1 MILBERG WEISS BERSHAD & SCHULMAN LLP 2 JEFF S. WESTERMAN (SBN 94559) ELIZABETH P. LIN (SBN 174663) 3 355 S. Grand Avenue, Suite 4170 Los Angeles, CA 90071-3172 4 Telephone: (213) 617-1200 Facsimile: (213) 617-1975 5 MILBERG WEISS BERSHAD 6 & SCHULMAN LLP MELVYN I. WEISS 7 ELAINE S. KUSEL One Pennsylvania Plaza 8 New York, NY 10119 Telephone: (212) 594-5300 9 Facsimile: (212) 868-1229 10 Lead Counsel for the Class

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14 UNITED STATES DISTRICT COURT 15 NORTHERN DISTRICT OF CALIFORNIA 16 SAN FRANCISCO DIVISION 17

18 RICHARD GREGORY, On Behalf of Himself ) Case No. C-04-4293-VRW and All Others Similarly Situated, ) 19 ) CONSOLIDATED AMENDED Plaintiff, ) COMPLAINT FOR VIOLATIONS OF THE 20 ) FEDERAL SECURITIES LAWS vs. ) 21 ) DEMAND FOR JURY TRIAL CHIRON CORPORATION, HOWARD H. ) 22 PIEN, JOHN A. LAMBERT and DAVID V. ) SMITH, ) 23 ) Defendants. ) 24 ) 25 26 27 28

CONSOLIDATED AMENDED COMPLAINT FOR VIOLATIONS OF THE FEDERAL SECURITIES LAWS CASE NO.: C-04-4293-VRW

1 TABLE OF CONTENTS

2 Page 3 NATURE OF THE ACTION AND SUMMARY OF ALLEGATIONS ...... 1 4 JURISDICTION AND VENUE ...... 6 5 PARTIES ...... 6 6 PLAINTIFF'S CLASS ACTION ALLEGATIONS ...... 9 7 BACKGROUND FACTS...... 10 8 FACTS WITHIN DEFENDANTS’ KNOWLEDGE DURING THE CLASS PERIOD ...... 12 9 The Liverpool Plant Producing Fluvirin Had a History of Contamination and Regulatory Compliance Problems...... 13 10 Defendants Knew the Liverpool Plant Did Not Comply With Good Manufacturing Practices and that Contamination of Fluvirin Was Found 11 by the FDA Prior to the Acquisition of the Plant by Chiron ...... 15 12 Defendants Knew that the Fluvirin Produced for the 2004-2005 Flu Season Was Contaminated ...... 21 13 The MHRA and the FDA Determined that Defendants Knew About the Fluvirin Contamination and Failed to Adequately Investigate the Root Cause and 14 Eliminate Potential Sources of the Contamination ...... 26 15 MATERIALLY FALSE AND MISLEADING STATEMENTS ISSUED DURING THE CLASS PERIOD AND THE REASONS WHY THESE 16 STATEMENTS WERE FALSE AND MISLEADING WHEN MADE...... 28 17 THE TRUTH BEGINS TO EMERGE ...... 40 18 POST-CLASS PERIOD EVENTS ...... 41 19 ADDITIONAL SCIENTER ALLEGATIONS...... 44 20 APPLICABILITY OF PRESUMPTION OF RELIANCE: FRAUD-ON-THE-MARKET DOCTRINE ...... 47 21 NO SAFE HARBOR ...... 48 22 COUNT I 23 Violation Of Section 10(b) Of The Exchange Act And Rule 10b-5 Promulgated Thereunder Against All Defendants...... 48 24 COUNT II 25 Violation Of Section 20(a) Of The Exchange Act Against the Individual Defendants...... 51 26 PRAYER FOR RELIEF ...... 52 27 JURY TRIAL DEMANDED...... 53 28 CONSOLIDATED AMENDED COMPLAINT FOR VIOLATIONS OF THE FEDERAL SECURITIES LAWS - i - CASE NO.: C-04-4293-VRW DOCS\273993v3

1 Plaintiff alleges the following based upon the investigation of plaintiff’s counsel regarding 2 Chiron Corporation (“Chiron” or the “Company”). Plaintiff’s counsel’s investigation included a 3 review of documents from the U.S. Food and Drug Administration (“FDA”), documents from the 4 Medicines and Healthcare Products Regulatory Agency (“MHRA”), Chiron’s regulatory filings and 5 reports, securities analyst reports and advisories, press releases and other public statements issued by 6 the Company, media reports about the Company, and interviews with former employees of the 7 Company.

8 NATURE OF THE ACTION AND SUMMARY OF ALLEGATIONS 9 1. This is a class action brought on behalf of persons who purchased the securities of 10 Chiron between July 23, 2003 through October 5, 2004, inclusive (the “Class Period”), and who 11 were damaged thereby, seeking to pursue remedies under the Securities Exchange Act of 1934 (the 12 “Exchange Act”). 13 2. During the Class Period, defendants engaged in a fraud which artificially inflated the 14 price of Chiron stock. The fraud enabled Chiron to raise approximately $885 million through sales 15 of convertible debentures on terms favorable to the Company during the Class Period. Also, by 16 engaging in the fraud, defendants hoped to increase their bonuses, which were tied to meeting 17 revenue and earnings targets and which amounted up to 200% of their salary. 18 3. Chiron, headquartered in Emeryville, California, is a global pharmaceutical company 19 focused on developing products for cancer and infectious diseases. It commercializes its products 20 through three business units: blood testing, vaccines and biopharmaceuticals. Chiron’s vaccine unit 21 produces more than 30 types of vaccines, including a flu vaccine marketed under the name Fluvirin. 22 4. Fluvirin is manufactured in a plant near Liverpool, England (“Liverpool Plant” or 23 “Plant”). Chiron acquired the Liverpool Plant in the purchase of PowderJect Pharmaceuticals in 24 July, 2003 in an effort to obtain a foothold in the U.S. vaccines market through sales of Fluvirin and 25 to fuel its growth. In 2003, Chiron sold $219 million worth of Fluvirin for the 2003-2004 flu season, 26 which represented approximately 19% of the Company’s revenue in third quarter 2003 and 27 approximately 12% of the Company’s overall revenues that year. Chiron was expected to provide its 28 flu vaccine to the United States for the 2004-2005 flu season, and defendants publicly represented CONSOLIDATED AMENDED COMPLAINT FOR VIOLATIONS OF THE FEDERAL SECURITIES LAWS - 1 - CASE NO.: C-04-4293-VRW DOCS\273993v3

1 that it would provide the U.S. market with more Fluvirin in 2004 than in 2003. The Company, 2 which already increased Fluvirin production by 50% in 2003, told investors that it would increase 3 production by 30% more in 2004. 4 5. However, unbeknownst to investors, the Liverpool Plant producing Fluvirin had a 5 history of severe and pervasive contamination and regulatory compliance problems. These serious 6 problems prevented Chiron from providing Fluvirin for the 2004-2005 flu season. Problems with 7 the Plant have been documented since 1999. In 1999, FDA inspectors found unusually high levels 8 of bioburden, or bacteria and other organisms, in partially processed Fluvirin vaccine at the Plant. 9 At that time, the FDA specifically warned Medeva, the then owner of the Plant, that if corrective 10 action was not taken, it could suspend or revoke the Plant’s license without further notice. This 11 warning letter was available to Chiron before it acquired the Liverpool Plant through its due 12 diligence. In addition, in October 2000, millions of oral polio vaccines produced at the Plant were 13 recalled after it was discovered that they may have been contaminated with protein associated with 14 mad cow disease. In 2001, hepatitis A vaccines being filled into syringes at the Plant were found to 15 have been ruined by contamination. In July 2002, the Irish Medicines Board suspended the Plant’s 16 license to supply BCG tuberculosis vaccine after it inspected the Plant. 17 6. In June 2003, just one month before Chiron acquired PowderJect, the FDA conducted 18 an inspection of the Liverpool Plant. In the June 2003 inspection, the FDA found that the Plant did 19 not follow good manufacturing practices essential to ensuring the safety of the product, that Plant 20 managers failed to correct problems identified by the FDA in its prior inspections even though the 21 FDA had warned it could suspend or revoke the Plant’s license if the problems were not corrected, 22 that Plant managers failed to investigate the high levels of bioburden since year 2000, and that there 23 was contamination at various stages in the Fluvirin production for the 2003-2004 flu season. The 24 Liverpool Plant’s problems were so severe that FDA inspectors recommended official action be 25 taken. Despite the fact that FDA inspectors found horrific, ongoing and uncorrected conditions at 26 the Plant, John Lambert, President of Chiron Vaccines, misrepresented during the Class Period that 27 the FDA’s 2003 inspection “confirmed that the facilities were really in very good order.” 28 CONSOLIDATED AMENDED COMPLAINT FOR VIOLATIONS OF THE FEDERAL SECURITIES LAWS - 2 - CASE NO.: C-04-4293-VRW DOCS\273993v3

1 7. During the Class Period, defendants also represented that Chiron would produce 2 approximately 50 million doses of Fluvirin for distribution into the U.S. and that it would achieve 3 earnings of between $1.80 and $1.90 in 2004 due in large part to the contribution of Fluvirin to 4 Chiron’s financial results. However, these statements were false and misleading when made because 5 defendants knew that the Liverpool Plant grossly deviated from good manufacturing practices and 6 that remediation of the Liverpool Plant, as well as a thorough investigation and determination of the 7 root causes of the contamination that had plagued the Plant since 1999, were required before 8 production of Fluvirin could be increased in the 2004-2005 flu season. 9 8. In early 2004, as Chiron began to produce Fluvirin for the 2004-2005 flu season, it 10 was clear that contamination would be a problem. By March 2004, Chiron already found extremely 11 high levels of bioburden in pools of vaccine that had not been fully processed. In fact, throughout 12 the 2004 Fluvirin production process, there were extraordinarily high levels of bioburden ranging 13 from one thousand to ten million times that of 2003 levels; the number of unacceptably high levels 14 of bioburden incidents climbed from 6-8 in 2003 to 50 in 2004; up to 60% of the 2004 production 15 lots had abnormally high levels of bacteria contamination; and more than six different bacterial 16 contaminants were identified at different steps in the Fluvirin production process. Yet, even as 17 defendants were aware of these remarkable facts, they continued to reaffirm that Chiron would 18 produce 50 million doses for distribution into the U.S. They later even announced that Chiron would 19 increase production by 2 million more doses. 20 9. When contamination was found in some of Chiron’s final filled vials of the flu 21 vaccine in July 2004, defendants waited about two months before they contacted regulators about the 22 problem. When defendants finally notified the public of the contamination in late August, 2004, 23 defendants downplayed and misrepresented the seriousness of the problem and, instead, 24 characterized the contamination as being limited to a small number of lots which would only slightly 25 delay the delivery of Fluvirin and reduce the amount of Fluvirin doses Chiron planned to deliver by 26 4 million doses. 27 10. Despite defendants’ positive statements that the contamination was limited and that 28 Chiron would be able to ship about 48 million doses of Fluvirin in October, internal Chiron CONSOLIDATED AMENDED COMPLAINT FOR VIOLATIONS OF THE FEDERAL SECURITIES LAWS - 3 - CASE NO.: C-04-4293-VRW DOCS\273993v3

1 documents demonstrate that Chiron officials were privately concerned that the Company would not 2 be able to ship its flu vaccines. In an internal e-mail dated September 17, 2004, Rob Budge, a 3 Chiron executive in the U.K., wrote to Chiron’s U.S. vaccine executive, John Vavricka, about the 4 retesting of the flu vaccines at the Liverpool Plant. “My folks are telling me that we should be 5 concerned about the testing,” according to the e-mail. “One looks good, one not.” Mr. Budge then 6 suggested Mr. Vavricka alert CEO Pien to the mixed results. A draft press release by Chiron dated 7 September 27, 2004 also indicated that defendants were aware Chiron would not be able to release 8 any of the Fluvirin. The September 27, 2004 draft press release that was leaked to the media after 9 the end of the Class Period stated that “anomalies in retesting results” and “internal quality- 10 assurance confirmatory testing” of Chiron’s Fluvirin vaccine “failed to provide results necessary to 11 permit release of the vaccine to the market.” 12 11. Despite the fact that defendants were aware that Fluvirin could not be released, the 13 very next day, on September 28, 2004, Chiron issued a press release stating that it intended to ship 14 about 48 million flu vaccines to the U.S. On September 28, 2004, Howard Pien, Chiron’s President 15 and CEO, also testified before Congress to assure Congress that Chiron would be able to supply the 16 U.S. with more doses than last year. However, as he spoke, he was aware that British inspectors had 17 recently conducted “for cause” inspection of the Liverpool Plant and found unacceptable conditions, 18 that they told Chiron in writing not to release any Fluvirin pending a second “for cause” inspection, 19 that they reviewed and found Chiron’s draft report on the causes of the contamination to be 20 unacceptable, and that they were, as of September 28, 2004, conducting a second “for-cause” 21 inspection of the Liverpool Plant to determine whether to suspend Chiron’s license. 22 12. On October 5, 2004, Chiron surprised the market when it announced that “the UK 23 regulatory body, the Medicines and Healthcare Products Regulatory Agency (MHRA), has today 24 temporarily suspended the company's license to manufacture Fluvirin® influenza virus vaccine in its 25 Liverpool facility, preventing the company from releasing any of the product during the 2004-2005 26 influenza season.” As a result of the license suspension, Chiron disaffirmed its previous financial 27 guidance and stated that it expected full year 2004 pro forma earnings of between $0.70-$0.80 per 28 share -- a reduction of between $1.10-$1.15. CONSOLIDATED AMENDED COMPLAINT FOR VIOLATIONS OF THE FEDERAL SECURITIES LAWS - 4 - CASE NO.: C-04-4293-VRW DOCS\273993v3

1 13. In reaction to defendants’ belated disclosure, the price of Chiron common stock 2 plummeted from a closing price of $45.42 per share on October 4, 2004, to a closing price of $37.98 3 per share on October 5, 2004, a one day drop of 16.3% on unusually heavy trading volume of over 4 25 million shares, compared to average trading volume of 1.8 million shares. Chiron stock traded as 5 low as $29 on October 5. 6 14. On October 15, 2004, after conducting an inspection of the Liverpool Plant, the FDA 7 agreed with the MHRA that “none of the influenza vaccine manufactured by Chiron Corporation for 8 the U.S. market is safe for use.” 9 15. Chiron and regulators later determined that aseptic connections between tanks of 10 vaccine and the formulation area were the likely source of the Fluvirin contamination. The fact that 11 the aseptic connections could be a source of contamination was raised by the MHRA in 2002 and 12 again by the FDA in 2003. The FDA found, however, that as of 2004, Chiron took no steps to 13 correct the problem. In addition, the Fluvirin produced for the 2004-2005 flu season was found to be 14 contaminated primarily by Serratia bacteria, the same bacteria found by the FDA during its 15 inspection of the Liverpool Plant in 2003. 16 16. As a result of Chiron's inability to sell Fluvirin, the Company recorded no Fluvirin 17 vaccine sales for the third or fourth quarters of 2004. The lack of Fluvirin sales devastated Chiron’s 18 financial results. In third quarter 2004, Chiron was forced to write-off its Fluvirin vaccine inventory, 19 reducing its earnings per share by $0.36, and Chiron reported earnings of only $0.26 per share 20 compared to $0.60 in the same quarter the year before. In fourth quarter 2004, Chiron suffered a loss 21 of $0.04 per share compared to earnings of $0.29 the same quarter the year before. Analysts 22 previously expected Chiron Fluvirin sales of $264-$305 million, or approximately 14% of Chiron’s 23 total revenues for fiscal 2004. 24 17. The Company’s last-minute announcement that it would be unable to deliver Fluvirin 25 sparked widespread concern of a U.S. flu pandemic, as Chiron was to supply half of the U.S.’s flu 26 vaccines for the 2004-2005 flu season. 27 18. Chiron has received a grand jury subpoena from the U.S. Attorney’s office for the 28 Southern District of New York regarding the suspension of Chiron’s license to manufacture the CONSOLIDATED AMENDED COMPLAINT FOR VIOLATIONS OF THE FEDERAL SECURITIES LAWS - 5 - CASE NO.: C-04-4293-VRW DOCS\273993v3

1 vaccine. The SEC also initiated an informal investigation of Chiron, which has since become a 2 formal investigation. 3 19. Lambert, president of Chiron Vaccines, resigned from the Company. Pien was 4 removed as President of the Company, although he continued as CEO. Neither Lambert nor Pien 5 received bonuses for 2004. Various senior managers of the Liverpool Plant, including its site 6 director, also left the Company. 7 20. During the Class Period, defendants were responsible for ensuring that the Liverpool 8 Plant complied with Good Manufacturing Practice (“GMP”) and were aware of its non-compliance. 9 As noted by the FDA in its warning letter to CEO Pien, after the Fluvirin contamination was 10 disclosed, “[i]t is your responsibility as management to assure that your establishment is in 11 compliance with the provisions of the FD&C Act, PHS Act, and applicable federal regulations.”

12 JURISDICTION AND VENUE 13 21. The claims asserted herein arise under and pursuant to Sections 10(b) and 20(a) of the 14 Exchange Act [15 U.S.C. §§78j (b) and 78t (a)] and Rule 10b-5 promulgated thereunder by the SEC 15 [17 C.F.R. §240.10b-5]. 16 22. This Court has jurisdiction over the subject matter of this action pursuant to 28 U.S.C. 17 §§1331 and 1337, and Section 27 of the Exchange Act. 18 23. Venue is proper in this District pursuant to Section 27 of the Exchange Act and 28 19 U.S.C. §1391(b). Many of the acts charged occurred in substantial part in this District and Chiron

20 conducts business in this District. 21 24. In connection with the acts alleged in this complaint, defendants, directly or 22 indirectly, used the means and instrumentalities of interstate commerce, including, but not limited to, 23 the mails, interstate telephone communications and the facilities of the national securities markets.

24 PARTIES 25 25. Lead Plaintiff International Union of Operating Engineers Local No. 825 Pension 26 Fund, as set forth in its certification previously filed in this Court and attached as Exhibit A, 27 purchased the common stock of Chiron at artificially inflated prices during the Class Period and was 28 damaged thereby. CONSOLIDATED AMENDED COMPLAINT FOR VIOLATIONS OF THE FEDERAL SECURITIES LAWS - 6 - CASE NO.: C-04-4293-VRW DOCS\273993v3

1 26. Defendant Chiron is a Delaware corporation headquartered in this District at 4560 2 Horton Street, Emeryville, California. 3 27. Defendant Howard H. Pien (“Pien”) served as Chiron’s Chief Executive Officer and 4 President throughout the Class Period. From May 2004, Pien also served as Chairman of Chiron’s 5 Board of Directors. 6 28. Defendant David V. Smith (“Smith”) served as Chiron’s Chief Financial Officer 7 throughout the Class Period. 8 29. Defendant John A. Lambert (“Lambert”) served as Vice President of Chiron and 9 President of Chiron Vaccines. He oversaw the Liverpool Plant throughout the Class Period. 10 30. Defendants Pien, Smith and Lambert are referred to herein as the “Individual 11 Defendants.” 12 31. During the Class Period, the Individual Defendants, as senior executive officers 13 and/or directors of Chiron, were privy to confidential and proprietary information concerning 14 Chiron, its operations, finances, financial condition, and present and future business prospects. The 15 Individual Defendants also had access to material adverse non-public information concerning 16 Chiron, as discussed in detail below. Because of their positions with Chiron, the Individual 17 Defendants had access to non-public information about its business, finances, products, markets and 18 present and future business prospects via access to internal corporate documents, conversations and 19 connections with other corporate officers and employees, attendance at management and board of 20 directors meetings and committees thereof and via reports and other information provided to them in 21 connection therewith. Because of their possession of such information, the Individual Defendants 22 knew or recklessly disregarded the fact that adverse facts specified herein had not been disclosed to, 23 and were being concealed from, the investing public. 24 32. The Individual Defendants are liable as direct participants with respect to the wrongs 25 complained of herein. In addition, the Individual Defendants, by reason of their status as senior 26 executive officers and/or directors were “controlling persons” within the meaning of Section 20 of 27 the Exchange Act and had the power and influence to cause the Company to engage in the unlawful 28 CONSOLIDATED AMENDED COMPLAINT FOR VIOLATIONS OF THE FEDERAL SECURITIES LAWS - 7 - CASE NO.: C-04-4293-VRW DOCS\273993v3

1 conduct complained of herein. Because of their positions of control, the Individual Defendants were 2 able to and did, directly or indirectly, control the conduct of Chiron’s business. 3 33. The Individual Defendants, because of their positions with the Company, controlled 4 and/or possessed the authority to control the contents of its reports, press releases and presentations 5 to securities analysts and through them, to the investing public. The Individual Defendants were 6 provided with copies of the Company's reports and press releases alleged herein to be misleading, 7 prior to or shortly after their issuance and had the ability and opportunity to prevent their issuance or 8 cause them to be corrected. Thus, the Individual Defendants had the opportunity to commit the 9 fraudulent acts alleged herein. 10 34. As senior executive officers and/or directors and as controlling persons of a publicly- 11 traded company whose common stock was, and is, registered with the Securities and Exchange 12 Commission (the “SEC”) pursuant to the Exchange Act, and was traded on the NASDAQ National 13 Market (“NASDAQ”) and governed by the federal securities laws, the Individual Defendants had a 14 duty to disseminate promptly accurate and truthful information with respect to Chiron’s financial 15 condition and performance, growth, operations, financial statements, business, products, markets, 16 management, earnings and present and future business prospects, to correct any previously issued 17 statements that had become materially misleading or untrue, so that the market price of Chiron’s 18 common stock would be based upon truthful and accurate information. The Individual Defendants’ 19 misrepresentations and omissions during the Class Period violated these specific requirements and 20 obligations. 21 35. The Individual Defendants are liable as participants in a fraudulent scheme and 22 course of conduct that operated as a fraud or deceit on purchasers of Chiron common stock by 23 disseminating materially false and misleading statements and/or concealing material adverse facts. 24 The scheme (a) deceived the investing public regarding Chiron’s business, operations and 25 management and the intrinsic value of Chiron common stock, and (b) caused plaintiff and members 26 of the Class to purchase Chiron common stock at artificially inflated prices. 27 28 CONSOLIDATED AMENDED COMPLAINT FOR VIOLATIONS OF THE FEDERAL SECURITIES LAWS - 8 - CASE NO.: C-04-4293-VRW DOCS\273993v3

1 PLAINTIFF'S CLASS ACTION ALLEGATIONS 2 36. Plaintiff brings this action as a class action pursuant to Federal Rule of Civil 3 Procedure 23(a) and (b)(3) on behalf of a Class, consisting of all those who purchased the securities 4 of Chiron between July 23, 2003 to October 5, 2004, inclusive, and who were damaged thereby. 5 Excluded from the Class are defendants, the officers and/or directors of the Company, at all relevant 6 times, members of their immediate families and their legal representatives, heirs, successors or 7 assigns and any entity in which defendants have or had a controlling interest. 8 37. The members of the Class are so numerous that joinder of all members is 9 impracticable. Throughout the Class Period, Chiron had more than 187 million shares of common 10 stock outstanding that were actively traded on NASDAQ. While the exact number of Class 11 members is unknown to plaintiff at this time and can only be ascertained through appropriate 12 discovery, plaintiff believes that there are hundreds or thousands of members in the proposed Class. 13 Record owners and other members of the Class may be identified from records maintained by Chiron 14 or its transfer agent and may be notified of the pendency of this action by mail, using the form of 15 notice similar to that customarily used in securities class actions. 16 38. Plaintiff's claims are typical of the claims of the members of the Class as all members 17 of the Class are similarly affected by defendants' wrongful conduct in violation of federal law that is 18 complained of herein. 19 39. Plaintiff will fairly and adequately protect the interests of the members of the Class 20 and has retained counsel competent and experienced in class and securities litigation. 21 40. Common questions of law and fact exist as to all members of the Class and 22 predominate over any questions solely affecting individual members of the Class. Among the 23 questions of law and fact common to the Class are: 24 (a) whether the federal securities laws were violated by defendants' acts as 25 alleged herein; 26 (b) whether statements made by defendants to the investing public during the 27 Class Period misrepresented material facts about the business and operations of Chiron; and 28 CONSOLIDATED AMENDED COMPLAINT FOR VIOLATIONS OF THE FEDERAL SECURITIES LAWS - 9 - CASE NO.: C-04-4293-VRW DOCS\273993v3

1 (c) to what extent the members of the Class have sustained damages and the 2 proper measure of damages. 3 41. A class action is superior to all other available methods for the fair and efficient 4 adjudication of this controversy since joinder of all members is impracticable. Furthermore, as the 5 damages suffered by individual Class members may be relatively small, the expense and burden of 6 individual litigation make it impossible for members of the Class to individually redress the wrongs 7 done to them. There will be no difficulty in the management of this action as a class action.

8 BACKGROUND FACTS 9 42. Chiron is a global pharmaceutical company focused on developing and 10 commercializing various products through three business units: Biopharmaceuticals, Vaccines, and 11 Blood Testing. 12 43. On July 8, 2003, Chiron acquired PowderJect Pharmaceuticals, based in England, for 13 approximately $878 million. At the time of the acquisition, PowderJect owned a manufacturing 14 facility in the industrial area of Speke, on the southern fringe of Liverpool, England. The Liverpool 15 Plant produced Fluvirin, an injectable influenza vaccine. 16 44. Influenza, or flu, is a contagious disease caused by the influenza virus. Hundreds of 17 millions of people worldwide become infected every year. The virus attacks the respiratory tract 18 (i.e., nose, throat, and lungs) in humans, leading to rapid onset of symptoms such as fever, headache, 19 fatigue, body aches, sore throat, and nasal congestion. In the U.S., it is estimated that 10%-20% of 20 the population (i.e., 28-56 million people) become infected every year. 21 45. Chiron’s acquisition of PowderJect gave the Company immediate access to the 22 lucrative flu vaccine market. In 2003 and 2004, Fluvirin was one of only two injectable flu vaccines 23 approved for use in the U.S. by the regulatory authorities. Fluvirin was also registered for use in 24 over 20 countries. The vast majority of Fluvirin production was supplied to the U.S. market, with 25 the United Kingdom accounting for most of the balance. 26 46. Each year, vaccination preparation begins after the Center for Disease Control and 27 Prevention (“CDC”) and the World Health Organization (“WHO”) select the three new virus strains 28 representing the strains expected to be in U.S. circulation to produce. Under current methods of CONSOLIDATED AMENDED COMPLAINT FOR VIOLATIONS OF THE FEDERAL SECURITIES LAWS - 10 - CASE NO.: C-04-4293-VRW DOCS\273993v3

1 manufacturing, individual lots of each of the three virus strains are injected into fertilized chicken 2 eggs and incubated. After some time, the allantoic fluid (egg white) is removed and harvested. The 3 harvested virus is inactivated with a chemical treatment, purified and separated from the egg 4 proteins, usually by high-speed ultra-centrifugation. The whole virus concentrates are then further 5 purified and split (split vaccine) or purified, such that the vaccine contains predominately only the 6 hemagglutinin and neuraminidase virus coat proteins (surface antigen or sub-unit). The monovalent 7 (single-strain) antigen lots are sterile-filtered and quality control and potency tested. The 8 monovalent lots are then formulated into trivalent vaccine, filled into the final containers and 9 packaged into vials or syringes. 10 47. The Liverpool Plant is separated into three sites for manufacturing the flu vaccine 11 Fluvirin. The first site is the Egg Virus Unit (“EVU”), where eggs are grown and incubated. The 12 second site is the Primary Production Facility, where the primary manufacturing and purification 13 functions occur. The third site is the Secondary Production Facility, where major filling and 14 packaging functions occur. The Liverpool Plant manufacturing Fluvirin is a rather old facility, with 15 some of the structures dating back to the 1970s. Prior to PowderJect, its owners included 16 GlaxoSmithKline, Medeva Pharma Ltd., and Celltech Chiroscience. 17 48. Vaccine production can be messy, and flu virus grown inside chicken eggs are ideal 18 breeding grounds for bacteria. According to FDA records, former flu vaccine maker Parkedale 19 Pharmaceuticals, Inc. had trouble with contamination at its factory such that in 2000, the FDA 20 ordered the company to stop making the flu vaccine. 21 49. Quality assurance in the production and distribution of medicines and vaccines is 22 essential for the safeguarding of public health, and vaccines such as Fluvirin must be licensed for 23 immunization and distribution within the U.S. After the FDA issues a license for the vaccine, the 24 FDA’s policy also calls for inspection of the manufacturing facility every two years. Fluvirin was 25 licensed for distribution into the U.S. and was subject to FDA inspections and applicable regulations, 26 27 28 CONSOLIDATED AMENDED COMPLAINT FOR VIOLATIONS OF THE FEDERAL SECURITIES LAWS - 11 - CASE NO.: C-04-4293-VRW DOCS\273993v3

1 including regulations requiring compliance with GMP.1 The FDA inspected the Liverpool Plant in 2 1999, 2001 and 2003. 3 50. Because the Liverpool Plant is located in England and Fluvirin was also distributed 4 into the U.K., the Plant was also subject to regulatory oversight by the MHRA, the British equivalent 5 of the FDA. According to the “Orange Guide,” which provides guidance to manufacturers of 6 medicines in Europe, medicine must be manufactured so as to ensure that they are fit for their 7 intended use and do not place patients at risk. The Liverpool Plant producing Fluvirin must design 8 and correctly implement system of Quality Assurance incorporating GMP and Quality Control 9 (“QC”). GMP ensures that products are consistently produced and controlled to the quality 10 standards appropriate to their intended use. QC is concerned with sampling, specifications and 11 testing, and with organization, documentation and release procedures which ensure that the 12 necessary and relevant tests are carried out and that products are not released for sale until their 13 quality has been judged to be satisfactory. 14 51. Conducting manufacturing according to GMP is critical to ensuring that the 15 pharmaceutical product is fit for its intended use, as poor GMP conditions at a manufacturing facility 16 could pose life-threatening health risks to patients. Although sterility tests are done to test for 17 contamination of vaccines, only a small portion of the vials are tested. Thus, sterility tests do not 18 ensure that the vaccine being distributed is free from contamination. Only with GMP can public 19 safety be assured.

20 FACTS WITHIN DEFENDANTS’ KNOWLEDGE DURING THE CLASS PERIOD 21 52. During the Class Period, defendants made numerous false and misleading statements 22 about Chiron’s production of Fluvirin. Defendants were aware, at the time they made their 23 statements, that such statements were false and misleading because they had knowledge of the facts 24 set forth immediately below.

25 1 GMP is also sometimes referred to as “cGMP.” The “c” stands for “current,” reminding 26 manufacturers that they must employ technologies and systems that are up-to-date in order to comply with the regulation. GMP regulations for drugs and biologics are set forth in Title 21 of the 27 Code of Federal Regulations, Parts 210 through 226 (drugs) and Parts 600 through 680 (biologics). 28 CONSOLIDATED AMENDED COMPLAINT FOR VIOLATIONS OF THE FEDERAL SECURITIES LAWS - 12 - CASE NO.: C-04-4293-VRW DOCS\273993v3

1 The Liverpool Plant Producing Fluvirin Had a History of Contamination and Regulatory Compliance Problems 2 53. Prior to Chiron’s purchase, the Liverpool Plant was known to have a history of 3 severe, persistent and pervasive contamination and regulatory compliance problems. The records of 4 these problems were available to Chiron’s top management when the facility was purchased by 5 Chiron and were known to defendants, in particular, as a result of Chiron’s due diligence process in 6 purchasing the $878 million Plant, as defendants participated in the due diligence as part of their role 7 in evaluating, approving and implementing the purchase. 8 54. In July of 1999, when the Liverpool Plant was owned by Medeva Pharma Ltd., 9 investigators from the FDA found horrific conditions at the plant. FDA inspectors who visited the 10 Liverpool Plant from July 13 through July 21, 1999, “documented significant deviations from the 11 applicable standards and requirements.” Among the problems noted by the FDA were failure to 12 “clean, maintain and sanitize equipment and utensils at appropriate intervals to prevent malfunction 13 or contamination;” failure to maintain systems to prevent unacceptable levels of toxins and bacteria 14 contaminating the production process; failure to ensure batches of vaccines “will conform with all 15 established standards, specifications and characteristics;” and failure to prove that vaccines would be 16 free from “bacteria and fungi.” The inspectors found that some of the plant’s partially processed 17 Fluvirin vaccine contained unusually high levels of bioburden – bacteria and other microorganisms – 18 after the final production steps, and that they were “refiltered,” or mixed with cleaner, 19 uncontaminated ones in order to improve test results. Among the bacteria found were E.coli, which 20 produces a powerful toxin and can cause severe illness, and Chryseomonas luteloa, which can cause 21 meningitis. The FDA’s inspection team found that the contaminated Fluvirin vaccine was refiltered 22 more than once. The FDA’s inspection team was also stunned to find that the Plant’s manufacturing 23 process had not been validated, or certified by the company as effective, since the early 1990s. 24 55. Due to the serious GMP deficiencies, following the July 1999 inspection, on October 25 21, 1999, the FDA’s director of compliance, Steve Masiello, sent a warning letter to Medeva’s head 26 of primary production, John O’Brien. In the warning letter, the FDA instructed Medeva to “take 27 prompt action to correct these deviations. Failure to promptly correct these deviations may result 28 CONSOLIDATED AMENDED COMPLAINT FOR VIOLATIONS OF THE FEDERAL SECURITIES LAWS - 13 - CASE NO.: C-04-4293-VRW DOCS\273993v3

1 in regulatory action without further notice. Such actions include license suspension and/or 2 revocation.” The warning letter was one of three the FDA issued among 20 vaccine manufacturers it 3 inspected that year. 4 56. In January 2000, the Liverpool Plant was bought by Celltech Chiroscience. In 5 October 2000, millions of oral polio vaccine doses produced at the Liverpool Plant were recalled by 6 the British Department of Health after it was discovered that they may have been contaminated with 7 BSE-infected material. BSE, otherwise known as bovine spongiform encephalopathy, is the protein 8 associated with mad cow disease. 9 57. In October 2000, the Plant was resold by Celltech to PowderJect Pharmaceuticals in 10 October 2000. The Liverpool Plant became Evans Vaccines, a wholly owned subsidiary of 11 PowderJect. 12 58. On March 9, 2001, the FDA conducted a GMP inspection of the Liverpool Plant 13 pursuant to its procedure of inspecting manufacturing facilities once every two years. The inspection 14 again uncovered a host of serious problems. The FDA inspectors found, among other things, 15 deficiencies in Fluvirin process validation, cleaning validation, and lack of validation of the vial 16 filler speed and vial/stopper washing process. Deficiencies were also noted in sterility test failure 17 investigations, inaccuracies in Master Production Records for Fluvirin, problems with collecting and 18 monitoring of samples of water used for injections, and failure of the Quality Control Unit to 19 conduct monitoring of various production operations. At the time of the inspection, the inspectors 20 informed PowderJect that re-filtered flu batches are considered reworked and cannot be distributed 21 in the U.S. without the FDA’s knowledge. At the conclusion of the inspection, the FDA issued a 22 Form FDA 483, which notified the inspected establishment’s top management in writing of 23 “significant objectionable conditions” or other violations of the Food, Drug & Cosmetic Act which 24 were observed during the inspection. 25 59. On May 11, 2001, the FDA conducted a Pre Approval Inspection (“PAI”) for a 26 different product produced in the Liverpool Plant. FDA inspectors, at that time, again found 27 deficiencies in the manufacturing process at the Plant. These deficiencies included “lack of 28 document failure investigations,” “failure to close non-conformance within time frames,” “deficient CONSOLIDATED AMENDED COMPLAINT FOR VIOLATIONS OF THE FEDERAL SECURITIES LAWS - 14 - CASE NO.: C-04-4293-VRW DOCS\273993v3

1 equipment cleaning and autoclave validations,” and “lack of documentation of the inspection of 2 media filled units.” The FDA issued another Form FDA 483 to top management during this 3 inspection. 4 60. Despite the numerous citations and warnings, the problems in the Liverpool Plant 5 were uncorrected and continued. In 2001, hepatitis A vaccines being filled into syringes at the 6 Liverpool Plant were found to have been ruined by contamination problems. Also, in July 2002, the 7 Irish Medicines Board suspended PowderJect’s license to supply BCG tuberculosis vaccine to the 8 Irish market after declaring it was “dissatisfied” with the Liverpool Plant’s procedures. This 9 suspension of the Plant’s license to supply the vaccine in Ireland was made after the Irish Medicines 10 Board carried out an inspection of the Plant, which revealed that some batches of vaccines were less 11 potent than others. 12 61. In June through November 2002, the MHRA also conducted several GMP inspections 13 of the Plant. The MHRA also noted various GMP deficiencies, including issues with the Plant’s 14 aseptic connections.

15 Defendants Knew the Liverpool Plant Did Not Comply With Good Manufacturing Practices and that Contamination of Fluvirin Was Found by the FDA Prior to the 16 Acquisition of the Plant by Chiron 17 62. In 2002, Chiron became interested in acquiring PowderJect, which owned the 18 Liverpool Plant, in order to strengthen its vaccine franchise and to gain a foothold in the U.S. 19 vaccines market. 20 63. In or around January 2003, Chiron sent several senior employees to England to 21 conduct due diligence of the Liverpool Plant. According to a former Chiron employee who 22 participated in the due diligence process and had a role in determining and reporting the findings to 23 senior management, the due diligence team uncovered serious problems with the Liverpool Plant. 24 Among other things, the Liverpool Plant had problems with validation, or being able to show that 25 there was a process that was under control, and did not comply with GMP. The due diligence team 26 saw that the Liverpool Plant needed upgrades in terms of air handling, people flow, and equipment. 27 According to this witness, anyone in the regulatory field or quality field could recognize that there 28 were issues. In fact, Chiron’s due diligence team was specifically informed that the Liverpool Plant CONSOLIDATED AMENDED COMPLAINT FOR VIOLATIONS OF THE FEDERAL SECURITIES LAWS - 15 - CASE NO.: C-04-4293-VRW DOCS\273993v3

1 lacked standards. According to another former employee of the Liverpool Plant, he overheard three 2 or four Americans conducting the due diligence inquire about the engineering standards at the 3 Liverpool Plant, and the Project Engineering Manager at the Liverpool Plant responding: “Well, we 4 haven’t got any.” 5 64. According to the former Chiron employee who participated in due diligence of the 6 Liverpool Plant, within a day or two of the due diligence team’s return from England, they made a 7 presentation to Chiron’s executive management committee at the Company’s headquarters in 8 Emeryville, California. The attendees of the presentation included Sean Lance (then CEO of 9 Chiron), David Smith, and a number of other executives including Craig Wheeler (President of the 10 BioPharma Group) and Linda Short (Vice President of Corporate Resources). Defendant John 11 Lambert attended the presentation by telephone. The presentation lasted over an hour and the 12 executive management committee discussed whether it made sense to do the PowderJect acquisition. 13 During the presentation, Chiron officers were specifically informed that Chiron would need to make 14 a one hundred million dollar investment in the Liverpool Plant in upgrades and remediation to bring 15 the facility into compliance with GMP. According to this witness, it was determined by the due 16 diligence team and reported to Chiron’s upper management that without the one hundred million 17 dollar investment in the Liverpool Plant, “[i]t was, as you say, an accident waiting to happen, 18 because it needed investment. It needed a lot of investment.” According to this witness, reports 19 were generated concerning the due diligence of the Liverpool Plant, and the reports would have been 20 distributed to defendants John Lambert, David Smith and others in Chiron management. 21 65. Also according to this witness, Elan Corporation, another pharmaceutical company, 22 declined to purchase PowderJect because of the amount of money and remediation needed to 23 upgrade the Liverpool Plant to comply with production and regulatory standards. 24 66. On March 20, 2003, Chiron announced that CEO Sean Lance would be succeeded by 25 Howard Pien. Prior to becoming CEO of Chiron, Pien served as President of GlaxoSmithKline 26 Pharmaceuticals International and had substantial experience in the pharmaceuticals industry. 27 67. On April 21, 2003, Chiron also announced that its chief financial officer, James Sulat, 28 would also resign. David Smith, Chiron’s vice president for finance, took over the post. CONSOLIDATED AMENDED COMPLAINT FOR VIOLATIONS OF THE FEDERAL SECURITIES LAWS - 16 - CASE NO.: C-04-4293-VRW DOCS\273993v3

1 68. In April or May, 2003, according to a former employee who worked at the Liverpool 2 Plant, defendant John Lambert made a due diligence visit to the Plant. Along with Lambert were 3 twenty or thirty other people, all senior management, including Ged Dittman (production manager 4 on the EVU site), Andy Sneddon (Liverpool Plant site director) and John O’Brien (head of Technical 5 Services). The witness also recalled that a man was introduced as head of regulatory and that this 6 person said he would concentrate on ensuring that the Liverpool Facility was complying with 7 regulatory affairs. 8 69. On May 19, 2003, Chiron announced that it launched a cash tender offer for all 9 outstanding shares of common stock of PowderJect. Chiron acquired PowderJect for approximately 10 $878 million. 11 70. At the time of Chiron’s announcement of its offer for PowderJect, defendants were 12 aware that the Liverpool Plant had a well-documented history of regulatory problems due to their 13 own due diligence team’s reports, and the regulatory inspection reports and warnings provided in the 14 course of making the decision to purchase PowderJect. Defendants also knew or should have known 15 the contents of the regulatory warnings and reports as part of their due diligence because they were 16 available to them from the regulatory agencies as potential purchaser and owner of the facility, and 17 even through Freedom of Information Act requests in the course of normal pre-purchase due 18 diligence. As discussed above, the FDA in 1999 warned Medeva, which owned the Liverpool Plant 19 at the time, of risks of contamination at the Liverpool Plant. In October 2000, U.K. regulators 20 recalled oral polio vaccines manufactured at the Liverpool Plant. In 2002, the Irish Medicines Board 21 suspended the Plant’s license to supply BCG tuberculosis vaccine. At the time of Chiron’s 22 acquisition of the Liverpool Plant, defendant Pien was very familiar with its problems because he 23 had been a top executive at GlaxoSmithKline (which resulted from the merger of SmithKline 24 Beecham and GlaxoWellcome) since 1991, had lived in England between 1995 and 1997, and 25 GlaxoSmithKline owned the Liverpool Plant before it was sold to Medeva. Further, Pien had 26 extensive knowledge regarding the vaccines business and process; among his first jobs at 27 GlaxoSmithKline was to launch U.S. vaccines. Prior to joining GlaxoSmithKline, Pien also worked 28 six years for Abbott Laboratories and five years for Merck & Co. Pien was involved in the CONSOLIDATED AMENDED COMPLAINT FOR VIOLATIONS OF THE FEDERAL SECURITIES LAWS - 17 - CASE NO.: C-04-4293-VRW DOCS\273993v3

1 acquisition of PowderJect and knew that at least an additional $100 million was necessary to bring 2 the Liverpool Plant up to compliance with GMP. 3 71. From June 2 through June 10, 2003, the FDA conducted another inspection of the 4 Liverpool Plant. According to the Establishment Inspection Report and the Form FDA 483 issued to 5 upper management by the FDA, FDA inspectors found serious deficiencies in the manufacture of 6 Fluvirin at the Plant. 7 72. During the June 2003 inspection, FDA inspectors found contamination with 8 potentially lethal bacteria after “ultrafiltration,” a point in the production process that is supposed to 9 remove the vast majority of bacteria. FDA inspectors also found evidence of contamination after 10 “sterile filtration,” the point beyond which there should not be any bacterial growth. The FDA 11 inspectors determined that on 14 occasions between March 2001 and July 2002, the Company found 12 Serratia bacteria in vaccine pools. Also, between March 2001 through 2002, at least 50 monovalent 13 blend pool lots failed bioburden testing. 14 73. During the June 2003 inspection, FDA inspectors, as in their 1999 inspection, 15 identified poor sanitation practices that increased the risk that bacteria could contaminate sterile parts 16 of the production process. For example, the inspectors noted that “curtains” that were supposed to 17 segregate sterile areas of the plant from nonsterile areas were not properly maintained. Also, even 18 though the company identified a susceptibility to contamination in the system of connection between 19 tanks of vaccine in the “formulation area” of the plant, the aseptic connections, it did not take 20 appropriate steps to eliminate this source of potential bacterial contamination. These were ongoing 21 and continuous problems because the owner of the Liverpool Plant simply failed to adequately 22 correct problems raised by the FDA in its prior inspections. 23 74. During the June 2003 inspection, the FDA also noted that during the 2001-2002 flu 24 season, various monovalent Fluvirin lots with high levels of bioburden were re-filtered into trivalent 25 lots and released into the U.S. market. This was done despite the fact that, in March 2001, the FDA 26 specifically told PowderJect that refiltered flu batches cannot be distributed into the U.S. without 27 FDA approval. FDA inspectors also found that four out of five batches of tested vaccine made for 28 the 2001-2002 flu season lost potency too soon. Although PowderJect managers considered CONSOLIDATED AMENDED COMPLAINT FOR VIOLATIONS OF THE FEDERAL SECURITIES LAWS - 18 - CASE NO.: C-04-4293-VRW DOCS\273993v3

1 recalling the flu vaccine in 2002 because of concerns about its potency, they ultimately decided 2 against it. 3 75. The FDA also found that some of the required quality-control tests before 2003 were 4 not performed and others were not done on time. Also, in two years leading up to 2004, the FDA 5 received test vaccine samples labeled as one kind of flu strain when they were actually another. 6 76. In the June 2003 inspection, the FDA further found that there were high levels of 7 bioburden in the 2000-2001 and 2001-2002 production materials and that at least 30 post filtration 8 and sterilization blend pool lots failed testing in 2002. The contaminants included Serratia, 9 Enterobacter, Klebsiella and Psuedomonas. The FDA also noted that 56 injection site inflammation 10 adverse events were reported by vaccine recipients who received product from three different 11 batches, consistent with continuing bacterial or endotoxin contamination. 12 77. In its Establishment Inspection Report for the June 2003 inspection, the FDA noted

13 that “the firm has been experiencing high levels of bioburden since year 2000.” It also noted that 14 “no attempts were made by the firm to investigate the root cause of the higher than expected 15 bioburden levels. In addition, there was no documentation that the firm opened a formal 16 investigation into the high levels of bioburden levels to find the root cause and eliminate the 17 potential source/sources of the contaminations.” 18 78. The FDA inspectors discussed their observations during the July 2003 inspection with 19 John O’Brien, Head of Operations, and Simon Bryson, Head of Quality. At the close of inspection, 20 the FDA’s observations were presented to Andy Sneddon, Head of Manufacturing and Site Director 21 of the Liverpool Plant. Staph Bakali, the Chief Operating Officer of PowderJect, was also present 22 during the issuance and discussion of the Form FDA 483. A copy of the Form FDA 483 was 23 provided to managers of the Liverpool Plant. 24 79. Due to the pervasiveness and severity of the GMP deficiencies at the Liverpool Plant, 25 the FDA inspectors involved in the June 2003 inspection recommended official enforcement action. 26 However, according to the October 5, 2003 handwritten notes of John Eltermann, an FDA director, 27 the FDA “downgraded” the recommendation and instead, requested voluntary corrective action by 28 PowderJect. CONSOLIDATED AMENDED COMPLAINT FOR VIOLATIONS OF THE FEDERAL SECURITIES LAWS - 19 - CASE NO.: C-04-4293-VRW DOCS\273993v3

1 80. On July 8, 2003, Chiron closed the PowderJect acquisition. Before the acquisition 2 closed, Chiron was aware that the FDA inspected the Liverpool Plant a month earlier and found 3 extremely high levels of bioburden. Based on later testimony by CEO Pien before Congress, Chiron 4 knew about the results of FDA’s inspection in June 2003 because, according to his testimony, the 5 acquisition was conditioned upon the inspection. Additionally, Chiron was aware of the results of 6 the inspection because the PowderJect employees who discussed the Form FDA 483 with the FDA 7 inspectors when they inspected the Plant in June 2003 became employees of Chiron Vaccines after 8 the PowderJect acquisition closed. Andy Sneddon remained Site Director for the Liverpool Plant, 9 John O’Brien remained the Head of Operations, and Simon Bryson remained the Head of Quality at 10 the Liverpool Plant after it was acquired by Chiron. Chiron also retained the hundreds of other 11 employees who worked at the Plant. 12 81. In or around September 2003, according to various employees of the Liverpool Plant, 13 John Lambert, the President of Chiron Vaccines, made another visit to the Plant. During this visit, 14 Lambert made a presentation to Plant employees in the lecture theatre at the Liverpool Plant to 15 discuss Chiron’s take over of the Plant. Several Americans from Chiron were also present. 16 82. The serious GMP deficiencies at the Liverpool Plant were obvious, visible, and must 17 have been known by Lambert when he visited the Plant as well as by defendants and other high 18 ranking officers of Chiron. According to a former employee who worked on various machines used 19 in the production of Fluvirin at the Liverpool Plant until late 2003, after Chiron purchased the Plant, 20 the Liverpool Plant needed drastic remediation. For example, the EVU area where the flu vaccine 21 was harvested from the eggs contained old autoclave machines (sterilizers) that kept leaking water. 22 These autoclave machines had trays on which eggs were placed. Additionally, the farmomac 23 machine used to fill vials with the vaccine, was always breaking down, sometimes even three or four 24 times a day. It tended to smash lots of vials, anywhere from fifty to one thousand vials out of sixty 25 thousand, even when working properly. Pieces of broken glass and other particles were potentially 26 getting into those vials. According to another former employee who worked at the Liverpool Plant 27 until late 2003, also after Chiron’s purchase, stated although it was recognized that the Liverpool 28 Plant was old and had various machinery and equipment that needed to be refurbished or replaced, it CONSOLIDATED AMENDED COMPLAINT FOR VIOLATIONS OF THE FEDERAL SECURITIES LAWS - 20 - CASE NO.: C-04-4293-VRW DOCS\273993v3

1 was not. “For instance, one of these autoclaves, they said that if we keep using this we’re going to 2 get inspected and it’s not going to pass, but we’ve got to keep using it.” 3 83. In September or October 2003, Chiron and the FDA communicated about the 4 problems found by the FDA in its June 2003 inspection, according to later Congressional testimony 5 by Pien. Thus, Chiron clearly knew, before it started the 2004-2005 Fluvirin campaign, that there 6 were serious GMP deficiencies at the Liverpool Plant. 7 84. According to data from the Vaccine Adverse Event Reporting System (“VAERS”), a 8 passive safety surveillance program that collects information about adverse events that occur after 9 the administration of vaccines, there were approximately 250 reported adverse events in 2002 for 10 Fluvirin. In contrast, in 2003, there were approximately 570 reported adverse events – more than 11 double that of 2002 – suggesting that some of the Fluvirin released in 2003 may have been 12 contaminated.

13 Defendants Knew that the Fluvirin Produced for the 2004-2005 Flu Season Was Contaminated 14 85. In January, 2004, Chiron began preparing for the manufacturing of Fluvirin for the 15 2004-2005 flu season. 16 86. For the 2004 flu season, Chiron boosted Fluvirin production about 30%. This 17 increase in production occurred despite the fact that defendants knew production had already been 18 boosted by 50% the year before, that Fluvirin contamination was found during inspections in 2003, 19 that drastic remediation was required for the Liverpool Plant, and that production could not be 20 increased without first finding the root of the contamination problems. Indeed, the MHRA 21 ultimately found that throughout the 2004 Fluvirin production process, there were extraordinary high 22 levels of bioburden and bacterial contamination that increased over the prior year. These levels 23 ranged from one thousand to ten million times more than that of 2003 levels, and the number of 24 unacceptably high levels of bioburden incidents climbed from 6-8 in 2003 to 50 in 2004. Also, 25 more than six different bacterial contaminants were identified at different steps in the process, and 26 up to 60% of production lots had abnormally high levels of bacterial contamination. 27 28 CONSOLIDATED AMENDED COMPLAINT FOR VIOLATIONS OF THE FEDERAL SECURITIES LAWS - 21 - CASE NO.: C-04-4293-VRW DOCS\273993v3

1 87. By March, 2004, Chiron knew that the contamination problem that had long plagued 2 the Liverpool Plant in the past was affecting the Fluvirin production for the 2004-2005 flu season. 3 On March 2, 2004, Chiron itself found high levels of bacteria in a monovalent blend pool -- a pool of 4 vaccine that had not been fully processed. While low levels of bacteria are expected and tolerated 5 before final filtration steps are taken, high levels in bulk vaccine demonstrate that something is 6 wrong with the process. 7 88. On March 15, 2004, after confirming Mycoplasma growth on a Working Seed batch, 8 Chiron created a Non-Conformance Report, required by the standard operating procedure when a 9 batch fails the test for contamination. The contaminated seed lot was not discarded but was later 10 used in Fluvirin monoblend batches that were rejected. 11 89. On May 17, 2004, Chiron fumigated the formulation area after finding contamination 12 problems, including contamination by Serratia bacteria in April and May. Although Chiron reported 13 to the FDA that its testing showed the fumigation “was successful” with no “confirmed isolates of 14 Serratia,” this was not accurate. The FDA later found that testing by employees at the Plant from 15 May through September 2004 showed continued alert and action level excursions for Gram negative 16 contamination including Serratia. 17 90. On May 31, 2004, Chiron’s intermediate Fluvirin product failed sterility. By this 18 time, at the latest, Chiron should have notified the FDA, as applicable regulation requires reporting 19 within 45 days of any event associated with the manufacturing of a license biological product in 20 which the safety, purity, or potency of a distributed product may be affected. Further, given that the 21 vaccine production cycle requires approximately six months from commencing preparations to 22 supplying the vaccine, resolution of this problem was critical. 23 91. In June 2004, Chiron employees from headquarters traveled to Liverpool, England, to 24 review the conditions of the Liverpool Plant. According to a former scientist in Chiron’s BioPharma 25 division who spoke to another Chiron employee who said he had been at the Liverpool Plant in June 26 2004, the Liverpool Plant was a disaster; Chiron did not put anything in place to correct any of the 27 problems; and procedures had not changed at the Plant since the problem with the polio vaccine 28 (which occurred in 2000). CONSOLIDATED AMENDED COMPLAINT FOR VIOLATIONS OF THE FEDERAL SECURITIES LAWS - 22 - CASE NO.: C-04-4293-VRW DOCS\273993v3

1 92. On July 5, 2004, Chiron generated another Non-conformance Report (#2004/1071/07) 2 which indicated that Mycoplasma growths were confirmed on Master and Working Seed batches. 3 These contaminated seed lots, again, were later used in Fluvirin monoblend batches that were 4 rejected. 5 93. From July 8, 2004 through August 2, 2004, Chiron found sterility failures in the 6 finished product, as eight filled vial lots (or approximately 4.5 million doses) out of sixty were found 7 to be contaminated with Serratia bacteria. Although Chiron’s standard of operation required the 8 Company to address the root cause, take immediate corrective action, and evaluate product impact at 9 the time of each failure, Chiron failed to do so. During this time, on July 23, 2004, Chiron shipped 10 the first million doses of Fluvirin to the U.S. market, despite its knowledge of contamination in 11 multiple lots in the finished product. The FDA later found four other monovalent batches, in 12 addition to the nine Serratia-contaminated lots, that were rejected for other sterility issues.2 13 94. Despite the contamination problems that were known, Chiron waited until late August 14 to inform the FDA of the problems. On August 25, 2004, Chiron notified the FDA that it discovered 15 Serratia marcescens bacterial contamination in eight lots of final vaccine product and told them that 16 it was investigating the problem. Serratia marcescens is considered a harmful human pathogen, and 17 has been known to cause urinary tract infections, wound infections, and pneumonia. Serratia 18 bacteria also may have antibiotic resistance properties that could become problematic if the 19 incidence of Serratia infections dramatically increases. 20 95. On August 26, 2004, Chiron publicly announced that sterility failures occurred, but 21 assured the public that it would ship safe lots (46-48 million doses) by October. 22 96. On August 27, 2004, Chiron also notified the MHRA of the contamination problem. 23 97. On September 8, 2004, another Non-Conformance Report (#2004/1625) was 24 generated because microbial action limits were reached by two Fluvirin filling operators working in

25

26 2 Certain documents indicate that there were eight contaminated lots, but other documents 27 (including the warning letter by the FDA dated December 9, 2004) indicate that there were nine contaminated lots. 28 CONSOLIDATED AMENDED COMPLAINT FOR VIOLATIONS OF THE FEDERAL SECURITIES LAWS - 23 - CASE NO.: C-04-4293-VRW DOCS\273993v3

1 the aseptic filling area, an area that was supposed to be free of pathogenic microorganisms. In 2 addition, growth of Brevibacillus brevis, Bacillus subtilis, Micrococcus spp and Gram negative rods 3 were noted at vial in-feed on the filling machine. 4 98. On September 9, 2004, another Non-Conformance Report (#2004/1632) was 5 generated because a lot was rejected due to growth of Micrococcus spp on a Fluvirin filling needle 6 swab. In addition, two alert levels with microbial growths were also identified. 7 99. On September 13 and 14, 2004, an MHRA expert, along with another inspector, 8 visited the Liverpool Plant on a fact finding mission to establish the adequacy of Chiron’s 9 investigation into the sterility failures of batches of Fluvirin. According to the memo of one of the 10 inspectors, during their walk-through of the manufacturing process, the MHRA inspectors noted a 11 number of poor aseptic practices, including “lack of cable ties on vessel rigs and filter housings,” 12 “venting of filter housings in the Grade [redacted] area” and “invalid autoclave equipment cycles.” 13 The MHRA also found “SOP’s [standard of operations] not being followed.” The MHRA also 14 found that the Company’s handling of the contamination was inadequate, and its explanations were 15 implausible. As noted by the MHRA: 16 The strategy of the Company would appear to be to treat the contamination issue of the [redacted] filled batches as one-off single point incidents during blending and that 17 these failures have no impact on any other batches. However, it was ascertained that another [redacted] had been contaminated with the same organism – Serratia 18 Marcescens (same serotype) immediately after sterile filtration which would contradict the companies [sic] position. If all batches had been contaminated during 19 the aseptic filtration process then other batches would probably be similarly affected. 20 The company claims that the batch that was found to be contaminated immediately after aseptic filtration had a different root cause than the USA batches. Whilst it is 21 possible that this is the case, as identical serotypes were found in all cases, it is probable that there is a common root cause. 22 The company position is that [redacted] for the [redacted] were initially sterile and 23 became contaminated when [redacted] the [redacted] was subsequently drawn off to blend with the other [redacted]. This would appear to be a reasonable supposition on 24 the surface but is not supported by the fact that [redacted] was found to be contaminated and had not been drawn off and by the fact that the same serotype was 25 found to be present on a regular basis in the room used for aseptic filtration but has not been found in the room for drawing of the [redacted]. The pre-filtration 26 bioburden for all affected [redacted] batches contained the same serotype. 27 The MHRA, in writing, requested that Chiron not release any batches of Fluvirin to the market 28 pending a second inspection of the Plant it scheduled for September 28 to September 31, 2004. CONSOLIDATED AMENDED COMPLAINT FOR VIOLATIONS OF THE FEDERAL SECURITIES LAWS - 24 - CASE NO.: C-04-4293-VRW DOCS\273993v3

1 100. On September 17, 2004, Rob Budge, a Chiron executive in the U.K., sent an e-mail to 2 Chiron’s U.S. vaccine executive, John Vavricka, about the retesting of the flu vaccines at the 3 Liverpool Plant. “My folks are telling me that we should be concerned about the testing,” according 4 to the e-mail. “One looks good, one not.” Budge then suggested Vavricka alert CEO Pien to the 5 mixed results. This e-mail was obtained by the Wall Street Journal after the end of the Class Period. 6 101. On September 24, 2004, Chiron submitted a draft report pertaining to the causes of 7 the contamination to the MHRA expert inspector who visited site and to MHRA’s Acting Director of 8 the Inspection and Enforcement Division. After reviewing Chiron’s draft report, the MHRA 9 concluded that the report did not address the root causes of the contamination problems being 10 experienced by the Company. 11 102. On September 27, 2004, Chiron drafted a news release stating that “internal quality- 12 assurance confirmatory testing” of its Fluvirin vaccine “failed to provide results necessary to permit 13 release of the vaccine to the market” and that Chiron would not supply any of the vaccine due to 14 “anomalies in retesting results.” This press release was not made public at the time, although it was 15 later leaked to the Wall Street Journal and United Press International in late October, after the end of 16 the Class Period. 17 103. The next day, on September 28, 2004, Chiron issued a press release stating its 18 intention to ship about 48 million flu vaccines to the U.S. – directly contradicting its draft press 19 release. 20 104. From September 28 to September 30, 2004, the MHRA conducted a “for-cause” 21 inspection of the Liverpool Plant. Among other things, MHRA inspectors found that “[b]ioburden 22 levels for the 2004 manufacturing campaign were found to be significantly higher by a number of 23 orders of magnitude compared to 2003 and 2002. These levels had been sustained from March 2004 24 to date.” MHRA inspectors also found that “[t]he number of instances of Gram negative organism 25 contamination in a critical (sterile filtration) manufacturing room has increased significantly during 26 2004.” At the time of the MHRA’s second “forensic” inspection, Pien was testifying before 27 Congress to reaffirm delivery of 48 million doses of Fluvirin. 28 CONSOLIDATED AMENDED COMPLAINT FOR VIOLATIONS OF THE FEDERAL SECURITIES LAWS - 25 - CASE NO.: C-04-4293-VRW DOCS\273993v3

1 105. On October 1, 2004, the MHRA inspectors presented their findings from the “for- 2 cause” inspection at a meeting of the Cross-Agency Vaccine Group attended by representatives from 3 various British health agencies. The inspectors listed 19 serious issues relating to microbial 4 contamination and potential for microbial contamination in flu vaccine production. At the 5 conclusion of the presentation, the inspector’s report was referred to the MHRA’s Inspection Action 6 Group. 7 106. On October 2, 2004, Chiron created another Non-Conformance Report (#2004/1852) 8 because Staphylococcus spp growth was identified on a Fluvirin needle swab and on a hand plate 9 sample of one aseptic filling room operator. Additionally, alert level growth of Staphylococcus 10 aureus/Moraxella spp was detected. 11 107. On October 4, 2004, Chiron generated another Non-Conformance Report 12 (#2004/1863) because microbial growth of Gram positive cocci were noted in the aseptic filling 13 room. 14 108. On October 4, 2004, MHRA’s Inspection Action Group met. The Group 15 recommended immediate suspension of Chiron Vaccines’ manufacturing license because of the 16 Company’s failure to comply with requirements of GMP resulting in potentially serious risk to 17 patients who receive a vaccine that may be contaminated.

18 The MHRA and the FDA Determined that Defendants Knew About the Fluvirin Contamination and Failed to Adequately 19 Investigate the Root Cause and Eliminate Potential Sources of the Contamination 20 109. On October 5, 2004, the MHRA sent a letter to Chiron stating that it was suspending 21 Chiron’s license to manufacture Fluvirin pursuant to section 28 of the Medicines Act of 1963 “on the 22 grounds that you have to a material extent contravened the provisions of the license [] by failing to 23 conduct your operations in accordance with the principles and guidelines of Good Manufacturing 24 Practice.” That same day, the MHRA issued an announcement that it was suspending Chiron’s 25 manufactures license with respect to Fluvirin due to “systematic deficiencies within the firm related 26 to sterility issues as well as a finding of contamination in some of the lots.” The MHRA’s decision 27 prevented Chiron from shipping approximately 48 million flu shots to the U.S., or about half of the 28 CONSOLIDATED AMENDED COMPLAINT FOR VIOLATIONS OF THE FEDERAL SECURITIES LAWS - 26 - CASE NO.: C-04-4293-VRW DOCS\273993v3

1 U.S.’s flu vaccine supply, in time for the 2004-2005 flu season. Later that day, a teleconference was 2 held between the FDA, Chiron and the MHRA. 3 110. On October 9, 2004, Chiron’s Fluvirin Sterility Investigation concluded that 4 inadequate aseptic technique during aseptic connections was most likely the cause of the 5 contamination of the 2004 flu vaccine. Over a year earlier, in June 2003, FDA inspectors found 6 evidence of contamination in Fluvirin vaccine, even after sterile filtration was supposed to remove 7 all bacteria, and identified the aseptic connections between tanks of vaccine and the formulation area 8 as a potential source of contamination. Further, in 2002, the MHRA noted issues with the aseptic

9 connections during its inspection. Thus, the aseptic connections, previously identified as a source 10 of potential contamination in 2002 by the MHRA and in 2003 by the FDA, were identified by both 11 Chiron and the FDA in 2004 as the likely source of the Fluvirin contamination. The FDA later 12 found no documentation that adequate corrective action was conducted by Chiron to eliminate the 13 potential contamination arising from the aseptic connections since their inspection in 2003. 14 111. From October 10 through October 15, 2004, the FDA conducted an inspection of the 15 Liverpool Plant and confirmed the findings of the MHRA, concluding that there were “deviations 16 from current good manufacturing practice” in the manufacture of Fluvirin. The FDA found, among 17 other things, that “[n]umerous Fluvirin monovalent blend pools (over 50%) manufactured between 18 March 2004 and October 2004 and used in the formulation of trivalent batches manufactured for the 19 2004 Fluvirin Campaign, greatly exceeded the bioburden alert level.” The FDA also found that 20 “[m]onovalent blend pools produced during the 2004 production campaign that have exceeded the 21 alert limit have been forward processed to final product on multiple occasions, even when bioburden 22 results have exceeded alert limit by multiple orders of magnitude.” The FDA further found that in 23 24 incidences during the 2004 Fluvirin campaign, cultures were used in egg inoculation that 24 exceeded bioburden levels, which resulted in inoculation of eggs that were used in the manufacturing 25 of Fluvirin Vaccine with high bioburden containing cultures. “Although the firm was aware that the 26 live virus inoculum contained high bioburden, the eggs/batches were not rejected but allowed to 27 continue through the manufacturing process.” 28 CONSOLIDATED AMENDED COMPLAINT FOR VIOLATIONS OF THE FEDERAL SECURITIES LAWS - 27 - CASE NO.: C-04-4293-VRW DOCS\273993v3

1 112. FDA inspectors also found that Chiron did not conduct adequate investigation, failed 2 to follow standard operating procedure following a sterility test failure, and failed to follow plans to 3 assure that Fluvirin conformed to appropriate standards of identity, strength, quality and purity. The 4 FDA also noted that Chiron failed to investigate the root cause of high levels of bioburden in certain 5 lots, and that these problems were not corrected from the 2003 inspection because they re-occurred. 6 113. After completing its inspection on October 15, 2004, the FDA announced the same 7 day that “none of the influenza vaccine manufactured by Chiron Corporation for the U.S. market is 8 safe for use.” The FDA concurred with the MHRA that Chiron violated GMP procedures, and stated 9 in a conference call that random testing found contamination in additional lots. The FDA stated that 10 it suspected contamination could have occurred during the final vial-filling process, could not assure 11 the safety of each individual vial, and could not allow them to be used in the U.S. 12 114. The FDA identified contamination by Serratia marcescens originating in three bulk 13 lots of influenza vaccine ultimately blended into nine lots of trivalent vaccine, all of which failed 14 sterility testing. In examining the production records, the FDA found that high bioburden levels 15 were found in the pre-filtration step in 83% of influenza batches made during the 2004 campaign. 16 60% of the total monovalent flu lots showed evidence of excessive levels of biological 17 contamination, with 26 of an estimated 100 lots of vaccine produced also showing evidence of 18 contamination by the presence of endotoxin. In addition to Serratia, at least six other bacterial 19 contaminants at different stages in the production process were identified, including Mycoplasma, 20 Staphlycoccus aureus, Moraxella, Bacillus and Micrococcus species. 21 MATERIALLY FALSE AND MISLEADING STATEMENTS ISSUED DURING THE CLASS PERIOD AND THE REASONS WHY THESE 22 STATEMENTS WERE FALSE AND MISLEADING WHEN MADE

23 115. As set forth above, although defendants were aware that the Liverpool Plant had a 24 history of contamination and was repeatedly cited by the FDA and British regulators for GMP 25 deficiencies, that the FDA’s June 2003 inspection found contamination at the Liverpool Plant, and 26 that at least one hundred million dollars in investment was required for remediation of the Liverpool 27 Plant, they deliberately ignored those facts. Instead, they increased production of Fluvirin by 50% in 28 CONSOLIDATED AMENDED COMPLAINT FOR VIOLATIONS OF THE FEDERAL SECURITIES LAWS - 28 - CASE NO.: C-04-4293-VRW DOCS\273993v3

1 2003 and again by another 30% in 2004, without first correcting systems and procedural problems 2 that had long plagued the Liverpool Plant, and without identifying the root cause of the earlier 3 contaminations. In doing so, defendants knew that contamination would occur in the Fluvirin 4 produced for the 2004-2005 campaign. 5 116. During the Class Period, even as defendants were aware that alert levels of bioburden 6 had been found at the Liverpool Plant and that the bioburden was being sustained at these high 7 levels, defendants continued to represent that Chiron would be able to deliver 50 million doses to the 8 U.S. market, without disclosing the problems it was having in its Liverpool Plant. During the Class 9 Period, defendants even increased their estimates of the number of Fluvirin doses they can deliver by 10 two million. 11 117. The Class Period commences on July 23, 2003. On that date, Chiron issued a press 12 release approved by Individual Defendants that reported strong growth in pro-forma income and 13 revenues for the second quarter of 2003. Commenting on the favorable results, defendant Pien 14 highlighted the prominent role that the PowderJect acquisition would play in the Company’s 15 continuing success: 16 “Chiron made several important advances that demonstrate our momentum as a global biopharmaceutical company and that will help drive growth from the 17 immediate to the long term, increasing shareholder value,” said Howard Pien, Chiron’s president and CEO. “Prominent among these was our acquisition of 18 PowderJect, which makes us the second-largest flu vaccines manufacturer worldwide and adds a U.S. complement to our strong global vaccines business. The PowderJect 19 acquisition, after integration costs, will be EPS neutral or better this year and accretive in 2004, and we are affirming our 2003 pro-forma guidance to be toward 20 the upper end of the previously stated range of $1.40 to $1.50.” 21 118. On July 23, 2003, following the issuance of this press release, Pien, Smith and other 22 top Chiron executives conducted a conference call with analysts. At the conference call, in response 23 to a question regarding the Liverpool Plant, Pien emphasized the Liverpool Plant’s capabilities and 24 its ability to satisfy the U.S. market for Fluvirin. According to Pien: 25 The physical facility is principally in (indiscernible), which is outside of Liverpool, England. It is one of two manufacturing facilities that are certified by the FDA to 26 make products for the US market. And that is one of the most important pieces of the assets that we acquired in PowderJect. And one of our highest priorities in the 27 integration efforts is to make sure that there is no disturbance to the capability of that manufacturing capability, its workhorse, its standards, its manufacturing 28 CONSOLIDATED AMENDED COMPLAINT FOR VIOLATIONS OF THE FEDERAL SECURITIES LAWS - 29 - CASE NO.: C-04-4293-VRW DOCS\273993v3

1 capabilities to be able to satisfy the US market. And that is exactly what we are doing now. And all of the signs and indications are extremely positive. 2 119. On October 29, 2003, Chiron issued a press release approved by Individual 3 Defendants announcing a “47 Percent Increase in Revenues Over 2002 Driven by New U.S. Flu 4 Sales” for the third quarter of 2003. Commenting on the results, defendant Pien highlighted 5 expected continued strong growth in 2004 for the Company, driven by its vaccine and blood testing 6 segments: 7 “Chiron continues to deliver the solid financial results that are a hallmark of the 8 company,” said Howard Pien, Chiron’s president and CEO. “Looking forward, we expect 2004 to be a year of strong growth in vaccines and blood testing, enabling 9 investment that will further enhance shareholder value and increase our impact on human health worldwide.” 10 “We reaffirm our mid-year 2003 pro-forma EPS guidance to be at the upper end of 11 the $1.40-$1.50 range. Our 2004 guidance is consistent with our 20 percent pro- forma EPS growth goal. It is a testament to the strength of the Chiron business 12 model that we can deliver superior earnings and fund worthy investment opportunities across our three business units.” 13 * * * 14 Chiron expects 2004 pro-forma earnings per share from continuing operations to 15 be between $1.80 and $1.90. In 2004, Chiron expects product sales to be between $1.5 billion and $1.6 billion, with revenues between $1.9 billion and $2.0 billion. 16 120. On October 29, 2003, Pien, Smith, Lambert and other top Chiron executives also 17 conducted a conference call with analysts. During the conference call, Pien stated that “we expect 18 2004 to be a year of solid growth for both the top and the bottom line” and that “this will translate 19 into a pro forma EPS number in the range of $1.80 to $1.90 [in fiscal 2004].” Similarly, Smith 20 reiterated that “we expect our pro forma EPS [for fiscal 2004] to be in the range of $1.80 to $1.90.” 21 During the conference call, John Lambert also stated that “We expect to see an increase in capacity 22 out of Fluvirin [for 2004].” 23 121. On January 12, 2004, Chiron issued a press release approved by Individual 24 Defendants, in which it announced delivery of additional flu vaccine to the U.S. Department of 25 Health and Human Services, bringing the number of vaccines sold by Chiron to the U.S. for the 26 2003-2004 flu season to 38 million. In a press release, defendant Pien represented that the Company 27 28 CONSOLIDATED AMENDED COMPLAINT FOR VIOLATIONS OF THE FEDERAL SECURITIES LAWS - 30 - CASE NO.: C-04-4293-VRW DOCS\273993v3

1 would increase production of Fluvirin to 50 million doses for the 2004-2005 flu season. According 2 to Pien: 3 “Chiron is committed to collaborating with government health authorities to increase levels of flu vaccination and protect more people,” said Howard Pien, Chiron’s 4 president and CEO. “For the 2004-2005 flu season, we expect to increase capacity and respond to market needs, producing approximately 50 million doses of 5 Fluvirin, most of which will reach the United States.” 6 122. On January 28, 2004, Chiron issued a press release approved by Individual 7 Defendants and containing a quote by Pien in which it announced strong growth for its fourth quarter 8 and year 2003, driven in large part by $219 million worth of sales of Fluvirin produced at the 9 Liverpool Plant following Chiron’s acquisition of PowderJect. The Fluvirin sales accounting for 10 approximately 12% of the Company’s total consolidated revenues in 2003. In the press release, 11 Chiron also stated: 12 For the 2003-2004 flu season, Chiron increased production of Fluvirin® influenza vaccine for the U.S. market by approximately 50 percent over the 2002-2003 flu 13 season. The company produced more than 40 million Fluvirin doses worldwide, including approximately 38 million doses for the U.S. market. For the 2004-2005 14 flu season, Chiron expects to increase capacity, producing approximately 50 15 million doses of Fluvirin, most of which is destined for the United States. The company has committed approximately $100 million for the expansion of its 16 manufacturing facility in Liverpool, England.

17 123. On January 28, 2004, Pien, Smith, Lambert and other top Chiron executives also held 18 a conference call with securities analysts. During the conference call, CEO Pien reiterated: 19 “Our flu virus production for the ’03 ’04 season in the U.S. represented a 50 percent increase over production of the previous season. … The next ’04 ’05 season, we 20 project that we will be able to produce approximately 50 million doses of the Fluvirin, the vast majority of which is destined for the U.S. Chiron is committing 21 approximately $100 million to our Liverpool flu vaccination manufacturing facility. The investment will allow for an incremental increase in our production, with greater 22 efficiency and greater capacity.” 23 During the conference call, John Lambert, President of Chiron Vaccines, also assured investors that 24 Chiron would be able to produce 50 million doses of Fluvirin in 2004, specifically because the FDA 25 inspection found the Liverpool Plant to be “in very good order” in 2003. According to Lambert:

26 We’re fairly confident we’re going to reach the 50 million doses level. During the time of the acquisition, we had an FDA inspection of Liverpool, which confirmed 27 that the facilities were really in very good order. We don’t expect any reinspections next year. So we’re confident of the 50 million doses this year. 28 CONSOLIDATED AMENDED COMPLAINT FOR VIOLATIONS OF THE FEDERAL SECURITIES LAWS - 31 - CASE NO.: C-04-4293-VRW DOCS\273993v3

1

2 During the conference call, CFO Smith also reaffirmed: “We have no change to our 2004 EPS 3 guidance of $1.80 to $1.90.” 4 124. On February 12, 2004, Chiron issued a press release approved by Individual 5 Defendants regarding defendant Pien’s scheduled appearance at a hearing of the U.S. House of 6 Representatives Government Reform Committee. Reiterating the Company’s commitment to 7 supplying the U.S. with flu vaccine, defendant Pien was quoted as follows in the press release: 8 In a written statement submitted to the committee, Mr. Pien discussed Chiron’s commitment to expanding flu vaccine production. Chiron projects that it will 9 produce approximately 50 million doses of Fluvirin® flu vaccine in 2004, the vast majority of which will be destined for the United States. If sufficient demand for 10 influenza vaccine exists, Chiron plans to increase its production capacity and supply of influenza vaccine to the United States even further in subsequent seasons. 11 125. During his February 12, 2004 testimony to the Committee, Pien discussed the 12 importance of the flu vaccine and discussed Chiron’s ability to increase production: 13 Over the past five years, investments of approximately $70 million in both primary 14 (bulk) and secondary (fill/finish) manufacturing have been made to increase the production capacity of the Liverpool facility. This investment has resulted in a 15 significant increase in the amount of Fluvirin supplied to the United States: The 16 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 17 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 18 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 19 production capacity and supply of influenza vaccine to the United States even further 20 beyond 2004.

21 126. The statements referenced above in ¶¶115-125, were each materially false and 22 misleading when made because they failed to disclose the following material adverse facts, among 23 others: 24 (a) The Liverpool plant producing Fluvirin had a history of problems, including 25 contaminated polio vaccines in 2000, that led to lost sales even before Chiron bought the plant in 26 July 2003. Such problems were documented and defendants knew of them or recklessly disregarded 27 them before Chiron purchased the Plant; 28 CONSOLIDATED AMENDED COMPLAINT FOR VIOLATIONS OF THE FEDERAL SECURITIES LAWS - 32 - CASE NO.: C-04-4293-VRW DOCS\273993v3

1 (b) Subsequent to the purchase of the Plant, defendants knew or recklessly 2 disregarded the Plant’s history of problems and had not developed the quality control systems 3 necessary to identify the manufacturing conditions that caused vaccine contamination and/or to take 4 the steps necessary to prevent contamination; 5 (c) The FDA previously warned that if the problems at the Liverpool Plant were 6 not corrected, that license suspension or revocation could occur without further notice; 7 (d) Defendants did not maintain the standards required for the manufacturing of 8 Fluvirin and did not make the necessary investment required to bring the Liverpool Plant up to 9 standards; 10 (e) Just one month before Chiron purchased the Liverpool Plant, FDA 11 investigators found that the Liverpool Plant had numerous GMP deficiencies, that Plant managers 12 failed to follow previous FDA directives by improperly releasing certain Fluvirin lots, that they 13 failed to adequately correct problems raised in prior FDA inspections, and that potentially lethal 14 bacteria were found at points during the production process when there should not have been any 15 bacterial growth; 16 (f) The Plant suffered from serious GMP deficiencies and was not in compliance 17 with health and safety regulations; 18 (g) At all relevant times, the foregoing deficiencies resulted in the palpable, but 19 undisclosed, risk that the Liverpool Plant would be shut down or that its license would be suspended 20 or revoked; and 21 (h) Because of these undisclosed material problems and risks, defendants’ 22 statements with respect to the Company’s performance, such as the statement that they expected to 23 sell in excess of 50 million doses of Fluvirin to the U.S. and that the Company would achieve 24 earnings per share of between $1.80 and $1.90 in 2004 in part due to sales in Fluvirin, were lacking 25 in any reasonable basis when made. 26 127. On April 6, 2004, Chiron issued its 2003 Annual Report to shareholders. The Annual 27 Report contained a letter to shareholders signed by Pien dated March 4, 2004, which stated the 28 following: CONSOLIDATED AMENDED COMPLAINT FOR VIOLATIONS OF THE FEDERAL SECURITIES LAWS - 33 - CASE NO.: C-04-4293-VRW DOCS\273993v3

1 VACCINES: THE WORLD’S SECOND-LARGEST FLU VACCINE MANUFACTURER 2 With all the early hallmarks of success, the acquisition of PowderJect has made 3 Chiron a significant player in the U.S. flu vaccine market as well as a household name. The value of the deal is reflected in Vaccines’ revenue growth: In 2003, net 4 product sales for the Vaccines business were $678 million versus $357 million for 2002. 5 The public is increasingly conscious of the value of vaccination in preventing 6 influenza. We are working to help meet that public health need. Our Fluvirin® flu vaccine production for the 2003-2004 U.S. flu season represented a 50 percent 7 increase over production the previous season. This significant accomplishment was achieved while integrating PowderJect operations and is testimony to the dedication 8 and professionalism of our employees. For the 2004-2005 flu season, we project that we will produce 50 million doses of Fluvirin, the overwhelming majority of 9 which is destined for the United States. 10 Flu vaccines will be an important driver of growth for Chiron in the near-term to midterm.… In order to fulfill the growing demand for flu vaccines, Chiron has 11 committed approximately $100 million to further develop and expand our Liverpool, England, manufacturing facility. These improvements will lead to 12 increases in our production, through greater efficiency and greater capacity. 13 128. On April 21, 2004, Chiron issued a press release approved by Individual Defendants 14 which contains a quote by Pien. The press release announced Chiron’s first quarter 2004 financial 15 results and stated that it achieved a 24% increase in pro forma revenue over the comparable 2003 16 period. The Company also stated that results for the second half of 2004 will be substantially higher 17 than second half of 2003. According to the Company: 18 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, 19 Fluvirin® influenza vaccine are heavily seasonal and are recognized primarily in the second half of the year; however, costs associated with PowderJect are incurred 20 throughout the year.

21 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 22 substantially higher than 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 23 between 75 percent and 80 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 24 to be between 80 percent and 85 percent of total earnings per share for the year.) 25 129. Following the issuance of the press release on April 21, 2004, Pien, Smith and 26 Lambert and other top Chiron executives held a conference call later that day with analysts. On the 27 conference call, Pien stated: 28 CONSOLIDATED AMENDED COMPLAINT FOR VIOLATIONS OF THE FEDERAL SECURITIES LAWS - 34 - CASE NO.: C-04-4293-VRW DOCS\273993v3

1 “We are reiterating our pro forma earnings guidance for the year of between $1.80 and $1.90 per share for 2004. … Driving our growth last year was the acquisition 2 and successful integration of PowderJect which positioned Chiron as the number two provider of flu vaccines worldwide and which provide us with exciting opportunities 3 for our future growth. … The flu vaccine business should continue to grow this year and our production for the ‘04/’05 season is now well underway. The CDC has 4 chosen the three strains for this year’s vaccine and we are comfortable that we will be able to meet our goal of producing approximately 50 million doses of Fluvirin, 5 the vast majority of which has been (inaudible) in the U.S. market.” 6 On the conference call, Lambert also stated: 7 “As you know at the start of the season, each of the manufacturers set off their (indiscernible) wondering what the yield’s going to be each year. And now getting 8 fairly well through this progress stage at the moment and by the end of April we have a certain level of confidence that there are yields we can expect so at the 9 moment we have every confidence we will reach the 50 million doses that we expect to put onto the market.” 10 130. On June 23, 2004, Chiron’s Analyst Day took place. During the event, Chiron 11 officers, including Pien, Lambert and Smith, made presentations and answered questions from a live 12 audience. During his presentation, defendant Lambert reiterated that, with respect to Fluvirin 13 production: 14 “What we’ll commit to at the moment is that when you reach this point of mid-June, 15 which is a point where you’ve received the reagents (ph) from the final stage of the manufacturing process, you could probably – well, you can be very confident in the 16 minimum quantities that you’ll be able to produce. And for Fluvirin, we’re extremely confident now that we’ll be able to produce the 50 million doses that we 17 have committed to. It’s too early to say if there’s going to be any upsides from that.” 18 131. The statements referenced above in ¶¶127-130, were each materially false and 19 misleading when made. In addition to the reasons already stated in ¶126, these statements were false 20 and misleading when made because defendants failed to disclose the following material adverse 21 facts: 22 (a) By this time, the Company already found that the monovalent blend pools 23 used in the formulation of trivalent batches for the production of Fluvirin greatly exceeded the 24 bioburden alert level to the tune of one thousand to ten million times that of 2003 levels, and that 25 these levels had been sustained since March 2004; 26 (b) By this time, the Company was already suffering from a high number of 27 unacceptably high levels of bioburden incidents, which climbed from 6-8 in 2003 to 50 in 2004; 28 CONSOLIDATED AMENDED COMPLAINT FOR VIOLATIONS OF THE FEDERAL SECURITIES LAWS - 35 - CASE NO.: C-04-4293-VRW DOCS\273993v3

1 (c) In producing Fluvirin for the 2004-2005 flu campaign, the Company 2 identified more than six different bacterial contaminants at different steps in the process, including 3 Serratia bacteria; and 4 (d) Up to 60% of production lots of Fluvirin had abnormally high levels of 5 bacterial contamination. 6 132. On July 21, 2004, Chiron issued a press release approved by Individual Defendants 7 announcing its results for the second quarter of 2004. The Company announced that because

8 revenues of Fluvirin are recognized primarily in the second half of the year, “Chiron expects that 9 earnings per share for the second half of 2004, as a proportion of earnings per share for the year, 10 will be substantially higher than they were for the second half of 2003.” In commenting on the 11 results and the condition of the Company, defendant Pien did not disclose any problems with respect 12 to the production of Fluvirin and even represented that the Company expected to deliver more 13 Fluvirin doses in 2004 than it had estimated earlier: 14 “Chiron has delivered solid financial results and made substantial progress toward completing our 2004 milestones,” said Howard Pien, Chiron’s president, chief 15 executive officer and chairman of the board. “The second half of the year will yield further progress. We expect to deliver beyond our initial estimates for the 2004- 16 2005 influenza season, bringing an additional 2 million doses of Fluvirin to the U.S. market as well as contributing to a CDC stockpile.” 17 133. On July 21, 2004, after issuing the press release, Pien, Lambert, Smith and other top 18 Chiron executives held a conference call with analysts. In the conference call, Pien reiterated: 19 “We had previously expected that we would produce 50 million doses of Fluvirin, 20 of which about 48 million doses would be shipped to the U.S. We now anticipate that for the U.S., we can deliver 50 million doses of Fluvirin during the season, 21 and furthermore we expect to produce another 2 million doses for CDC stockpile at the end of the season. This will allow the CDC to prepare for the possibility of 22 another dramatic flu season. For Chiron, all of this would represent an increase of about one-third in the number of doses over last year’s production. . . . For now, let 23 me just say that the 20 percentile growth year on year is a good indication of our strong underlying performance. I will also add that we have been and we remain 24 confident that we are on course for our 2004 guidance of $1.80 to $1.90 pro forma EPS. And certainly as the flu season in the U.S. shapes up, our confidence is even 25 more fortified.” 26 In the conference call, CFO Smith also emphasized:

27 “We made excellent progress on flu vaccine production and now expect total U.S. doses to total 50 million for the 2004-2005 season with an additional 2 million 28 doses for the CDC’s stockpile. . . . We have provided guidance that we would deliver CONSOLIDATED AMENDED COMPLAINT FOR VIOLATIONS OF THE FEDERAL SECURITIES LAWS - 36 - CASE NO.: C-04-4293-VRW DOCS\273993v3

1 pro forma earnings in the 20 to 25% range of total-year earnings for the first half of the year, and our first-half earnings confirm this as we came in on the upper end of 2 that range. We continue to affirm our full-year guidance of $1.80 to $1.90 with ever-increasing confidence as the year unfolds.” 3 134. On July 23, 2004, Chiron issued a press release approved by the Individual 4 Defendants and which contained a quote by Pien. The press release, entitled “Chiron Delivers First 5 Million Doses of Fluvirin® Influenza Vaccine to U.S. Distributors for Upcoming Influenza Season; 6 U.S. Fluvirin Supply Expected to Increase by Over a Third to 52 Million Doses,” stated in part that: 7 Chiron Corporation today announced that it has delivered the first one million doses 8 of its Fluvirin® influenza vaccine to U.S. distributors in preparation for the upcoming influenza season. The company expects to deliver a total of 52 million 9 doses of Fluvirin to the U.S. market this season through regular shipments over the next few months, including 2 million doses later in the season for a national 10 stockpile held by the U.S. Centers for Disease Controls and Prevention (CDC). This record level of supply represents an increase of more than one third compared 11 with Fluvirin deliveries during the last influenza season. 12 135. The statements referenced above in ¶¶132-134, were each materially false and 13 misleading when made. In addition to the reasons already stated in ¶¶126 and 131, these statements 14 were false and misleading when made because defendants failed to disclose that in July and August, 15 2004, the Company found contamination by Serratia bacteria in the finished Fluvirin product. Thus, 16 it would not be able to deliver 50 million doses of Fluvirin for the 2004-2005 flu season, much less 17 the additional 2 million doses for the CDC. 18 136. On August 26, 2004, Chiron announced that it would delay further shipment of 19 Fluvirin pending additional testing after internal tests identified a “small number of lots” with 20 sterility problems. The additional testing would delay the Fluvirin shipment until early October and 21 would prevent the Company from recognizing revenue from Fluvirin in the third quarter of 2004. 22 Asserting that the problem was immaterial and short-term, the Company misrepresented that it still 23 expected to meet its previously issued 2004 guidance: 24 Chiron Corporation today announced that, in conducting final internal release procedures for its Fluvirin(R) influenza virus vaccine, the company's quality systems 25 have identified a small number of lots that do not meet product sterility specifications. While ongoing internal investigations into the root cause of the 26 variance indicate no widespread issues with the manufacturing process, Chiron has delayed releasing any Fluvirin doses until it has completed additional release tests. 27 Chiron currently expects that the additional tests will delay product release until early October. Because of the delay in shipment, Chiron does not expect to record any 28 sales of Fluvirin in the third quarter of 2004. Assuming timely release of Fluvirin in CONSOLIDATED AMENDED COMPLAINT FOR VIOLATIONS OF THE FEDERAL SECURITIES LAWS - 37 - CASE NO.: C-04-4293-VRW DOCS\273993v3

1 October, Chiron expects to be within the range of its previous full-year 2004 pro- forma earnings guidance of $1.80-$1.90 per share but at the low end of this range 2 (a range of $1.50-$1.60 per share on a GAAP basis).… 3 “Chiron is committed to protecting people. These extra checks will ensure that the quality, safety and effectiveness of our product meet our rigorous standards,” said 4 John Lambert, president of Chiron Vaccines. “In our role as a key supplier of an important public health product, we are working with the FDA, the U.S. Department 5 of Health and Human Services, and the CDC to meet the projected demand for the upcoming influenza season. We currently expect Fluvirin doses to be available in 6 early October, in time to meet public health needs for this influenza season, and we expect to provide even more Fluvirin doses this season than last season.” 7 In July, Chiron announced that it was on track to deliver an estimated total 50 million 8 doses of Fluvirin to the U.S. market this season, an increase from earlier projections, and that it had delivered its first 1 million doses to U.S. distributors. Assuming 9 satisfactory results from ongoing release testing, Chiron now expects to deliver between 46 and 48 million Fluvirin doses to the U.S. market beginning in October. 10 … The planned late-season delivery of 2 million Fluvirin doses for a national stockpile held by the U.S. Centers for Disease Control and Prevention (CDC), not 11 included in the totals above, remains on schedule. 12 137. The Company’s announcement caused Chiron’s stock price to drop from $47.49 per 13 share on August 26, 2004 to $43.41 per share on August 27, 2004. However, the seriousness of the 14 problems at the Liverpool plant and the negative impact that they would have on the Company were 15 still being concealed by defendants, who downplayed the problem, characterizing it as an 16 immaterial, short-term issue that would not impact the Company’s 2004 financial results. 17 Accordingly, Chiron’s stock price remained artificially inflated. 18 138. On September 28, 2004, Chiron issued a press release approved by Individual 19 Defendants entitled “Chiron to Testify Today to the Value of Influenza Vaccination Before U.S. 20 Senate Special Committee on Aging.” The press release stated in part: 21 Mr. Pien will [] reiterate Chiron’s expectation, as stated in the company’s August 26, 2004, press release, that it will supply between 46 million and 48 million 22 Fluvirin® influenza virus vaccine doses to the U.S. market for the 2004-2005 influenza season, beginning in early October. The planned late-season delivery of 23 2 million Fluvirin doses for a national stockpile held by the U.S. Centers for 24 Disease Control and Prevention (CDC), not included in the totals above, remains on schedule as well. Since its August announcement, Chiron has worked closely 25 with government agencies to keep them informed of its retesting process. The results of the confirmatory testing to date are consistent with the company’s 26 shipping expectations. Following compilation and formal sign-off of its testing data, Chiron expects to complete its discussions with regulatory authorities and proceed 27 with releasing Fluvirin to the U.S. market in early October. 28 CONSOLIDATED AMENDED COMPLAINT FOR VIOLATIONS OF THE FEDERAL SECURITIES LAWS - 38 - CASE NO.: C-04-4293-VRW DOCS\273993v3

1 139. In the hearing before the Senate Special Committee on Aging on September 28, 2004, 2 Pien stated the following: 3 On August 26th, Chiron Vaccines announced that in conducting final internal release procedures for its Fluvirin influenza virus vaccine, our quality systems identified a 4 small number of lots that did not meet product sterility specifications. Chiron therefore announced that it had delayed releasing any Fluvirin doses until it had 5 completed additional release tests, a process that will delay release until October. As of September 27th, it remains Chiron’s expectation that between 46 million and 48 6 million Fluvirin doses will be delivered to the U.S. market beginning in early October as compared to the 50 million doses projected in July. … The planned 7 late-season delivery of 2 million Fluvirin doses for a national stockpile held by the U.S. Centers for Disease Control and Prevention (CDC), not included in the totals 8 above, remains on schedule. The results of the tests are entirely in line with the company’s expectations that the variance was confined to the initial scope 9 identified. Following compilation and formal sign-off of test data, Chiron expects to report its conclusions to regulatory authorities and, upon confirmation, proceed with 10 releasing Fluvirin to the U.S. market in early October. 11 * * * It is important to note that the 46-48 million doses of Fluvirin projected for delivery 12 during the 2004/05 influenza season represents an increase of more than 25% 13 compared to the amount of influenza vaccine Chiron supplied to the United States last season. … [D]espite the delay in availability of Fluvirin, it does not appear that 14 there will be a shortage of influenza vaccine this season as manufacturers will be supplying the United States with 13 million doses more than last year. 15 140. In the September 28, 2004 Senate Special Committee on Aging, Pien also reaffirmed 16 that Fluvirin delivery would be on schedule and that the Fluvirin would be safe. According to Pien: 17 Chiron reiterates our expectation that we can deliver between 46 and 48 million 18 doses of flu vaccine this season, as we previously announced. We expect to make an announcement on our shipment times in the next few days. We profoundly regret 19 that we have caused uncertainties in this year’s flu vaccine supply; however, when considering all of the dimensions of our responsibility as a vaccine supplier, we 20 ultimately place the heaviest weight on the preservation of the trust of Americans that when they get the flu shot, the product is safe. This is the reason that we have 21 been deliberate, thorough and extremely careful.

22 141. The statements referenced above in ¶¶136-140, were each materially false and 23 misleading when made. In addition to the reasons already stated in ¶¶126, 131 and 135, these 24 statements were false and misleading when made because, contrary to defendants’ representations, 25 defendants knew the problems at the Liverpool Plant were serious, that internal investigations 26 indicated that there were widespread issues with the manufacturing process, and that such problems 27 would prevent the Company from delivering any Fluvirin for the 2004-2005 flu season. Defendants 28 knew, contrary to their representation, Chiron would not be able to supply between 46 million and CONSOLIDATED AMENDED COMPLAINT FOR VIOLATIONS OF THE FEDERAL SECURITIES LAWS - 39 - CASE NO.: C-04-4293-VRW DOCS\273993v3

1 48 million Fluvirin influenza virus vaccine doses to the U.S. market for the 2004-2005 flu season 2 because of the extent of the contamination. Indeed, according to an internal corporate e-mail dated 3 September 17, 2004 by Rob Budge, a Chiron executive in the U.K. to John Vavrika, a Chiron 4 vaccine executive in the U.S., discussing the retesting of Chiron vaccines, Budge stated: “My folks

5 are telling me that we should be concerned about the testing.” Additionally, on September 27, 2004, 6 the day before Chiron’s press release and Pien’s testimony reaffirming Chiron’s shipment of about 7 48 million doses of flu vaccine, Chiron prepared a draft press release that was not published which 8 indicated that the Company knew Fluvirin could not be shipped. According to the draft press 9 release, “anomalies in retesting results” and “internal quality-assurance confirmatory testing” of its 10 Fluvirin vaccine “failed to provide results necessary to permit release of the vaccine to the market.” 11 Further, British inspectors had already found unacceptable conditions at the Liverpool Plant in early 12 September, were unsatisfied with Chiron’s draft report regarding the causes of the contamination, 13 and were, as of the date of Pien’s Congressional testimony on September 28, 2004, conducting a 14 second “for-cause” inspection of the Liverpool Plant which resulted in license suspension.

15 THE TRUTH BEGINS TO EMERGE 16 142. On October 5, 2004, Chiron announced that the MHRA “has today temporarily 17 suspended the company's license to manufacture Fluvirin® influenza virus vaccine in its Liverpool 18 facility, preventing the company from releasing any of the product during the 2004-2005 influenza 19 season.” According to the Company’s press release, the MHRA shut the plant down after

20 determining that it did not comply with UK Good Manufacturing Practices. The Company also 21 announces it would not meet its guidance for 2004, and slashed its expected earnings by more than 22 half: 23 As Chiron conducted its internal quality assurance confirmatory testing in recent weeks, MHRA, in its capacity as the Liverpool production facility's local regulatory 24 authority, reviewed the test data and the manufacturing processes at the facility. As noted in the company's September 28, 2004, press release, Chiron anticipated that the 25 regulatory review process would be satisfactorily completed in time to allow release of Fluvirin in early October. However, MHRA has asserted that Chiron's 26 manufacturing process does not comply with UK Good Manufacturing Practices regulations and has suspended the company's Liverpool facility license to 27 manufacture influenza vaccine for three months. Chiron has initiated discussions with the MHRA to determine the appropriate corrective actions. 28 CONSOLIDATED AMENDED COMPLAINT FOR VIOLATIONS OF THE FEDERAL SECURITIES LAWS - 40 - CASE NO.: C-04-4293-VRW DOCS\273993v3

1 As a result of the license suspension, Chiron does not expect to record any sales of Fluvirin for the 2004-2005 season. Chiron disaffirms its previous full-year 2004 2 pro-forma earnings guidance of $1.80-$1.90 per share (a range of $1.50-$1.60 per share on a GAAP basis), including its August 2004 guidance of being in the low 3 end of this range. Chiron currently expects pro-forma and GAAP earnings per share to be negatively affected by a range of $1.10-$1.15 as a result of today's 4 announcement. Chiron currently expects full-year 2004 pro-forma earnings of between $0.70-$0.80 per share (a range of $0.35-$0.45 per share on a GAAP 5 basis). 6 143. In reaction to defendants’ belated, October 5, 2004 disclosure, the price of Chiron 7 common stock plummeted, from a closing price of $45.42 per share on October 4, 2004, to a closing 8 price of $37.98 per share on October 5, 2004, a one day drop of 16.3% on unusually heavy trading 9 volume of over 25 million shares. Chiron stock traded as low as $29.00 on October 5. 10 144. Following the disclosure, several investment analysts cut their ratings on Chiron stock 11 while others revised their earnings projections and stock price targets. Standard & Poor’s, a credit 12 ratings agency, placed Chiron on Creditwatch with negative implications. According to David Lugg, 13 an S&P Credit analyst, “The effect on 2004 financial measures will be dramatic, as flu vaccines 14 contributed about 20% of 2003 sales and a higher proportion of earnings.” Moody’s, another credit 15 agency, also later cut Chiron’s ratings on its corporate debt to Baa2 from Baa1 because of free cash 16 flow erosion due to loss of Fluvirin sales in 2004 and the fact that the Liverpool Plant problem may 17 hurt Fluvirin sales in 2005.

18 POST-CLASS PERIOD EVENTS 19 145. Chiron’s problem sparked widespread fears of a flu pandemic in the U.S., where

20 thousands of companies were forced to cut vaccine dispensation programs as a result of Chiron’s 21 inability to provide the more than 50 million doses. Chiron had been expected to provide 22 approximately half of the overall U.S. demand. 23 146. Numerous articles reported that problems at Chiron’s plant had been documented 24 since at least 2000. For example, On October 7, 2004, The Financial Times, a British daily 25 newspaper, reported that “In 2000 the Department of Health was forced to withdraw an oral polio 26 vaccine after concerns about contamination at the plant, and [FDA] investigators had expressed 27 concern about the conditions at the plant, which manufactured vaccines for tuberculosis and tetanus 28 as well as flu.” In the same vein, an October 7, 2004 article in The New York Times reported that CONSOLIDATED AMENDED COMPLAINT FOR VIOLATIONS OF THE FEDERAL SECURITIES LAWS - 41 - CASE NO.: C-04-4293-VRW DOCS\273993v3

1 “British health officials said Wednesday that their United States counterparts were aware of 2 problems at the Liverpool plant long before the British government revoked [Chiron’s] license to 3 make flu vaccine.” Similarly, an October 11, 2004 Wall Street Journal article reported that the 4 FDA, in June 2003, documented “systemic quality-control issues” that made it unlikely that 5 problems would be identified and fixed in the early stages: 6 Federal regulators said an inspection of Chiron Corp.’s flu-vaccine plant in England last year turned up manufacturing problems similar to those that led British 7 authorities to shut down the facility last week. 8 U.S. Food and Drug Administration officials documented what they called “deviations” from good manufacturing standards at Chiron’s Liverpool plant in June 9 2003. John Taylor, the FDA’s associate commissioner for regulatory affairs, said “systemic quality-control issues” led inspectors to conclude that Chiron wouldn’t 10 necessarily be able to discover problems, identify the root cause and take steps to prevent similar issues from arising again. 11 147. On October 12, 2004, Chiron received a grand jury subpoena from the U.S. 12 Attorney’s office for the Southern District of New York, seeking documents and materials relating to 13 Chiron’s Fluvirin vaccine and U.K. regulators’ decision to suspend Chiron's license to manufacture 14 the vaccine. 15 148. On October 13, 2004, The Wall Street Journal on its website reported that the SEC 16 initiated an informal investigation into whether Chiron “failed to adequately disclose the extent of 17 problems at the Liverpool, England facility that made its influenza vaccines,” citing an unidentified 18 person familiar with knowledge of the probe. 19 149. On October 15, 2004, after conducting an inspection of the Liverpool Plant, the FDA 20 agreed with the MHRA that “none of the influenza vaccine manufactured by Chiron Corporation for 21 the U.S. market is safe for use.” 22 150. On October 20, 2004, Chiron announced that it recorded no Fluvirin sales in third 23 quarter 2004 as a result of MHRA’s suspension of its license to manufacture the vaccine in the 24 Liverpool Plant. The entire Fluvirin vaccine inventory was written off in third quarter 2004, 25 resulting in a $91 million charge to cost-of-sales line, which reduced Chiron’s earnings per share by 26 $0.36. For third quarter 2004, the Company reported pro forma income of $49 million, or $0.26 per 27 share (or income of $24 million, or $0.13 per share, on GAAP basis). 28 CONSOLIDATED AMENDED COMPLAINT FOR VIOLATIONS OF THE FEDERAL SECURITIES LAWS - 42 - CASE NO.: C-04-4293-VRW DOCS\273993v3

1 151. In November 2004, the U.S. House of Representatives Committee on Energy and 2 Commerce notified Chiron that it was conducting an investigation into the license suspension. 3 152. In or around November 2005, Andy Sneddon, the head of Manufacturing and site 4 director of the Liverpool Plant, along with other senior managers of the Plant, left the Company. 5 153. The manufacturing procedures at the Liverpool Plant were so deficient that, on 6 December 7, 2004, the MHRA continued the suspension of Chiron’s license to manufacture Fluvirin 7 at the Liverpool Plant for another three months, effective January 4, 2005. 8 154. On December 9, 2004, following an inspection that took place from October 10 9 through October 15, the FDA issued a warning letter to Chiron in connection with the numerous 10 GMP deficiencies of the Liverpool Plant. The FDA’s warning letter, which was addressed to Pien 11 and which copied Lambert and Andy Sneddon (the Liverpool Plant site director), stated: “It is your 12 responsibility as management to assure that your establishment is in compliance with the provisions 13 of the FD&C Act, PHS Act, and applicable federal regulations.” 14 155. On January 26, 2005, Chiron announced that it also recorded no Fluvirin vaccine 15 sales for the fourth quarters of 2004. The loss of Fluvirin devastated the Company as it reported loss 16 of $0.04 per shares compared to earnings of $0.29 in fourth quarter 2003. 17 156. On February 11, 2005, Chiron announced that the SEC began a formal investigation 18 of the Company for potential violations of federal securities laws. The investigation was previously 19 an informal investigation. 20 157. On February 17, 2005, Chiron’s Compensation Committee decided that, based on 21 Chiron’s overall performance for 2004, defendant Pien should not receive a variable cash 22 compensation award. 23 158. On February 23, 2005, Chiron appointed Jack Goldstein to the additional post of 24 President, replacing defendant Pien in that position. 25 159. On February 28, 2005, defendant Lambert was forced to terminate his employment 26 with Chiron, and was paid about $1.72 million in severance. 27 28 CONSOLIDATED AMENDED COMPLAINT FOR VIOLATIONS OF THE FEDERAL SECURITIES LAWS - 43 - CASE NO.: C-04-4293-VRW DOCS\273993v3

1 ADDITIONAL SCIENTER ALLEGATIONS 2 160. As alleged herein, defendants acted with scienter in that defendants knew that the 3 public documents and statements issued or disseminated were materially false and misleading when 4 made; knew that such statements or documents would be issued or disseminated to the investing 5 public; and knowingly and substantially participated or acquiesced in the issuance or dissemination 6 of such statements or documents as primary violations of the federal securities laws. 7 161. During the Class Period, defendants were motivated to defraud the investing public in 8 order to increase their compensation under Chiron’s Annual Incentive Plan, which provided for 9 bonuses to executive officers based on revenue and earnings per share growth over the previous year 10 and on meeting significant milestones. Under the Annual Incentive Plan, defendant Pien would 11 receive an annual bonus equal to 100% of his base salary if the targeted level of performance is 12 satisfied, with a maximum bonus of 200% if the performance substantially exceeds the targeted 13 level. Defendant Lambert was entitled to receive a cash bonus equal to 60% of his base salary if the 14 targeted level of performance was satisfied, with a maximum bonus of 120%. Defendant Smith was 15 also entitled to receive a cash bonus equal to up to 60% of his base salary if he met the targeted level 16 of performance. Each of these defendants made false and misleading statements in order to meet 17 performance targets so that they would be rewarded with larger bonuses and compensation. After 18 the adverse facts were disclosed, however, Lambert received no bonus and was forced to resign, and 19 Pien received no bonus. 20 162. During the Class Period, defendants were also motivated to make false statements 21 about Fluvirin and the Company’s business in order to enable Chiron to successfully sell hundreds of 22 millions in debentures. Indeed, on July 30, 2003, just weeks after the Company closed its 23 acquisition of PowderJect, Chiron raised $450 million through an offering of convertible debentures 24 and an additional $50 million from the exercise of options granted to underwriters to purchase 25 additional convertible debentures. On June 22, 2004, Chiron also sold $385 million in debenture. 26 Altogether, Chiron was able to raise approximately $885 million during the Class Period as a result 27 of defendants’ false and misleading statements. Following disclosure of the news regarding 28 MHRA’s suspension of Chiron’s license to produce Fluvirin, Standard & Poor’s, a credit agency, CONSOLIDATED AMENDED COMPLAINT FOR VIOLATIONS OF THE FEDERAL SECURITIES LAWS - 44 - CASE NO.: C-04-4293-VRW DOCS\273993v3

1 indicated that it was reviewing Chiron’s corporate credit rating for a possible downgrade and 2 Moody’s cut Chiron’s ratings for corporate debt to Baa2 from Baa1. 3 163. At all relevant times during the Class Period, defendants were fully apprised of the 4 problems involving Chiron’s Liverpool Plant. The Individual Defendants were senior officers of the 5 Company, and were privy to confidential information about the Company, including with regards to 6 Fluvirin production. Each of these defendants discussed the Fluvirin issue with employees, received 7 reports, e-mails and other correspondence concerning the issue, and attended meetings where this 8 issue was discussed. They also received and reviewed the due diligence information about the 9 PowderJect Acquisition which included the information about past regulatory problems and 10 deficiencies at the Liverpool Plant, which continued through the acquisition. 11 164. Each of these defendants was also involved in the issuance of public statements about 12 the Company through press releases, conference calls, shareholder communications, presentations, 13 Congressional testimony, statements to the news media and filings with the SEC. Defendants 14 reviewed these public statements prior to their issuance, and had the ability to prevent their issuance 15 or cause them to be corrected. Each of the Individual Defendants made extensive statements to the 16 public. 17 165. Throughout the Class Period, defendants were responsible for ensuring that the 18 Liverpool Plant was in compliance with GMP and were aware of the Plant’s contamination 19 problems.” Defendants Lambert and Smith and other top ranking Chiron officers attended a 20 presentation in Chiron’s headquarters made by the due diligence team after it returned from the 21 Liverpool Plant, and each of them were made aware that the Liverpool Plant did not conform to 22 GMP standards and that, in order to bring the Liverpool Plant up to the standards, it required a one 23 hundred million dollar investment for remediation – which was not made. Although during the 24 Class Period the Company announced that it planned to make an approximately one hundred million 25 dollar investment, the investment was not for remediation of the existing Liverpool Plant, but rather 26 to build an adjacent plant in order to further expand production capacity. Through June 30, 2004, 27 the Company spent just $6.3 million of the $97 million approved by the Board for the new plant. 28 CONSOLIDATED AMENDED COMPLAINT FOR VIOLATIONS OF THE FEDERAL SECURITIES LAWS - 45 - CASE NO.: C-04-4293-VRW DOCS\273993v3

1 166. Throughout the Class Period, defendant Pien also knew about the Liverpool Plant’s 2 contamination problems and the fact that it was not in compliance with GMP in the production of 3 Fluvirin. Pien had access to reports, including due diligence reports, about the Liverpool Plant, and 4 communicated with and received information from Peter Calcott, Chiron’s head of Corporate 5 Quality Assurance, John Lambert, the President of Chiron Vaccines, and Luciano Nencioni, in 6 charge of regulatory in Vaccines, regarding the Liverpool Plant. When Pien became CEO in March, 7 2003, he was apprised of the condition of the Liverpool Plant and the need for an investment of one 8 hundred million in remediation. Pien himself told the Contra Costa Times in 2003 that he “was very 9 much part of the decision” to buy PowderJect. Additionally, prior to Pien becoming the CEO of 10 Chiron, he was in the pharmaceuticals industry, and was well aware of the importance of GMP. In 11 particular, Pien had been a top executive at GlaxoSmithKline since 1991, and had extensive 12 knowledge regarding the vaccine business. Also, GlaxoSmithKline owned the Liverpool Plant 13 before it was sold to Medeva, and Pien was well aware of the problems at the Plant when he became 14 CEO of Chiron. Further, based on his experience in the industry, Pien was aware that it was 15 dangerous to increase production when a manufacturing plant had already been cited for 16 contamination and GMP issues. Because the Liverpool Plant already suffered from serious GMP 17 deficiencies and contamination was found in certain points of the Fluvirin production before it was 18 even acquired by Chiron, Pien knew that substantially increasing production of Fluvirin would 19 aggravate the problems and lead to contamination in the expanded production of the final product. 20 167. As set forth above, Lambert participated during the presentation by Chiron’s due 21 diligence team and knew about the remediation required of the Plant. Further, Lambert, who was 22 based at Chiron Vaccines in Oxford, England, was an hour’s drive away from the Liverpool Plant, 23 visited the Liverpool Plant and acquired first hand knowledge of its GMP deficiencies directly. 24 According to various former employees who worked in the Liverpool Plant, Lambert made several 25 visits to the Liverpool Plant, including a visit in April or May 2003 and another in or about 26 September 2003. Because Lambert was physically present at the Liverpool Plant, he could see that 27 the Company did not follow GMP in manufacturing Fluvirin. Also, Lambert, as the president of 28 Chiron Vaccines, was made aware of the issues involving the Liverpool Plant and Fluvirin CONSOLIDATED AMENDED COMPLAINT FOR VIOLATIONS OF THE FEDERAL SECURITIES LAWS - 46 - CASE NO.: C-04-4293-VRW DOCS\273993v3

1 production, as numerous employees at the Plant, including Andy Sneddon, the Site Director of the 2 Liverpool Plant, reported them to him. Sneddon was the same person who discussed the GMP 3 deficiencies and contamination problems in 2003 with the FDA. 4 168. Later on during the Class Period, as extremely high levels of bioburden were found 5 and were sustained, and led up to contamination in the final Fluvirin vials, defendants continued 6 making false and misleading statements about the production and delivery of Fluvirin and the 7 expected positive impact on the Company’s financial results. Despite the fact that contamination in 8 the final product was found as early as July 8, defendants did not notify regulators and the public 9 about this until late August, 2004. Indeed, even as Pien was testifying about Fluvirin in Congress, 10 defendants were aware that British authorities were conducting a second inspection of the Liverpool 11 Plant after finding unsatisfactory conditions the first time.

12 APPLICABILITY OF PRESUMPTION OF RELIANCE: FRAUD-ON-THE-MARKET DOCTRINE 13 169. At all relevant times, the market for Chiron’s securities was an efficient market for 14 the following reasons, among others: 15 (a) Chiron’s stock met the requirements for listing, and was listed and actively 16 traded on the NASDAQ, a highly efficient and automated market; 17 (b) As a regulated issuer, Chiron filed periodic public reports with the SEC and 18 the NASDAQ; 19 (c) Chiron regularly communicated with public investors via established market 20 communication mechanisms, including through regular disseminations of press releases on the 21 national circuits of major newswire services and through other wide-ranging public disclosures, such 22 as communications with the financial press and other similar reporting services; and 23 (d) Chiron was followed by several securities analysts employed by major 24 brokerage firms who wrote reports, which were distributed to the sales force and certain customers 25 of their respective brokerage firms. Each of these reports was publicly available and entered the 26 public marketplace. 27 28 CONSOLIDATED AMENDED COMPLAINT FOR VIOLATIONS OF THE FEDERAL SECURITIES LAWS - 47 - CASE NO.: C-04-4293-VRW DOCS\273993v3

1 170. As a result of the foregoing, the market for Chiron’s securities promptly digested 2 current information regarding Chiron from all publicly available sources and reflected such 3 information in Chiron’s stock price. Under these circumstances, all purchasers of Chiron’s securities 4 during the Class Period suffered similar injury through their purchase of Chiron’s securities at 5 artificially inflated prices and a presumption of reliance applies.

6 NO SAFE HARBOR 7 171. The statutory safe harbor, provided for forward-looking statements under certain 8 circumstances, does not apply to any of the allegedly false statements pleaded in this complaint. 9 Many of the specific statements pleaded herein were not identified as "forward-looking statements" 10 when made. To the extent there were any forward-looking statements, there were no meaningful 11 cautionary statements identifying important factors that could cause actual results to differ materially 12 from those in the purportedly forward-looking statements. Alternatively, to the extent that the 13 statutory safe harbor does apply to any forward-looking statements pleaded herein, defendants are 14 liable for those false forward-looking statements because at the time each of those forward-looking 15 statements was made, the particular speaker knew that the particular forward-looking statement was 16 false, and/or the forward-looking statement was authorized and/or approved by an executive officer 17 of Chiron who knew that those statements were false when made.

18 COUNT I Violation Of Section 10(b) Of 19 The Exchange Act And Rule 10b-5 Promulgated Thereunder Against All Defendants 20 172. Plaintiff repeats and realleges each and every allegation contained above as if fully set 21 forth herein. 22 173. During the Class Period, Chiron and the Individual Defendants, and each of them, 23 carried out a plan, scheme and course of conduct which was intended to and, throughout the Class 24 Period, did: (a) deceive the investing public, including plaintiff and other Class members, as alleged 25 herein; (b) artificially inflate and maintain the market price of Chiron’s securities; and (c) cause 26 plaintiff and other members of the Class to purchase Chiron’s securities at artificially inflated prices. 27 28 CONSOLIDATED AMENDED COMPLAINT FOR VIOLATIONS OF THE FEDERAL SECURITIES LAWS - 48 - CASE NO.: C-04-4293-VRW DOCS\273993v3

1 In furtherance of this unlawful scheme, plan and course of conduct, defendants, and each of them, 2 took the actions set forth herein. 3 174. Defendants (a) employed devices, schemes, and artifices to defraud; (b) made untrue 4 statements of material fact and/or omitted to state material facts necessary to make the statements not 5 misleading; and (c) engaged in acts, practices, and a course of business which operated as a fraud 6 and deceit upon the purchasers of the Company's securities in an effort to maintain artificially high 7 market prices for Chiron’s securities in violation of Section 10(b) of the Exchange Act and Rule 8 10b-5. All defendants are sued either as primary participants in the wrongful and illegal conduct 9 charged herein or as controlling persons as alleged below. 10 175. In addition to the duties of full disclosure imposed on defendants as a result of their 11 making of affirmative statements and reports, or participation in the making of affirmative 12 statements and reports to the investing public, defendants had a duty to promptly disseminate truthful 13 information that would be material to investors in compliance with the integrated disclosure 14 provisions of the SEC as embodied in SEC Regulation S-X (17 C.F.R. Sections 210.01 et seq.) and 15 Regulation S-K (17 C.F.R. Sections 229.10 et seq.) and other SEC regulations, including accurate 16 and truthful information with respect to the Company's operations, financial condition and earnings 17 so that the market price of the Company's securities would be based on truthful, complete and 18 accurate information. 19 176. Chiron and the Individual Defendants, individually and in concert, directly and 20 indirectly, by the use, means or instrumentalities of interstate commerce and/or of the mails, engaged 21 and participated in a continuous course of conduct to conceal adverse material information about the 22 business, operations and future prospects of Chiron as specified herein. 23 177. These defendants employed devices, schemes and artifices to defraud, while in 24 possession of material adverse non-public information and engaged in acts, practices, and a course of 25 conduct as alleged herein in an effort to assure investors of Chiron’s value and performance and 26 continued substantial growth, which included the making of, or the participation in the making of, 27 untrue statements of material facts and omitting to state material facts necessary in order to make the 28 statements made about Chiron and its business operations and future prospects in the light of the CONSOLIDATED AMENDED COMPLAINT FOR VIOLATIONS OF THE FEDERAL SECURITIES LAWS - 49 - CASE NO.: C-04-4293-VRW DOCS\273993v3

1 circumstances under which they were made, not misleading, as set forth more particularly herein, 2 and engaged in transactions, practices and a course of business which operated as a fraud and deceit 3 upon the purchasers of Chiron’s securities during the Class Period. 4 178. The Individual Defendants’ primary liability, and controlling person liability, arises 5 from the following facts: (a) the Individual Defendants were high-level executives and/or directors at 6 the Company during the Class Period; (b) the Individual Defendants were privy to and participated 7 in the creation, development and reporting of the Company's internal budgets, plans, projections 8 and/or reports; and (c) the Individual Defendants were aware of the Company's dissemination of 9 information to the investing public which they knew or recklessly disregarded was materially false 10 and misleading. 11 179. The defendants had actual knowledge of the misrepresentations and omissions of 12 material facts set forth herein, or acted with reckless disregard for the truth in that they failed to 13 ascertain and to disclose such facts, even though such facts were available to them. Such defendants' 14 material misrepresentations and/or omissions were done knowingly or recklessly and for the purpose 15 and effect of concealing Chiron’s operating condition and future business prospects from the 16 investing public and supporting the artificially inflated price of its securities. As demonstrated by 17 defendants' overstatements and misstatements of the Company's business, operations and earnings 18 throughout the Class Period, defendants, if they did not have actual knowledge of the 19 misrepresentations and omissions alleged, were reckless in failing to obtain such knowledge by 20 deliberately refraining from taking those steps necessary to discover whether those statements were 21 false or misleading. 22 180. As a result of the dissemination of the materially false and misleading information 23 and failure to disclose material facts, as set forth above, the market price of Chiron’s securities was 24 artificially inflated during the Class Period. In ignorance of the fact that market prices of Chiron’s 25 publicly-traded securities were artificially inflated, and relying directly or indirectly on the false and 26 misleading statements made by defendants, or upon the integrity of the market in which the 27 securities trade, and/or on the absence of material adverse information that was known to or 28 recklessly disregarded by defendants but not disclosed in public statements by defendants during the CONSOLIDATED AMENDED COMPLAINT FOR VIOLATIONS OF THE FEDERAL SECURITIES LAWS - 50 - CASE NO.: C-04-4293-VRW DOCS\273993v3

1 Class Period, plaintiff and the other members of the Class acquired Chiron securities during the 2 Class Period at artificially high prices and were damaged thereby. 3 181. At the time of said misrepresentations and omissions, plaintiff and other members of 4 the Class were ignorant of their falsity, and believed them to be true. Had plaintiff and the other 5 members of the Class and the marketplace known of the true financial condition and business 6 prospects of Chiron which were not disclosed by defendants, plaintiff and other members of the 7 Class would not have purchased or otherwise acquired their Chiron securities, or, if they had 8 acquired such securities during the Class Period, they would not have done so at the artificially 9 inflated prices which they paid. 10 182. By virtue of the foregoing, defendants have violated Section 10(b) of the Exchange 11 Act, and Rule 10b-5 promulgated thereunder. 12 183. As a direct and proximate result of defendants' wrongful conduct, plaintiff and the 13 other members of the Class suffered damages in connection with their respective purchases and sales 14 of the Company's securities during the Class Period.

15 COUNT II Violation Of Section 20(a) Of 16 The Exchange Act Against the Individual Defendants 17 184. Plaintiff repeats and realleges each and every allegation contained above as if fully set 18 forth herein. 19 185. The Individual Defendants acted as controlling persons of Chiron within the meaning 20 of Section 20(a) of the Exchange Act as alleged herein. By virtue of their high-level positions, and 21 their ownership and contractual rights, participation in and/or awareness of the Company's 22 operations and/or intimate knowledge of the statements filed by the Company with the SEC and 23 disseminated to the investing public, the Individual Defendants had the power to influence and 24 control and did influence and control, directly or indirectly, the decision-making of the Company, 25 including the content and dissemination of the various statements which plaintiff contends are false 26 and misleading. The Individual Defendants were provided with or had unlimited access to copies of 27 the Company's reports, press releases, public filings and other statements alleged by plaintiff to be 28 CONSOLIDATED AMENDED COMPLAINT FOR VIOLATIONS OF THE FEDERAL SECURITIES LAWS - 51 - CASE NO.: C-04-4293-VRW DOCS\273993v3

1 misleading prior to and/or shortly after these statements were issued and had the ability to prevent 2 the issuance of the statements or cause the statements to be corrected. 3 186. In particular, the Individual Defendants had direct and supervisory involvement in the 4 day-to-day operations of the Company and, therefore, are presumed to have had the power to control 5 or influence the particular transactions giving rise to the securities violations as alleged herein, and 6 exercised the same. 7 187. As set forth above, Chiron and the Individual Defendants each violated Section 10(b) 8 and Rule 10b-5 by their acts and omissions as alleged in this Complaint. By virtue of their positions 9 each as a controlling person, the Individual Defendants are liable pursuant to Section 20(a) of the 10 Exchange Act. As a direct and proximate result of Chiron’s and the Individual Defendants’ 11 wrongful conduct, plaintiff and other members of the Class suffered damages in connection with 12 their purchases of the Company's securities during the Class Period.

13 PRAYER FOR RELIEF 14 WHEREFORE, plaintiff prays for relief and judgment, as follows: 15 A. Determining that this action is a proper class action, certifying plaintiff as class 16 representative under Rule 23 of the Federal Rules of Civil Procedure and plaintiff' counsel as class 17 counsel; 18 B. Awarding compensatory damages in favor of plaintiff and the other Class members 19 against all defendants, jointly and severally, for all damages sustained as a result of defendants'

20 wrongdoing, in an amount to be proven at trial, including interest thereon; 21 C. Awarding plaintiff and the Class their reasonable costs and expenses incurred in this 22 action, including counsel fees and expert fees; and 23 D. Such other and further relief as the Court may deem just and proper. 24 25 26 27 28 CONSOLIDATED AMENDED COMPLAINT FOR VIOLATIONS OF THE FEDERAL SECURITIES LAWS - 52 - CASE NO.: C-04-4293-VRW DOCS\273993v3

1 JURY TRIAL DEMANDED 2 Plaintiff hereby demands a trial by jury 3 DATED: April 14, 2005 MILBERG WEISS BERSHAD & SCHULMAN LLP 4 JEFF S. WESTERMAN ELIZABETH P. LIN 5 6 /s/ Elizabeth P. Lin 7 ELIZABETH P. LIN

8 355 South Grand Avenue, Suite 4170 Los Angeles, CA 90071 9 Telephone: (213) 617-1200 Facsimile: (213) 617-1975 10

11 MILBERG WEISS BERSHAD & SCHULMAN LLP 12 MELVYN I. WEISS ELAINE S. KUSEL 13 One Pennsylvania Plaza New York, NY 10119-0165 14 Telephone: (212) 594-5300 Facsimile: (212) 868-1229 15 Lead Counsel for the Class 16

17

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EXHIBIT A

1 DECLARATION OF SERVICE BY MAIL 2 I, the undersigned, declare: 3 1. That declarant is and was, at all times herein mentioned, a resident of the County of 4 Los Angeles, over the age of 18 years, and not a party to or interest in the within action; that 5 declarant’s business address is 355 South Grand Avenue, Suite 4170, Los Angeles, 6 California 90071. 7 2. That on April 14, 2005, declarant served the CONSOLIDATED AMENDED 8 COMPLAINT FOR VIOLATIONS OF THE FEDERAL SECURITIES LAWS by depositing a true 9 copy thereof in a United States mailbox at Los Angeles, California in a sealed envelope with postage 10 thereon fully prepaid and addressed to the parties listed on the attached Service List. 11 3. That there is a regular communication by mail between the place of mailing and the 12 places so addressed. 13 4. That on the above date, declarant served via email to: [email protected]. 14 I declare under penalty of perjury that the foregoing is true and correct. Executed this 14th 15 day of April, 2005, at Los Angeles, California. 16 /s/ Faith Umaguing 17 FAITH UMAGUING 18 19

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1 CHIRON CORPORATION April 14, 2005 2 Service List

3 Attorneys for Plaintiffs

4 JEFF S. WESTERMAN MELVYN I. WEISS ELIZABETH P. LIN ELAINE P. KUSEL 5 MILBERG WEISS BERSHAD & PETER E. SEIDMAN SCHULMAN LLP MILBERG WEISS BERSHAD & 6 355 S. Grand Avenue, Suite 4170 SCHULMAN LLP Los Angeles, CA 90071 One Pennsylvania Plaza 7 Tel: (213) 617-1200 New York, NY 10119 Fax: (213) 617-1975 Tel: (212) 594-5300 8 Fax: (212) 868-1229

9 Counsel for Defendants 10 STACIE F. BECKERMAN ERIC WAXMAN 11 SKADDEN ARPS SLATE MEAGHER SKADDEN ARPS SLATE MEAGHER & FLOM LLP & FLOM LLP 12 525 University Avenue 300 S. Grand Avenue Suite 1100 Los Angeles, CA 90071 13 Palo Alto, CA 94301 Tel: (213) 687-5000 Tel: (650) 470-4500 Fax: (213) 687-5600 14 Fax: (650) 470-4570

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