Exhibit 99.1
Chiron Reports Third-Quarter 2005 Adjusted Earnings of $0.38 per Share,
GAAP Earnings of $0.27 per Share
EMERYVILLE, Calif.--(BUSINESS WIRE)--Oct. 25, 2005--Chiron Corporation
(Nasdaq:CHIR) today reported financial results for the third quarter of 2005.
Chiron reported adjusted income from continuing operations of $73 million, or
$0.38 per share, for the third quarter of 2005, compared to $53 million, or
$0.27 per share (as restated), for the third quarter of 2004. Chiron reported
GAAP income from continuing operations of $51 million, or $0.27 per share, for
the third quarter of 2005, compared to $27 million, or $0.14 per share (as
restated), for the third quarter of 2004.
Three factors had a material impact on the quarterly comparison of
financial results. As previously reported, following the suspension of Chiron's
manufacturing license for its Liverpool facility in October 2004, Chiron's
entire FLUVIRIN(R) influenza virus vaccine product inventory was written off in
the third quarter of 2004, resulting in a $91 million charge to cost of sales.
Also in the third quarter of 2004, Chiron recognized $46 million of royalty and
license fee revenue resulting from a settlement with F. Hoffmann-La Roche
related to a U.S. patent directed to NAT methods for HIV (Roche settlement),
compared to $8 million recognized in the third quarter of 2005. Lastly, there
was a lost contribution from sales of BEGRIVAC(R) influenza virus vaccine as
there were no sales of BEGRIVAC vaccine in the third quarter of 2005, compared
to $41 million of sales in the third quarter of 2004.
"The third quarter marked a significant turning point for the company. The
work underpinning the Liverpool remediation came to culmination with the return
of FLUVIRIN vaccine to the U.S. market, and Chiron is now poised to provide
possible solutions in the government's assessment of policy options to address
influenza. At the same time, we continue to hit important clinical and
commercial milestones in our BioPharmaceuticals and Blood Testing businesses,
and we continue to foster opportunities for growth and value creation across all
our businesses," said Howard Pien, chief executive officer of Chiron.
Chiron uses adjusted financial statements to gain an understanding of the
company's operating performance on a comparative basis. Adjusted amounts exclude
special items relating to certain acquisitions and an impairment loss on
acquired intangible assets, which may not be indicative of the company's trends
or potential future performance. Please refer to the tables at the end of this
press release for more detail on these items and a reconciliation of the
adjusted financial information to GAAP financial information; this information
is also located at www.chiron.com in the Investors section under Financial
Reports. All references to per-share amounts are per diluted share. -0- *T
Selected Financial Highlights (Amounts are both GAAP and adjusted)
Third- Third-
Quarter Quarter Change
($ millions) 2005 2004
- --------------------------------------------- -------- -------- ------
Net product sales $367 $376 (2%)
Total revenues 480 530 (9%)
Cost of sales 169 241
Gross profit margin 54% 36%
Research and development 107 103 4%
Selling, general and administrative 117 112 5%
- --------------------------------------------- -------- -------- ------
Net product sales for the third quarter of 2005 decreased 2 percent, or $8
million, compared to the third quarter of 2004, primarily due to no sales of
BEGRIVAC vaccine in the third quarter of 2005, compared to $41 million of sales
of BEGRIVAC vaccine in the third quarter of 2004. The decline was partially
offset by increases in sales of other influenza vaccines, rabies vaccines,
PROCLEIX(R) NAT products, MENJUGATE(R) meningococcal C vaccine, TOBI(R)
tobramycin inhalation solution, and BETASERON(R) interferon beta-1b.
Revenues decreased 9 percent, or $50 million, primarily due to recognition
of $46 million in the third quarter of 2004 relating to the Roche settlement,
compared to recognition of $8 million in the third quarter of 2005 relating to
the settlement. In addition, there were no BEGRIVAC vaccine product sales in the
third quarter of 2005.
Gross profit margin increased primarily due to the entire FLUVIRIN vaccine
product inventory being written off in the third quarter of 2004, resulting in a
$91 million charge to cost of sales.
Research and development expenses increased primarily due to the cost of
development efforts in the oncology franchise and the meningococcal vaccine
franchise. This increase was partially offset by decreases from a variety of
BioPharmaceutical and Blood Testing research and development programs that were
completed or discontinued prior to the third quarter of 2005.
Selling, general and administrative expenses increased due to a broad range
of activities, including the pre-launch program for CUBICIN(R) daptomycin for
injection in Europe, higher employee-related costs and corporate governance.
The effective tax rate was 22 percent on an adjusted basis and a GAAP basis
for the third quarter of 2005, compared to 25 percent on an adjusted basis and
31 percent on a GAAP basis for the third quarter of 2004. The tax rate decreased
primarily due to lower than expected revenues from FLUVIRIN vaccine and BEGRIVAC
vaccine, which are realized in high-tax jurisdictions. The change is expected to
be a non-recurring event impacting adjusted and GAAP tax rates in 2005.
BLOOD TESTING
Total Blood Testing revenues were $138 million for the third quarter of
2005, a decrease of 2 percent compared to the third quarter of 2004.
Selected Blood Testing Revenues
Third- Third-
Quarter Quarter
($ millions) 2005 2004 Change
- --------------------------------------------- -------- -------- ------
Ortho-Clinical Diagnostics $7 $7 (1%)
PROCLEIX(R) NAT products 71 64 11%
-------- -------- ------
Blood Testing net product sales 78 71 10%
Revenues from joint business
arrangement 36 34 6%
Royalty and license fee revenues 23 34 (34%)
Total Blood Testing revenues(a) $138 $141 (2%)
- --------------------------------------------- -------- -------- ------
(a) Total Blood Testing revenues consist of net product sales from
Chiron's joint business contractual arrangement with Ortho-Clinical
Diagnostics and from Chiron's PROCLEIX NAT product line, revenues from
Chiron's joint business arrangement with Ortho-Clinical Diagnostics,
collaborative agreement revenues, royalty and license fee revenues,
and other revenues. Totals may not sum due to rounding and the
inclusion of only selected financial information.
-- PROCLEIX NAT products: The increase in sales for the third
quarter of 2005 compared to the third quarter of 2004 was
primarily due to the introduction of the PROCLEIX(R) ULTRIO(R)
Assay and PROCLEIX(R) TIGRIS(R) System into a number of
markets abroad and an increase in donations in the United
States.
-- Joint business arrangement with Ortho-Clinical Diagnostics:
The increase in revenues was primarily due to increased
profitability realized by the joint business.
-- Royalty and license fee revenues related to NAT blood
screening: The decrease was primarily due to recognition in
the third quarter of 2004 of the Blood Testing share of the
Roche settlement and 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 partially offset by increased royalties from
Roche due to an increase in applicable royalty rates as
certain countries entered the EU and an increase in reported
donations. In addition, royalties increased due to several
settlements entered into prior to the third quarter of 2005.
The gross profit margin for Blood Testing products was 42 percent for the
third quarter of 2005, compared to 43 percent for the third quarter of 2004. The
decrease was primarily due to the cost of additional PROCLEIX TIGRIS System
support and service.
VACCINES
Vaccines net product sales were $153 million for the third quarter of 2005,
a decrease of 12 percent compared to the third quarter of 2004.
Selected Vaccines Revenues
Third- Third-
Quarter Quarter Change
($ millions) 2005 2004
- --------------------------------------------- -------- -------- ------
Influenza vaccines $60 $93 (35%)
Meningococcal vaccines 12 9 31%
Travel vaccines 35 26 32%
Pediatric and other vaccines 46 44 3%
-------- -------- ------
Vaccines net product sales 153 173 (12%)
Total Vaccines revenues(a) $157 $180 (13%)
- --------------------------------------------- -------- -------- ------
(a) Total Vaccines revenues consist of net product sales,
collaborative agreement revenues, royalty and license fee revenues,
and other revenues. Totals may not sum due to rounding and the
inclusion of only selected financial information.
-- Influenza vaccines: The decrease in influenza vaccines sales
was due to no sales of BEGRIVAC vaccine in the third quarter
of 2005, compared to $41 million of sales in the third quarter
of 2004, partially offset by increased sales of other
influenza vaccine products.
-- Meningococcal vaccines: The increase in MENJUGATE vaccine
sales was primarily due to a tender sale in Spain, partially
offset by a decline in tender sales to the United Kingdom and
Canada.
-- Travel vaccines: The increase in travel vaccines sales was
primarily due to an increase in sales of rabies vaccine due to
increased demand as a result of a product recall from another
supplier, an increase in price, and an increase in tender
sales in Europe.
-- Pediatric and other vaccines: The increase in pediatric and
other vaccines sales was primarily due to an increase in sales
of diphtheria, pertussis and tetanus vaccine concentrate,
partially offset by a decline in polio vaccine sales due to
product write-offs and product unavailability as a result of
manufacturing upgrades.
The gross profit margin for Vaccines products was 45 percent for the third
quarter of 2005, compared to 9 percent for the third quarter of 2004. The
increase was primarily due to the entire FLUVIRIN vaccine product inventory
being written off in the third quarter of 2004, resulting in a $91 million
charge to cost of sales in that quarter. The absence of any sales of BEGRIVAC
vaccine and costs related to remediation activities for FLUVIRIN vaccine and
BEGRIVAC vaccine had a negative impact on gross margin for the third quarter of
2005.
BIOPHARMACEUTICALS
BioPharmaceuticals net product sales were $137 million for the third
quarter of 2005, an increase of 4 percent compared to the third quarter of 2004.
Selected BioPharmaceuticals Revenues
Third- Third-
Quarter Quarter Change
($ millions) 2005 2004
- --------------------------------------------- -------- -------- ------
TOBI(R) tobramycin inhalation solution $58 $56 4%
PROLEUKIN(R) (aldesleukin) for injection 31 32 (2%)
BETASERON(R) interferon beta-1b 37 35 5%
BioPharmaceuticals net product sales(a) 137 132 4%
BETAFERON(R) interferon beta-1b royalties 13 13 0%
Total BioPharmaceuticals revenues(b) $155 $148 5%
- --------------------------------------------- -------- -------- ------
(a) Net product sales include sales from TOBI, PROLEUKIN, BETASERON
and other products.
(b) Total BioPharmaceuticals revenues consist of net product sales,
collaborative agreement revenues, royalty and license fee revenues,
and other revenues. Totals may not sum due to the inclusion of only
selected financial information.
-- TOBI: The increase in TOBI product sales for the third quarter
of 2005 compared to the third quarter of 2004 was primarily
due to price increases and increased patient demand in both
the United States and Europe, partially offset by wholesaler
ordering patterns.
-- PROLEUKIN: The decrease in PROLEUKIN product sales was
primarily due to decreased patient demand in the United States
and Europe and wholesaler ordering patterns, partially offset
by price increases.
-- BETASERON: The increase in BETASERON product sales to Berlex
Inc. (and its parent company Schering AG) for marketing and
resale was primarily due to price increases, a shift from
third-party to in-house production and timing of clinical
product, partially offset by a reduction in shipments to
Berlex and inventory ordering patterns.
-- BETAFERON royalties: BETAFERON royalties in the third quarter
of 2005 were consistent with BETAFERON royalties the third
quarter of 2004 due to an increase in demand and price,
partially offset by a shift from third-party to in-house
production.
The gross profit margin for BioPharmaceuticals products was 71 percent for
the third quarter of 2005, compared to 67 percent for the third quarter of 2004.
The increase in gross profit margin was primarily due to favorable product mix
and increased utilization of facilities over the prior year.
ROYALTY AND LICENSE FEE REVENUES
Total royalty and license fee revenues include royalties and license fees
attributed to Blood Testing, Vaccines and BioPharmaceuticals. These revenues
also include other royalty and license fee revenues, which consist primarily of
royalties from Roche, Roche Molecular Systems and Bayer HealthCare AG for
clinical diagnostic products.
Selected Royalty and License Fee Revenues
Third- Third-
Quarter Quarter
($ millions) 2005 2004 Change
- --------------------------------------------- -------- -------- ------
Blood Testing $23 $34 (34%)
Vaccines 1 1 4%
BioPharmaceuticals 17 15 12%
Other 30 61 (51%)
Total royalty and license fee revenues(a) $71 $111 (37%)
- --------------------------------------------- -------- -------- ------
(a) Totals may not sum due to rounding.
-- Total royalty and license fee revenues: In addition to the
variances in Blood Testing, Vaccines and BioPharmaceuticals
royalty and license fee revenues for the third quarter of 2005
compared to the third quarter of 2004 as explained above,
other royalty and license fee revenues decreased. The decrease
was primarily due to the Roche settlement, which was entered
into in the third quarter of 2004. In relation to this
settlement in the third quarter of 2005, $3 million related to
blood screening and thus was recognized as Blood Testing
royalty and license fee revenues, and $5 million related to
clinical diagnostics and thus was recognized as other royalty
and license fee revenues. In the third quarter of 2004, $10
million of the Roche settlement was recognized as Blood
Testing royalty and license fee revenues, and $36 million was
recognized as other royalty and license fee revenues.
RECENT EVENTS
-- Chiron has received all necessary approvals from the U.S. Food
and Drug Administration (FDA) and the UK Medicines and
Healthcare products Regulatory Agency (MHRA) to start
supplying FLUVIRIN vaccine to the U.S. market. Subsequent to
the third quarter of 2005, Chiron announced that it began
delivering FLUVIRIN vaccine to customers in the United States
for the 2005-2006 influenza season. The company expects that
the total number of FLUVIRIN vaccine doses it will produce for
the 2005-2006 influenza season will be below its previously
stated range announced on July 27, 2005, due to production
delays related to remediation as well as lower production
output associated with adaptation to new processes and
procedures implemented in remediation. Accordingly, Chiron
expects that its financial results for 2005 will be below its
previously stated guidance. Chiron expects to have more
information on FLUVIRIN vaccine production totals and
financial guidance in the weeks ahead.
-- The FDA notified Chiron's collaborator Gen-Probe Incorporated
that it considers the PROCLEIX TIGRIS System "not
substantially equivalent" to the PROCLEIX Enhanced
Semi-Automated System (eSAS) for screening donated human blood
with the PROCLEIX ULTRIO Assay. The FDA made this
determination in response to Gen-Probe's 510(k) application
for the TIGRIS System. Gen-Probe has discussed the
determination with the FDA and is scheduling a series of
meetings to resolve the outstanding issues.
-- In conjunction with the recently held European Committee for
Treatment and Research in Multiple Sclerosis (ECTRIMS)
meeting, the University of Basel in Switzerland announced
results from the BENEFIT (BETAFERON/BETASERON in Newly
Emerging Multiple Sclerosis For Initial Treatment) clinical
study. Study results showed that BETAFERON/BETASERON
interferon beta-1b 250 mcg treatment delayed the onset of
clinically definite multiple sclerosis by one year (363 days)
in patients with first clinical signs of multiple sclerosis
compared to placebo.
-- Chiron and XOMA Ltd. announced the initiation of a second
clinical trial of CHIR-12.12, a novel, fully human, antagonist
antibody that targets the CD40 antigen. The Phase I trial is
for patients with multiple myeloma, a type of cancer that is
associated with expression of the CD40 antigen on the cancer
cell surface.
-- Chiron and Nektar Therapeutics announced the initiation of
clinical testing in the Phase III program evaluating
tobramycin inhalation powder (TIP), an investigational inhaled
antibiotic. The TIP Phase III program includes two clinical
trials and will evaluate the efficacy and safety of TIP in the
treatment of lung infections caused by Pseudomonas aeruginosa
in patients living with cystic fibrosis. The first trial,
called ASPIRE I, is now underway.
THIRD-QUARTER 2005 EARNINGS CONFERENCE CALL
Chiron will hold a conference call and webcast on Tuesday, October 25,
2005, at 4:45 p.m. EDT to review its third-quarter 2005 results of operations
and business highlights. In addition, the company may address forward-looking
questions concerning business and financial matters and trends affecting the
company.
To access either the live call or the one-year webcast 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 by phone is available
approximately two hours after the completion of the call through 11:55 p.m. EST,
Tuesday, November 1, 2005. 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 1067243.
ABOUT CHIRON
Chiron delivers innovative and valuable products to protect human health by
advancing pioneering science across the landscape of biotechnology. The company
works to deliver on the limitless promise of science and make a positive
difference in people's lives. For more information about Chiron, please visit
www.chiron.com.
Download financial information in PDF format:
http://www.chiron.com/investors/7819/chiron_financial.pdf
View financial information online:
http://www.chiron.com/investors/finreports/index.html
This news release contains forward-looking statements, including statements
regarding earnings and sales growth, supply of influenza virus vaccines that
Chiron expects to deliver in future influenza seasons, improvements to
manufacturing facilities, product development initiatives, new product
indications, new product marketing, and clinical trials, that involve risks and
uncertainties and are subject to change. A discussion of the company's
operations and financial condition, including factors that may affect its
business and future prospects that could cause actual results and developments
to differ materially from those expressed or implied by these forward-looking
statements, is contained in documents the company has filed with the SEC,
including the Form 10-K for the year ended December 31, 2004, and the Form 10-Q
for the quarter ended June 30, 2005, 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, among others, additional adverse developments resulting
from the previous suspension of Chiron's UK license to manufacture FLUVIRIN(R)
influenza virus vaccine from October 5, 2004, through March 2, 2005, the
announcement of such suspension and the litigation and investigations relating
to those matters, the outcome of clinical trials, regulatory review and
approvals, manufacturing capabilities, intellectual property protections and
defenses, litigation, stock-price and interest-rate volatility, marketing
effectiveness and the severity of the 2005-2006 influenza season. There can be
no assurance that additional issues with respect to FLUVIRIN vaccine or Chiron's
manufacturing generally will not arise in the future, or additional doses of
FLUVIRIN vaccine will satisfy Chiron's internal release procedures and/or FDA
influenza vaccine lot release procedures. The company may face additional
competition in the influenza market in the future and challenges in distribution
arrangements as a result of previous vaccine developments. In addition, the
company may engage in business opportunities, the successful completion of which
is subject to certain risks, including approval by Novartis AG, stockholder 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: BEGRIVAC, FLUVIRIN, MENJUGATE, PROCLEIX, PROLEUKIN, TOBI and ULTRIO
are trademarks of Chiron. BETASERON and BETAFERON are trademarks of Schering AG.
TIGRIS is a trademark of Gen-Probe Incorporated. CUBICIN is a trademark of
Cubist Pharmaceuticals.
CHIRON CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands, except per share data)
Three Months Ended
September 30,
-----------------------------------------------------
2005 2004 Restated (3)
-------------------------- --------------------------
Adjusted Adjust- Actual Adjusted Adjust- Actual
(1) ments (2) ments
-------------------------- --------------------------
Revenues:
Product sales,
net $367,175 $- $367,175 $375,549 $- $375,549
Revenues from
joint business
arrangement 36,093 - 36,093 34,017 - 34,017
Collaborative
agreement
revenues 3,149 - 3,149 4,124 - 4,124
Royalty and
license fee
revenues 70,726 - 70,726 111,396 - 111,396
Other revenues 2,470 - 2,470 4,450 - 4,450
-------- ------- --------- -------- ------- ---------
Total
revenues 479,613 - 479,613 529,536 - 529,536
-------- ------- --------- -------- ------- ---------
Operating
expenses:
Cost of sales 168,726 - 168,726 241,044 - 241,044
Research and
development 107,309 - 107,309 103,000 - 103,000
Selling,
general and
administrative 117,152 - 117,152 112,013 - 112,013
Purchased in-
process
research and
development - - - - (9,629) 9,629
Amortization
expense - (12,361) 12,361 - (20,566) 20,566
Impairment loss
on acquired
intangible
assets - (14,522) 14,522 - - -
Other operating
expenses 3,621 - 3,621 1,280 - 1,280
-------- ------- --------- -------- ------- ---------
Total
operating
expenses 396,808 (26,883) 423,691 457,337 (30,195) 487,532
-------- ------- --------- -------- ------- ---------
Income from
operations 82,805 26,883 55,922 72,199 30,195 42,004
Interest expense (7,759) - (7,759) (7,063) - (7,063)
Interest and
other income,
net 18,514 - 18,514 5,369 - 5,369
Minority interest (531) - (531) (504) - (504)
-------- ------- --------- -------- ------- ---------
Income from
continuing
operations
before income
taxes 93,029 26,883 66,146 70,001 30,195 39,806
Provision for
income taxes 20,172 5,337 14,835 17,500 5,141 12,359
-------- ------- --------- -------- ------- ---------
Income from
continuing
operations 72,857 21,546 51,311 52,501 25,054 27,447
======== ======= ========= ======== ======= =========
Loss from
discontinued
operations, net
of taxes - - - (450) - (450)
-------- ------- --------- -------- ------- ---------
Net income $72,857 $21,546 $51,311 $52,051 $25,054 $26,997
======== ======= ========= ======== ======= =========
Basic earnings
per share:
Income from
continuing
operations $0.39 $0.27 $0.28 $0.15
========= ========= ========= =========
Net income $0.39 $0.27 $0.28 $0.14
========= ========= ========= =========
Diluted earnings
per share:
Income from
continuing
operations $0.38 $0.27 $0.27 $0.14
========= ========= ========= =========
Net income $0.38 $0.27 $0.27 $0.14
========= ========= ========= =========
Shares used in
calculating
basic earnings
per share 188,039 188,039 187,368 187,368
========= ========= ========= =========
Shares used in
calculating
diluted earnings
per share 197,802 197,802 197,894 190,014
========= ========= ========= =========
(1) 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) An impairment loss of $14.5 million on
acquired intangible assets from our acquisition of PowderJect related
to a yellow fever vaccine.
(2) Adjusted amounts exclude (a) the amortization expense on
acquired intangible assets related to the acquistions of PathoGenesis,
Chiron Behring, Pulmopharm and PowderJect Pharmaceuticals and (b)
Purchased in-process research and development related to the Sagres
acquisition.
(3) Chiron determined that certain sales of a travel vaccine
recorded as revenues in the second quarter of 2004 should not have
been recorded as revenue at that time, and that portions of those
sales should have been recorded as revenues in the third and fourth
quarters of 2004 and possibly in later quarters.
On a GAAP and adjusted basis, as a result of the restatement, for
the three months ended September 30, 2004, product sales were
increased by $5.6 million, cost of sales were increased by $0.9
million and income taxes were increased by $1.2 million. This resulted
in a $3.5 million increase in income from continuing operations and
net income and a $0.01 increase of diluted income from continuing
operations per share ($0.14 per share instead of the $0.13 per share
as previously reported on a GAAP basis and $0.27 per share instead of
$0.26 per share as previously reported on an adjusted basis).
Note: Due to rounding, quarterly earnings (loss) per share amounts
may not sum fully to yearly earnings per share amounts.
CHIRON CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands, except per share data)
Nine Months Ended
September 30,
---------------------------------------------------------
2005 2004 Restated (6)
---------------------------- ----------------------------
Adjusted Adjust- Actual Adjusted Adjust- Actual
(4) ments (5) ments
---------------------------- ----------------------------
Revenues:
Product
sales, net $947,913$- $947,913 $937,836 $- $937,836
Revenues
from joint
business
arrangement 103,154 - 103,154 92,910 - 92,910
Collaborative
agreement
revenues 11,129 - 11,129 14,467 - 14,467
Royalty and
license fee
revenues 227,309 - 227,309 221,384 - 221,384
Other
revenues 16,221 - 16,221 22,363 - 22,363
---------- ----------------- ---------- ------- ---------
Total
revenues 1,305,726 - 1,305,726 1,288,960 - 1,288,960
---------- ----------------- ---------- ------- ---------
Operating
expenses:
Cost of
sales 511,005 - 511,005 498,808 - 498,808
Research and
development 324,620 - 324,620 301,736 - 301,736
Selling,
general
and admini-
strative 375,802 - 375,802 321,775 - 321,775
Purchased in-
process
research and
development - - - - (9,629) 9,629
Amortization
expense - (54,237) 54,237 - (63,077) 63,077
Impairment
loss on
acquired
intangible
assets - (14,522) 14,522 - - -
Other
operating
expenses 12,823 - 12,823 8,040 - 8,040
---------- ----------------- ---------- ------- ---------
Total
operating
expenses 1,224,250 (68,759)1,293,009 1,130,359 (72,706)1,203,065
---------- ----------------- ---------- ------- ---------
Income from
operations 81,476 68,759 12,717 158,601 72,706 85,895
Interest
expense (22,932) - (22,932) (19,440) - (19,440)
Interest and
other
income, net 66,259 - 66,259 41,252 - 41,252
Minority
interest (1,723) - (1,723) (1,583) - (1,583)
---------- ----------------- ---------- ------- ---------
Income from
continuing
operations
before
income taxes 123,080 68,759 54,321 178,830 72,706 106,124
Provision for
income taxes 27,625 15,722 11,903 44,708 15,770 28,938
---------- ----------------- ---------- ------- ---------
Income from
continuing
operations 95,455 53,037 42,418 134,122 56,936 77,186
========== ================= ========== ======= =========
Gain from
discontinued
operations,
net of taxes - - - 24,854 - 24,854
---------- ----------------- ---------- ------- ---------
Net income $95,455 $53,037 $42,418 $158,976 $56,936 $102,040
========== ================= ========== ======= =========
Basic
earnings per
share:
Income from
continuing
operations $0.51 $0.23 $0.71 $0.41
========== ========== ========== ==========
Net income $0.51 $0.23 $0.85 $0.54
========== ========== ========== ==========
Diluted
earnings per
share:
Income from
continuing
operations $0.50 $0.22 $0.70 $0.40
========== ========== ========== ==========
Net income $0.50 $0.22 $0.83 $0.53
========== ========== ========== ==========
Shares used
in calculating
basic
earnings
per share 187,564 187,564 187,751 187,751
========== ========== ========== ==========
Shares used
in calculating
diluted
earnings per
share 189,064 189,064 198,134 190,901
========== ========== ========== ==========
(4) 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) An impairment loss of $14.5 million on
acquired intangible assets from our acquisition of PowderJect related
to a yellow fever vaccine.
(5) Adjusted amounts exclude (a) the amortization expense on
acquired intangible assets related to the acquistions of PathoGenesis,
Chiron Behring, Pulmopharm and PowderJect Pharmaceuticals and (b)
Purchased in-process research and development related to the Sagres
acquisition.
(6) Chiron determined that certain sales of a travel vaccine
recorded as revenues in the second quarter of 2004 should not have
been recorded as revenue at that time, and that portions of those
sales should have been recorded as revenues in the third and fourth
quarters of 2004 and possibly in later quarters.
On a GAAP and an adjusted basis, as a result of the restatement,
for the nine months ended September 30, 2004, product sales were
reduced by $8.3 million, cost of sales were reduced by $0.6 million
and income taxes were reduced by $1.9 million. This resulted in a $5.8
million reduction in income from continuing operations and net income
on a GAAP and an adjusted basis. The restatement also resulted in a
$0.03 reduction of diluted income from continuing operations per share
on a GAAP basis ($0.40 per share instead of the $0.43 per share as
previously reported) and a $0.03 reduction of diluted income from
continuing operations per share on an adjusted basis ($0.70 per share
instead of the $0.73 per share as previously reported).
Note: Due to rounding, quarterly earnings (loss) per share amounts
may not sum fully to yearly earnings per share amounts
CHIRON CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In thousands)
September December
30, 31,
2005 2004
----------- -----------
Assets
- -----------------------------------------------
Current assets:
Cash, cash equivalents and short-term
investments $580,106 $603,621
Accounts receivable, net of allowances 383,925 402,094
Inventories, net of reserves 268,566 221,154
Other current assets 209,525 167,154
----------- -----------
Total current assets 1,442,122 1,394,023
Non-current investments in marketable debt
securities 437,650 409,421
Property, plant, equipment and leasehold
improvements, net 824,097 799,415
Other non-current assets 1,512,937 1,702,644
----------- -----------
Total assets $4,216,806 $4,305,503
=========== ===========
Liabilities and stockholders' equity
- -----------------------------------------------
Current liabilities $459,522 $434,444
Long-term debt 938,449 936,652
Long-term portion of capital lease 156,723 156,952
Non-current unearned revenue 25,146 26,175
Other non-current liabilities 105,612 140,226
Minority interest 10,679 9,350
Stockholders' equity 2,520,675 2,601,704
----------- -----------
Total liabilities and stockholders' equity $4,216,806 $4,305,503
=========== ===========
CHIRON CORPORATION
SUPPLEMENTAL SCHEDULE OF COMPUTATION OF EARNINGS PER SHARE
(Unaudited)
(In thousands, except per share data)
Three Months Ended
September 30,
2005 2004 Restated
---------------- ----------------
Adjusted Actual Adjusted Actual
---------------- ----------------
Computation for earnings per share -
continuing operations
Income (Numerator):
Income from continuing operations $72,857 $51,311 $52,501 $27,447
Plus: Interest on 1.625%
convertible debentures, net of
taxes 1,589 1,589 1,570 -
Plus: Interest on Liquid Yield
Option Notes, net of taxes 147 147 143 -
---------------- ----------------
Income from continuing operations,
plus impact from assumed
conversions $74,593 $53,047 $54,214 $27,447
================ ================
Shares (Denominator):
Weighted-average common shares
outstanding 188,039 188,039 187,368 187,368
Effect of dilutive securities:
Stock options and equivalents 1,883 1,883 2,646 2,646
1.625% convertible debentures 7,306 7,306 7,306 -
Liquid Yield Option Notes 574 574 574 -
---------------- ----------------
Weighted-average common shares
outstanding, plus impact from
assumed conversions 197,802 197,802 197,894 190,014
================ ================
Basic earnings per share from
continuing operations $0.39 $0.27 $0.28 $0.15
================ ================
Diluted earnings per share from
continuing operations $0.38 $0.27 $0.27 $0.14
================ ================
Computation for earnings per share -
net income
Income (Numerator):
Net income $72,857 $51,311 $52,051 $26,997
Plus: Interest on 1.625%
convertible debentures, net of
taxes 1,589 1,589 1,570 -
Plus: Interest on Liquid Yield
Option Notes, net of taxes 147 147 143 -
---------------- ----------------
Net income, plus impact from
assumed conversions $74,593 $53,047 $53,764 $26,997
================ ================
Shares (Denominator):
Weighted-average common shares
outstanding 188,039 188,039 187,368 187,368
Effect of dilutive securities:
Stock options and equivalents 1,883 1,883 2,646 2,646
1.625% convertible debentures 7,306 7,306 7,306 -
Liquid Yield Option Notes 574 574 574 -
---------------- ----------------
Weighted-average common shares
outstanding, plus impact from
assumed conversions 197,802 197,802 197,894 190,014
================ ================
Basic earnings per share from net
income $0.39 $0.27 $0.28 $0.14
================ ================
Diluted earnings per share from net
income $0.38 $0.27 $0.27 $0.14
================ ================
CHIRON CORPORATION
SUPPLEMENTAL SCHEDULE OF COMPUTATION OF EARNINGS PER SHARE
(Unaudited)
(In thousands, except per share data)
Nine Months Ended
September 30,
2005 2004 Restated
---------------- ------------------
Adjusted Actual Adjusted Actual
---------------- ------------------
Computation for earnings per share
- continuing operations
Income (Numerator):
Income from continuing
operations $95,455 $42,418 $134,122 $77,186
Plus: Interest on 1.625%
convertible debentures, net of
taxes - - 4,710 -
---------------- ------------------
Income from continuing
operations, plus impact from
assumed conversions $95,455 $42,418 $138,832 $77,186
=============== ===================
Shares (Denominator):
Weighted-average common shares
outstanding 187,564 187,564 187,751 187,751
Effect of dilutive securities:
Stock options and equivalents 1,500 1,500 3,150 3,150
1.625% convertible debentures - - 7,233 -
---------------- ------------------
Weighted-average common shares
outstanding, plus impact from
assumed conversions 189,064 189,064 198,134 190,901
================ ==================
Basic earnings per share from
continuing operations $0.51 $0.23 $0.71 $0.41
================ ==================
Diluted earnings per share from
continuing operations $0.50 $0.22 $0.70 $0.40
================ ==================
Computation for earnings per share
- net income
Income (Numerator):
Net income $95,455 $42,418 $158,976 $102,040
Plus: Interest on 1.625%
convertible debentures, net of
taxes - - 4,710 -
---------------- ------------------
Net income, plus impact from
assumed conversions $95,455 $42,418 $163,686 $102,040
================ ==================
Shares (Denominator):
Weighted-average common shares
outstanding 187,564 187,564 187,751 187,751
Effect of dilutive securities:
Stock options and equivalents 1,500 1,500 3,150 3,150
1.625% convertible debentures - - 7,233 -
---------------- ------------------
Weighted-average common shares
outstanding, plus impact from
assumed conversions 189,064 189,064 198,134 190,901
================ ==================
Basic earnings per share from net
income $0.51 $0.23 $0.85 $0.54
================ ==================
Diluted earnings per share from net
income $0.50 $0.22 $0.83 $0.53
================ ==================
CHIRON CORPORATION
SUPPLEMENTAL QTR REVENUE SUMMARY (ADJUSTED)
(Unaudited)
(In thousands)
Current Prior Change
Quarter Quarter from Change
Q3 2005 Q2 2005 Prior
QTR %
- ----------------------------------------------------------------------
Product Sales
Blood Testing
Ortho $7,023 $7,988 $(965) (12.1)%
NAT 70,677 66,104 4,573 6.9%
----------------------------------
Total Blood
Testing 77,700 74,092 3,608 4.9%
Vaccines
Influenza
vaccines 60,321 (492) 60,813 12360.4%
Meningococcal
vaccines 11,635 13,605 (1,970) (14.5)%
Travel vaccines (TBE, Rabies,
Arilvax and Dukoral) 35,012 45,014 (10,002) (22.2)%
Pediatric/Other
vaccines 45,800 39,127 6,673 17.1%
----------------------------------
Total Vaccines 152,768 97,254 55,514 57.1%
Biopharmaceuticals
Proleukin 31,028 31,727 (699) (2.2)%
TOBI 57,890 56,600 1,290 2.3%
Betaseron(a) 36,927 38,132 (1,205) (3.2)%
Other 10,862 5,770 5,092 88.2%
----------------------------------
Total
Biopharmaceuticals 136,707 132,229 4,478 3.4%
TOTAL PRODUCT
SALES, NET $367,175 $303,575 $63,600 21.0%
==================================
Revenues from joint
business
arrangement $36,093 $31,003 $5,090 16.4%
Collaborative
agreement revenues 3,149 3,453 (304) (8.8)%
Royalty and license
fee revenues 70,726 76,522 (5,796) (7.6)%
Other revenues 2,470 4,204 (1,734) (41.2)%
----------------------------------
TOTAL REVENUES $479,613 $418,757 $60,856 14.5%
==================================
Gross Margins
Blood Testing 42% 40% 2%
Vaccines 45% 6% 39%
Biopharmaceuticals 71% 68% 3%
----------------------------------
TOTAL GROSS
MARGINS 54% 41% 13%
==================================
- ----------------------------------------------------------------------
(a) Excludes
Betaferon
Royalty $13,413 $16,943 $(3,530) (20.8)%
- ----------------------------------------------------------------------
Restated Change
Quarter from Change
Q3 2004 Prior
Year %
- ----------------------------------------------------------------------
Product Sales
Blood Testing
Ortho $7,098 $(75) (1.1)%
NAT 63,629 7,048 11.1%
-------------------------
Total Blood
Testing 70,727 6,973 9.9%
Vaccines
Influenza
vaccines 93,486 (33,165)(35.5)%
Meningococcal
vaccines 8,865 2,770 31.2%
Travel vaccines (TBE, Rabies,
Arilvax and Dukoral) 26,434 8,578 32.5%
Pediatric/Other
vaccines 44,491 1,309 2.9%
-------------------------
Total Vaccines 173,276 (20,508)(11.8)%
Biopharmaceuticals
Proleukin 31,739 (711) (2.2)%
TOBI 55,734 2,156 3.9%
Betaseron(a) 35,171 1,756 5.0%
Other 8,902 1,960 22.0%
-------------------------
Total
Biopharmaceuticals 131,546 5,161 3.9%
TOTAL PRODUCT
SALES, NET $375,549 $(8,374) (2.2)%
=========================
Revenues from joint
business
arrangement $34,017 $2,076 6.1%
Collaborative
agreement revenues 4,124 (975)(23.6)%
Royalty and license
fee revenues 111,396 (40,670)(36.5)%
Other revenues 4,450 (1,980)(44.5)%
-------------------------
TOTAL REVENUES $529,536 $(49,923) (9.4)%
=========================
Gross Margins
Blood Testing 43% (1)%
Vaccines 9% 36%
Biopharmaceuticals 67% 4%
-------------------------
TOTAL GROSS
MARGINS 36% 18%
=========================
- ----------------------------------------------------------------------
(a) Excludes
Betaferon
Royalty $13,374 $39 0.3%
- ----------------------------------------------------------------------
CHIRON CORPORATION
SUPPLEMENTAL YTD REVENUE SUMMARY (ADJUSTED)
(Unaudited)
(In thousands)
Nine Months Ended Change Change
September 30, from
2004 Prior
2005 Restated Year %
- ----------------------------------------------------------------------
Product Sales
Blood Testing
Ortho $21,473 $19,940 $1,533 7.7%
NAT 201,212 186,104 15,108 8.1%
-------------------------------------
Total Blood Testing 222,685 206,044 16,641 8.1%
Vaccines
Influenza vaccines 63,400 109,398 (45,998)(42.0)%
Meningococcal vaccines 34,393 18,430 15,963 86.6%
Travel vaccines (TBE, Rabies,
Arilvax and Dukoral) 123,785 75,705 48,080 63.5%
Pediatric/Other vaccines 115,420 143,292 (27,872)(19.5)%
-------------------------------------
Total Vaccines 336,998 346,825 (9,827) (2.8)%
Biopharmaceuticals
Proleukin 92,290 98,664 (6,374) (6.5)%
TOBI 167,425 159,600 7,825 4.9%
Betaseron(a) 101,693 96,933 4,760 4.9%
Other 26,822 29,770 (2,948) (9.9)%
-------------------------------------
Total Biopharmaceuticals 388,230 384,967 3,263 0.8%
TOTAL PRODUCT SALES, NET $947,913 $937,836 $10,077 1.1%
=====================================
Revenues from joint business
arrangement $103,154 $92,910 $10,244 11.0%
Collaborative agreement revenues 11,129 14,467 (3,338)(23.1)%
Royalty and license fee revenues 227,309 221,384 5,925 2.7%
Other revenues 16,221 22,363 (6,142)(27.5)%
-------------------------------------
TOTAL REVENUES $1,305,726 $1,288,960 $16,766 1.3%
=====================================
Gross Margins
Blood Testing 42% 42% 0%
Vaccines 21% 21% 0%
Biopharmaceuticals 70% 72% (2)%
------------------------------
TOTAL GROSS MARGINS 46% 47% (1)%
==============================
- ----------------------------------------------------------------------
(a) Excludes Betaferon Royalty $45,833 $38,766 $7,067 18.2%
- ----------------------------------------------------------------------
CONTACT: Chiron Corporate Communications & Investor Relations
Media, 510-923-6500
Investors, 510-923-2300