EXHIBIT F Chiron News Page 1 of 9 Lc

Chiron Reports 2003 Second -Quarter Pro-Forma Income of 35 Cents Per Share 17 Percent Increase in Revenues Over 200 2

EMERYVILLE, Calif., July 23 /PRNewswire-FirstCall/ -- Chiron Corporation (Nasdaq : CHIR) today reported pro-forma income from continuing operations of $67 million, or $0 .35 per share, for the second quarter of 2003, compared to $56 million, or $0.29 per share, for the second quarter of 2002 . (Chiron management uses pro-forma financial statements to gain an understanding of the company's operating performance on a comparative basis . Pro-forma results exclude special items relating to certain acquisitions and revenues, which may not be relevant to gaining an understanding of the company's trends or potential future performance . Please refer to the attached tables at the end of this document for more detail on these items and a reconciliation to GAAP financial statements .) On a GAAP basis, Chiron's income from continuing operations was $61 million, or $0 .32 per share, for the second quarter of 2003, compared to $50 million, or $0 .26 per share, for the second quarter of 2002 . (All references to per-share amounts are per diluted share .) Foreign exchange rates, on a pro-forma basis, resulted in a $0 .01 increase in earnings per share .

"Chiron made several important advances that demonstrate our momentum as a global biopharmaceutical company and that will help drive growth from the immediate to the long term, increasing shareholder value," said Howard Pion, Chiron's president and CEO . "Prominent among these was our acquisition of PowderJect, which makes us the second-largest flu vaccines manufacturer worldwide and adds a U .S. complement to our strong global vaccines business . The PowderJect acquisition, after integration costs, will be EPS neutral or better this year and accretive in 2004, and we are affirming our 2003 pro-forma guidance to be toward the upper end of the previously stated range of $1 .40 to $1 .50.

"Our Blood Testing business also saw notable milestones, including the introduction of the Procleix(R) West Nile Virus Assay, which is now used to test more than 80 percent of the U .S . blood supply under an IND . Our BioPharmaceuticals business continues its strategic advancement with expanded leadership and positive clinical data," added Pion . "Together, Chiron's businesses continue to increase the company's profound impact on human health worldwide ."

Overall Revenues

Total revenues in the second quarter of 2003 were $350 million, an increase of approximately 17 percent from $299 million in the second quarter of 2002 . Foreign exchange rates resulted in an 8 percent increase in revenues . Net product sales increased 16 percent in the second quarter of 2003, to $246 million from $211 million in the second quarter of 2002 . All other revenues increased 19 percent in the second quarter of 2003, to $104 million from $88 million in the second quarter of 2002 .

BioPharmaceutical s

The BioPharmaceuticals division reported net product sales and Betaferon(R) interferon beta-1 b royalties of $124 million in the second quarter of 2003, compared to $115 million in the second quarter of 2002 . The gross profit margin on biopharmaceutical products sold during the second quarter of 2003 was 71 percent, compared to 72 percent in the second quarter of 2002 .

TOBI(R) tobramycin solution for inhalation sales in the second quarter of 2003 were $39 million, compared to $34 million in the second quarter of 2002, primarily due to greater product penetration in Europe , increased patient demand and compliance in the United States, and price increases in both the United States and Europe, which were partially offset by wholesale ordering patterns . Sales of Betaseron(R) interferon beta-lb, marketed in Europe as Betaferon, to Berlex Laboratories, Inc . (and its parent company Schering AG) for marketing and resale were $31 million in the second quarter of 2003, compared to $34 million in the second quarter of 2002 . The decrease was due to wholesale ordering patterns resulting from last year's launch of the room-temperature stable formulation, partially offset by price increases . Royalties from Schering AG's European sales of Betaferon were $17 million in the second quarter of 2003, compared to $11 million in the second quarter of 2002 . Proleukin(R) (aldesleukin) interleukin-2 sales were $29 million in the second quarter of 2003, compared to $28 million in the second quarter of 2002, due primarily to price increases .

Vaccine s

Vaccines net product sales in the second quarter of 2003 were $86 million, compared to $73 million in the second quarter o f

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2002. The gross profit margin on vaccines products for the second quarter of 2003 was 56 percent, compared to 61 percent in the second quarter of 2002 .

Sales of Menjugate(TM) conjugate vaccine against meningococcal C disease totaled $14 million in the second quarter of 2003, compared to $10 million in the second quarter of 2002, with the increase due primarily to sales made under an Australian tender in the state o f New South Wales . Sales from Chiron's travel vaccines -- the tick-borne encephalitis vaccine Encepur(TM) and the rabies vaccine RabAvert(R) -- were $23 million in the second quarter of 2003, consistent with the second quarter of 2002 . Typically, the first half of the year is the prime season for Encepur ; overall, the product has seen a seasonal increase of 17 percent year over year . Sales of Chiron's pediatric, flu and other vaccines products wer e $49 million in the second quarter of 2003, compared to $40 million in the second quarter of 2002, with the increase primarily due to tender sales of pediatric vaccines .

Blood Testing

Total Blood Testing revenues in the second .quarter of 2003 were $106 million, compared to $77 million in the second quarter of 2002 . Blood Testing revenues pnniarily include revenues from the sales of products related to Chiron's Procleix(R) HIV- 1 /HCV Assay ; revenues related to Chiron's joint immunodiagnostic business with Ortho-Clinical Diagnostics, Inc . (Ortho), a Johnson & Johnson company; royalties paid by F . Hoffmann-La Roche (Roche) related to nucleic acid testing (NAT) blood screening ; and new license fees related to NAT plasma fractionation .

Sales related to Procleix were $46 million in the second quarter of 2003, compared to sales of $29 million in the second quarter of 2002 . Product revenues recognized in the second quarter of 2003 include a full quarter of commercial pricing in the United States, market share gains in the United States, and continued penetration into several markets abroad . Revenues recorded in earnings from Chiron's unconsolidated joint business with Ortho were $27 million in the second quarter of 2003, comparable with $27 million in the second quarter of 2002 . Royalties paid by Roche related to NAT blood screening were $14 million in the second quarter of 2003, compared to $11 million in the second quarter of 200? .

Pipeline and Products Updat e

Chiron has a diverse and robust array of clinical programs and product franchises with a focus on cancer and infectious disease. The company is committed to expanding its franchises through geographic and market expansion, new indications, and new products . Chiron expects to continue to see advances in franchises across all three business units in 2003 .

BioPharmaceuticals : TOBI(R) Tobramycin Solution for Inhalatio n

Chiron is further developing TOBI, used by cystic fibrosis (CF) patients with chronic pseudomonal lung infection, through new formulations, new delivery systems and expanded indications.

The FDA has accepted the IND for the dry-powder formulation and hand-held device for TOBI, which Chiron is developing in collaboration with Nektar Therapeutics . Chiron initiated Phase I testing with this product, which will increase ease of use for patients ; last week . - At the 26th European Cystic Fibrosis Conference in Belfast in June, Chiron presented the results of a 184-patient open-label study that showed that subjects undergoing TOBI treatment in conjunction with routine care were significantly less likely to be hospitalized for respiratory symptoms or to be treated with oral antibiotics than those undergoing routine care alone . -- Chiron also saw recent positive data on TOBI's efficacy in decreasing Pseudomonas aeruginosa (Pa) in pediatric patients, which was publishe d

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in the March 15, 2003, American Journal of Respiratory and Critical Care Medicine, as well as data on TOBI's potential role in treating chronic bronchiectasis, which was presented at the American Thoraci c Society Meeting in Seattle in May . -- At the end of 2003, Chiron intends to initiate the ELIT E (EarLy Intervention TOBI Eradication) trial in Europe to further study the benefits of TOBI in treatment of early onset Pa in CF patients .

BioPharmaceuticals : Betaseron(R) Interferon Beta-lb

Betaseron continues to distinguish itself in the multiple sclerosis (MS) market through its strong clinical results and expanded labeling. Convenience features and new studies will help drive Betaseron growth .

Upcoming product enhancements include a pre-filled diluent syringe for the U .S . market to increase ease of use . At the European Neurological Society annual meeting in Istanbul in June, Chiron's marketing partners, Berlex and Berlex's parent Schering AG, presented data from a 64-patient blinded, controlled study showing that Betaferon/Betaseron as compared with Rebif(R) was associated with less pain and fewer skin reactions at the injection site . - Schering AG also announced the completion of recruitment for its Phase III BENEFIT study, the first long-term MS trial to assess a high-dose, frequently administered beta interferon therapy in patients with early signs of MS . More than 450 patients from 98 centers in 20 countries have been randomized and started treatment in the two-year study, the final results of which will be available by mid-2005 .

BioPharmaceuticals : Oncology

Chiron's anticancer franchise has three dimensions : immune-based therapies , monoclonal antibodies and novel cancer agents.

- Chiron currently has four clinical trials underway -- two in Phase II and two in Phase I -- to evaluate the potential of Proleukin(R) (aldesleukin) interleukin-2 and its second-generation liquid formulation to increase the clinical benefit of rituximab or trastuzumab in cancer treatments . Chiron anticipates having sufficient data to decide next steps in several of these trials by the end of 2003 . -- Chiron has two Phase II trials underway to study the potential of tezacitabine, Chiron's next-generation nucleoside analog . The current trials in colorectal cancer and gastroesophogeal cancer are part of a program to determine the specific tumor types that the compound is most effective in treating . Chiron expects to see preliminary data from the current Phase II trials in 2004 .

Vaccines

Chiron is the fifth-largest vaccines business in the world and markets more than 30 novel and conventional vaccines for adults and children. The company is investing in the vaccines business to develop new products with significant growth potential.

As previously announced, Chiron acquired PowderJect Pharmaceuticals, solidly positioning Chiron as the second-largest manufacturer of flu vaccines in the world . The two companies were geographic complements, and the acquisition provides Chiron with a strong U .S . flu vaccines business and an excellent platform to launch new vaccines products in the United States . Chiron will begin incorporating PowderJect results in the third quarter . In the second quarter, Chiron saw progress in its development of vaccines for the five primary serogroups that cause meningococcal disease . * Enrollment is continuing in Chiron's Phase III trial in the United States for Menjugate(TM) conjugate vaccine . Chiron expects t o

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complete Phase III and present data to the FDA in 2004 . Chiron's combination ACYW vaccine candidate showed favorable safety and immunogenicity results in Phase I testing and has advanced to Phase II . Enrollment for this trial is on track, and Chiron expects results from the study later this year . Positive proof-of-concept data from the Phase I trial for Chiron's first-generation, broad-coverage meningococcal B vaccine raised the company's confidence in the potential of its second-generation vaccine candidate, which is expected to enter Phase I testing in 2004 and show stronger immunogenicity .

Blood Testing : Procleix(R) System

Chiron is a leader in blood testing and making the blood supply safer . Through its NAT collaboration with Gen-Probe Incorporated, the company expects to expand its leadership through new geographies, greater market penetration, additional assays and enhanced automation of the Procleix instrument system .

-- Chiron and its collaborator Gen-Probe incorporated introduced the Procleix(R) West Nile Virus Assay on a cost-recovery basis under an IND to customers in the United States, meeting the deadline requested by federal health authorities . - Chiron's Procleix(R) Ultrio(TM) Assay, which adds a hepatitis B virus assay to the current Procleix{R} HIV-1/HCV Assay, is on track for approval of CE marking in Europe by the end of the year, followed by commercial launch . Chiron also expects to file an IND and begin clinical trials in the United States for Ultrio this year . - Chiron saw the resolution of the Commission of the European Communities inquiry with a joint settlement proposal made by Chiron and Roche, which preserves Chiron's NAT per-donation royalty structure and recognizes the value of the company's intellectual property while potentially expanding the number of Chiron licensees and licensed products serving the European blood-screening marketplace . Chiron licensed its HIV and hepatitis C virus (HCV) intellectual property to Baxter AG, a subsidiary of Baxter International, for use in screening plasma in combination with Baxter's own technology in Europe, representing the first license of Chiron's intellectual property for use in plasma fractionation .

Other Recent Business Milestone s In other recent business milestones, Chiron :

-- Appointed Kenneth W . Bair, Ph .D ., as senior vice president, head of BioPharma research, Chiron BioPharmaceuticals, and Carl Pelzel as senior vice president, BioPharma commercial operations, Chiron BioPharmaceuticals . Dr . Bair was formerly vice president, discovery oncology, Pharmacia Corporation, and Mr . Pelzel was most recently president and CEO of Invenux, a privately held drug discovery company .

2Q03 Earnings Conference Cal l

Chiron will hold a conference call and webcast on Wednesday, July 23, 2003, at 4 :45 p.m. Eastern Daylight Time (EDT) to review its second-quarter 2003 results of operations and business highlights . In addition, the company may address forward- looking questions concerning business, financial matters and trends affecting the company ,

To access either the live webcast or the one-week archive, please log on to http ://www,chiron .cam/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 1-800-374-0907 (U.S.) or 706-643-3367 (international) . Replay is available approximately two hours after the completion of the call through 11 :59 p.m. EDT, Wednesday, July 30, 2003 . To access the replay, please call 1-800- 642-1687 (U.S .) or 706-645-9291 (international) . The conference ID number is 1582120 .

About Chiro n

Chiron Corporation, headquartered in Emeryville, California, is a global pharmaceutical company that leverages a diverse business model to develop and commercialize high-value products that make a difference in people's lives . The company

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has a strategic focus on cancer and infectious disease . Chiron applies its advanced understanding of the biology of cancer and infectious disease to develop products from its platforms in proteins, small molecules and vaccines . The company commercializes its products through three business units : BioPharmaceuticals, Vaccines and Blood Testing . For more information about Chiron, visit the company's website at www .chiron.com.

This news release contains forward-looking statements, including statements regarding sales growth, product development initiatives, new product indications, new product marketing, acquisitions, and in- and out- licensing activities, that involve risks and uncertainties and are subject to change . A full discussion of the company's operations and financial condition, including factors that may affect its business and future prospects, is contained in documents the company has filed with the SEC, including the form 10-Q for the quarter ended March 31, 2003, and the form 10- K for the year ended December 31, 2002, and will be contained in all subsequent periodic filings made with the SEC . These documents identify important factors that could cause the company's actual performance to differ from current expectations, including the outcome of clinical trials, regulatory review and approvals, manufacturing capabilities, intellectual property protections and defenses, stock-price and interest-rate volatility, and marketing effectiveness . In particular, there can be no assurance that Chiron will increase sales of existing products, successfully develop and receive approval to market new products, or achieve market acceptance for such new products . There can be no assurance that Chiron's out-licensing activity will generate significant revenue, nor that its in- licensing activities will fully protect it from claims of infringement by third parties . In addition, the company may engage in business opportunities, the successful completion of which are subject to certain risks, including shareholder and regulatory approvals and the integration of operations .

Consistent with SEC Regulation FD, we do not undertake an obligation to update the forward-looking information we are giving today .

NOTE: Encepur, Menjugate , Procleix , Proleukin, RabAve rt, TOBI and Ultrio are trademarks of Chiron Corporation . Betaseron and Betaferon are trademarks of Schering AG . Rebif is a trademark of Serono, Inc .

CHIRON CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited ) (In thousands, except per share data ) Three Months Ended June 30, 200 3 Pro Forma Pro Forma Adjusted(A) Adjustments Actual Revenues : Product sales, ne t $245,926 $-- $245,92 8 Earnings of unconsolidated joint businesse s 27,475 -- 27,47 5 Collaborative agreement revenues 3,624 -- 3,62 4 Royalty and license fee revenues 66,876 -- 66,87 6 Other revenue s 6,369 6,369

Total revenue s 350,272 -- 350,27 2

Operating expenses : Cost of sale s 97,420 - 97,420 Research and developmen t 89,915 - 89,915 Selling, general and administrative 79,707 79,70 7 Amortization expens e (7,701) 7,70 1 Restructuring and reorganization charge s 519 -- 51 9 Other operating expense s 1,259 -- 1,25 9

Total operating expenses 268,820 (7,701) 276,52 1

Income from operation s 81,452 7,701 73,75 1

Interest expense (2,839) -- (2,839 ) Other income, net 11,613 -- 11,61 3 Minority interes t (581) -- (581 )

Income from continuing operations before income taxe s 89,645 7,701 81,94 4 Provision for income taxes 22,412 1,927 20,48 5

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Income from continuing operations 67,233 5,774 61,45 9

Gain on disposal of discontinue d operations 538 -- 53 8

Net income $67,771 $5,774 $61,99 7

Basic Earnings per share : Income from continuing operations $0 .36 $0 .3 3 Net Income $0 .36 $0 .33 Diluted Earnings per share : Income from continuing operations $0 .35 $0 .3 2 Net Income $0 .36 $0 .3 3

Shares used in calculating basi c earnings per share 186,408 186,40 8 Shares used in calculating diluted earnings per share 195,191 189,963

Three Months Ended June 30, 200 2 Pro Forma Pro Forma Adjusted (B) Adjustments Actua l

Revenues : Product sales, ne t $211,293 $-- $211,29 3 Earnings of unconsolidated joint businesse s 27,394 -- 27,39 4 Collaborative agreement revenues 6,602 -- 6,60 2 Royalty and license fee revenues 45,494 -- 45,49 4 Other revenue s 8,495 -- 8,49 5

Total revenues 299,278 -- 299,27 8

Operating expenses : Cost of sale s 76,225 -- 76,22 5 Research and development 83,530 -- 83,53 0 Selling, general and administrative 71,093 -- 71,09 3 Amortization expens e -- (7,446) 7,44 6 Restructuring and reorganization charges Other operating expense s 899 -- 899

. Total operating expenses 231,747 (7,446) 239,193

Income from operations 67,531 7,446 60,08 5

Interest expens e (3,133) -- (3,133 ) Other income, net 12,613 -- 12,61 3 Minority interes t (464) -- (464 )

Income from continuing operations before income taxe s 76,547 7,446 69,10 1 Provision for income taxes 20,668 2,011 18,65 7

Income from continuing operations 55,879 5,435 50,44 4

Gain on disposal of discontinued operation s

Net incom e $55,879 $5,435 $50,44 4

Basic Earnings per share : Income from continuing operations $0 .29 $0 .2 7 Net Income $0 .29 $0 .27

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Diluted Earnings per share : Income from continuing operations $0 .29 $0 .26 Net Income $0 .29 $0 .26

Shares used in calculating basi c earnings per share 189,579 189,579 Shares used in calculating diluted earnings per share 192,925 192,92 5

(A) Pro Forma Adjusted amounts exclude the amortization expense on acquired intangible assets related to the acquisitions of PathoGenesis, Chiron Behring and Pulmopharm .

(B) Pro Forma Adjusted amounts exclude the amortization expense on acquired intangible assets related to the PathoGenesis acquisition and the Chiron Behring acquisition .

CHIRON CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF OPERATION S (Unaudited ) (In thousands, except per share data) Year to Dat e June 30, 200 3 Pro Forma Pro Forma Adjusted (C) Adjustments Actua l Revenues : Product sales, net $464,548 $-- $464,54 8 Earnings of unconsolidated join t businesses 53,927 -- 53,92 1 Collaborative agreement revenues 7,738 -- 7,73 8 Royalty and license fee revenues 120,300 -- 120,30 0 Other revenues 10,381 (14,413) 24,79 4

Total revenues 656,894 (14,413) 671,30 7

Operating expenses : Cost of sales 183,009 -- 183,00 9 Research and development 172,045 -- 172,04 5 Selling, general and administrative 132,749 -- 152,74 9 write-off of purchased in-proces s technologies ------Amortization expense -- (15,314) 15,31 4 Restructuring and reorganizatio n charges 675 -- 67 5 Other operating expenses 2,794 -- 2,79 4

Total operating expenses 511,272 (15,314) 526,58 6

Income from operations 145,622 901 144,72 1

Interest expense (6,301) -- (6,301 ) Other income, net 25,931 -- 25,93 1 Minority interest (981) -- (981 )

Income from continuing operation s before income taxes 264,271 901 163,37 0 Provision for income taxes 41,069 227 40,84 2

Income from continuing operations 123,202 674 122,52 8

Gain on disposal of discontinue d operations 1,964 -- 1,964

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Net income $ 125,166 $674 .$124,49 2

Basic earnings per share : Income from continuing operations $ 0 .66 $0 .6 6 Net income $0 .67 $0 .6 7 Diluted earnings per share : Income from continuing operations $0 .65 $0 .6 5 Net income $ 0 .66 $0 .66

Shares used in calculating basi c earnings per share 186,584 186,58 4 Shares used in calculating diluted earnings per share 189,881 189,88 1

Year to Dat e June 30, 200 2 Pro Forma Pro Form a Adjusted (D) Adjustments Actua l Revenues : Product sales, ne t $384,877 $-- $384,87 7 Earnings of unconsolidated joint businesse s 46,192 -- 46,19 2 Collaborative agreement revenues 12,809 -- 12,80 9 Royalty and license fee revenues 90,372 -- 90,37 2 Other revenue s 17,225 -- 17,22 5

Total revenues 551,475 -- 551,47 5

Operating expenses : Cost of sale s 142,391 -- 142,39 1 Research and developmen t 162,303 -- 162,30 3 Selling, general and administrative 133,863 -- 133,86 3 write-off of purchased in-process technologie s (54,781) 54,78 1 Amortization expense -- (14,824) 14,82 4 Restructuring and reorganization charge s Other operating expenses 5,482 -- 5,48 2

Total operating expenses 444,039 (69,605) 513,64 4

Income from operation s 107,436 69,605 37,83 1

Interest expense (6,288) -- (6,288 ) Other income, net 32,760 -- 32,76 0 Minority interes t (883) -- (883 )

Income from continuing operations before income taxe s 133,025 69,605 63,42 0 Provision for income taxes 35,917 4,004 31,91 3

income from continuing operations 97,108 65,601 31,50 7

Gain on disposal of discontinued operation s

Net income $97,108 $65,601 $31,50 7

Basic earnings per share : Income from continuing operations $0 .51 $0 .1 7 Net income $0 .51 $0 .1 7 Diluted earnings per share : Income from continuing operations $0 .50 $0 .1 6 Net income $0 .50 $0 .16

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Shares used in calculating basi c earnings per share 189,536 189,536 Shares used in calculating dilute d earnings per share 193,209 193,209

(C) Pro Forma Adjusted amounts exclude : (a) amortization expense on acquired intangible assets related to the acquisitions of PathoGenesis, Chiron Behring and Pulmopharm and (b) the Sioge n and Serono settlements in connection with the McCormick patents owned by Schering's U .S . subsidiary, Berlex Labratories .

(D) Pro Forma Adjusted amounts exclude ; (a) write-off of purchased in-process technologies related to the Matrix acquisition an d (b) amortization expense on acquired identifiable intangible assets related to the PathoGenesis and Chiron Behring acquisitions .

Note : Due to rounding, quarterly earnings per share amounts may not sum fully to yearly earnings per share amounts .

CHIRON CORPORATION CONDENSED CONSOLIDATED BALANCE SHEET S (Unaudited ) (In thousands) June 30, December 31 , 2003 200 2 Asset s Current assets : Cash and short-term investments $1,147,333 $874,08 0 Accounts receivable, net 289,380 278,62 5 Current portion of notes receivable 750 71 8 Inventories, net 196,005 146,00 5 Other current assets 108,413 86,29 4 Total current assets 1,741,881 1,385,72 2 Noncurrent investments in marketabl e debt securities 119,171 414,44 7 Property, plant, equipment an d leasehold improvements, net 403,904 373,55 8 Other noncurrent assets 812,095 786,61 7 Total assets $3,077,051 $2,960,34 4

Liabilities and stockholders' equit y Current liabilities $283,261 $298,63 6 Long-term debt 421,073 416,95 4 Noncurrent unearned revenue 54,711 62,58 0 Other noncurrent liabilities 88,724 81,80 9 Minority interest 6,115 5,35 5 Put options -- 19,05 4 Stockholders' equity 2,223,167 2,075,95 6 Total liabilities an d stockholders' equity $3,077,051 $2,960,34 4

SOURCE Chiron Corporatio n

http ://phx..corporate-ir.net/phoenix .zhtml?c=105850&p=irol-newsArticle_Print&ID=55293 . .. 4/20/2.005 EXHIBIT G CHIRON Moderator : Martin Forres t 07-23-0314:45 pm CT Confirmation # 1582120 Page 1

CHIRON

Moderator: Martin Forrest July 23, 2003 4:45 pm CT

Operator: Good afternoon. My name is (Amy) and I will be your conference facilitator . At this time I would like to welcome everyone to the Chiron Second Quarter 2003 Financial Results conference call.

All lines have been placed on mute to prevent any background noise . After the speakers' remarks there will be a question and answer period . If you would like to ask a question during this time, simply press star then the number 1 on your telephone keypad. If you would like to withdraw your question, press star then the number 2.

Thank you. I will now turn the conference over to Mr. Martin Forrest . Sir, you may proceed.

Martin Forrest: (Unintelligible) discussion of Chiron's results I would like to remind you that our remarks today will include forward-looking statements relating to futur e events in the financial performance of the company . Actual events and performance may differ materially from our expectations .

72200812 CHIRON Moderator: Martin Fo rrest 07-23-03/4 :45 pm CT Con firmation # 1582120 Page 2

We refer you to the documents that the company has filed with the Securitie s and Exchange Commission . These include 2002 1 OK report and the first quarter I OQ report . The second quarter IOQ report will be available shortly .

All the filings include information under the heading Factors that May Affect Future Results in the MD&A portion of the document. This information identifies important factors that could cause the company's actual performance to differ from current expectations including the timing and outcome of clinical trials, regulatory review, manufacturing capabilities , efficiencies of operations and research and development, the strength of our management . team, the effectiveness of our partnerships and sales and marketing effectiveness.

Please note that where we indicate a number to be pro forma in today's discussion we have made available a reconciliation of pro forma to GAAP in a condensed consolidated statement of operations attached to our press release issued today. The reconciliation for the second quarter along with the reconciliation of pro forma to GAAP for prior quarters is also available on our Web site, www.chiron.com.

The system is SEC Regulation FD . We do not undertake an obligation to update the forward-looking information we are giving today .

Finally please note this call is being electronically recorded and is copyrighte d by Chiron. No reproductions, retransmissions, transcripts or copies of thi s conference call c an be made without the written permission of Chiron .

With that as a preface , I'll turn the call over to you Howard.

72200813 CHIRON Moderator : Martin Forres t 07-23-0314 :45 pm CT Confirmation #1582120 Page 3

Howard Pien : Thank you Martin. We are pleased to be reporting our second quarter results this afternoon. It has been an eventful sp ring for Chiron and certainly for m e personally. The completion of the PowderJect acquisition earlier is week brings to Chiron new opportunities and challenges in a field where there is good potential for improving health through prevention .

Since our last earnings call we made several important advances that will help drive growth from the immediate to the long-term future . Let me highlight five of these events for you.

One, the acquisition of PowderJect now makes us the second larges t manufacturer of flu vaccines in the world and provides us with a stron g platform to launch new products in the US . This acquisition will help move up our growth for the vaccines business from the mid-term to the immediate future.

Two, we introduced the Procleix West Nile Assay, on a cost-recovery basi s under an IND in the US, setting the stage for accelerating growth in the blood testing business.

Three, we saw the fair resolution of the European Commission inquiry with an agreement that preserves our NAT per donation royalty structure and als o recognizes the value of our IP.

Four, we licensed our HIV and HCV technology to Baxter for use in Europe for plasma fractionation .

And five, we made key leadership appointments in BioPharma, an important steps in fulfilling our long-term growth strategy for this business .

72200819 CHIRON Moderator: Martin Forrest 07.23.0314 :45 pm CT Confirmation #1582120 Page 4

So you can see from all of these events that Chiron is generating momentum and increasing shareholder value . We continue to produce solid financial results. Today we are announcing second quarter pro forma EPS of 35 cents, a 21 % increase from the same period last year .

Our accomplishments demonstrate our ability to leverage our validated business model combining growing franchises with a strong intellectua l property portfolio while continuing to invest in innovation . 2003 is an important year for Chiron as several of these investments reach key juncture s for advancement.

Now let me highlight some of the areas of progress in each of the businesses . BioPharma is continuing to enhance its focus on key programs . We strengthened our leadership team in the second quarter with two ke y appointments.

Dr. Ken Bair joins us as Senior Vice President and head of the BioPharma research. Ken has extensive oncology experience having led oncolog y programs at Novartis and more recently at Pharmacia . Also joining BioPharma is Carl Pelzel, Senior Vice President and head of BioPharm a commercial operations. Carl brings to Chiron more than ten years of global commercial experience from GlaxoSmithKline .

The appointment of Ken and Carl are important steps in BioPharma's goal of enhancing our capabilities focused in cancers and infectious disease .

Chiron's BioPharma products are performing up to our expectations . Betaseron's high dose, high frequency message has distinguished it in the growing MS market . At the European Neurological Society annual meeting in Istanbul in June, our partner Schering AG presented the data from a blinded,

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CHIRON Moderator: Martin Forres t 07-23-03/4 :45 pm CT Confirmation #1582120 Page 5

controlled, 64 patient study showing that Betaseron as compared with Rebif was associated with less pain and fewer skin reactions at the injection site. We believe that Betaseron will continue to grow along with the market as we introduce product enhancements, including a saline (unintelligible) syringe and see further clinical data which will bolster Betaseron's clinical message .

Betaseron will undergo a financial transition beginning in the fourth quarter of 2003 . In large part, this transition is the result of provisions in our lon g established agreement with Schering. Later in the call, David Smith will discuss the financial impact of these changes in more detail but for now, just a few statements of context for me .

Betaseron is an important product for us and we see attractive opportunities for growth. Continued life cycle management of Betaseron working in collaboration with our partner Schering, we made a key priority of (unintelligible) management.

We see opportunities for other BioPharma products as well . TOBI has become the growth standard for treating Pseudomonal lung infections in cystic fibrosis patients. TOBI has improved the health of cystic fibrosis patients worldwide, thereby achieving commercial success for Chiron . The overwhelming majority of CF patients with advanced pulmonary disease use TOBI .

TOBI is showing its value in earlier stages of the disease as well . At a European Cystic Fibrosis Conference held last month in Belfast, Chiron presented the results of a 184-patient open-label study showing that a patient with milder pulmonary disease undergoing TOBI treatment in conjunction with routine care were significantly less likely to be hospitalized for respiratory symptoms.

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CHIRON '"Moderator: Martin Forres t 07.23-0314 :45 pm CT Confirmation #I582120 Page 6

Further showing the company's interest in evaluating TOBI's use in less severe patient populations, Chiron has also announced the sta rt of a study called the (Elite) to examine the potential benefits of early TOBI treatment at the onset of Pseudomonal infection.

TOBI has been a fast growing product whereas along with such rapid growth comes the rising risk of competitive threat . Chiron has filed a patent infringement suit against a generic manufacturer who has been granted tentative approval for a generic version of TOBL The approval, which is based on that generic product reportedly being an equivalent to TOBI, will remain tentative as long as TOBI holds orphan drug status .

Our patent covers TOBI and its equivalents . We therefore believe that the generic infringes . We have filed our suit well in advance of the expiration o f TOBI's orphan drug status to protect the value of our product .

We are committed to continued investment in the CF market . A key strategy is the development and commercialization of the dry powder formulation and hand-held device, which would increase ease of use for the patient . The IND for this new product, which we are developing in collaboration with Nektar Therapeutics has been accepted by the FDA and we initiated Phase I testing last week.

Moving to oncology, Chiron's programs to explore the role of IL-2 in combination with monoclonal antibodies continues to make progress. Enrollment continues in the four clinical trials underway, two in Phase II an d two in Phase I with both Proleukin and the second generation liquid formulation and in combination with (rituxin) or (unintelligible) .

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CHIRON Moderator: Martin Forres t 07-23-0314:45 pm CT Confirmation # 1582120 Page 7

The program continues to attract strong interest from physicians as illustrated by the success of our (Asko) symposium . We expect to have sufficient data from these trials by the end of this year to advance to the next developmen t milestone.

We are also making progress in our Phase II program for tezacitabine, whic h is our next generation nucleoside analog . Two trials are currently underway, one in colorectral and the other one in gastroesophogeal cancer .

This is part of an aggressive program to determine the specific tumor types that a compound is most effective in treating . We believe that tezacitabine has substantial potential as an oncology treatment and we are committed to screening multiple tumor types as necessary in order to identify the-best development path forward . We expect to see preliminary data from the current Phase II trials in 2004.

Moving on to vaccines, this is a very exciting time for our vaccines business with the acquisition of PowderJect and with the advances in our meningococcal pipeline . Our acquisition of PowderJect, which was completed earlier this week, solidly positions Chiron as the second largest player in the global flu market.

Powderlect is a great strategic fit for Chiron. Its business complements our vaccines business geographically and provides us with a strong platform to launch new products in the US, especially for our meningococcal vaccine s currently in development .

Were off to a quick start with the integration of PowderJect into Chiron . We have announced our commitment to the formal PowderJect location i n Oxford, England . We have already made our key top level management

72200818 CHIRON Moderator: Martin Forrest 07-23-0314 :45 pm CT Confirmation # 1582120 Page 8 appointments and we are working diligently to bring the operations together quickly and efficiently. We believe the integration process will be largely completed by the end of this year .

Although it is still early in the integration process, we want to signify our confidence by confirming our previous statements on our pro forma EPS estimates. The PowderJect acquisition will make a contribution to our performance this year and after integration expenses will be EPS neutral or better in 2003 and will be accretive in 2004. Hence we affirming our 2003 pro forma EPS guidance to be towards the upper end of the previously state d range of between $1 .40 and S 1 .50 .

Our focus during this phase of the PowderJect integration is on meeting our commitment to customers and delivering flu vaccines on time . Our goal is to build on the existing reputation for high quality service that both Chiron an d PowderJect have so as to enhance customer loyalty .

It is critical to meet a market demand early and reliably as most flu shot s certainly in the US take place by the end of the fourth quarter . And given this timeframe, the summer is hugely important in the flu production cycle and w e are on target to meet our commitments.

The CDC estimates that total vaccine product in the US for the forthcoming season will be about 80 to 85 million doses, close to the estimated 79 million doses sold in 2002 . There is substantial room for long-term growth in the US market. As part of the Healthy People 2010 campaign the CDC has set a goal for increasing flu vaccinations , which could reach 150 million doses in the US by the end of this decade..

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CHIRON Moderator: Martin Forres t 07-23-03!4:45 pm CT Confirmation # 1582120 Page 9

Chiron also made good progress in our meningococcal vaccines program in the past quarter. The market for vaccines to prevent all five primary serotypes of meningitis is in the billion dollar range . On the strength of a platform enabled by a growing US presence, our meningococcal program could transform our vaccines business and position Chiron as a credible contender for leadership in the vaccine field .

Enrollment is continuing on the Phase 11 trial in the US for Menjugate, our conjugate vaccine to prevent Men C . This trial will extend the existing substantial safety database for Menjugate to include a US population . We're on track to complete the Phase III trial and present the data to the FDA nex t year.

Chiron's combination ACYW vaccine candidate shows a favorable safety an d immunogenicity profile in Phase I testing and we have moved into Phase I i trial from which we expect to see results next year.

Relying on our pioneering research on the meningococcal genome, Chiron is also tackling the development, which is challenging, for a broad coverage Men B vaccine . The multitude of subtypes has made it difficult to develop an effective vaccine from the Men B polysaccharide shell.

Data from the Phase I trial for our first generation candidate shows proof of concept, but we believe that our second generation candidate will show stronger immunogenicity . We plan the entry into Phase I trial with this candidate next year.

Turning now to blood testing, as we mark the first full year of commercial pricing with the Procleix HIV-(FC) Assay in the US, we are seeing new

72200820 CHIRON Moderator : Ma rtin Forrest 07-23-03/4 :45 pm CT Confirmation #1582120 Page 1 0 advances in the blood testing business . The business will grow through three main avenues -- new assays, enhanced automation and geographic expansion.

The introduction of Procleix West Nile Virus Assay on an investigational use only basis is our most recent achievement . By duly 1, the assay was implemented by all of our customers in the US, representing greater than 80% of the total market .

With our collaborator Gen-Probe, we were able to develop an assay for a new pathogen threatening the blood supply of the country and bring it to the market in a record nine months. We have trained more than 350 operator s from alI of our customer sites on the new assays in just six weeks . We are proud of this accomplishment and of the added safety this new assay brings to the country's blood supply .

As an indication of just how valuable this assay can be, the very first weekend it was put into use the Indiana Blood Center detected an infected blood donation that would otherwise have entered the blood supply, making this the first positive donation identifier .

For blood banks, catching infected samples before they enter the blood supply is crucial. In high prevalence areas, the rate of donors infected with West Nile Virus can be as high as 2/10 of a percent of the donor population during the peak mosquito season. This is a figure that far exceeds the prevalence of HIV.

With the introduction of the Procleix West Nile, Chiron will see new revenues from our blood testing business . The cost recovery revenues from the West Nile Assay represent one in a series of milestones for the Procleix franchise in the next few years that could generate new revenue opportunities in the US, Europe and the rest of the world .

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The next step will be from Ultrio, which will add a hepatitis B test to the existing test for HIV and (FC) . Ultrio is on track for CE marking by the end of this year and Chiron expects to roll out a product in Europe at the beginning of 2004, In the US we are on track to file an IND and begin clinical trials for Ultrio by the end of this year . The introduction of Ultrio will also make the Procleix system even more attractive in many Asian markets where hepatiti s B infection is endemic.

All of these tests for Ultrio, the European marketing introduction, the IND filing in the US and the penetration in the Asian market will represent significant new opportunities for the blood testing business . At the same time we continue to see expansion and increased market penetration of the current (unintelligible) assay.

We noted on the last call that we had been awarded 1/3 of the blood testing business in the US . Since it can take two or more quarters for new centers to come (unintelligible), we will start seeing the impact of these new customers in the second half of this year,

Finally, Chiron is working to support customers as the market continues to work towards individual donor testing, which will provide the highest possible level of sensitivity . We are seeking CE marking and introducing five new instrument upgrades to enhance the automation of the Procleix system . These upgrades will be introduced outside of the US first with filings for five l OK approvals in the US to follow .

I'd also like to note another important milestone for blood testing business , which is that earlier this month the European Commission agreed to a settlement jointly negotiated by Chiron and Roche that resolved a complaint

72200822 CHIRON Moderator : Martin Forres t 07-23-03/4 :45 pm CT Confirmation 41582120 Page 1 2

about competitive practices brought by five European blood banking organizations against our two companies . We believe that the resolution is a fair one for all of the parties involved . The agreement recognizes the value o f our IP and preserves our current per donation royalty structure .

We will now be offering licenses to permit home brew testing for blood screening in Europe . We are grateful to the Commission for its hard work i n ensuring this fair and equitable resolution .

Now I would like to turn the call over to David Smith for discussion of Chiron's financial results .

David Smith: Thank you Howard . I'll being with a review of the results for the quarter, which were released today at approximately 1 :00 pm Pacific Daylight Time .

All earnings per share amounts discussed today refer to pro forma diluted pe r share earnings . As we have discussed previously , we present our results on both an as reported GAAP basis and a pro forma or non -GAAP basis.

The adjustments we made this quarter to arrive at pro forma earnings consist of the amortization expense on acquired identifiable intangible assets related to the PathoGenesis acquisition, the Chiron Behring acquisition, the Pulmapharm acquisition and discontinued operations associated with the sale of our vision and diagnostics businesses .

The adjustments made in the second quarter of 2002 consisted of the amortization expense on acquired identifiable intangible assets related to the PathoGenesis acquisition and the Chiron Behring acquisition . The reconciliation between our GAAP and pro forma results can be found on our Web site at Chiron.com.

72200823 CHIRON Moderator: Martin Forres t 07-23-0314 :45 pm CT Confirmation 41582120 Page 1 3

For the second quarter of 2003, Chiron reported pro forma income fro m continuing operations of $67 million or 35 cents per share . This result was approximately 21% higher than the earnings per share of 29 cents reported i n Q2, 2002 .

Total revenues for the second quarter of 2003 increased 17% to $350 million from $299 million for the same pe riod in 2002 . Product sales increased 16% to $246 million from $211 million. Increases in sales were seen primarily in TOBI, Procleix, Menjugate and pediatric vaccines .

Royalty and other license fees increased 47% to $67 million driven by increased Betaferon and HCV and HIV product royalties and license fees from our intellectual property portfolio.

Chiron has substantial global operations which generate approximately half of our revenues outside of the United States . This fact, when coupled with the depreciation of the dollar over the past year as led to an FX effect on revenues of approximately 8 percentage points.

Gross margins decreased to 60% from 64% the prior year. The principle reason for gross margin decline was the FX impact on the vaccines manufacturing whose costs are largely euro based .

Research and development expenses for the second quarter of 2003 totaled $90 million, up 8% from the second quarter of 2002 and in line with our expectations. The increase principally reflects several programs in the meningococcal franchise that are in Phase II and Phase III . We are very pleased with the progress of these programs .

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CHIRON Moderator: Martin Forres t 07-23-03/4 :45 pm CT Confirmation 41582120 Page 1 4

SG&A expenses for the second quarter of 2003 totaled $80 million, up 12 % from the second quarter of 2002 . As expected, the increase in SG&A reflects continued investment in our businesses-

Our estimated full year effective tax rate is 25%, down approximately 2 % from last year. The tax rate decrease as we explained last quarter, reflects th e implementation of several tax planning strategies .

Now I'd like to move on to a review of the business unit financial results, starting with our biopharmaceuticals unit . Total biopharmaceuticals, product revenues including Betaferon royalties were $124 million in the second quarter of 2003, up from $115 million over the year ago quarter, a 9% increase. We saw increases in TOBI, Proleukin and Betaseron including Betaferon royalties.

Our second quarter TOBI sales were $39 million, up 16% from the year ago period. This was due primarily to greater product penetration in Europe, increased patient demand and compliance in the United States and price increases in both the United States and Europe, which are only partially offse t by wholesaler ordering patterns .

Second quarter sales of Proleukin were $29 million, up 7% from the year ago period, primarily due to price increases.

Second quarter Betaseron revenues were $48 million versus $45 million las t year. These revenues as usual include the royalties earned from the sale of Betaferon by Schering in Europe . This is an increase of 6% primarily due to price increases and higher Betaferon royalties partially offset by wholesaler ordering patterns resulting from last year's launch of the room temperature stable formulation .

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CHIRON Moderator : Martin Forrest 07-23-0314 :45 pm CT Confirmation # 1582120 Pagc 1 5

I'd now like to take a minute to talk about the financial transitions that Betaferon will undergo principally next year . As we previously disclosed in our 34F filing, hereto revenues and Betaferon royalties will decline by 5 percentage points pursuant to our agreement with Schering . This will result in a reduction on two line items -- product sales and the royalties and license - line.

Net effect is a reduction to Chiron's revenues and contributions in 2004 . There are however mitigating circumstances and considerations that will somewha t offset this contractual change .

We have been aggressively pursuing plans to expand production capacity for Betaseron to meet growing US demand and our contractual obligations for Europe. When this capacity becomes operational, we will reduce the need to source product from (Beringer Engleheim) for European and rest of world market.

In addition, plans are in place to launch a new Betaseron product presentation, a prefilled (unintelligible) syringe in the future . This product is a convenient switch, new product presentation that will include a self contained kit of product, syringe and ancillaries for one dose of Betaseron. The combination of the prefilled (unintelligible) syringe and the market's first room temperature stable product will make Betaseron one of the most convenient MS products and will solidify our commercial position in the market .

Despite the financial impact in 2004, the transition to Chiron manufactured product and a launch of product upgrades with ease of use features are important investments in the Betaseron franchise . Betaseron has performed well in the competitive MS marketplace and we expect that it will continue to

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do so. Gross margins in the biopharmaceutical segment decreased to 71 % from last year's gross margins of 72%.

Turning now to vaccines, in the second quarter of 2003, total product sales fo r vaccines were $86 million versus $73 million in the same period last year . We saw increases primarily in pediatrics and the Menjugate vaccine .

Sales of pediatric, flu and other vaccines were $49 million in the secon d quarter of 2003, an increase of 23% from the year ago period primarily due t o the tender sales of our pediatric vaccine .

Our second quarter Menjugate sales were $14 million, up 39% from the year ago period. This increase was primarily driven by winning an Australia n tender in the state of New South Wales .

Sales of our travel vaccines, which comprise TBE and rabies were $23 million in the second quarter, relatively flat from the year ago period . The first half of the year is the traditional season for TBE, although TBE has seen a seasonal increase of 17% year-over-year.

Gross profit for vaccines decreased to 56% from last year' s gross margins of 61%. Gross margins for the second quarter of 2003 was negatively impacte d by foreign exchange rates.

Moving to our third business, blood testing, blood testing total revenues including product sales, Chiron's share of the earnings of our unconsolidated joint business with Ortho, collaborative agreement revenues and royalty and license fees increased to $106 million in the second quarter of 2003 from $77 million in the year ago period, a 37% increase .

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This increase was primarily due to three factors -- Procleix commercial pricing and market share gains in the United States , higher royalty revenue for the use of HCV and HIV intellectual prope rty relating to NAT testing and new license fees for NAT use for plasma fractionation. Product revenues recognized in the second quarter of 2003 include a full quarter of commercial , pricing in the United States for Procleix and continued penetration in the several markets abroad .

Now in summary, let me take a moment to highlight our view of the several notable announcements that occurred during the qua rter and the financial results for Q2. We acquired PowderJect, making us the second largest manufacturer of flu vaccines in the world . This transaction will provide us with a strong platform to launch new products in the United States market as well as participation in an attractive flu market in the United States .

The European Commission inquiry was fairly resolved with an agreement tha t preserves our NAT per donation royalty structure and that recognizes th e value of our intellectual property .

We introduced the Procleix West Nile Virus assay on a cost recovery basi s under an IND in the United States. We licensed our HIV and HCV technology to Baxter for use in the plasma fractionator market in Europe, our first such license in this new market segment.

Financial results were consistent with our expectations this quarter as I had previously mentioned . While foreign exchanges rates did affect our top line, we still experienced underlying growth . Chiron has substantial operations over seas and as such is naturally hedged as it relates to FX . Our earnings per share was affected by FX by approximately 1 cent .

72200828 CHIRON Moderator: Ma rtin Forrest 07-23-0314 :45 pm CT Confirmation #1582120 Page 1 8

Operating expenses were in line with our expectations and reflect our ongoing commitment to grow the business over the long-term . We are pleased with ou r growth in operating income over the prior year and over Q 1 of this year .

Operating margins were strong with contributions from all of our businesses .

Earnings per share grew 21% over the prior year, reflecting the opportunities inherent in a growing global and diversified business, validating our business model yet again this quarter .

Taking all of this into consideration, Chiron executed several significan t activities during the quarter while again delivering solid financial results .

From my recent conversations with many of you, I know that you are interested in an update on longer-term guidance . As Howard stated in his remarks, we believe that PowderJect will make a contribution to Chiron in 2003 . However this contribution will be largely offset by integration related activity. We are comfortable that we will be up towards the upper end of our previous guidance for pro forma earnings per share of $1 .40 to $1 .50 in 2003. We've also indicated that we expect PowderJect to be accretive in 2004 .

As we usually do, we'll have an update on 2004 and other relevant activitie s during our Q3 earnings call . At this point I will wrap up and turn the call bac k over to Martin for Q&A .

Martin Forrest: Thanks David . Before moving on to Q&A, I would just like to address a statement that was made earlier in opening remarks . It was said that we had been awarded a third of the US tender for NAT. That is to be corrected to a third of the UK tender for NAT blood testing . We hope to come back and talk about having 80 % market share for the UK in the future . What we have in the US is 80% market share.

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CHIRON Moderator : Martin Forrest 07-23-03/4 :45 pm CT Confirmation # 1582120 Page 1 9

Now we'll open the call up for questions . We are joined for the Q&A session by Jack Goldstein, president of Chiron Blood testing, Carl Pelzel, Senior Vice President of BioPharma commercial operations and Bill Green, Chiron' s general counsel .

Also on the phone we have with us (Bruce Sharsmit), Vice President of Clinical Development, (Kevin Bryant), Vice President of Operations for our vaccines business . And as always the investor relations team will be availabl e after the call to answer questions .

So operator we'll open the line for questions now .

Operator: At this time I would like to remind everyone if you would like to ask a question, please press star then the number I on your telephone keypad . We'll pause forjust a moment to compile the Q&A roster.

Your first question comes from Jennifer Chao with RBC Capital Market .

Jennifer Chao : Great, thanks and congratulations on a nice quarter. Firstly, with respect to the US flu vaccines market, what percentage of Wyeth's roughly 79 million Flu- Shield doses sold in 2002 do you believe Flu Viron could capture in the 2003 flu season? And could you give us an update on seeking a label expansion for Flu Viron for the under four age group .

Martin Forrest : (Kevin) do you want to take a stab at that?

(Kevin Bryant) : Yes, clearly the withdrawal of the Wyeth products has opened the market up . We have expanded our production and we anticipate that we will take a significant part of the space that's been left with Wyeth .

72200830 CHIRON Moderator : Martin Forrest 07-23-03/4 :45 pm CT Confirmation # 1582120 Page 2 0

With regards to the pediatric indication, this is something that we are currently evaluating. As you understand we are in the very early days of integration and so this is a project which our R&D people are looking at to expand as rapidly as we can.

Jennifer Chao : Okay and then moving on to the blood testing space , on last quarter's cal l there were a number of new blood testing contracts that were cited as being signed during the first quarter but were not reflected due to the 90 to 120 day lag time for new customers to come in . Can you give us a sense of what percent of these contracts were actually accounted for here in the second quarter and how many new contracts were signed in the second quarter ?

Martin Forrest : I'll let Jack Goldstein handle that one .

Jack Goldstein: Okay thanks Jennifer. First of all as you can see from the number the Proclei x sales were up 10% quarter-to-quarter from the first quarter . And they were up 59% from the second quarter'02 . So we saw significant increases in ou r revenues.

The second quarter really saw about half of the customers that we signed up in the US that really came on board during the second quarter and started to - where we started to see revenues . Most of them and all' the rest of them came on board with West Nile Virus and started July 1, including West Nile Virus as well as Procleix HIV I and II . So we'll see the results of those customers coming on board for the third quarter.

Jennifer Chao : And Jack, did you see a significant number of new contracts in the secon d quarter that would be then reflected in the third quarter?

72200831 CHIRON Moderator: Martin Forrest 07-23-03/4 :45 pm CT Confirmation 41582120 Page 2 1

Jack Goldstein : Most of the second quarter was taken up Jennifer by contracting with current customers and some new customers for West Nile Virus.

Jennifer Chao : Okay great. Thanks, nice quarter .

Operator: Your next question comes from Dennis Harp with Deutsche Bank .

Dennis Harp: Great quarter and thanks for taking questions. First on the PowderJect acquisition, how accretive could it be in 2004? And then what has to happen in 2003 for it to be better than neutral ?

David Smith : Let me give a shot at that first Dennis and then kick it over to Howard if he wants to make some comments . We've said in the past that we believe it wil l be accretive in 2004, that I think we stated that we assume it's somewher e around 10% accretive . So I don't think we have a different perspective on that .

And as we said 2003 we expect it to make a contribution with some - largely offset by integration costs . So that's really about all I have that I can add to that particular point . I'm not sure Howard if you have anything you want to add there?

Howard Pien : I would just say to Dennis that we appreciate your subtle ways of pinning us down on guidance for 2004 before we are ready, but we are just not ready . We need to firm up much, much more on our integration plans .

As you have to remember that this whole acquisition from announcement to closure is done in a matter of less than two months . And this is in contrast to some of the major mergers that you hear about that you see where they take a year to do the planning and then get regulatory clearance and do the

72200832 CHiRON Moderator: Martin Forres t 07-23 .03/4 :45 pm CT Confirmation # 1552120 Page 22

consummation . So we just don't have enough time to get into the nitty grittys of the business that we bought .

And as we said in our remarks earlier, our first priority now that we have had our hands on the PowderJect operation for three days is to just to make sure that we can satisfy the supply and the preexisting commitments that we have with our customers . So that's our number one priority .

So by the time we are done with the - all of the integration plan, we will be in a far, far better position to articulate the element of the analysis to give you a far crisper answer . So we beg your indulgence to give us that one mor e quarter.

Dennis Harp: Okay, fair enough . If I can ask one follow up question on TOBI, when doe s the orphan drug designation expire and when does the patent that you have o n TOBI under which you brought suit against the generic manufacturer, when does that patent expire .

Martin Forrest: I'll let. . . I'm sorry . Go ahead .

Carl Pelzel: I'm sorry. Hey Dennis, this is Carl Pelzel. Yes the orphan drug patent on TOBI expires in December 2004 and goes significantly beyond that in both Europe and the United States, 2013 .

Dennis Harp: Okay, thank you.

Operator: Your next question comes from Eric Schmidt with SG Cowen.

72200833 CHIRON Moderator: Martin Forres t 07-23-03/4 :45 pm CT Confirmation # 1582120 Page 2 3

Eric Schmidt : Congratulations from me as well . I'm not sure I understood the answer to Dennis' last question . Is orphan drug in the US what expires in December of '04?

Carl Pelzel : Yes that's correct.

Eric Schmidt : And can you talk about how many generic ANDAs they were and who filed them?

Carl Pelzel : Yes our understanding is that there was one filed by Roxanne and the FDA gave a tentative approval to that, so that's pending.

Eric Schmidt : And that was the only ANDA filed?

Carl Pelzel: As far as we know.

Eric Schmidt : And let's see. Maybe Howard if you could just speak broadly given this is your first conference call at Chiron too, your vision of the company going forward. Are you a fan of the diversified business model as it stands lookin g forward? Are we going to see more acquisitions in vaccine or diagnostic space than in the therapeutic space or is therapeutics an area that you want to buil d up and focus more on?

Howard Pien : I would say that my preliminary impressions after some 90 days is extraordinarily positive . I think this company has - is made up of colleagues who have a great deal of drive and energy and enthusiasm .

I am a huge fan of the business model where we do have diversified businesses, each one of them containing drivers for growth . I think that this also - this business model also affords a reliable consistent financial growth .

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CHIRON Moderator: Martin Forres t 07-23-03/4 :45 pm CT Confirmation #1582120 Page 2 4

And that financial growth gives us the financial strength then to invest in the range of opportunities, some of which may very well be from our internal research and development effort, some of which would be expansion of geographic market, some of which may very well be acquisitions .

I think you have seen a history of this company doing acquisitions in a sound, wise as possible way. And to the extent that being sound and being profitable and being wise are good things you should not expect any change .

Eric Schmidt: Great, thanks for taking my questions .

Operator: Your next question comes from (Thomas Way) with US Bancorp Piper Jaffray.

(Thomas Way): Thanks. I had a couple of questions on PowderJect. Could you give us an update on the number of flu doses that PowderJect is scheduled to put ou t there on the US market for the 2003 2004 flu season ?

David Smith: Thomas actually we're not disclosing what that is for competitive reasons .

(Thomas Way): Okay and could you talk a little bit about what some of the potential integration costs would be for PowderJect? And will those be accounted fo r on the P&L in a separate merger related cost line ?

David Smith: The answer to the second part of that question is no . They'll be on each one of the lines as part of the ongoing operations. So they'll be absorbed whereve r they are incurred on the P&L.

Examples of those types of activities can be systems related integrations, s o ERP systems. You have potentially redundancy payments and other types of -

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those are kind of big getter items that you might expect to see related t o integration.

(Thomas Way) : Okay and then one more question on Menjugate. The Australian tender, is there anything left in that particular contract for subsequent quarters ?

David Smith: There is actually on a backlog basis about $32 million for Menjugate in total. There is some portion of that which is related to Australia .

(Thomas Way): Thanks .

Operator: Your next question comes from Alex Hittle with AG Edwards .

Alex Hittle: Thanks for taking my question . I'm curious if you could put some numbers or sort of size to the plasma market opportunities that you highlighted with the license from Baxter and also the European settlement on the home brew test . How many tests roughly does that amount to in Europe? And are you going to enjoy a royalty that is sort of comparable to what you are getting when these NAT tests are done outside of your firm ?

Martin Forrest : Jack?

Jack Goldstein: Okay let me see if I can answer that Alex. First of all, talking about plasma, there are about (15) million units of plasma that are collected in the US and another 3 or 4 million that are collected in Europe . A lot of the US plasma is transferred to Europe for production by various companies like Baxter and (Adventix), et cetera and are tested there instead of here in the US .

72200836 CHIRON' Moderator: Martin Forres t 07-23-03/4 :45 pm CT Confirmation # 1582120 Page 26

Most of the plasma fractionators test many different tests beyond HIV and HCV and HDB. They test (unintelligible) virus and a few others that I can't think of off the top of my head and generally use home brew tests .

So we expect that other plasma fractionators in addition to Baxter will eventually become licensees . And we have some ongoing discussions with additional plasma fractionators at this time in order to bring them in line with the license. So I think you get an idea of the total number of tests and based o n the Baxter settlement some idea of the revenues that might be derived fro m those kinds of agreements .

Your second question related - sorry, did you want to say something Martin?

Martin Forrest : No.

Jack Goldstein: With regard to the EU settlement, we believe there are about 5 million home brew units of blood that are tested in Germany and some of the other European countries . We think that there will be a mixture of certain home brewers in some of these countries taking on licenses . We think some will be utilizing Procleix assays and some will utilize Roche assays . So without any further speculation at least we'll at least derive some revenues from either royalties or sale from approximately 5 million units - additional units over the course of the next two quarters.

Alex Hittle: Okay and if I may ask one unrelated follow up question . Any idea when you might get commercial pricing on the West Nile Virus? What kind of timeframe should we put on that?

Jack Goldstein : We don't really know at this point in time. We believe that we will be under an IND for at least approximately two years . We're working with the FDA as

72200837 I~tW iy ~. _ y~

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well as the blood banking community to really understand what is happening with West Nile virus, the extent of the epidemic this year and whether or not it's going to be tested after that two year period.

Alex Hittle : Okay, very nice quarter . Thanks.

Operator: Your next question comes from Meirav Chovav with UBS.

Meirav Chovav : HI thank you. A little bit more detail on the PowderJect acquisition in terms o f the physical facilities . Could you give us a little more details on that as well a s on the potential cost synergies that you can see?

And another topic also related to Flu Viron, where are you in terms-of th e drug delivery version?

Howard Pien : Let me take that first part Meirav . The physical facility. is principally in (unintelligible), which is outside of Liverpool England. It is one of two manufacturing facilities that are certified by the FDA to make products for th e US market. And that is one of the most important pieces ofthe assets that we acquired in PowderJect.

And one of our highest priorities in the integration effort is to make sure that there is no disturbance to the capability of that manufacturing capability, its workforce, its standards, its manufacturing capabilities to be able to satisfy the US market. And that's exactly what we are doing now . And all of the signs and indications are extremely positive .

Over time it is possible that we would be able to actually improve both the manufacturing capability in terms of yield and in terms of perhaps investin g further at the - on the total capacity to increase both output and throughput .

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The second question I will probably turn over to (Kevin).

(Kevin Bryant) : At the moment we are very, very early in the integration . We are currently looking at exactly where they stand with the delivery system . I know already even though we are only three or four days into it, there has been a major meeting over the last two days reviewing all of the research and development of PowderJect, but I'm not personally aware of the outcome of that meeting .

Martin Forrest: Its Martin here . I'm sorry, Meirav . You asked about some of the synergies . I think it's important to just highlight that the transaction was done for one reason was the complementary nature of the two businesses in terms o f geography -- PowderJect strong in Scandinavia, strong in the UK, the US, places where we are not strong .

The point here is that there are not a lot of synergies to be had and we had talked about that, And secondly, (Kevin) also did mention the review and the work that's under way to take a look at the pipeline and clinical developmen t programs.

Meirav Chovav: I'm talking more about in terms of the general and administrative .

Howard Pien : Again Meirav I think it's very early in terms of what we are doing for integration. As we said we did this because of what it does for us strategically, what it does in terms of flu in the US market. We didn't do this deal on a cost synergy basis. So it's awfully early for us to have a position on what changes we might be seeing there.

Meirav Chovav: Sure, and where are you in terms of establishing your own distribution in the US for the flu vaccine?

72200839 :11L .ILL L.~ ~~rr~u

CHIRON Moderator: Martin Forrest 07-23-03/4 :45 pm CT Confirmation #1582120 Page 29

Howard Pien: Well this flu season Meirav is spoken for in the contracts with distributors and (unintelligible) are signed and in place. And what we need to do is to contemplate what kind of organizational structure that we establish for on the commercial side in the US . And we are going to do that as soon as we get through with the supply of this flu season.

When we have a commercial organization we are in a far, far better position to discuss with you just what exactly our plans are what the financial gains are going to be. But we - it is a little premature for us to answer that question because it would be purely speculative .

Meirav Chovav: One last question has to do with pricing of the flu vaccine for this season . We are hearing some vibes that pricing had significantly firmed up relative t o previous years.

Howard Pier : We've heard the same thing. And I think what we are able to say now is that given the contracts with the distribution channel, or ones that we have signed or that PowderJect has signed and we have inherited, we are not likely to see very much of the what you call firming up upside this year. But it gives us tremendous confidence that which we can make we can sell .

Martin Forrest : Operator I think we're at our hour here and we'll take two more question s since we are going a little long here .

Operator: Okay, your next question comes from Caroline Copithorne with Morga n Stanley.

Caroline Copithorne : Thank you . I had a couple clarification points. One on the gross margi n decline, I think it was - someone attributed that to foreign exchange impact on

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manufacturing costs of vaccines in Europe . But I thought that would hav e been at least more than offset by revenue FX impact so I'm just trying to - understand that dynamic.

David Smith: Well when you talk - we did have about an 8 point affect on our revenues overall . We did however - our vaccines manufacturing is almost all offshore . So from that perspective, the cost of goods sold was substantially affected by that particular - by that particular action and activity .

So on an overall basis when you take into consideration the overall affect o n the P&L being - given the magnitude of our operations offshore, they do offset almost nearly 100% to the revenues that we've seen. One cent is the net effect to the positive that we have.

Caroline Copithorne : But the gross margin affect is greater?

David Smith: But the gross margin affect is - the gross margin effect would be then greate r yes.

Caroline Copithorne : And then in the - the pointing to the high end of the EPS expectations, is that related o the PowderJect - potential PowderJect impact on '03 or is that from the ongoing Chiron businesses ?

David Smith: It really is a reflection of our perspective on what we think PowderJect may be able to provide for us and at the same time a reflection on Chiron's operations as a whole.

Caroline Copithorne : Okay and then just lastly, the - in terms of the - some of the expectations you laid out in your recent presentations for the flu market, you mentioned that you don't expect upside to pricing this year . What are the basic price

72200841 CHIRON "Moderator: Martin Forrest 07-23-0314 :45 pm CT Confirmation # 1582120 Page 3 1

assumptions that are built into those forecasts that I think reflect - I think almost a 50% increase by '07 or something like that ?

David Smith : We actually haven't been specific about those pricing assumptions again for competitive reasons.

Caroline Copithorne : Okay, thank you .

Martin Forrest : Okay (Amy) this will be our last question .

Operator: Okay, your final question comes from Elise Wang.

Elise Wang: Thanks for taking my question . You mentioned that there were some price increases for several products -- TOBI, Proleukin, Betaseron . Could you tell us what those price increases were and when they were implemented? And then if you could also put that in the context of some of the comments you made about the offset of those price increases by some wholesaler inventory stocking?

David Smith: Early in Q1, they were if I recall correctly 5% for both TOBI and Proleukin and I believe about 6% for Betaseron . So that's - that gives you a relative magnitude there.

If you look at particularly Betaeron on a year-over-year basis -- Beta is down a little bit -- you have a price increase offset . But what you see is the fact that there was a substantial order or set of orders form the wholesalers for roo m temperature formulation products in the second quarter of last year so you really see a skew on that.

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If you look at Proleukin, it's a price increase basically on a year-over-year basis. And TOBI, we continue to see it as the gold standard . It continues to perform well. Demand is good in Europe . Demand is going well in the United States. You have that with the - complement that with the price increase you are seeing, you know, that minimized impact on wholesaler effect.

I think what you can see is that volatility that we've had in the past based on expectation or prices from the wholesaler has been diminished substantially given the efforts that our biopharmaceuticals group has gone to tamp dow n that type of volatility that can occur .

Elise Wang : Okay thank you. And then I just wanted to run something by you in terms o f what we can expect to see when we model out the way the flu vaccin e business may in fact appear on your income statement .

Given the seasonality of the business as I understand it typically -- and do make any comments that you think are appropriate as to what is the correct way of looking at this -- but with the flu vaccine does that - if I recall most of the time we will see a pretty big influx and (unintelligible) of revenues in the third quarter. And then that's followed with some additional revenues clearly in the fourth quarter. But the third is the quarter typically where we would expect to see the bigger piece of the revenues from the flu vaccine and that simply I guess that certainly has been true for you all in Europe . I'm assuming that its the same in the US. IS that the way we should be modeling this business if we were to take into account the PowderJect business ?

David Smith: The flu business can be a (unintelligible) move between Q3 and Q4. For our own business we've seen periods and you guys have seen it as well where w e receive a decree in a country on September 30 and the next year we might ge t it on October 1 . So you can see it shift between the quarters.

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From a Flu Viron perspective there are FDA release requirements and if everything were released prior to the end of the third quarter then that would be the quarter you might see that. But we can't tell whether that - those release will happen in Q3 or in Q4 .

Howard Pien : Which is one of the reasons we don't give quarterly guidance.

David Smith: Howard is learning.

Elise Wang: At this point though are the releases being reviewed by the FDA at this stage? And can you at least comment on what the typical turnaround time is at the FDA?

David Smith: I really Elise I really can't. This is kind of new for all of us in terms of (unintelligible) release timing. So I really can't give you a whole lot of emphasis on one area or another ,

Elise Wang: Okay thank you very much .

Howard Pien: Thank you Elise. I'm just going to make a closing comment. This is my first quarter at Chiron and to reiterate my answers earlier to Eric's point, I am hugely impressed with the energy and drive of my Chiron colleagues with the progress we are continuing to make towards our goal.

In this quarter I have visited numerous Chiron sites and met several of our investors and analysts. And most of my encounters have confirmed my conviction about extraordinary prospects of Chiron . I believe that Chiron has numerous attractive opportunities to build upon our very, very impressive scientific heritage.

72200844 EXHIBIT H Chiron News Page I of 1 2

Chiron Reports 2003 Third-Quarter Pro-Forma Income of 60 Cents Per Share 47 Percent Increase in Revenues Over 2002 Driven by New U .S. Flu Sale s

EMERYVILLE, Calif., Oct. 29 /PRNewswire-FirstCall/ - Chiron Corporation (Nasdaq : CHIR) today reported pro-forma income from continuing operations of $117 million, or $0 .60 per share, for the third quarter of 2003, compared to $88 million, or $0.46 per share, for the third quarter of 2002 . Foreign exchange rates, on a pro-forma basis, resulted in a $0 .02 increase in earnings per share . On a GAAP basis, Chiron's loss from continuing operations was $20 million, or $0 .11 per share, for the third quarter of 2003, compared to income from continuing operations of $83 million, or $0 .43 per share, for the third quarter of 2002. The loss was due to the write-off of in-process research and development in the PowderJect acquisition .

Chiron management uses pro-forma financial statements to gain an understanding of the company 's operating performance on a comparative basis . Pro-forma results exclude special items relating to certain acquisitions and revenues, which may not be relevant to gaining an understanding of the company's trends or potentia l future performance . Please refer to the attached tables at the end of this document for more detail on these items and a reconciliation to GAAP financial statements. All references to per-share amounts are per diluted share . ,

"Chiron continues to deliver the solid financial results that are a hallmark of the company," said Howard Pien, Chiron's president and CEO. "Looking forward, we expect 2004 to be a year of strong growth in vaccines and blood testing, enabling investment that will further enhance shareholder value and increase our impact on human health worldwide .

"We reaffirm our mid-year 2003 pro-forma EPS guidance to be at the upper end of the $1 .40-$1 .50 range . Our 2004 guidance is consistent with our 20 percent pro-forma EPS growth goal . It is a testament to the strength of the Chiron business model that we can deliver superior earnings and fund worthy investment opportunities across our three business units."

2004 Guidanc e

Chiron expects 2004 pro-forma earnings per share from continuing operations to be between $1 .80 and $1 .90 . In 2004, Chiron expects product sales to be between $1 .5 billion and $1 .6 billion, with revenues between $1 .9 billion and $2 .0 billion . Gross margins are expected to be equivalent or down slightly from 2003, while operating expenses are expected to be up approximately 10 percent over the prior year . The tax rate is expected to be at or slightly higher than the 2003 tax rate .

Overall Revenue s

Total revenues in the third quarter of 2003 were $540 million, an increase of approximately 47 percent from $368 million in the third quarter of 2002 . Foreign exchange rates resulted in a 6 percent increase in revenues . Net product sales increased 59 percent in the third quarter of 2003, to $433 million from $272 million in the third quarter of 2002 . Total third-quarter 2003 revenues for PowderJect Pharmaceuticals, which Chiron acquired during the third quarter of 2003, were $116 million . Excluding PowderJect revenues and foreign exchange effect, all other revenues increased 10 percent in the third quarter of 2003.

Biopharmaceutical s

The BioPharmaceuticals division reported net product sales and Betaferon(R) interferon beta-lb royalties of $126 million in the third quarter of 2003, compared to $115 million in the third quarter of 2002 . The gross profit margin an biopharmaceutical products sold during the third quarter of 2003 was 74 percent, compared to 77 percent in the third quarter of 2002 .

-- Proleukin(R) (aldesleukin) interleukin-2 sales were $30 million in the third quarter of 2003, compared to $32 million in the third quarter of 2002, with the decrease primarily due to wholesaler ordering patterns, offset by price increases . TOBI(R) tobramycin solution for inhalation sales in the third quarter of 2003 were $43 million, compared to $39 million in the third quarter of 2002, with the increase primarily due to greater product penetration in Europe and price increases in both the United States and Europe, which were partially offset by wholesale ordering patterns . Sales of Betaseron(R) interferon beta-lb, marketed in Europe as Betaferon, to Berlex, Inc . (and its parent company Schering AG) for marketing and resale were $29 million in the third quarter of 2003, compared to $28 million in the third quarter of 2002 . The increase was due to price increases and increased patient demand, partially offse t

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by wholesaler ordering patterns . Royalties from Schering AG's European sales of Betaferon were $16 million in the third quarter of 2003, compared to $10 million in the third quarter of 2002 .

vaccine s

Vaccines net product sales in the third quarter of 2003 were $263 million, compared to $125 million in the third quarter of 2002. PowderJect product revenues were $111 million in the third quarter of 2003 . The gross profit margin on vaccines products in the third quarter of 2003 was 58 percent, compared to 60 percent in the third quarter of 2002 .

Sales of flu vaccines were $183 million in the third quarter of 2003, compared to $67 million in the third quarter of 2002 . Sales of Fluvirin(R) vaccine, the flu vaccine that Chiron acquired with PowderJect, were $103 million in the third quarter of 2003, the first quarter in which Chiron recorded Fluvirin revenues . Sales of Menjugate(TM) conjugate vaccine against meningococcal C disease were $11 million in the third quarter of 2003, compared to $6 million in the third quarter of 2002, with the increase primarily due to sales made to Australia, Spain and France . Sales from Chiron's travel vaccines were $11 million in the third quarter of 2003, compared to $16 million in the third quarter of 2002 . Travel vaccines include Encepur(TM) vaccine for tick-borne encephalitis, RabAvert(R) vaccine for rabies, and, newly acquired with PowderJect, Arilvax(TM) vaccine for yellow fever and Dukoral(TM) vaccine for cholera . The decrease is primarily due to the seasonality of tick-borne encephalitis, as the first half of the year is typically the prime season for Encepur . Sales of Chiron's pediatric and other vaccines products were $58 million in the third quarter of 2003, compared to $36 million in the third quarter of 2002, with the increase primarily due to tender sales of pediatric vaccines and increased sales following the Powderiect acquisition .

Blood Testing

Total Blood Testing revenues in the third quarter of 2003 were $109 million, compared to $89 million in the third quarter of 2002. Blood Testing revenues primarily include revenues from the sales of products related to Chiron's Procleix(R) HIV- 1/HCV Assay; revenues related to Chiron's joint business arrangement for immunodiagnostics with Ortho-Clinical Diagnostics, Inc. (Ortho), a Johnson & Johnson company; and royalties paid by F . Hoffmann-La Roche (Roche) related to nucleic acid testing (NAT) blood screening .

- Sales related to the Procleix(R) System were $54 million in the third quarter of 2003, compared to sales of $36 million in the third quarter of 2002 . The increase is primarily due to revenues from th e investigation-only use of the Procleix(R) West Nile Virus Assay in the United States, market share gains in the United states, and continued penetration into several markets abroad . Revenues from Chiron's joint business arrangement with Ortho were $26 million in the third quarter of 2003, compared to $32 million i n the third quarter of 2002, with the decrease primarily due to lower profits from U .S . operations . - Royalties paid by Roche related to NAT blood screening were $19 million in the third quarter of 2003, compared to $13 million in the third quarter of 2002 .

Pipeline and Products Updat e

Since mid-year, Chiron has seen advances in franchises across all three of its business units .

Biopharmaceuticals : Oncolog y

Chiron's oncology franchise has three dimensions : immune-based therapies, monoclonal antibodies and novel cancer agents.

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-- Over the past year, Chiron has been conducting four clinical trials to evaluate the potential of Proleukin(R) (aldesleukin) incerleukin-2 and its second-generation liquid formulation to increase the clinica l benefit of monoclonal antibodies in cancer treatments .

The Phase II study of Proleukin and rituximab in patients with low-grade non-Hodgkin's lymphoma who have failed rituximab therapy continues to enroll patients and should yield sufficient data to allow a decision on next steps by the end of the year . - The Phase II trial of Proleukin and rituximab in patients with high-grade lymphoma who have failed prior chemotherapy and/or rituximab therapy will not continue due to limited efficacy . - The Phase I study of liquid IL-2 with rituximab in patients with advanced non-Hodgkin's lymphoma continues to enroll patients and should yield sufficient data to allow a decision on next steps by the end of the year . The Phase I study of liquid IL-2 and trastuzumab in patients with metastatic breast cancer met the primary endpoint of determining maximum tolerated dose and will no longer enroll patients .

-- Chiron and its collaborator Sirna are seeking a licensee for the further development of ANGIOZYME(TM), a ribozyme that inhibits vascular endothelial growth factor (VEGF) signaling via inhibition of VEGFR-1 expression . A pilot Phase II program studied ANGIOZYME in breast cancer and colorectal cancer .

BioPharmaceuticals : Infectious Disease

Chiron continues to build its portfolio of products to treat and prevent infectious disease . This franchise leverages a significant global commercial infrastructure .

As announced separately today, Chiron plans to initiate a Phase III trial for tifacogin in patients with severe community-acquired pneumonia . This indication would fulfill a substantial unmet medical need . Chiron inlicensed the antibiotic daptomycin for injection from Cubist Pharmaceuticals, Inc ., gaining development and commercialization for the product in multiple countries outside the United States . The FDA recently approved Cubicin for the treatment of complicated skin and skin structure infections caused by Gram-positive bacteria . -- Chiron is further developing TOBI(R) tobramycin solution for inhalation, used by cystic fibrosis patients with chronic pseudomonal lung infection . The company has completed enrollment and dosing for two cohorts of its Phase I trial for the dry-powder formulation and hand-held device for TOBI, which it is developing in collaboration with Nektar Therapeutics . Chiron anticipates results of this phase of the multiyear program in the first half of next year .

BioPharmaceuticals : Betaseron(R) Interferon Beta-l b

Betaseron continues to distinguish itself in the multiple sclerosis (MS) market through its strong clinical resu€ts . Convenience features and new studies will help drive Betaseron growth.

The FDA approved a new pre-filled diluent syringe for Betaseron, making it easier to use for people with MS . The drug's formulation remains unchanged, continuing to provide patients with the proven efficacy of Betaseron . - At the 19th Congress of the European Committee for Treatment and Research in Multiple Sclerosis (ECTRIMS) in Milan, Chiron's partner Schering AG announced the completion of the pilot phase of its BEYOND study, with the first clinical outcomes showing that both the approved Betaferon dose and a new, double-dose of Betaferon were safe and well tolerated in relapsing-remitting MS patients, and no new or unpredictable side effects were reported .

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Vaccine s

Chiron Vaccines development is focused on its meningococcal franchise and flu cell culture technology .

Chiron's newly acquired U .S . flu business is on schedule to deliver Fluvirin(R) flu vaccine to reach millions of patients in the United States . In the development of vaccines for the five primary serogroups that cause meningococcal disease, Chiron anticipates upcoming advances :

The Phase III trial in the United States for Menjugate(TM) conjugate vaccine for meningococcal C disease is on track to complete enrollment this year, and Chiron expects to present data to the FDA in 2004 . Chiron expects to see results from the Phase II trial for a conjugated meningococcal ACYW vaccine in 2004 .

-- In collaboration with St . Louis University, Chiron has initiated its Phase I trial for a hepatitis C virus (HCV) vaccine .

Blood Testing : Procleix(R) System

Chiron expects to expand its leadership in blood testing through new geographies and greater market penetration .

-- Since its June introduction to customers in the United States on a cost-recovery basis under an IND, the Procleix(R) West Nile virus Assay has detected hundreds of confirmed samples of blood infected with West Nile virus, preventing those donations from entering the blood supply .

Recent Business Milestone s

Recent business activities underline the value of Chiron's products and intellectual property and the strength of its leadership.

At the 17th Annual North American Cystic Fibrosis Conference (NACFC) in Anaheim, California, Chiron announced funding for the establishment of the TOBI Foundation, an independent non-profit foundation dedicated to increasing access to TOBI(R) tobramycin solution for inhalation for .uninsured and underinsured people with CF . - Chiron and Children's Hospital and Regional Medical Center of Seattle have settled a patent infringement suit against Roxane Laboratories, a subsidiary of Boehringer-Ingelheim Corporation, regarding Roxane's plans to market a generic equivalent of TOBI . Roxane agreed that it would not seek approval to market the product until the patent expiration in 2014 and dropped its challenge to the patent . The federal Centers for Medicare and Medicaid Services recently implemented a reimbursement change that will increase access to Proleukin(R) (aldesleukin) interleukin-2 therapy for certain patients with metastatic renal cancer and metastatic melanoma . -- Chiron announced that, as of the May 2004 annual meeting of shareholders, president and CEO Howard Pien will become chairman of the board, succeeding current chairman Sean Lance . Mr . Lance intends to retire from active service with Chiron and its board of directors as of the same meeting . - Chiron further strengthened its BioPharmaceuticals senior management team . Following the appointments last quarter of senior vice presidents of BioPharma research and BioPharma commercial operations, Chiron recently filled the role of senior vice president and head of BioPharma development . -- Chiron granted a nonexclusive license to Gilead Sciences for the research, development and commercialization of small molecule therapeutics against certain hepatitis C virus (HCV) drug targets .

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3Q03 Earnings Conference Cal l

Chiron will hold a conference call and webcast on Wednesday , October 29, 2003, at 4:45 p.m. Eastern Standard Time (EST) to review its third-quarter 2003 results of operations and business highlights . In addition, the company may address forward- looking questions concerning business , financial matters and trends affecting the company .

To access either the live webcast or the one-week archive, please log on to http ://www,chiron .com/webc.ast . 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 1-800-374 -0907 (U.S.) or 706-643-3367 (international) . Replay is available approximately two hours after the completion of the call through 11 :59 p .m. EST, Friday, November 7, 2003 . To access the replay, please call 1-800- 642-1687 (U .S.) or 706-645-9291 (international) . The conference ID number is 3325860 .

About Chiro n

Chiron Corporation, headquartered in Emeryville, California, is a global pharmaceutical company that leverages a diverse business model to develop and commercialize high-value products that make a difference in people's lives. The company has a strategic focus on cancer and infectious disease . Chiron applies its advanced understanding of the biology of cancer and infectious disease to develop products from its platforms in proteins, small molecules and vaccines . The company commercializes its products through three business units : BioPharmaceutica.ls, Vaccines and Blood Testing. For more information about Chiron, visit the company's website at www .chiron .com.

This news release contains forward-looking statements, including statements regarding sales growth, product development initiatives, new product indications, new product marketing, acquisitions, and in- and out-licensing activities that involve risks and uncertainties and are subject to change . A full discussion of the company's operations and financial condition, including factors that may affect its business and future prospects, is contained in documents the company has filed with the SEC, including the form 10-Q for the quarter ended June 30, 2003, and the form 10-K for the year ended December 31, 2002, and will be contained in all subsequent periodic filings made with the SEC . These documents identify important factors that could cause the company's actual performance to differ from current expectations, including the outcome of clinical trials, regulatory review and approvals, manufacturing capabilities, intellectual property protections and defenses, stock-price and interest-rate volatility, and marketing effectiveness . In particular, there can be no assurance that Chiron will increase sales of existing products, successfully develop and receive approval to market new products, or achieve market acceptance for such new products . There can be no assurance that Chiron's out-licensing activity will generate significant revenue, nor that its in- licensing activities will fully protect it from claims of infringement by third parties . In addition, the company may engage in business opportunities, the successful completion of which are subject to certain risks, including shareholder and regulatory approvals and the integration of operations .

Consistent with SEC Regulation FD, we do not undertake an obligation to update the forward-looking information we are giving today .

NOTE : Arilvax, Dukorai, Encepur, Fluvirin, Menjugate , Procleix, Proleukin, RabAvert and TOBI are trademarks of Chiron Corporation . Betaseron and Betaferon are trademarks of Schering AG .

CHIRON CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited ) (In thousands, except per share data)

Three Months Ende d September 30 , 200 3 Pro Forma Pro Forma Adjusted (1) Adjustments Actua l

Revenues : Product sales, net $432,674 $-- $432,67 4 Revenues from joint busines s arrangement 26,058 -- 26,05 8 Collaborative agreement revenues 7,816 -- 7,81 6 Royalty and license fee revenues 66,237 -- 66,23 7 Other revenues 7,688 -- 7,68 8

Total revenues 540,473 -- 540,47 3

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Operating expenses : Cost of sales 174,380 -- 174,38 0 Research and development 97,519 -- 97,51 9 Selling, general and administrative 104,736 -- 104,73 6 Write-off of purchased in-proces s research and development -- (122,700) 122,70 0 Amortization expense -- (19,821) 19,82 1 Restructuring and reorganizatio n charges 1,082 -- 1,08 2 Other operating expenses 4,779 -- 4,77 9

Total operating expenses 382,496 (142,521) 525,01 7

Income from operations 157,977 142,521 15,45 6

Interest expense (6,222) -- (6,222 ) Interest and other income, net 5,239 -- 5,23 9 Minority interest (443) -- (443 )

Income from continuing operation s before income taxes 156,551 142,521 14,03 0 Provision for income taxes 39,138 4,955 34,18 3

Income (loss) from continuin g operations 117,413 137,566 (20,153 )

Gain (loss) from discontinue d operations 1,174 -- 1,17 4

Net income (loss) $118,587 $137,566 $(18,979 )

Basic earnings (loss) per share : Income (loss) from continuing operations $0 .63 $(0 .11 ) Net Income (loss) $0 .64 $(0 .10 )

Diluted earnings (loss) per share : Income (loss) from continuing operations $0 .60 $(0 .11 ) Net Income (loss) $0 .61 $(0 .10 )

Shares used in calculating basi c earnings (loss) per share 186,685 186,685

Shares used in calculating diluted earnings (loss) per share 200,463 186,68 5

Three Months Ende d September 30 , 2002 Pro Forma Pro Form a Adjusted (2) Adjustments Actual (3 )

Revenues ; Product sales, net $272,190 $-- $272,19 0 Revenues from joint busines s arrangement 32,356 -- 32,35 6 Collaborative agreement revenues 4,977 -- 4,97 7 Royalty and license fee revenues 48,047 -- 48,04 7 Other revenues 10,911 -- 10,91 1

Total revenues 368,481 -- 368,48 1

Operating expenses :

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Cost of sales 97,432 -- 97,43 2 Research and development 81,635 -- 81,63 5 Selling, general and administrative 68,159 -- 68,15 9 Write-off of purchased in-proces s research and development -- - - Amortization expense -- (7,504) 7,50 4 Restructuring and reorganizatio n charges ------Other operating expenses 5,694 -- 5,69 4

Total operating expenses 252,920 (7,504) 260,42 4

Income from operations 115,561 7,504 108,05 7

Interest expense (3,210) -- (3,210 ) Interest and other income, net 8,696 -- 8,69 6 Minority interest (477) -- (477 )

Income from continuing operation s before income taxes 120,570 7,504 113,06 6 Provision for income taxes 32,554 2,024 30,53 0

Income (loss) from continuin g operations 88,016 5,480 82,53 6

Gain (loss) from discontinue d operations (320) -- (320 )

Net income (loss) $87,696 $5,480 $82,23 6

Basic earnings (loss) per share : Income (loss) from continuin g operations $0 .47 $0 .4 4 Net Income (loss) $0 .47 $0 .4 4

Diluted earnings (loss) per share : Income (loss) from continuing operations $0 .46 $0 .43 Net Income (loss) $0 .46 $0 .4 3

Shares used in calculating basi c earnings per share 188,493 188,493

Shares used in calculating diluted earnings per share 196,547 196,547

(1) Pro Forma Adjusted amounts exclude the amortization expense on acquired intangible assets related to the acquisitions of PathoGenesis, Chiron Behring, Pulmopharm and PowderJect Pharmaceuticals and (b) the write-off of purchased in-process research and development related to the PowderJect Pharmaceuticals acquisition . (2) Pro Forma Adjusted amounts exclude the amortization expense on acquired intangible assets related to the acquisitions of PathoGenesis, Chiron Behring and Pulmopharm . (3) Actual results reflect increased cost of sales of $1 .9 million (a reduction of $1 .4 million in net income) compared to Chiron's earnings press release dated October 23, 2002, related to the results for the three months ended September 30, 2002 . There was a corresponding decrease in inventories of $1 .9 million a t September 30, 2002 .

CHIRON CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

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(Unaudited) (In thousands, except per share data)

Nine Months Ended September 30, 2003 Pro Forma Pro Forma Adjusted (4) Adjustments Actua l

Revenues : Product sales, ne t $897,222 $-- $897,22 2 Revenues from joint business arrangemen t 79,985 -- 79,98 5 Collaborative agreement revenues 15,554 -- 15,55 4 Royalty and license fee revenues 186,537 -- 186,53 7 Other revenue s 18,069 (14,413) 32,48 2

Total revenues 1,197,367 (14,413) 1,211,78 0

Operating expenses : Cost of sales 357,389 -- 357,38 9 Research and development 269,564 -- 269,56 4 Selling, general and administrative 257,485 -- 257,485 write-off of purchased in-process research and developmen t - (122,700) 122,700 Amortization expense - (35,135) 35,13 5 Restructuring and reorganization charge s 1,757 -- 1,75 7 Other operating expenses 7,573 -- 7,57 3

Total operating expenses 893,768 (157,835) 1,051,60 3

Income from operations 303,599 143,422 160,17 7

Interest expens e (12,523) -- (12,523 ) Interest and other income, net 31,170 -- 31,17 0 Minority interes t (1,424) -- (1,424 )

Income from continuing operations before income taxe s 320,822 143,422 177,40 0 Provision for income taxes 80,206 5,181 75,02 5

Income from continuing operations 240,616 138,241 102,37 5

Gain (loss) from discontinued operation s 3,138 -- 3,13 8

Net income $243,754 $138,241 $105,51 3

Basic earnings per share : Income from continuing operations $1 .29 $0 .5 5 Net income $1 .31 $0 .5 7

Diluted earnings per share : Income from continuing operations $1 .25 $0 .5 4 Net incom e $1 .27 $0 .5 5

Shares used in calculating basic earnings per shar e 186,658 186,65 8

Shares used in calculating diluted earnings per share 196,935 190,48 8

Nine Months Ended

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September 30, 200 2 Pro Forma Pro Form a Adjusted (5) Adjustments Actual (6 )

Revenues : Product sales , net $657,067 $-- $657,06 7 Revenues from joint busines s arrangement 78,548 -- 78,54 8 Collaborative agreement revenues 17,786 -- 17,78 6 Royalty and license fee revenues 138,419 -- 138,41 9 Other revenues 28,136 -- 28,13 6

Total revenues 919,956 -- 919,95 6

Operating expenses : Cost of sales 239,823 -- 239,82 3 Research and development 243,938 -- 243,93 8 Selling, general and administrative 202,022 -- 202,02 2 Write-off of purchased in-proces s research and development -- ( 54,781) 54,78 1 Amortization expense -- ( 22,328 ) 22,32 8 Restructuring and reorganizatio n charges ------Other operating expenses 11,176 11,17 6

Total operating expenses 696,959 (77,109) 774,06 8

Income from operations 222,997 77, 109 145,88 8

Interest expense ( 9,498 ) -- ( 9,498 ) Interest and other income, net 41,456 -- 41,45 6 Minority i nterest ( 1,360 ) -- (1,360 )

Income from continuing operation s before income taxes 253,595 77,109 176,48 6 Provision for income taxes 68,471 6,028 62,44 3

Income from continuing operations 185,124 71, 081 114,04 3

Gain ( loss) from discontinue d operations (320) -- (320 )

Net income $ 184,804 $71,081 $113,72 3

Basic earnings per share : Income from continuing operations $ 0 .98 $0 .6 0 Net income $ 0 .98 $0 .6 0

Diluted earnings per share : Income from continuing operations $ 0 .96 $0 .5 9 Net income $0 .96 $0 .5 9

Shares used in calculating basi c earnings per share 189,175 189,17 5

Shares used in calculating dilute d earnings per share 192,565 192,56 5

(4) Pro Forma Adjusted amounts exclude : (a) amortization expense on acquired intangible assets related to the acquisitions of PathoGenesis, Chiron Behring, Puimopharm and PowderJect Pharmaceuticals, (b) the Biogen and Serono settlements in connection with the McCormick patents owned by Schering's U .S . subsidiary,

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Berlex Labratories, and (c) the write-off of purchased in-process research and development related to the PowderJect Pharmaceuticals acquisition . (5) Pro Forma Adjusted amounts exclude : (a) write-off of purchased in- process research and development related to the Matrix acquisition and (b) amortization expense on acquired identifiable intangible assets related to the acquisitions of PathoGenesis, Chiron Behring and Pulmopharm . (6) Actual results reflect increased cost of sales of $1 .9 million (a reduction of $1 .4 million in net income) compared to Chiron's earnings press release dated October 23, 2002, related to the results for nine months ended September 30, 2002 . There was a corresponding decrease in inventories of $1 .9 million at September 30, 2002 .

Note : Due to rounding, quarterly earnings per share amounts may not sum fully to yearly earnings per share amounts .

CHIRON CORPORATION CONDENSED CONSOLIDATED BALANCE SHEET S (Unaudited ) (In thousands)

September 30, December 31 , Assets 2003 2002 Current assets : Cash and short-term investments $697,698 $874,08 0 Accounts receivable, net 427,749 278,62 5 Current portion of notes receivable 1,469 718 Inventories, net 247,641 146,00 5 Other current assets 150,041 86,29 4 Total current assets 1,524,598 1,385,72 2 Noncurrent investments in marketable deb t securities 340,308 414,44 7 Property, plant, equipment and leasehol d improvements, net 642,318 373,55 8 Other noncurrent assets 1,585,221 .786,617 . Total assets $4,092,445 $2,960,34 4

Liabilities and stockholders ' equit y Current liabilities $477,231 $298,63 6 Long-term debt 923,725 416,95 4 Capital lease 157,756 - - Noncurrent unearned revenue 49,696 62,58 0 Other noncurrent liabilities 217,566 81,80 9 Minority interest 6,633 5,35 5 Put options -- 19,05 4 Stockholders' equity 2,259,838 2,075,95 6 Total liabilities and stockholders ' equity $4,092,445 $2,960,34 4

CHIRON CORPORATION Supplemental Revenue Summary (Pro Forma ) USD $ (in thousands )

Current Prior Change Quarter Quarter from Change Q3 2003 Q2 2003 Prior QTR % Product Sales Biopharmaceuticals :

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= CALLSTREET EVENT PAGE

hftp:iiwww .calistreet .com/call-sclie.dule.a5p?eventid= 13184

The CellStreet event page contains CaUStre et Transcripts, Ca!lStreet Reports® and supplemental information including a link to the company's press release associated with this call.

- MANAGEMENT DISCUSSION SECTIO N

Operator

Good afternoon . My name is Amanda, and I will be your conference facilitator . At this time, I would like to welcome everyone to Chiron's third-quarter 2003 financial results conference call . All lines have been placed on mute to prevent any background noise . After the speakers' remarks, there will be a question and answer period. If you would like to ask a question during this time, simply press "'", then the number "1" on your telephone keypad. If you would like to withdraw your question, press the "#" key. I would now like to turn the conference over to Mr. Martin Forrest, Vice President of Corporate Communications and Investor Relations . Please go ahead, sir.

Martin Forrest, Vice President Corporate Communications and Investor Relation s

Thanks very much. Good afternoon everyone and welcome to Chiron's third-quarter 2003 conference call. On behalf of the Chiron team, I would like to introduce you to our principal speakers, Howard Pien, Chiron's CEO and President, and David Smith, Chiron's CFO . I'm Marti n Forrest from the Communications and Investor Relations group . I and the rest of team will be available after the call to answer all of your questions .

Now, before I turn the call over to Howard for his discussion of Chiron's results, I would like to remind you that our remarks today will include forward-looking statements relating to future events and the financial performance of the Company . Actual events and performance may differ materially from our expectations . We refer you to the documents that the Company has filed with the Securities and Exchange Commission, which are available on our website at www .chiron .com. These include the 2002 10-K report and the second quarter 10- 0 report. The third quarter 10-Q report will be available shortly. All the filings include information under the heading `Factors That May Affect Future Results" in the MD&A portion of the document . This information identifies important factors that could cause the Company's actual performance to differ from current expectations. Please note that where we indicate a number to be pro forma in today's discussion, we have made available a reconciliation of pro forma to GAAP in the condensed consolidated statement of operations attached to our press release issued today . The reconciliation for the third quarter, along with the reconciliation of pro forma to GAAP for the prior quarters is also available on our website. Consistent with SEC Regulation FD, we do not undertake an obligation to update the forward-looking information we are giving today.

Finally, please note that this call is being electronically recorded and is copyrighted by Chiron . No reproductions, retransmissions, transcripts or copies of this conference call can be made without the written permission of Chiron. With that as a preface, I will turn the call over to you, Howard .

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88800725 Chiron Corp. CHIR 03 2003 Earnings Cali Oct . 2 ~ . 2003 CompanY Tickers Event Type A Oat_ A

Howard Pion, CEO

Thank you Martin . Good afternoon and thank you all for joining our third quarter earnings call . Today, Chiron announced its third quarter earnings results and provided financial guidance . In this call, I will be addressing earnings, how we are finishing this year, and provide our outlook for 2004 . Following me, David Smith will walk you through the numbers In greater detail . Let me now begin with the quarterly earnings . Today, we recorded third quarter pro forma net income from continuing operations of $0.60 per share, up 30% from the same period last year . All 3 business units performed well and, in particular, our vaccines and blood testing businesses experienced exceptional growth. Following the completion of the PowderJect transaction, we recorded our first US Flu Vaccine revenues and, as well, we booked our first-quarter sales of West Nile Virus assay on a cost-recovery basis . These are significant milestones in the growth of these two franchises of Chiron .

Chiron's revenue grew 47% in the third quarter over the same period last year, reaching $540 million . Product sales for the quarter were $433 million, an Increase of 59% over the same period last year, largely due to the booking of our first full quarter of US flu sales . We met our US flu vaccine delivery commitments in time for this year's flu season . While it is only a mere five and a half months into the consummation of the PowderJect transaction, at least given our announcement of the intent, we think we are now able to proclaim that this acquisition has all the early signs of success. Not only is the integration of PowderJect being executed quickly and efficiently, the other business units are progressing, as well . Blood testing : RIBA®, the West Nile Virus Assay, detecting hundreds of cases of infected blood donations since July 1 . And we announced the in-licensing of daptomycin from Cubist Pharmaceuticals, leveraging our sales and distribution network outside of the United States .

I would now like to move on to the financial guidance . We are reaffirming our projection from mid- year that our 2003 EPS guidance will be at the upper end of the range between $1 .40 and $1 .50. Our 2003 earnings would be higher except that we are increasing our level of investment across all three business units . Of these investments, daptomycin is just one example . The other examples of the Investments that are high margin and high growth include the following . In our vaccines business, we are preparing to enter Phase III testing for flu cell culture in Europe, which entails significant investment in manufacturing .

In addition, our clinical development and progress for the meningococcal vaccines franchise is driving the Increase In our R&D spend . In the blood testing business, we have been investing in the commercial capability to advance our geographic expansion, especially in those markets where NAT testing has not yet been mandated. We're also investing in increased automation on the current NAT testing platforms, so that blood-testing centers can test greater volumes of donations on an individual donor basis . And we are also looking at investment opportunities beyond screening for hepatitis and retroviruses that would expand the blood testing business into the broader realm of blood safety. In the biopharmaceuticals arena we are investing in the business and building organizational strength. We believe strongly that long-term value will be created in this business, with judicious selection of the investment opportunities and further enhancement of our implementation and execution capability. Indeed, we have been working hard to bring new energy and focus to this business . And regarding the implementation capability, we have been steadily strengthening our blopharma management team, with the appointment of the fourth Senior Vice President in the last year and half. The most recent of the additions is Dr . Stephen Dilly, who joins Chiron from Genentech, and previously, SmithKline Beecham, as the new head of biopharma development. As many of you have heard before, our development programs are focused in well -. understood compounds, targeted at diseases with well-characterized populations . Inhaled cyclosporines, daptomycin and dry-powder tobramycin all fall into this category .

Notwithstanding this focus, we will encounter some disappointments . This means that we need to make timely decisions on our development plan. In this context, we have closely examined th e

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88800726 Chiron Corp . CHIR 03 2003 Eamings Call Oct, 29, 2003 CvrripanyA Tickerk Event Type A Date ♦ available information from our full clinical trials of IL-2 in combination with monoclonal antibodies . We have established the maximum tolerated dose for liquid IL-2 in our Phase I study of patients with blood cancer . And, we have stopped patient enrollment . Because of limited efficacy, we have also stopped enrolment in the Phase II study of Proleukin® in combination with Rituxin (rituximab) for high-grade lymphoma . We are continuing to enroll in our Phase 11 study of patients with the low- grade lymphoma who had previously failed Rituxin, and we are continuing our Phase I study of liquid IL-2 in patients with non-Hodgkin's lymphoma . For these two remaining programs we anticipate data by the end of this year to determine our steps. Now let me take a moment or two to outline the basis of our decision to enter into Phase Ill development with tifacogin, previously know as TFPI, in a new indication of severe community-acquired pneumonia . Recent advances in tissue factor biology, along with lessons carefully learned from the thorough analysis of the tifacogin phase ill trial in severe sepsis that was conducted with the collaboration of Pharmacia, has now given us the confidence to begin this new trial in this new indication . In the last few months we have completed the negotiations with Pfizer, which, as you know, has acquired Pharmacia . So, Chiron is now in sole control of the destiny of tifacogin . The unmet medical need for severe community- acquired pneumonia is substantial . More than one million patients are admitted to hospitals in the US annually with community-acquired pneumonia, of whom about a quarter end up in the ICU . It is this population we are targeting . Of these patients approximately 30% will die, despite appropriate antibody therapy and supportive care .

Unlike the sepsis population, these pneumonia patients are well characterized, and tifacogin evaluated in this population represents a good investment opportunity, in part, because of the homogeneity of the patient population . Moreover, this investment makes commercial sense for Chiron . In addition, to being an area of significant unmet medical need, the prescriber base is . relatively small : therefore we can access the potential customer base by leveraging and supplementing resources to our existing oncology and Infectious disease sales forces. We have also assembled an advisory board to gather the input on the choice of the new development path and, indeed, to fortify the decision as to whether we should continue tifacogin's development . And finally, we had just completed a meeting with the FDA on our plan, and I am encouraged by both the substance and the tenor of that meeting . But as we speak, Chiron is mobilizing the clinical development and drug supply apparatus . Assuming we receive the Agency's final clearance of our protocol proposal by the end of this year, we will aim to enroll our Phase III patients by March or April 2004 .

We are not underestimating the usual risks associated with any Phase III development program . But I firmly believe that we have sound scientific and commercial arsenals to move forward with this trial, with a new Indication that would address an unmet medical need . This concludes my discussion of our pipeline advances and the investments that underpin our financial projections . I would now like to conclude my comments with a discussion of 2004 earnings goals. We expect 2004 to be a year of solid growth for both the top and the bottom line. This growth will be driven by strong performance in two principal franchises of Chiron, Flu being one and NAT being the other . We expect to see total product sales growth around the mid-teens, with total revenue growing at a slightly slower rate due to the reduction in Betaseron royalty . We aim to achieve 20% pro forma EPS growth inclusive of the investment agenda that I just described . This would translate into a pro forma EPS number in the range of $1 .80 to $1 .90. Without the investment agenda, we can obviously achieve a higher rate of short-term growth. We are confident that we have the opportunities and the capability to create greater long-term value by pursuing a more aggressive investment agenda . It is a testimony to the strength of the Chiron business model that we can achieve 20% growth and fund significant investment in the business . Put another way, the engines behind the business model can deliver superior earnings and fund worthy investment opportunities across all three of our businesses . David will come back to the topic with 2004 guidance after his review of the quarters' financial results, David ?

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88800727 Chiron Corp . I C-hIR Q3 2003 Earnings Call Oct. 2t9, 2003 Cornpariy• TickerA Event Type f . Date A --~.

David Smith, CFO

Thank you, Howard . I will begin with a review of the results for the quarter, which were released today at approximately 1 PM Pacific Standard time . All earnings per share amounts discussed today refer to the pro forma diluted per share earnings . As we've discussed previously, we present our financial results on both an as-reported GAAP basis, and a pro forma or non-GAAP basis . The adjustments we made to arrive at pro forma earnings consist of the write-off of purchased in- process research and development on acquisitions, amortization expense on acquired identifiable intangible assets on acquisitions, and discontinued operations . A reconciliation between our GAAP and pro forma results can be found on our website at chiron .com.

For the third quarter of 2003, Chiron reported pro forma income from continuing operations of $117 million, or $0 .60 per share . This result was approximately 30% higher than the earnings per share of $0.46 reported in 03 2002. Total revenues for the third quarter of 2003 increased 47% to $540 million, from $368 million for the same period in 2002 . Product sales increased 59% to $433 million, from $272 million reflecting our acquisition of PowderJect during the quarter. The continue d weakening of the dollar against the euro had a sizable impact on our top line . Net of foreign exchange, revenues increased 41 % year-over-year . Total revenues for PowderJect for the third quarter were $116 million. Net of PowderJect and foreign exchange, our total revenues increased 10% year-over-year. Increases in sales were seen primarily in T081, flu, Menjugate, pediatric and other vaccines and Procleix . Royalty and other license fees increased 38% to $66 million, primarily due to increased Betaferon and HCV and HIV product royalties, and license fees from our intellectual property portfolio. Revenues from our joint business arrangement with Ortho-Clinical Diagnostics were down, primarily due to lower profits from the US operations . Collaborative agreement and other revenues were consistent in the third quarter of 2002 . Gross margins decreased to 60% from last year's gross margins of 64% . . The decrease was largely due to product mix, FX impact, and a planned maintenance shutdown .

Research and development expenses for the third quarter of 2003 totaled $98 million, up 19% from the third quarter of 2002, and an indication of our increased level of investment . The increase primarily related to development of our meningococcal franchise and flu cell'oulture . In addition, PowderJect contributed approximately 45% of the increase in research and development expenses for the current quarter. SG&A expenses for the third quarter of 2003 totaled $105 million, as compared to $68 million In the third quarter of 2002 . PowderJect contributed approximately 58% of the increase for the current quarter . Integration-related expenses were $7 million in the third quarter, approximately a quarter of our total expected integration expenses . We expect that we will see additional integration expenses through mid-2004 . The increase in SG8A was also driven by additional costs associated with ongoing marketing programs to support the continued growth of our business, as well as corporate initiatives. Our estimated full-year effective tax rate is 25% . Now I would like to move on to a review of the business unit financial results, starting with our biopharmaceuticals unit . Biopharmaceuticals product revenues, including Betaferon royalties where $126 million in the third quarter of 2003, up from a $115 million over the year ago quarter, a 9% increase. We saw increases for Betaseron including Betaferon royalties and for TOBI, partially offset by a decline in Proleukin ,

Third-quarter sales for Betaseron, including the royalty earned from the sale of Betaferon by Schering in Europe, were $45 million versus $38 million last year, an increase of 18% primarily due to price increases, increased patient demand, and Betaferon royalties, offset by wholesale ordering patterns. TOBI performed well, with third-quarter sales of $43 million, up 10% from the year-ago period, largely due to the progress of TOBI across Europe and price increases, offset by wholesale ordering patterns. Third quarter sales of Proieukin were $30 million, down 7% from the year ago period, largely as a result of wholesale ordering patterns, offset by price increases . Gross margins in biopharmaceutical segment decreased to 74% from last year's gross margins of 77% . The decrease was primarily the result of a planned annual maintenance shutdown and product start-up costs for the recently approved Betaseron diluent syringe .

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88800728 Chiron Corp . I CHIR 03 2003 Eamings Cafi 0c' 29. 2003 CcmpanvA { TickerA Fve,ir Ty,-,e A- Date A

Turing now to vaccines. We saw excellent results in vaccines this quarter, confirming the value of our purchase to PowderJect in the third quarter of 2003 . Total product revenues for the vaccines business were $263 million, versus $125 million in the same period last year . PowderJect product revenues were $114 million in the current quarter . In addition, we saw increases primarily in flu, Menjugate, Pediatric and other vaccines, which were offset by a decline in travel vaccines . Total flu sates for the third quarter increased $174%, to $183 million over the prior-year period . Fluvirin sales were $103 million for the quarter, while the rest of Chiron ex-US flu vaccine sales were $80 million for the quarter . This came as a result of recording one full quarter of Fluvirin sales during the quarter. Looking at the entire flu season, which spans the third and fourth quarters, we expect that worldwide pro forma flu sales will be approximately 40% over the prior year . Menjugate performed well In the third quarter; mostly as is a result of sales to Australia, Spain and France . Menjugate sales were $11 million, up 72% from the year-ago period . Sates of all other vaccines were $69 million in the third quarter of 2003, an increase of 31 % from the year-ago period . The increase was driven largely by tender sales of our pediatric vaccines and increased sales following th e acquisition of PowderJect, slightly offset by the seasonality in the travel vaccines portfolio .

Moving to our third business, blood testing . With the introduction of the West Nile Virus Assay, blood testing saw a strong growth In the quarter . Blood testing total revenues, including product safes, Chiron's share the revenues from our joint business arrangement with Ortho, collaborative agreement revenues, and royalty and license fees, increased to $109 million in the third quarter of 2003, from $89 million in the year-ago period, a 22% increase . Driving this growth was the Procleix West Nile Virus Assay, available on an investigational use only basis in the United States, market share gains in the US for product sales of Procleix, and continued penetration into several markets abroad. Also contributing to the increase was higher royalty revenue for the use of HCV and HIV intellectual property related to NAT testing. Offsetting the gains were lower revenues from our joint business arrangement, primarily due to lower profits for the United States operations . In summary, the third quarter illustrated the ability to deliver the power of our business model .

Let me take a moment to highlight several notable announcements from the qua rter and the financial results for 03 . Our acquisition of PowderJect has allowed us to access the increasingly attractive US flu market, and at the same time, acquire a commercial platform that will allow us to launch new products in the United States . We acquired international development and commercialization rights to Cubist 's daptomycin antibiotic. Revenues were pa rticularly strong, with product revenues up 59 % and total revenues up 47%, reflecting growth in all three of our business units. Financial results for the quarter were consistent with our expectations . PowderJect accelerated the growth of our top line from 15% for the base business to 47% . Net of FX, our revenues increased 41 % over the year .

Operating expenses were in line with our expectations , and reflect our ongoing commitment to grow and invest in the business over the long term . EPS grew 30% over the prior year, reflecting the opportunities inherent in a growing , global , and diversified business . While foreign exchange did affect our top line , we still experienced underlying growth . Chiron has substantial operations oversees and, as such , is naturally hedged as it relates to FX. FX increased our EPS by approximately $0.02 this quarter. Taking all of this into consideration , Chiron executed significant activities during the quarter, not the least of which, has been the ve ry successful progress in the PowderJect integration , while delivering solid financial results . Now, I would like to turn ahead and look at 2004. As Howard, mentioned , we expect 2004 will be a year of solid growth , both for the top line and the bottom line. We expect product sales to reach between $1 .5 billion and $ 1 .6 billion, and total revenues to achieve between $ 1 .9 billion to $2 billion . Gross margins are expected to be equivalent to, or slightly lower than , 2003 level, while operating expenses will increase by approximately 10% over 2003 spending levels . We expect our tax rate to be equivalent to, or slightly higher than , the current tax rate. As a result of all of the above, we expect our pro forma EPS to be in the range of $1 .80 to $1 .90. To amplify what I just mentioned, we expect growth rate s

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88800729 Chiron Corp. CHIR Q3 2003 E arnings Call Oct. 29. 2003 Company* TickerA Event Type A Date

for 2004 for total product sales to be around the mid-teens, and total revenues to grow at a slightly slower rate.

In biopharrna, we expect mid-single digit growth in sales in our oncology and infectious disease franchises, to be offset by the reduction in Betaseron and Betaferon revenues . In vaccines, we expect to see sales growth in the mid-teens for both Flu and the remaining three product groups combined . For Flu, the main revenue growth driver will be greater participation in the US flu market, as a result of increasing manufacturing capacity beyond 2003 levels, and modest price increases . In blood testing, we are expecting to see the whole franchise grow in the mid-teens . Naturally, NAT product sales will be growing at a substantially faster rate, reflecting the following drivers . Penetration of the Procleix system in new international markets, commercial revenues from the Ultrio assay in certain European and Pacific Rim markets, and a full year of cost recovery revenue from the West Nile Virus Assay in the United States . We believe that total royalties will grow in the mid-single digits and royalties, excluding Betaferon royalties, can grow in the high teens . Excluding Betaferon royalties, royalty revenue growth will be driven by immunodiagnostics and molecular diagnostic testing and blood screening, and plasma testing market segments . Growth will obviously not be consistent in each quarter.

Our vaccines business., is seasonal, with travel vaccines revenues booked primarily in the first and second quarters and flu vaccine revenues recorded in the third and fourth quarters . Accordingly, our bottom growth in the first half of the year will be modest, and the acceleration will pick up in the third quarter. In summary, Chiron will deliver at or above its growth goal next year, while investing across our businesses for long-term value creation . The accretion of the PowderJect acquisition, along with organic growth of the business, has been put into an enhanced investment agenda that includes new geographies, new capacities, and new products . And with a new enhance d investment agenda, we project 2004 to be another year in which Chiron's unique business model continues to build a sustainable and compelling growth platform . With that I'll turn the call back to you, Martin.

Martin Forrest, Vice President Corporate Communications and Investor Relation s

Thanks, David. That concludes our prepared remarks. Now I would like to open up the call for questions. To help us respond to all questions in the queue, please refrain from asking multi-part questions. If you have additional questions, we ask that you re-enter the queue with your follow-on questions. For Q&A, we are joined by some additional people: Jack Goldstein, the President of our Chiron blood testing business ; Craig Wheeler, President of Chiron BioPharmaceuticals ; Stephen Dilly, Senior Vice President of BloPharma Strategy -- I think that's development; I'm sure there's some strategy in development also; Bruce Scharschrnidt, Vice President of BioPharma Clinical Development. Joining us by phone is John Lambert, President of Chiron Vaccine ; Kevin Bryett, Vice President of Commercial Operations for Vaccine . We will now take some Q&A .

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88800730 Chiron Corp . CHiR 03 2003 Earnings Call ' Oc :!. 29 2003 Company♦ Tic:ker• cvc r t t 7 y' ♦ 1 Dare A m QUESTION AND ANSWER SECTION

Operator : At this time, I would like to remind everyone, if you would like to ask a question . please -", then the number "1" on your telephone keypad . We'll pause for just a moment to compile the Q&A roster . The first question is from Dennis Harp of Deutsche Bank .

<0 - Dennis Harp> : Congratulations on a great quarter. I wanted to understand the Flu vaccine business a little bit better . Howard, you mentioned in your prepared remarks that you met all of your commitments in the third quarter . So I lake it, what we would see In the fourth quarter or perhaps in the first quarter would be driven by market dynamics, and what are the drivers that would drive sales of the Flu vaccine In the fourth quarter? How much do you have of your 2003 capacity remaining to sell, and then how much does capacity grow in 2004 ?

: John Lambert will join me in supplementing the answers I would give . We have previously projected, in fact, in 2003, we would be able to north of 40 million doses of Flu vaccine for the US market. As we speak, we believe that goal will be that . In the third quarter, we believe that approximately half of those doses have been shipped . I would believe that the remaining half of those doses will be shipped in the fourth quarter . The dynamics of the market is dominated by the fact that Wyeth has left the market since last year . And by all indications, the conventional vaccines are still taking up the dominant volume . And as a result of what we think is a supply-side/demand-side imbalance, we've seen that all of the conventional vaccines that have been made and that will have been shipped into the market will indeed be sold and, largely, used . We are not in a position to project in far into the future, but certainly the 2003 full season looks every bit consistent to our expectation when we made a decision to acquire PowderJecl 5 .5 months ago. John, do you want to say anything ?

: No I don't -- but that's perfect, Howard . We are in a position, both with the PowderJect product and the ex-Chiron flu vaccine, so that we have sold or actually committed to sell every dose that we've produced this year .

: And what about next year, how much will your capacity grow?

: We expect to see an increasing capacity out for Fluvirin, but we are not in a position to confirm a percentage increase . There will be an increase next year.

Operator: The question is from May-Kin Ho of Goldman Sachs .

: Hi, can you tell me, what doses are you thinking of using with TFPI, and what is the patent life left on this ?

: Hi May-Kin, Stephen Dilly here. We are going to take forward two doses into our Phase III program, using what is usually called the pick-the-winner design ; we will need to be sure that we are on the plateau of the dose response curve . So we are looking at 2 infusion rates : 0.025 and 0 .075 ,

: There are several patents covering the compound. The patents expire mid next decade for the compound .

<0 - May-Kin do> : Okay, how big a study do you envision ?

: We are looking at a well-powered study . What we discussed with the FDA was a study design which would give us at least 700 patients in our database of the dose we choose to take to completion of the study .

<0 - May-Kin Ho>: Thank yo u

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88800731 Chiron Corp .. CHIR 03 2003 Earnings Call Oct. 29. 2003 Companyi , I Ticker . Event TypeA Dcto A - .N

Operator: The next question is from Mark Augustine of Credit Suisse First Boston .

: Hi, just wanted a clarification on the comment that was made in the prepared remarks regarding a 40% increase in . I think it was a worldwide sales of flu vaccines over '02. And I just couldn't make that math work, maybe you can clarity that, help me out .

: Sure Mark this is David Smith. We've talked about it at the point of acquisition with PowderJect that we had pro forma revenues related to flu on a worldwide basis of about $240 million or so, and taking in consideration $150 million from PowderJect and about $90 million for us last year. So, we are assuming that we've got a 40% uplift, which will take you to somewhere around $330 million as it relates to flu next year .

<0 -- Mark E . Augustine >: Okay, next year or 2003 ?

: I am sorry, I meant this year, 2003 .

=Q - Mark E. Augustine>: And then one quick one, on TFPI study. What is anticipated? I know that you don't have critical agreement, but what are you hopeful is the primary efficacy endpoint of this study?

: Probably it is going to be a survival study.

<0 - Mark E. Augustine >: Okay .

: And the primary efficacy endpoint will be survival for 28 days . We will be collecting some data for a more prolonged period than that , but that is the primary endpoint .

<0 - Mark E. Augustine >: Thanks very much .

Operator: The next question is from Mike King of Banc of America .

: Sorry, can you hear me okay ?

: Hi Mike.

: Hi, my question is about the guidance. I mean, clearly you are , the number that you reported here for the third quarter is, annualizing out at a number well over $2, so understand the need to spend to support your current programs , but I am just wondering , why the such conservative guidance for'04 EPS?

: Let me address that for you Mike . We are projecting $1 .50. If we didn't have investment, we didn't have integration expenses, we didn't have things like that, we would obviously be higher than that . If you take a look at the - how things play out, integration expenses were about $7 million in this quarter, and we said that's about a quarter of what we expect the total to be . My belief is 04 integration expenses will be higher ; we will see a few, some go Into 2004, but we will see increased integration expense In the fourth quarter. At the same time, something that largely goes unnoticed for some folks, is the fair value adjustment that you need to do to inventories . When you do purchase accounting you have to write up the value of your inventory. That has the effect of depressing your margins, and that has a depression on your bottom line. And that's not insignificant as it relates to this particularly activity. If you look at the investments that we are making - and daptomycin is one example of something, and that is a charge that we are take in the fourth quarter . Again, it is not insignificant in terms of what the effect is in earnings per share. So, if you took at that, the ramp up with TFPI, increases as we are looking forward In terms of Menjugate and its clinical trials, and then ACYW activities going along in the business and then - and blood testin g

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88800732 Chiron Corp. CHIR 03 2003 Earninqs Ca,`l 29. 2003 CorriDanvA Ticker A, l vernf Tyr). -A Dare A

you can see where - you can dial into a number that is closer to what we were suggesting . Going forward Into 2004, clearly, it we were not pursuing an enhanced investment agenda, we would be significantly higher than the range that we are showing . But again, one of the things tha t PowderJect does cover is the step-down as it relates to Betaseron - and that isn't insignificant - we've talked about that in the past . TFPI investment and the opportunities that we are pursuing internally, as well as potential external opportunities, which gives the basis to return the growth goal in that 20-plus percentage that we have been talking about and continue to invest for the future .

: And Mike if can just add a bit - Howard here - we have already said this, we don't know how to make it any more obvious. Daptomycin marks our intent, a dear intend to clearly to acquire products and that fit neatly into our strategy . And we have said already that we have a clear strategic objective in our blood testing business to advance our realm into blood safety overall, so in due course you will see the clear manifestations of the investment agenda, beyond the ones that we've already outlined .

: Sure, integration expenses are those things that are related to redundancies -

: consulting-related expenses around integration, around systems, tax planning, things of that nature - those are the big drivers in terms of what we have seen and what we will continue to see . None of those are eligible for an in-process charge, which you take, which is a one-time charge. In-process charges are dealing with technologies versus, let's say, operational activities .

<4 - Michael King>: And will you make it transparent to investors what those charges are relative to, sort of, expenses for the normal course of business ?

: Okay. Thanks very much.

Operator: The next question is from Thomas Wei of Piper Jaffray .

: Thanks. I had a couple of questions on Flu . I guess the 40% number that you were talking about, can you give us a sense as to what the contribution of price versus volume is? And if It's mostly volume, is that pretty consistent between the US, or the PowderJect business and your base business?

: On that one it's primarily volume, because the lowest we have seen increases in prices, and in the end-market prices in the US, PowderJect had original contracts in place that already set contracts with its distribution network . So most of the increase that you see is in volume .

<0 - Thomas Wei>: And, I'm sorry, in the US , the PowderJect business versus the, your base business or the volume gain, similar, or was it mostly in PowderJect ?

: It is mainly in PowderJect . Now, with some modest increases in the current business.

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88800733 Chiron Corp. CHIR 03 2003 Earnings Call Oct. 29.2003 Company ► Ticker ► Event Type ► i Date A

Operator: The next question is from Alexander Hittle of A.G. Edwards .

: Thank you and very nice quarter here . I am curious on the expenses that you are going to take here for the Cubist, you are going to buy $18 million worth of converts or maybe you already have -I'm sorry restricted stock . Is that going to be flat-out expensed, going through your income statement next quarter?

: Well, actually there is $18 million that we talked about . There is a component of which is a licensee and there is a component of which we purchased securities at premium . So the premium obviously gets expensed, and then the licensee fee gets expensed as well . So there is the -- we didn't purchase any type of convertible instrument in this .

: Okay. And if I may jump in and go off of that topic for a second, when you talked about blood safety overall, could you explain more specifically what that means ?

: Let me take that, this is Jack Goldstein . We are looking to make investments in a number of areas in blood testing, some within the NAT lab that we are currently in, some in other testing laboratories in blood donor centers, and then the third area is in the processing centers in blood centers, which are beyond our current reach . So, those are three areas that we are looking to make investments in .

: And does this become more of an equipment business ?

: No, not at all . All of these opportunities are more reagent types of opportunities, some of them with lasers and razorblades .

: Great, thank you .

Operator; The next question is from Eric Ende of Merrill Lynch .

: Thanks for taking my question . I am just trying to reconcile the guidance that you are giving . It sounds like you are giving guidance for $0 .25 in the fourth quarter, which would imply just a huge amount of spending . Included within that spending, I guess, your including thes e integration expenses as well the write-up of inventory, as well? : Yes that.

: Just trying to get a sense really as to how much of it is R&D and SG&A?

: We are taking into consideration the integration expenses, as well as the inventory valuation . Also, as we talked about, the Cubist-related expenses will hit in that particular realm as well . Also, taking into consideration that this is the first quarter that we have the reduction in Betaseron to factor into that particular equation, plus TFBI, it is a little difficult for me off the top of my head to do kind of a split between what you might characterize as a one-time expenses and some of the ongoing expenses at this point .

: Okay, so then we shouldn't use the fourth-quarter numbers really as a run rate going into 104 .

: I think, we talked about being up, kind of 10%, and we take a look at that enhanced agenda in working in with TFBI and all of that, it's probably a bit difficult to call what an effective run rate might be In the off of the fourth quarter . I think you probably have to take look and see what you think at the end of the year to gauge that ,

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88800'734 Chiron Corp . CHIP 03 2003 Earnings 11al!. Oc-. 29 . 2003 Carnpany♦ Ticker AL Even' Ty; o A Date A

: Okay and then just the next question has to do with the tax rate . You said tax rate should be about equal, a little bit greater than, what we saw in '03, Given the fact that the US profit should increase because of Fluvirin, I'm just trying to understand how the tax rate Is going to stay kind of flattish.

: Well it's, one, having a global footprint, as we do in our business, allows for us to have more of a pharmaceutical-like tax opportunity and tax planning . The PowderJect profits are actually domiciled in the United Kingdom . They are not domiciled in the United States . The reason that we are suggesting that there Is a chance you may see a tick up is that there is profits associated with PowderJect. We have a series of initiatives ongoing to take a took at what type of tax planning we might be able to do In order to keep ourselves at or close to rate that we have currently .

: And then, just one final quick question, how much visibility do you really have on your spending in '04, given that you really spun together your team on the biopharma business ?

: Actually, we've been sweating those guys pretty hard. So, I think we've got very good visibility. These guys are not new to this business . So, they come in, study very quickly and have come up with, I believe, very sensible recommendations for where we ought to be going next year. both in programs and in stents.

: Okay. Thanks a lot.

Operator: Your next question is coming from Jennifer Chao of RBC Capital Markets .

: Thanks and congratulations on a very strong quarter . Just going back to FiuMistTM, what percent of the gap left by Wyeth's FluShield due to their exiting the market this year, you estimate could be picked up by FluVirin this season? Could you just clarify for us also what the expectation going into the PJP acquisition was on the total doses, be potentially sold from all three players this year, and then maybe just a little bit of color on how fast you think this US flu market is growing?

: Howard Pien here, Jennifer . When we purchased PowderJect, we knew that that PowderJact's capacity was in the low-to-mId 30s . And we know that -- the reason to do the transaction is for the US market . And we knew, of course, Wyeth was out. What we didn't know at the time was whether or not, indeed, we can get the supply up from mid-to-low 30s to a number higher . And now we believe, as I have said before, we can get it to the low 40s range . We didn't know, of course, also what was going happen to FluMist. You probably know a great deal more than we do, I mean, about the performance of FluMlst, and we've all been learning from the experience . And there is a tremendous amount of dynamic in that marketplace that we are all trying to figure out . And preliminarily, I think, it's difficult for us to forecast what FluMist is going to do in 2004. We do believe that FluMlst will not take up a dominant market share, even with all of Its convenience features and so on, I mean, given the preliminary indications of its uptake in 2003 . And we believe that it will still be a general imbalance, although we actively can come clearly close if we succeed in increasing our volume in the way that we are currently forecasting for 2004 from 2003. I think we will come awfully close. Of course we have no idea what Aventis is going to be able to do in 2004. So it would be imprudent for us to give that .

: So just for maybe just clarification around that, In terms of your capacity and supply for this year, were you able to at least flex that into a competitive manner vis-a-vis Aventis this year? Can you give, maybe quantify what portion of the Flu shield market you were able to get?

: I think, John, you may have something to add to that at this point, but I think it's difficult for us to say. Of course, the dynamic of US flu marketing - for the most part is the relationship with physician supply houses and vaccine supply houses, and whether or not they feel that you can honor the contract, the supply agreement, with them and therefore how aggressive they're going to

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88800735 Chiron Corp . CHIR Q3 2003 Earnings Cali Oct . 29, 2003 Company A. TckerA Event Tyaei, Date A be in pushing the vaccine to clinics and physicians' offices . And I think the part that we will be able get into the market early and honor our commitments in the way that is suitable for the physician, for our channels, I think had a great deal to do with our success and our sense of general optimism .

<0 - Jennifer Chao>: And then, just may be lastly, can you give us a sense of what your underlying assumptions were on the US flu market growth for next year ?

: John, do you want to try to address that?

: Yes, I'll take that one. Just one point of clarification, Wyeth has been out of the market for a couple of years now. The US flu market is very much driven by the CDC recommendations for flu. As you - if you look at these, they're showing an increase over the year, so this is how we see the market going.

: Okay, thanks a lot .

Operator: The next question is from Tom Shrader of Harris Nesbitt Gerard .

: Hi, thanks for taking my question . Can you tell us In the third quarter what fraction of US blood was tested for West Nile ?

: Sure . This Is Jack. 100% of all blood In the United States for this season was tested for West Nile virus since July 1 . We, of course, have an over 80% share, so over 80% of the blood was tested with Procleix .

: Okay, are you willing to break out cost recovery royalties, or is that too personal question ?

: We have not disclosed our cost recovery price . I can say from the numbers that we - we had an excellent quarter. We grew 17% from the second quarter. And that was fuelled mostly by West Nile virus, but in addition, market share gains in the United States, Italy and Spain . And actually the delta of the second quarter to the third quarter was offset by one-time instrument sales for West Nile virus in the second quarter. So we had a very, very good quarter .

: Okay, But, can I ask one, on the TFPI, what fraction of the patients that die from serious CAP go through some sort of serious sepsis first ?

: That's a quite complicated question, because the intersection between pneumonia and sepsis is a complicated story. What we can say is, we are looking at something around a quarter of the patients with severe community-acquired pneumonia end up in the ICU ; the mortality rate in that population historically is somewhere in the high 20% to low 30% . But the whole point about this trial is we are trying to catch the patients before they become moribund with sepsis cases, so that we have a clear opportunity for the drug to show efficacy .

: So, its kind of a cleaner pre-sepsis trial?

: Absolutely right, and the whole point about this is we are trying to define a well-characterized homogenous population to give the drug the best chance of showing efficacy .

<0 - Thomas Shrader>: What fraction of people die from something completely unrelated to sepsis? Essentially, what do you think the noise is in this trial - the mortality rate that you don't have an effect on?

: We believe that if you are in the ICU with severe community-acquired pneumonia, that is the real and present threat, and that's the thing that you are likely to die from . So we believe fro m

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88800736 Chiron Corp. CHIR 03 2003 Earnings :3ai# Oc- 29, 2003 Cotrfpaity4 Ticker & Fleet Tv • Date A

historical data in that indication, and also the method of this drug that we have plenty of opportunity to show a signal .

: Also -

: We are not concerned about confounding variables like that .

: Okay, good . Thanks a lot.

Operator: The next question is from Geoffrey Porges of Sanford Bernstein .

: Hi, thanks for taking my question . Congratulations on a great quarter. I will ask my allotment of four questions right now . Particularly on the vaccine business, could you give me a sense of when do you expect to get the infinite label from six months to five years of age, that would let you compete with Aventis in that newly recommended population? Secondly, just a little bit more color on the price increases . I know you have taken a list-price increase, but I am curious about what you think the realized price Increase Is likely to be next year, given the prices- the list-price increase and then rolling that into the contract . And then finally when could we expect meaningful news on MenACYW? Thanks

: Okay, we'll let Bruce try the first one and John, why don't you follow up with the second ?

: The couple of questions pe rtaining to the vaccines pipeline, the ACYW Phase ll trails completed enrollment. Over 100 subjects were enrolled and we can expect a read out on that . in the first half of next year. Results of the question pertaining to label expansion for Fluvi rin, that's something that's currently in the evaluation stage . I don't think we'd be prepared to comment on timing at this point .

: Okay, thanks.

: Hi, this is John . The market price has gone up by 15% this year, and as I mentioned we have fixed price agreements with our distributors . Those agreements, in fact, continue into next year. In all of our modeling we have assumed a fairly modest price increase for flu for next year, an end-market market price, but we don't really reap the benefit of that next year . On the ACWY, I will go back to Bruce on that one .

: Bruce answered that question. John, just on the current list price increase. Can you give us sense of what percentage of your contracts actually come up for renewal and where you will be able to realize the price increase next year?

: Next year. No.

<0 - Geoffrey Porges>: Okay. Thanks.

Operator: Your next question is from Craig Parker of Lehman Brothers .

: Hi. Thanks for taking my eight questions. That was a joke, guys .

: You'll have to go to the back in the queue . : First, quick question . I just want to make sure I understood a statement earlier that there was 10% growth in the non-influenza part of the business . And then the comment about 7% currency effect, does that pertain to just the non-influenza part of the business, or everything ?

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88800737 Chiron Corp. I CHIR Q3 2003 Earnings Call Oct 29. 2003 Company& Ticker Event Type A Date A

: The FX effect is that we talked about pertains to the entirety of Chiron's business.

: Okay. So, given that most of the increased sales were in the US, can I assume that there was something like 6% effect on the non-influenza business, and therefore something like 4% growth in local currency of the non-influenza business ?

: Probably something like that is not out of line, yeah .

: Okay, I also have a question of the rational for the CAP study . I assume that there was some analysis of the subset of patients who met the ATF definition for severe community-acquired pneumonia. Was that a prospectively defined subset, and can you tell me what sort of patient numbers there were in that subset ?

: We did analyze that subset from the year 7 study, which is the previous UN study. That was not our only piece of data to lead us to the conclusion that CAP was a valid place to go. It was one of many analyses; they were exploratory analyses . This was not a prospectively defined analysis . Therefore it was exploration of the data and it had to be taken in the context of other understanding of the pathway . We loomed a lot of things from analyzing our previous study . One of them was about an interaction with heparin ; one of them was about the definition of the population - all of which have factored into the final design of the next study that we are going to do in CAP.

<0 - Craig Parker> : Okay, great. Maybe I can follow up offline about the homogeneous population, because my understanding was it was things like baseline alcohol use had quite an effect on survival risk, but IT just follow up later.

: Then operator, I think we will take one more question .

Operator: Okay your last question comes from Caroline Copithorne of Morgan Stanley,

eQ - Caroline Copithorne >: Thank you . I wanted to go through some more clarification on the guidance. I am not sure understood some of the'04 guidance numbers such as, those that were used in comparison, like the 10% increase in operating expense over'03 . What number are we supposed to be using for '03? PowderJect, just for the combined period, was it actually combined or on a pro forma basis, and all of these additional expenses , you know, I just wanted to find out what some of those comparisons are.

: Well, I think, unfortunately, Caroline, some of the comparisons are bit difficult . I would look at the second half of the year before I'd look at the full year from a run rate basis. We didn't do PowderJecl for cost synergies ; there will be some things that will change over time, but the big drivers in the increase are obviously TFPI and advancing in the programs . So, it is something second half of the year-ish, if you wanted to do a full year comparison off of 2003 - something like that .

: So what did you use when you calculated this 10% increase in '04 versus the prior year?

: I used the budget . I have the advantage of full knowledge in that regard .

: But if we use the second half, like last six months of 2003, annualize it, and then assume 10% over that?

: I haven't done that math to be able to tell you, but I think I can say that I wouldn't be using the first half of the year because the level of spend was a bit lower .

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88800738 Chiron Corp. CHIR Q3 2003 Earn '?nigs Call Oc': 29 2003 Cornoanv A Ticker A rvefW,* v e 4 ; Date A

: Right . So you, given all this spending, 10% sounds like a really low increase .

: Well it can be between - again we are talking total operating expenses as well . So, it could be that R&D spend will go up higher and SG&A spend will be lower . So, we've given you kind of an overall operating expense number in terms of the projections for next year .

aQ - Caroline Coptthorne>: Okay. And then on the blood testing business, can you just walk through kind of where in the developing country markets - it seemed that they are all kind of fully penetrated with the existing . products -- but what the penetration rates, market shares, and what you, where, the timelines for stepping up the pricing, based on new test data is?

: You are talking specifically at about Asia ?

: No, in so in the developed market so, the kind of US, Europe, Japan and, I guess It up to you to pick the market, but . . ,

: In developed markets representing about 54 million units sold abroad?

: Great .

: And of that 54 million units, about 8% is homebrew and about a third is un-penetrated, where they are not doing serological tests but they're not doing any NAT testing right now. : Right. And the market shares split in and outside the US is what ?

: You know, I don't have those numbers off the top . When we've looked at market share on worldwide basis, we believe that, In that 54 million number, that we have about 33% market share worldwide, and our main competitor has about 31 % worldwide share . And then the rest is, as I said, homebrew or un-penetrated .

<0 - Caroline Copithorne >: And so how much of your growth do you expect to come from new markets versus market share gains versus product line extensions, or in new tests?

: Not to give the exact figures, but next year we are expecting increases in product revenues to come from the introduction of Ultrio in Europe and Asia, penetration into new markets in Asia, and full-year effect of West Nile virus in the United States . Those are the 3 drivers of our growth for 2004 .

: Okay thank you.

: That concludes our Q&A period . I would now like to turn the call back to Howard for our closing remarks,

Howard Plan, CEO and President

This quarter, Chiron continued to deliver the kind of solid financial results that are a hallmark of the company . The PowderJect acquisition has already proven to be an excellent addition to our vaccines business, and to the company as a whole . The revenues that we are driving from our growing businesses in vaccines and in blood testing allow us to reinvest In the company so that we will be able to enhance shareholders value even further toward the long run . We see 2004 as a year when we will continue to execute on our strategy to develop all three business units further, while delivering the same financial results that you have come to expect from us . We took forward

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88800739 Chiron Corp. CHIR 03 2003 Earnings Call cc- 29, 2003 CompanyA Trcker♦ Event Type4 li Date♦

to continue to talk to you about the progress we're making in the months to come. And thank you very much for joining us this afternoon .

Operator

This concludes Chiron's third-quarter 2003 financial results conference call . You may now disconnect.

Dliclalmar The M orimikon herein is based on sources we behave to be reliable but is not guaranteed by vs antl does hot purport to be a corrpINa or anofiee statement or sumhary of the available data, As such , we do not wrraht, •ndmse or puaranlaa the coiroSISnaas. wairaoy. intgiiy, or hmutinesa of the int rmahon. You mast evaluate, end hear 011 dshs aesodslad wB , the use of any Infomsdon pro ed hereunder, Indut any rNience on the exuracy, mt latan•as, safety or asufuin •ss of such infama$pn. This Inform bon is not Intended to bound is fhe glmety WMl IX invanomnt decisions . It should not be construed as advice dadgneS to (neat I ri s perticute Wrawm ent needs of any Inv afn . TIYs report is published solely fur info o on purposes , and is no to be construed as Lino ndal or other adufo► or as an offer In sell or the rdiaitabon of an offer to buy any eecudty In any slats where rich an offer or on iWhpon would be IMpsl . Mry intonnation soprssed he arr on Slit data is wbjecl to Menge a hoot notlts . Airy apinlons or asse rtions contained In Oft Infaiwution do not represent Hrs upinlona or beli efs of CaItStroat, LLC . CetISlreal. LLC, or one or nqno of Its srr"oyaes. indurri the waiter of this roporl, may have a podLm n anyof the soczrihea dswased herein .

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88800740 EXHIBIT J f

!,y •

For Immediate Releas e

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CHIRON DELIVERS ADDITIONAL FLUVIRIN® FLU VACCINE DOSES TO U.S. DEPARTMENT OF HEALTH AND HUMAN SERVICE S -Agency will distribute 363,200 doses to state and local health authorities--

EMERYVILLE, Calif., January 12, 2004 - Chiron Corporation (NASDAQ : CHIR) today announced that it has delivered an additional 363,200 doses of Fluvirin® flu vaccine to the U.S . Department of Health and Human Services (H TS) . The additional doses, which HHS purchased from Chiron in mid-December, came from extra production material the company had after filling its regular orders . Chiron produced 38 million doses of Fluvirin for U .S. distribution for the 2003-2004 flu season, approximately 50 percent more than in the previous flu season .

"Chiron is committed to collaborating with government health authorities to increase levels of flu vaccination and protect more people," said Howard Pien, Chiron's president and CEO. "For the 2004-2005 flu season, we expect to increase capacity and respond to market needs, producing approximately 50 million doses of Fluvirin, most of which will reach the United States."

To deliver the Fluvirin doses to HHS, Chiron's Liverpool manufacturing facility took the extra production material through the final steps of the manufacturing process, including filling and packing the vials as well as quality inspection and release. HHS and the U.S . Centers for Disease Control and Prevention (CDC) are working with state and local health departments as well as physicians' groups and others to assess supply and distribute the doses to those areas most in need .

"We're pleased to have been able to deliver these additional doses to provide protection to at-risk individuals," said John Lambert, president, Chiron Vaccines . "We are currently the second-largest supplier of flu vaccine worldwide, and we will continue to invest in our flu vaccines production capacity as well as our research and development efforts to help the CDC meet its 2010 target of 150 million flu vaccinations ."

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proteins, small molecules and vaccines . The company commercializes its products through three business units : BioPharmaceuticals, Vaccines and Blood Testing. For more information about Chiron, visit the company's website at www.chiron.com.

This news release contains forward-looking statements, including statements regarding product development initiatives, capital investments, sales growth and new product marketing that involve risks and uncertainties and are subject to change. A full discussion of the company's operations and financial condition, includingfactors that may affect its business and future prospects, is contained in documents the company has filed with the SEC, including the form 10-Q for the quarter ended September 30, 2003, and the form 10-K for the year ended December 31, 2002, 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 product development activities such as clinical trials, manufacturing capabilities, intellectual property protections and defenses, stock price and interest-rate volatility, and marketing effectiveness. In particular, there can be no assurance that Chiron will increase sales of existing products, successfully develop and receive approval to market new products, or achieve market acceptance for such new products.

Consistent with SEC Regulation FD, we -do not undertake an obligation to update the forward- looking information we are giving today.

NOTE: Fluvfrin, Agrippal, Begrivac and Fluad are trademarks of Chiron Corporation . •

0 EXHIBIT K Chiron News Page 1 of 1 3

Chiron Reports 2003 Total Revenues of $1 .8 Billion 47 Percent Increase in Net Product Sales Over 200 2

19 Percent Increase in Pro-Forma Earnings Per Share Over 200 2

EMERYVILLE, Calif ., Jan. 281PRNewswire-FirstCall/ - Chiron Corporation (Nasdaq : CH1R) today reported. pro-forma income from continuing operations of $297 million, or $1 .54 per share, for the year ended December 31, 2003, compared to $248 million, or $1 .29 per share, for the year ended December 31, 2002 . For the year, foreign exchange rates, on a pro- forma basis, resulted in a $0 .06 increase in earnings per share . On a GAAP basis, Chiron reported income from continuing operations of $220 million, or $1 .15 per share, for the year 2003, compared to income from continuing operations of $181 million, or $0 .94 per share, for the year 2002 .

For the fourth quarter of 2003, Chiron reported pro-forma income from continuing operations of $56 million, or $0 .29 per share, compared to $63 million, or $0 .33 per share, for the fourth quarter of 2002 . For the quarter, foreign exchange rates, on a pro-forma basis, resulted in a $0 .02 increase in earnings per share over the fourth quarter of 2002 . On a GAAP basis, Chiron reported income from continuing operations of $118 million, or $0 .59 per share, for the fourth quarter of 2003, compared to income from continuing operations of $67 million, or $0 .35 per share, for the fourth quarter of 2002 . On a GAAP basis, Chiron recorded a purchase-price allocation adjustment to the write-off of purchased, in-process research and development related to the PowderJect Pharmaceuticals acquisition, for the fourth quarter of 2003, upon completion of strategic assessments of the value of certain research and development projects .

Chiron management uses pro-forma financial statements to gain an understanding of the company's operating performance on a comparative basis . Pro-forma results exclude special items relating to certain acquisitions and revenues, which may not be relevant to gaining an understanding of the company's trends or potential future performance. Please refer to the attached tables at the end of this document for more detail on these items and a reconciliation to GAAP financial statements . All references to per-share amounts are per diluted share .

"Chiron's strong performance shows our ability to deliver excellent financial results while making key investments in our businesses to create future value for shareholders," said Howard Pien, Chiron's president and chief executive officer . "Building on our 2003 successes, we have set aggressive goals for ourselves in 2004 .

"We are aiming to reach 20 significant goals and milestones, including the geographic expansion of Blood Testing into the Pacific Rim, continued investment in flu vaccine production and development, and initiation of Phase II and III clinical trials in our infectious disease and cancer franchises, as well as delivering 20 percent long-term EPS growth . These advances and investments attest to our commitment to pioneering science and to improve human health worldwide ."

Overall Revenue s

Total revenues were $1 .8 billion for the year 2003, compared to $1 .3 billion for the year 2002 . Foreign exchange rates resulted in an 8 percent increase in total revenues . Net product sales were $1 .3 billion for the year 2003, compared to $914 million for the year 2002 . Total 2003 revenues for PowderJect Pharmaceuticals, which Chiron acquired during the third quarter of 2003, were $245 million . Excluding PowderJect revenues and foreign exchange effect, all other revenues increased 11 percent in 2003 .

Blood Testin g

Total Blood Testing revenues were $422 million for the year 2003, compared to $316 million for the year 2002 . Blood Testing revenues primarily include revenues from the sales of products related to Chiron 's Procleix (R) HIV-1/HCV Assay ; revenues related to Chiron's joint business arrangement for immuno diagnostics with O rtho-Clinical Diagnostics , Inc. (Ortho), a Johnson & Johnson company ; and royalties paid by F . Hoffmann-La Roche (Roche ) related to nucleic acid testing (NAT) blood screening .

Sales related to the Procleix(R) System were $200 million for the year 2003, compared to sales of $125 million for the year 2002 . The increase is primarily due to a full year of commercial pricing in the United States, revenues from the investigation-only use of the Procleix(R) West Nile Virus Assay in the United States, market share gains in the United States, and continued penetration into several markets abroad . Procleix sales were $58 million for the fourth quarter of 2D03, compared to $42 million for the fourth quarter of 2002 . -- Revenues from Chiron's joint business arrangement with Ortho were $10 8

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million for the year 2003, compared to $105 million for the year 2002 . Revenues from the joint business arrangement were $28 million for the fourth quarter of 2003, compared to $26 million for the fourth quarter of 2002 . -- Royalties paid by Roche related to NAT blood screening were $62 million for the year 2003, compared to $49 million for the year 2002 . Royalties paid by Roche related to NAT blood screening were $14 million for the fourth quarter of 2003, compared to $15 million for the fourth quarter of 2002 .

Vaccines

Vaccines net product sales were $678 million for the year 2003, compared to $357 million for the year 2002 . PowderJect product sales were $243 million for the year 2003 . The gross profit margin on vaccines products was 53 percent for the year 2003, compared to 58 percent for the year 2002, with the decrease primarily due to the one-time effect of additional costs associated with the fair value of inventory acquired during the acquisition of PowderJect. Total vaccines product sales were $262 million for the fourth quarter of 2003, compared to $101 million for the fourth quarter of 2002 .

-- Sales of flu vaccines were $332 million for the year 2003, compared to $90 million for the year 2002 . Sales of Fluvirin(R) vaccine,' the flu vaccine that Chiron acquired with PowderJect, were $219 million for the year 2003, representing one full season of Fluvirin revenues . Sales of Agrippal(R) Si, Begrivac(TM) and Fluad(R) flu vaccines were $113 million for the year 2003 . Flu vaccines sales were $141 million for the fourth quarter of 2003, compared to $19 million for the fourth quarter of 2002 . Sales of Menjugate(R) conjugate vaccine against meningococcal C disease were $66 million for the year 2003, compared to $55 million for the year 2002, with the increase primarily due to sales made to Australia . Menjugate sales were $34 million for the fourth quarter of 2003, compared to $33 million for the fourth quarter of 2002 . Sales of Chiron's travel vaccines were $88 million for the year 2003, compared to $64 million for the year 2002 . Travel vaccines primarily include Encepur(TM) vaccine for tick-borne encephalitis and RabAvert(R) vaccine for rabies . The increase was primarily due to increased sales of Encepur vaccine in Germany . Travel vaccines sales were $28 million for the fourth quarter of 2003, compared to $6 million for the fourth quarter of 2002 . Sales of Chiron's pediatric and other vaccines products were $192 million for the year 2003, compared to $148 million for the year 2002, with the increase primarily due to tender sales of pediatric vaccines and increased sales following the PowderJect acquisition . Pediatric and other vaccines products sales were $59 million for the fourth quarter of 2003, compared to $43 million for the fourth quarter of 2002 .

Biopharmaceutical s

The Biopharmaceuticals division reported net product sales and Betaferon(R) interferon beta-1 b royalties of $503 million for the year 2003, compared to $456 million for the year 2002 . The gross profit margin on biopharmaceutical products was 72 percent for the year 2003, compared to 73 percent for the year 2002 . Total biopharmaceutical product sales and Betaferon royalties were $137 million for the fourth quarter of 2003, compared to $122 million for the fourth quarter of 2002 .

- TOBI(R) tobramycin solution for inhalation sales were $172 million for the year 2003, compared to $147 million for the year 2002, with the increase primarily due to progress of the product in Europe, the benefit of foreign exchange rates and price increases . TOBI sales were $49 million for the fourth quarter of 2003, compared to $39 million for the fourth quarter of 2002 . Proleukin(R) (aldesleukin) interleukin-2 sales were $115 million for the year 2003, compared to $114 million for the year 2002 . The consistent sales pattern was primarily due to price increases, the benefit of foreign exchange rates and increased patient demand in the United States, offset by wholesaler ordering patterns . Proleukin sales were $30 million for the fourth quarter of 2003, compared to $3 1

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million for the fourth quarter of 2002 . -- Sales of Betaseron(R) interferon beta-lb for injection, marketed in Europe as Betaferon(R), to Berlex, Inc ., (and its parent company Schering AG) for marketing and resale were $125 million for the year 2003, compared to $118 million for the year 2002 . The increase was primarily due to increased patient demand, price increases and the benefit of foreign exchange rates . The increase was partially offset by a decline in royalties on product sales in the fourth quarter of 2003, pursuant to our agreement with Schering, and changes in wholesaler ordering patterns . Royalties from Schering AG's European sales of Betaferon were $64 million for the year 2003, compared to $47 million for the year 2002 . The increase was primarily due to increased patient demand and the benefit of foreign exchange rates . The increase was partially offset by a decline in Betaferon royalties in the fourth quarter of 2003, pursuant to Chiron's agreement with Schering . Sales of Betaseron for marketing and resale were $36 million for the fourth quarter of 2003, compared to $34 million for the fourth quarter of 2002 . Royalties from Schering AG's European sales of Betaferon were $17 million for the fourth quarter of 2003, compared to $13 million for the fourth quarter of 2002 .

Pipeline and Products Update

Chiron has seen recent advances in franchises across all three of its business units and expects continued progress in 2004 .

Blood Testin g

Chiron expects to expand its leadership in blood testing through new assays, new geographies, greater market penetration and expansion into blood safety .

- At the American Association of Blood Banks annual meeting in San Diego in November, Chiron announced that the Procleix(R) West Nile Virus Assay had identified 861 blood donations confirmed to be infected with the West Nile virus since the investigational-use-only assay was implemented at the beginning of the 2003 mosquito season . Chiron expects to begin a registration trial for the assay in the United States this year . The Procleix(R) Ultrio(TM) Assay, for the simultaneous detection of HIV-1, hepatitis C virus (HCV) and hepatitis B virus (HBV) in donated blood, plasma, organs and tissue, received CE marking in Europe, which will allow full commercialization of the product there . - In the United States, the Procleix Ultrio Assay entered clinical trials, and Chiron, in collaboration with its partner Gen-Probe Incorporated, expects to file a biologics license application (BLA) for the assay this year . In the first quarter of this year, Chiron and Gen-Probe expect to begin clinical trials for 510(k) approval of the TIGRIS(R) fully automated system, a key enabling technology for individual donor testing . The TIGRIS clinical trials will run the Procleix Ultrio Assay in support of its BLA . In collaboration with ZymeQuest Inc ., Chiron plans to develop and commercialize ZymeQuest's enzymatic conversion system, which converts groups A, B and AB red blood cells to enzyme-converted group 0 (ECO(R)) red blood cells . This technology could greatly reduce the number of blood donations currently discarded due to blood types not matching patient needs . -- Chiron recently announced an agreement with Infectio Diagnostic Inc . (IDI) to license IDI's proprietary nucleic acid-based technology for the rapid detection of bacterial contamination in platelets and blood products . The technology brings the potential for reducing test time from two days to one, an important factor given the five-day shelf life of platelet concentrates .

Vaccine s

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Chiron Vaccines development is focused on its meningococcal franchise and flu cell-culture technology .

For the 2003-2004 flu season, Chiron increased production of Fluvirin(R) influenza vaccine for the U .S . market by approximately 50 percent over the 2002-2003 flu season . The company produced more than 40 million Fluvirin doses worldwide, including approximately 38 million doses for the U .S . market . For the 2004-2005 flu season, Chiron expects to increase capacity, producing approximately 50 million doses of Fluvirin, most of which is destined for the United States . The company has committed approximately $100 million for the expansion of its manufacturing facility in Liverpool, England . Chiron expects to enter Phase III studies for its flu cell-culture vaccine this year . A flu cell-culture vaccine may offer additional manufacturing flexibility . -- In the development of vaccines for the five primary serogroups that cause meningococcal disease, Chiron anticipates upcoming advances : The Phase III trial in the United States for Menjugate(R) conjugate vaccine for meningococcal C disease completed enrollment, and Chiron expects to present data to the U .S . Food and Drug Administration (FDA) this year . Chiron expects to see further progress toward the Phase III program for its conjugated meningococcal ACWY vaccine this year . -- In collaboration with the HIV Vaccine Trials Network, funded by the National institute of Allergy and Infectious Diseases, Chiron initiated a clinical trial in the United States for its HIV vaccine candidate, testing a new generation of HIV vaccines that attempt to generate cellular immune response together with broad antibody response that will neutralize the virus . The Phase I study will evaluate the safety and immunogenicity of the vaccine .

BioPharrnaceuticals : Infectious Disease

Chiron continues to build its portfolio of products to treat and prevent infectious disease . This franchise leverages a significant global commercial infrastructure .

Chiron is progressing in its evaluation of aerosolized cyclosporine as a potential treatment for lung transplant rejection and plans to file a new drug application (NDA) this year . - Chiron is determining the regulatory path forward for daptomycin in the European Union . Chiron in-licensed the antibiotic, which the FDA has approved for the treatment of complicated skin and skin structure infections caused by Gram-positive bacteria, from Cubist Pharmaceuticals Inc . in 2003, gaining development and commercialization rights in Europe and several countries outside the United States . -- Chiron initiated the ELITE (EarLy Intervention TOBI Eradication) trial in Europe to further study the benefits of TOBI(R) tobramycin solution for inhalation in treatment of early onset Pseudomonas aeruginosa in cystic fibrosis patients . -- Chiron is investing to expand its TOBI franchise in its study of the dry-powder formulation, delivered with a hand-held device that the company is developing in collaboration with Nektar Therapeutics . Chiron anticipates Phase I results from this study in the first half of the year, and, based on an understanding with the FDA, the company may move directly to Phase III testing by the end of the year . - Chiron plans to initiate a Phase III trial for tifacogin in patients with severe community-acquired pneumonia this spring .

BioPharmaceuticals : Oncology

Chiron's oncology franchise has three dimensions : immune-based therapies, monoclonal antibodies and novel cancer agents.

-- Based on objective, durable responses in a specific sub-population, Chiron is expanding enrollment in its Phase II study of Proleukin(R )

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(aldesleukin) for injection plus rituximab in patients with low-grade non-Hodgkin's lymphoma who have failed rituximab therapy . The company has submitted an abstract to the American Society of Clinical Oncology (ASCO) meeting, to be held June 5-8 in New Orleans, to detail these findings . -- Chiron is broadening the scope of its development of Proleukin plus rituximab by initiating a new Phase II study in rituximab-naive patients to determine the combination's potential as an early treatment option . Chiron recently began a Phase I study for GFKI-258 . This growth factor kinase inhibitor is Chiron's first small-molecule oncology compound . -- Chiron expects to file an investigational new drug application (IND) for another oncology compound, anti-CD40, this year .

Biopharmaceuticals : Betaseron(R) Interferon Beta-lb for Injection

Betaseron continues to distinguish itself in the multiple sclerosis (MS) market through its strong clinical results . Convenience features and new studies will help drive Betaseron growth .

-- Chiron and its partner Berlex launched a new pre-filled diluent syringe for Betaseron, making it easier to use for people with MS . The drug's formulation remains unchanged, continuing to provide patients with the proven efficacy of Betaseron .

Other Recent Business Milestone s

Other recent business activities underline the value of Chiron's products and intellectual property and the strength of its leadership .

Chiron announced the appointment of David Smith to the position of chief financial officer . Mr . Smith joined Chiron Corporation as vice president, corporate controller, in February 1999 and previously held executive finance positions at Anergen Inc . and Genentech . Chiron granted nonexclusive licenses to Pfizer Inc ., Rigel Pharmaceutials, Vertex Pharmaceutials and Boehringer Ingelheim International GmbH for the research, development and commercialization of therapeutics against certain hepatitis C virus (HCV) drug targets .

4Q03 Earnings Conference Cal l

Chiron will hold a conference call and webcast on Wednesday, January 28, 2004, at 4 :45 p .m. EST to review its fourth- quarter 2003 results of operations and business highlights . In addition, the company may address forward-looking questions concerning business, financial matters and trends affecting the company .

To access either the live call or the one-week archive, please log on to http://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 1-800-374-0907 (U.S.) or 706-643-3367 (international) . Replay is available approximately two hours after the completion of the call through 11 :00 p.m. EST, Wednesday, February 4, 2004 . To access the replay, please call 1- 800-642-1687 (U .S.) or 706-645-9291 (international) . The conference ID number is 1046313 .

About Chiro n

Chiron Corporation, headquartered in Emeryville, California, is a global pharmaceutical company that leverages a diverse business model to develop and commercialize high-value products that make a difference in people's lives. The company has a strategic focus on cancer and infectious disease . Chiron applies its advanced understanding of the biology of cancer and infectious disease to develop products from its platforms in proteins, small molecules and vaccines . The company commercializes its products through three business units: BioPharmaceuticals, Vaccines and Blood Testing . For more information about Chiron, visit the company's website at www .chiron.com,

This news release contains forward-looking statements, including statements regarding sales growth, product development initiatives, new product indications, new product marketing, acquisitions, and in- and out- licensing activities, that involve risks and uncertainties and are subject to change . A full discussion of the company's operations and financial condition, including factors that may affect its business and future prospects, is contained in documents the company has filed with th e

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SEC, including the form 10-Q for the quarter ended September 30, 2003, and the form 10-K for the year ended December 31, 2002, and will be contained in all subsequent periodic filings made with the SEC . These documents identify important factors that could cause the company's actual performance to differ from current expectations, including the outcome of clinical trials, regulatory review and approvals, manufacturing capabilities, intellectual property protections and defenses, stock-price and interest-rate volatility, and marketing effectiveness . In particular, there can be no assurance that Chiron will increase sales of existing products, successfully develop and receive approval to market new products, or achieve market acceptance for such new products . There can be no assurance that Ch€ron's out-licensing activities will generate significant revenue, nor that its in-licensing activities will fully protect it from claims of infringement by third parties . In addition, the company may engage in business opportunities, the successful completion of which are subject to certain risks, including shareholder and regulatory approvals and the integration of operations .

Consistent with SEC Regulation FD, we do not undertake an obligation to update the forward-looking information we are giving today .

NOTE: Agrippa[, Begrivac, Encepur, Fluad, Fluvirin, Menjugate, Procleix, Proleukin, RabAvert, TOBI and Ultrio are trademarks of Chiron Corporation . Betaseron and Betaferon are trademarks of Schering AG . TIGRIS is a registered trademark of Gen-Probe Incorporated . ZymeQuest and ECO are trademarks of ZymeQuest, Inc .

CHIRON CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited ) (In thousands, except per share data)

Three Months Ended December 31 ,

2003 Pro Forma Pro Forma Adjusted (1) Adjustments Actua l

Revenues : Product sales, net $448,611 $-- $448,61 1 Revenues from joint busines s arrangement 28,313 -- 28,31 3 Collaborative agreement revenues 3,008 -- 3,00 8 Royalty and license fee revenues 63,605 -- 63,60 5 Other revenues 11,044 -- 11,04 4

Total revenues 554,581 -- 554,58 1

Operating expenses : Cost of sales 214,508 214,508 Research and development 140,242 -- 140,24 2 Selling, general and administrative 121,405 -- 121,40 5 write-off (reversal) of purchase d in-process research and development -- 77,400 (77,400 ) Amortization expense -- (21,230) 21,23 0 Restructuring and reorganizatio n (reversals) charges (103) -- (103 ) Other operating expenses 3,803 -- 3,80 3

Total operating expenses 479,855 56,170 423,68 5

Income from operations 74,726 (56,170) 130,89 6

Interest expense (6,581) -- (6,581 ) Interest and other income, net 7,498 -- 7,49 8 Minority interest (329) -- (329 )

Income from continuing operation s before income taxes 75,314 {56,170) 131,48 4 Provision for income taxes 16,828 5,307 13,52 1

Income from continuing operations 56,486 (61,477) 117,96 3

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Gain from discontinued operations 3,837 -- 3,83 7

Net incom e $60,323 $(6 :1,477) $121,80 0

Basic earnings per share ; Income from continuing operations $0 .30 $0 .6 3 Net Income $0 .32 $0 .6 5

Diluted earnings per share : Income from continuing operations $0 .29 $0 .59 Net Income $0 .31 $0 .6 1

Shares used in calculating basic earnings per shar e 187,39 3 187,39 3

Shares used in calculating diluted earnings per shar e 200,567 205,79 5

2002 Pro Forma Pro Form a Adjusted (2) Adjustments Actua l

Revenues : Product sales, ne t $257,054 $-- $257,05 4 Revenues from joint business arrangemen t 26,028 -- 26,02 8 Collaborative agreement revenues 4,356 -- 4,35 6 Royalty and license fee revenues 60,397 -- 60,39 7 Other revenue s 8,489 -- 8,48 9

Total revenues 356,324 -- 356,32 4

Operating expenses : Cost of sale s 101,985 -- 101,98 5 Research and developmen t 81,854 -- 81,85 4 Selling, general and administrative 61,690 -- 81,69 0 Write-off (reversal) of purchased in-process research and development 9,600 (9,600 ) Amortization expense - (7,529) 7,52 9 Restructuring and reorganization (reversals) charge s Other operating expenses 5,776 -- 5,77 6

Total operating expenses 271,305 2,071 269,23 4

Income from operations 85,019 (2,071) 87,09 0

Interest expens e (3,323) -- (3,323 ) Interest and other income, net 4,906 -- 4,90 6 Minority interes t (304) -- (304 )

Income from continuing operations before income taxe s 86,298 (2,071) 88,36 9 Provision for income taxes 23,300 2,033 21,26 7

Income from continuing operations 62,998 (4,104) 67,10 2

Gain from discontinued operations

Net income $62,998 $(4,104) $67,10 2

Basic earnings per share :

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Income from continuing operations $0 .34 $0 .36 Net Incom e $0 .34 $0 .3 6

Diluted earnings per share : Income from continuing operations $0 .33 $0 .35 Net Incom e $0 .33 $0 .3 5

Shares used in calculating basic earnings per share 187,639 187,639

Shares used in calculating dilute d earnings per share 190,899 196,127

(1) Pro Forma Adjusted amounts exclude (a) the amortization expense on acquired intangible assets related to the acquisitions o f PathoGenesis, Chiron Behring, Pulmopharm and PowderJect Pharmaceuticals and (b) a purchase price allocation adjustment to the write-off of purchased in-process research and development related to the PowderJect Pharmaceuticals acquisition, upon completion of strategic assessments of the value of certain research and development projects .

(2) Pro Forma Adjusted amounts exclude (a) the amortization expense on acquired intangible assets related to the acquisitions of PathoGenesis, Chiron Behring and Pulmopharm and (b) the adjustment to the write-off of purchased in-process research and development related to the Matrix acquisition for a lease assignment .

CHIRON CORPORATIO N CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) . (In thousands, except per share data)

Year Ended December 31 ,

2003 Pro Forma Pro Forma Adjusted (3) Adjustments Actua l

Revenues : Product sales, ne t $1,345,833 $-- $1,345,83 3 Revenues from joint business arrangemen t 108,298 -- 108,29 8 Collaborative agreement revenues 18,562 -- 18,56 2 Royalty and license fee revenues 250,142 -- 250,14 2 Other revenue s 29,113 (14,413) 43,52 6

Total revenue s 1,751,948 (14,413) 1,766,36 1

Operating expenses : Cost of sale s 571,897 -- 571,897 Research and developmen t 409,806 -- 409,806 Selling, general and administrative 378,890 -- 378,89 0 Write-off of purchased in-process research and developmen t -- (45,300) 45,300 Amortization expense -- (56,365) 56,36 5 Restructuring and reorganization charge s 1,654 -- 1,654 Other operating expense s 11,376 -- 11,37 6

Total operating expense s 1,373,623 (101,665) 1,475,28 8

Income from operations 378,325 87,252 291,073

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Interest expens e (19,104) -- (19,104 ) Interest and other income, net 38,668 -- 38,66 8 Minority interes t (1,753) -- (1,753 )

Income from continuing operations before income taxe s 396,136 87 ,252 308,88 4 Provision for income taxes 99,034 10 , 488 88,54 6

Income from continuing operations 297,102 76,764 220,33 8

Gain (loss) from discontinued operation s 6,975 -- 6,97 5

Net income $304,077 $76,764 $227,31 3

Basic earnings per share : Income from continuing operations $1 .59 $1 .1 8 Net income $1 .63 $1 .22

Diluted earnings per share : Income from continuing operations $1 .54 $1 .1 5 Net incom e $1 .58 $1 .1 9

Shares used in calculating basic earnings per shar e 186,835 186,83 5

Shares used in calculating diluted earnings per shar e 199,143 193,91 5

2002 Pro Forma Pro Form a Adjusted (4) Adjustments Actua l

Revenues : Product sales, ne t $914,121 $-- $914,12 1 Revenues from joint business arrangemen t 104,576 -- 104,57 6 Collaborative agreement revenues 22,142 -- 22,14 2 Royalty and license fee revenues 198,816 -- 198,81 6 Other revenue s 36,625 -- 36,62 5

Total revenues 1,276,280 -- 1,276,28 0

Operating expenses : Cost of sale s 341,808 -- 341,80 8 Research and developmen t 325,792 -- 325,79 2 Selling, general and administrative 283,712 -- 283,71 2 Write-off of purchased in-process research and developmen t (45,181) 45,18 1 Amortization expense -- (29,857) 29,85 7 Restructuring and reorganization charges Other operating expenses 16,952 -- 16,95 2

Total operating expenses 968,264 (75,038) 1,043,30 2

Income from operations 308,016 75,038 232,97 8

Interest expens e (12,821) -- (12,821 ) Interest and other income, net 46,362 -- 46,36 2 Minority interes t (1,664) -- (1,664)

Income from continuing operations

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before income taxes 339,893 75,038 264,85 5 Provision for income taxe s 91,771 8,061 83,71 0

Income from continuing operations 248,122 66,977 181,14 5

Gain (loss) from discontinued operation s (320) (320 )

Net incom e $247,802 $66,977 $180,82 5

Basic earnings per share : Income from continuing operations $1 .31 $0 .9 6 Net incom e $1 .31 $0 .96

Diluted earnings per share ; Income from continuing operations $1 .29 $0 .9 4 Net incom e $1 .29 $0 .9 4

Shares used in calculating basic earnings per share 188,792 188,792

Shares used in calculating dilute d earnings per share 192,152 192,152

(3) Pro Forma Adjusted amounts exclude : (a) the Biogen and Serono settlements in connection with the McCormick patents owned by Schering's U .S . subsidiary, Berlex Labratories, (b) amortization expense on acquired intangible assets related to the acquisitions of PathoGenesis, Chiron Behring, Pulmopharm and Powderject Pharmaceuticals and (c) the write-off of purchased in-process research and development related to the PowderJect Pharmaceuticals acquisition .

(4) Pro Forma Adjusted amounts exclude ; (a) write-off of purchased in- process research and development related to the Matrix acquisition and (b) amortization expense on acquired identifiable intangible assets related to the acquisitions of PathoGenesis, Chiron Behring and Pulmopharm .

Note : Due to rounding, quarterly earnings per share amounts may not sum fully to yearly earnings per share amounts .

CHIRON CORPORATION CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited ) (In thousands)

December 31 , December 31, 200 3 200 2

Asset s Current assets ; Cash and short-term investments $538,48 2 $874,080 Accounts receivable, net 382,93 3 278,625 Current portion of note s receivable 1,47 9 71 8 Inventories, net 199,62 5 146,005 Other current assets 135,13 0 86,294 Total current assets 1,257,64 9 1,385,72 2 Noncurrent investments in marketabl e debt securities 560,29 2 414,447 Property, plant, equipment an d leasehold improvements, net 689,750 373,55 8

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other noncurrent assets 1,687,478 ..786,617 Total asset s $4,195,169 $2,960,34 4

Liabilities and stockholders' equity Current liabilitie s $436,913 $298,63 6 Long-term debt 926,709 416,954 Capital leas e 157,677 - - Noncurrent unearned revenue 45,564 62,58 0 Other noncurrent liabilities 176,944 81,80 9 Minority interes t 7,002 5,35 5 Put options 19,05 4 Stockholders' equity 2,444,360 2 , 075,95 6 Total liabilities and stockholders' equity $4,195,169 $2,960,34 4

CHIRON CORPORATION Supplemental Revenue Summary (Pro Forma ) USD $ (in thousands )

Current Prior Change Quarter Quarter from Change Q4 2003 Q3 2003 Prior QTR % Product Sales, net Blood Testing Ortho $8,625 $6,235 $2,390 38 .3% NAT 58,299 53,663 4,636 8 .6% Total Blood Testing 66,92 4 59,89 8 7,026 11 .7 %

Vaccine s Flu Vaccines 141,142 183,250 (42,108) (23 .0)% Meningococcus Vaccines 33,672 10,642 23,030 216 .4w Travel Vaccines 27,850 11,229 16,621 148 .0 % Pediatric/Other Vaccines 58,97 4 57,59 8 1,376 2 .4% Total Vaccine s 261,638 262,719 (1,081) (0 .4)%

Biopharmaceuticals : Proleukin 29,852 29,859 (7) 0 .0 % TOB I 49,307 43,022 6,285 14 .6% Betaseron* 36,14 8 29,01 0 7,138 24 .6% Other 4,742 8,166 (3,424) (41 .9) % Total Biopharmaceutical s 120,049 110,057 9,992 9 .1 %

TOTAL PRODUCT SALES, NET $448,611 $432 ,674 $15,937 3 .7%

Revenues From joint Business Arrangemen t $28,313 $26,058 $2,255 8 .7% Collaborative Agreement Revenues 3,008 7,816 (4,808) (61 .5) % Royalty and License Fee Revenues 63,605 66,237 (2,632) (4 .0)% Other Revenue s 11,044 7,688 3,356 43 .7% TOTAL REVENUES $554,581 $540,473 $14,108 2 .6%

Gross Margins Blood Testing 38% 40% (2) % Vaccines 49% 58% (9)% Biopharmaceuticals 66% 74% (8)% TOTAL GROSS MARGIN S 52% 60% (8)%

* Excludes Betaferon Royalty $16,658 $15,970 $688 4 .3 9

Year Ago Chang e Quarter from Change Q4 2002 Prior Year % Product Sales, net

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Blood Testing Ortho $5,513 $3,112 56 .4 % NAT 42,041 16,258 38 .7 % Total Blood Testing 47,554 19,370 40 .7%

Vaccine s Flu Vaccines 18,948 122,194 644 .9 % Meningococcus Vaccines 33,152 520 1 .6 % Travel Vaccines 5,823 22,027 378 .3 % Pediatric/Other Vaccines 43,057 15,917 37 .0 % Total Vaccines 100,980 160,658 159 .1 %

Biopharmaceuticals : Proleukin 30,588 (736) (2 .4) % TOBI 38,566 10,741 27 .9 % Betaseron* 33,920 2,228 6 .6 % Other 5,446 (704) (12 .9) % Total Biopharmaceuticals 108,520 11,529 10 .6 %

TOTAL PRODUCT SALES, NET $257,054 $191,557 74 .5 %

Revenues From Joint Business , Arrangement $26,028 $2,285 8 .6% Collaborative Agreement Revenues 4,356 (1,348) (30 .9) % Royalty and License Fee Revenues 60,397 3,208 5 .3 % Other Revenues 8,489 2,555 30 .1 % TOTAL REVENUES $356,324 $198,257 55 .6 %

Gross Margin s Blood Testing 44% (6) % Vaccines 58% (9) % Biopharmaceuticals 67% {1) %- TOTAL GROSS MARGINS 60% (8) %

* Excludes Betaferon Royalty $13,202 $3,456 26 .2 %

CHIRON CORPORATION Supplemental YTI] Revenue Summary (Pro Forma ) USD $ (in thousands )

Twelve Months Ended Chang e December. 31, from Chang e 2003 2002 Prior Year % Product Sales, ne t Blood Testing Ortho $28,391 $22,652 $5,739 25 .3 % NAT 200,066 125,465 74,601 59 .5 % Total Blood Testing 228,457 148,117 80,340 54 .2 %

Vaccine s Flu Vaccines 332,428 89,995 242,433 269 .4 % Meningococcus Vaccines 65,548 54,971 10,577 19 .2% Travel Vaccines 87,631 64,335 23,496 36 .5% Pediatric/Other Vaccines 192,511 147,963 44,548 30 .1 % Total Vaccines 678,318 357,264 321,054 89 .9 %

Biopharmaceuticals : Proleukin 115,075 114,281 794 0 .7 % TOBI 172,047 146,874 25,173 17 .1 % Betaseron* 124,936 118,513 6,423 5 .4 % Other 27,000 29,072 (2,072) (7 .1) 96 Total Biopharmaceuticals 439,058 408,740 30,318 7 .4 %

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TOTAL PRODUCT SALES, NET $1,345,833 $914,121 $431,712 ; 47 .2 %

Revenues From Joint Business Arrangement $108,296 $104,576 $3,722 3 .6 % Collaborative Agreemen t Revenues 18,562 22,142 (3,580) (16 .2) % Royalty and License Fee Revenues 250,142 198,816 51,326 25 .8% Other Revenues 29,113 36,625 {7,512) (20 .5) % TOTAL REVENUES $1,751,948 $1,276,280 $475,668 37 .3 %

Gross Margin s Blood Testing 41% 41% 0 % Vaccines 53% 58% (5) % Biopharmaceuticals 72% 73% (1) % TOTAL GROSS MARGINS 58% 63% (5) %

* Excludes Betaferon Royalty $63,768 $46,937 $16,831 35 .9 %

SOURCE Chiron Corporatio n

http://phx.corporate-ir .net/phoenix.zhtml?c=105850&p=irol-newsArticle_Print&ID=55298 ... 4/20/2005 EXHIBIT L Chiron Corp . CHIR 04 2003 Earnings Call Jan. 28, 2004 Companva TickerA Event Type A Date d

= CALLSTREET EVENT PAG E

hftp-//www.calistreet.com/call ,

The CaflStreet event page contains CallStreet Transcripts, CalIStreet Reports and supplemental information including a fink to the company's press release associated with this ca!) .

= MANAGEMENT DISCUSSION SECTION

Operator

Good afternoon . My name is Shayta and I will be your conference facilitator for today . At this time, I would like to welcome everyone to the Chiron fourth quarter full year 2003 financial results conference call. All lines have been placed on mute to prevent any background noise . After the speakers' remarks, there will be a question and answer period . If you would like to ask a question during this time, simply press star then your number one on your telephone keypad . If you would like to withdraw your question, press star then your number two on your telephone keypad . I would now like to turn the call over to Martin Forrest, Vice President of Corporate Communications and Investor Relations . Please go ahead sir .

Martin Forrest , Vice President of Corporate Communications and Investor Relation s

Thank you Shayla . Good afternoon and welcome to Chiron's fourth quarter 2003 conference call . On behalf of the Chiron team I would like to introduce you to our principal speakers, Howard Pien, Chiron's CEO and President and David Smith, Chiron's CFO . I'm Martin Forrest from the Investor Relations and Corporate Communications group . Marty Veer and the Investor Relations team will be available after the call today to answer any questions that you might have . Before I turn the call over to Howard for his discussion on Chiron's results, I would like to remind you that our remarks today will include forward-looking statements relating to future events and the financial performance of the company. Actual events and performance may differ materially from our expectations . We refer you to the documents that the company has filed with the Securities and Exchang e Commission which are available through our website at chiron .com. These include 2002 10-K reports and the third quarter 10-Q report.

The 2003 10-K report will be available shortly . All the filings include information under the heading 'Factors That May Affect Future Results' in the MD&A portion of the document . This information identifies important factors that could cause the company's actual performance to differ from current expectations. Please note that where we indicate a number to be pro forma in today's discussion, we have made available a reconciliation of pro forma to GAAP in the condensed consolidated statement of operations attached to our press release issued today . The reconciliation for the fourth quarter along with the reconciliation of pro forma to GAAP for prior quarters is also available on our website. Consistent with SEC Regulation FD, we do not undertake an obligation to update the forward-looking information we are giving today . Finally, please note that this call is being electronically recorded and is copyrighted by Chiron, no reproductions, retransmissions, transcripts, or copies of this conference call can be made without written permission of Chiron . With that as a preface, I will turn the call over to you, Howard .

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64402185 Chiron Corp. CHIR Q4 2003 Earnings Call Jan . 28, 2004 CompanyA TickerA Event TyptA _ Date A

Q) Howard Pion, CE O L) Thank you . Good afternoon and thank you for joining our call . Today Chiron announced its fourth quarter earnings results . In today's call I want to talk to you about our accomplishments in 2003 and the goals by which you can measure us by in 2004 . And following me David Smith will walk you V) through the details from the quarter and full year, but let me start with just a remark on earnings . air Today, we reported fourth quarter pro forma net income from continuing operations of $0 .29 per share. Our results for the full year were $1 .54, up 19% from 2002 . Revenues grew 37% year-over- year to $1 .8 billion, the highest in Chiron's 23-year history. All 3 business units performed well this quarter and our earnings for the year reflected growth for each 1 of our business units . Our strong showing is a tribute to our ability to deliver great financial results while making key investments in ,r • our businesses to create future value for shareholders . At the same time we were able to invest in the areas that we discussed in the last quarter's call. .

As we move into 2004, we will continue to fulfill our investment agenda while aiming for a long-term EPS growth rate of 20% .'We recognize that we exceeded our stated guidance for 2003 . When we provided you with updated guidance on the third quarter call, we explained that it was predicated upon our commitment to an investment agenda . Nearly all of the items on that investment agenda, which underpinned our guidance update in October, have revealed themselves and expenses have been or will be taken in the relationship to where these items actually fell, either before or after the end of the year. We have begun the year with important developments that portend a bright year ahead. I will line now outline a few of these developments . To start with, the current core of our thriving Blood Testing business is our NAT franchise . We have multiple goals and milestones to achieve In 2004 . One, we are expecting geographic growth for the Procleix HIVIHCV Assay in several new countries including Poland, Greece, Korea and Thailand . Two, the Procleix Uitrib Assay has received CE marking, thus opening the way to full commercialization of the product in Europe.

The addition of a hap B test to the assay will be an important advantage for the test as we expand Q. into Pacific Rim and Latin America, where hep B is endemic . Three, we have begun clinical trials r rrrr for Ultrio in the US and expect to file a BLA for Ultrio this year . Four, we're expecting a clinical trial to begin in the US for our West Nile Virus Assay . Five, with our partner Gen-Probe, we are expecting clinical trials to begin for the TIGRIS fully automated system, a .key enabling technology V for individual donor testing . Clinical trials for Ultrio will be conducted on TIGRIS. ♦ V Beyond NAT, we have made investments to expand our business into the broader realm of blood safety. Since we already have 80% of the US NAT market . We clearly understand the needs of our customers and we are rising to meet them . Our agreement with fill brings us a bacterial detection . We have the potential to reduce time for results from 2 days to 1, an important Co system in platelets advantage when platelets have to be processed, shipped, and used within just 5 days . This system could be on the market as soon as 2005 . And through our collaboration also recently announced with ZymeQuest, we have the potential to develop a system to convert blood to universal donor type O . This technology could greatly reduce mis-matches of blood, help reduce blood shortages and reduce the number of donations discarded due to blood types not matched against the patient's needs. Combining these expansions into blood safety with our existing NAT franchise should help our Blood Testing business reach $800 million in revenue in the next 5 years .

Now onto our Vaccines Business . As you all know, Chiron's entry into the US flu market during a 0 season of heightened awareness of the dangers of flu has made the company nearly a household name. The public is increasingly conscious of the value of vaccination in preventing a common, but potentially deadly disease, and we are working to help meet the public health need . Our Fluvirin production for the '03 -'04 season in the US represented a 50% increase over production of the previous season and this was achieved while the PowderJect acquisition was being Integrated . 0 This is a significant accomplishment and testimony to the dedication and professionalism of ou r V www .CaliStreet . com • 212 . 931 .65 15 • Copyright ® 2004 CallStreet

64402186 Chiron Corp. Cl-HR Q4 2003 Earnings Call Jan . 28, 2004 +_J Compan A TickerA Event T eA Date A employees . The next'04 -'05 season, we project that we will be able to produce approximately 50 million doses of Fluvirin, a vast majority of which is destined for the US .

Chiron is committing approximately $100 million to our Liverpool flu vaccine manufacturing facility- The investment will allow for an incremental increase in our production through greater efficiency and greater capacity. Chiron is also preparing to enter Phase III testing for our flu cell culture vaccine, Cell culture vaccine production potentially has greater flexibility. Cell culture will be an important component to the existing egg-based technology, which is likely to remain a key component in flu vaccine manufacturing for many years to come . With Fluvirin not only have we acquired a great product with tremendous potential for growth, we have also established a beachhead in the important US market . One of our goals for'04 is to strengthen a commercia l • +~► vaccines organization in the US in preparation for the advancement of our meningococcal vaccine . We anticipate that we will be filing a BLA for Menjugate, our men C vaccine, in 2004 . Our next step forward will be to continue to advance the program for our ACWY vaccines towards Phase III . And finally we're continuing development of a broad coverage men B vaccine to complete a full suite of meningococcal vaccines that represent a billion dollar plus opportunity .

Now, on to our BioPharmaceuticals Business . With our new leadership team in place, we believe that the Biopharma pipeline now represents a clear set of opportunities for short-term and long-term growth. In 2004, we're focusing on 2 major Phase III programs, a potentially pivotal Phase It program and an NDA submission . Aerosolized cyclosporine or CsA is a potential treatment for lung transplant rejection. With about 1100 lung transplants in the US each year and a 5-year mortality rate approaching 50%, this is a well-defined population with a significant unmet medical need . Preliminary analysis of the data Indicates the possibility of a substantial reduction in mortality after lung transplant with the use of CsA. Our goal is to submit the NDA for CsA this year .

Another important near-term opportunity is daptomycin for which we in-licensed commercial rights last year in Europe and several other ex-US territories . We are in the process of determining the 41-J CL regulatory path with European registration and we'll soon reach a decision with our partner Cubist. Again this is a hospital-based product that would leverage our sales force's existing relationship ■ ~„■ with existing customers .

U We are also investing to expand our TOBI franchise to meet the needs of CF patients . DPI, a dry powder formulation of TOBI, will reduce administration time and increase convenience, which would encourage greater compliance among CF patients . We are anticipating Phase I results fo r V DPI in the first half of the year and based on our understanding from the FDA, may move directly into Phase III testing by year's end .

In the longer term we have several significant opportunities . Tifacogin for patients with severe community-acquired pneumonia could address a major unmet need, We plan to initiate a Phase III }, trial this spring and in March we will be holding a conference call to detail the program and th e protocol for you. Besides in infectious disease, we have 4 developments in oncology. We just announced our progress with Proleukin in combination with rituximab in patients with non-Hodgkin's lymphoma . In the current Phase II trial with rituximab in refractory patients, we have seen endurable responses in the population in which such responses are not expected . To study the !V~/1 patients and have identified a specific sub-population with particular genotypes . Based on these }J high quality responses we are expanding involvement of this trial to confirm our hypothesis on U which patients are best suited for treatment . They have submitted an abstract to ASCO to detail these findings .

In addition we are broadening the scope of our development of Proleukin plus rituximab by initiating a randomized controlled Phase II trial in rituximab-naive patients in this particular patient sub-group . We want to determine if Proleukin plus rituximab has potential as an early treatment option . Another significant development in oncology is GFKI-258 -- that's GFKI - Growth Factor Kinase Inhibitor 258 . Our first small-molecule oncology compound . Phase I trials for this compound began 0

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64402187 Chiron Corp. I CHIR Q4 2003 Earnings Call Jan . 28, 2004 ComoanvA I Ticker) Event Type A Date A

W this month. We expect to file an IND for a second oncology compound, the anti-CD40 this year . These advances we believe strongly foretell the vibrancy of our pipeline .

In 2004 we will have 20 important goals and milestones of which 10 will be pipeline advances and progressions . 6 of this 10 will be advances for biopharmaceuticals representing the early, but convincing fruits of our labor to sharpen the focus of our development efforts . As you can see, 2004 erne promises to be an exciting year for us in all 3 of our businesses, and we're off to a great start . Now, I'd like to turn the call over to David for detailed discussion of the fourth quarter financial results .

U David Smith, Chief Financial Officer

Thanks Howard . I'll begin with a review of the results for both the quarter and the full year, which were released today at approximately 1 PM Pacific Standard Time . Our earnings per share amounts discussed today refer to the pro forma diluted per share earning . As we have discussed previously, we present our financial results on both an as reported GAAP basis and a pro forma . basis . The adjustments we made this year to arrive at a pro forma earnings consists of a write-off of purchased in-process technologies, related to the PowderJect acquisition, the amortization expense on acquired, identifiable and tangible assets related to acquisitions, plus the Biogen and Serono settlements in connection with the McCormick patents and discontinued operations .

The adjustments in 2002 consisted of the write off of purchase of in-process technologies related to the Matrix acquisition, the amortization expense on acquired, identifiable and tangible assets related to acquisitions and discontinued operations . A reconciliation between our GAAP and, pro forma results can be found on our website at chiron .com . For the year, Chiron reported pro forma income from continuing operations of 297 million or $1 .54 per share . This result exceeded our guidance and was approximately 19% higher than the earnings per share of $1 .29 reported in 2002. For the fourth quarter, Chiron reported pro forma income from continuing operations of $0 .29 per share. Total revenues for 2003 increased 37% to $1 .8 billion from $1.3 billion for 2002. Product a- revenues increased 47% to $1 .3 billion from $914 million reflecting our acquisition of PowderJect during the third quarter.

The continued weakening of the dollar against the euro had a favorable impact on our top line, net U of foreign exchange, revenues increased 29% year-over-year . Total revenues for PowderJect for ♦ 2003 were 245 million. Net of PowderJect and FX, our total revenues Increased 11 % year-over- V year. Increases In product sales are seen across all three of our business units, in particular Flu -Vaccines and Procleix. Revenues from our joint business arrangement with Ortho-Clinica l 'Diagnostics were also up . Royalty and license fees, collaborative agreement revenues and other revenues increased 16% primarily due to HCV and HIV product royalties, and license fees from our intellectual property portfolio and Betaferon royalties. Gross margins decreased to 58% from last year's gross margins of 63% largely due to change in the product mix from our three business units . Research and development expenses for 2003 totaled $410 million, up 26% from 2002, with PowderJect contributing about 5% . This is an indication of our increased level of investment across 70 all three of our business units.

The main beneficiaries of this increase include our meningococcal vaccines franchise, flu cell culture, tifacogin, and interleukin-2 in combination with various monoclonal antibodies . The 4-11 additional component of the investment agenda includes expenses related to the in-licensing of C) daptomycin and technology from ZymeQuest and IDI . SGA, SG&A expenses for 2003 totaled $379 million, up 34% from 2002 with PowderJect contributing approximately 40% of the increase for the a) current year . Integration related expenses were $12 million for the year, approximately half of our total expected integration expenses . We expect that we will continue to incur Integration related expenses through mid-2004 . Our full year effective tax rate was 25% . 0 U www.CaliStreet .com • 212 .931 .6515 • Copyright @ 2004 CallStreet 4

64402188 Chiron Corp . CHIR Q4 2003 Earnings Call Jan . 28, 2004 4..i Corn an A TickerA Event T A Date A w Now I'd like to move on to review of the business unit financial results, starting with our Bloo d Testing unit . Blood Testing total revenues including product sales, Chiron's share of revenues from our joint business arrangement with Ortho, collaborative agreement revenues, and royalty and license fees increased to $422 million in 2003 from $316 million in 2002, a 34% increase . Driving this growth was a full year of commercial pricing for product sales, Procleix in the United Lon States, the Pracleix West Nile Virus available Assay available on an investigational only basis in the US, market share gains in the US for product sales of Procleix and continued penetration into several markets abroad . Also contributing to the increase was higher royalty revenue for the use of HCV and HIV intellectual property related to NAT testing and higher revenues from our joint business arrangement.

• Turning now to Vaccines . We saw excellent results in Vaccines this year confirming the value of our purchase to PowderJect . In 2003, total product revenues for the Vaccines Business were 678 million versus 357 million last year . PowderJect product revenues were 243 million for 2003 . Total flu sales for 2003 increased 269% to 332 million over 2002 . Total Fluvirin sales were 219 million for the year, while Chiron flu vaccine sales were 113 million for the year.

On a pro forma basis, the year-over-year increase in flu sales was 44% . Menjugate performed well in 2003, primarily as a result of sales to Australia. Menjugate sales were 66 million, up 19% from 2002. Sales of our travel vaccines were $88 million in 2003, up 37% from 2002 . The Encepur vaccine was the principal growth driver as it had a very successful year in the German market . Sales of pediatric and other vaccines were 192 million in 2003, up 30% from 2002 . The increase was largely driven by tender sales of our pediatric vaccines and increased sales following our acquisition of PowderJect . Gross profit for Vaccines was 53% down from 58% in 2002 .The decrease was primarily due to the one-time effect of additional costs reflected in 2003 associated with the fair value of inventory acquired during the acquisition of PowderJect.

Moving to our third business, BioPharmaceutical. Total BioPharmaceutical's product revenues, including Betaferon royalties, were 503 million in 2003, up from 456 million in 2002, a 10% CL increase . We saw increases in TOBI and Betaseron sales while Proleukin sales were consistent r r~ with 2002. Our TOBI sales were $172 million, up 17% from 2002, largely due to the progress of TOBI across Europe and price increases . 2003 sales of Betaseron including the royalty earned from the sale of Betaferon by Schering in Europe were 189 million versus 165 million last year, an increase of 14%. This increase was primarily driven by increased patient demand, price increases, and the benefit of foreign exchange rates. These increases were partially offset by a decline in product sales and Betaferon royalties in the fourth quarter of 2003, pursuant to our agreement with Schering and changes in wholesale ordering patterns . Sales of Proleukin were 115 million essentially consistent with 2002, mostly due to price increases and increased patient demand in the US, offset by wholesale ordering patterns . Wholesaler inventory levels remain in line with our expectations. Gross margins in the BioPharmaceutical segment were 72% .

Now In summary, let me take a moment to highlight our view of 2003 and what to look forward to in 2004. 2003 was an important year for Chiron, a year in which we delivered solid financial growth while advancing long-term value creation proposition . The acquisition of PowderJect positioned us as a major player in the growing US flu market . Blood Testing saw the introduction of testing for the Proclelx West Nile Virus Assay under an IND, and growth in key markets including the United a) Kingdom. We strengthened our BioPharma management team, and in-licensed CsA and 4_0 daptomycin, 2 products with near-term market potential . We beat our guidance for 2003 by $0 .04 V and in doing so performed ahead of our expectations . There were 2 principle reasons for this, The first relates to the timing of certain tenders from vaccines that we had expected in 2004 . Secondly a) as Howard mentioned, we began execution of our enhanced investment agenda, some of which occurred in 2003. Our achievements during the year testified to Chiron's unique ability to deliver solid financial results, while funding exciting new opportunities . a U www .CaliiStreet. com • 212 . 931 .6515 • Copyright © 2004 CallStreet

64402189 Chiron Corp . CHIR Q4 2003 Earnings Call Jan . 28, 2004 ~.) Corn an A TickerA Event Type A Date A

We are pleased with our accomplishments so far and look forward to discussing additiona l opportunities as 2004 moves along . We have no change in our 2004 EPS guidance of $1 .80 to $1 .90. But I would be remiss if I didn't mention as I have in the past, that given the seasonal nature of our business and the addition of PowderJect related expenses and our investment agenda, we expect second half earnings per share to be significantly higher than the first half . Indeed 2004 is shaping up to be another strong year . We have already announced two important investments in our Blood Testing business and have secured CE markings for our Procleix Ultrio NAT test . We have announced our goal to produce 50 million doses of Fluvirin for the 2004 and 2005 flu seasons and have made plans to launch a pilot universal program against men B in New Zealand . And we've also seen encouraging Phase II data from our Proleukin-rituximab trial. Underlying all of our achievements is our investment agenda . As we did in 2003, we will invest in opportunities to gro w S all three businesses, and we will do so while aiming for 20% long-term EPS growth . The power of Chiron's business model will allow us to deliver solid financial results while creating long-term value for our shareholders .

At this point I'll turn it back over to Martin for Q&A.

Martin Forrest, Investor Relation s

Thanks David . That concludes our prepared remarks, now I would like to open up the call for questions. In order to accommodate as many individuals as possible we will answer only one question from each caller . We are joined for the Q&A session by Jack Goldstein, President of our stood Testing Business, Craig Wheeler, President of our BioPharmaceuticals Business, John Lambert, President of Chiron Vaccines, Bruce Scharschmidt, Vice President of Scientific Affairs for Vaccines and Stephen Dilly, Senior Vice President for Development BioPharmaceuticals . Operator, we'll take our first question . 4-d

U

CCU 4-1

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64402190 Chiron Corp. CHIR 04 2003 Earnings Call Jan. 2s, 2004 +.J Compan 1 TickerA Event T eA Date,

QUESTION AND ANSWER SECTION

~h..,. Operator: At this time, I would like to remind everyone, in order to ask a question please press star .~.i then the number one on your telephone keypad . Well pause for just a moment to compile the Q&A roster.

Your first question comes from Thomas Wei from PiperPier Jaffra

: Thanks very much . I wanted to ask just in terms of the quarters you've clearly always had a much heavier second half EPS balanced than the first half, I'm just curious given the very third and fourth quarter heavy addition of the PowderJact sales and the additional R&D and SG&A infrastructure for PowderJect that would be more of a year-round expense, is it reasonable to assume that the first and second quarter EPS should be a lot lower this year than in previous years?

: Well, I think certainly Tom, as we are - this skewing of the seasonality is likely to be more pronounced . We are more revenue loaded on the backside and probably more expense loaded on the front end . I think this year's was a 40% first half and 60% second halt or something in that range. So when you look at the advancement of the Investment agenda, you look at the opportunities in our investment in our own organic growth, the commercial opportunities for vaccines in the US, things of that nature . It's, it would be, in my mind it would be expected that we would see the first half, the lower contributions to earnings in the second half, but we are still obviously very comfortable with our overall guidance for the year .

: Well take our next question ?

Operator: Thank you. Your next question comes from Craig Parker of Lehman Brothers . 4-1 : Good afternoon, I'm trying to understand what the sort of the run rate for the R&D expenses, so is it possible to quantify, I guess, that what you might call the one tim e ■ i partnering components of R&D expense for the quarter ?

r : Craig, the way that we are looking at the guidance for operating expenses in V total, we were talking about 10% growth on a year-over-year basis, so the best base I'd look at r~ was, would be to use the full year operating expense and then extrapolate off of that .

: Okay. Thank you.

ICU Operator: Thank you. Your next question comes from Jennifer Chao of RBC Capital Markets .

L : Great, thanks. Congratulations on strong product sales for the quarter and thanks for taking my question. With respect to Fluvirin, could you just discuss what manufacturin g C improvements are assumed for producing the projected 50 million doses for the 04-05 flu season and what of these improvements are subject to critical FDA inspections and approvals and if so when are these expected to take place? Thanks .

.+J : John, I will let you take that question .

: Fine, since the improvements come about by using a lot of the old Chiron expertise in producing flu, and using the same processes within PowderJect facilities in Liverpool, we're fairly confident that we're going to reach the 50 million dose level . During the time of the ,.~ acquisition, we had an FDA inspection of Liverpool which confirmed that the facilities were really in very good order, and we don't expect any re-inspection from FDA, so we're confident of the 50 0 million doses this year.

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64402191 Chiron Corp . CHIR Q4 2003 Earnings Call Jan . 28, 2004 Com an A L TickerA Event TypeA Date A

W : Next question .

1. Operator: Thank you, your next question comes from Mike King of Banc of America Securities .

A-j : Thanks for taking my question . I wanted to ask you to perhaps put into V) perspective the competitive situation with Menjugate vis-a-vis Menactra, and given that Menactra is already quadrivalent, does it make sense to file Menjugate when you have ACYW on track for a filing later in the year ?

CJ : John or Bruce, would you like to take that ?

• : Fine, it's John here, I am fine with that. Menjugate is going to be filed in 2004, and we are going to file it for outbreak situation. 1. think the situation in the US, as many countries face, is that there's a.shortage of the number of supplies of vaccine, and in fact the more people you've got producing vaccines, I think the better is for health of the people . So you know bearing in mind that we are launching Menjugate for breakout situations, the important thing also for us is it gives us a good entry into the meningitis market in the US and we're going to use as something to build on from that.

Operator: Thank you . Your next question comes from Geoffrey Porges of Sanford Bernstein .

: My question . Follow up question on the expenses. Could you just give me some guidance as to the change in the gross margins in the vaccine business, and how much of that is a function of the one-time effect of the PowderJect acquisition and the inventory there , and what sort of gross margins we should looking at in the vaccine business overall, going forward? Thanks.

+J : IT answer that on kind of an overall basis . Obviously, there was an effect for the fair value of inventory as it relates to the PowderJect acquisition . For the overall corporation, that was probably about two points of effect, and for vaccines it was somewhere around 3 plus points in that regard . So, if you're looking at margins for the corporation on a go-forward basis, our guidance was atlor slightly lower. It would be reasonable to take that 2 points of downdraft out when making that type U of a calculation.

r ) : Thanks .

Operator: Your next question comes from Eric Schmidt of SG Cowen.

: Good afternoon. My ques tion's for Howard on the long-term growth guidance L of 20%. Could you comment on whether that's completely from organic growth or maybe include s some mixed acquisitions , and if so , what you might think the organic growth rate of the company is?

70 : Well I think that if you just look at what we have done in 2003 and maybe 2002, there is ample indications as to the ways that we're going to achieve growth. Certainly a big part of the growth engine would be the interna l opportunities and we talk about the drivers in the Vaccines business in terms of flu and in terms of the meningococcal franchise, and we talked about U NAT in the Blood Testing business and how that is now going to the adjacent area of blood safety and, and donation , universalization and our pharmaceutical business would highlight these opportunities, both short-term in terms of line extensions, claim extensions, and long-term in terms of new products, especially with ti€acogin and with the oncology pipeline on which we have a great deal of excitement . So, that's one big bucket , the internal opportunities - there are certainly acquisitions of products and rights and businesses that our recent history have suggested that w e Q have the capability of being successful in the rights and products area , you saw the cyclosporine, you saw daptomycin , I think both of these examples demonstrate our capabilities to identif y

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64402192 Chiron Corp. CHIR 04 2003 Earnings Call Jan . 28, 2004 CompanyA TickerA Event T e• Date A

opportunities with which we can exploit value creation with a ve ry small amount of incrementa l v resource. Investment, certainly in the case of business acquisition, we saw this, what is, amounts to a transforming acquisition in the form of PowderJect, which is not just financially important, but also important in strategic terms and then of course these are - there is the opportunity of going after a 4_) partnership in-licenses and the 2 most recent ones, in the Blood Testing area were ZymeQuest and IDI speaks to that kind of intended capability of executing very clever deals where we know how value can be created with minimum amount of competition that can see that sort of value . So, it's not going to come from 1 single area in all 3 realms, rights, businesses and then partnership in- licenses and the internal growth . I think we have clear opportunities and clear capabilities of creating value. So, thank you Eric for that question .

Operator: Thank you. Your next question comes from Mark Augustine of First Boston .

ce - Mark Augustine> : A comment was made about the timing of tenders for vaccines that had been expected in'04, landing in '03 . Can you elaborate and then tell us what growth rate you forecast for the vaccine revenues in '04?

: Sure, let me take that first and John, if you have anything you want to add, go ahead. There was, there were, there was a tender that was, that did occur in 2003 that we had anticipated in 2004 and that related to Encepur . The guidance that we gave on the third quarter was that we would see the vaccines organization for non-flu related in the mid-teens in terms of growth and we spoke that that's a reasonable growth rate .

: Thanks very much .

Operator. Thank you. Your next question comes from Caroline Loewy of Morgan Stanley.

}J : Caroline, are you there.

<0 - Caroline Loewy >: Hi, sorry about that . I was just curious if you could expand a little more on ■ ,.,... what your plans are for expanding the vaccine sales and marketing operations and whether direct sales of flu vaccine would be dependent on expanded product line-ups like the men C approval and what we might see in terms of spending and ramp up of that process?

t /) : John?

: Okay, I'll took at this just from the commercial side. We are currently setting up an operation on the east coast in Philadelphia ; we just recruited a brand new head of the US operation. And as you quite rightly say the main business would be through flu, then meningitis as we go forward. We are selling flu very successfully at the moment through our distributor network . ♦~ We are very pleased with that situation . The new head of our US operations will be developing our future strategies for the global vaccine business in the US. So that's all very positive at the moment . The new office say in Philadelphia should be operational April/May this year, fully staffed out .

: And just given the clarification, can you tell us what we might see in terms of timing In amount of both ramp up in cost or a step up in revenues related to price increase catch A-J ups or a better value that you are able to extract?

U : I think there we will be looking somewhere ahead for 2004, we are very much in terms of pricing, we have price agreements, we have contractual agreements with our distributors. So we -- won't see an increase In pricing there . We do have this opportunity that if prices do increase in the flu market there is a sharing of the additional pricing .

: We'll take our next call now please.

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64402193 Chiron Corp . I CHIR 04 2003 Earnings Call I Jan, 28, 2004 CompanyA TickerA Event Type A Date A

Operator; Thank you . Your next question from Meirav Chovav of 1165.

: Hi and I know people have asked this question in different version but when I look and compare your third quarter to your fourth quarter of '03, the number on total vaccine is almost identical and you even have more high margin and nieningo vaccine in the fourth quarter and therapeutic was slightly higher so I find it somewhat striking that your gross margins ewe, ■ww~ have declined so dramatically relative to, you know, fourth quarter relative to the third quarter . So my basic question is, what is the correct run-rate or the correct measurements, the third or the fourth?

: Meirav this is David, I think you have to look at it on a full year basis. A couple • . of factors that occurred from the third to the fourth quarter are one, the Biopharmaceuticals margins are down . This is the beginning as it relates to the diluent syringe, which we have highlighted in the past, which is at a higher cost of goods rate, as well as the effect that happened in the fourt h quarter of the contractual reduction in the rate as it relates to Betaseron, so that both of those had an effect of bringing down some of the margins as well . And in Vaccines we also saw the absorption of the flu facility in terms of the timing of the cost related to that flu facility over in the UK. So, you have to look at it on a full year basis and that's why we said really when you look at the margins at about 58, you've got to factor out about 2 points related to the fair value of inventory to get a more prospective run rate, but you need to take into consideration the effect on Betaseron on a full year basis next year and what it will mean to the margins which is why we got it to at or slightly lower.

Operator: Thank you .

<0 - Meirav Chovav >: Thank you .

Operator: Your next question comes from Elise Wang from Lehman, I'm sorry, from Smith Barney .

: I am sorry . Operator, could you please repeat that . It was a bit garbled on our end. U Operator: Your next question comes from Elise Wang from Smith Barney. : Hi. It's Elise. Can you hear me?

: Yes. C : Okay. Just to come back on some of the comments on operating expenses . I Co know what your overall guidance is, but just to fine tune that a little bit, coming back to the R&D trends we are seeing on spending, obviously, there was a fairly sizable number that you recorded this past quarter and just to understand, what is the appropriate run rate to look upon for the R&D spending size since you do you have a number of significant clinical studies that you have been YOU talking about, either conducting or about to start ? : There, I think again, I will go back to what we talked about little bit earlier where, the guidance that we gave on an overall operating expense basis was off of the full year of 2004, up by approximately you know 10% . So, it's, its about, you can look at it on a line-by-line U basis, but our guidance would be on an overall basis to look at it that way . a) cQ - Elise Wang>: Okay. So, there is no - I am just trying to get a better sense of the pattern, because it does imply that spending levels, on the R&D side, will go down quarter-by-quarter from the fourth quarter. Was there some one-timers that you recorded in the fourth quarter ?

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64402194 Chiron Corp . CHIR Q4 2003 Earnings Call Jan . 28, 2004 Com an • TickerA Event Type • Date A

: Well, there certainly were some events the, as we highlighted daptomycin and the ZymeQuest and IDI are in that, but we think that the overall full year number - 10 - if you take that up as we have guided on overall operating expenses, about 10% . That's probably reasonable .

4_j : Okay. All right. Thank you very much.

. Your next question comes from Craig West from A . G. Edwards . rrrrrrr Operator: Thank you : Hi Craig . Are you there ?

CO - Alex Hittle> : Yeah, it's actually Alex here . I am curious about the Betaseron deal term ! • change . Did that hit and did It apply fully across the quarter or did it come into play, you know, either in a ramp or partway into the quarter?

: Alex, David. It actually came into play during the quarter. So you didn't see a full quarter's effect as it came into play .

: Great, so we should see more .

: Well, the expectation is that you'll see a full year obviously next year of it and we didn't have a full quarter, so, it's, you know, depending upon run rates in some of the opportunity, again we're just launching diluent syringe and there is some, there is obviously some mitigating factors that we may see, but we're still pretty comfortable with you know the guidance that we gave off our product sales, they're mathematically down about 18%, royalties down in the 30% range .

: Thank you .

Operator: Thank you . Your next question comes from May-Kin Ho of Goldman Sachs .

■ „■~ <0 - May-Kin Ho>: Hi, can you tell me for the markets that you intend to go into this year for the Procleix tests, for example, Korea and all that, that you outlined what Is the opportunity there?

: Jack .

: Sure. The total, the total opportunity in the countries that we talked about, that is Korea, Thailand, Poland and Greece. Korea collects 2 .5 million units of blood, Thailand 1 .2 million, Poland about 1 million, and Greece about 600,000. So, all told, this fairly significan t opportunity. Having said that most of these countries are going - are not going to go all at once . I think that they'll start in some of the larger cities and then roll out to some of the smaller cities over the next couple of years.

<0 - May-Kin Ho>: And what about pricing?

: Well, worldwide pricing is, is holding, probably a little bit less than the US but overall not significantly different .

: Thank you .

Operator: Thank you. Your next question comes from Michael Meyers from Trivium Capital .

<0 - Michael Meyers>: Thanks for taking my call . Simple question, when is the earliest that we might see Chiron in Japan for blood screening . Is it via the Roche contract? Q : Jack. www . CallStreet . com • 212 ,931 .6515 • Copyright ® 2004 CallStreet 11

64402195 Chiron Corp. CHIR Q4 2003 Ea rn ings Call Jan. 28, 2004 _.. CornpanyA TickerA ` Event ape• bate A

a) a) : Well, I'll take that one too . Well, we are currently selling quote blood screening products that are used by the Japanese Red Cross for confirmation of positive tests that are gotten both with competitive NAT tests as well as with serology tests . They're currently using our HCV and HIV individual tests for confirmation. They are currently in a trial with our Ultno for V) blood screening as well as our HBV for confirmation . We expect that we'll probably see some additional confirmato ry testing this year and probably through 2005, until the Roche contract is up in 2006 for the blood -screening segment.

: And Jack just as a corollary of that, if the confirmatory tests are earlier than through '05, is it possible that we could see you in Japan you know in '05? Fully rolled out .

: You will see us in confirmatory testing in - means currently in'04 and in '05, we can't predict what's going to happen with blood screening in Japan obviously we are there and as soon as we are able to get some business we are ready to serve this to Japanese Red . Cross, and they understand that.

<0 - Michael Meyers> : Thank you .

Operator: Thank you . Your next question comes from Thomas Wei of from Piper Jaffray .

: Hi, I had a follow-up question on the A-Fujian-H3N2 strain . Can you just confirm for us that there is a commercial strain that's available if it's chosen for the '04, '05 vaccine and whether or not you have any metrics on how well that strain grows ?

: Bruce?

: We do it to, project Thomas, that a strain would be available, and J don't at this point foresee issues with respect to growability.

Q.

V : All right. Thomas thanks for the question . Yes, a strain would be available, and we don't at this point project problems in terms of growability, in fact some of those VJ factors are taken into account in making the public health recommendations .

C : Thanks . Lco. Operator: Thank you . Your next question comes from Geoffrey Porges of Sanford Bernstein . 4-J : Hi, thanks for taking the follow-up question . Just another question on market expansion for the testing business . You described the process for securing royalties from the home brew testers in Germany and give us some sense of realistically how long that could take p and how much incremental revenue it could contribute?

C) : I'll let you take that one . U : We have Jack on a remote line. Jack, did you hear the question, otherwise we'll restate it. W : Yes, the question was with regard to royalties from home brewers in Germ any? 0 : That's righ t c) www .CaliStreet .com • 212.931 .6515 • Copyright © 2004 CaliStreet 12

64402196 Chiron Corp. CHIR Q4 2003 Earnings Call Jan . 28, 2004 4...3 Com an A TickerA Event Type • Date A,

: Can you hear me ?

: Yes.

+, : Okay. So, we are currently in discussions with the German Red Cross and all of the home brewers in !Germany as well as in Scotland and some other countries in the European Union. We believe that we 'll receive some royalties from licenses in some of those countries, some of the German blood banks have already signed license agreements with us and we'll see some royalties in 2004 from those centers . We believe we'll see them from some centers from centers in Scotland as well and we'll see what happens with the German Red Cross , I believe that we will come to some agreement with the German Red Cross sometime this year and we'll se e • • a combination of royalty revenues as well as commercial revenues from some of those centers . Germany represents a little over 4 million units of blood .

: Great, thanks a lot.

Operator: Thank you. Your next question comes from Meirav Chovav of UBS .

: This is a sort of a follow-up question. But going back to the '05 time period, where the distribution agreement that PowderJect had signed with Hen ry Schein expires, I was wondering, could we expect a significant improvement or some improvement in economics, considering that the agreement with Henry Schein was signed by PowderJect many years ago, where PowderJect has no way to distribute it himself?

: John?

: The strategy after 2005 is under review, with our new head of the US, but we do have a very good agreement in place with Schein and the other distributors . We're, both parties I'd say are very happy with the arrangement .

: But could there be improved economics, not in '04 but in'05 .

U : I think if you renegotiate any contract there can always be improved economics . But this is going to be under review by a new head .

U) : Yes. Thank you .

C Operator : Thank you. Your next question comes from Mark Augustine of First Boston .

: Okay. Thanks . That Fujian strain sounds vaguely familiar . I wanted to ask a question though about the testing with Proleukin and Rituxan . Can you tell us more about what your genotypic analysis has identified in subset of patients most likely to respond to combination and what percentage of total treated patients you estimate that to include ?

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6440219'7 Chiron Corp CHIR 04 2003 Earnings Call Jan. 28, 2004 CompanyA Tickers Event Type A Date A

: Great. Look forward to it . Thank you .

Operator: Thank you. Your next question comes from Jennifer Chao of RBC Capital Market s

: Great. Thanks for the follow-up. Jack, I was just wondering in order to help us to quantity progress, could you just provide current Procieix penetration rates in your key EU fear and Pacific Rim markets and any notable increases seen In the fourth quarter? Thanks . ~wwe : Okay, well I think at the JP Morgan conference, we talked about a worldwide share of 33% on north of 80% in the US, approximately 27% .in the EU, and 11 % in Asia Pacific. That does not include additional business in Thailand and Korea that we're expecting and r • also in the EU, Poland, and Greece .

cQ - Jennifer Chao>: Right, thanks.

Operator: Thank you, your next question comes from Andrew Goffe of OSS Capita l

: Hi, I just noticed that the royalties from Roche were down sequentially quite a bit. And regarding that, I'm just wondering if you could comment on that ?

: Sure, the royalties were down - one thing you need to look out when you took at royalties is really look at it on a full year over full year basis . Royalties were up sharply for blood screening related to Roche in that perspective . And, the swings from quarter-to-quarter depend upon on true ups and what we will call it true downs, since we book royalties on an estimated, and then true it up the following quarter. So we're actually comfortable with the type of growth pattern that we've seen out of the royalties on a 2003 over 2002 perspective .

♦J : So it doesn't mean that, it doesn't mean that you're taking a lot of share from Roche at this point ? 0 r r■rrf : Well, we're 80% share in the US .

: No I mean worldwide .

: We obviously continue to look for opportunities to take share, but I wouldn't Vr took at the sequential as being a hallmark of a substantive share gain in that perspective . That's, that's the longer term .

: Okay thanks.

: Operator, that concludes our question and answer period. I'll now turn the call back to Howard 4_4 for some closing remarks.

V

Howard Pien,CE O

0 As we move forward in 2004, I'd just like you to think of Chiron as four numbers . 5500, 20, 20 and 1 . 5500 stands for the number of Chiron employees that are dedicated to improving human health a) worldwide. The first 20 stands for the 20 milestones that we have for 2004 to measure our own progress as a company . The second 20 stands for our 20% long-term EPS growth target, and the 1 I- stands for 1 company committed to delivering financial results and long-term value creation . On that note I just want to thank you very, very much for joining us and we look forward to the entire 0 2004 to have more dialogue with you . 0 www .CaliStreet .com • 212.931 .6515 • Copyright m 2004 CallStreet 14

64402198 Chiron Corp. CH1R 04 2003 Earnings Call Jan . 28, 2004 CompanyA Ticker) Event Type A Date A

Q) Q)

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Dlsclakmer The k onnation herein is Mead on sources we believe to be reliable but is not yuaronlsed by us and does not purport to to a ccnrplete or err -re. statermfd or sumrnary of the available dale . As such. we do not wamnl. endorse or pua+anta• the wmpletan•w, aewracy, Integrity . or Gnwlnsss of the hiorm•Iinn . You must wan". end bear &N risks associated with, the use Cf any Inbrrtrtion provided hereunder . Indurkrrp etry relian ce an he ItrLe5 y, corepletar»ss, safely m userulnsss of such info nslion . The inkrr,rstion is not intends to be used as the pronely bes is of InvessmsM Cecisions . R should not be mratrued as advke designed to meei the pNiicu ar ewesIiwq needs of any inusaisir, This report If published solely for Iri er anon purposes, and is not lo be mesBu d as M1roncisl or other edhics or en an offer to sel or the solicitation of on offer to buy my Security in wvp stale niece such an offer or soildteton would be tleyal . Any weormacon erpre,sed herein on this data Is sul0 t to thugs without make . Any opi tans or e enbons ewgak ad in this ielomhon do not rsyonos ! Ble ops io s or boners of C .ISb s.L LLC . CaIISVe*L LLC . or one or pore d Ns unpleyeee, Including the writ r of this repoel, may been a po~ In any of th e securities disowned herein. V THE INFORMATION PROVIDED TO YOU HEREUNDER IS PROVIDED -AS IS ; AND TO THE MAXIMUM EXTENTPERMITTEO BY APPLICABLE LAW . C. Stew, LLC AND ETS LICENSORS, BUSINESS ASSOCIATES AND SUPPLIERS DISCLAIM ALL WARRANTIES WITH RESPECT TO THE SAI1E, EXPRESS, IMPLIED AND STATUTORY. INCLUDING a) WITHOUT LIMITATION ANY IMPLIED WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, ACCURACY, COMPLETENESS, AND HON- INFRINGEMENT . TOTHE MAXIMUM EXTENT PERMITTED BY APPLICABLE LAW, NEITHER CALLSTREET,LLC NOR ITS OFFICERS, MEMBERS, DIRECTORS, PARTNERS. AFFILIATES, BUSINESS ASSOCIATES, LICENSORS OR SUPPLIERS WILL BE L IABLE FOR ANY INDIRECT, INCIDENTAL, SPECIAL, CONSEQUENTIAL OR PUNITIVE DAMAGES. INCLUDING WITHOUT LIMITATION DAMAGES FOR LOST PROFITS OR REVENUES. GOODWILL, WORK STOPPAGE, SECURITY BREACHES, VIRUSES. COMPUTER FAILURE OR MALFUNCTION. USE . DATA OR OTHER NTANGIBLE LOSSES OR COMMERCIAL DAMAGES, EVEN IF ANY OF SUCH PARTIES IS ADVISED OF THE POSSIBILITY OF SUCH LOSSES, ARISING UNDER OR IN CONNECTION WITH THE INFORMATION PROVIDED HEREIN OR ANY OTHER SUBJECT MATTER HEREOF .

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64402199 EXHIBIT M Chiron News Pagel of 2

Chiron to Testify to Congress on Influenza Vaccin e President and CEO Howard Pien to Appear at U .S . House of Representatives Government Reform Committee Hearing Today

EMERYVILLE, Calif ., Feb. 121PRNewswire-FirstCall/ - Chiron Corporation (Nasdaq: CHIR) today announced that president and chief executive officer Howard Pien will appear before the U.S . House of Representatives Government Reform Committee in Washington, D .C., today as part of an oversight hearing to examine this year's influenza season and pandemic preparedness . Chiron will highlight the importance of strong cooperation between health agencies and private sector companies at all levels .

"Chiron is committed to meeting demand for flu vaccine in the United States, today and tomorrow," said Mr . Pien . "Strengthening our public health infrastructure -- to increase immunization rates in the inter-pandemic years -- is the single most important initiative today to prepare for tomorrow's pandemic ."

Today's hearing will take place immediately following the committee's 10 a .m. EST business meeting . Mr. Pien's testimony will follow those of Dr . Julie Gerberding, director of the Centers for Disease Control and Prevention ; Dr. Anthony Fauci, director of the National Institute of Allergy and Infectious Diseases ; and other witnesses .

In a written statement submitted to the committee, Mr . Pien discussed Chiron's commitment to expanding flu vaccine production . Chiron projects that it will produce approximately 50 million doses of Fluvirin(R) flu vaccine in 2004, the vast majority of which will be destined for the United States . If sufficient demand for influenza vaccine exists, Chiron plans to increase its production capacity and supply of influenza vaccine to the United States even further in subsequent seasons .

Mr. Pien also discussed Chiron's investment in the development of a cell culture-based flu vaccine and the company's pandemic preparedness plans . The cell-culture vaccine production process offers potential advantages to current egg-based vaccines, including flexibility, and could offer significant benefits in a flu pandemic situation . Chiron's influenza cell-culture research program has completed Phase II clinical trials in Europe .

"Chiron is investing in bringing innovation to the U .S. market," said Mr . Pien . "This month we plan to file an IND application for our cell-culture flu vaccine, which is viewed as the best way to defend against a possible future pandemic ."

In his discussion of the 2003-2004 flu season, Mr. Pien noted that the estimated 83 million Americans immunized represented the highest immunization rate ever for flu, a milestone in public health . He advocated measures to minimize the burden of disease caused by the annual flu epidemic, including an adequate supply of flu vaccine in non-pandemic seasons, appropriate mechanisms to ensure delivery of the vaccine to target populations, and high public awareness of the need for immunization to ensure increased immunization .

Chiron produced 38 million doses of Fluvirin for U .S. distribution for the 2003-2004 flu season, approximately 50 percent more than in the previous flu season . In total for the 2003-2004 flu season, Chiron produced 75 million doses of its four brands of flu vaccine for the global market, with production in Liverpool, United Kingdom ; Marburg, Germany ; and Siena and Rosia, Italy.

About 10 to 20 percent of the U .S. population contracts flu each year. Vaccination not only decreases the risk of illness for the vaccine recipient but also helps prevent the spread of the flu virus and limits its role in the potential development of life- threatening complications . In an average year in the United States, flu kills 36,000 people, primarily in the over-65 population, and hospitalizes 114,000 people .

About Flu and Chiron's Flu Vaccines

Influenza (flu), a contagious disease caused by the influenza virus, affects the respiratory tract, often resulting in symptoms in the nose, throat and lungs, as well as fever, headache, tiredness and body aches. It can also lead to complications such as pneumonia, bronchitis, or sinus and ear infections or exacerbate chronic conditions . in the Northern Hemisphere, flu season typically begins in November and peaks between December and March .

Flu vaccination provides protection from flu within about two weeks of administration and may last for as long as a year . The vaccine protects up to 80 percent of vaccinated people from contracting flu, and vaccinated people who do contract flu generally develop milder cases than unvaccinated people . Flu vaccines, the majority of which are made from inactivated (killed) flu strains, are updated each year to address changes in the viruses . People who are allergic to eggs, who have had a severe reaction to a flu shot in the past, or who have previously developed Guillain-Barre syndrome in the six weeks after receiving a flu vaccination should consult their doctors before receiving flu vaccination .

http://phx.corporate-ir.net/phoenix.zhtml?c=105850&1)=irol-newsArticle Print&I =55299 . . . 12/8/2004 EXHIBIT N CHIRON

Statement Presented To

Committee on Government Reform

United States House of Representatives

By Howard Pien

President and CEO

Chiron Corporation

February 12,200 4

1

33734224 Introduction Mr. Chairman, Members of the Committee: Thant: you for the opportunity to provide a statement to the House Government Reform Committee at today's hearing. I am Howard Pien, president and CEO of Chiron Corporation, a global biotechnology company headquartered in Emeryville, California . Chiron Corporation, founded in California in 1981, is composed of three business units : BioPharmaceuticals, Blood Testing and Vaccines . Chiron is dedicated to research and innovation addressing global public health challenges . Through Chiron's breakthrough research discoveries in the fields of hepatitis B virus, human immunodeficiency virus and hepatitis C virus . millions of potentially fatal infections have been prevented .

Overview of Chiro n Chiron is the fifth-largest vaccines producer in the world, with sales of $678 million in 2003 . Chiron Vaccines produces pediatric and adult vaccines to prevent life- threatening illnesses . These vaccines, which are sold throughout the world, have protected millions of people globally from N. Meningiridis Group C, polio, measles and other potentially fatal diseases . Chiron is a leading supplier of oral polio vaccine, producing more than 800 million doses annually to support global polio eradication efforts. Our rich heritage in vaccines is traced to the three European manufacturers Chiron has acquired over the past two decades, all of which were founded 100 years ago or more. The company has production facilities in Liverpool, United Kingdom ; Siena, Italy; Marburg, Germany; and Ankleshwar, India ; and it carries out research in Siena, Marburg and Emeryville . Chiron has a successful record of product development, including the launch of the first recombinant vaccine against pertussis, the first adjuvanted influenza vaccine and a conjugate vaccine against N. Meningitidis Group C .

Chiron currently has two vaccines licensed in the United States: Fluvirin® flu vaccine, one of only two injectable influenza vaccines approved by the U .S . Food and Drug Administration, and RabAvert®® rabies vaccine, approved by the FDA in 1997. Chiron also supplies diphtheria and tetanus (DT) concentrate to GlaxoSmithKline for use in its DT-containing vaccines licensed by the FDA .' In addition, Chiron has initiated Phase III studies in the United States with the aim of licensing its conjugate vaccine against N. Meningitidis Group C, Menjugate®.Z

Chiron and Influenza Vaccines Chiron Corporation's $878 million acquisition of PowderJect Pharmaceuticals and its influenza vaccine Fluvirin in July 2003 represents a major commitment to ensuring that an adequate supply of vaccine is available to meet the needs of the United States . The principle driver for the acquisition was Fluvirin, which is produced at the company's FDA-approved and FDA-licensed facility in Liverpool . Approximately 90 percent of the production from the facility is delivered to the United States, with most of the remainder going to the United Kingdom .

Prior to its acquisition of PowderJect, Chiron was the third-largest producer of influenza vaccines globally and the second-largest supplier of influenza vaccine outside the United States . Today, Chiron is the second-largest producer of influenza

Infanrix (DtaP) & Pediarix (DtaP-HepB-IPV) 2 Menjugate® has been licensed in Europe via the Mutual Recognition Procedure and is also approved in other countries, including Canada and Australia.

33734225 vaccines in the world, with production of approximately 75 million doses annually. Chiron produces influenza vaccines at its facilities in Liverpool, Marburg and Siena and offers a number of influenza vaccines.

Currently, all influenza vaccines marketed in the United States are produced in embryonated hens' eggs from designated chicken flocks . Individual lots of each of the three virus strains are grown in the eggs and harvested . The harvested virus is inactivated (killed), purified and separated from the egg proteins, usually by high- speed ultra-centrifugation. The whole virus concentrates are then further purified and split (split vaccine) or purified, as for Fluvirin, such that the vaccine contains predominately only the hemagglutinin and neuraminidase virus coat proteins (surface antigen or sub-unit) . The monovalent (single-strain) antigen lots are then sterile- filtered and Quality Control and potency tested. The monovalent lots are then formulated into trivalent vaccine (following FDA release), filled into the final containers and packed. The final run of primary antigen production in eggs is usually completed by September to allow time for processing, FDA potency assignment, vaccine formulation, packaging, QA release and shipping to have completed release of the product into the marketplace by October or November .

In addition to its conventional egg-based influenza vaccines, Chiron is pursuing development of a cell culture-based subunit influenza vaccine using the Madin-Darby Canine Kidney (MDCK) cell line. Chiron's influenza cell-culture research program has completed Phase II clinical trials, with licensure in Europe projected sometime during the latter half of the decade . A Chiron influenza cell-culture production facility for full-scale production of the vaccine exists in Marburg. Chiron has initiated discussions with the FDA and plans to submit an Investigational New Drug Application to pursue licensure of an influenza cell-culture vaccine in the United States.

While there do not appear to be significant clinical advantages to cell-culture vaccines as compared with the current egg-based vaccines in terms of safety and efficacy, the cell-culture production process offers several potential advantages . The overall process is more flexible and can be more easily adapted to increases in market demand. Additionally, the fermentation process is highly compliant with Good Manufacturing Practice (GMP) compliance.

In the event of an influenza pandemic, the cell-culture production process could offer significant benefits compared with the conventional process, including : • Increased production capacity via faster initiation of continuous manufacture. • Lack of dependence on a supply of eggs, which could be a key rate-limiting step in meeting an urgent public health crisis . Production can start at any time and can easily be expanded to full-year production . • Reduction of production lead-time by six to eight weeks . • Cell-culture production, unlike egg-based production, is a closed process that can be easily upgraded to Class III bio-safety standards that may be required for the management of a pandemic strain. • Cell-culture production is suited to producing vaccines for influenza of avian origin, which will not grow on eggs without genetic modification .

33734226 Overview of Egg-Based Influenza Vaccine Productio n Influenza vaccine usually contains three different influenza strains that are recommended by the World Health Organization (WHO) and FDA . The strains are selected to match the families of influenza viruses expected to be circulating each winter, following WHO continuous surveillance. The vaccine has a new composition each year, and the vaccine therefore cannot be stockpiled but must be made to order each year. In addition, influenza vaccine is a seasonal product, with the majority of immunizations occurring in the September-to-November time frame in the United States. If there is surplus vaccine that is unused at the end of the season, it cannot be reused the following year and must therefore be destroyed . The requirement for Southern Hemisphere influenza vaccine in the January to March season is comparatively small and usually of a different composition .

Vaccine manufacturers try to match annual supply and demand, ensuring enough doses are available to meet demand while avoiding wasteful destruction of unused vaccine at the end of the season. The inability to carry, over inventory into the following season means that the margin of error is much smaller than for other vaccines. Forecasting demand accurately is complicated by the fact that it is not possible to assess the severity of the epidemic and then adjust production volumes ; additional capacity cannot be added at short notice and must be planned at least one season in advance. The cycle time for vaccine production means that demand must be predicted based on historical data, without an indication of the severity of the current influenza epidemic .

Supply of Influenza Vaccine in Interpandemic Years It is important to put the 2003 influenza season and the resulting demand for influenza vaccine into perspective by comparing it with previous years in which the influenza epidemic was less severe. In 2003, all supplies of injectable influenza vaccine produced for the United States appear to have been used, resulting in an estimated 83 million Americans being immunized against influenza . A milestone was reached : The estimated 83 million Americans immunized represent the highest immunization rate ever for influenza. Prior to 2003, immunization rates had remained relatively static, and unused vaccine had to be destroyed . For example, it is estimated that approximately 12 million doses were destroyed in 2002 . It seems safe to assume, given the severity of the epidemic and the publicity in the media in 2003, that more people would have been immunized had additional supplies of influenza vaccine been available. Therefore, it is not surprising that the focus has been on the shortage of vaccine that occurred and how to prevent its occurrence in the future rather than the victory in reaching this public health milestone .

While one cannot underestimate the potential severity and impact of an influenza pandemic on the United States, ensuring an adequate supply of vaccine and achieving high immunization rates in interpandemic years is of major importance from a public health perspective . Influenza pandemics are irregular events occurring infrequently, approximately once every few decades. The influenza epidemic is an annual event, which was estimated during the 1990s to have caused an average of approximately 36,000 deaths per year3 and 114,000 hospitalizations in the United States . This represents a significant burden of disease even when compared to the impact of a

Source: Morbidity & Mortality Weekly Report 2003, Vol . 52 RR8

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33734227 pandemic. It is estimated that approximately 500,000 deaths due to influenza occurred in the United States between September 1918 and April 1919 and that the pandemic caused 20 million deaths worldwide . The 1918-1919 pandemic was the worst pandemic recorded, and mortality in more recent pandemics has been lower . The Asian influenza pandemic of 1957 is estimated to have caused approx mately seventy thousands deaths in the United States while the Hong Kong influenza pandemic of 1968 is estimated to have caused 33,000 deaths .4 Therefore, while pandemic preparedness is crucial from a public health perspective, the public health benefits of implementing a routine influenza immunization program in interpandemic years should not be underestimated. Not only would it help prepare the United States in the event of a pandemic by ensuring that production capacity and mechanisms for distribution and delivery of vaccine are in place, but it also would reduce the annual burden of disease and death due to influenza .

The following must be in-place in order to minimize the burden of disease caused by the annual influenza epidemic: • An adequate supply of influenza vaccine in non-pandemic seasons to protect the population . • Appropriate mechanisms to ensure delivery of the vaccine to the target populations . • High public awareness on the need for immunization to ensure use of the vaccine by the target population.

Prior to its acquisition of PowderJect, Chiron was not committed to entering the U.S. influenza market for economic reasons . However, over the last few years, significant changes in the dynamics of the U.S, influenza market have occurred. The key changes are: • The recommendations of the Advisory Committee on Immunization Practices (ACIP) on influenza immunization were broadened to include individuals between 50 and 64 years of age and healthy children between 6 and 23 months of age, significantly expanding the potential market for influenza vaccine . • Pricing of influenza vaccines has reached a level that allows manufacturers to invest in maintaining facilities to meet FDA standards and in expanding manufacturing capacity in order to meet the increased demand. • Reimbursement rates for providing influenza injections have been increased to levels at which physicians are encouraged to actively immunize patients .

These changes in market dynamics were key factors in Chiron's decision to acquire PowderJect and expand its strong presence in the influenza market to include the United States . There has been considerable comment in the media about the decision of three influenza vaccine manufacturers to discontinue production over the past few years and the resulting decrease in supply . However, it should be noted that two of the producers exited at a time when the market price of the vaccine was significantly lower, making it difficult to justify the investment required to maintain facilities to FDA standards or to consider an increase in capacity . The changes in market conditions over the past few years have resulted in a reduction in the barriers to investment, and the impact of these changes are beginning to be felt .

4 Source : www.cdc.gov/od/nvpo/pandemics

337342.28 The shift in dynamics has had a significant impact on investment decisions and capacity at Chiron . Over the past five years, investments of approximately $70 million in both primary (bulk) and secondary (fill/finish) manufacturing have been made to increase the production capacity of the Liverpool facility . This investment has resulted in a significant increase in the amount of Fluvirin supplied to the United States : The amount of Fluvirin supplied to the United States on an annual basis more than tripled from 12 million doses in 2000 to 38 million doses in 2003 . Additional increases in production capacity and, consequentl}-, to supply to the United States are planned for 2004 and beyond . Chiron is projecting that it will be able to produce approximately 50 million doses of Fluvirin in 2004, with the vast majority destined for the United States . If sufficient demand for influenza vaccine exists, Chiron plans to increase its production capacity and supply of influenza vaccine to the United States even further beyond 2004.

Building on recent investments to increase manufacturing capacity at the Liverpool facility, Chiron is committing an additional $100 million dollars to replace the existing influenza bulk manufacturing facility in Liverpool with a new "state of the art" facility5 to complement the secondary manufacturing facility opened in 1998 . This commitment is being made to ensure that Chiron is in a position to continue to supply Fluvirin to the United States and to add incremental capacity until the FDA approves its cell-culture vaccine and sufficient cell-culture production capacity is available to meet the market needs in the United States .

It should be recognized that changes in market dynamics, specifically the increase in price that has occurred over the past three years, have reversed the trend of decreasing manufacturing capacity as producers are investing in capacity increases and upgrading facilities and licensing cutting-edge technologies for the U .S. market. Chiron manufacturing investments are not unique to the industry, suggesting that the growing U.S . influenza market is an important public health priority that the private sector must ensure is met. However, given the nature of biologics manufacturing there is inevitably a lag between the decision to invest and improved capacity as a result of that investment. The United States is only now beginning to see the impact of the positive changes in market dynamics that occurred a few years ago with regard to expanded investment in manufacturing capacity .

The early onset of the 2003 influenza season and the resultant increase in demand above levels seen in previous influenza epidemics created a shortage of vaccine which has led to concerns in the media and general population about the fragility of . influenza vaccine supply and its potential impact on the health of the U.S. population. However, the influenza vaccine supply situation is much less fragile than for many other commonly used vaccines in the United States . The recent Institute of Medicine Report "Financing of Vaccines in the 21St Century Assuring Access and Availabilityi6 highlighted the fact that a single source of supply existed for six of the recommended vaccines? in the United States . This means that no backup capacity is available should a manufacturer experience production problems or other disruptions creating a

S A now fill/finish facility was completed a few years ago. 6 Institute of Medicine, August 200 3 7 Tetanus-diphtheria, measles-mumps-rubella, varicella (chicken pox), pneumococcal conjugate, meningococcal polysaccharide, pneumococcal polysaccharide

33734229 significant potential for supply interruptions . Indeed, these have occurred over the past few years . In 2001 and 2002, eight of the 11 recommended childhood vaccines were in short supply .' These shortages impacted immunization policy in the United States, forcing the ACIP to temporarily revise its recommendations on pneumococcal conjugate vaccine and diphtheria, tetanus and pertussis (DtaP) and to recommend that varicella (chicken pox) immunization be pushed back to 18-24 months from 12-18 months. In contrast, there are now three sources of supply for influenza vaccine, making a complete disruption of supply an unlikely event.

Key public policies are of critical importance to ensure that influenza production in interpandemic years is adequate . A competitive environment that encourages multiple suppliers of vaccines to ensure continuity of supply is vital . Implementation of any public purchase program with a "winner take all" approach could have the unintended impact of discouraging potential suppliers by increasing the risk associated with participating in the market, as production is impossible to plan in an "all or nothing" situation .

The shortage of vaccine in 2003 has led to a tremendous focus on the supply side of the equation and mechanisms for increasing supply to meet an above-ordinary level of demand. A key lesson learned was that demand for influenza vaccine in a -severe epidemic can reach levels above those anticipated for a more typical season and that producers are not able to adjust supply to meet the surge in demand once the season has started. The production cycle times for influenza vaccine are such that by the time the surge is identified it is too late to increase supply to meet the increase in demand. This has led to proposals aimed at ensuring a sufficient supply of influenza vaccine for the United States in the event a severe epidemic leads to a surge in demand. Many of the proposals involve mechanisms guaranteeing purchase of influenza vaccine by the federal government with a primary objective of creating a strategic reserve to meet an above-average level of demand for influenza vaccine . Essentially, the purpose of these purchases would be to provide insurance against a severe epidemic by encouraging manufacturers to expand capacity to produce volumes above predicted levels of demand in the event of a typical epidemic. The premise of the mechanism would be to transfer the risk of investing and carrying excess inventory from the producers to the federal government.

As Congress and the Administration consider these proposals, Chiron is committed to working collaboratively with you to craft balanced solutions . Together we must fully consider issues relative to the timing of implementing new approaches to supply, opportunities to expand immunization rates to meet the Healthy People 2010 objectives, and the potential risk to existing supply and distribution channels. Chiron's perspective is as follows : • Chiron is prepared to increase its supply of influenza vaccine by extending the production season and delivering additional doses in late November and December. At present, Chiron does not do this, as U .S . demand for influenza vaccine after November does not usually occur. Based upon U. S. immunization trends prior to 2003, extension of the production season heretofore would have led to unused vaccine that would have ultimately been destroyed .

8 USA Today, February 18, 2002

33734230 The go/no-go decision on whether to extend the production season needs to be made early in the year to guarantee the supply of eggs required for vaccine production . Therefore, a commitment to purchase the doses would need to be made prior to this date, when no real indication of the severity of the epidemic exists. Theoretically, a go/no-go decision on extending the production season could be made in June. However, a concern exists regarding reliabiliy of egg supply, and this would not be the optimal solution on an ongoing basis, In order to maximize the benefit of the program, guaranteed purchase of vaccine should be distributed among all suppliers who are able to provide vaccine, • Demand created by these purchases would be artificial if not accompanied by an increase in vaccinations, as the incremental doses would be destroyed at the end of the season. While the primary intention of these purchases is to create a buffer to meet unanticipated surges in demand, concerns exist about the long-term viability of any purchase program where doses would be destroyed . Essentially, the program would achieve its goals in the short term, but Chiron believes that real demand for influenza vaccine must be increased if supply is to grow in the long term . • Any expansion of government programs for the purchase influenza vaccine beyond existing programs, such as Vaccines for Children and 317 funds, should contain components to ensure expanded use of the vaccine in order to prevent destruction of unused doses at the end of the season, which could detrimentally impact the demand side of the equation . • Government involvement, while it may be appropriate and necessary, may have unintended consequences that we need to be cognizant of and manage prospectively. Large-scale government purchases of vaccine have the potential of disrupting the current private-sector distribution system for influenza vaccines .

We believe that the factors highlighted above can be effectively managed in a prospective fashion by collaboratively developing a program to secure a strategic reserve by the government that does not create the unintended consequences or detrimentally impact the private market.

Ensuring increasing year-on-year demand for influenza vaccine under routine circumstances creates a market-efficient solution to the issue of meeting episodic surges in demand, as it prospectively balances supply and demand in the event of a severe epidemic. Furthermore, focusing on solutions impacting the demand side of the equation is important in the context of planned increased production capacity for future seasons . If demand remains static or returns to levels seen in 2002, a situation will exist where demand exceeds supply . As mentioned previously, 2003 represented the highest number of people ever immunized, and there is no guarantee that the same levels will be achieved in the event of a less severe epidemic.

Chiron's concern is that in future, if demand remains static, the United States will return to a situation where supply will again exceed demand, leading to unused vaccine doses being destroyed, as has occurred in the past, This would trigger a reassessment by Chiron of the need to increase influenza supply and, depending on any demand shortfall, may even lead to a reduction in supply in future years . We

33734231 should therefore not be complacent and assume that because excess demand existed in 2003, it will automatically spill over to future years and absorb projected supply for the U. S. market.

In order to raise influenza immunization coverage rates to effectively use the additional supply that will be available next year, key stakeholders (manufacturers . distributors, the public health community, providers and insurers) should collaborate on the following issues : • Raising awareness of the immunization recommendations among the medical community and general population . • Encouraging immunization by highlighting the benefits of immunization and developing innovative programs for facilitating access to the vaccine . • Extending the immunization season into December to ensure all doses are used and to potentially increase the window in which vaccine could be supplied to the market. • Creating an environment that supports manufacturers who produce doses at risk.

Furthermore, these efforts must not be limited to the 2004 season but must be continued for the long term . A significant increase in demand for influenza vaccine is required to achieve the Healthy People 2010 goals of 90 percent coverage rates of non-institutionalized adults 65 years of age and older and 60 percent coverage rates of high-risk non-institutionalized adults 18-64 years of age .9 While these goals 'are ambitious, they are achievable if both the public and private sector collaborate on achieving them. The success of such partnerships in raising immunization rates for pediatric vaccines demonstrates how this approach can achieve positive results . It is recognized that there are differences between influenza vaccination and the pediatric immunization situation, where school entry mandates played an important role in raising coverage rates. Nevertheless, it is felt that some of the lessons learned would be applicable.

In conclusion, Chiron believes the building blocks are in place to ensure a reliable supply of influenza vaccine for the United States in interpandemic years because : • The pricing environment has reached levels where it supports manufacturers' investment in production capacity for the United States, as evidenced by the investments made by Chiron and other producers in recent years . The results of these investments are beginning to be realized . • Federal recommendations expanding significantly the number of individuals eligible for the vaccine are in place and production capacity is being increased to meet these targets.

Chiron believes that the main challenge moving forward will be ensuring that demand continues for the capacity that it projects will come on stream over the next few years . Based on the success of initiatives in raising pediatric immunization rates, it is believed that partnerships between key immunization stakeholders in the private and public sector represent the best option for increasing demand . Chiron wishes to partner with stakeholders and is prepared to invest resources in efforts aimed at

9 The target rate for institutionalized adults aged 18 and older is 90 percen t

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33734232 increasing immunization coverage. Finally, while Chiron believes guaranteed purchase of influenza vaccine by the federal government could provide a short-term solution to meeting above average demand in the event of a severe epidemic, provided incentives are properly structured, it is concerned about the long-term viability of any program that would artificially raise demand and result in surplus doses of vaccine being destroyed . Chiron therefore believes that focusing on increasing demand on an annual basis, thereby reducing the level of unexpected demand in the event of a severe epidemic, might provide a more viable long-term alternative . Chiron welcomes the opportunity to provide input into proposals as they are being developed.

As stated in a recent editorial in the New England Journal of Medicine : "Ultimately the experience of 2003-2004 may help us deal with influenza epidemics more effectively . The public awareness and media attention that accompanied reports of severe illness in children have resulted in greater recognition of both the severity of influenza in all age groups and the benefits of influenza vaccine . This recognition may spur increased use of vaccination and help us achieve the goals for vaccine coverage encompassed by the Healthy People 2010 Initiative. Increased demand for vaccine will encourage manufacturers to continue producing it, possibly in greater quantities . increased production is critical toward developing the surge capacity that will be needed to deal with new pandemic viruses when they occur ."10

U.S. Influenza Supply in a Pandemi c The impact of an influenza pandemic would not be limited to the United States, as the entire global population of 6 billion people would be at risk . The global nature of a pandemic presents a significant challenge to the public health infrastructure and to influenza vaccine manufacturers in particular . Chiron is committed to supporting pandemic preparedness efforts and is actively involved in pandemic preparedness working groups at both the international and national level : • At the international level, Chiron co-sponsors a specialized group of influenza vaccine manufacturers, the Influenza Vaccine Supply Task Force ([VS TF), created in 2001 with the endorsement of the International Federation of Pharmaceutical Manufacturers Associations . The group is made up of II companies representing 80 percent of total global influenza vaccine production capacity. The IVS TF is providing industry input on pandemic preparedness planning to bodies such as the WHO, European Commission, European Medicines Evaluation Agency (EMEA), and other international, national and local health authorities . • At the European level, Chiron, together with other influenza vaccine manufacturers represented by the European Vaccine Manufacturers (EVM) group, is directly involved in many activities regarding pandemic preparedness in Europe. • Chiron submitted a pandemic capability statement in June 2003 at the request of the U.S. Centers for Disease Control and Prevention (CDC) and the National Vaccine Program Office (NVPO) .

10 Treanor, J ., New England Journ al of Medicine, January 15, 2004 .

33734233 From the perspective of an influenza vaccine producer, planning for a pandemic represents a significant challenge due to the nature of the product being manufactured . Essentially, the following factors limit the ability to rapidly expand supply in the face of a pandemic under current circumstances : • Production capacity-Influenza vaccine production capacity is aligned iNith annual demand for vaccine under normal circumstances, i .e., between pandemics, and therefore little or no surge capacity exists to meet pandemic demand. • Inability to stockpile-Stockpiling of vaccine in preparation for a pandemic is not a viable strategy, as it is not possible to predict the vaccine strain that will cause the pandemic. • Supply of primary production material-Currently, vaccines are produced using eggs, and ensuring an adequate supply of eggs to significantly increase production during a pandemic represents a significant challenge . • Specialized production facilities-Additional quantities of vaccine could not be readily produced in facilities used for other vaccines, as production and purification equipment and facilities are specifically designed for influenza vaccines.

Chiron has plans to maximize production of influenza vaccine at its Liverpool, Marburg and Siena facilities to help overcome these challenges in the event of a pandemic: The following steps would be undertaken to increase vaccine production :

Year-round production-Influenza vaccine production would be run continuously over the whole year as opposed to the current seasonal production cycle. However, it should be noted that this assumes that additional egg supply will be available to keep the facilities running year round. Monovalent vaccine -A monovalent vaccine containing-the pandemic strain only would be produced as opposed to the standard trivalent vaccine containing three strains . Manufacturing capacity would therefore be increased by a factor of three, assuming that the vaccine contains the same amount of antigen as the conventional influenza vaccine ." Any increase in the antigen content of the pandemic vaccine would result in a proportional reduction in the number of doses that could be produced . At present, the clinical data available to support the definition of the pandemic vaccine is limited .

Chiron estimates that implementing these two steps in the event of a pandemic would more than triple its influenza vaccine manufacturing capacity, of which 50 percent would be produced at its FDA-licensed facility in Liverpool, assuming the pandemic vaccine contains the same amount of antigen as the normal vaccine . By the end of the decade, under its current plan, Chiron anticipates being able to increase its pandemic vaccine production by an additional 50 percent due to expanded production capacity in Liverpool and the availability of a cell-culture facility in Marburg producing its MDCK-based cell-culture vaccine .

1' It should be noted that studies of experimental vaccines produced in response to the avian influenza A outbreaks in Hong Kong suggest that a greater dosage or an adjuvanted vaccine may be required . 'therefore, whether this assumption will tam out to be valid is open to question .

33734234 Adjuvantation'2 of the pandemic vaccine could theoretically expand production capacity even further by reducing the required antigen dose . However, limited clinical data for the pandemic strain situation exist . Chiron therefore believes that it would be of significant benefit if publicly funded studies were undertaken with a goal of defining the characteristics (e.g., antigen and/or adjuvant dose) of a `'pandemic- like" vaccine and vaccination schedule .

A pandemic would not represent a "business-as-usual" situation for Chiron. Implementing these steps to increase influenza vaccine production would occur at a cost of using resources normally devoted to the production of other vaccines . For example, producing the additional influenza vaccine would take up additional filling capacity impacting the ability to fill other vaccines. Therefore, production of the pandemic vaccine would potentially disrupt Chiron's ability to supply other vaccines to its customers . This disruption in supply could lead to public health consequences if alternative sources of supply could not be found or adequate stockpiles were not in place. At present, the impact of disruption of supply on the United States would be limited, as the only Chiron vaccine that could be impacted is its rabies vaccine . However, global markets for Chiron's pediatric and adult vaccines would be detrimentally impacted .

In the face of a potential influenza pandemic, switching production to a monovalent pandenuc vaccine imposes a significant financial risk : If the predicted pandemic failed to materialize, there would be no demand for the monovalent vaccine, and Chiron would be forced to destroy the vaccine . Therefore . Chiron would be unlikely to make the decision to switch production from trivalent vaccine to a monovalent pandemic strain without a guarantee that its production would be purchased whether or not the pandemic materialized . Chiron would be unable to assume this risk without financial guarantees being in place due to the severe consequences of losing an entire year's revenues generated from the production of influenza vaccine . Therefore, in order to trigger a switch to pandemic vaccine production as quickly as possible in the event of a potential pandemic, governmental guarantees to purchase the vaccine and an agreed-upon purchase mechanism should be in place . The need for a mechanism to guarantee purchase implies a limited role for the private sector in the marketing of a vaccine in the event of a pandemic . National governments will procure the vaccine, be responsible for its distribution and determine the priority of immunization. Based on these considerations, Chiron assumes that in the event of a pandemic, the market for influenza vaccine will be almost exclusively a public-sector market, with national governments purchasing vaccine from producers . In addition, Chiron assumes a mechanism for indemnifying manufacturers, similar to that of smallpox, will be in place.

It is important to note that the current regulatory approval process would have to be expedited in order for manufacturers to rapidly convert to producing a monovalent pandemic vaccine in a timely fashion . Under the present system, obtaining regulatory approval could be a bottleneck in supplying pandemic vaccine . Chiron believes that discussions and planning should occur now between manufacturers and the FDA i n

12 Adding an adjuvant, a substance that improves the immune response to the vaccine .

33734235 order to determine the regulatory pathway for approval of a vaccine, including any amendments to official release requirements in the event of a pandemic . This would be of significant value to expedite the availability of supply should the pandemic occur.

Despite a potential increase in the supply of vaccine by a factor of greater than three . there will be a global shortage of influenza vaccine in the event of a pandemic . Demand for influenza vaccine would increase dramatically compared to normal circumstances due to the need to immunize most of the global population and a potential increase in the number of doses required per person to provide immune protection from one to two . Current global influenza vaccine production capacity. estimated at roughly 300 million doses in a typical year,13 will most likely be unable to cope with global demand, and therefore a shortage of vaccine is expected to occur.

Chiron is committed to maintaining supply to the United States in the event of a pandemic. However the current location of Chiron's influenza manufacturing facilities outside of the United States imposes constraints on its ability to ensure this occurs, as it is not clear how global allocation of the vaccine will take place in the event of a pandemic. Where demand outstrips supply, it is possible that national authorities will impose constraints on the allocation of influenza vaccine by manufacturers under their jurisdiction . One of the constraints that maybe imposed by national authorities is that producers be required to give priority to meeting national demand before shipping vaccine supply to traditional markets. For example, Chiron could be asked to give precedence to the United Kingdom in allocating vaccine supply from its Liverpool facility, as it is the only domestic source of supply for that country. Furthermore, once the needs of the United Kingdom were met, priority might be given to other European countries before allowing vaccine to be made available to the rest of the world. In addition, manufacturers with facilities located in European Union countries may be required by their national authorities to give precedence to the needs of other EU member -countries once domestic needs have been met before vaccine can be exported outside of the EU, particularly for those member states that do no not have domestic production capacity, These variables are real and uncharted.

A critical success factor to pandemic preparedness efforts in the United States would therefore be increasing domestic production capacity of influenza vaccine in order to ensure a supply of vaccine free from external pressure in a pandemic. Ideally, this would involve creating new facilities rather than expanding capacity at the only domestic facility because, as stated previously, reliance on a single supplier is inherently risky .

If new facilities were to be built in the United States with a primary objective of ensuring supply of vaccine in the event of a pandemic they should be based on cell- culture technology as opposed to the current egg-based production . Cell-culture technology offers significant advantages in the event of a pandemic as previously highlighted in this statement . The private sector appears to represent the best option for expediting the availability of domestic cell-culture production capacity as access to a scaled-up production process would considerably shorten development timelines .

13 Clifton internal estimate.

33734236 Chiron has yet to decide whether it will expand its planned cell-culture production capacity in Marburg in order to supply the U .S. market, but several potential scenarios for capacity expansion have been evaluated . These involve either increasing production at the Marburg site or developing a "green field" site in Europe, the United States or elsewhere for the production of influenza cell-culture vaccine . The decision as to which approach to take will primarily be based on financial considerations, such as the required level of capital investment and Chiron's ability to expeditiously commercialize influenza cell culture . A preliminary analysis suggests that capacity expansion at Marburg could be the fastest and probably most cost-effective option for Chiron due to the benefits of economies of scale in concentrating production at a single site. Developing a new facility on a "green field" site capable of producing 50- 70 million doses of conventional trivalent influenza cell-culture vaccine and more than 200 million doses of monovalent pandemic vaccine is estimated to require a capital investment or more than $200 million.

To expedite pandemic preparedness, Chiron believes that the United States should consider providing incentives, such as tax relief or a contract to guarantee purchase of a certain volume of vaccine at a specified rate, to encourage influenza vaccine producers to locate cell-culture production facilities in the United States . The objective of these incentives would be to ensure that in a pandemic situation the United States has access to cell-culture influenza vaccine free from external government jurisdiction. These incentives should be structured to result in more than one production facility being developed so as to avoid reliance on a single supplier. Incentives should be structured to encourage the location of "bricks and mortar" in the United States as opposed to encouraging the development of a cell-culture vaccine . Financing the development of a vaccine may expedite licensure of a new product or products but would not guarantee that the source of supply will be located in the United States, a key objective for pandemic preparedness . Chiron believes that the private sector is best placed to rapidly bring these facilities on stream as vaccine producers have access to scaled up cell-culture manufacturing processes from production facilities located outside of the United States, which could easily be transferred to a new plant .

In conclusion, an influenza pandemic will represent a significant challenge to Chiron, as it will need to rapidly expand influenza vaccine at the expense of other products in its portfolio. Recognizing this challenge, Chiron is committed to supporting global pandemic preparedness efforts prior to the inevitable occurrence of a pandemic . Chiron believes that continuing to forge partnerships between vaccine manufacturers and the public health authorities is crucial in order to discuss and resolve the following issues : • Increasing demand during interpandemic years to encourage increased capacity. • Determining whether or not pandemic vaccine supply can be expanded by adjuvantation of the vaccine . • Identifying the regulatory pathway for approval of a pandemic vaccine, including any amendments to official release requirements in the event of a pandemic. • Establishing a mechanism to indemnify influenza manufacturers .

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33734237 • implementing mechanisms to trigger the switch to production of a monovalent pandemic vaccine through guarantees to purchase output whether or not the pandemic materializes . • Incentivizing U. S. influenza manufacturing capacity.

In summary, Chiron has invested heavily in ensuring that the United States has a supply of influenza vaccine in interpandemic years . Chiron is committed to providing leadership in the U.S, influenza market . Chiron is shouldering the necessary risks to expand its ability to increase supply and is bringing cutting-edge technologies in influenza cell-culture production to the U.S. market. Fundamental to Chiron's success in realizing its commitments is the ability to work collaboratively with Congress, the 'Administration and public health officials to reach the immunization rates established in Healthy People 2010 while incentivizing the private sector to transition to new technologies in influenza immunization . These priorities are of critical importance if we are to effectively position the United States for preparedness for a global influenza pandemic .

Thank you for the opportunity to present the views of Chiron Corporation, I am happy to answer any questions you may have for me.

33734238

LETTER TO SHAREHOLDERS

Howard Pien, President and Chief Executive Officer, and Seth Lance, Chairman of the Boar d

2003 was an exceptional yea r of growth and financial success

By setting and attaining more than a dozen important goals BLOOD TESTING: and milestones in 2003, Chiron recorded another year o f BUILDING ON OUR CUSTOMER BAS E growth and financial success . I am pleased that 2003 was one The current core of our Blood Testing business is our nucleic of Chiron's most successful and productive years. The three acid testing (NAT) franchise . With the Procleix® System holding engines of Chiron's powerful business model continue to deliver more than 80 percent of the U .S. market and continuing to expand strong financial results while providing the resources to invest in elsewhere in the world, our NAT business was a major driver of exciting opportunities to build long-term shareholder value . the company's growth. Blood Testing revenues increased 34 percent During 2003, we advanced five key clinical programs, made three in 2003 to $422 million . regulatory submissions, and achieved four clinical and commercial Answering the needs of blood banks, Chiron and its collaborator milestones. We also successfully acquired and expeditiously integrated Gen-Probe Incorporated developed and introduced the Procleix® PowderJect Pharmaceuticals, which significantly enhanced Chiron's West Nile Virus Assay in just nine months . The assay, available leadership position in vaccines . We delivered financial results: revenues since July 2003 on an investigational-use basis in the United of $1 .8 billion, the highest in Chiron's 23-year history, and pro-forma States, showed dramatic results, capturing more than 800 potentially diluted earnings per share from continuing operations of $1 .54 (GAAP infectious blood donations that would otherwise have entere d diluted EPS $1 .15)` For 2004, we foresee a year of bright prospects the blood supply. for growth and value creation in all of our business units . .

'See page 14 for descrip!ian of pro-forma New geographies and assays will expand the Procleix franchise licensing agreements to address customer needs . Our agreement in 2004 . We are expecting geographic growth for the Praaleix® with Infectio Diagnostic Inc . brings us a bacterial detection system HIV-1/HCV Assay in several new countries, including Poland, Greece, in platelets with the potential to reduce test time from two days to Korea and Thailand . The Procleix® UltrioTM Assay, which adds a one - an important factor when platelets have only five days in hepatitis B test to the system, now bears the CE (Conformite which to be tested, shipped and used . This system could be on the Europeenne) Mark, thus opening the way to full commercialization of market as soon as 2005 . the product in Europe . The hepatitis B component of lfltrio will be an Through our collaboration with ZymeQuest Inc ., we have the important asset for the assay as we expand into the Pacific Rim and potential to develop a system to convert blood groups A , B and AB Latin America, where hepatitis B is endemic. to universal donor group 0. The technology could greatly reduce We also anticipate filing a biologics license application (BLA) for the number of blood donations currently discarded due to bloo d the Procleix Ultrio Assay in the United States this year . The trials will types not matching patients' needs. be conducted in part on TIGRISH a fully automated system developed with Gen-Probe. TIGRIS, which began clinical testing early in 2004, is VACCINES : THE WORLD'S SECOND-LARGEST a key enabling technology for individual donor testing . On the heels FLU VACCINE MANUFACTURE R of the strong preliminary reception of the West Nile virus assay in With all the early hallmarks of success, the acquisition of PowderJect 2003, we also are moving forward with a U .S. clinical trial for this has made Chiron a significant player in the U .S. flu vaccine market as test, which will pave the way for full commercial pricing . well as a household name . The value of the deal is reflected in . We have been investing to expand the Blood Testing business Vaccines' revenue growth : In 2003, net product sales for the Vaccines into the broader realm of blood safety. In 2003, we made tw o business wore $678 million versus $357 million for 2002 .

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1984 - HIV 1986 - Hepatitis 1992 - Cancer 1993 - Multiple Sclerosi s In 1984, as AIDS emerged as a In the early 1980s, Chiron Proleukino (aldesleukin) After more than a decade of public health crisis, Chiron scientists developed the method to interleukin-2, approved in 1992 as research and development at were among the first to clone and produce the hepatitis B antigen the first drug treatment specifically various companies, Setaseron ® sequence the human immuno- used to develop the first for metastatic renal cell carcinoma interferon beta-4b, the first deficiency virus (HIV), the cause genetically engineered human (kidney cancer), was heralded disease-modifying therapy fo r of AIDS, and identify its important vaccine, licensed to Merck and by the FDA as an example of the multiple sclerosis, was success - coding domains . These discoveries introduced in 1986 . In 1987, potential of biotechnology to fully brought to market by Chiro n have enabled ongoing research Chiron researchers discovered, improve health care" In 1998, and Berlex Laboratories in 1993. by Chiron and other companies cloned and sequenced non-A, Proleukin was approved for the Innovative manufacturing tech- searching for more effective non-B hepatitis - the hepatitis C treatment of metastatic melanoma, niques developed at Chiron have treatments and a possible vaccine virus . This work has led to the a type of skin cancer. Since its helped make Betaseron available for this devastating disease . development of blood-screening introduction, this breakthrough to millions of patients worldwide. technologies, including Chiron® product has demonstrated that it Procleix® assays, which have offers the possibility of complete prevented millions of potentially and long-lasting remission in fatal hepatitis infections . these diseases .

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PROLEUKIN® ALDESLELIKI N FOR INJECTIO N ARECOMBINANT INIERLEVKIN.2

2 CHIRON : n-ir GROWTH OF SCI€NC£ The public is increasingly conscious of the value of and greater capacity. Chiron is also preparing to enter Phase III vaccination in preventing influenza . We are working to help meet testing for cell-culture-derived flu vaccine . Cell-culture vaccine that public health need . Our FluvirinO flu vaccine production for the manufacturing potentially has greater flexibility and would be an 2003-2004 U.S. flu season represented a 50 percent increase over important complement to the existing egg-based technology. production the previous season . This significant accomplishment With Fluvirin, not only have we acquired a great product with was achieved while integrating PowderJect operations and is tremendous . potential for growth ; we have also established a beach- testimony to the dedication and professionalism of our employees . head in the important U .S. market. One of our goals for 2004 is to For the 2004-2005 flu season, we project that we will produce 50 strengthen our commercial Vaccines organization in the United States million doses of Fluvirin, the overwhelming majority of which is as we develop our meningococcal vaccines . We anticipate that we will destined for the United States . file a BLA for our meningococcal C vaccine, Menjugate~ in 2004 . Our Flu vaccines will be an important driver of growth for Chiron next step forward will be to advance our multivalent AGWY vaccine in the near-term to midterm . Outside the United States, Chiron program toward Phase III . Finally, we are developing a broad-coverage markets Agrippal® Si, BegrivacTM and Fluad© flu vaccines . In total meningococcal B vaccine to complete a full suite of meningocaccal for the 2003-2004 flu season, Chiron produced 75 million doses vaccines that represents a significant market opportunity . of its four brands of flu vaccines for the global market . In order to fulfill the growing demand for flu vaccines, Chiron has committed BIOPHARMACEUTICALS : FUELING approximately $100 million to further develop and expand our NEAR-TERM AND LONG-TERM GROWT H Liverpool, England, manufacturing facility . These improvements Our BioPharmaceuticals business also performed well in 2003, will lead to increases in our production through greater efficiency with revenues increasing 12 percent over 2002 to $562 million .

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1996 - Influenza 2000 - Meningococcus 2003 - SAR S Achieving Our Goals Fluad® the world's first adjuvanted Chiron introduced Menjugate® In less than six months in 2003, o Five clinical advancements flu vaccine, was introduced by conjugate vaccine against meningo- more than 8,000 people worldwide o Four program prioritie s Chiron in 1996 . A key component coccel C disease in 2000 as part of became sick and 774 people died 0 Three regulatory submissions is Ch iron's proprietary MF59 a universal vaccination campaign from severe acute respiratory o Pro-forma diluted EPS $1 .54 adjuvant, the world's first vaccines in the United Kingdom, where it syndrome (SARS) . In response to (GAAP diluted EPS $1 .15) adjuvant shown to enhance the helped reduce deaths from meningo- this public health crisis, Chiron immunogenicity of flu vaccines coccal C disease by 80 percent . The scientists, in collaboration with the Exceeding Expectation s while maintaining a clinically product is now in U .S . clinical trials . University of Marburg (Germany), o Two key investments in blood s acceptable safety profile . Today, Chiron also has sequenced the decoded the genomic information safety technologie Chiron is the world's second- meningococcus S genome and is of the SARS virus, work that may • One major acquisition in Vacc Ines largest provider of flu vaccines, developing a broad-coverage vac- open the door to development of • Two promising in-licensing offering products specifically cine based on this technology. a vaccine or treatment . agreements in BioPharmaceuticai s designed for children, adults and A multivalent ACWY vaccine, now the elderly. in development, would complete Chiron's portfolio of vaccines against the five major types of meningococcal disease . FWad' °"' i

CH{RON : THE GROWTH OF SCIENCE 3 The business made important strides in 2003 with the formation of partner Cubist Pharmaceuticals, we are working to gain product a new leadership team that we believe has the experience and track approval for daptomycin in Europe . record to move the pipeline and the business forward . We are also investing to expand our TOBI franchise . TPI, a dry The BioPharmaceuticals pipeline is a balanced mix o f powder formulation of tobramycin, would use a small, hand-held near-term opportunities and long-term potential. By leveraging device to reduce administration time . to just a few minutes . This our established expertise in infectious disease and oncology, would encourage greater compliance among CF patients. we are poised to make key regulatory and clinical advances i n In the longer term, we have significant opportunities . the coming year . Tifacogin, for patients with severe community-acquired pneumonia, Cyclosporine solution for inhalation is a potential treatment could meet a major medical need . We are moving forward with a for lung transplant rejection. With about 1,100 lung transplants in Phase I I I trial in 2004 . the United States each year and a five-year mortality rate In oncology, we are continuing our program for approaching 50 percent, this is a well-defined population with a Proleukin® (aldesleukin) interleukin-2 in combination with significant unmet medical need . Because of our experience with rituximab inpatients with non-Hodgkin's lymphoma (NHL) . We TOBI® tobramycin solution for inhalation, our treatment for have seen durable responses in patients with ritux.imab- pseudomonal infection in cystic fibrosis (CF) patients, we are wel l refractory NHL, who were otherwise unlikely to respond to positioned to bring this drug to market . treatment with rituximab alone . Those responses seem to Another important near-term opportunity is daptomycin, an correlate to a particular patient genotype, which may help us antibiotic for which we in-licensed commercial rights in 2003 for identify patients best suited to treatment . We are encouraged Europe and other key markets outside the United States . With our by these early results .

Regulatory Submissions Clinical Advancement s Commercial Objectives Financial Results oBiologics license application (BLA) • Initiation of Procleix® West Nile • Blood Testing expansion into Pro-forma diluted EPS $1 .80-$1 .90 for Procleix® UltriGTM Assay Virus Assay U .S . clinical trial Pacific Ri m (GMP diluted EPS $1 .50 - $1 .60 ) 0 BLA for Meniugate® vaccin e Phase III trial for cell-culture- o Procleix® UttrioTM Assay launch in o CE (Conformite Europeenne) Mark derived flu vaccine European Unio n for TIGRIS® system o Phase III trial for tifacogi e o Ex-U .s . TIGRIS® system launch o New drug application (NDA) for o Phase III trial for tohramycin dry o Increased flu vaccine cyclosporine solution for inhalation powder formulatio n manufacturing capacity • Pilot immunization campaign for o Strengthen LLS. Vaccines men ingococcus B New Zealand organization vaccine* o Phase II completion of Proleukin® (aldesleukin) interieukin-2 plus rituximab trial • Phase I I trial for Proieukinm plus rituximab in rituximab-naive patient s o Phase I enrollment for second- generation meningococcus B vaccine candidate • Phase I enrollment for CHI R258 • INO filing for anti-C040 `Phase f!! equivalent

4 CHIRON : THE GROWTH OF SCIENCE Chiron's research in small molecules is now bearing 2003 and departing chairman of the board . Chiron is deeply fruit. CH1R258, a growth factor kinase inhibitor and the first of indebted to Sean for his outstanding leadership during a crucial our small molecule oncology compounds to emerge from our stage of the company's maturation . His work enabled many of our research programs, has begun Phase I testing . 2003 successes, which will continue to fuel Chiron's growth for Also in oncology, we expect to file an investigational new years to come . 1 have personally benefited enormously from his drug application (1ND) for anti-CIJ40, a monoclonal antibody, counsel during this transition, and I have hugely enjoyed his this year. advice, given with wisdom and grace .

A SOLID FOUNDATION FOR A BRIGHT FUTUR E In 2004, Chiron alms to achieve more than a dozen regulatory Sincerely, submissions and product pipeline progressions that will help build future value for shareholders . Chiron will continue to seek new opportunities to expand its impact on human health worldwide . We are committed to developing new products to detect, prevent and treat disease . We thank our shareholders, our customers and our employees for their support . Howard Pie n And finally, on behalf of all of us at Chiron, I wish to thank President and Chief Executive Officer Sean Lance, our chief executive-officer from March 1998 to April March 4, 2004

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(Pictured from left to rtplt) Howard Pion President and Chief Executive Officer John A. Lamber t Vice President; President, Chiron Vaccines Linda W. Short Vice President, Corporate Resources Rine Happen[ ! Vice President and Chief Scientific Officer Jack Goldstein Vice President; President, Chiron Blood Testing William G . Gree n Senior Vice President, General Counsel and Secretary Craig A. Wheele r Vice President; President, Chiron BioPharmaceuticals David V. Smith Vice President and Chief Financial Officer Bryan Walse r Vice President, Corporate Strategy

CHIRON : THE GROWTH OF SCIENCE 5

Reverse Vaccinology Using proven skill s in genomics, Chiron is pioneering a new approach to vaccine antigen discovery . This innovative method has taken Chiron's meningococcal B vaccine from concept to clinical study in just four years . www.chiron .com/menvax

Small Molecules The Chiron-developed novel therapeutic CHIR258, a growth factor kinase inhibitor, acts against pathways common to the growth of several cancer types . Clinical trials, currently in Phase I, will evaluate the potential benefits of this exciting molecule . www.chiron.com/CHIR258

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"a z O 0. Recombinant Proteins Severe community- acquired pneumonia affects approximately 300,000 U.S. patients. annually ; approximately 30 percent of those patients die despite the best available supportive care . Tifacogin, a recombinant form of tissue factor, pathway inhibitor, now moving into Phase II! clinical trials, has the potential to address this major unmet .need. www.chiron.com/tifacogi n serogroups that cause human disease sets the stage for development of a new global franchise of Chiron products . Research into cell-culture manufacturing technology for flu vaccines may yield greater flexibility in the production of Chiron flu products . The company also is advancing programs for potential vaccines against HCV and HIV, two viruses that continue to impact world populations . In oncology, Chiron is building on more than a decade of research to evaluate the potential of Proleukin® (aldesleukin) interleukin-2 to increase the benefit of monoclonal antibodies targeting certain cancers, and the company's work in small-molecule therapeutics has led to a Phase I clinical trial for CHIR258, a growth factor kinase inhibitor .

CH{RQN : MOVING RESEARCH FORWARD 7

New Procleix® Assays The Procleix® Ultrio d " Assay, a triplex test that detects HIV-1, HCV an HBV simultaneously, provides greater efficiency t o customers and broadens Chiron's portfolio of sq1 4 blood-screening products. $l- www.chiron .com/procleix

Growing the Global Flu Market (in trillions) $2 . 6

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Flu Vaccines Chiron produced 75 million doses of its four brands of flu vaccines in 2003. To meet the needs of this growing market, particularly in the United States, Chiron is committing $100 million to improve its flu vaccine manufacturing capabilities . www.chiron .com/flu

Nile Virus Assay in 2003 under an FDA-approved investigational use protocol in just nine months . Chiron is building on the Procleix®System franchise to expand into the broader realm of blood safety, a $2 .5 billion market. With the acquisition of U .K.-based vaccines company PowderJect Pharmaceuticals, Chiron added Fluvirin® influenza vaccine to its portfolio of leading flu products and established itself as the No . 2 flu vaccine provider in the world . Chiron delivered 38 million Fluvirin doses to U .S. distributors for the 2003-2004 flu season, a 50 percent increase over the previous season . The rapid and successful integration of PowderJect operations allowed Chiron to meet its commitments on time in a season of particularly high demand .

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Z Geographic Expansion Disease transmitted through blood transfusions continues to be a serious health issue in many countries, including China and Brazil . Chiron is introducing Procleix® assays and systems in these and other markets worldwide, further protecting the global blood supply. www.chiron .com/procloi x

In its BioPharmaceuticals business, Chiron has made strategic investments that play to the strengths of the organization and create unique market opportunities . The in-licensing of cyclosporine solution for inhalation, a potential treatment for lung transplant rejection, leverages Chiron's pulmonology expertise, demonstrated by the continued success of Chiron's leading product for cystic fibrosis patients, TOBI® tobramycin solution for inhalation . Chiron's well-established commercial infrastructure in Europe will help the company realize the full value of its licensing agreement to develop and market FDA-approved antibiotic daptomycin outside the United States .

10 CHIRON : CREATING COMMERCIAL OPPORTUNITIES intellectual Property Chiron's extensive 1 •~ patent portfolio encourages scientific collaboration, fuels company growth and funds innovative research that leads to new discoveries . In 2003, Chiron patents generated more than $250 million in royalty and licensing revenue . www.chiron,com/I P

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Daptomycin Chiron's agreement to commercialize FDA-approved antibiotic daptomycin in key international markets leverages the company's European infrastructure to create a promising growth opportunity. www.chiron.com/daptomyci n

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CHIRON : CREATING COMMERCIAL OPPORTUNI TIES 11

Blood Safety To further protect the world's blood supply, Chiron and its collaborators are developing new technologies designed to detect harmful bacteria in platelets and to convert non-0 red blood cells to universal-donor red blood cells . www.chiron .com/bloodtesting

_A Disease Prevention Vaccination helps relieve the burden of disease before it begins . Chiron is working with health authorities across the world to identity and meet emerging needs and to promote better understanding of the value of vaccines . www.chiron .com/vaccine s

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Innovative Therapeutics Cystic fibrosis, cancer and multiple sclerosis patients have benefitted from Chiron's expertise in developing breakthrough therapies that can change lives . Chiron is applying qf~~

existing Chiron products have the potential to deliver even greater value to patients. By sharing its scientific expertise through partnerships and licensing agreements, Chiron stimulates research and product development efforts at other companies and extends its ability to transform lives even further. Chiron is proud to be a leading company dedicated to pioneering science and committed to improving health worldwide.

CHIRON : IMPROVING HEALTH WORLDWIDE 13

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',"14Jihr .chrron_cor Chiron Blood Testing is dedicated to preventing the spread of infectious U diseases through the development of novel blood-screening tools that protect Z iz the world's blood supply . Chiron" Procleix® assays and systems, developed in cn w collaboration with Gen-Probe Incorporated, utilize state-of-the-art nucleic acid 1- o testing (NAT) technology to detect RNA .and DNA in donated blood, plasma and 0 organs during the very early stages of infection, when infectious agents are J present but cannot be detected by immunodiagnostic screening technologies . CM Through its joint business with Ortho-Clinical Diagnostics, Chiron also develops and markets a line of immunoassay screening, diagnostic, and supplemental hepatitis and retrovirus tests.

Leading Products oProcleix® HIV-1/HCV Assay For simultaneous detection of human immunodeficiency virus type 1 (HIV-1) and hepatitis C virus (HCV) in blood and blood products oProcteix ® Ultrio- Assay For simultaneous detection of HIV-1, HCV and hepatitis B virus (HBV) in blood and blood products olmmunoassay s Screening and supplemental tests for infectious diseas e

For more information on Chiron Blood Testing : www.chiron.com/bloodtestin g

Procfeix* Ultrio' - Assay is not approved for safe in the United States . Available in select internationaf markets. Chiron Vaccines , the world's fifth-largest vaccines business, is headquartered in Oxford, England, and has facilities located throughout Europe, the United Z Z States and Asia . Chiron Vaccines is the world's second-largest manufacturer of V¢ flu vaccines and has important meningococcal, pediatric and travel vaccine > franchises . Chiron Vaccines is the leading vaccine manufacturer in the Unite d Kingdom, Germany and Italy . The company's portfolio of products includes vaccines for influenza, meningococcal C disease, rabies, tick-borne encephalitis, yellow fever, haemophilus influenzae B (Hib), polio, mumps, measles, rubella, diphtheria, tetanus and pertussis (whooping cough) .

Leading Products oFlu Vaccine s Fluvirin®, Agrippal! S1, Begrivac'"' and Fluad®, for prevention of influenza oMeningococcal Vaccines Menjugate®, for prevention of meningitis G oPediatric Vaccine s

PolioraP', .for prevention of polio pE UI!7f oTravel Vaccine s Encepuf", for prevention of tick-borne encephalitis ; Mvaiju9ate' Syriaga ._ ._. _ Arilvax", for prevention of yellow fever ; RabAvert® and Rabipur®, for prevention of rabie s

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For more information on Chiron Vaccines : 4olior'a1" www.chiron.com/vaccines

Huad' Fluvirin® and RabAvert® vaccines are approved for sale in the United States . All other products available in select International markets. Chiron RioPharmaceuticals develops and . manufactures high-value therapeutic cn products. Leading products include TOBI° tobramycin solution for inhalation, U_ for lung infections in cystic fibrosis patients ; Proleukin® (aldesleukin) H interleukin-2, for metastatic melanoma and metastatic renal cell cancer ; and uJ Betaseron® interferon beta-1 b, for multiple sclerosis . The company is leveraging U its expertise in infectious disease and cancer to advance clinical programs and n! . product improvements in these focus areas, including the development of new I formulations of TOBI and the use of Proleukin to enhance the benefit of monoclonal antibodies in cancer treatment , O M

Leading Product s oTOBI® tobramycin solution for inhalation For treatment of pseudomonal lung infections in cystic TOBI M n Sc&®n k h'du= fibrosis patients oProleukin® (aldesleukin ) interleukin- 2 " r .~ ....Z .^ 4 For treatment of adults with metastatic renal cell carcinoma .. r and metastatic melanom a oBetaseron ® interferon beta-l b R`TwNruwo. e~11 For treatment of relapsing forms of multiple sclerosis to reduce frequency of clinical exacerbation s

For more information on Chiron BioPharmaceuticals : www.chiron.com/biopharma Chiron Intellectual Property is an important part of the company's business . >- Chiron's pioneering accomplishments in hepatitis C virus (HCV) and human c w immunodeficiency virus (HIV) form the foundation of the company's large an d CL O growing intellectual property portfolio . Chiron is committed to helping address major unmet medical needs by commercializing its technology through its own products and by making its technology available to other companies . As a f{ °. a result, Chiron has numerous collaborations and licensing agreement s w- W with major companies working to improve human health . Royaltie s from Chiron intellectual property will continue to drive growth for th e Uu h company, funding new research and product development in each Z Chiron business unit. hIL

Major Licensees oAbbott Laboratories 0Baye r oBristol-Meyers Squibb oF. Hoffman-La Roche oGilead Sciences cGlaxoSmithKline cMerck 0Pfizer

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Chiron Corporation 4560 Norton Street Emeryville, CA 54608-2916 Tel : (510) 655-8730 Fax : (510) 655-9910 www .chirun .cam 1 ~~ ~v Ski ~ - ~ ~

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Chiron's 2003 successe s point to a bright path I n 2004 and beyond .

HOWARD PIEN, PRESI DENT AND CHIEF EXECUTIVE OFFICER r