Exhibit 99.1
Chiron Reports 2004 Third-Quarter Pro Forma Earnings Results of 26 Cents Per
Share; GAAP Results of 13 Cents Per Share
EMERYVILLE, Calif.--(BUSINESS WIRE)--Oct. 20, 2004--Chiron Corporation
(NASDAQ:CHIR) today reported pro forma income from continuing operations of $49
million, or $0.26 per share, for the third quarter of 2004, compared to $117
million, or $0.60 per share, for the third quarter of 2003. On a GAAP basis,
Chiron reported income from continuing operations of $24 million, or $0.13 per
share, for the third quarter of 2004, compared to a loss from continuing
operations of $20 million, or $0.11 per share, for the third quarter of 2003.
Foreign exchange rates resulted in an approximate $0.04 decrease in pro forma
earnings per share and an approximate $0.05 decrease in GAAP earnings per share
for the third quarter of 2004.
As a result of the October 5, 2004, action by the UK regulatory body, the
Medicines and Healthcare products Regulatory Agency (MHRA), to temporarily
suspend Chiron's license to manufacture FLUVIRIN(R) influenza virus vaccine in
the company's Liverpool facility, Chiron has recorded no FLUVIRIN vaccine sales
for the third quarter of 2004. In addition, the entire FLUVIRIN vaccine product
inventory has been written off in the third quarter of 2004, resulting in a $91
million charge to the cost-of-sales line. The charge has resulted in an
approximate $0.36 decrease in both pro forma and GAAP earnings per share.
Included in the third quarter of 2004 is a settlement with F. Hoffmann-La
Roche (Roche) regarding Chiron's HIV patent in the United States. The settlement
includes a lump-sum payment to Chiron of $78 million, of which $14 million was
recognized as royalty and license fee revenues in the third quarter of 2004. In
addition, the settlement also resulted in $32 million of previously deferred
royalty and license fee payments being recognized as royalty and license fee
revenues in the third quarter. The impact of the Roche settlement was an
approximate $0.18 increase in both pro forma and GAAP earnings per share.
"These past weeks have been among the most difficult of Chiron's 23-year
history. We feel deeply saddened that some people may not be able to get
immunized against influenza this season," said Howard Pien, president and chief
executive officer of Chiron.
"Influenza vaccines are a public health priority. Going forward, we are
focused on restoring our capacity to provide FLUVIRIN vaccine and achieving an
effective solution. We are working with the U.S. and UK regulatory authorities
as we design and implement our remediation plan. As we move forward on
addressing this major concern, Chiron is also realizing milestones in our
BioPharmaceuticals and Blood Testing businesses, as well as progressing in other
areas of our Vaccines business. We are confident in the strength of the company
as a whole."
Guidance
Chiron's outlook for full-year 2004 pro forma earnings remains unchanged at
between $0.70 to $0.80 per share (a range of $0.32 to $0.42 per share on a GAAP
basis). This outlook does not include any revenue from sales of FLUVIRIN(R)
vaccine for the 2004-2005 influenza season. This outlook does not include costs
the company may incur in connection with remediation and other FLUVIRIN-related
issues. Pro forma guidance excludes amortization expense on acquired intangible
assets related to the acquisitions of PathoGenesis, Chiron Behring, Pulmopharm
and PowderJect, and a charge for purchased in-process research and development
related to the acquisition of Sagres, totaling approximately $0.38 per share.
Chiron management uses pro forma financial statements to gain an
understanding of the company's operating performance on a comparative basis. Pro
forma amounts exclude certain revenue items and special items relating to
certain acquisitions, which may not be indicative of the company's trends or
potential future performance. Please refer to the tables at the end of this
document for more detail on these items and a reconciliation of the pro forma
information to GAAP financial statements. All references to per-share amounts
are per diluted share.
Product Sales and Revenues
Total revenues were $524 million for the third quarter of 2004, compared to
$540 million for the third quarter of 2003. Net product sales were $370 million
for the third quarter of 2004, compared to $433 million for the third quarter of
2003. No FLUVIRIN(R) vaccine sales were recorded in the third quarter 2004.
Sales of FLUVIRIN vaccine were $103 million in the third quarter of 2003. For
the quarter, foreign exchange rates resulted in a 2 percent increase in total
revenues.
Blood Testing
Total Blood Testing revenues were $141 million for the third quarter of
2004, compared to $109 million for the third quarter of 2003. Blood Testing
revenues primarily include revenues from the sales of products related to
Chiron's PROCLEIX(R) HIV-1/HCV Assay; revenues related to Chiron's joint
business arrangement for immunodiagnostics with Ortho-Clinical Diagnostics Inc.
(Ortho), a Johnson & Johnson company; and royalties paid by Roche related to
nucleic acid testing (NAT) blood screening. The gross profit margin on
blood-testing products was 43 percent for the third quarter of 2004, compared to
40 percent for the third quarter of 2003.
-- Sales related to the PROCLEIX(R) System were $64 million for the third
quarter of 2004, compared to sales of $54 million for the third
quarter of 2003. The increase was primarily due to market share gains
in the United States for the PROCLEIX(R) HIV-1/HCV Assay, and
continued penetration into several markets abroad.
-- Revenues from Chiron's joint business arrangement with Ortho were $34
million for the third quarter of 2004, compared to $26 million for the
third quarter of 2003. The increase was primarily due to increased
revenues as a result of higher royalties realized by the joint
business.
-- Royalties paid by Roche related to NAT blood screening were $25
million for the third quarter of 2004, compared to $19 million for the
third quarter of 2003. Contributing to the increase in the third
quarter of 2004 was the Blood Testing share of the settlement with
Roche, consisting of a portion of the deferred royalties recognized
and a portion of the $14 million lump sum. In addition, revenues also
increased approximately $8 million due to recognition of a portion of
the license fee under Chiron's license agreements with the Blood
Transfusion Centers of the German Red Cross (Blutspendediensten des
Deutsche Rotes Kreuz, or DRK). This was offset by a one-time payment
from Roche in the third quarter of 2003.
Vaccines
Vaccines net product sales were $168 million for the third quarter of 2004,
compared to $263 million for the third quarter of 2003. The decrease was
primarily due to no sales of FLUVIRIN(R) vaccine in the third quarter of 2004.
The gross profit margin on vaccines products was 8 percent for the third quarter
of 2004, compared to 58 percent for the third quarter of 2003. The decrease was
primarily due to the write-off of the company's entire FLUVIRIN vaccine
inventory in the third quarter, resulting in a $91 million charge to
cost-of-sales.
-- Sales of influenza vaccines were $93 million for the third quarter of
2004, compared to $183 million for the third quarter of 2003. The
decrease was primarily due to no sales of FLUVIRIN vaccine in the
third quarter of 2004, compared to $103 million in sales of FLUVIRIN
vaccine in the third quarter of 2003. This was partially offset by a
17 percent increase in sales of Chiron's other influenza vaccines,
AGRIPPAL(R) S1, BEGRIVAC(TM) and FLUAD(R), due to price increases, and
the benefit of foreign exchange rates.
-- Sales of meningococcus vaccines were $9 million for the third quarter
of 2004, compared to $11 million for the third quarter of 2003. The
decrease was primarily due to lower sales of MENJUGATE(R)
meningococcal C vaccine as a result of the timing of tenders and
increased price competition, partially offset by the commencement of
sales of MENZB(TM) meningococcal B vaccine to New Zealand.
-- Sales of Chiron's travel vaccines were $21 million for the third
quarter of 2004, compared to $11 million for the third quarter of
2003. The increase was driven largely by increased sales of
RABAVERT(R) rabies vaccine in the United States and late-season sales
of ENCEPUR(TM) tick-borne encephalitis vaccine.
-- Sales of Chiron's pediatric and other vaccines products were $45
million for the third quarter of 2004, compared to $58 million for the
third quarter of 2003. The decrease was primarily due to the
previously announced divestiture of certain operations in Sweden
acquired via the PowderJect acquisition.
BioPharmaceuticals
The BioPharmaceuticals division reported net product sales and BETAFERON(R)
interferon beta-1b royalties of $145 million for the third quarter of 2004,
compared to $126 million for the third quarter of 2003. The gross profit margin
on biopharmaceutical products was 67 percent for the third quarter of 2004,
compared to 74 percent for the third quarter of 2003. The decrease in gross
profit margin was primarily due to the contractual change in the royalty rate
related to the sale of BETASERON(R) interferon beta-1b and the increased costs
associated with the new BETASERON pre filled diluent syringe. These decreases
were partially offset by product mix and the benefit of foreign exchange rates.
-- Sales of TOBI(R) tobramycin solution for inhalation were $56 million
for the third quarter of 2004, compared to $43 million for the third
quarter of 2003. The increase was primarily due to increased patient
demand in the United States, wholesale ordering patterns, price
increases and the benefit of foreign exchange rates.
-- Sales of PROLEUKIN(R) (aldesleukin) interleukin-2 were $32 million for
the third quarter of 2004, compared to $30 million for the third
quarter of 2003. The increase was primarily due to price increases.
-- Sales of BETASERON to Berlex Inc. (and its parent company, Schering
AG) for marketing and resale were $35 million for the third quarter of
2004, compared to $29 million for the third quarter of 2003. The
increase was primarily due to wholesaler ordering patterns and price
increases. This was partially offset by a decline in the royalty rate
pursuant to Chiron's contractual agreement with Schering. Royalties
from Schering's European sales of BETAFERON were $13 million for the
third quarter of 2004, compared to $16 million for the third quarter
of 2003. Royalties declined pursuant to Chiron's contractual agreement
with Schering. This decrease was partially offset by increased patient
demand and the benefit of foreign exchange rates.
Total Royalty and License Fee Revenues
-- Total royalty and license fee revenues were $111 million for the third
quarter of 2004 compared to $66 million for the third quarter of 2003.
The increase was primarily due to revenues from the settlement with
Roche relating to Chiron's HIV patent in the United States for use in
clinical diagnostics and blood screening. The settlement includes a
lump-sum payment to Chiron of $78 million, of which $14 million was
recognized as royalty and license fee revenues in the third quarter of
2004. In addition, the settlement also resulted in $32 million of
previously deferred royalty and license fee payments being recognized
as royalty and license fee revenues in the third quarter.
Pipeline and Products Update
Blood Testing
-- Chiron and Gen-Probe Incorporated (Gen-Probe) submitted a design
dossier amendment to Gen-Probe's European notified body for use of the
PROCLEIX(R) ULTRIO(TM) Assay on the PROCLEIX(R) TIGRIS(R) System. This
amendment would allow the already CE-Marked assay to be run on the
TIGRIS(R) fully automated, high-throughput instrument platform, as
well as on the PROCLEIX(R) System, the semi-automated instrument
platform currently used.
-- Chiron and Gen-Probe submitted a Biologics License Application (BLA)
for the PROCLEIX ULTRIO Assay for blood screening. This assay
simultaneously detects HIV-1, hepatitis C virus (HCV) and hepatitis B
virus (HBV) in donated blood, plasma, organs and tissue. The companies
intend to seek approval to run the test on both the semi-automated
PROCLEIX(R) System and on the fully automated, high-throughput
PROCLEIX TIGRIS System.
-- Chiron and Gen-Probe initiated testing with the PROCLEIX(R) WEST NILE
VIRUS (WNV) Assay under an investigational protocol on the PROCLEIX
TIGRIS System. The fully automated, high-throughput NAT system,
developed by Gen-Probe, is designed to allow blood centers to test
individual blood samples with greater operator efficiency and is being
introduced into blood-testing centers under an Investigational New
Drug (IND) protocol in regions with the highest prevalence of WNV. In
addition, Chiron and Gen-Probe initiated a pivotal clinical trial of
PROCLEIX WNV Assay on the eSAS semi-automated instrumentation
platform. The PROCLEIX WNV Assay, which is labeled "For
Investigational Use Only," has detected approximately 243 WNV-infected
donations since May.
-- Chiron granted a non-exclusive license to the Blood Transfusion
Centers of the German Red Cross, or DRK, for use of the company's
HIV-1 and HCV technology for use in molecular-probe home-brew blood
screening.
-- Chiron reached a settlement with Roche in a dispute over licensing
fees and royalties that Chiron had asserted were owed to the company
under a licensing agreement related to its U.S. Patent No. 6,531,276.
The patent, which was issued in the United States in March 2003, is
directed to NAT methods for HIV. Under the terms of the settlement
agreement, which covers clinical diagnostics and blood screening,
Roche irrevocably stipulates to the validity and enforceability of the
patent.
-- Chiron acquired Prion Solutions Inc., a privately held company focused
on research into variant Creutzfeldt-Jakob disease (vCJD) and other
prion-related diseases.
Vaccines
-- During the third quarter of 2004, Chiron initiated dosing in a
clinical trial that is a component of the Phase III program designed
to enable European registration of the company's cell culture-derived
influenza vaccine.
-- Chiron is performing additional analyses regarding MENJUGATE(R)
vaccine at the request of the U.S. Food and Drug Administration (FDA).
As a result, Chiron anticipates that it will file the BLA for
MENJUGATE in 2005.
-- Chiron won a further contract from the National Institute of Allergy
and Infectious Diseases (NIAID), a part of the U.S. National
Institutes of Health (NIH), to produce an investigational vaccine
designed to protect against H9N2, a potential pandemic-like strain of
influenza.
BioPharmaceuticals: Infectious Disease
-- Chiron submitted a New Drug Application (NDA) to the FDA for marketing
approval of PULMINIQ(TM) (cyclosporine, USP) inhalation solution.
Chiron is seeking an indication for the increase in survival and
prevention of chronic rejection in patients receiving allogeneic lung
transplants, in combination with standard immunosuppressive therapy.
PULMINIQ could be the first immunosuppressant approved for this
indication.
-- Chiron presented data from the final study report of a Phase I
clinical trial of tobramycin powder for inhalation (TPI) at the North
American Cystic Fibrosis Conference in St. Louis, October 14-17. TPI,
an inhaled antibiotic, is being developed for the treatment of cystic
fibrosis (CF) patients with Pseudomonas aeruginosa infection. The
trial data suggest that TPI, a formulation of tobramycin, a drug with
a proven efficacy and safety profile, may significantly reduce the
treatment burden for CF patients by offering a short administration
time and full portability.
-- Chiron launched cForward.net, an online resource for CF patients and
their caregivers. The site offers interactive educational content,
community-based programming and access to important information
specific to CF patients and their needs.
-- Berlex Inc., a U.S. affiliate of Schering AG, Chiron's marketing
partner for BETASERON(R) interferon beta-1b, announced that the proven
benefits of BETASERON treatment for people living with multiple
sclerosis (MS) was underscored by a long-term follow-up study (eight
years) presented at the 20th Congress of the European Committee for
Treatment and Research in Multiple Sclerosis (ECTRIMS) in Vienna. In
addition, Schering announced positive interim results from a study
called "BETAFERON(R) in Early Relapsing-Remitting Multiple Sclerosis
Surveillance Trial" (BEST). The interim results showed that patients
treated with BETAFERON (BETASERON in the U.S.) for one year reduced
their annual relapse rate by 51 percent, and 68 percent of patients
were free of both progression and relapse.
-- Chiron granted a nonexclusive license to InterMune Inc. for the
research, development and commercialization of therapeutics against
HCV drug targets.
BioPharmaceuticals: Oncology
Chiron's oncology franchise has three dimensions: immune-based therapies,
monoclonal antibodies and novel cancer agents.
-- As a result of progress made in the initial Phase I study of CHIR-258,
Chiron has initiated an additional Phase I study of CHIR-258 in acute
myelogenous leukemia (AML).
-- Chiron acquired Sagres Discovery, a privately held company
headquartered in Davis, Calif., that focuses on the discovery and
validation of targets with potential application to the development of
cancer therapeutics. With the targets from Sagres, Chiron expects to
be able to maximize the value of the company's collaboration with Xoma
Ltd. and its small-molecule drug discovery program for the development
and commercialization of new drugs for the treatment of cancer.
Other Recent Business Milestones
-- Ursula B. Bartels was appointed vice president and general counsel.
Ms. Bartels will be responsible for all legal functions at Chiron. Ms.
Bartels was previously vice president of Boehringer Ingelheim
Corporation and senior vice president, general counsel and secretary
of Boehringer Ingelheim Pharmaceuticals Inc., where she was
responsible for all legal functions for the corporation and U.S.
subsidiaries.
Third-Quarter 2004 Earnings Conference Call
Chiron will hold a conference call and webcast on Wednesday, October 20,
2004, at 4:30 p.m. EDT to review its third-quarter 2004 results of operations
and business highlights. In addition, the company may address forward-looking
questions concerning business, financial matters and trends affecting the
company.
To access either the live call or the one-week archive, please log on to
www.chiron.com/webcast. Please connect to the website at least 15 minutes prior
to the conference call to ensure adequate time to download any necessary
software. Alternatively, please call (800) 819-7026 from the United States or
Canada or (706) 643-7768 from other locations. Replay is available approximately
two hours after the completion of the call through 11:55 p.m. EDT, Wednesday,
October 27, 2004. To access the replay, please call (800) 642-1687 from the
United States or Canada or (706) 645-9291 from other locations. The conference
ID number is 1335529.
About Chiron
Through its global Blood Testing, Vaccines and BioPharmaceuticals
businesses, Chiron Corporation addresses human suffering with more than 50
diverse products to detect, prevent and treat disease worldwide. The company's
success has come from its pioneering science, skill in delivering innovations in
biotechnology and disciplined business approach. Chiron believes that science
has the power to improve people's lives and harnesses that power to transform
human health. For more information, visit www.chiron.com.
This news release contains forward-looking statements, including statements
regarding earnings and sales growth, supply of FLUVIRIN(R) vaccine that Chiron
expects to deliver to the U.S. market in future influenza seasons, improvements
to manufacturing facilities, product development initiatives, new product
indications, new product marketing, clinical trials, and in- and out-licensing
activities, that involve risks and uncertainties and are subject to change. No
assurances can be given that additional issues with respect to FLUVIRIN or
Chiron's manufacturing generally will not arise in the future or that the MHRA
will not further suspend or revoke the license to Chiron's Liverpool facility.
Many factors could cause actual results and developments to differ materially
from those expressed or implied by these forward-looking statements, including,
among others, additional adverse developments resulting from Chiron's
announcement of the suspension of its UK license to manufacture FLUVIRIN,
including litigation and investigations relating to such announcement. A
discussion of the company's operations and financial condition, including
factors that may affect its business and future prospects, is contained in
documents the company has filed with the SEC, including the form 10-K for the
year ended December 31, 2003, and the form 10-Q for the quarter ended June 30,
2004, and will be contained in all subsequent periodic filings made with the
SEC. These documents identify important factors that could cause the company's
actual performance to differ from current expectations, including the outcome of
clinical trials, regulatory review and approvals, manufacturing capabilities,
intellectual property protections and defenses, litigation, stock-price and
interest-rate volatility, and marketing effectiveness. In particular, there can
be no assurance that Chiron will increase sales of existing products, resume
manufacturing or sale of FLUVIRIN for the 2005-2006 influenza season or ever,
successfully develop and receive approval to market new products, or achieve
market acceptance for such new products. There can be no assurance that Chiron's
out-licensing activities will generate significant revenue nor that its
in-licensing activities will fully protect it from claims of infringement by
third parties. In addition, the company may face additional competition in the
influenza market in the future and challenges in distribution arrangements as a
result of the recent FLUVIRIN announcements. The company may engage in business
opportunities, the successful completion of which are subject to certain risks,
including shareholder and regulatory approvals and the integration of
operations.
Chiron does not undertake an obligation to update the forward-looking
information the company is giving today.
NOTE: AGRIPPAL, BEGRIVAC, ENCEPUR, FLUVIRIN, FLUAD, MENJUGATE, MENZB,
PROCLEIX, PROLEUKIN, PULMINIQ, RABAVERT, TOBI and ULTRIO are trademarks of
Chiron Corporation. BETASERON and BETAFERON are trademarks of Schering AG.
TIGRIS is a trademark of Gen-Probe Incorporated.
CHIRON CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands, except per share data)
Three Months Ended September 30,
2004
Pro
Pro Forma Forma
Adjusted Adjust-
(1) ments Actual
------------ -------- ---------
Revenues:
Product sales, net $369,980 $- $369,980
Revenues from joint business
arrangement 34,017 - 34,017
Collaborative agreement revenues 4,124 - 4,124
Royalty and license fee revenues 111,396 - 111,396
Other revenues 4,450 - 4,450
------------ -------- ---------
Total revenues 523,967 - 523,967
------------ -------- ---------
Operating expenses:
Cost of sales 237,622 - 237,622
Research and development 103,000 - 103,000
Selling, general and administrative 114,531 - 114,531
Purchased in-process research and
development - (9,629) 9,629
Amortization expense - (20,566) 20,566
Other operating expenses 1,281 - 1,281
------------ -------- ---------
Total operating expenses 456,434 (30,195) 486,629
------------ -------- ---------
Income from operations 67,533 30,195 37,338
Interest expense (7,063) - (7,063)
Interest and other income, net 5,369 - 5,369
Minority interest (504) - (504)
------------ -------- ---------
Income from continuing operations
before income taxes 65,335 30,195 35,140
Provision for income taxes 16,334 5,142 11,192
------------ -------- ---------
Income from continuing operations 49,001 25,053 23,948
============ ======== =========
Gain (loss) from discontinued
operations (450) - (450)
------------ -------- ---------
Net income (loss) $48,551 $25,053 $23,498
============ ======== =========
Basic earnings (loss) per share:
Income (loss) from continuing
operations $0.26 $0.13
============ =========
Net income (loss) $0.26 $0.13
============ =========
Diluted earnings (loss) per share:
Income (loss) from continuing
operations $0.26 $0.13
============ =========
Net income (loss) $0.26 $0.12
============ =========
Shares used in calculating basic
earnings per share 187,368 187,368
============ =========
Shares used in calculating diluted
earnings per share 190,588 190,014
============ =========
Three Months Ended September 30,
2003
Pro
Pro Forma Forma
Adjusted Adjust-
(2) ments Actual
------------ --------- ---------
Revenues:
Product sales, net $432,674 $- $432,674
Revenues from joint business
arrangement 26,058 - 26,058
Collaborative agreement revenues 7,816 - 7,816
Royalty and license fee revenues 66,237 - 66,237
Other revenues 7,688 - 7,688
------------ --------- ---------
Total revenues 540,473 - 540,473
------------ --------- ---------
Operating expenses:
Cost of sales 174,380 - 174,380
Research and development 97,519 - 97,519
Selling, general and administrative 105,818 - 105,818
Purchased in-process research and
development - (122,700) 122,700
Amortization expense - (19,821) 19,821
Other operating expenses 4,779 - 4,779
------------ --------- ---------
Total operating expenses 382,496 (142,521) 525,017
------------ --------- ---------
Income from operations 157,977 142,521 15,456
Interest expense (6,222) - (6,222)
Interest and other income, net 5,239 - 5,239
Minority interest (443) - (443)
------------ --------- ---------
Income from continuing operations
before income taxes 156,551 142,521 14,030
Provision for income taxes 39,138 4,955 34,183
------------ --------- ---------
Income from continuing operations 117,413 137,566 (20,153)
============ ========= =========
Gain (loss) from discontinued
operations 1,174 - 1,174
------------ --------- ---------
Net income (loss) $118,587 $137,566 $(18,979)
============ ========= =========
Basic earnings (loss) per share:
Income (loss) from continuing
operations $0.63 $(0.11)
============ =========
Net income (loss) $0.64 $(0.10)
============ =========
Diluted earnings (loss) per share:
Income (loss) from continuing
operations $0.60 $(0.11)
============ =========
Net income (loss) $0.61 $(0.10)
============ =========
Shares used in calculating basic
earnings per share 186,685 186,685
============ =========
Shares used in calculating diluted
earnings per share 200,463 186,685
============ =========
(1) Pro Forma Adjusted amounts exclude (a) the amortization expense on
acquired intangible assets related to the acquisitions of
PathoGenesis, Chiron Behring, Pulmopharm and PowderJect
Pharmaceuticals and (b) Purchased in-process research and development
related to the Sagres acquisition.
(2) Pro Forma Adjusted amounts exclude (a) the amortization expense on
acquired intangible assets related to the acquisitions of
PathoGenesis, Chiron Behring, Pulmopharm and PowderJect
Pharmaceuticals and (b) purchased in-process research and development
related to the PowderJect Pharmaceuticals acquisition. Note that in
Q4'03, there was a purchase price adjustment to the purchased
in-process research and development related to the PowderJect
Pharmaceuticals acquisition, upon completion of strategic assessments
of the value of certain research and development projects. The
adjustment reduced purchased in-process research and development by
$77.4 million.
CHIRON CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands, except per share data)
Year to Date September 30,
2004
Pro
Pro Forma Forma
Adjusted Adjust-
(3) ments Actual
----------- -------- ----------
Revenues:
Product sales, net $946,138 $- $946,138
Revenues from joint business
arrangement 92,910 - 92,910
Collaborative agreement revenues 14,467 - 14,467
Royalty and license fee revenues 221,384 - 221,384
Other revenues 22,363 - 22,363
----------- -------- ----------
Total revenues 1,297,262 - 1,297,262
----------- -------- ----------
Operating expenses:
Cost of sales 495,048 - 495,048
Research and development 301,736 - 301,736
Selling, general and administrative 326,128 - 326,128
Purchased in-process research and
development - (9,629) 9,629
Amortization expense - (63,077) 63,077
Other operating expenses 8,040 - 8,040
----------- -------- ----------
Total operating expenses 1,130,952 (72,706) 1,203,658
----------- -------- ----------
Income from operations 166,310 72,706 93,604
Interest expense (19,440) - (19,440)
Interest and other income, net 41,252 - 41,252
Minority interest (1,583) - (1,583)
----------- -------- ----------
Income from continuing operations
before income taxes 186,539 72,706 113,833
Provision for income taxes 46,635 15,770 30,865
----------- -------- ----------
Income from continuing operations 139,904 56,936 82,968
=========== ======== ==========
Gain from discontinued operations 24,854 - 24,854
----------- -------- ----------
Net income $164,758 $56,936 $107,822
=========== ======== ==========
Basic earnings per share:
Income from continuing operations $0.75 $0.44
=========== ==========
Net income $0.88 $0.57
=========== ==========
Diluted earnings per share:
Income from continuing operations $0.73 $0.43
=========== ==========
Net income $0.86 $0.56
=========== ==========
Shares used in calculating basic
earnings per share 187,751 187,751
=========== ==========
Shares used in calculating diluted
earnings per share 190,901 190,901
=========== ==========
Year to Date September 30,
2003
Pro
Pro Forma Forma
Adjusted Adjust-
(4) ments Actual
----------- --------- ----------
Revenues:
Product sales, net $897,222 $- $897,222
Revenues from joint business
arrangement 79,985 - 79,985
Collaborative agreement revenues 15,554 - 15,554
Royalty and license fee revenues 186,537 - 186,537
Other revenues 18,069 (14,413) 32,482
----------- --------- ----------
Total revenues 1,197,367 (14,413) 1,211,780
----------- --------- ----------
Operating expenses:
Cost of sales 357,389 - 357,389
Research and development 269,564 - 269,564
Selling, general and administrative 259,086 - 259,086
Purchased in-process research and
development - (122,700) 122,700
Amortization expense - (35,135) 35,135
Other operating expenses 7,729 - 7,729
----------- --------- ----------
Total operating expenses 893,768 (157,835) 1,051,603
----------- --------- ----------
Income from operations 303,599 143,422 160,177
Interest expense (12,523) - (12,523)
Interest and other income, net 31,170 - 31,170
Minority interest (1,424) - (1,424)
----------- --------- ----------
Income from continuing operations
before income taxes 320,822 143,422 177,400
Provision for income taxes 80,206 5,181 75,025
----------- --------- ----------
Income from continuing operations 240,616 138,241 102,375
=========== ========= ==========
Gain from discontinued operations 3,138 - 3,138
----------- --------- ----------
Net income $243,754 $138,241 $105,513
=========== ========= ==========
Basic earnings per share:
Income from continuing operations $1.29 $0.55
=========== ==========
Net income $1.31 $0.57
=========== ==========
Diluted earnings per share:
Income from continuing operations $1.25 $0.54
=========== ==========
Net income $1.27 $0.55
=========== ==========
Shares used in calculating basic
earnings per share 186,658 186,658
=========== ==========
Shares used in calculating diluted
earnings per share 196,935 190,488
=========== ==========
(3) Pro Forma Adjusted amounts exclude (a) the amortization expense on
acquired intangible assets related to the acquisitions of
PathoGenesis, Chiron Behring, Pulmopharm and PowderJect
Pharmaceuticals and (b) the purchased in-process research and
development related to the Sagres acquisition.
(4) Pro Forma Adjusted amounts exclude: (a) the amortization expense
on acquired intangible assets related to the acquistions of
PathoGenesis, Chiron Behring, Pulmopharm and PowderJect
Pharmaceuticals, (b) the Biogen and Serono settlements in connection
with the McCormick patents owned by Schering's U.S. subsidiary, Berlex
Laboratories and (c) purchased in-process research and development
related to the PowderJect Pharmaceuticals acquisition. Note that in
Q4'03, there was a purchase price adjustment to the purchased
in-process research and development related to the PowderJect
Pharmaceuticals acquisition, upon completion of strategic assessments
of the value of certain research and development projects. The
adjustment reduced purchased in-process research and development by
$77.4 million.
Note: Due to rounding, quarterly earnings per share amounts may not
sum fully to yearly earnings per share amounts.
CHIRON CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In thousands)
September December
30, 2004 31, 2003
-----------------------
Assets
- -----------------------------------------------
Current assets:
Cash and short-term investments $544,490 $538,482
Accounts receivable, net 397,802 382,933
Current portion of notes receivable - 1,479
Inventories, net 218,589 199,625
Other current assets 135,814 135,130
----------- -----------
Total current assets 1,296,695 1,257,649
Noncurrent investments in marketable debt
securities 467,813 560,292
Property, plant, equipment and leasehold
improvements, net 751,393 689,750
Other noncurrent assets 1,667,430 1,687,478
----------- -----------
Total assets $4,183,331 $4,195,169
=========== ===========
Liabilities and stockholders' equity
- -----------------------------------------------
Current liabilities $389,250 $436,913
Long-term debt 940,295 926,709
Capital lease 157,014 157,677
Noncurrent unearned revenue 30,525 45,564
Other noncurrent liabilities 192,678 176,944
Minority interest 8,498 7,002
Stockholders' equity 2,465,071 2,444,360
----------- -----------
Total liabilities and stockholders'
equity $4,183,331 $4,195,169
=========== ===========
CHIRON CORPORATION
SUPPLEMENTAL SCHEDULE OF COMPUTATION OF EARNINGS PER SHARE
(Unaudited)
(In thousands, except per share data)
Three Months Ended
September 30,
2004 2003
--------- -------- --------- ---------
Pro Forma Pro Forma
Adjusted Actual Adjusted Actual
--------- -------- --------- ---------
Computation for earnings (loss) per share
- continuing operations
Income (loss) (Numerator):
Income (loss) from continuing
operations $49,001 $23,948 $117,413 $(20,153)
Plus: Interest on 1.625%
convertible debentures, net
of taxes - - 1,064 -
Plus: Interest on Liquid
Yield Option Notes, net of
taxes 143 - 1,745 -
--------- -------- --------- ---------
Income (loss) from continuing
operations, plus impact from
assumed conversions $49,144 $23,948 $120,222 $(20,153)
========= ======== ========= =========
Shares (Denominator):
Weighted-average common
shares outstanding 187,368 187,368 186,685 186,685
Effect of dilutive securities:
Stock options and
equivalents 2,646 2,646 4,897 -
1.625% convertible
debentures, net of taxes - - 3,653 -
Liquid Yield Option Notes 574 - 5,228 -
--------- -------- --------- ---------
Weighted-average common
shares outstanding, plus
impact from assumed
conversions 190,588 190,014 200,463 186,685
========= ======== ========= =========
Basic earnings (loss) per share
from continuing operations $0.26 $0.13 $0.63 $(0.11)
========= ======== ========= =========
Diluted earnings (loss) per
share from continuing
operations $0.26 $0.13 $0.60 $(0.11)
========= ======== ========= =========
Computation for earnings (loss)
per share -net income (loss)
Income (loss) (Numerator):
Net income (loss) $48,551 $23,498 $118,587 $(18,979)
Plus: Interest on 1.625%
convertible debentures, net
of taxes - - 1,064 -
Plus: Interest on Liquid
Yield Option Notes, net of
taxes 143 - 1,745 -
--------- -------- --------- ---------
Net income (loss), plus
impact from assumed
conversions $48,694 $23,498 $121,396 $(18,979)
========= ======== ========= =========
Shares (Denominator):
Weighted-average common
shares outstanding 187,368 187,368 186,685 186,685
Effect of dilutive securities:
Stock options and
equivalents 2,646 2,646 4,897 -
1.625% convertible
debentures, net of taxes - - 3,653 -
Liquid Yield Option Notes 574 - 5,228 -
--------- -------- --------- ---------
Weighted-average common
shares outstanding, plus
impact from assumed
conversions 190,588 190,014 200,463 186,685
========= ======== ========= =========
Basic earnings (loss) per share $0.26 $0.13 $0.64 $(0.10)
========= ======== ========= =========
Diluted earnings (loss) per
share $0.26 $0.12 $0.61 $(0.10)
========= ======== ========= =========
CHIRON CORPORATION
SUPPLEMENTAL SCHEDULE OF COMPUTATION OF EARNINGS PER SHARE
(Unaudited)
(In thousands, except per share data)
Year to Date
September 30,
2004 2003
--------- -------- --------- ---------
Pro Forma Pro Forma
Adjusted Actual Adjusted Actual
--------- -------- --------- ---------
Computation for earnings per
share - continuing operations
Income (Numerator):
Income from continuing
operations $139,904 $82,968 $240,616 $102,375
Plus: Interest on 1.625%
convertible debentures, net
of taxes - - 1,064 -
Plus: Interest on Liquid
Yield Option Notes, net of
taxes - - 5,260 -
--------- --------- --------- ---------
Income from continuing
operations, plus impact
from assumed conversions $139,904 $82,968 $246,940 $102,375
========= ========= ========= =========
Shares (Denominator):
Weighted-average common
shares outstanding 187,751 187,751 186,658 186,658
Effect of dilutive securities:
Stock options and
equivalents 3,150 3,150 3,828 3,828
1.625% convertible
debentures, net of taxes - 1,218 -
Liquid Yield Option Notes,
net of taxes - - 5,229 -
Put options - - 2 2
--------- --------- --------- ---------
Weighted-average common
shares outstanding, plus
impact from assumed
conversions 190,901 190,901 196,935 190,488
========= =================== =========
Basic earnings per share from
continuing operations $0.75 $0.44 $1.29 $0.55
========= ========= ========= =========
Diluted earnings per share
from continuing operations $0.73 $0.43 $1.25 $0.54
========= ========= ========= =========
Computation for earnings per
share -net income
Income (Numerator):
Net income $164,758 $107,822 $243,754 $105,513
Plus: Interest on 1.625%
convertible debentures, net
of taxes - - 1,064 -
Plus: Interest on Liquid
Yield Option Notes, net of
taxes - - 5,260 -
--------- --------- --------- ---------
Net income $164,758 $107,822 $250,078 $105,513
========= =================== =========
Shares (Denominator):
Weighted-average common
shares outstanding 187,751 187,751 186,658 186,658
Effect of dilutive securities:
Stock options and
equivalents 3,150 3,150 3,828 3,828
1.625% convertible
debentures, net of taxes - - 1,218 -
Liquid Yield Option Notes,
net of taxes - - 5,229 -
Put options - - 2 2
--------- --------- --------- ---------
Weighted-average common
shares outstanding, plus
impact from assumed
conversions 190,901 190,901 196,935 190,488
========= =================== =========
Basic earnings per share $0.88 $0.57 $1.31 $0.57
========= ========= ========= =========
Diluted earnings per share $0.86 $0.56 $1.27 $0.55
========= ========= ========= =========
CHIRON CORPORATION
Supplemental Revenue Summary (Pro Forma)
USD $ (in thousands, except percentages)
Current Prior Change
Quarter Quarter from Change
Q3 2004 Q2 2004 Prior QTR %
- ----------------------------------------- --------- --------- --------
Product Sales
Blood Testing
Ortho $7,098 $6,608 $490 7.4%
NAT 63,629 60,589 3,040 5.0%
--------- --------- --------- -------
Total Blood Testing 70,727 67,197 3,530 5.3%
Vaccines
Flu Vaccines 93,486 8,207 85,279 1039.1%
Meningococcus Vaccines 8,865 5,016 3,849 76.7%
Travel Vaccines (TBE, Rabies,
Arilvax and Dukoral) 20,865 40,132 (19,267) (48.0)%
Pediatric/Other Vaccines 44,491 47,619 (3,128) (6.6)%
--------- --------- --------- -------
Total Vaccines 167,707 100,974 66,733 66.1%
Biopharmaceuticals:
Proleukin 31,739 35,057 (3,318) (9.5)%
TOBI 55,734 51,342 4,392 8.6%
Betaseron(a) 35,171 31,626 3,545 11.2%
Other 8,902 8,896 6 0.1%
--------- --------- --------- -------
Total Biopharmaceuticals 131,546 126,921 4,625 3.6%
TOTAL PRODUCT SALES $369,980 $295,092 $74,888 25.4%
========= ========= ========= =======
Revenues From Joint Business
Arrangement $34,017 $28,532 $5,485 19.2%
Collaborative Agreement
Revenues 4,124 3,828 296 7.7%
Royalty and License Fees 111,396 55,196 56,200 101.8%
Other Revenues 4,450 10,975 (6,525) (59.5)%
--------- --------- --------- -------
TOTAL REVENUES $523,967 $393,623 $130,344 33.1%
--------- --------- --------- -------
Gross Margins
Blood Testing 43% 42% 1%
Vaccines 8% 42% (34)%
Biopharmaceuticals 67% 74% (7)%
--------- --------- --------- -------
TOTAL GROSS MARGINS 36% 56% (20)%
--------- --------- --------- -------
- ----------------------------------------- --------- --------- --------
(a) Excludes Betaferon Royalty $13,374 $11,585 $1,789 15.4%
- ----------------------------------------- --------- --------- --------
Change
Year Ago from
Quarter Prior Change
Q3 2003 Year %
- --------------------------------------------------- --------- -------
Product Sales
Blood Testing
Ortho $6,235 $863 13.8%
NAT 53,663 9,966 18.6%
--------- --------- -------
Total Blood
Testing 59,898 10,829 18.1%
Vaccines
Flu Vaccines 183,250 (89,764) (49.0)%
Meningococcus
Vaccines 10,642 (1,777) (16.7)%
Travel Vaccines (TBE, Rabies, Arilvax
and Dukoral) 11,229 9,636 85.8%
Pediatric/Other
Vaccines 57,598 (13,107) (22.8)%
--------- --------- -------
Total Vaccines 262,719 (95,012) (36.2)%
Biopharmaceuticals:
Proleukin 29,859 1,880 6.3%
TOBI 43,022 12,712 29.5%
Betaseron(a) 29,010 6,161 21.2%
Other 8,166 736 9.0%
--------- --------- -------
Total
Biopharmaceuticals 110,057 21,489 19.5%
TOTAL PRODUCT
SALES $432,674 $(62,694) (14.5)%
========= ========= =======
Revenues From Joint
Business
Arrangement $26,058 $7,959 30.5%
Collaborative
Agreement Revenues 7,816 (3,692) (47.2)%
Royalty and License
Fees 66,237 45,159 68.2%
Other Revenues 7,688 (3,238) (42.1)%
--------- --------- -------
TOTAL REVENUES $540,473 $(16,506) (3.1)%
--------- --------- -------
Gross Margins
Blood Testing 40% 3%
Vaccines 58% (50)%
Biopharmaceuticals 74% (7)%
--------- --------- -------
TOTAL GROSS
MARGINS 60% (24)%
--------- --------- -------
- --------------------------------------------------- --------- -------
(a) Excludes
Betaferon
Royalty $15,970 $(2,596) (16.3)%
- --------------------------------------------------- --------- -------
CHIRON CORPORATION
Supplemental YTD Revenue Summary (Pro Forma)
USD $ (in thousands, except percentages)
Change
Nine Months Ended from
September 30, Prior Change
2004 2003 Year %
----------------------------------------
Product Sales
Blood Testing
Ortho $19,940 $19,766 $174 0.9%
NAT 186,104 141,767 44,337 31.3%
----------- ----------- -------- -------
Total Blood Testing 206,044 161,533 44,511 27.6%
Vaccines
Flu Vaccines 109,398 191,286 (81,888) (42.8)%
Meningococcus Vaccines 18,430 31,876 (13,446) (42.2)%
Travel Vaccines (TBE,
Rabies, Arilvax and
Dukoral) 84,007 59,981 24,026 40.1%
Pediatric/Other Vaccines 143,292 133,537 9,755 7.3%
----------- ----------- -------- -------
Total Vaccines 355,127 416,680 (61,553) (14.8)%
Biopharmaceuticals:
Proleukin 98,664 85,223 13,441 15.8%
TOBI 159,600 122,740 36,860 30.0%
Betaseron(a) 96,933 88,788 8,145 9.2%
Other 29,770 22,258 7,512 33.7%
----------- ----------- -------- -------
Total Biopharmaceuticals 384,967 319,009 65,958 20.7%
TOTAL PRODUCT SALES $946,138 $897,222 $48,916 5.5%
=========== =========== ======== =======
Revenues From Joint Business
Arrangement $92,910 $79,985 $12,925 16.2%
Collaborative Agreement
Revenues 14,467 15,554 (1,087) (7.0)%
Royalty and License Fees 221,384 186,537 34,847 18.7%
Other Revenues 22,363 18,069 4,294 23.8%
----------- ----------- -------- -------
TOTAL REVENUES $1,297,262 $1,197,367 $99,895 8.3%
----------- ----------- -------- -------
Gross Margins
Blood Testing 42% 42% 0%
Vaccines 24% 56% (32)%
Biopharmaceuticals 72% 75% (3)%
----------- ----------- -------- -------
TOTAL GROSS MARGINS 48% 60% (12)%
----------- ----------- -------- -------
- ----------------------------------------- ----------- -------- -------
(a) Excludes Betaferon
Royalty $38,766 $47,110 $(8,344) (17.7)%
- ----------------------------------------- ----------- -------- -------
CONTACT: Chiron Corporate Communications & Investor Relations
Media, 510-923-6500
Investors, 510-923-2300