Exhibit 99.1
Chiron Reports 2005 Adjusted Earnings of $1.34
Per Share, GAAP Earnings of $0.97 Per Share; FLUVIRIN(R) Influenza
Virus Vaccine Sales Drive 12 Percent Product
Sales Growth Compared to 2004
EMERYVILLE, Calif.--(BUSINESS WIRE)--Jan. 31, 2006--Chiron
Corporation (NASDAQ: CHIR) today reported financial results for the
year ended December 31, 2005.
OVERVIEW
-- Chiron's FLUVIRIN(R) influenza virus vaccine returned to the
U.S. market in 2005. The company sold approximately 13 million
doses of the vaccine to its customers in 2005.
-- Total revenues for the year ended December 31, 2005, increased
11 percent compared to the year ended December 31, 2004.
-- Chiron continues to build on the company's promising pandemic
influenza vaccine program. The company announced preliminary
data from a clinical study of an investigational vaccine
candidate, both with and without Chiron's adjuvant MF59,
against an H9N2 avian influenza strain, as well as a contract
to supply the U.S. government with candidate pre-pandemic
influenza vaccines for a stockpile to protect against an H5N1
avian influenza virus strain. In the fourth quarter of 2005,
Chiron also advanced clinical studies in the United States and
Europe of cell culture-derived vaccine for seasonal influenza,
which could also prove beneficial in a pandemic.
-- Completion of the Novartis AG (Novartis) acquisition of
Chiron, as announced on October 31, 2005, is expected in the
first half of 2006, subject to approval by Chiron's
stockholders and other customary closing conditions.
Chiron reported adjusted income from continuing operations of $259
million, or $1.34 per share, for the year ended December 31, 2005,
compared to adjusted income from continuing operations of $127
million, or $0.67 per share, for the year ended December 31, 2004.
Chiron reported GAAP income from continuing operations of $187
million, or $0.97 per share, for the year ended December 31, 2005,
compared to GAAP income from continuing operations of $54 million, or
$0.28 per share, for the year ended December 31, 2004.
"We are pleased with our achievements in the past year,
particularly our return to the U.S. influenza vaccine market and
advancements in our key programs such as pandemic influenza virus
vaccines, cell-culture derived influenza vaccines and tifacogin.
Thanks to the dedication and hard work of Chiron employees, we
finished the year a much stronger company," said Howard Pien, chief
executive officer of Chiron.
The following factors had significant impact on the annual
comparison of financial results: return of FLUVIRIN vaccine to the
U.S. market in the fourth quarter of 2005; lost contribution from
sales of BEGRIVAC(R) influenza virus vaccine in 2005; and a decrease
in the effective tax rate to 11 percent on an adjusted and GAAP basis
for the year ended December 31, 2005.
Foreign exchange rates resulted in an approximate $0.01 decrease
in adjusted earnings per share and an approximate $0.01 decrease in
GAAP earnings per share for the year ended December 31, 2005.
Chiron uses adjusted financial information to gain an
understanding of the company's operating performance on a comparative
basis. Adjusted amounts exclude special items relating to certain
acquisitions and impairment losses on acquired intangible assets,
which may not be indicative of the company's trends or potential
future performance. Please refer to the tables at the end of this
press release for more detail on these items and a reconciliation of
the adjusted financial information to GAAP financial information; this
information is also located at www.chiron.com in the Investors section
under Financial Reports. All references to per-share amounts are per
diluted share.
SELECTED FINANCIAL RESULTS
Selected financial results, on an adjusted and GAAP basis, except
where noted
($ millions) Year 2005 Year 2004 Change
- ----------------------------------------------------------------------
Net product sales $1,423 $1,268 12%
Total revenues 1,921 1,723 11%
Cost of sales 726 676 7%
Gross profit margin 49% 47%
Research and development 434 431 1%
Selling, general and administrative 502 460 9%
Income from continuing operations
(adjusted) 259 127 104%
Net income (adjusted) 259 152 71%
Income from continuing operations
(GAAP) 187 54 245%
Net income (GAAP) 187 79 136%
- ----------------------------------------------------------------------
Net product sales for the year ended December 31, 2005, increased
12 percent, or $155 million, compared to the year ended December 31,
2004, primarily due to $96 million in sales of FLUVIRIN vaccine in
2005, compared to $2 million in sales of FLUVIRIN vaccine in 2004,
which related to late sales from the 2003-2004 influenza season. In
addition, net product sales increased due to higher sales of travel
vaccines, PROCLEIX(R) NAT products, TOBI(R) tobramycin inhalation
solution, meningococcal vaccines, and BETASERON(R) interferon beta-1b.
These increases were partially offset by no sales of BEGRIVAC vaccine
in 2005, compared to $53 million of sales in 2004.
Total revenues increased 11 percent, or $198 million, primarily
due to the increase in net product sales, and increases in both
royalty and license fee revenues and revenues from the joint business
contractual arrangement with Ortho-Clinical Diagnostics. Royalty and
license fee revenues increased, primarily due to various settlements
in 2005, including a favorable settlement with Centocor relating to
certain patents, which resulted in the recognition of upfront payments
and royalties, and a settlement with the Scottish National Blood
Transfusion Service regarding certain Chiron hepatitis C (HCV) and HIV
patents. BETAFERON(R) interferon beta-1b royalties increased primarily
due to higher demand and price increases. Royalties related to NAT
blood screening received from F. Hoffmann-La Roche Ltd. (Roche)
increased due to higher applicable royalty rates as certain countries
entered the EU and an increase in reported donations. Revenues from
the joint business contractual arrangement with Ortho-Clinical
Diagnostics increased primarily due to higher profitability realized
by the joint business arrangement.
Gross profit margin increased to 49 percent primarily due to the
return of FLUVIRIN vaccine to the U.S. market in 2005. As previously
reported, in the year ended December 31, 2004, the entire FLUVIRIN
vaccine product inventory was written off, resulting in a $91 million
charge to cost of sales. The increase in gross profit margin was
partially offset by FLUVIRIN remediation costs in 2005, no sales of
BEGRIVAC influenza virus vaccine in 2005 due to a product sterility
issue, and inventory write-offs in 2005.
Research and development expenses increased primarily due to the
cost of development efforts in Chiron's oncology and meningococcal
vaccine franchises, tifacogin, and cell culture-derived influenza
vaccine. This increase was partially offset by decreases from a
variety of research and development programs that were discontinued
prior to 2005.
Selling, general and administrative expenses increased due to a
broad range of activities, including Novartis transaction-related
costs, the pre-launch program for CUBICIN(R) daptomycin in Europe,
higher employee-related costs, compliance with the Sarbanes-Oxley Act
and higher FLUVIRIN vaccine-related legal costs.
The effective tax rate was 11 percent on an adjusted and GAAP
basis for the year ended December 31, 2005, compared to 25 percent on
an adjusted basis and 28 percent on a GAAP basis for the year ended
December 31, 2004. The decrease was primarily due to lower profits in
certain ex-U.S. locations and the transfer of certain product rights
in 2004. Chiron does not consider this tax rate to be indicative of
the company's effective tax rate going forward.
BLOOD TESTING
Total Blood Testing revenues were $556 million for the year ended
December 31, 2005, an increase of 12 percent compared to the year
ended December 31, 2004.
Selected Blood Testing Revenues
($ millions) Year 2005 Year 2004 Change
- ----------------------------------------------------------------------
Ortho-Clinical Diagnostics $31 $28 12%
PROCLEIX(R) NAT products 273 250 9%
-------------------------------
Blood Testing net product sales 305 278 10%
Revenues from joint business
contractual arrangement 137 118 16%
Royalty and license fee revenues 106 89 19%
Total Blood Testing revenues (1) $556 $494 12%
- ----------------------------------------------------------------------
(1) 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 products, revenues from
Chiron's joint business contractual 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 was primarily due
to continued geographic expansion and the introduction of the
PROCLEIX(R) ULTRIO(R) Assay and PROCLEIX(R) TIGRIS(R) System
into a number of markets outside of the United States.
-- Joint business contractual 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 increase was primarily due to 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
various licensing agreements and settlements with entities
such as the Scottish National Blood Transfusion Service, the
German Red Cross, and LabCorp. Royalty and license fee
revenues also increased due to payments recognized in 2005
relating to the Blood Testing share of a settlement entered
into in 2004 with Roche regarding Chiron's HIV patent in the
United States for use in clinical diagnostics and blood
screening (the 2004 Roche settlement). This was partially
offset by recognition in 2004 of a lump-sum payment and
deferred amounts related to the 2004 Roche settlement.
The gross profit margin for Blood Testing products was 41 percent
for the year ended December 31, 2005, compared to 42 percent for the
year ended December 31, 2004. The decrease was primarily due to the
cost of additional PROCLEIX TIGRIS System support and service.
VACCINES
Vaccines net product sales were $582 million for the year ended
December 31, 2005, an increase of 22 percent compared to the year
ended December 31, 2004.
Selected Vaccines Revenues
($ millions) Year 2005 Year 2004 Change
- ----------------------------------------------------------------------
Influenza vaccines $225 $153 47%
Meningococcal vaccines 43 28 56%
Travel vaccines 148 97 52%
Pediatric and other vaccines 166 201 (17%)
-------------------------------
Vaccines net product sales 582 479 22%
Total Vaccines revenues (1) $604 $510 18%
- ----------------------------------------------------------------------
(1) 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 increase in influenza vaccines sales
was due to the return of FLUVIRIN vaccine to the U.S. market.
Sales of FLUVIRIN vaccine were $96 million in 2005, compared
to $2 million in 2004, which related to sales from the
2003-2004 influenza season. Sales of other influenza vaccines
were $129 million in 2005, a decrease of 15 percent compared
to 2004, primarily due to no sales of BEGRIVAC vaccine in
2005, compared to $53 million of sales in 2004. This decrease
was partially offset by increased sales of other influenza
vaccines.
-- Meningococcal vaccines: The increase in meningococcal vaccines
was primarily due to increased sales of MENZB(TM)
meningococcal B vaccine to the Ministry of Health in New
Zealand and an increase in tender sales of MENJUGATE(R)
meningococcal C vaccine.
-- Travel vaccines: The increase in travel vaccines sales was
primarily due to an increase in sales of ENCEPUR(R) tick-borne
encephalitis vaccine and RABAVERT(R)/RABIPUR(R) rabies
vaccines. The increase in ENCEPUR vaccine sales was due to
overall market growth and marketing initiatives that increased
the company's market share. In addition, ENCEPUR vaccine sales
in 2004 were lower due to sales that took place in the fourth
quarter of 2003. Sales of RABAVERT/RABIPUR rabies vaccines
increased in 2005, primarily due to an increase in demand
driven by a product recall from another supplier, a price
increase, and an increase in tender sales in Europe and Asia.
-- Pediatric and other vaccines: The decrease in pediatric and
other vaccines sales was primarily due to a decline in polio
vaccine sales and mumps, measles and rubella vaccine sales due
to product unavailability as a result of manufacturing
upgrades. In addition, certain other vaccine sales declined
due to remediation efforts at Chiron's Liverpool manufacturing
facility, which resulted in an interruption of production.
These decreases were partially offset by an increase in sales
of diphtheria, pertussis and tetanus vaccine concentrate.
The gross profit margin for Vaccines products was 32 percent for
the year ended December 31, 2005, compared to 23 percent for the year
ended December 31, 2004. The increase was primarily due to the return
of FLUVIRIN vaccine to the U.S. market in 2005. As previously
reported, in the year ended December 31, 2004, the entire FLUVIRIN
vaccine product inventory was written off, resulting in a $91 million
charge to cost of sales. The increase in gross profit margin was
partially offset by FLUVIRIN remediation costs, no sales of BEGRIVAC
vaccine in 2005, inventory write-offs, and decreased sales of
pediatric vaccines.
BIOPHARMACEUTICALS
BioPharmaceuticals net product sales were $536 million for the
year ended December 31, 2005, an increase of 5 percent compared to the
year ended December 31, 2004.
Selected BioPharmaceuticals Revenues
($ millions) Year 2005 Year 2004 Change
- ----------------------------------------------------------------------
TOBI(R) tobramycin inhalation
solution $233 $213 9%
PROLEUKIN(R) (aldesleukin) for
injection 124 129 (5%)
BETASERON(R) interferon beta-1b 142 131 9%
BioPharmaceuticals net product sales
(1) 536 512 5%
BETAFERON(R) interferon beta-1b
royalties 60 52 16%
Total BioPharmaceuticals revenues (2) $629 $596 6%
- ----------------------------------------------------------------------
(1) Net product sales include sales from TOBI, PROLEUKIN, BETASERON
and other products.
(2) Total BioPharmaceuticals revenues consist of net product sales,
collaborative agreement revenues, royalty and license fee revenues,
and other revenues. Totals may not sum due to the inclusion of only
selected financial information.
-- TOBI: The increase in TOBI product sales was primarily due to
price increases and increased patient demand in both the
United States and Europe, partially offset by wholesaler
ordering patterns.
-- PROLEUKIN: The decrease in PROLEUKIN product sales was
primarily due to decreased patient demand in the United States
and Europe, partially offset by price increases.
-- BETASERON: The increase in BETASERON product sales to Berlex
Inc. (and its parent company Schering AG) for marketing and
resale was primarily due to price increases and a shift from
third-party to in-house production, partially offset by a
reduction in shipments to Berlex and inventory ordering
patterns.
-- BETAFERON royalties: The increase in BETAFERON royalties was
due to an increase in demand and price, partially offset by a
shift from third-party to in-house production.
The gross profit margin for BioPharmaceuticals products was 72
percent for the year ended December 31, 2005, consistent with the year
ended December 31, 2004.
ROYALTY AND LICENSE FEE REVENUES
Total royalty and license fee revenues include royalties and
license fees attributed to the Blood Testing, Vaccines and
BioPharmaceuticals businesses. These revenues also include other
royalty and license fee revenues, which consist primarily of royalties
from Roche and Bayer HealthCare AG for clinical diagnostic products.
Selected Royalty and License Fee Revenues
($ millions) Year 2005 Year 2004 Change
- ----------------------------------------------------------------------
Blood Testing $106 $89 19%
Vaccines 5 5 (1%)
BioPharmaceuticals 73 72 2%
Other 133 124 7%
-------------------------------
Total royalty and license fee
revenues (1) $317 $290 9%
- ----------------------------------------------------------------------
(1) 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 2005 compared to 2004 as
explained above, other royalty and license fee revenues
increased. The increase was primarily due to a 2005 settlement
with Centocor relating to certain patents, which resulted in
the recognition of upfront payments and royalties, and
increased royalties from Roche due to an increase in reported
sales. The increase was partially offset by recognition in
2004 of a lump-sum payment and deferred amounts related to the
2004 Roche Settlement.
FINANCIAL GUIDANCE
The company will not provide 2006 financial guidance at this time.
RECENT NOVARTIS-RELATED EVENTS
-- On October 31, 2005, Chiron announced that the company had
entered into a definitive merger agreement with Novartis under
which Novartis would acquire all of the shares of Chiron that
it does not currently own for $45.00 per Chiron share, or a
total of approximately $5.1 billion, in cash. The non-Novartis
board of directors of Chiron determined that the merger is
fair and in the best interests of Chiron's stockholders and
unanimously recommend that the stockholders of Chiron adopt
the merger agreement. The company's proxy statement, which
contains detailed information about the merger, including the
background and reasons for the non-Novartis directors'
recommendation, is expected to be mailed to Chiron
stockholders in the near future, subject to completion of
review by the U.S. Securities and Exchange Commission.
-- On December 6, 2005, Chiron announced that the U.S. Federal
Trade Commission approved early termination of the antitrust
waiting period under the Hart-Scott-Rodino Act for the
proposed acquisition of the company by Novartis.
-- Under provisions of the 1994 Subscription Agreement with
Novartis, as amended, on October 30, 2005, Chiron exercised
its right to have Novartis purchase newly issued shares of
Chiron common stock. On December 8, 2005, Chiron announced
that the company sold 6,896,552 newly issued shares of its
common stock at a price of $43.50 per share to a subsidiary of
Novartis, for $300 million in the aggregate, following receipt
of necessary regulatory approvals.
-- On January 23, 2006, the Committee on Foreign Investments in
the United States (CFIUS) advised Chiron that it had concluded
its review of the proposed acquisition of Chiron by Novartis
and determined that there are no issues of national security
sufficient to warrant an investigation under the Defense
Production Act.
RECENT PRODUCT AND PIPELINE-RELATED EVENTS
Blood Testing
-- The U.S. Food and Drug Administration (FDA) approved the
PROCLEIX(R) West Nile Virus Assay for use on the PROCLEIX(R)
System to screen whole blood donations. The assay, which was
developed in collaboration with Gen-Probe Incorporated, has
been used to screen more than 29 million units of blood on an
investigational-use-only basis since June 2003 and has
intercepted more than 1,500 West Nile virus-positive
donations.
Vaccines
-- Chiron initiated a Phase 1/Phase 2 study of an investigational
cell culture-derived vaccine for seasonal influenza in the
United States. The company also completed enrollment of a
second Phase 3 study of investigational cell culture-derived
influenza vaccine in Europe. A first pivotal Phase 3 study of
cell culture-derived influenza vaccine in Europe, conducted in
2004, met the safety and immunogenicity endpoints of the
study.
-- Chiron won a contract to supply the U.S. government with a
candidate pre-pandemic influenza vaccine for a stockpile to
protect against an H5N1 avian influenza virus strain. Under
the agreement with the Department of Health and Human Services
(HHS), Chiron will provide a bulk stockpile of the candidate
H5N1 influenza vaccine. The amount payable to Chiron under the
agreement depends upon the amount of bulk vaccine actually
delivered, which is subject to manufacturing factors such as
yield, throughput and total manufacturing time.
-- Chiron announced preliminary promising data from a clinical
study of its investigational vaccine against an H9N2 avian
influenza strain. The trial was supported by the National
Institute of Allergy and Infectious Diseases (NIAID), part of
the U.S. National Institutes of Health (NIH). The study
explored the safety and immunogenicity of four different doses
of the investigational vaccine with and without Chiron's
adjuvant MF59. All vaccine formulations containing the
adjuvant MF59 proved highly immunogenic, inducing antibody
levels believed to confer protection against the influenza
strain, including at the lowest antigen dose tested, 3.75
micrograms.
BioPharmaceuticals
-- The European Commission granted marketing approval for
CUBICIN(R) (daptomycin) in the 25 member states of the
European Union, Iceland, Liechtenstein and Norway. Under the
approval, CUBICIN is a first-in-class intravenous antibiotic
indicated for the treatment of complicated skin and
soft-tissue infections (cSSTI) caused by Gram-positive
bacteria.
-- An independent Data Monitoring Committee (DMC) recommended the
continuation of Chiron's CAPTIVATE study, an ongoing Phase 3
clinical trial of tifacogin for the treatment of patients with
severe community-acquired pneumonia. The DMC made its
recommendation following a planned interim analysis of
clinical data from the study. The study data remains blinded
to Chiron, and a detailed analysis will not be available until
the trial has been completed. The committee identified no
safety concerns, confirming safety assessments conducted when
patient enrollment reached 300 and 600.
EARNINGS CONFERENCE CALL
Chiron will hold a conference call and webcast on Tuesday, January
31, 2006, at 4:45 p.m. EST to review its 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,
February 7, 2006. 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 4436756.
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.
FINANCIAL INFORMATION
2005 financial information in PDF format
http://www.chiron.com/investors/8701/chiron_financial.pdf
2005 financial information online
http://www.chiron.com/investors/finreports/index.html
This news release contains forward-looking statements, including
statements regarding 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
September 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, 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, competition,
intellectual property protections and defenses, litigation,
stock-price and interest-rate volatility, and marketing effectiveness.
There can be no assurance that Chiron will successfully develop and
receive approval to market new products or achieve market acceptance
for such new products. No assurance can be given that the transaction
contemplated by the merger agreement with Novartis AG will be
consummated. 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. 2005
financial results included in this press release are preliminary and
quarterly information is unaudited.
NOTE: BEGRIVAC, ENCEPUR, FLUVIRIN, MENJUGATE, MENZB, PROCLEIX,
PROLEUKIN, RABAVERT, RABIPUR, 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 December 31,
--------------------------------------
2005
--------------------------------------
Adjusted (1) Adjustments Actual
------------ ------------ ------------
Revenues:
Product sales, net $ 475,267 $ - $ 475,267
Revenues from joint business
arrangement 33,547 - 33,547
Collaborative agreement
revenues 1,955 - 1,955
Royalty and license fee
revenues 89,697 - 89,697
Other revenues 15,173 - 15,173
------------ ------------ ------------
Total revenues 615,639 - 615,639
------------ ------------ ------------
Operating expenses:
Cost of sales 215,116 - 215,116
Research and development 109,271 - 109,271
Selling, general and
administrative 125,777 - 125,777
Amortization expense - (11,969) 11,969
Impairment loss on acquired
intangible assets - (1,136) 1,136
Other operating expenses 7,692 - 7,692
------------ ------------ ------------
Total operating expenses 457,856 (13,105) 470,961
------------ ------------ ------------
Income (loss) from operations 157,783 13,105 144,678
Loss on disposal of assets (319) - (319)
Interest expense (7,683) - (7,683)
Interest and other income, net 19,644 - 19,644
Minority interest (498) - (498)
------------ ------------ ------------
Income (loss) from continuing
operations before income taxes 168,927 13,105 155,822
Provision for (benefit of)
income taxes 5,085 (6,552) 11,637
------------ ------------ ------------
Income (loss) from continuing
operations 163,842 19,657 144,185
============ ============ ============
Net income (loss) $ 163,842 $ 19,657 $ 144,185
============ ============ ============
Basic earnings (loss) per
share:
Income (loss) from continuing
operations $ 0.86 $ 0.76
============ ============
Net income (loss) $ 0.86 $ 0.76
============ ============
Diluted earnings (loss) per
share:
Income (loss) from continuing
operations $ 0.81 $ 0.71
============ ============
Net income (loss) $ 0.81 $ 0.71
============ ============
Shares used in calculating
basic earnings (loss) per
share 190,679 190,679
============ ============
Shares used in calculating
diluted earnings (loss) per
share 205,008 205,008
============ ============
Three Months Ended December 31,
--------------------------------------
2004
--------------------------------------
Adjusted (2) Adjustments Actual
------------ ------------ ------------
Revenues:
Product sales, net $ 330,467 $ - $ 330,467
Revenues from joint business
arrangement 25,336 - 25,336
Collaborative agreement
revenues 3,577 - 3,577
Royalty and license fee
revenues 68,177 - 68,177
Other revenues 6,838 - 6,838
------------ ------------ ------------
Total revenues 434,395 - 434,395
------------ ------------ ------------
Operating expenses:
Cost of sales 177,136 - 177,136
Research and development 129,392 - 129,392
Selling, general and
administrative 137,727 - 137,727
Amortization expense - (21,426) 21,426
Impairment loss on acquired
intangible assets - - -
Other operating expenses 4,804 - 4,804
------------ ------------ ------------
Total operating expenses 449,059 (21,426) 470,485
------------ ------------ ------------
Income (loss) from operations (14,664) 21,426 (36,090)
Loss on disposal of assets (2,092) - (2,092)
Interest expense (6,653) - (6,653)
Interest and other income, net 14,390 - 14,390
Minority interest (385) - (385)
------------ ------------ ------------
Income (loss) from continuing
operations before income taxes (9,404) 21,426 (30,830)
Provision for (benefit of)
income taxes (2,351) 5,356 (7,707)
------------ ------------ ------------
Income (loss) from continuing
operations (7,053) 16,070 (23,123)
============ ============ ============
Net income (loss) $ (7,053) $ 16,070 $ (23,123)
============ ============ ============
Basic earnings (loss) per
share:
Income (loss) from continuing
operations $ (0.04) $ (0.12)
============ ============
Net income (loss) $ (0.04) $ (0.12)
============ ============
Diluted earnings (loss) per
share:
Income (loss) from continuing
operations $ (0.04) $ (0.12)
============ ============
Net income (loss) $ (0.04) $ (0.12)
============ ============
Shares used in calculating
basic earnings (loss) per
share 186,813 186,813
============ ============
Shares used in calculating
diluted earnings (loss) per
share 186,813 186,813
============ ============
(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 $1.1 million on acquired intangible assets from our
acquisition of PowderJect Pharmaceuticals related to a contract
manufacturing agreement.
(2) Adjusted amounts exclude the amortization expense on acquired
intangible assets related to the acquisitions of PathoGenesis, Chiron
Behring, Pulmopharm and PowderJect Pharmaceuticals.
CHIRON CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands, except per share data)
Year Ended December 31,
--------------------------------------
2005
--------------------------------------
Adjusted (3) Adjustments Actual
------------ ------------ ------------
Revenues:
Product sales, net $ 1,423,180 $ - $ 1,423,180
Revenues from joint business
arrangement 136,701 - 136,701
Collaborative agreement
revenues 13,084 - 13,084
Royalty and license fee
revenues 317,006 - 317,006
Other revenues 31,394 - 31,394
------------ ------------ ------------
Total revenues 1,921,365 - 1,921,365
------------ ------------ ------------
Operating expenses:
Cost of sales 726,121 - 726,121
Research and development 433,891 - 433,891
Selling, general and
administrative 501,579 - 501,579
Purchased in-process research
and development - - -
Amortization expense - (66,206) 66,206
Impairment loss on acquired
intangible assets - (15,658) 15,658
Other operating expenses 20,515 - 20,515
------------ ------------ ------------
Total operating expenses 1,682,106 (81,864) 1,763,970
------------ ------------ ------------
Income from operations 239,259 81,864 157,395
Loss on disposal of assets (1,108) - (1,108)
Interest expense (30,615) - (30,615)
Interest and other income, net 86,692 - 86,692
Minority interest (2,221) - (2,221)
------------ ------------ ------------
Income from continuing
operations before income taxes 292,007 81,864 210,143
Provision for income taxes 32,710 9,170 23,540
------------ ------------ ------------
Income from continuing
operations 259,297 72,694 186,603
============ ============ ============
Gain from discontinued
operations, net of taxes - - -
------------ ------------ ------------
Net income $ 259,297 $ 72,694 $ 186,603
============ ============ ============
Basic earnings per share:
Income from continuing
operations $ 1.38 $ 0.99
============ ============
Net income $ 1.38 $ 0.99
============ ============
Diluted earnings per share:
Income from continuing
operations $ 1.34 $ 0.97
============ ============
Net income $ 1.34 $ 0.97
============ ============
Shares used in calculating
basic earnings per share 188,448 188,448
============ ============
Shares used in calculating
diluted earnings per share 199,280 198,704
============ ============
Year Ended December 31,
--------------------------------------
2004
--------------------------------------
Adjusted (4) Adjustments Actual
------------ ------------ ------------
Revenues:
Product sales, net $ 1,268,303 $ - $ 1,268,303
Revenues from joint business
arrangement 118,246 - 118,246
Collaborative agreement
revenues 18,044 - 18,044
Royalty and license fee
revenues 289,561 - 289,561
Other revenues 29,201 - 29,201
------------ ------------ ------------
Total revenues 1,723,355 - 1,723,355
------------ ------------ ------------
Operating expenses:
Cost of sales 675,944 - 675,944
Research and development 431,128 - 431,128
Selling, general and
administrative 459,502 - 459,502
Purchased in-process research
and development - (9,629) 9,629
Amortization expense - (84,503) 84,503
Impairment loss on acquired
intangible assets - - -
Other operating expenses 12,844 - 12,844
------------ ------------ ------------
Total operating expenses 1,579,418 (94,132) 1,673,550
------------ ------------ ------------
Income from operations 143,937 94,132 49,805
Loss on disposal of assets (3,247) - (3,247)
Interest expense (26,093) - (26,093)
Interest and other income, net 56,797 - 56,797
Minority interest (1,968) - (1,968)
------------ ------------ ------------
Income from continuing
operations before income taxes 169,426 94,132 75,294
Provision for income taxes 42,357 21,126 21,231
------------ ------------ ------------
Income from continuing
operations 127,069 73,006 54,063
============ ============ ============
Gain from discontinued
operations, net of taxes 24,854 - 24,854
------------ ------------ ------------
Net income $ 151,923 $ 73,006 $ 78,917
============ ============ ============
Basic earnings per share:
Income from continuing
operations $ 0.68 $ 0.29
============ ============
Net income $ 0.81 $ 0.42
============ ============
Diluted earnings per share:
Income from continuing
operations $ 0.67 $ 0.28
============ ============
Net income $ 0.80 $ 0.41
============ ============
Shares used in calculating
basic earnings per share 187,545 187,545
============ ============
Shares used in calculating
diluted earnings per share 190,202 190,202
============ ============
(3) Adjusted amounts exclude (a) the amortization expense on acquired
intangible assets related to the acquisitions of PathoGenesis, Chiron
Behring, Pulmopharm and PowderJect Pharmaceuticals, (b) an impairment
loss of $14.5 million on acquired intangible assets from our
acquisition of PowderJect Pharmaceuticals related to a yellow fever
vaccine and (c) an impairment loss of $1.1 million on acquired
intangible assets from our acquisition of PowderJect Pharmaceuticals
related to a contract manufacturing agreement.
(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) Purchased
in-process research and development related to the Sagres acquisition.
CHIRON CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In thousands)
December 31, December 31,
2005 2004
------------- -------------
Assets
- -------------------------------------------
Current assets:
Cash, cash equivalents and short-term
investments $ 680,128 $ 603,621
Accounts receivable, net of allowances 477,402 402,094
Inventories, net of reserves 237,636 221,154
Other current assets 195,096 167,154
------------- -------------
Total current assets 1,590,262 1,394,023
Non-current investments in marketable debt
securities 728,663 409,421
Property, plant, equipment and leasehold
improvements, net 860,928 799,415
Other non-current assets 1,546,114 1,702,644
------------- -------------
Total assets $ 4,725,967 $ 4,305,503
============= =============
Liabilities and stockholders' equity
- -------------------------------------------
Current liabilities $ 516,714 $ 434,444
Long-term debt 939,233 936,652
Long-term portion of capital lease 156,661 156,952
Non-current unearned revenue 27,359 26,175
Other non-current liabilities 84,829 140,226
Minority interest 10,904 9,350
Stockholders' equity 2,990,267 2,601,704
------------- -------------
Total liabilities and stockholders'
equity $ 4,725,967 $ 4,305,503
============= =============
CHIRON CORPORATION
SUPPLEMENTAL SCHEDULE OF COMPUTATION OF EARNINGS (LOSS) PER SHARE
(Unaudited)
(In thousands, except per share data)
Three Months Ended
December 31,
2005 2004
------------------- -------------------
Adjusted Actual Adjusted Actual
------------------- -------------------
Computation for earnings
(loss) per share --
continuing operations
Income (loss) (Numerator):
Income (loss) from
continuing operations $163,842 $144,185 $ (7,053) $(23,123)
Plus: Interest on 1.625%
convertible debentures, net
of taxes 1,586 1,586 - -
Plus: Interest on Liquid
Yield Option Notes, net of
taxes 147 147 - -
--------- --------- --------- ---------
Income (loss) from
continuing operations, plus
impact from assumed
conversions $165,575 $145,918 $ (7,053) $(23,123)
=======================================
Shares (Denominator):
Weighted-average common
shares outstanding 190,679 190,679 186,813 186,813
Additional shares from
exercise of right under an
agreement with Novartis (5) 3,448 3,448 - -
Effect of dilutive securities:
Stock options and
equivalents 3,001 3,001 - -
1.625% convertible
debentures 7,306 7,306 - -
Liquid Yield Option Notes 574 574 - -
--------- --------- --------- ---------
Weighted-average common
shares outstanding, plus
impact from assumed
conversions 205,008 205,008 186,813 186,813
=======================================
Basic earnings (loss) per
share from continuing
operations $ 0.86 $ 0.76 $ (0.04) $ (0.12)
========= ========= ========= =========
Diluted earnings (loss) per
share from continuing
operations $ 0.81 $ 0.71 $ (0.04) $ (0.12)
========= ========= ========= =========
Computation for earnings
(loss) per share -- net
income (loss)
Income (loss) (Numerator):
Net income (loss) $163,842 $144,185 $ (7,053) $(23,123)
Plus: Interest on 1.625%
convertible debentures, net
of taxes 1,586 1,586 - -
Plus: Interest on Liquid
Yield Option Notes, net of
taxes 147 147 - -
--------- --------- --------- ---------
Net income (loss), plus
impact from assumed
conversions $165,575 $145,918 $ (7,053) $(23,123)
=======================================
Shares (Denominator):
Weighted-average common
shares outstanding 190,679 190,679 186,813 186,813
Additional shares from
exercise of right under an
agreement with Novartis (5) 3,448 3,448 - -
Effect of dilutive securities:
Stock options and
equivalents 3,001 3,001 - -
1.625% convertible
debentures 7,306 7,306 - -
Liquid Yield Option Notes 574 574 - -
--------- --------- --------- ---------
Weighted-average common
shares outstanding, plus
impact from assumed
conversions 205,008 205,008 186,813 186,813
=======================================
Basic earnings (loss) per
share from net income $ 0.86 $ 0.76 $ (0.04) $ (0.12)
========= ========= ========= =========
Diluted earnings (loss) per
share from net income $ 0.81 $ 0.71 $ (0.04) $ (0.12)
========= ========= ========= =========
(5) On October 30, 2005 we exercised our right under an agreement with
Novartis (as successor to Ciba-Geigy), dated as of November 20, 1994,
as amended, to require Novartis or its affiliate to purchase shares of
our common stock for an aggregate purchase price of $300.0 million at
a per share purchase price of $43.50. On December 8, 2005, we closed
on a sale of $300.0 million in newly issued shares of our common stock
at a price of $43.50 per share to a subsidiary of Novartis. For
purposes of calculating diluted earnings per share, the issued shares
of this transaction are considered outstanding from October 30, 2005.
As a result, the calculation of diluted earnings per share for the
fourth quarter of 2005 included an additional 3.4 million shares.
CHIRON CORPORATION
SUPPLEMENTAL SCHEDULE OF COMPUTATION OF EARNINGS PER SHARE
(Unaudited)
(In thousands, except per share data)
Year Ended
December 31,
2005 2004
------------------- -------------------
Adjusted Actual Adjusted Actual
------------------- -------------------
Computation for earnings per
share -- continuing
operations
Income (Numerator):
Income from continuing
operations $259,297 $186,603 $127,069 $ 54,063
Plus: Interest on 1.625%
convertible debentures, net
of taxes 6,357 6,357 - -
Plus: Interest on Liquid
Yield Option Notes, net of
taxes 586 - - -
--------- --------- --------- ---------
Income from continuing
operations, plus impact
from assumed conversions $266,240 $192,960 $127,069 $ 54,063
=======================================
Shares (Denominator):
Weighted-average common
shares outstanding 188,448 188,448 187,545 187,545
Additional shares from
exercise of right under an
agreement with Novartis (6) 1,061 1,061 - -
Effect of dilutive securities:
Stock options and
equivalents 1,887 1,887 2,657 2,657
1.625% convertible
debentures 7,308 7,308 - -
Liquid Yield Option Notes 576 - - -
--------- --------- --------- ---------
Weighted-average common
shares outstanding, plus
impact from assumed
conversions 199,280 198,704 190,202 190,202
=======================================
Basic earnings per share from
continuing operations $ 1.38 $ 0.99 $ 0.68 $ 0.29
========= ========= ========= =========
Diluted earnings per share
from continuing operations $ 1.34 $ 0.97 $ 0.67 $ 0.28
========= ========= ========= =========
Computation for earnings per
share -- net income
Income (Numerator):
Net income $259,297 $186,603 $151,923 $ 78,917
Plus: Interest on 1.625%
convertible debentures, net
of taxes 6,357 6,357 - -
Plus: Interest on Liquid
Yield Option Notes, net of
taxes 586 - - -
--------- --------- --------- ---------
Net income, plus impact from
assumed conversions $266,240 $192,960 $151,923 $ 78,917
=======================================
Shares (Denominator):
Weighted-average common
shares outstanding 188,448 188,448 187,545 187,545
Additional shares from
exercise of right under an
agreement with Novartis (6) 1,061 1,061 - -
Effect of dilutive securities:
Stock options and
equivalents 1,887 1,887 2,657 2,657
1.625% convertible
debentures 7,308 7,308 - -
Liquid Yield Option Notes 576 - - -
--------- --------- --------- ---------
Weighted-average common
shares outstanding, plus
impact from assumed
conversions 199,280 198,704 190,202 190,202
=======================================
Basic earnings per share from
net income $ 1.38 $ 0.99 $ 0.81 $ 0.42
========= ========= ========= =========
Diluted earnings per share
from net income $ 1.34 $ 0.97 $ 0.80 $ 0.41
========= ========= ========= =========
(6) On October 30, 2005, we exercised our right under an agreement
with Novartis (as successor to Ciba-Geigy), dated as of November 20,
1994, as amended, to require Novartis or its affiliate to purchase
shares of our common stock for an aggregate purchase price of $300.0
million at a per share purchase price of $43.50. On December 8, 2005,
we closed on a sale of $300.0 million in newly issued shares of our
common stock at a price of $43.50 per share to a subsidiary of
Novartis. For purposes of calculating diluted earnings per share, the
issued shares of this transaction are considered outstanding from
October 30, 2005. As a result, the calculation of diluted earnings per
share for the year included an additional 1.1 million shares.
CHIRON CORPORATION
SUPPLEMENTAL REVENUE SUMMARY
(Unaudited)
(In thousands, except percentages)
- ----------------------------------------------------------------------
Current Prior Change
Quarter Quarter from Change
Q4 2005 Q3 2005 Prior QTR %
- ----------------------------------------------------------------------
Product Sales
Blood Testing
Ortho $ 9,825 $ 7,023 $ 2,802 40%
NAT 72,195 70,677 1,518 2%
---------------------------------------
Total Blood Testing 82,020 77,700 4,320 6%
Vaccines
Influenza vaccines 161,955 60,321 101,634 168%
Meningococcal vaccines 8,968 11,635 (2,667) (23)%
Travel vaccines (TBE,
Rabies, Arilvax and
Dukoral) 23,722 35,012 (11,290) (32)%
Pediatric/Other vaccines 50,574 45,800 4,774 10%
---------------------------------------
Total Vaccines 245,219 152,768 92,451 61%
Biopharmaceuticals
Proleukin 31,259 31,028 231 1%
TOBI 65,199 57,890 7,309 13%
Betaseron (7) 40,545 36,927 3,618 10%
Other 11,025 10,862 163 2%
---------------------------------------
Total Biopharmaceuticals 148,028 136,707 11,321 8%
TOTAL PRODUCT SALES, NET $475,267 $367,175 $108,092 29%
=======================================
Revenues from joint business
arrangement $ 33,547 $ 36,093 $ (2,546) (7)%
Collaborative agreement
revenues 1,955 3,149 (1,194) (38)%
Royalty and license fee
revenues 89,697 70,726 18,971 27%
Other revenues 15,173 2,470 12,703 514%
---------------------------------------
TOTAL REVENUES $615,639 $479,613 $136,026 28%
=======================================
Gross Margins
Blood Testing 38% 42% (4)%
Vaccines 48% 45% 3%
Biopharmaceuticals 76% 71% 5%
-----------------------------
TOTAL GROSS MARGINS 55% 54% 1%
=============================
- ----------------------------------------------------------------------
(7) Excludes Betaferon Royalty $ 14,122 $ 13,413 $ 709 5%
- ----------------------------------------------------------------------
Change
Prior from
Year Prior Change
Q4 2004 Year %
- ------------------------------------------------------------
Product Sales
Blood Testing
Ortho $ 7,904 $ 1,921 24%
NAT 63,705 8,490 13%
-----------------------------
Total Blood Testing 71,609 10,411 15%
Vaccines
Influenza vaccines 44,015 117,940 268%
Meningococcal vaccines 9,309 (341) (4)%
Travel vaccines (TBE,
Rabies, Arilvax and
Dukoral) 21,159 2,563 12%
Pediatric/Other vaccines 57,656 (7,082) (12)%
-----------------------------
Total Vaccines 132,139 113,080 86%
Biopharmaceuticals
Proleukin 30,713 546 2%
TOBI 53,276 11,923 22%
Betaseron (7) 33,639 6,906 21%
Other 9,091 1,934 21%
-----------------------------
Total Biopharmaceuticals 126,719 21,309 17%
TOTAL PRODUCT SALES, NET $330,467 $144,800 44%
=============================
Revenues from joint business
arrangement $ 25,336 $ 8,211 32%
Collaborative agreement
revenues 3,577 (1,622) (45)%
Royalty and license fee
revenues 68,177 21,520 32%
Other revenues 6,838 8,335 122%
-----------------------------
TOTAL REVENUES $434,395 $181,244 42%
=============================
Gross Margins
Blood Testing 40% (2)%
Vaccines 28% 20%
Biopharmaceuticals 70% 6%
-------------------
TOTAL GROSS MARGINS 46% 9%
===================
- ------------------------------------------------------------
(7) Excludes Betaferon Royalty $ 12,798 $ 1,324 10%
- ------------------------------------------------------------
CHIRON CORPORATION
SUPPLEMENTAL YTD REVENUE SUMMARY
(Unaudited)
(In thousands, except percentages)
Year Ended
December 31, Change from Change
2005 2004 Prior Year %
- ----------------------------------------------------------------------
Product Sales
Blood Testing
Ortho $ 31,298 $ 27,844 $ 3,454 12%
NAT 273,407 249,809 23,598 9%
-----------------------------------------------
Total Blood Testing 304,705 277,653 27,052 10%
Vaccines
Influenza vaccines 225,355 153,413 71,942 47%
Meningococcal
vaccines 43,361 27,739 15,622 56%
Travel vaccines
(TBE, Rabies,
Arilvax and
Dukoral) 147,507 96,864 50,643 52%
Pediatric/Other
vaccines 165,994 200,948 (34,954) (17)%
-----------------------------------------------
Total Vaccines 582,217 478,964 103,253 22%
Biopharmaceuticals
Proleukin 123,549 129,377 (5,828) (5)%
TOBI 232,624 212,876 19,748 9%
Betaseron (8) 142,238 130,572 11,666 9%
Other 37,847 38,861 (1,014) (3)%
-----------------------------------------------
Total
Biopharmaceuticals 536,258 511,686 24,572 5%
TOTAL PRODUCT
SALES, NET $1,423,180 $1,268,303 $ 154,877 12%
===============================================
Revenues from joint
business arrangement $ 136,701 $ 118,246 $ 18,455 16%
Collaborative
agreement revenues 13,084 18,044 (4,960) (27)%
Royalty and license
fee revenues 317,006 289,561 27,445 9%
Other revenues 31,394 29,201 2,193 8%
-----------------------------------------------
TOTAL REVENUES $1,921,365 $1,723,355 $ 198,010 11%
===============================================
Gross Margins
Blood Testing 41% 42% (1)%
Vaccines 32% 23% 9%
Biopharmaceuticals 72% 72% 0%
-----------------------------------
TOTAL GROSS
MARGINS 49% 47% 2%
===================================
- ----------------------------------------------------------------------
(8) Excludes Betaferon
Royalty $ 59,955 $ 51,564 $ 8,391 16%
- ----------------------------------------------------------------------
CONTACT: Chiron Corporate Communications & Investor Relations
Media, 510-923-6500
Investors, 510-923-2300