pharmacia & Upjohn, Astra and
SmithKline Beecham.

Barriers to Entry

We believe there are significant entry barriers to our industry, including:

. access to and expertise in leading manufacturing and process
technologies and the ability to manage the complex regulatory
regime governing new product development; and

. the significant cost and lead time necessary to construct state-of-
the-art pilot plant facilities and to qualify cGMP commercial scale
manufacturing facilities, such as our Annan and Dudley facilities.

In addition, world-class facilities typically require experienced management and
highly trained technical personnel familiar with specific production facilities
and processes. Pharmaceutical companies are generally reluctant to outsource
their needs to companies that do not have production facilities or a staff with
a proven track record. We believe that our management and technical personnel,
almost all of whom have substantial experience at FDA inspected cGMP facilities,
are experienced and highly trained to meet these needs.

BUSINESS

We provide a broad range of outsourcing services to pharmaceutical and life
science companies, from the early stages of post-discovery drug development to
full scale manufacturing of active ingredients. By providing process development
expertise, pilot plant capacity and full scale manufacturing capabilities, we
are able to offer our customers a complete and integrated package of services
throughout the product life cycle. The diagram below sets forth the different
phases of drug discovery and development and indicates the various services
which we offer as our customers move through the drug development process:

PRODUCT DEVELOPMENT LIFE CYCLE

Product Development Life Cycle

Discovery

The initial challenge in the drug development process is discovery of a
compound which may have a therapeutic effect for a particular disease. Our

pharmaceutical and life science customers identify a lead compound which
interacts with certain biological targets, such as an enzyme or other protein,
which are associated with a disease. The discovery process involves screening or
testing multiple chemical compounds and their interactions with biological
targets to identify the most promising lead compounds for further study.

As pharmaceutical and life science companies face increasing pressure to
bring new drugs to market in the shortest period of time, our customers have
focused their efforts and resources on the discovery stage. As a result, these
customers have increasingly sought to outsource services in the subsequent
stages of the drug development process to companies such as ours to minimize
costs and development time.

Pre-Clinical

After a lead compound is identified and selected in the discovery phase,
the compound is evaluated for efficacy and safety during pre-clinical tests on
animal models.

While a product progresses through pre-clinical trials, customers require
process research and development services which will allow for a cost-effective,
safe and timely scale-up of a compound as it progresses from the laboratory to
pilot plant and ultimately to commercial scale manufacturing. Process research
and development seeks to provide a simple, economic and non-hazardous route to
production of a lead compound at the required scale. In addition, customers
often require small scale cGMP capabilities to produce quantities of a product
for clinical trials and analytical methods development for regulatory and
quality control purposes.

Customers are increasingly seeking outsourcing companies, such as
ours, which can provide seamless technology transfer throughout the
development process to push a product through the development life cycle as
rapidly as possible. As a result, process development and other related services
can be a valuable source for developing relationships with customers for pilot
plant production and ultimately commercial scale manufacturing. In addition,
once a company has received certification for a product by the applicable
regulatory authority, it is advantageous for the customer to maintain the
relationship with such company. Accordingly, expertise in process development
can solidify a relationship with a customer early in the product development
timeline and help secure longer term commercial-scale supply arrangements.

IND/Phase I/Phase II/Phase III/NDA

An investigational new drug application ("IND") is one of the first steps
in the clinical trial phase of drug development. Clinical trials are divided
into three investigational phases which test the use of a drug in humans. Phase
I tests the drug for safety; Phase II tests the drug for efficacy and safety in
a relatively small sample of patients; and Phase III tests the drug for efficacy
in a larger sample of patients. Upon completion of the clinical trial phases, a
new drug application ("NDA") is prepared which bridges the development process
from clinical trial to full scale commercial manufacture.

As a drug proceeds through the clinical testing phases, it is crucial that
its production conform with appropriate cGMP standards. In addition, the process
developed in the laboratories needs to be validated at a larger scale to
establish that it can be consistently produced at the required specifications as
it is scaled-up to commercial quantities. These steps are often conducted in a
pilot plant environment which can provide hazard evaluation, analytical method
validation, identity and purity testing as well as significant regulatory
expertise and documentation services.

Commercialization

After a drug has been approved, commercial quantities of the drug are
manufactured and marketed for commercial sale. Pharmaceutical and life science
companies frequently outsource the manufacture of bulk intermediates and
pharmaceutical active ingredients. Companies which provide such services must
have facilities that conform to strict guidelines and can pass FDA inspections.
In addition, pharmaceutical fine chemical manufacturers require significant
expertise due to the high level of development engineering and synthesis design
required for these products.

Relationship with Glaxo Wellcome

In the fall of 1997, we purchased Glaxo Wellcome's pharmaceutical
production facility located in Annan, Scotland, for approximately (Pounds)41
million, (approximately $68 million, assuming an exchange rate of $1.66 per
(Pounds)1.00) including payment for certain working capital. We entered into a
supply agreement with Glaxo Wellcome to supply certain pharmaceutical
intermediates and active ingredients, which we estimate will provide for
approximately $450 million in aggregate sales volume over the life of the
contract. In connection with the Glaxo supply agreement, we invested
approximately (Pounds) 18 million (approximately $30 million) to remodel two of
the production buildings to accommodate multiple products. Prior to its
acquisition by us, the Annan facility was one of only four primary facilities
that Glaxo Wellcome operated in the United Kingdom. In connection with the
acquisition of the Annan facility, we hired most of the facility staff formerly
employed by Glaxo Wellcome.

The Glaxo supply agreement provides for the purchase by Glaxo Wellcome from
us of intermediates and active ingredients for some of Glaxo Wellcome's most
important and innovative new drugs. In collaboration with Glaxo Wellcome, we
have undertaken to install production capacity for the main products covered by
the Glaxo supply agreement in excess of the contracted quantities.

Under the Glaxo supply agreement, Glaxo Wellcome agreed to purchase a
certain amount of products each year from us on a firm commitment basis. If
Glaxo Wellcome does not purchase such products from us in the amount of such
firm commitment (other than as a result of our default), it will pay to us the
Added Value of such products. As defined in the Glaxo supply agreement, "Added
Value" means the difference between the price at which we are to sell the
product to Glaxo Wellcome and the cost of the raw materials and variable costs
directly incurred in the manufacture, packaging and waste disposal processes.
The Glaxo supply agreement provides that if any amounts are owed by Glaxo
Wellcome under such provision, we will use reasonable endeavors to evaluate in
good faith the possibility of manufacturing additional products or volumes for
Glaxo Wellcome on the same terms.

In addition to products to be supplied by us on a firm commitment basis,
the Glaxo supply agreement provides that certain products will be purchased by
Glaxo Wellcome on an intended purchase basis. In the event that such products
cannot be purchased by Glaxo Wellcome in the volumes specified or at all due to
lack of regulatory approval or market uncertainties in relation to such
products, the Glaxo supply agreement provides that Glaxo Wellcome will use its
best endeavors to purchase certain specified replacement products in a volume
which will result in the equivalent Added Value to us.

The Glaxo supply agreement also contains certain profit sharing terms which
provide that if orders in excess of volumes of products to be supplied on a firm
commitment basis and an intended purchase basis are placed, then any Added Value
to which we shall be entitled shall be shared between us and Glaxo Wellcome in
accordance with the terms of the agreement.

We have agreed under the Glaxo supply agreement to have sufficient capacity
to manufacture at least 10% in excess of orders placed by Glaxo Wellcome under
the terms of the Glaxo supply agreement. The products to be supplied by us under
the Glaxo supply agreement may be manufactured at either the Dudley or Annan
facilities.

The initial term of the Glaxo supply agreement is through December 31,
2002, and is automatically renewed for successive periods of twelve months
unless terminated by either party at the end of its initial term or at the end
of any renewal period by 24 months prior written notice. The Glaxo supply
agreement may also be terminated upon the occurrence of an insolvency event by
either party, a material breach of the terms of the agreement (subject to
certain cure periods), or upon 60 days notice by Glaxo Wellcome if at any time
prior to December 31, 2002, there occurs a Change of Control (as such term is
defined in the Glaxo supply agreement) of ChiRex (Annan) Limited.

SERVICES OFFERED

We believe that we are one of only a few companies to offer an integrated
package of services from post-discovery to full scale manufacturing of active
ingredients. Through the CTC, the Development Center and our world-class cGMP
manufacturing facilities, we offer a convenient and seamless solution to our
customers' outsourcing needs.

ChiRex Technology Center

We plan to commence operations at the CTC in April 1999. The CTC, which
will be located in Boston, Massachusetts, in close proximity to Harvard and MIT,
will consist of 11,000 square feet of laboratories which can accommodate up to
35 research scientists. Professor Eric Jacobsen, Professor of Chemistry and
Chemical Biology at Harvard University and inventor of some of our leading
proprietary technologies, will be the scientific director of the CTC. The CTC
will focus on the design, development and synthesis of molecules.

The CTC will offer various process development services under cGMP
guidelines, including: (i) contract process development; (ii) custom synthesis;
(iii) contract analytical development; and (iv) process research utilizing our
proprietary intellectual property. The CTC will also serve as a source of
licensing revenue for our technologies.

Process development and custom synthesis services offered by the CTC will
include:

. synthesis route selection;

. process research to make finished quality products;

. samples of material and supply of small quantities;

. development work to generate a technology package which will allow us
or the customer to manufacture at scale; and

. transfer of technology by CTC personnel to the manufacturing
location.

Analytical development services offered by the CTC will include:

. test method development and validation;

. quality control and release testing;

. high performance liquid and/or gas chromatography for the separation
of enantiomers and identification of impurities; and

. nuclear magnetic resonance services.

Process research utilizing our proprietary technology will include:

. process development and sample quantities to qualify with customers;

. scale-up to 50 liter scale at the CTC or kilogram to ton production at
our cGMP manufacturing facilities; and

. validated scaled technology transfer package.

The state-of-the-art CTC laboratories will operate under cGMP using the
standard operating procedures developed at our large-scale manufacturing
facilities in Dudley and Annan and which have been refined over the last 30
years. The CTC equipment has been designed to mirror that of the Development
Center to aid in technology transfers. The CTC's state-of-the-art equipment will
include:

. GC-Mass Spectrometry, GC and HPLC Systems with autosamplers;

. 400 MHz JEOL multi-nuclear magnetic resonance spectrometer;
and

. an isolated 50 liter glassware facility to provide kilogram quantities
of materials.

Development Center

The Development Center primarily prepares chemical processes for commercial
manufacturing by conducting economic, hazard and engineering evaluations. Opened
at our Dudley facility in 1996, the Development Center consists of research and
development laboratories and an associated pilot plant. The Development Center
offers a variety of services, including: (i) process development based on either
customer technologies or our proprietary technologies; (ii) hazard evaluation;
(iii) impurity profile characterization and analytical

method validation; (iv) supply of clinical trial material up to Phase III
clinical trials; and (v) state-of-the-art analytical structure elucidation.

The Development Center is staffed with over 50 scientists, including
experts in process development, analytical and hazard evaluation. These
Development Center scientists manage the product between laboratory production
and commercial scale manufacture. During this intermediate process and before
commencing commercial manufacture, each scientific team carefully considers the
safety, speed and cost of each project. The Development Center uses small-scale
(25L and 50L) equipment to pilot plant size reactors to replicate processes
which assists in evaluations and seamless technology transfer. With safety a
primary consideration, the hazard evaluation laboratory enables us to analyze
each process before it is scaled up in the pilot plant. Equipment in the hazard
evaluation laboratory includes RC1 calorimeters, ARC and vent sizing equipment,
DSC and other standard hazard evaluation equipment.

In addition to assisting customers with early-stage molecule design and
development, the Development Center can also produce clinical trial material
quantities. These quantities are produced in the Development Center's pilot
plant, which allows for rapid scale-up from 50-1000 kilograms under cGMP
conditions.

The following table sets forth the number of projects worked on in the
Development Center during the past three years and the number of those projects
which incorporated our proprietary technology:

1996 1997 1998
----- ----- -----

Projects (1) 67 53 48
Projects with ChiRex
technologies (1) 18 22 24
Percentage of projects
with ChiRex
technologies (1) 26.9% 41.5% 50.0%

_________

(1) A project can span more than one fiscal year.

Of the projects that include our proprietary technologies, the following
table sets forth the number of projects sponsored by customers or by us:

1996 1997 1998
---- ---- ----

Customer sponsored 10 15 12
ChiRex sponsored 8 7 12
---- ---- ----
Total projects with ChiRex
technologies 18 22 24
==== ==== ====

The projects in the Development Center generated revenues for the years
ended December 31, 1996, 1997 and 1998 as follows (dollars in thousands):

1996 1997 1998
----- ---- -----

Product development revenues $3,143 $10,566 $12,947
(1) (2)
Percentage of total revenues 3.5% 11.2% 10.8%

_________

(1) The revenue on a particular project may be recognized over more than one
fiscal year.

(2) Excludes a product that was manufactured in our pilot plant but
in sufficient quantities to be treated as a commercial product.

Manufacturing Facilities

We have two cGMP facilities, one in Dudley, England, and the other in
Annan, Scotland. Our manufacturing facilities specialize in the scale-up and
commercial manufacture of intermediates and pharmaceutical active ingredients
under cGMP guidelines. Whether we design the initial synthesis or evaluate and
adapt a customer's process to our regulatory and efficiency standards, we
produce intermediates and pharmaceutical active ingredients in a highly-
regulated environment. Our facilities and processes used in the manufacture of
products for clinical use or for sale in the United States must be operated in
conformity with cGMP guidelines and must pass inspections by the FDA. We also
support the commercial production process with regulatory support, including NDA
and drug master file assistance.

The Dudley facility specializes in the scale-up and commercial-scale
production of intermediates and final products. The facility is located on
45 acres and consists of a former Sterling Winthrop facility with a production
capacity of 650 cubic meters (over 160,000 gallons). There are three main
production buildings at the Dudley site which have a variety of advanced
equipment to provide a flexible FDA-inspected, cGMP and ISO 9002 certified
manufacturing base. Two of the buildings provide flexible, multi-process
facilities (including a segregated bulk pharmaceutical purification suite fitted
with reactors, isolation and finishing equipment) capable of performing an
extensive range of chemical transformations. The third building is a plant that
was dedicated to the manufacture of acetaminophen and will be demolished to
allow for future capacity expansion.

The Annan facility, one of the world's best-equipped cGMP facilities,
specializes in the production of bulk pharmaceutical active ingredients. The
facility is located on a 154-acre site and was a former Glaxo Wellcome facility.
The site encompasses three main production buildings. Two of the production
buildings, operated as a unit since 1980 to produce large volumes of an anti-
hypertensive drug, have been extensively remodeled since acquired in the fall of
1997 at a cost of $30.0 million to accommodate multiple products. Special
features of these buildings include a computerized process control system, a
single fluid heat transfer system and a totally enclosed plant with bulk
handling systems (for both powders and liquids) to ensure safe processing of
chemicals and solvents. The third building, built in 1990 at a cost of $60.0
million, comprises nearly half the site capacity and is available for future
contract manufacturing demand.

PRODUCT PORTFOLIO

Commercial Products

We currently manufacture in excess of 50 products on a commercial scale.
Approximately 86% of our product portfolio is pharmaceutical products with the
remaining 14% consisting of fragrance and flavor, agrichemical and polymer
products. Nearly all of the products produced or under development by us are
governed by secrecy agreements which contain, among other things, restrictions
on the disclosure of the customer, the product and the therapeutic indication.
Our customers' pharmaceutical products are used in the treatment of, among
others, cancer, cardiovascular disease, AIDS, urinary tract infections and high
cholesterol.

Development Products

We and our predecessors have over 30 years of experience collaborating with
pharmaceutical companies on the process development of new pharmaceutical
products. We manufacture development products upon the specific request of a
particular customer. Our work in the development stage of our customers'
products provides a strong foundation for securing supply arrangements for full-
scale manufacturing upon commercialization. Products are no longer considered
development products when they are produced by us on a commercial scale.

We provide development and pilot-scale manufacturing services for our
pharmaceutical customers. The following table sets forth 40 products in our
development pipeline which we believe have significant revenue potential.
Twenty-two of these products are produced at pilot-scale and had revenues
associated with them in the year ended December 31, 1998. Twenty-three of these
products incorporate chiral technologies, of which 21 use our proprietary
technologies. The remaining products are at an earlier stage in the development
cycle. We believe that the opening of the CTC will increase the number of
products under development.

Number of
Development Phase of Company
Drug(a) Products Representative Indications
------- --------- --------------------------

Commercial(b)........ 19 AIDS, Hypertension, Central Nervous
System Disorder, Diabetes and Allergies
Phase III............ 7 Cancer, Pancreatitis, Asthma, Migraine

Phase II............. 8 Cancer and Antivirals

Preclinical/Phase I/
Unknown............ 6 Various

_______________
(a) Based on customer provided or publicly available information.
(b) These products have either been approved or are being produced on a
commercial scale by manufacturers other than us.

MANUFACTURING AND PROCESS DEVELOPMENT TECHNOLOGY

We have developed expertise in the large-scale operation of many classical
chemical transformation technologies and have the exclusive right to use our
proprietary technologies in a defined field on a perpetual basis. Our
proprietary technologies consist of proprietary synthesis and separation
technologies used in the manufacture of single-isomer products. The cost and
time of pharmaceutical product development has become significantly greater for
compounds developed as racemic mixtures as compared to single-isomer chemicals,
creating a demand for new processes and process technologies that can produce
single-isomer drugs quickly, efficiently and economically.

We have approximately 45 U.S. patents and several patent applications with
respect to our proprietary technologies. In addition, we have accumulated
experience in the effective management of the risks inherent in handling toxic
or hazardous raw materials and products and in carrying out hazardous chemical
reactions. Our expertise allows pharmaceutical companies to have complex multi-
step procedures carried out at a single site, which increases the ability of
such companies to maintain confidentiality, product supervision and management.

Our proprietary technologies consist of a broad platform of asymmetric
synthesis and resolution technologies, which we believe provide multiple
manufacturing routes to produce single-isomer chiral pharmaceutical
intermediates and active ingredients. We select the most appropriate technology
for a particular application based on several factors, including the cost of any
required catalyst and the availability and cost of the starting materials. The
following table summarizes certain aspects of our proprietary technologies:

METHOD OF
TECHNOLOGY USE PHASE MANUFACTURE
------------ ---- ------ -----------

Kinetic Resolution........... Catalytic ring Commercial Asymmetic Synthesis
opening of epoxides
to make chiral
epoxides and diols
Asymmetric dihydroxylation... Catalytic Commercial Asymmetic Synthesis
asymmetric reaction
to make chiral
diols using
Sharpless catalyst
Asymmetric epoxidation....... Catalytic Commercial Asymmetric Synthesis
oxidation to make
chiral epoxides
using Jacobsen
catalyst

Enzymatic resolution........ Enzymatic Commercial Enzymatic Resolution
biotransformation
Diastereomeric
crystallization........... Resolution by Commercial Chemical Resolution
crystallization
Asymmetric reduction........ Catalytic reduction Laboratory Asymmetric Synthesis
to make chiral
alcohols
Metal-Catalyzed Aromatic Manufacture of Laboratory Aromatic Coupling
Carbon-Heteroatom aromatic amines,
Bonding-Forming indoles and
Technologies (ABT)........ diphenyl ethers

Single-isomer chiral chemicals are generally manufactured by asymmetric
synthesis or resolution. In asymmetric synthesis, the single-isomer form of the
drug or intermediate is synthesized directly from a precursor compound that is
achiral. With resolution, the single-isomer is separated from a racemic mixture.
Asymmetric synthesis is often the preferred method of producing single-isomer
drugs or intermediates due to potential higher attainable yields. Due to the
technical challenges of developing a cost-effective process, however, there are
few asymmetric synthesis processes used at commercial scale.

We continue to improve our technology position through significant research
and development expenditures, licensing third party technology and by
maintaining close relationships with our Scientific Advisory Board and
institutional research partners.

On January 1997, we entered into an exclusive license agreement with
Harvard University for the application of kinetic resolution technology to a
wide range of pharmaceutical products. Kinetic resolution is a new technology
developed by Professor Eric N. Jacobsen, a member of our Board of Directors and
Scientific Advisory Board, which enables us to produce single-isomer
pharmaceutical chiral intermediates using more cost-effective processes than
others currently available. We believe that this technology has significant
commercial potential, including the production of drugs for the treatment of
asthma, arthritis, cardiovascular disease, AIDS, cancer and hepatitis. In May
1998, we also entered into an exclusive license agreement with the MIT for the
metal-catalyzed aromatic carbon-heteroatom bond forming technologies discovered
by Professor Stephen Buchwald of MIT. We believe that these technologies can
reduce the complexity and cost of manufacturing certain aryl and heterocyclic
intermediates, which are core building blocks for both existing and emerging
pharmaceuticals, and thus extend the range of products we can manufacture at a
competitive advantage.

In support of our technologies, we maintain a state-of-the-art hazards
evaluation laboratory where operating hazards are identified and safe operating
parameters established for all processes before they are carried out in the
pilot plant. The pilot plant is then used to confirm the safe operation of the
process and evaluate scale-up parameters before moving to full-scale operation.
In addition, we have accumulated extensive in-house experience in the
development and application of microprocessor control systems to control process
hazards and improve the reproducibility of process performance and product
quality.

PATENTS AND PROPRIETARY TECHNOLOGY

Our proprietary rights with respect to our products and processes are
generally protected only to the extent that they are covered by valid and
enforceable patents or are maintained in confidence as trade secrets. We
currently have the perpetual, exclusive and royalty-free right and license to
use and practice our proprietary technologies on a worldwide basis in a defined
field. Our principal patents expire at various times beginning in 2005. Some of
our technology remains uncovered by any patent or patent application. In
addition, we have ongoing research efforts and expect to seek additional patents
in the future covering patentable results of such research. We cannot assure you
that any pending patent applications we file will result in patents being
issued, or that any patents or licenses:

. will protect us against competitors with similar technologies;

. will not be infringed upon or designed around by others;

. will not be challenged by others and held to be invalid or
unenforceable; or

. will not be terminated by a licensor pursuant to various terms in
such licenses or due to any breach.

In the absence of patent protection, our business may be adversely affected
by competitors who independently develop substantially equivalent technology.

There may be third-party patents relating to technology we use. We may need
to acquire licenses to, or to contest the validity of, any such patents.
Defending any claim that we are infringing a third-party patent would most
likely prove costly, and any such claim could adversely affect us until the
claim is resolved. Furthermore, any such dispute could result in a rejection of
our patent applications or the invalidation of our patents. We cannot assure you
that we could obtain any licenses required under such patents on acceptable
terms or that we

would prevail in any litigation involving such patents. Any of the foregoing
negative results could have a material adverse effect on us and our results of
operations.

We use our own proprietary technology, including technology that may not be
patented or patentable. We seek to protect our proprietary technology through,
among other things, confidentiality agreements and, if applicable, inventors'
rights agreements with our collaborators, advisors, employees and consultants.
We cannot assure you that these agreements will not be breached, that we will
have adequate remedies for any breach or that our trade secrets will not
otherwise be disclosed to, or discovered by, our competitors. In addition, we
cannot assure you that these collaborators, advisors, employees and consultants
will not claim rights to intellectual property arising out of their research.

SALES AND MARKETING, CUSTOMERS

We market the majority of our products directly to pharmaceutical and other
life science companies. An important component of our strategy is to pursue
long-term supply relationships with selected major customers. We employ sales
and marketing personnel who possess the requisite technical backgrounds to
communicate effectively with both prospective customers and our research and
development personnel.

We have initiated the implementation of a new product management approach
by shifting from a departmental to a product management philosophy. This
approach is a departure from the traditional plant management focus and involves
organizing the our activities around products instead of facilities. First, this
new approach will improve accountability to customers by vesting ultimate
authority for every product with a single person, or product manager, at our
company. Second, we will realign our product strategy to parallel our customers'
business activities, thus facilitating communication and cooperation during the
production process, and thereby reducing a particular product's time to market.
Third, we will reduce overall product complexity by focusing on products that
play to our chemistry strengths, such as complex multi-stage synthesis of
complex molecules. Fourth, we will select products based on the potential for
application of our proprietary process technologies. To facilitate this focus on
product management, we are implementing a more formalized product evaluation
process, including a review of potential new products by a committee involving
senior marketing, manufacturing and technology staff.

As part of our ongoing commercial development efforts, we maintain a
presence at important international trade shows and host a bi-annual
international technical symposium to which selected senior representatives and
executives of the research

and development organizations of major pharmaceutical companies are invited. In
addition, our technical and marketing personnel present papers at symposia on a
regular basis.

We are dependent on a small number of customers. In 1998, our three largest
customers accounted for approximately 85% of total revenues. Glaxo Wellcome p1c,
Sanofi S.A. and Rohm and Haas Company accounted for approximately 57%, 16% and
12%, respectively, of our 1998 revenues. We will continue to rely on a limited
number of customers, particularly Glaxo Wellcome, as well as a limited number of
products for a great deal of our revenues. In addition, we expect that over the
next five years an even higher percentage of our total revenues will come from
our sales to Glaxo Wellcome under our supply agreement with Glaxo Wellcome. The
loss of one or more of these customers could have a material adverse effect on
our business. In particular, while our supply agreement with Glaxo Wellcome
contains certain provisions for renewal, we cannot assure you that the contract
will be renewed. Our customers may also be susceptible to adverse effects on
their own businesses due to changes in government regulation, including those
regarding he alth care reform.

CONTRACTS

We conduct business on both a purchase order basis and a formal contract
basis. Where we conduct business on a formal contract basis, we have entered
into a variety of contractual arrangements with our customers, on both a fixed
price and a cost plus basis. In cases where the contracts are fixed price, we
bear the cost of overruns but benefit if the costs are lower than anticipated.
In cases where the contracts are on a cost plus basis, we are guaranteed
reimbursement for our actual costs of performance and an agreed upon profit,
with certain exceptions.

Contracts may have terms ranging from a few months to several years
depending upon the nature of the work being performed and the approval status of
the product in question. Some of our contracts are terminable by our customer
upon notice. Contracts may also be terminated for a variety of reasons including
unexpected or undesired results of the product, the failure of a product to
satisfy safety requirements, the failure of a product to gain regulatory
approval or a party's failure to properly discharge its obligations under such
agreement.

ENVIRONMENTAL REGULATION

Our manufacturing and research and development processes involve the
controlled use of hazardous materials. We are subject to laws and regulations
governing the use, manufacture, storage, handling and disposal of such materials
and waste products in the United Kingdom and United States. In the event of
contamination or injury from hazardous materials, we could be held liable for
any resulting damages and any such liability could exceed our resources.

Dudley, England Facility

Our manufacturing plant in Dudley, England, is subject to the U.K.
Environmental Protection Act 1990 ("EPA 1990"), which requires
authorizations for any industrial air and certain water discharges and
solid waste disposal. The individual authorizations are contained within
several Integrated Pollution Control ("IPC") authorizations under the 1991
Environmental Protection Regulations adopted pursuant to the EPA 1990. Our
IPC authorizations for the Dudley facility are administered by the U.K.'s
Environment Agency ("EA"). In addition, the Dudley plant is also subject to
the U.K. Water Resources Act 1991 ("WRA") governing the discharge of liquid
waste, and the U.K. Water Industry Act 1991 ("WIA") governing discharges to
sewers.

We believe we are in compliance in all material respects with our IPC
authorization conditions, limitations and compliance schedules for Dudley.
We possess "envelope" authorizations for our air pollutant emissions, which
enable us to alter our production lines and processes to a degree without
seeking additional authorizations. We have committed ourselves in a plan
submitted to the EA to implement certain air pollution emission reduction
programs.

We have a consent to discharge our process waste water in Dudley,
following treatment in our biological waste water pretreatment plant, into
local sewers for further treatment by the company that owns and operates
the local area wastewater treatment facility, which discharges its effluent
to the River Tyne. Northumbrian Water ("NW") is the local sewer operator
and the EA is the governmental regulatory body responsible for the
regulation of NW and the country's rivers. In the past, we have had
periodic difficulties in meeting our consent limits and ends for suspended
solids in waste water. During 1996, we reached agreement with NW which
resulted in a relaxation of the consent limit for suspended solids. We also
made certain capital improvements to our biological waste water treatment
plant, and it is now consistently in compliance with the consent limit. If
the consent limit is exceeded, the plant must adhere to certain notice and
corrective action procedures. This compliance program was developed in
consultation with and has received the approval of the EA.

Since the initial public offering, we have reached agreement with NW
and the EA on a set of contingency measures that would be taken in the
event our biological pretreatment plant in Dudley experienced a treatment
upset or, due to malfunction or other failure had to be bypassed for a
period of time. The procedures are designed to minimize the impact of such
occurrences while allowing us to continue our production operations, which
in the absence of such agreed procedures, would have been subject to
potential shutdown.

The Environment Act 1995 ("1995 Act") imposes strict, retroactive
cleanup liability on persons responsible for creating or contributing to
contaminated sites. Landowners are presumptively liable under this statute
for conditions existing on their property where a different responsible
party can not be found. We believe that the limited areas of subsurface
contamination presently known to exist at the Dudley site are confined and
will not give rise to liability under the 1995 Act.

Annan, Scotland Facility

Our manufacturing plant in Annan, Scotland, is also subject to the EPA
1990 and the 1995 Act. Our IPC authorizations for Annan are administered by
the Scottish Environmental Protection Agency ("SEPA"). In addition, the
facility is also subject to the Sewerage (Scotland) Act 1968 and the
Control of Pollution Act 1974 providing for the regulation of trade or
sewage effluent to streams and other inland waters, as well as certain
provisions of The Rivers (Prevention of Pollution) (Scotland) Acts 1951 and
1965.

We possess certain IPC authorizations covering existing products at
the Annan site. In addition we are in the process of obtaining from SEPA
additional IPC Envelope authorizations which will give us the flexibility
to introduce new products in the future without the need to seek further
authorizations. The first of these authorizations has been granted, the
second will be granted by end of the first quarter in 1999 and the last is
scheduled to be in place by end of the third quarter in 1999. Phase I of
the environmental improvement program for the site incinerator, involving
burner modifications, was completed during the fourth quarter of 1998.
Phase II, involving installation of a bag-house filter to manage
particulate emissions, is underway and scheduled for completion by the end
of the second quarter 1999. The program to reduce volatile organic compound
emissions by installing new vacuum pumps and scrubbers is also underway and
scheduled for completion by end of the second quarter in 1999.

An oil spill following the off-loading of a road tanker occurred on
the Annan site in 1992 when Glaxo Wellcome plc owned the facility. Actions
to control the oil spill were taken at such time. However, sporadic
problems have been encountered since such spill, involving the appearance
of fuel in the site's drainage system. To address this issue, we have
applied for permission to install a land drainage interceptor to capture
minor residual oil before it can enter any waterways or the land drainage
system. Under the Asset Purchase Agreement between us and Glaxo Wellcome,
Glaxo is responsible for remediation costs relating to such oil spill and
has agreed to provide us with certain indemnities in the event of
governmental and other claims. Installation of the interceptor is expected
to be complete by end of the third quarter in 1999.

We cannot assure you that we will not be required to incur future
expenditures for environmental compliance and control at our facilities. Such
costs, and other unanticipated costs of compliance with environmental laws and
regulations in the future, could have a material adverse effect on our results
of operations.

OTHER GOVERNMENTAL REGULATION

Our operations, as well as those of our customers, are subject to extensive
regulation by numerous governmental authorities in the United States, the United
Kingdom and other countries. In particular, we are required to adhere to
applicable FDA regulations for cGMP, including extensive record keeping and
reporting and periodic inspections of our manufacturing facilities. Similar
requirements are imposed by governmental agencies in other countries. The
concept of cGMP encompasses all aspects of the production process and involves
changing and evolving standards. Consequently, continuing compliance with cGMP
is a particularly difficult part of regulatory compliance, especially since the
FCA and certain other analogous international governmental agencies have
increased the number of regular inspections to determine compliance. Failure to
comply with the applicable regulatory requirements can, among other things,
result in fines, suspensions of regulatory approvals, product recalls, operating
restrictions and criminal prosecution.

Continuing studies of the proper utilization, safety and efficacy of
pharmaceutical products are being conducted by government agencies, industry and
others. Such studies, which increasingly employ sophisticated methods and
techniques, can call into question the utilization, safety and efficacy of
previously marketed products and in some cases have resulted, and may in the
future result, in the discontinuance of their marketing and, in certain
countries, give rise to claims for damages for persons who allege they have been
injured as a result of their use.

We are subject to environmental, labor, health and workplace safety
regulation pursuant to a variety of national and local legislation in the United
Kingdom, including the Health and Safety at Work Act 1974, which requires
management to take all reasonably practicable steps to ensure the safety of its
employees, visitors and other parties who may be affected by acts and omissions
of its employees. We are also subject to FDA regulation under the Federal Food,
Drug, and Cosmetic Act, the Public Health Service Act and the Toxic Substances
Control Act. In addition, numerous other domestic and foreign government
regulations govern our company.

The evolving and complex nature of regulatory requirements, the broad
authority and discretion of governmental agencies, continuing studies involving
the safety of currently marketed pharmaceutical products and the generally high
level of regulatory oversight results in a continuing possibility that from time
to time we will be adversely affected by regulatory actions despite our ongoing
efforts and commitment to achieve and maintain compliance with regulatory
requirements.

In addition, compliance with governmental laws and regulations, including
environmental laws and regulations, requires us to obtain permits issued by
appropriate regulatory agencies. Permits generally require periodic renewal or
review of their conditions, and public comment may be solicited in the
permitting process. We cannot assure you that we will be able to obtain all
necessary permits or renew all existing permits, or that material changes in
permit conditions will not be imposed or that material public opposition will
not surface. Failure to obtain or renew certain permits could result in the
shutdown of our facilities, the imposition of significant fines or require us to
incur significant expenditures to comply with the law.

FINANCIAL INFORMATION ABOUT FOREIGN AND DOMESTIC OPERATIONS AND EXPORT SALES

99% and 99%, respectively, of our net sales for those periods. As a result of
our international operations, we are subject to risks associated with operating
in foreign countries, including devaluations and fluctuations in currency
exchange rates, imposition or increase of withholding and other taxes on
remittances and other payments by foreign subsidiaries, trade barriers,
political risks and imposition or increase of investment and other restrictions
by foreign governments. Because substantially all of our revenues and expenses
are denominated in Pounds Sterling, our revenues, cash flows and earnings are
directly and materially affected by fluctuations in the exchange rate between
the Pound Sterling and the U.S. Dollar. These risks could have a material
adverse effect on our business and operating results.

EMPLOYEES

As of December 31, 1998, we had 630 full-time employees. Three hundred and
eighty-six of our full time employees are unionized. We believe our labor
relations are satisfactory.

LEGAL PROCEEDINGS

We are involved in various legal proceedings incidental to the conduct of
its business. While it is not possible to determine the ultimate disposition of
these proceedings, we believe that the outcome of such proceedings will not have
a material adverse effect on our financial position or results of operations.

RISK FACTORS

The following is a description of certain risks that our company faces. This
list is not exhaustive: additional risks not presently known to us or that we
currently deem immaterial may also impair our business operations.

Product Development Risks; Dependence on Others

Part of our business strategy involves collaborating with our customers in
the early stage of product development. This enables us to establish long-term
relationships for the manufacture of these products upon their
commercialization. We currently collaborate with customers on a substantial
number of development products, the majority of which are currently in clinical
trials. Our success depends in large part on the following factors:

. the commercial viability of new pharmaceutical and life science
products being developed by our customers

. our customers' willingness to attempt to commercialize such products

. the ability of our pharmaceutical and life science customers to
conduct clinical trials, obtain required regulatory approvals and
successfully market such products.

In particular, the marketing and sale of pharmaceutical products in the
United States will require FDA approvals and will require similar approvals in
foreign countries. To obtain such approvals, the safety and efficacy of these
products must be demonstrated through human clinical trials which, if permitted,
can take several years. We cannot assure you that any of these products will be
safe or efficacious. Each stage in the development of these products can require
substantial investment and take a long time without any assurance as to the
commercial viability of these products, the absence of competing drugs or
alternative therapies. We cannot assure you that our product development efforts
will be successful, that required regulatory approvals can be obtained on a
timely basis, if at all, that products can be manufactured at an acceptable cost
and with appropriate quality, that any products, if approved, can be
successfully marketed or that our customers will commercialize such products.

Dependence on Key Customers and Products

We are dependent on a small number of customers. In 1998, our three largest
customers accounted for approximately 85% of total revenues. Glaxo Wellcome plc,
Sanofi S.A. and Rohm and Haas Company accounted for approximately 57%, 16% and
12%, respectively, of our 1998 revenues. We will continue to rely on a limited
number of customers, particularly Glaxo Wellcome, as well as a limited number of
products for a great deal of our revenues. In addition, we expect that over the
next five years an even higher percentage of our total revenues will come from
our sales to Glaxo Wellcome under our supply agreement with Glaxo Wellcome. The
loss of one or more of these customers could have a material adverse effect on
our business. In particular, while our supply agreement with Glaxo Wellcome
contains provisions for renewal, we cannot assure you that the contract will be
renewed. Our customers may also be susceptible to adverse effects on their own
businesses due to changes in government regulation, including those regarding
health care reform. See "Business--Relationship with Glaxo Wellcome."

Risks Associated With Operating Facilities

Many factors, such as production disruptions, industrial accidents,
environmental hazards, technical difficulties or equipment failures, labor
disputes, late delivery of supplies, and periodic or extended interruptions due
to inclement or hazardous weather conditions, fires, explosions or other
accidents or acts of force majeure, could cause serious operational problems at
the Annan and Dudley Facilities and at the CTC. These events could damage or
destroy the Annan or Dudley facility or the CTC, cause personal injury,
environmental damage, delays in productions, or result in financial losses and
legal liability. Any prolonged downtime or shutdowns of the Annan or Dudley
facilities or the CTC could have a material adverse effect on our business,
results of operations, financial conditions or prospects.

Competition

We operate in an extremely competitive environment. Many of our
competitors are major chemical, pharmaceutical, and process research and
development companies, including a number of our own customers, that have much
greater financial resources, technical skills and marketing experience than we
do. Our competitive market is characterized by extensive research efforts and
rapid technological progress. We expect new developments to continue, and we
cannot assure you that discoveries by our competitors will not render our
research and development, our technologies or our potential products obsolete or
noncompetitive. Competition may grow more intense as industry-wide
technological progress accelerates and more money is invested in these fields.

Competition in our market is based upon reputation, service, manufacturing
capability and expertise, price and reliability of supply. We cannot assure you
that we will be successful in obtaining customer contracts on commercially
favorable terms, if at all. Furthermore, our success depends to a significant
extent on our ability to provide manufacturing services to potential customers
at an early stage of product development. We cannot assure you that we will be
successful in such efforts. In addition, we may not be able to attract and
retain experienced management and technical personnel.

Dependence on Key Personnel

We are highly dependent on some of the key members of our senior management
and scientific staff, including, in particular, Michael A. Griffith, Chairman of
the Board and Chief Executive Officer, Frank J. Wright, Executive Vice
President, Corporate Development, and Eric N. Jacobson, the Scientific Director
of the CTC on a consultancy basis and a member of the Board of Directors. We
cannot assure you that we will be able to retain such personnel. The loss of
one or more members of our senior management or scientific staff could have a
material adverse effect on our business, results of operations, financial
conditions or prospects.

Environmental Risks; Hazardous Materials

Our manufacturing and research and development processes involve the
controlled use of hazardous materials. We are subject to laws and regulations in
the United Kingdom and the United States governing the use, manufacture,
storage, handling and disposal of such materials and certain waste products. In
the event of contamination or injury from hazardous materials, we could be held
liable for any damages that result. Our liability for these damages could exceed
our resources. In addition, we may have to incur significant costs to comply
with environmental laws and regulations in the future. Any environmental
regulatory action taken by U.K. or U.S. environmental authorities causing the
temporary cessation of production

operations at the Dudley or Annan facilities or at the CTC could have a material
adverse effect on our results of operations. Maintaining our permitted effluent
discharge limits and implementing air emission improvement programs acceptable
to the regulatory authorities may also prove costly. These programs may require
significant ongoing capital expenditures in an amount greater than we currently
anticipate, which could have a material adverse effect on our results of
operations.

Comprehensive Governmental Regulation

Our operations, as well as those of our customers, are subject to extensive
regulation by numerous governmental authorities in the United States, the United
Kingdom and other countries. In particular, we are required to adhere to
applicable FDA regulations for cGMP, including extensive record keeping and
reporting and periodic inspections of our manufacturing facilities. Similar
requirements are imposed by governmental agencies in other countries. The
concept of cGMP encompasses all aspects of the production process and involves
changing and evolving standards. Consequently, continuing compliance with cGMP
is a particularly difficult part of regulatory compliance. Failure to comply
with the applicable regulatory requirements can, among other things, result in
fines, suspensions of regulatory approvals, product recalls, operating
restrictions and criminal prosecution. We are also subject to numerous
environmental, health and workplace safety laws and regulations, including those
governing emissions control, laboratory procedures and the handling of hazardous
materials. Any violation of, and cost of compliance with, these laws and
regulations could adversely affect our operations.

Governmental laws and regulations, including environmental laws and
regulations, require us to obtain permits from appropriate regulatory agencies
to continue to operate our manufacturing facilities. These permits generally
require periodic renewal or review of their conditions, and public comment may
be solicited in the permitting process. We cannot assure you that we will be
able to obtain all necessary permits or renew all existing permits, or that
material changes in permit conditions will not be imposed or that material
public opposition will not surface. Failure to obtain or renew certain permits
could result in the shutdown of our facilities or the imposition of significant
fines, each of which would have a material adverse effect on our business and
results of operations. See "--Environmental Risks; Hazardous Materials,"
"Environmental Regulation" and "Other Governmental
Regulation."

Patents and Proprietary Technology

Our proprietary rights with respect to our products and processes are
generally protected only to the extent that they are covered by valid and
enforceable patents or are maintained in confidence as trade secrets. We
currently have the perpetual, exclusive and royalty-free right and license to
use and practice the our proprietary technologies on a worldwide basis in a
defined field. Our principal patents expire at various times beginning in 2005.
Some of our technology remains uncovered by any patent or patent application. In
addition, we have ongoing research efforts and expect to seek additional patents
in the future covering patentable results of such research. We cannot assure you
that any pending patent applications we file will result in patents being
issued, or that any patents or licenses:

. will protect us against competitors with similar technologies;

. will not be infringed upon or designed around by others;

. will not be challenged by others and held to be invalid or
unenforceable; or

. will not be terminated by a licensor pursuant to various terms in
such licenses or due to any breach.

In the absence of patent protection, our business may be adversely affected
by competitors who independently develop substantially equivalent technology.

disclosed to, or discovered by, our competitors. In addition, we cannot assure
you that these collaborators, advisors, employees and consultants will not claim
rights to intellectual property arising out of their research.

Product Liability Risks; Lack of Insurance

Our business exposes us to product liability risks inherent in the testing,
manufacturing and marketing of pharmaceuticals and life science products. We
have limited product liability insurance coverage, and we cannot assure you that
we will be able to obtain further product liability insurance on acceptable
terms or that our current or future insurance will provide adequate coverage
against any or all potential claims. In addition, we have no clinical trial
liability insurance.

Significant Risks Relating to International Operations; Currency Fluctuations;
Introduction of the Euro

Substantially all of our operations are conducted outside the United
States. We operate two manufacturing facilities in the United Kingdom, where
substantially all of our employees are located. For 1996, 1997 and 1998, net
sales of our products outside the United States totaled approximately $73
million, $93 million and $119 million, representing 98%, 99% and 99%,
respectively, of our net sales for those periods. As a result of our
international operations, we are subject to risks associated with operating in
foreign countries, including devaluations and fluctuations in currency exchange
rates, imposition or increase of withholding and other taxes on remittances and
other payments by foreign subsidiaries, trade barriers, political risks and
imposition or increase of investment and other restrictions by foreign
governments. Because substantially all of our revenues and expenses are
denominated in Pounds Sterling, our revenues, cash flows and earnings are
directly and materially affected by fluctuations in the exchange rate between
the Pound Sterling and the U.S. Dollar. These risks could have a material
adverse effect on our business and operating results.

As of January 1, 1999 the Euro replaced some of the currencies of the
member states of the European Union, including countries in which we market our
products. We cannot assure you that the introduction of the Euro will not
increase the volatility of Pounds Sterling exchange rates or result in the
future appreciation of Pounds Sterling, which could, in either case, adversely
affect our results of operations. It is possible that under certain
circumstances the United Kingdom may participate in the European Monetary Union
at a later date. If the United Kingdom were to participate in the European
monetary union, the Pound Sterling will be replaced by the Euro.

Year 2000 Issue

We have worked internally to identify and resolve any "year 2000"
compliance issues. We have also engaged external resources, including hiring an
independent consulting firm. We intend to purchase necessary computer software
and upgrades to become year 2000 compliant.

To ensure year 2000 compliance, we will develop comprehensive testing
procedures once necessary software and equipment have been installed. We are
implementing a year 2000 compliant management information system at our Annan
facility in connection with our business plans for this location. We plan to
implement these systems at our other locations, including the Dudley facility,
in 1999. We expect to spend approximately $7.1 million on year 2000 compliant
systems and equipment, and will expense these costs in accordance with current
accounting guidance.

We believe that the management information systems at two of the three
production facilities at Annan are year 2000 compliant. At present, we do not
utilize the third production facility at Annan. If we do begin operations at
this third facility, we expect to spend approximately $1.0 million upgrading the
facility's computer systems and applications. We will expense these costs in
accordance with current accounting guidance.

We have contingency plans in place for all our major computer systems and
applications. These plans include manual capability of certain business areas,
if necessary, and the controlled shutdown and start-up of the manufacturing
plant for a minimum period of days during the date change. The approach,
methodology, plan and contingencies for our internal processes have been
reviewed by our independent computer consultant and are subject to further
development and testing. Our contingency plans for external factors, such as
supply of raw materials, access to funds and potential utility disruption, are
at a preliminary stage and require further development.

However, we cannot assure you that all year 2000 compliance issues will be
resolved without any future disruption or that we will not incur significant
additional expense. In addition, if some of our major suppliers and customers
fail to address their own year 2000 compliance issues, their non-compliance
could have a material adverse effect on us and our operations.

Anti-Takeover Effects of Certain Charter and by-Law Provisions and Delaware Law;
Rights Plan

Certain provisions of our Certificate of Incorporation and Amended and
Restated By-Laws and the Delaware General Corporation Law may have the effect of
delaying or preventing changes in control or management of our company, which
could adversely affect the market price of our Common Stock. These provisions
include:

(1) a board divided into three classes, each of which serves for a
staggered three-year term;

(2) provisions restricting the removal of directors, the filling of
board vacancies and the taking of stockholder action;

(3) advance notice provisions with respect to shareholder proposals;
and

(4) the authority of our Board of Directors to issue up to 4,000,000
shares of Preferred Stock and to determine the price, rights,
preferences and privileges of those shares without any further
vote or action by the stockholders.

The rights of the holders of our Common Stock will be subject to, and may be
adversely affected by, the rights of the holders of any shares of Preferred
Stock that may be issued in the future. We are also subject to Section 203 of
the Delaware General Corporation Law which, subject to certain exceptions,
prohibits a Delaware corporation from engaging in a broad range of business
combinations with any interested stockholder for a period of three years
following the date that such stockholder became an interested stockholder.

In addition, the Board of Directors has adopted a Rights Plan, which may
render an unsolicited takeover of our company more difficult or less likely to
occur or might prevent such a takeover, even though such takeover may offer our
stockholders the opportunity to sell their stock at a price above the prevailing
market rate and may be favored by a majority of our stockholders. The Rights
Plan could adversely affect the market price of the Common Stock.

Potential Volatility of Stock Price

The market price of the shares of our Common Stock, like that of the common
stock of many other pharmaceutical and chemical companies, may be highly
volatile. Factors such as announcements of technological innovations or new
commercial products by us or our competitors, disclosure of results of clinical
testing or regulatory proceedings, developments in our relationships with our
customers, FDA announcements, FDA and other governmental regulation and
approvals, developments in patent or other proprietary rights, public concern as
to the safety of products developed by us and general market conditions may have
a significant effect on the market price of our common stock. In addition, U.S.
stock markets have experienced extreme price and volume fluctuations. This
volatility has significantly affected the market prices of securities of many
pharmaceutical and chemical companies for reasons frequently unrelated or
disproportionate to the operating performance of the specific companies. These
broad market fluctuations may adversely affect the market price of our Common
Stock.

ITEM 2. PROPERTIES

Our corporate offices are located in Stamford, Connecticut, and our new
Technology Center is located in Boston, Massachusetts. Our production
facilities are located in the United Kingdom.

LAND SIZE
LOCATION TILE (ACRES) (SQ.FT.) USE
- -------- ---- ------- -------- ---

Stamford, CT Leased -- 4,500 Corporate Office

Boston, MA Leased -- 11,000 Technology Center

Dudley, England Owned 45 443,108 Manufacturing, Warehousing,
Offices

Annan, Scotland Owned 154 158,446 Manufacturing, Warehousing,
Offices

ITEM 3. LEGAL PROCEEDINGS

We are involved in various legal proceedings incidental to the conduct of
our business. While it is not possible to determine the ultimate disposition of
these proceedings, we believe that the outcome of such proceedings will not have
a material adverse effect on our financial position or results of operation.

ITEM 4. SUBMISSIONS OF MATTERS TO A VOTE OF SECURITY HOLDERS

None.

PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

PRICE RANGE OF COMMON STOCK

The Common Stock was initially offered to the public on March 5, 1996 at a
price of $13.00 per share. The Common Stock is listed and traded on The Nasdaq
Stock Market's National Market SM ("Nasdaq") under the symbol "CHRX." The
following table sets forth for the periods indicated the high and low sales
prices of the Common Stock as reported by Nasdaq.

1997: HIGH LOW
- ----- ---- ---

First Quarter............................................... $13.25 $ 9.50
Second Quarter.............................................. 12.75 9.88
Third Quarter............................................... 25.50 11.63
Fourth Quarter.............................................. 26.25 16.63

1998: HIGH LOW
- ----- ---- ---

First Quarter............................................... $19.31 $11.63
Second Quarter.............................................. 23.25 14.19
Third Quarter............................................... 19.00 9.75
Fourth Quarter.............................................. 21.38 10.50

On February 23, 1999, the last reported sale price of the Common Stock as
reported by Nasdaq was $22.00. As of February 23, 1999, there were
approximately 5,900 holders of record of the Common Stock.

DIVIDEND POLICY

We have never declared or paid cash dividends on our capital stock. We
currently intend to retain any future earnings for use in our business and,
therefore, do not anticipate paying cash dividends in the foreseeable future.

ITEM 6. SELECTED HISTORICAL FINANCIAL DATA

The following selected historical financial data of our company as of
December 31, 1994 and 1995 and for the years then ended have been derived from
the financial statements of our company which have been audited by Coopers &
Lybrand L.L.P., independent public accountants. The selected historical
financial data for our company as of December 31, 1996, 1997 and 1998 and for
the years then ended, have been derived from the financial statements of our
company which are incorporated by reference elsewhere in this document and which
have been audited by

Arthur Andersen LLP, independent public accountants. This information should be
read in conjunction with "Item 8. Financial Statements and Supplementary Data"
and "Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations."

CHIREX INC.

YEAR ENDED DECEMBER 31,
-----------------------
1994 1995 1996 1997 1998
---- ---- ---- ---- ----
(IN THOUSANDS EXCEPT PER-SHARE AMOUNTS)

STATEMENT OF OPERATIONS DATA:
Revenues........................................................... $ 1,810 $ 2,754 $ 74,615 $ 94,100 $119,663
Cost and expenses: Cost of goods sold.............................. 814 1,715 56,508 71,440 87,876
Research and development........................................... 2,343 595 3,517 3,937 4,389
Selling, general and administrative................................ 1,964 2,099 7,952 9,423 12,622
Goodwill amortization.............................................. - - 924 1,164 1,164
Restructuring and other expense, net of proceeds
from disposition of acetaminophen business in 1997.............. - - 5,611 8,069 3,242

Write-off of in-process research and development................... - - 5,790 - -
------- ------- -------- -------- --------
Total operating expenses........................................ 5,121 4,409 80,302 94,033 109,293
------- ------- -------- -------- --------

Operating income (loss)............................................ (3,311) (1,655) (5,687) 67 10,370
Interest expense, net.............................................. - - 755 1,052 5,829
Other expenses..................................................... - 797 - - -
------- ------- -------- -------- --------
Income (loss) before income taxes.................................. (3,311) (2,452) (6,442) (985) 4,541
(Provision) benefit for income taxes............................... - - (1,867) 335 (2,373)
------- ------- -------- -------- --------

Net income (loss)............................................... $(3,3ll) $(2,452) $ (8,309) $ (650) $ 2,168
======= ======= ======== ======== ========

Basic and diluted income
(loss) per common share.......................................... $ (0.94) $ (0.70) $ (0.88) $ (0.06) $ 0.18

1994 1995 1996 1997 1998
---- ---- ---- ---- ----

BALANCE SHEET DATA (AS OF
DECEMBER 31):
Cash............................................................... $ - $ 1 $ 291 $ 5,347 $ 128
Total assets....................................................... 1,873 2,692 130,806 203,067 238,538
Long-term debt..................................................... - - 3,933 69,675 76,544
Stockholders' equity............................................... 1,873 2,692 90,068 93,095 97,213

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF
OPERATIONS AND FINANCIAL CONDITION

Management's discussion and analysis of results of operations and financial
condition as set forth on pages 16 through 22 of the Registrant's 1998 Annual
Report to Stockholders is incorporated herein by reference.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Stockholders and Board of Directors of ChiRex Inc.

We have audited, in accordance with generally accepted auditing standards, the
consolidated financial statements of ChiRex Inc. included in ChiRex Inc.'s Form
10-K and have issued our report thereon dated February 19, 1999. Our audits
were made for the purpose of forming an opinion on the basic consolidated
financial statements taken as a whole. ChiRex Inc's schedule of Valuation and
Qualifying Accounts, included in Schedule II immediately below, is the
responsibility of the Company's management and is presented for purposes of
complying with the Securities and Exchange Commission's rules and is not part of
the basic consolidated financial statements. This schedule has been subjected to
the auditing procedures applied in the audits of the basic consolidated
financial statements and, in our opinion, fairly states, in all material
respects, the financial data required to be set forth therein in relation to the
basic consolidated financial statements taken as a whole.

ARTHUR ANDERSEN LLP

Boston, Massachusetts
February 19, 1999

Financial statements and supplementary data as set forth on pages 23
through 45 of the Registrant's 1998 Annual Report to Stockholders is
incorporated herein by reference. In addition, the following is included herein
as Schedule II:

SCHEDULE II-VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1997 AND 1998

CHARGED BALANCE
BALANCE (CREDITED)TO AT END
BEGINNING STATEMENTS OF OF
OF PERIOD OPERATIONS DEDUCTIONS PERIOD
--------- ---------- ---------- ------

Allowance for doubtful
accounts
1996................... $ 70,000 $ 434,000 $(204,000) $ 300,000
1997................... 300,000 (236,000) (42,000) 22,000
1998................... 22,000 -- (3,000) 19,000
Restructuring reserves
1997................... $ -- $1,272,150 $ -- $1,272,150
1998................... 1,272,150 -- (172,150) 1,100,000

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

None.

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The required information is hereby incorporated by reference from our Proxy
Statement for the 1999 Annual Meeting of Stockholders to be filed with the
Securities and Exchange Commission on or before March 19, 1999.

ITEM 11. EXECUTIVE COMPENSATION

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The required information is hereby incorporated by reference from the
Company's Proxy Statement for the 1999 Annual Meeting of Stockholders to be
filed with the Securities and Exchange Commission on or before March 19, 1999.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON Form 8-K

(a) (1) Financial Statements. The following financial statements as set forth
on pages 23 through 45 of the Registrant's 1998 Annual Report to Stockholders
are incorporated herein by reference:

- Reports of Independent Public Accountants;
- Consolidated Balance Sheets as of December 31, 1997 and 1998;
- Consolidated Statements of Operations for the years ended December 31,
1996, 1997 and 1998;
- Consolidated Statements of Comprehensive Operations for the years
ended December 31, 1996, 1997 and 1998;
- Consolidated Statements of Cash Flows for the years ended December 31,
1996, 1997 and 1998;
- Consolidated Statements of Stockholders' equity for the years ended
December 31, 1996, 1997 and 1998; and
- Notes to Consolidated Financial Statements.

(a) (2) Financial Statement Schedule. Schedules have been omitted as they are
not applicable or the required information is shown in the financial statements
or notes thereto.

(a) (3) Exhibits. The Exhibits listed on the accompanying Index to Exhibits are
filed as part of this Annual Report on Form 10-K.

(b) Reports on Form 8-K. In 1998 we filed the following Reports on Form 8-K:

- On July 7, 1998, announcing the retirement of Alan R. Clark, as
Chairman and Chief Executive Officer, and other management changes.

- On September 1, 1998, announcing the appointment of Michael A.
Griffith, as Chairman and Chief Executive Officer, and other
management changes.

CHIREX INC.
INDEX TO EXHIBITS
ITEM 14 (A) (3)

EXHIBIT NO. DESCRIPTION

2.1* Agreement for the Sale and Purchase of the Entire Issued Share
Capital of Sterling Organics Limited by and among Sanofi Winthrop
Limited, Crossco (157) Limited and Sanofi, dated August 10, 1995.
2.2* Contribution Agreement by and among the Registrant, SepraChem
Inc. and the shareholders of Crossco (157) Limited listed on
Schedule 1 attached thereto, dated February 7, 1996.
2.3* Agreement and Plan of Merger by and among the Registrant,
SepraChem, Sepracor, SepraChem. Merger Corporation, Roger B.
Pettman and Certain Trusts Affiliated with Victor H. Wooley,
dated as of February 6, 1996, as amended.
2.4+**** Asset Purchase Agreement between ChiRex Limited, ChiRex Inc. and
Rhone Poulenc Chimie S.A.
2.5+***** Asset Purchase Agreement between ChiRex Inc. and Glaxo Wellcome
plc
3.1* Certificate of Incorporation of the Registrant.
3.2*** Amended and Restated By-Laws of the Registrant.
4.1* Specimen Certificate for Shares of Common Stock, $.01 par value,
of the Registrant.
4.2***** Facilities Agreement between ChiRex (Holdings) Limited and
Bankers Trust Company.
4.3***** Pledge Agreement between ChiRex Inc. and Bankers Trust Company.
4.4 Deeds of Accession to the Facilities Agreement by ChiRex America,
Inc. and ChiRex Technologies Center, Inc., as Guarantors.
4.5 Amendment No. 3 dated February 19, 1999, to the Facilities
Agreement.
10.1* 1995 Employee Stock Purchase Plan.
10.2*** 1997 Stock Incentive Plan.
10.3***** Amended and Restated 1995 Director Stock Option Plan.
10.4 Employment Agreement with Michael A. Griffith dated as of
September 1, 1998.
10.5 Amended and Restated Employment Agreement with Frank J. Wright
dated as of June 24, 1998 and Amendment No. 1 dated December 16,
1998.
10.6 Amended and Restated Employment Agreement with Jon E. Tropsa
dated as of April 15, 1998.
10.7 Employment Agreement with Ian D. Shott dated as of June 9, 1998.
10.8 Employment Agreement with Roger B. Pettman dated as of April 15,
1998.
10.9 Amended and Restated Employment Agreement with David F. Raynor
dated as of July 1, 1998.
10.10*** ChiRex Pension Scheme.
10.11+*** Supply Agreement dated as of January 21, 1997, between ChiRex
Inc. and Cell Therapeutics, Inc.
10.12+*** License Agreement dated as of February 3, 1997, between ChiRex
Inc. and President and Fellows of Harvard College.
10.13* Contract Research Agreement by and between the Registrant and
Sepracor, dated December 21, 1995.
10.14* Contract Manufacturing Agreement by and between the Registrant
and Sepracor, dated December 21, 1995.
10.15* Technology Transfer and License Agreement by and between the
Registrant and Sepracor, dated as of January 1, 1995.
10.16* Corporate Services Agreement by and between the Registrant and
Sepracor, dated December 21, 1995.
10.17* Supply Agreement by and between the Registrant and Sepracor,
dated December 21, 1995.

EXHIBIT DESCRIPTION
- ------- -----------

10.18* Technology Development Agreement by and between SepraChem and
Sandoz PhaLma Ltd., dated October 1, 1995.
10.19* License Agreement by and between Sepracor and Massachusetts
Institute of Technology, dated May 5, 1989.
10.20* License Agreement by and between Sepracor and Massachusetts
Institute of Technology, dated June 21, 1991.
10.21* License Agreement by and between Sepracor and Research
Corporation Technologies, Inc., dated March 13, 1991.
10.22* License Agreement by and between Sepracor and Research
Corporation Technologies, Inc., dated September 10, 1992.
10.23* License Agreement by and between Sepracor and Tanabe Seiyaku Co.,
Ltd., dated October 30, 1990.
10.24* Toll Manufacturing Agreement by and between Sterling Organics and
Rohm and Haas (UK) Limited, dated July 4, 1991.
10.25* Toll Manufacturing Agreement by and between Sterling Organics and
Rohm and Haas (UK) Limited, dated August 27, 1987.
10.26* Supply Agreement by and between Sterling Organics and Sanofi
Winthrop Limited and Sterling Winthrop, Inc. dated June 17, 1994.
10.27* Supply Agreement by and between Sterling Organics and Sanofi
S.A., dated August 10, 1995.
10.28* Supply Agreement by and between Sterling Organics and Sanofi
S.A., dated August 10, 1995.
10.29*** Sterling/Currency LIBOR Revolving Credit Facility between Midland
Bank Plc and ChiRex (Holdings) Limited, executed as of August 10,
1995.
10.30* Procedural Joint Union Agreement by and between Sterling Organics
and AEEU, dated July 7, 1975.
10.31* House Agreement by and between Sterling Organics and AEEU, dated
February 1976.
10.32* Procedural Agreement by and between Sterling Organics and EESA,
dated November 3, 1977.
10.33* Agreement by and between Sterling Organics and ACTS, dated July
19, 1978.
10.34* Escrow Agreement by and between the Registrant, Roger B. Pettman
and Broomes Secretarial Services Limited.
10.35* Escrow Agreement by and between Alan R. Clark, David F. Raynor,
John E. Weir, J. Graham Thorpe, Hugh F. Ford, William Riddell,
Geoff B. Loxham, C. Lyn Chapple, David A. Routiedge and Broomes
Secretarial Services Limited
10.36+***** Supply Agreement between ChiRex Inc. and Glaxo Wellcome p1c.
10.37 Exclusive Licensing Agreement with Massachusetts Institute of
Technology dated May 22, 1998.
10.38 Consulting Agreement with Eric N. Jacobsen dated as of October 1,
1998.
10.39 Compromise Agreement with Alan R. Clark dated July 3, 1998.
10.40 Compromise Agreement with John Graham Thorpe dated June 24, 1998.
10.41 Compromise Agreement with John E. Weir dated July 1998.
10.42 Consulting Agreements dated as of April 18, 1998, with Elizabeth
M. Greetham and W. Dieter Zander.
10.43 Assignment Agreements to ChiRex America, Inc. dated as of May 19,
1998, of the License Agreements listed under Exhibits 10.19,
10.20 and 10.22.
10.44 Amendment No. 3 dated as of May 19, 1998, to the Technology and
Transfer Agreement.
10.45 Lease Agreement dated November 1, 1998, and Amendment to the
Lease Agreement.
13 ChiRex Inc. 1998 Annual Report.
16** Letter re Change in Certifying Accountant.
21 Subsidiaries of the Registrant.
23.1 Consent of Arthur Andersen LLP.

EXHIBIT DESCRIPTION
- ------- -----------

27 Financial Data Schedule

- ----------
* Incorporated by reference to the corresponding exhibits in the Registration
Statement on Form S-1 previously filed by the Registrant (File no. 33-
80831).

** Incorporated by reference to the Form 8-K previously filed by the
Registrant on September 11, 1996.

*** Incorporated by reference to the corresponding exhibits in the
Registration Statement on Form S-1 previously filed by the Registrant on
February 26, 1997 (File no. 333-22401).

**** Incorporated by reference to the Form 8-K previously filed by the
Registrant on April 11, 1997.

***** Incorporated by reference to the Form 8-K previously filed by the
Registrant on November 17, 1997.

# Previously filed by the Registrant on the Company's 1996 Annual Report on
Form 10-K and is incorporated by reference.

+ Confidential treatment received as to certain portions.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended, the Registrant has duly caused this Annual
Report on Form 10-K to be signed on its behalf by the undersigned, thereunto
duly authorized, in the Town of Stamford, Connecticut on this 24th day of
February, 1999.

CHIREX INC.

By /s/ Michael A. Griffith
------------------------------
Michael A. Griffith
Chairman and Chief Executive
Officer

Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended, this Annual Report on Form 10-K has been
signed below by the following persons in the capacities indicated below on this
24th day of February, 1999.

SIGNATURE TITLE

/s/ Michael A. Griffith Chairman of the Board of Directors
--------------------------- and Chief Executive Officer
Michael A. Griffith (Principal Executive Officer)

/s/ Jon E. Tropsa Vice President, Finance, and
--------------------------- Secretary Elect (Principal Financial
Jon E. Tropsa Officer)

/s/ Eric Jacobsen Director
---------------------------
Eric Jacobsen

/s/ Dirk Detert Director
---------------------------
Dirk Detert

/s/ W. Dieter Zander Director
---------------------------
W. Dieter Zander