EXHIBIT M Chiron News Page ) of2

Chiron to Testify to Congress on Influenza Vaccine President and CEO Howard Pien to Appear at U.S. House of Representatives Government Reform Committee Hearing Today

EMERYVILLE . Calif., Feb . 12 IPRNewswire-FirstCali! - 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 rote 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.cor-potate-ir.net/phoenix .zhtmI?c=105850&p=irol-newsArticle Print&ID =55299... 12/8/2004 t t Chiron News Page 2 of 2

Chiron Vaccines is the world's second-largest flu vaccines company, with four leading brands . Fluvirin(R) is a triple-antigen flu vaccine, approved for sale in more than two dozen countries including the United States, the United Kingdom, and a 40 number of countries in Europe and the Southern Hemisphere . Outside the United States, Chiron Vaccines markets Agrippal (R) S1, Begrivac(TM) and Fluad(R) flu vaccines .

About Chiron

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 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, 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 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: Fluvirin, Agrippal, Begrivac and Fluad are trademarks of Chiron Corporation.

SOURCE Chiron Corporation

httD:f/tihx.comorate-ir.net/nhoenix.zhtml?c-105850&n=irol-newwsArticle Print&f=55299 . . . 12/R12004 EXHIBIT N CHIRoN

1 Introduction Mr. Chairman . Members of the Committee : Thank 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. Melningiridis 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®.2

Chiron and Influenza Vaccines Chiron Corporation's $878 million acquisition of Po-,vderiect 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 ) Menjupate® has been licensed in Europe via the Mutual Recognition Procedure and is also approved in other countries , including Canada and Austra lia. 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 embrvonated 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-vear 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, whicb will not grow on eggs without genetic modification.

1 Overview of Egg-Based Influenza Vaccine Production 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 cam' over inventor- 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 interpandernic 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

3 Source: Morbidity & Mortality Weekly Report 2003, Vol . 52 RR8 pandernic . 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 approximately seventy thousands deaths in the United States while the Hong Kong influenza pandemic of 1968 .is estimated to have caused 33 .000 . deaths a 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, I

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 Powderiect, 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 i mmunization 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 m anufacturers 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.govlod/nvpo/pandemics 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, consequently, 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 Availability"6 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 ,

A new fill/finish facility was completed a fewyears ago . 'Institute of Medicine, August 2003 Tetanus-diphtheria, measles-mumps-rubella, varicella (chicken pox) ; pneumococcal conjugate, meningococcal polysaccharide, pneumococcal polysaccharide significant potential for supply interruptions . Indeed . these have occurred over the past few years . In 2001 and 2002 . eight of the 1 I recommended childhood vaccines were in short supply .8 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 (Dial?) 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 b y 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 atypical 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 . • 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 prograrm 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 b -,' 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 ev~ent .of a severe epidemic. Furthermore, focusing on solutions impacting the demandside 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 i

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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 Health ., 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 wears because: The pricing environment has reached levels where it supports manufacturers' investment in production capacity for the United States, as evidenced by the in estments .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 percent. ~~ ~1~ .

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 Pandemic 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 (IVS TF), created in 2001 with the endorsement of the International Federation of Pharmaceutical Manufacturers Associations . The group is made up of i 1 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 Journal of Medicine, January 15, 2004 . 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 ivith annual demand for vaccine under -normal circumstances, i .e. . between pandemics, and therefore little or no surge capacity exists to meet pandeniic 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.tt 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 .

11 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 turn out to be valid is open to question. Adjuvantation'2 of the pandemic vaccine could theoreticall y 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 .%vould.=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 pandemic 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 b.e. 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 ofa~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 in

12 Adding an adjuvant, a substance that improves the immune response to the vaccine . 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.'' 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 may be 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 Chiron internal estimate. 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 p andemic vaccine, including any amendments to official release requirements in the event of a pandemic. • Establishing a mechanism to indemnify influenza manufacturers .

1- • 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 .

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Howard Pien, President and Chief Executive Officer, and Sean Lance, Chairman of the Board

2003 was an exceptional yea r of growth and financial success

B y setting and attaining more than a dozen Important goals BLOOD TESTING : and milestones in 2003, Chiron recorded another year of 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 Procle€x® 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 I AT 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 Procle€x® 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 entered 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 descriptio,, of pro-1gmM 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 Procleix® 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 Procleixw Ultrio7A1 Assay, which adds a one - an important factor when platelets have only five days in hepatitis 8 test to the system, now bears the CE (Conforrnite which to he 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 ..compone nt of Ultrio 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 TIGRIS® 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 VACCI NE 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 i n We have been investing to expand the Blood Testing business Vaccines' revenue growth : In 2003, not product sales for the Vaccines into the broader realm of blood safety . In 2003, we made two business were $678 million versus $357 million for 2002 .

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1984 - HIV 1986 - Hepatitis 1992 -Cancer 1993 - Multiple Sclerosis In 1984 . .as AIDS emerged as a In the early 1980s, Chiron Proleukine (aldesleukin ) After more than a decade of public health crisis, Chiron scientists developed the method to interleuk€n-2, approved in 1992 as research and development at were among the first to clone and produce the hepatitis .8 ant€gen the first drug treatment specifically various companies. Betas e.ronl& sequence the human immuno- used to develop the first for metastatic renal cell carcinoma interferon beta-1 b, the first deficiency virus (HIV), the cause genetically engineered human (kidney cancer), was heralde d disease-modifying therapy for 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 Chiron have enabled-ongoing research Chiron researchers discovered, improve health care" In 1998, and 8er€ex 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 sign cancer . Since its helped make Betaseron available . for this devastating disease . development of blood-screening introduct€on, this breakthroug h 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 .

4 ~ l • PROLEUKI N ALDESLEUK IN FOR INJECTION w~mMawuaru.ru IMJ.z - ~ i

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 Fluvirin® 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 Fiuvirin, 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 tIle 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 meningococcaf C vaccine, Menjugate! in 2004 . Our Flu vaccines will be an important driver of growth for Chiron next stop forward will be to advance our multivalent AGWY•vaccine in the near-term to midterm . Outside the United States, Chiron program toward Phase Il l. Finally, we are developing a broad-coverage markets AgrippalO S1, BegrivacTM and Fluad® flu vaccines . In total meningococcaf B vaccine to complete a full suite of meningococcal 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. Those 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 - Influenz a 2000 - Meningococcus 2003-SARS Achieving Our Goals. Fluad® the world's first adiovanted Chiron introduced Menjugateg In less than six months in 2003, o Five clinical advancements flu vaccine, was Introduced by conjugate vaccine against meningo- more than 8,001) people worldwide Four program priorities Chiron In 1996 . A key component coccal C disease in 2000 as part of became sick and 774 people died Three regulatory submissions is Chiron's proprietary MF59 a universal vaccination campaign from severe acute respiratory o Pro-forma diluted EPS .$1 .5 4 adjuvant, the world's first vaccines in the United Kingdom, where it syndrome {SARS) . In response to (GAAP diluted EI'S $1 .15) adjuvant shown to enhance the helped reduce deaths from mehingn= this public health crisis, Chiron immunogenicity of flu vaccines caccal c disease by 80"percent. The scientists . in collaboration with the Exceeding Expectations n blood . while maintaining a clinically product is now in U.S . clinical trials. University of Marburg (Germany), o Two key investments i acceptable safety profile. Today, Chiron also has sequenced the decoded the genomic information safety technologies Chiron is the world's second- meningococcus B genome and is of the SARS virus, work that may 0 One major acquisition in Vaccines o Two largest provider of flu vaccines, developing a broad-coverage vac- open the door to development of promising in-licensing in BioPharmaceulicals offering products specifically cine based on this technology . a vaccine or treatment. agreements designed for children, adults and A multivalent ACINY vaccine, now the elderly. in development, would complete Chiron's portfolio of vaccines against the five major types of meningococca€ disease .

F- 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 of 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 in 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 III 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) .interletrkin-2 in combination with significant unmet medical. need. Because of our experience with rituximab in patients with non-Hodgkin's lymphoma (NHL) . We TOBI® tobramycin solution for inhalation, our treatment for have seen durable responses in patients with rituximab- pseudomonal infection in cystic fibrosis (CF) patients, we are well 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 ou r by these early results .

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Regulatory Submissions Clinical Advancements .. Commercial Objectives Financial Result s • Biologics license application (BLA) o Initiation of Procleix' West Nile Blood Testing expansion into ° Pro-forma diluted EPS $1 .80 - $1 .90 for Prdcleixe URdo'" Assay Virus Assay U.S . clinical trial Pacific Rim . (GAAP diluted EPS $1 .50 - $1 .60) a BLA for Menjugate® vaccine ° Phase Ili trial for cell-culture- o Procleixw Ultrio'• Assay launch i n • CE (Contormite Eurapeenne) Mark derived flu vaccin e European Unio n for TIGRISO system 0 Phase III trial for tifacogin Ex-U .S . TIGRIS@ system launch o New drug application (NDA) for . Phase III trial for tabrarnycin dry 0 Increased flu .vaccine . cyclosporine solution for inhalation powder formulatio n manufacturing capacity . o Pilot immunization campaign fo r Strengthen U .S. Vaccines meningococcus B New Zealand organization vaccine ' o Phase II completion of Proleukin® (aldesieukin) interleukin-2 plu s rituximab trial o Phase tl trial for Proleuktn' plu s rituximab in rituximab-naive patient s Phase I enrollment for second - generation meningococcus 8 vaccine candidate Phase I enrollment for CHI R258 o IND filing for anti-0040 `PAa5e ill tquiv2rett Chiron's research in small molecules is now bearing 2003 and departing chairman of the board . Chiron is deeply fruit. CHIR258, 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 fo r Also in oncology, we expect to file an investigational new years to come . I have personally benefited enormously from his drug application (IND) for anti-CD40, 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 FUTURE In 2004, Chiron aims to achieve more than a dozen regulatory Sincerely, submissions and product pipeline progressions that will help buil d 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, 200 4

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!KctUred hom left to thy. Howard Pie n President and Chief Executive Officer Johi A, Lambast Vice Presiderh; : President, Chiron Veocines Linda W. Short Vice President, Corporate Resources Rine 8appuat i Vice President and Chief Scientific Officer Jack Goldstein Vice President, President, Chiron Blood Testing William G . Green 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

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Reverse Vaccinology Using proven skill s in genomics, Chiron is pioneering a new approach '1 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

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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 ProcleieSystem franchise to expand into the broader realm of blood safety, a $2 .5 billion market. With the acquisition of U,-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 andsuccessful integration of PowderJect operations -allowed Chiron to meet its commitments on time in a season of particularly high demand .

CHIRON- CREATING COMMERCIAL OPPORTUNITIES 9 f

W 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/proclei 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 .

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RIF and screen[t gxproducts .prevent rani missions o 'deadly virtl ,, in I-S" ! ; Nile virus. Because of Chiron , millions of,pe I = a --cinated against influenza, tin , polio, rabies and other life threate t r seises: Cancer patients are living longer, 11 s lerosis at is ar eai ie and more active - all because of Chiron. On iuman health. Chiron's global reach allows the company to provide ~n mare than 70 countries New discoveries by Chiron scientists and improvements tan, ) 6 1( .

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-O red blood cells to t k 3 .,

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Chiron Blood Testing is dedicated to preventing the spread of infectious diseases through the development of novel blood-screening tools that protect Z the world's blood supply . Chiron® Procleix® assays and systems, developed in LU collaboration with Gen-Probe Incorporated, utilize state-of-the-art nucleic acid © 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 8 present but cannot be detected by immunodiagnostic screening technologies . M 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 oProcieix® HIV-I/HCV Assa y For simultaneous detection of human immunodeficiency virus type 1 (HIV-1) and hepatitis C virus (HCV) in blood and blood products oproclieix® Ultrid" Assa y For simultaneous detection of HIV-1, HCV and hepatitis B virus (HBV) in blood and blood products dlmmunoassays Screening and supplemental tests for infectious disease

For more information on Chiron Blood Testing: www.chiron_com/bloodtesting

Proctalxv Uttr!a'" Assay Is not approved for sale in the United states . Available in select international markets. Chiron Vaccines , the world's fifth-largest vaccines business, is headquartered w in Oxford, England, and has facilities located throughout Europe, the United Z States and Asia. Chiron Vaccines is the world's second-largest manufacturer of V U 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 Vaccines Fluvirin®, Agrippale S1, Begfivac- and HUMID, for prevention of . influenza oMeningocaccaf Vaccines fylenjugate', for prevention of meningitis C oPedibtric Vaccine s Paliofar, .for prevention of polio . d1h oTravel Vaccine s ; Encepur'", for prevention of tick-borne encephalitis Menjuga.z Syringe - • ._. . Arilvax"; for prevention of yellow fever ; RabAvert ' and Rabipur' for prevention of rabie s "MIR

For more information on Chiron Vaccines : polioral " www.chiron_comlvaccine s

n Mrtn+and AabAyert° vaccines are approved for sale in Me United States. All other products available in select International markets-

1 Chiron BioPharmaceuticals develops and manufactures high-value therapeutic products. Leading products include TOBI® tobramycin solution for inhalation, U_ for lung infections in cystic fibrosis patients; Proleukin® (aldesleukin) interleukin~2, for metastatic melanoma and metastatic renal cell cancer ; and uw Betaseron® interferon beta-lb, for multiple sclerosis . The company is leveraging U its expertise in infectious disease and cancer to advance clinical programs and product improvements in these focus areas, including the development of new formulations of TOBI and the use of l?roieukin to enhance the benefit of monoclonal antibodies in cancer treatment . O

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Leading Products oTOBI ® tebramycin solution for inhalation TOB For treatment of pseudomonal lung infections in cystic I . - r vI,sol o~hrtfi o fibrosis patients oProleukin® (aldesleukin) interleukin- 2 For treatment of adults with metastatic renal cell carcinoma and metastatic melanoma o8etasoron® interferon beta-1 b 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 huma n immunodeficiency virus (HIV) form the foundation of the company's large an d a Q growing intellectual property portfolio . Chiron iscommitted to helping address 0. major unmet medical needs by commercializing its technology through its ow n products and by making its technology available to other companies. As Z)Q a result, Chiron has numerous collaborations and licensing agreements E- Lu with. major companies working to improve human health. Royalties J from Chiron intellectual property will continue to drive growth for th e w ZF- company, funding new research and product development in eac h --- Chiron business unit.

Major Licensees oAbbott Laboratories oBaye r oOristol -Meyers Squibb OF. Hoffman -La Roche oGilead Sciences oGlaxoSmithKline oMerc k oPfizer /

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Contacts : Chiron Corporate Communications & Investor Relations . Media: (510) 923-6500 Investors: (510) 923-2300

CHIRON REPORTS 2004 FIRST-QUARTER PRO-FORMA RESULTS OF 22 CENTS PER SHAR E -24 percent increase in pro forma revenues over first quarter 2003

EMERY'VIL,LE, Calif., Wednesday, April 21, 2004 - Chiron Corporation (NASDAQ: CH[R) today reported pro-forma income from continuing operations of $43 million, or $0.22 per share, for the first quarter of 2004, compared to $56 million, or $0.30 per share, for the first quarter of 2003 . The decrease in earnings per share for . the first quarter of 2004 as compared to the first quarter of 2003 was primarily due to two factors: the seasonal impact of the PowderJect acquisition and the decline in the Betaseron royalty rate . The impact °of these factors was an approximate $0 .10 decrease in pro-forma and GAAP earnings per share . For the quarter, foreign exchange rates, on a pro-forma basis, resulted in a $0.01 decrease in earnings per share. On a GAAP basis, Chiron reported income from continuing operations of $27 million, or $0 .14 per share, for the first quarter of 2004, compared to income from continuing operations of $61 million, or $0.32 per share, for the first quarter of 2003 .

The PowderJect . acquisition had a significant impact on earnings per share for the first quarter of 2004. Revenues of the primary product acquired with PowderJect, Fluvirin® influenza vaccine, are heavily seasonal and are recognized primarily in the second half of the. year; however, costs associated with PowderJect are incurred throughout the year.

Because of this seasonality , Chiron expects that earnings per share for the second half of 2004, as a proportion of earnings per share for the year ,.will be substantially higher th an they were for the second half of 2003 . The company expects the range of pro-forma earnings per share in the second half of 2004 to be between 75 percent and 8.0 percent of total earnings per share for the year . (The company expects the range of GAAP earnings per share in the second half of 2004 to be between 80 percent and 85 percent of total earnings per share for the year .)

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

-more- CHIRON REPORTS 2004 FIRST-QUARTER PRO-FORMA RESULTS OF 22 CENTS PER SHARE Page 2 of 8 special items relating to certain acquisitions and revenues, which may not be indicative 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 continues to execute its strategy and investment agenda and deliver solid financial returns," said Howard Pien, Chiron's president and chief executive officer. _ "We are progressing toward completion of our 20 milestones for growth as outlined at the beginning of the year, with expansion of our Blood Testing business . into the Pacific Rim, continued investment in flu vaccine production and development, and development plans in our infectious disease and cancer franchises .

"As we build the foundation for future value with these business milestones, we are committed to delivering a strong financial performance . We look forward to an excellent year that, through sound execution, disciplined science, and a steadfast commitment to improving human health, will bring value to shareholders and further contribute to the detection,-prevention and treatment of diseases worldwide ."

Overall Revenues Total revenues were $380 million for the first quarter of 2004, compared to $307 million for the first quarter of 2003. Foreign exchange rates resulted in a five percent increase in total revenues . Net product sales. were $281 million for the first quarter of 2004, compared to $219 million for the first quarter of 2003.

Blood Testing Total Blood Testing revenues were $117 million for the first quarter of 2004, compared to $93 million for the first. quarter of 2003 . Blood Testing revenues primarily include revenues from the sales of products related to Chiron's Procleix® H1V-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. HoffmannLa Roche (Roche) related to nucleic acid testing (NAT) blood screening. The gross profit margin on blood testing products . was 43 percent for the first quarter of 2004, compared to 40 percent for the first quarter of 2003. The increase was primarily due to the amendment, effective January 1, 2004, to the worldwide blood screening collaboration agreement with Gen-Probe Incorporated in order to adopt permanent, fixed revenue shares for each party . • Sales related to the Procleix® System were $62 million for the first quarter of 2004, compared to sales of $42 million for the first quarter of 2003 . The increase was primarily due to revenues from the investigation-only use of the Procleix® West Nile Virus Assay in the United States, market share gains in the United States and continued penetration into several markets abroad . CHIRON REPORTS 2004 FIRST-QUARTER PRO-FORMA RESULTS OF 22 CENTS PER SHARE Page 3 of 8

Revenues from Chiron's joint business arrangement with Ortho were $30 million for the first quarter of 2004, compared to $26 million for the first quarter of 2003 . The increase was primarily due to increased profitability . Royalties paid by Roche related to NAT blood screening were $15- million for the first quarter of 2004, compared to $14 million for the first quarter of 2003 .

Vaccines Vaccines net product sales were,$86 million for the first quarter of 2004, compared to $68 million for the first quarter of 2003 . The gross profit margin on vaccines products was 33 percent for the first quarter of 2004, compared to 49 percent for the first quarter of 2003 . The decrease was primarily due to the acquisition of PowderJect, as a portion of the facilities acquired was not active in flu vaccine production for a significant part of the first quarter . In addition, the product mix was heavily influenced by the shift of EncepurTm vaccine for tick-borne encephalitis sales to the fourth quarter of 2003 from the first quarter of 2004. • Sales of flu vaccines were $8 million for the first quarter of 2004', compared to $4 million for the first quarter of 2003 . The increase was primarily due to additional sales of Fluvirin® influenza vaccine, the flu, vaccine that Chiron acquired with PowderJect, to the U.S. Centers for Disease Control and Prevention . • Sales of Menjugate® conjugate vaccine against meningococcal C disease were $5 million for the first quarter of 2004, compared to $8 million for the first quarter of 2003, with the decrease primarily due to the timing of outbreaks and vaccination programs in various geographies . • Sales of Chiron's travel vaccines were $23 million for the first quarter of 2004, compared to $26 million for the first quarter of 2003 . Travel vaccines include. Encepufm vaccine for tick-borne encephalitis, Ar lvaxTM vaccine for yellow fever, DukoralTM vaccine for cholera, and RabAvert® vaccine for rabies . The decrease was primarily due to timing of sales of Encepur,~ as a portion of -sales. shifted to the fourth quarterrof.2003 from the first quarter of 2004, and was partially offset by sales of Arilvax and Dukoral, which Chiron acquired with PowderJect. , Sales of Chiron's pediatric and other vaccines products .were $50.million for the first quarter of 2004, compared to $30 million for the first quarter of 2003, with the increase primarily due to tender sales of pediatricvaccines, particularly polio vaccines, and increased sales following the PowderJect acquisition .

BioPharmaceuticals The BioPlxarmaceuticals division reported net product sales and Betaferon® interferon beta-lb royalties of.$140 million for the first quarter of 2004, compared to $116 million for the first quarter of 2003 . The gross profit margin on biopharmaceutical products was !~ J

CHIRON REPORTS 2004 FIRST-QUARTER PRO-FORMA RESULTS OF 22 CENTS PER SHARE Page 4 of 8

76 percent for the first quarter of 2004, compared to 79 percent for the first quarter of 2003 . The decrease was primarily due to a combination of a decline in the royalty rate related to the sale of Betaseron that took effect in the fourth quarter of 2003, pursuant to Chiron's agreement with Schering, and increased costs associated with the new pre-filled diluent syringe for Betaseron® interferon beta-lb . • TOBI® tobramycin solution for inhalation sales were $53 million for the first quarter of 2004, compared to $41 million for the first quarter of 2003, with the increase primarily due to increased patient demand, price increases, the benefit of foreign exchange rates and wholesaler ordering patterns. • Proleukin® (aldesleukin) interleukin-2 sales were $32 million for the first quarter of 2004, compared to $26 million for the first quarter of 20()3, with the increase primarily due to price increases and wholesaler ordering patterns . • Sales of Betaseron® interferon beta-lb for injection, marketed in Europe as Betaferon®, to Berlex, Inc ., (and its parent company Schering AG) for marketing and resale were $30 million for the first quarter of 2004, compared to $29 million for the first quarter of 2003 . The sales pattern was essentially level because the contractual decline in the royalty rate related to the sale of Betaseron, pursuant to Chiron's agreement with Sphering, and changes in ordering patterns were offset by increased patient demand, price increases, and the benefit of foreign exchange rates . Royalties from Schering AG's European sales of Betaferon were $14 million for the. first quarter of 2004, compared to $14 million for the first quarter of .2003. The royalty pattern was essentially level because the decline in Betaferon royalties, :pursuant to Chiron's agreement with Schering, was offset by increased patient demand, price increases, and the benefit of foreign exchange rates .

Pipeline and Products Update Chiron has seen recent advances in franchises across all three of its business units and expects continued progress throughout 2004 ,

Blood Testing Chiron expects to expand its leadership in blood testing through new assays, new geographies, greater market penetration and expansion into blood safety . In February, Chiron announced the initiation of U.S . clinical trials of the Procleix® UltrioTM Assay, for the simultaneous defection of HIV-1, hepatitis C virus (HCV) and hepatitis B virus (HBV) in donated blood, plasma, organs and tissue, on the Procleix TIGRIS® system, a key enabling technology for individual donor testing : Chiron, in collaboration with its partner Gen-Probe Incorporated ; expects to complete the clinical trials for TIGRIS in the second half of 2004 and to file submissions to the CHIRON REPORTS 2004 FIRST-QUARTER PRO-FORMA RESULTS OF 22 CENTS PER SHARE Page 5of 8

U.S. Food and Drug Administration (FDA) for TIGRIS and the Procleix Ultrio Assay later in the year. Chiron recently won a contract for the Pr~ocleix® H1V-IIHCV Assay with a major blood center in Korea, accounting for approximately a third of the nation 's annual donations .

Vaccines Chiron Vaccines development is focused on its meningococcal franchise and flu cell- culture technology . • Chiron is on track to initiate a Phase BI trial this year for its flu cell-culture vaccine for European registration. The company also recently filed an investigational new drug application (IND) for flu cell-culture in . the United States and has begun the dialogue with the FDA on development plans in the United States . • Chiron recently broke ground for the $100 million expansion of its Liverpool Fluvirin® influenza vaccine production facility, which will enable further increases in future production following the record increases experienced last .year and additional increases projected for this year. • Chiron advanced its establishment of commercial operations for vaccines in the United States, appointing a head of the business and positioning it to support .r, strategies for both the flu vaccine and meningococcal vaccines franchises. • In the development of vaccines for the five primary serogroups that cause meningococcal disease, Chiron recently began clinical trials .for its broad-coverage meningococcal B vaccine.

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 . Chiron is currently meeting with investigators for its Phase 111 . trial for tifacogin in patients with severe community-acquired pneumonia and plans to initiate the trial in May. Chiron will meet with the FDA in May to discuss the registration path for cyclosporine solution for inhalation (CSI) as a potential treatment for lung transplant . rejection. . • With its partner, Cubist Pharmaceuticals, Chiron soon expects to reach a decision to determine the regulatory path forward for daptomycin in the European Union, in which Chiron has commercial rights .

J CHIRON REPORTS 2004 FIRST-QUARTER PRO-FORMA RESULTS OF 22 CENTS PER SHARE Page 6 of 8

Chiron is investing to expand its TOBI franchise in its study of the dry-powder formulation delivered with a hand-held device, which the company is developing in collaboration with Nektar Therapeutics . . Chiron now plans to use commercial product and the commercial device in its upcoming Phase III trial, which the company anticipates will delay the start of the trial from the end of 2004 to the beginning of 2005, with minimal anticipated effect on the product launch date .

BioPhamwceuticals: Oncology Chiron's oncology franchise has three dimensions : immune-based therapies, monoclonal antibodies and novel cancer agents . • Chiron announced a collaborative agreement with XOMA Ltd. for the development and commercialization. of antibody products for the treatment of cancer. Chiron has successfully identified a number of potential targets and expects the agreement to help generate antibodies against those targets and accelerate their advancement through the development process . • Chiron is initiating a new Phase II study of Proleukin® (aldesleukin) for injection plus rituximab in rituximab-naive patients with low-grade non-Hodgkin's lymphoma to determine the combination's potential in patients receiving rituximab for the first tune • Chiron has had an abstract accepted for the American Society of Clinical Oncology (ASCO) meeting, to be held June 5-8 in New Orleans, to detail . the objective, durable responses found in a specific sub-population of . patients in its. existing Phase II -trial of Proleukin plus rituximab in patients with low-grade non-Hodgkin's lymphoma who have failed rituximab therapy. • Chiron discontinued further development of tezacitabine, a next-generation nucleoside analog, based on an analysis of the data from a Phase II trial in patients with gastroesophageal cancer .

Other Recent Business Milestones 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 Rino Rappuoli, Ph.D., to the position of chief scientific officer (CSO). Dr. Rappuoli joined Chiron as head of European vaccines research in 1992 with the acquisition of Italian vaccines company Sclavo SpA, where he served as head of research and development . Dr. Rappuoli is co'-founder of the field of cellular microbiology, a discipline combining cell biology and microbiology, and has pioneered the genomic approach to vaccine development termed "reverse vaccinology." CHHIRON REPORTS 2004 FIRST-QUARTER PRO-FORMA RESULTS OF 22 CENTS PER SHARE Page 7 of 8

• Chiron was listed at number 769 on the Fortune 1000 list for 2003, up from its debut at number 912 in 2002.

1004 Earnings Conference Cal l Chiron will hold a conference call and webcast on Wednesday, April 21, 2004, at 4 :45 p.m. EDT to review its first-quarter 2004 results of operations and business highlights . In addition, the company may address forward-looking questions concerning business, financial matters and trends affecting the company .

To access either the live call or the one-week archive, please log on to httpJ/www.chiron.com/webcast Please connect to the website at least 35 minutes prior to the conference call to ensure adequate time to download any necessary software . Alternatively, please call 800-374-0907 from the United States or Canada or 706-643- 3367 from other locations. Replay is available approximately two hours after the completion of the call through 11 :55 p.m. EDT, Wednesday, April 28, 2004. To access the replay, please call 800-642-1687 from the United States or Canada or 706-645-9291 from other locations . The conference ID number is 6631837 .

About Chiron Through its global Blood Testing, Vaccines and BioPharmaceuticals businesses, Chiron Corporation addresses human suffering with more than 50 diverse products to detect, rte' prevent and treat disease worldwide . The company's consistent success comes from it s pioneering science, skill in delivering innovations in biotechnology and disciplined business approach . Chiron believes that .science has the power to improve people's lives and harnesses that power to transform public health .

This year, Chiron Vaccines celebrates 100 years of advancing medicine with . the anniversary of two founding companies . In 1904, Emil von Behring and Achille Sclavo independently started companies in Germany and Italy, respectively, dedicated to the research, development and manufacture of vaccines to protect humanity from infectious disease. As the fifth-largest vaccine manufacturer in the world, Chiron remains dedicated to the legacies of von Behring and Sclavo to prevent disease and develop new vaccines to improve human health globally.

This news release contains forward-looking statements, including statements regarding sales gron1h, 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 andfinancial condition, including factors that may affect its business and future prospects, is contained in documents the company has filed with the SEC, including the form 10-K for the year ended December 31, 2003, and 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, regulato ry review and approvals, manufacturing capabilities, intellectual property protections and defenses, stock price and interest-rate CHIRON REPORTS 2004 F RST-QUARTER PRO-FORMA RESULTS OF 22 CENTS PER SHARE Page 8 of 8

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 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.

Arilvax, Dukoral, Encepur, Fluvirin, Menjugate, Procleix, Proleukin, RabAvert, TOBI and Atrio are trademarks of Chiron Corporation . Betaseron and Betaferon are trademarks of Schering AG . TIGRIS is a registered trademark of Gen-Probe Incorporated .

- Condensed Consolidated Balance Sheets and Statements of Operations and Pro-Forma-to-GAAP Reconciliation Attached -

# # # EXHIBIT Q Chiron Corp. CHIR Q1 2004 Earnings Call ; Apr. 21, 2004 Comoanv• Ticker s Event Type A Date A - MANAGEMENT DISCUSSION SECTION

Operator : Good afternoon . My name is Marcus and I will be your conference facilitator today . At this time I would like to welcome everyone to the Chiron first quarter 2004 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 ` then the number "2" on your telephone keypad . I would now like to introduce Mr. Martin Forrest, Vice President of Corporate Communications and Investor Relations . Sir you may begin .

Martin Forrest, VP of Corporate Communications and Investor Relation s

Thank you Marcus . . Good afternoon everyone and welcome to Chiron's first quarter 2004 . conference call . On behalf of the Ghiron team I would like to introduce you to our principal speakers. Howard Pien, Chiron-CEO and President; and David Smith, Chiron's CFO, and I'll b e available after the call along with the investor relations team to follow-up with any questions that you might have .

Before I turn 'the call over to Howard for a discussion of Chiron's results, I'd like to remind you that our remarks today. will include forward-looking statements related to future events in 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 through our website at chiron .com. These include the 2003 10-K report, the first quarter 10-Q . report, which will be available shortly and information under the heading "Factors That May Affect Future Results" in the MD&A portion of our periodic filing . 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 discussions, 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 the website. Consistent with Regulation FD, we do not undertake an obligation to update the forward- looking information we are giving today . And 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 to you, Howard .

Howard Pien, President, Chief Executive. Officer, Directo r

Good afternoon and welcome to our call . Today Chiron announced its first quarter earnings results . In today's call I will talk to you about our progress to date, inform you of the status of some of our key milestones, and provide you with the details of some of the key developments . Chiron is off to a strong start for the year. We have made excellent progress to advance key clinical programs . Through our investment strategy, we continue to lay the groundwork for enhancing future value for shareholders. At the same time, we are maintaining Chiron's record of solid financial performance . We are reiterating our pro forma earnings guidance for the year of between $1 .80 and $1 .90 per share for 2004 .

2004 is unfolding as a year .in which we continue to execute on our strate gy for both the near-term and the long-term entirely consistent with our plan . Our growth trajectory is highlighted by our rise

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in the Fortune 1000 ranking from number 912 in 2002 to number 769 in 2003 . Driving our growth W last year was the acquisition and successful integration of PowderJect, which has positioned Chiro n ~,,,• as the number two provider of flu vaccine worldwide, and which provides exciting opportunities fo r 4 our future growth . -1 As we move into 2004, we will continue to fulfill our agenda for value creation and long-ter m growth, while still aiming to deliver a tong-term EPS growth of 20% . Regarding our first quarter , today we reported first quarter pro forma net income from continuing operations of $0 .22 per share . Revenues grew 24% year-over-year to $380 million .. All 3 businesses performed in-line with our expectations this quarter and our earnings for the quarter reflect both, the growth and investments in each of our units . During the earnings call last quarter we indicated that the traditiona l seasonality of our earnings will be even more pronounced with the acquisition of PowderJect an d our enhanced investment agenda . While we do not give quarterly guidance, we are cognizant tha t this quarter's earnings are below the consensus number. We want to emphasize that when w e took at the growth of our businesses for the entire year, we are confident in our ability to delive r solid financial results, completely consistent with our previously stated guidance . And later in the call, David will provide more details of the contours of our financials between the first and second halves, so as to give you greater clarification on this amplified seasonality .

Now, back to the progress of each of our businesses and why we are positive about our prospect s for this year . Let me begin with the blood testing unit . Our blood testing business is advancing o n 2 tracks. The care of the business is our NAT franchise . The franchise continues to expand, both , in geography and through the introduction of the new assays . Procleix is making inroads in to new geographies, particularly in the Pacific Rim where we are already established in such countries a s Australia, Singapore, and Hong Kong . We recently won a contract for the duplex Assay with a major blood center in Korea accounting for about 113 of Korea 's annual donations . We are also . anticipating expansion this year in Thailand . Our position in Asia paves the way to the future ) introduction of Ultrio, the hepatitis 8 endemic (sic), which is part of the world and represents a significant threat to our safety. In addition, we are entering new markets in Europe as well, i n particular, Poland, and Greece . Ultrix achieved CE marking early in this year and is undergoing a successful launch .

Uptake of the new product among our existing customers has been going well . They are no w ~j telling us that they are pleased with the convenience and sensitivity of the Triplex Assay that add s f ~1 hepatitis B to the pre-existing HIV and hep. C tests. We are also moving ahead with our plans to file V a BLA for Ultrio in this year . Local trials in the US have commenced on the TIGRIS fully automate d system, a key enabling technology for slower pool sizes and individual donor testing . This automation will also provide greater throughput and more operational efficiency for blood centers than other existing NAT technology . In addition, as the mosquito season has now started, we are moving forward with clinical trials for our West Nile virus Assay . This innovation has detected over 800 positive blood donations since its introduction last June and the predictions are that this yea r 4-a we'll see the spread of the virus towards the West Coast . We are trying to move as rapidly a s possible with BI submission for the Assay . Blood testing is also expanding its reach into the realm s of blood safety, through the in-licensing of technologies . We are progressing with the development of technologies from IDI for bacteria detection in platelets and from ZymeQuest for blood typ e conversion .

Now on to our Vaccines business, the flu vaccine business should continue to grow this year and our production for the '04- '05 season is now well underway. The CQC has chosen the 3 strains fo r this year's vaccines and we are comfortable that we will be able to meet our goal of producin g approximately 50 million doses of Fluvirin, a vast majority of which has been for the US market : Our commitment for flu extends beyond the egg-based product with our activities and efforts in cell- culture. We are on track to initiate a Phase III program later this year for European registration . We have also filed an IND for flu cell culture in the US and we have begun the dialog with th e agency and established a firm development plan . As you know, Chiron testified before the Hous e

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Oversight Committee, examining last year's flu season and the country's preparedness for a flu pandemic. We welcome the Government's interest in strengthening the US public health infrastructure and we welcome its resolve to increase immunization rates, which we believe is the best strategy that will help prepare the nation for a future pandemic . We will continue to work with 4-1 both branches of the government and we pledge we will put all of our efforts to be part of the solution. We have made meaningful progress in establishing a commercial operation for vaccines in the. US. We have appointed Mr . John Vavricka, a veteran from GSK, to head our US operations . Establishing our commercial capability is an important step in our US strategy, both for capturing the upside to the flu market and for the . pre-launch conditioning of our meningococcal business . Development of our tetravalent ACWY vaccine is progressing as is our broad coverage men B vaccine, which has enrolled its first patients in Phase I tria€ . 1 9 9 Finally on to our Biopharmaceutical business . There is. a flurry of activities in Chiron biopharmaceutical . First quarter, commercial performance of TOBI and Proleukin was strong and progress in R&D is steady and .firm. . Let me highlight a few advances . Chiron announced a collaborative agreement with XOMA for development and commercialization of antibody products for treatment of cancer . Chiron has successfully identified a number of potential targets and this agreement will allow us to accelerate their development . We expect to see 2 INDs filed as a result of this collaboration within the next 24 months . We are preparing to initiate a Phase III clinical trial for tifacogin, a severe community-acquired pneumonia . We expect that the first patient in this randomized double-blind trial will be dosed in May . As we speak, the investigator meetings are being held and we look forward to updating you in the month to come . We are'also about to begin our Phase Il randomized trial of Proleukin in combination with rituximab, in rituximab naive patients . We will present an abstract at ASCO detailing the high quality responses found in a specific subpopulation of patients with particular genotypes in our existing Phase 11 trial .

We will be meeting with the FDA next month to discuss the registration path for cyclosporine solution for inhalation, or CSI, as a potential treatment for lung transplant rejection for which they 4-1 may indicate the possibility of a substantial reduction in mortality . And with our partner Nektar, .we are advancing : the Phase Ill .'programs to TPI, the dry powder formulation of TOBI . We have taken the. proactive decision that for the Phase Ill trial we will use both the commercial product and the commercial device therefore smoothing the registration path . As we go, we anticipate that the Phase 111 trial wilt begin in early'05, not at the end of'04 as we had previously . targeted . This small 0 slippage should have minimum if any effect on the launch date . We will be telling you more about the evolution of our programs in greater detail on June 23, when we will be holding an analyst and investor day . Now, I would like to turn the call over to David for a detailed discussion of the first quarter financial results .

David V. Smith, Chief Financial Officer

Thanks' Howard . I will begin with the review of the results for the quarter, which Were released today at approximately 1 p .m. Pacific Daylight Time . All earnings per share amounts discussed p today refer to the pro forma diluted per share earnings . As we previously discussed, we present our.financial results on an as . reported GAAP basis and a pro forma basis. The adjustments we fir/ made this quarter to arrive at pro forma earnings consist of the amortization of expense on acquired identifiable intangible assets related to acquisitions and discontinued operations . The adjustments made in the first quarter of 2003 consisted of the amortization expense on acquired identifiable intangible assets related to acquisitions plus the Biogen and Serono settlements in connection with the McCormick patent and with discontinued operation . A reconciliation between our GAAP and 0 pro forma result can be found on our website at chiron .corn .

For the first quarter of 2004, Chiron reported pro forma income from continuing operations of $43 million or $0 .22 per share . This result was in-line with our expectations ; and as we mentioned in 0 our last earnings call, reflects the effect of our acquisition of PowderJect. Chiron reported pro

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forma earnings per share of $0 .30 in the first quarter of 2003, the decrease in earnings per share for the first quarter of 2004, as compared to the quarter in 2003, was primarily due to 3 factors : The ~,,,• seasonal impact on the PowderJect acquisition, the decline in the Betaseron royalty rate, and foreign exchange rates . The impact of these factors was an approximate $0 .11 decrease in pro forma earnings per share, -

Total revenues for the first quarter of 2004 increased 24% to $380 million from $307 million for the same period in 2003 . Product sales increased 29% to $281 million from S219 million . Foreign exchange rates resulted in a 5% increase in total revenues . Increases in sales were seen primarily in Procleix, TOBI, and pediatric and other vaccines . Revenues from the joint business arrangement, collaborative agreement revenues, royalty and license fees, and other . revenues ! increased 12% primarily due to increased profitability of the joint business arrangements, increased collaborative agreement revenues, and the timing of contract manufacturing activities . Gross margins decreased to 55% from last year's gross margins of 61%, primarily driven by the expected decline in the gross margin for the vaccines business along with the reduction in the royalty rate related to Betaseron . Research and development expenses for the first quarter of 2004 totaled $98 million, up 20% from the first quarter of 2003 . The increase reflects the movement of our investment agenda and is primarily related to the development of tifacogin, cyclosporine solution for inhalation, the TOBI franchise, meningococcal franchise, and flu cell culture . These increases were partially offset by decreases due to the transfer of the responsibility of the IL-2 HIV SILCAAT trial, and higher development cost in the first quarter of 2003 associated with Betaseron . SG&A expenses for the first quarter of 2004 totaled $105 million up 43% from the first quarter of 2003 with PowderJect contributing 1 13 of the increase for the current quarter . Integration related expenses were immaterial in the first quarter, although we do expect them to increase in Q2 as integration efforts draw to a conclusion . Excluding PowderJect, increased SG&A expenses mirrored .increases in sales across our businesses., the impact of geographic expansion, and FX effects.

Now I would like to move on to a review of the business unit financial results starting with our blood- testing unit. Blood testing total revenues including product-sales, Chiron share of the revenues from our joint business arrangement with Ortho, collaborative agreement revenues ; and royalty and license fees increased to $117 million in the first quarter of 2004 from $93 million in the year ago period, a 27% increase. This increase was primarily :due to higher product sales of Procleix over a Q year ago, as well as our increased revenues associated with increased profitability from our joint business arrangement with Ortho . Sales related to Procieix were $62 million in the first quarter of 2004 compared to $42 million for the first quarter of 2003 . Driving Procleix growth was the 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 Procieix, and a continued penetration into several markets abroad.

Turning now to vaccine, In the first quarter of 2004, total product sales for the vaccines business were $86 million versus $68 million in the same period last year . We saw increases in pediatric and other vaccines and flu vaccines . These increases were partially offset by a decline in travel vaccines and Menjugate sale . Sales of pediatric and other vaccines were $50 million in the first quarter of 2004, up 66% from a year ago period . The increase was driven largely by tender sales of our pediatric vaccines, particularly polio and increased sales following our acquisition of PowderJect. Sales of flu vaccines were $8. million in the first quarter of 2004, up 81 %a from the year ago period . The increase was driven largely by additional sales of Fluvirin to the CDC in the United Q States in the first quarter of 2004 . Sales of our travel vaccines were $23 million in the first quarter , down 10% from the year ago period . Our TBE vaccine was a principal driver-as a portion of sales shifted from the first quarter 2004 to the fourth quarter 2003. The decrease was .partially offset by sales of Arilvax and Dukoral, the travel vaccines we acquired with PowderJect .

Our first quarter Menjugate sales-were $5 million, down 40% from the year ago period . This

decrease was primarily driven by the timing of outbreaks and vaccination programs in various t I~ geographies . Gross profit for vaccines decreased to 33% from last year's gross margins of 49% .

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W Gross margin for the first quarter 2004 decreased as a result of the addition of PowderJect W facilities, a portion of which were not in flu production for a significant part of the first quarter . In addition, the product mix was heavily influenced with the shift of the traditionally high margin TBE sales to the fourth quarter of 2003 .

Moving to our third business, Biopharmaceuticals, Total biopharmaceuticals product revenues . including Betaferon royalties were $140 million in the first quarter of 2004 up from $116 million over r~~rr the year ago quarter, a 21% increase . We saw increases in TOBI and Proleukin sales, while sales of Betaseron including the royalty earned from the sale .of Betaferon by Schering in Europe were essentially consistent . Our first quarter TOBI sales were $53 million, up 29% from the year ago period, due to increased patient demand, price increases, the benefit of foreign exchange rates, o f and wholesale ordering patterns . First quarter sales of Proleukin were $32 million up 23% from the year ago period, primarily due to price increases and wholesale ordering pattern . First quarter sales of Betaseron including the royalty earned from the sale of Betaferon by Schering in Europe were $44 million essentially consistent with the year ago period . There were increases primarily driven by increased patient demand, price increases, and the benefit of foreign exchange rates . These increases were offset by a decline in product sales and Betaferon royalties pursuant to our agreement with Schering and wholesale ordering pattern . Gross margins in the biopharmaceutical segment decreased to 76% from last year's margins of 79% . This decrease was primarily a result of the effect in the mix of the contractual change in the royalty rate related to the sale of Betaseron and the increased cost associated with the diluent syringe .

In summary, let me take a moment to highlight why Q1 has been a strong quarter for Chiron . Top- line revenue growth continues to fuel our business with excellent growth from each of our business units. While FX did affect our top-line, underlying growth was strong . We are executing on our ongoing investment agenda, which will continue to ramp up during the second. quarter and which will provide long-term shareholder value creation .

Now, I'd like to take a minute to talk about what Howard called the contours of our financial 0. seasonality . As we stated earlier, our quarter came in as expected and we are confident with our 2004 earnings per share guidance in the range of $1 .80 to $1 .90. Let me take you,back to what we said on our year-end earnings call . Recall that PowderJect amplified the seasonality of Chiron's earnings. Chiron is a stronger and different company because of the PowderJect acquisition . More 0 than ever before, our earnings contribution is heavily weighted to the second half of the year and this is amplified by our investment agenda, which is front-loaded when compared against the same U) period in the previous year . While pro forma earnings per share for the second half of 2003 was approximately 60% of the total 2003 EPS, we expect the pro forma EPS for the second half of this C year to be in a range of 75% to 80% of our total 2004 earnings per share . Because of the value creation milestones we have outlined for the year, we are pursuing multiple investment opportunities, which means ramping up our efforts in the first half of the year. For example, we are preparing for the start of the tifacogi .n trial and for the EU filing for daptomycin and we are advancing our geographic expansion efforts including the establishment of our US commercial operations for vaccines. Because of the fundamentals of our businesses remain strong and our revenue growth drivers remain vibrant, we are confident that we can deliver solid financial results V while executing on our plans for future success . When looking at the second half of this year, investors should keep in mind that earnings contributions for the second half of 2003 were affected 0 by charges related to PowderJect, such as the fair value of inventory adjustment and integration expenses, which will not recur in 2004 . Overall, we believe that 2004 will be representative of the C) flow of earnings for Chiron and we stand by our previous . guidance for the year . With that, I'll turn . 0 the call back over to Martin for Q&A ,

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Thanks David . That concludes our prepared remarks . Now I'd like to open up the call for questions . We are joined for the Q&A session by Craig Wheeler, President of Biopharmaceuticals ; Jack Goldstein, President of Blood Testing ;, John Lambert , President of Vaccine ; Stephen Diiliy. Senior Vice President of Biopharmaceuticals Development ; and Bruce Scharschmidt, Vice President for Vaccine Scientific Affairs . In order to take all calls in the queue , please ask one question and then rejoin the queue for subsequent questions . And with that operator , we wilt move to our first question.

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V www.CaliStre:ei .com . • 212 .931 .6515 • Copyright © 2004 CallStreet 6 Chiron Corp. CHIR 01 2004 Earnings Call i Apr. 21, 2004 ♦ Ticker Compan ► Event Type* ! Date ► a) = QUESTION AND ANSWER SECTIO N a) Operator: At this time I would like to remind everyone in order to ask a question, please press "`" 4-1 then the number "1" on your telephone keypad . We will pause for just a moment to compile the Q&A roster .

Your first question comes from Craig Parker wi th Lehman Brothers .

: Hi good afternoon guys . Thanks for taking my question . I guess I have a broad strategic question and Howard won't be surprised to hear this from me . If you compare your quarter for the last two years, it's actually the lowest quarterly earnings you've had since the first quarter of '02, but your revenue is up roughly 50% since the first quarter of 2002, but you did only - $0.01 better on the bottom line . I guess I am just sort of struggling with what the strategy behind a business model that produces 50% more top line with roughly equivalent bottom-line ?

; Well Craig that question is strategic indeed . I think the answer is pretty much in the consistent way we have articulated what it is that we want to do in creating value for the shareholders long-term . We understand that indeed our ability to grow EPS :consistently has been an important part of the investment: hypothesis for Chiron . We also: know that there is no sustainability to our ability to grow EPS without replenishing the drivers for long-term growth . And we made, therefore, a very, very conscious decision that when the PowderJect acquisition provided us with additional octane in our engine for growth that we use some of the energy there . We, put into a fairlyaggressive investment agenda that included, amongst other things, the licensing . opportunities and the growth of our own opportunities and the pipeline . We .also are very conscious that there is an enhancement of the capability of the management team that will bring about much, much more enhanced level of confidence that we can execute and we can implement against our investment agenda . And as a result of that conviction and which of course requires some fortitude and courage on our part to say that, well we are going to now improve execution and implementation but that's exactly what we have been doing in recruiting the levels of expertise and the range of experience of the people that have joined us in the last year or two . So there is a range of investment opportunities that indeed require some of the resources and the trick is how to do it with the right balance of delivering short-term growth versus delivering long-term prospects for continued growth . And then the covenant that we have held for ourselves and-to our investors is that we will continue to enhance our investment opportunity, execution capability against that investment agenda, while consistently delivering bottom line results . So, thank you Craig for the opportunity for us to re-articulate our sense and conviction that we are on exactly the right path creating long-term values for shareholders .

: We will take our next question .

Operator : Your next question comes-from Jennifer Chao with RBC Capital Markets

: Hi, thanks-for taking the question, My initial question here is on Fluvirin pricing for the '04, '05 flu season . I was wondering if you could give us a sense of the pricing flexibility, if there is a difference between the flexibility that you have in terms of pricing for the N portion of Fluvirin sales that were negotiated ; pre-Chiron PJP acquisition and then versus the incremental 12 million plus that you could join incremental capacity?

U : Jennifer, it's John here. Yes, we've, as we've said to you before, we have already in place contracts with, with our distributors which cover pricing . And we with these things tU that hope we can share enough prices in the market price . We are very much tied with the agreements that we've got for the moment in terms of pricing, so there is not a great deal of flexibility to increase our prices above where they are at the moment .

www.CaliStreet. com •. 212 .931 .651.5 • Copyright © 2004=CallStreet 7 Chiron Corp . CHIR Q1 2004 Earnings Call Apr. 21, 2004 4-1 CompanyA Ticker A Event Type A Date A : So, can you maybe try and just give us a range of what the terms of the original agreement were? I am assuming there was some kind of a range on year-aver-year increases to the pricing .

: Haven't got the details here . The pricing is set out very clearly in the agreements that we have .

<0 - Jennifer Chao > : Okay, thanks .

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

: Thanks-for taking the question . Can you give us an update on the status of China' s evaluation of the Procleix system, and what the opportunity is if they choose to go with the Procleix system?

: Okay, Dennis this is Jack. Let me try to answer that question . We've just about completed our registration trial in China and we will be filing our registration documents and the dossier will be.going in next month in May . We expect that we will get-licensure some time in the October or November timeframe to be free to sell product into the Chinese market. There are approximately 9 million units of blood that are screened in all of China, however, there are .over 500 blood banks and so it is very, very dispersed . The opportunity that we see in China is really for 6 or 7 large blood banks in the 6 or 7 major cities like in Beijing : or Shanghai and some of the other large cities. We don't expect there to be a tremendous uptake in China for NAT testing until we are : closer to the Olympics in Beijing sometime in 2008 . So, I think it will be incremental between now and then . I don't think that there is going to be a•lot of business in the '04, '05, '06 timeframe but starting '07 or so I think we'll start to see an increase in revenues there.

: Okay, thanks.

C Operator : Your next question comes from May Kin Ho with Goldman Sachs .

R//l : Hi, can you talk a little bit more about the Ultrio Assay. in terms of how it might affect the pricing of the NAT test that you have and also how it might also affect penetration, - - 0 especially outside of the US ? U) :Okay this is Jack again . We are having great success with, Ultrio and following our path that we set out for ourselves last year and the beginning of this -year : Essentially, C what we wanted to do was fallow a strategy where we first convert as many as our current customers as we possibly can from duplex to Ultrio in Europe and particularly in Southern C V European countries , where hepatitis B is more important than in the Northern countries of Europe . So far we have converted approximately. 8 centers, 6 major centers in Spain , Italy, and Portuga l and 2 smaller centers in Germany, and we believe additional centers in Spain, Italy, and Po rtugal will follow. For example , we just signed up Madrid, obviously a huge center in the Spanish market, and they will convert over the next month or 2 to Ultrio . So we are on course to follow the forecast that we had for Ourselves and what we wanted to do was move Ultrio-into approximately 30% of our installed base in Europe. In Asia, where hepatitis B as you. know is extremely,- important-, we have several trials going on in our current customer base, Australia , New Zealand, Singapore, but many 4-1 Asian countries such as Korea , where as was mentioned, we just got a contract with one of the major bloodbanks in Korea, one of the 3 major blood banks in Korea for 1/3 of-the market. They 0 generally require approval or FDA approval in the country of origin. So many Asian countries will not pick up Ultrio until it's approved by the FDA. Some are considering that, but we are certainly using it as a lever, and we are certainly using duplex in many countries as an effort to get into the country, establish ourselves , develop a relationship with the Red Cross .or the blood centers in that country and then conve rt them to Ultrio at the appropriate time . In terms of pricing , as you know we 0 haven't specifically disclosed price , but we are getting a premium in Europe consistent with wha t 0 www .CaliStreet .com • 212 .931 .6515 • Copyright 0 2004 -CallStree t 8 Chiron Corp. CHIR 01 2004 Earnings Call Apr . 21, 2004 CompanyA Ticker. Event Type A Date A

we thought we were going to get, and I could only relate it to 2 Assays in duplex we are getting for c) a certain figure around the $10, $15 range, and so now we are getting a premium for that third portion of the triplex product.

Operator : Our next question comes from Thomas Wei with Piper Jaffray .

: Thanks, I had a question, one of the surprises in the P&L on a quarterly basis was the royalty in license fee line, it'looks very low . relative to the past few quarters that you've reported . What's going on there? Is it a timing issue, are there royalties that are coming offline, where is the shortfall on a sequential basis coming from ?

: Hi Thomas, this is David . If you look at:it on a sequential basis you're right, it is down . Driving that is Beta, the contractual reductions in the royalties we have a full quarter effect this time. And also license revenues . So, in the fourth quarter we had some license revenues that we recorded. We principally did not have license revenues in the first quarter, and as you probably understand, we will see the timing of licenses fluctuate from a quarter-to-quarter basis . We . obviously work to monetize our substantive intellectual properties estate, but it's not always .an even flow . In fact if you go back and would look back over the last couple of quarters last year, you saw some movement up and down. That's chiefly, those are chiefly the reasons why they are down on a sequential basis .

: And other than Betaseron, are there any other contracts where the terms are changing or any royalty streams that are discontinuing ?

: Nothing of a material nature , we continue to see good growth with HCV and HIV, both year-on-year and sequentially .

4-1 Operator: Your next question comes from Mark Augustine with Credit Suisse First Boston i.t : Thanks very much, I did want to ask you about your volume expectations, manufacturing volume unit expectations for Fluvirin in 2004 and then get an update from you on the status of competitive bidding situations thus far into the '04 and '05 influenza line up? Thank you .

0 : HI Mark, it's John again . As you know, at the startof each season each of the manufacturers set off for their eggs wondering the yield is going to be each year U) . We are now getting fairly well through this focus phase at the moment and perhaps at the end of April, we can have a certain level of confidence of the yields that we can expect, and at the moment we have every confidence that we will reach .the 50 million doses that we expect to put onto, the market . What happens is most of this goes to the US . And as you also know that when you start the production like flu where you produce from eggs, you don't know what you are going to end up with . It's not like having a pound of powder, you know you are going to have 100,000 tablets . We feel pretty good at the moment with the 50 million figure is a very good indication for us .

: Can I just clarify? Last year though 38 million came to the US market. This year is out of the 50 total we'll see probably around 48 .will come .to the US .

: 47, 48.

: Then as one follow-up, can you tell us if you are aware if your competitor has expanded capacity? They did not in 2003 . Are you aware of what their plans are and what they 0 are executing on in '04?

: We are not aware of the competitors situation as discussed before, lot of our 0 business, almost all our business in the US is secured through distributors .

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~i : Right. W 1„•, : So, we're confident of selling the bulk of business into the predominantly US 41 market .

un : Thank you gentlemen . ~r wR Operator : Your next question comes from Geoffrey Porges with Sanford Bernstein .

<0 -- Geoffrey Forges >: Thanks for taking my question . My questions are regulatory ones, specifically what are the timings of submission review and expected approval of the INDs o r * actually the NDAs should I say for West Nile Virus testing and also of the ANDA 5 indication for Fluvirin? Thanks .

: Geoff, I'll take the West Nile Virus . The West Nile Virus pivotal clinical will be held this year starting this summer, and we expect to file the SLA either at the very end of the year or the first quarter of '05 for West Nile Virus .

: And what would the normal approval cycle be for something like that?

: Historically it takes somewhere around 18 months . It's taken from 12 to 24 months in the past.

: Okay. Thanks.

: I think the other question pertained to pediatric label for Fluvirin, currently as you know it is approved down to age 4 . The vast majority of our current market is in older age groups, but from a public health standpoint, it will really be helpful at more than the current single supplier . We are exploring approaches to making the vaccine available to younger age groups . We are not in a position to offer specifics on timing at this point . We imagine that the approval would rest'o n ,.. demonstration of safety and immunogenicity in the appropriate age groups .

<0 -- Geoffrey Porges> : So it's safe to say that we should not assume that you have that approval in time for the expanded use in the pediatric population this season ?

. As Isaid at this point we' are not in a position to offer specifics on timing .

: Okay, thanks . Thanks a lot for answering the question .

Operator : Your next question comes from Eric Ende with Merrill Lynch .

<0 ..- Eric Ende>: Thank you. A quick question regarding pricing beyond the '04-'05 season . My understanding is that a lot of the contracts that were signed by PowderJect are actually 2 year contracts and I think that by the '05-'06 season that those contracts should be up . I was wondering number 1, if that's true? Number 2, if it's true, what'percent would be up? And then number 3 , f1W~ what kind of pricing flexibility you'd have after the '0445 season ?

: It's John again . You are correct, the contracts do expire and they are up . This is part of the overall development strategy which John Vavricka is working on. As we plan our strategy going forward, we do expect that our overall distribution strategy will include wholesalers, but will also include a strategy without wholesalers . I think it's too early to determine what will actually happen to market pricing season beyond that .

: If I could just add a word to this . You understand that there are 2 suppliers Eric in this market . You understand that year-on-year the amount of the vaccines that are going to be made is a

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function of the production classes the capacity and reliability of the production classes . You understand therefore one's supplier's ability to supply up to certain quantity will have an impact on i the amount of competitive pressure on price . You also understand that therefore if we enter into negotiation with the distributors, they will be weighing what the supply record of one manufacturer versus the other one is going to be and ultimately you understand I'm sure that these are pricing V) negotiations and do not end up being signals of any sort between two competitors in the marxet . Though that, its not that we don't have some ideas as to what the upside are or, you know, what the sales projection can be, but it's not a negotiation, and the competitive reasons prevent. us from doing any kind of public speculation .

: Okay thanks .

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

: Good afternoon. A follow-up question on May Kin's question about Ultrio . Given you are expecting only about 30% penetration of the Assay into the installed EU based : First, could you explain why that's as slow as it is? I guess it's, because testing is only expected in endemic countries, but I guess I am having a tough time understanding why everyone wouldn't be adopting the -test? And second, could you just comment on what the expected penetration is into the US of Ultrio?

Operator : Again, I would like to remind everyone, in orderto ask a question please press then 4-1 the number "1" on your telephone keypad . Your next question comes from Jennifer Chao with RBC Capital Markets .

: Okay, thanks for taking the question . I was wondering maybe, Howard or David if you could speak more to the anatomy of the operating expenses associated with PJP? In other words if you can give . us a sense for example of when the SG&A figures really start to increase during the,calendar. year in front of efforts for Fluvirin and any specific activities going on, U on the R&D line and the COGS lines for the rest of the year . N : Let me try at that Jennifer, this is David . The efforts from an SG&A perspective are ongoing on a year .round basis. They are amplified by the work we are doing in the US with the expansion of the commercial operations, what John referred to, with John Vavricka taking on the responsibility for it here . So we continue to see efforts and we will continue to see 'o efforts ongoing as it relates to that particular activity . Let me address the COGS side, COGS wer e

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a) lower, a portion of which was the fact that while we are in production in the Liverpool facility, a portion of that facility was not in production during that time . It's on one of the downstream portions of the facility that is not utilized this early, so that's something that is considered idle and is obviously a period charge that hits in this P&L ., but the facilities are functioning effectively and 4-1 moving forward as John talked about . We remain very comfortable with what we are doing at our goal for 50 million doses. So as the streams for SG&A and for R&D are something we are, compared to the first half of the year over last year, they are definitely higher. This is something that when we look at our overall guidance. then for the full year, that is why we give guidance off of 2003 versus giving it off of any particular period in time, you need to take a look at all of that, it's really a question of the amplification that occurs when the revenue is on the back side of the year, C) on the back half of the year you see more of the amplification on the expenses on the front side .

: So David , I'd take it to mean then, due to the seasonality of the Fluvirin sales, that we should expect a similar level of proportion to product revenue on R&D and SG&A line as we are seeing currently, we wouldn 't expect any significant, certainly no significant decreases, but are we thinking about that in the right way ?

: Okay, that's helpful, thanks .

Operator: Your next question comes from Elise Wang with Smith Barney.

: Hi, I was wondering if you could just elaborate, you mentioned on a couple of products TOBI, Proleukin, and Betaseron price increases as well as some wholesaler buying patterns. If you can just-elaborate what level of stocking there may have been in each of those products as well as what the price increases were ?

: Sure Elise. The price increases were about 5% for Proleukin and TOBI and from a wholesaler 3 perspective it's when you compare it to a prior period it's really not a question of stocking that occurred as much in the first, in this year, but the fact that there was a much lower level of orders U) versus demand in the first quarter of last year . So, in effect what we are seeing is a little bit of topping up,but the inventory levels are very consistent with what our expectations are at this point C of.time. So, there wasn't what I will call significant wholesale stocking that occurred .

: Okay that's helpful and then in regards to the margins that we are seeing in the biopharmaceutical side and the vaccines, can you talk about some of the patterns that we can expect going forward? Obviously, there is the seasonality factor on the vaccines with the flu coming in, the flu vaccine coming in later but can you talk little bit more of that how you would 70 expect those margins to change during the course of the year? .

: Yeah the guidance we gave for the full year was at or slightly below for overall corporate margins when you take into consideration the fair value of inventory charge and not being there this year. And I think it's fair to say that margins on the front half of the year because of the fact that .0 you've got some idle that are going on there probably lower than what you would see on the second half of the year which is consistent with it what we were talking about in terms of our 0 earnings being back-end . loaded as well . On the biopharma side of things, it's what you're seeing is as we talked about in the past, is the beta royalty change is having a downward effect on the margins and the fact that the diluent syringe we also foreshadowed would be more expensive. 0

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

4-1

: Dennis this is Craig Wheeler, thanks for the question ; Obviously, we are watching this very closely. We haven't seen the data coming out from Antegren yet so we are not quite sure how, what one can say about single agent versus combination . However, we are * ! thinking very carefully about that marketplace . We do anticipate that a new entrant into that market _ place will induce competition, it also will continue to expand the .market. We expect it to be used in earlier patients and in new patients that are coming in . From our view we expect that because of different mechanisms there are-likely to be a combination use of this product in the marketplace . We continue to think that based upon the data we've seen and the data that we are generating that a high dose interferon is the right-product to be combining within any combination therapies . I'll also remind you that they don't' yet have long-term data on that therapy, . so we'll expect as they . come into the marketplace to see some of the adoption within longer term data, particularly if you are looking at a chronic therapy, the physicians will be looking at that,data evolving:as they begin to use the product, but we are thinking about it very carefully in terms of how we might combine . with it . We are looking at it as a potential expander of the market, but we are cognizant of the fact that . we will be more competitive .

<0 - Dennis Harp> : Great, thank you very much .

Operator : Your next question comes from Geoffrey Porges with Sanford Bernstein . 4-1 : Hi, thanks for taking the follow-up . Could you just talk a little bit about patents, we've seen the effect of the Betaseron patent, first patent expiry here . I am wondering if you would give us a'sense of when you expect the next step down to be in the 8etaseron royalty rate? And secondly could you also comment what you anticipate will happen when the, first HIV . 0 NAT patent-expires in' 2005 outside the U'S? Thanks . : Hi, this is Craig and I'll take the beta question . The step down that you saw was a contractual step down in Betaseron . It was not an expiration of a patent . So it was strictly what you call in contractual negotiations a step down over time C . I'll let David answer the. HIV numbers . Ct -: Geoffrey, the HIV patent outside the United States start to expire, I think it's in L. 2005_ Those are not significant in terms of revenue generation at this point in terms of the royalty stream and we obviously have a long way to run before we see any issues until the patent expiry as it relates to HCV . muo 4Q -Geoffrey Porges> : Okay, thanks a lot ..

: Marcus, I think we have time for one more question please.

0 Operator : Yes sire At this time your final question comes from Mark Augustine with Credit Suisse 'First Boston.

<0 - Mark Augustine>: Thanks for the follow-up. I did want to ask you if you could .take a minute' and tell us a bit more about your cancer growth factor kinase inhibitor program? Thank you . O

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W : Thank you Mark, it is Stephen Dilly here . We had in Phase I with Chiron CL) 258, which is a multiple kinase inhibitor . It has both anti-tumor activity [Ed note : audio dips 57:06] and antiangiogenic profiles : We are really following a translational mix and approach to development after the initial tolerability study, which is well underway now and we are getting good amounts of genetic data out of that . We are going to step into 2 studies in hematological malignancies . We are chasing the hematological malignancies largely because of the availability of as biornarkers. So we are likely to be looking at refractory AML and myeloma, because you can follow the (Ed note : audio dips 57 :40] of the molecule in bone marrow aspirates through the course of treatment. So, we see that as the next logical stage starting that towards the end of this year and giving some very clear understanding of the PKPD relationship with Chiron 258 . So things are going very well at the moment and we will have more data to talk about soon .

: I appreciate : Can you talk what factor it hits ?

: I don't think we disclosed the whole profile . That's going to be published at ASCO in the next few months . So- there will be a poster at ASOC on that .

: All right, thank you very much .

Operator : At this time, there~are no further questions . . Mr. Forrest, are there any closing remarks ?

I Martin Forrest, Vice President of Corporate Communications and Investor Relations

Yes there are and 1 will turn the call over to Howard for closing remarks .

Howard Pien, President and Chief Executive Office r

C Thank you Martin . We conclude with the reiteration that it was a very good first quarter for us and w wrwwe we expect the rest of the year will be full of goal posts of our progress . We are executing on our 20 r7~ milestones for growth providing the foundation while maintaining a strong financial performance . As I mentioned before, we will be holding an analyst Investor Day on June 23, I encourage you to 0 attend or to listen via webcast to this important event We are committed to the consistent delivery of financial growth, just as we are also committed to long-term value creation by executing on our, investment agenda . Thank you again for,joining us this afternoon

Operator : This concludes today's conference call . You may now disconnect. Co

4-J

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