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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1995
COMMISSION FILE NO. 0-12798
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CHIRON CORPORATION
(Exact name of Registrant as specified in its charter)
DELAWARE 94-2754624
(State of Incorporation) (IRS Employer Identification No.)
4560 HORTON STREET
EMERYVILLE, CALIFORNIA 94608
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (510) 655-8730
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
COMMON STOCK, $0.01 PAR VALUE
WARRANTS TO PURCHASE COMMON STOCK, $0.01 PAR VALUE
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes __X__ No ____
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.
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The aggregate market value of voting stock held by nonaffiliates of the
Registrant as of March 1, 1996, was $2,391,730,000.
The number of shares outstanding of each of the Registrant's classes of common
stock as of March 1, 1996:
TITLE OF CLASS NUMBER OF SHARES
- -------------------------------------------------------- --------------------------------------------------------
Common Stock, $0.01 par value 42,109,984
DOCUMENTS INCORPORATED BY REFERENCE
The Company's Consolidated Financial Statements for the fiscal year ended
December 31, 1995, are incorporated by reference into Parts II and IV of this
Form 10-K Report and are filed as Exhibit 13 to this Form 10-K Report.
Portions of the Proxy Statement for the Annual Meeting of Stockholders to be
held on May 16, 1996, are incorporated by reference into Part III of this
Report.
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PART I
ITEM 1. BUSINESS
THIS REPORT CONTAINS FORWARD-LOOKING STATEMENTS THAT INVOLVE RISKS AND
UNCERTAINTIES RELATING TO THE FUTURE FINANCIAL PERFORMANCE OF CHIRON CORPORATION
(THE "COMPANY" OR "CHIRON"), AND ACTUAL EVENTS OR RESULTS MAY DIFFER MATERIALLY.
IN EVALUATING SUCH STATEMENTS, STOCKHOLDERS AND INVESTORS SHOULD SPECIFICALLY
CONSIDER THE VARIOUS FACTORS IDENTIFIED UNDER THE CAPTION "FACTORS THAT MAY
AFFECT FUTURE OPERATING RESULTS" CONTAINED IN THE MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS IN CHIRON'S
CONSOLIDATED FINANCIAL STATEMENTS INCORPORATED BY REFERENCE IN THIS FORM 10-K,
WHICH COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE INDICATED BY
SUCH FORWARD-LOOKING STATEMENTS.
Chiron is a diversified, science-driven healthcare company that applies
biotechnology and other techniques of modern biology and chemistry to develop,
produce and sell products intended to improve the quality of life by diagnosing,
preventing and treating human disease. Chiron participates in four human
healthcare markets: diagnostics, including immunodiagnostics, critical care
diagnostics and new quantitative probe tests; therapeutics, with an emphasis on
oncology, serious infectious diseases and critical care diseases; pediatric and
adult vaccines; and ophthalmic surgical products for the correction of vision.
Chiron also develops or acquires new technologies, employing these technologies
to discover new products for the Company or for its partners. For example,
Chiron is developing a new generation of chemical therapeutics through advanced
techniques of drug design and discovery and is conducting an active program in
gene therapy.
Effective January 1, 1995, Chiron began a biotechnology partnership with
Ciba-Geigy Limited, of Basel, Switzerland ("Ciba") whereby Ciba acquired a 49.9
percent ownership interest in Chiron common stock. At the same time, Chiron
acquired Ciba's Ciba Corning Diagnostics Corp. ("CCD") business and Ciba's
interests in Chiron Biocine Company (formerly The Biocine Company) and Biocine
S.p.A. (through JV Vax B.V., a Netherlands company). In addition, Chiron and
Ciba agreed to cooperate in research, development, manufacturing and marketing
of biotechnology products on an arms-length basis, while remaining independent
to pursue other opportunities. For a further description of the partnership with
Ciba, see Part II, Item 8., Note 2 of Notes to Consolidated Financial
Statements. Chiron operates through the following business units: Chiron
Diagnostics, which includes the CCD business, quantitative probe tests and an
interest in a joint immunodiagnostic business; Chiron Biocine, a vaccine
business which includes Biocine S.p.A.; Chiron Therapeutics; and Chiron Vision,
the Company's ophthalmic business. A fifth business unit, Chiron Technologies,
manages the Company's research and clinical development programs other than
diagnostics and vaccines and develops new technologies with potential utility
throughout Chiron.
Chiron was incorporated in California in 1981 and reincorporated in Delaware
in 1987. A global organization with facilities on four continents, Chiron's
corporate headquarters is located at 4560 Horton Street, Emeryville, California
94608-2916, and its telephone number at that address is (510) 655-8730.
CHIRON DIAGNOSTICS
Chiron, through its Chiron Diagnostics business unit and its wholly-owned
subsidiary CCD (collectively "Chiron Diagnostics"), is one of the world's
largest providers of critical blood analyte systems used to measure blood gases,
blood electrolytes and metabolites. These systems are used by hospitals to
diagnose and monitor patients in critical care settings. Chiron Diagnostics also
markets the ACS:180-Registered Trademark- and ACS:180 Plus-TM-, which are
automated, high-throughput random access immunodiagnostic instrument systems
used by hospital and reference laboratories to detect and measure thyroid,
anemia, fertility, cancer and STAT cardiac indicators.
Chiron Diagnostics develops branched DNA ("bDNA") probe tests to quantify
levels of virus and other indicators of disease. Clinical evidence suggests that
Chiron's bDNA probe tests may have utility in predicting disease progression,
selection of patients for treatment based on probability of
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response and monitoring response to therapy. Chiron is selling bDNA probe tests
for human immunodeficiency virus ("HIV"), hepatitis C virus ("HCV"), and
hepatitis B virus ("HBV") for Research Use Only in the United States and Europe.
The United States Food and Drug Administration ("FDA") has accepted for review
Chiron's application to market its bDNA probe test for HIV in the United States.
Chiron has licensed rights to sell bDNA probe tests in Japan and Taiwan to
Daiichi Pure Chemicals Co., Ltd. ("Daiichi"). Daiichi currently markets Chiron's
Quantiplex-TM- bDNA tests for HCV and HBV in Japan.
Chiron has built a joint business with a significant worldwide presence in
the immunodiagnostic market with Ortho Diagnostic Systems, Inc. ("Ortho"), a
Johnson & Johnson company, based largely on sales of tests used to screen blood
for the potential presence of HCV. The joint business sells a full line of tests
required to screen blood for hepatitis viruses and retroviruses, and provides
confirmatory tests and microplate-based instrument systems to automate test
performance and data collection. Chiron and Ortho share equally in the pretax
operating earnings generated by the joint business. The joint business holds the
immunodiagnostic rights to Chiron's hepatitis and retrovirus technology and
receives royalty payments for the sale of HCV tests by Abbott Laboratories
("Abbott") and Pasteur Sanofi Diagnostics. In 1995, Chiron and Ortho began a
collaboration with Genelabs Technologies, Inc. ("Genelabs") regarding hepatitis
G virus. Under the terms of the collaboration agreement, the joint business
received certain immunodiagnostic rights to the Genelabs technology. Chiron also
has an option to share equally in the pretax operating earnings generated by
Johnson & Johnson's home HIV test, currently under review by the FDA.
CHIRON BIOCINE
Chiron Biocine, headquartered in Emeryville with operations in Siena, Italy,
is the Company's business to develop and market new vaccines. Chiron Biocine's
present business is based primarily on the sale of non-recombinant pediatric and
flu vaccines in Italy and, to a lesser extent, in Southern Europe, the Middle
East, the Far East, Africa, South America, and to international health services
such as the World Health Organization. Among its products is a new genetically
engineered acellular pertussis (whooping cough) vaccine, combined with
diphtheria and tetanus ("DTaP"), currently marketed in Italy. Chiron Biocine is
preparing applications to market the DTaP vaccine in the United States and
Europe, based on the results of large-scale government-sponsored trials in Italy
that showed the Chiron acellular pertussis vaccine is safer and more effective
than a current whole-cell pertussis vaccine.
Chiron Biocine is developing a new generation of vaccines for serious adult
infections such as herpes simplex virus, type 2 ("HSV-2") or genital herpes,
cytomegalovirus ("CMV") and HCV. These vaccines utilize genetically engineered
antigens which are displayed in a manner that mimics the appearance of the
actual agent, combined in a formulation with adjuvants that amplify the immune
response. In 1996, Chiron Biocine announced that, based on a preliminary review
of clinical trial data, a vaccine formulation designed to treat HSV-2 had a
statistically significant benefit on several disease indicators but did not
reach statistical significance on its primary endpoint. A separate Phase 3 trial
of a vaccine designed to prevent HSV-2 is underway and scheduled to be completed
in 1996. Phase 2 trials of a CMV vaccine are underway in the United States. A
Phase 1 trial of an HIV vaccine is underway in Thailand, in collaboration with
the Royal Army and the United States Department of the Army. A vaccine for HCV
is in preclinical trials. Chiron Biocine is also collaborating with NABI in the
development of a new family of human immunotherapeutic products, based on the
vaccines of Chiron Biocine and initially focused on the development of a
hyperimmune globulin product to prevent and treat CMV infections.
In February 1996, Chiron and Behringwerke AG, a subsidiary of Hoechst AG,
entered into an agreement whereby Chiron will purchase a 49 percent interest in
the human vaccine business of Behringwerke AG for Deutsche mark 171.5 million in
cash. Chiron has an option to purchase the remaining 51 percent in March 1998,
1999, 2000 or 2001, and Behringwerke AG has the option to have Chiron acquire
the remaining 51 percent interest in March 2001. Behringwerke AG, one of the
largest
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vaccine suppliers in Germany, manufactures and markets vaccines for flu,
diphtheria, tetanus, pertussis, rabies, tick-borne encephalitis, tuberculosis,
cholera, an oral vaccine for polio, and, under license from other companies,
distributes vaccines in Germany for measles, mumps, rubella, hepatitis B,
typhoid fever, pneumonia, haemophilus influenza as well as an inactivated polio
vaccine.
During the period of mutual ownership, Chiron and Behringwerke AG will
operate the vaccine business as a joint venture. The joint venture is designed
to provide an outlet for Chiron Biocine's new vaccines in the German market and
to expand its presence in the European vaccine market. Chiron will report its
share of the joint venture's results as equity in earnings of unconsolidated
joint businesses. Consummation of the transaction is subject to certain
conditions, including regulatory approvals and customary conditions prior to
closing.
In addition to its Chiron Biocine activities, Chiron has received royalty
payments since 1986 from the sales of Recombivax-Registered Trademark- HB, a
vaccine against HBV developed, manufactured and marketed by Merck & Co., Inc.
("Merck"), using technology developed by Chiron.
Recombivax-Registered Trademark- HB was the first vaccine using genetic
engineering to be licensed by the FDA for human use.
CHIRON THERAPEUTICS
Chiron Therapeutics, Chiron's hospital and large clinic-based business in
the United States and Europe, markets products for use principally by
oncologists. Its leading product is Proleukin-Registered Trademark-
(aldesleukin), interleukin-2, the first treatment approved for metastatic kidney
cancer. In the United States, Chiron also markets generic chemotherapy drugs as
part of a joint venture with Ben Venue Laboratories, Inc. In addition, on behalf
of Ciba Pharmaceuticals, Chiron promotes Aredia-Registered Trademark-
(pamidronate disodium for injection), a drug to treat hypercalcimia of
malignancy, Paget's disease and osteolytic bone lesions of multiple myeloma.
Chiron Therapeutics manufactures Betaseron-Registered Trademark- (interferon
beta-1b) for Berlex Laboratories, Inc., a United States affiliate of Schering AG
of Berlin, Germany ("Schering"), which markets the product in the United States
and Canada. In Europe, Schering is marketing the product under the trade name
Betaferon-TM-, manufactured by Boehringer Ingelheim, for which Chiron will
receive a royalty.
CHIRON VISION
Chiron Vision is the Company's business in ophthalmic surgical products,
with sales in the United States and 15 other countries. Chiron Vision's line of
products for the surgical correction of vision includes both hard and foldable
intraocular lenses for cataract replacement surgeries, phacoemulsification
instruments for small-incision cataract surgeries, and refractive surgical
instruments including corneal shapers and excimer lasers. In March 1995, Chiron
Vision expanded its presence in the United States and European markets for
cataract surgery products through the acquisition of the ophthalmic surgical
division of IOLAB, a Johnson & Johnson company. Following the acquisition of
IOLAB, Chiron Vision initiated a global restructuring of the combined operations
to enhance manufacturing, marketing and management efficiencies.
In March 1996, Chiron Vision received FDA approval to begin marketing the
Vitrasert-TM- Implant to deliver ganciclovir for the treatment of CMV retinitis
in people with AIDS. In Phase 3 clinical trials, the Vitrasert-TM- Implant
demonstrated a clinically important improvement over intravenously administered
ganciclovir in delaying the progression of CMV in these individuals. Chiron
Vision is co-marketing the Vitrasert-TM- Implant worldwide, including in the
United States and Europe, with Hoffmann-La Roche, Inc. ("Roche"), which
manufactures and markets ganciclovir.
CHIRON TECHNOLOGIES
Chiron Technologies applies enabling technologies in combinatorial
chemistry, gene therapy and recombinant proteins to develop products intended
for use as therapeutics, and develops new technologies with potential utility
throughout the Company. Chiron Technologies combines the Company's own
proprietary technologies in combinatorial chemistry, robotic screening and
selection and molecular biology with the knowledge and participation of a select
group of leading academic scientists in the fields of structural biology and
bio-organic chemistry. Chiron also engages in collaborations to create
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libraries of compounds for characterization and screening with other
pharmaceutical companies, including Janssen Pharmaceutica NV, a Johnson &
Johnson company, and Ciba, as well as with organizations in other fields such as
Dow Elanco, an agricultural company.
Chiron augmented its program in gene therapy with the acquisition in
September 1995 of Viagene, Inc., now known as Chiron Viagene. Through this
program, Chiron is developing gene therapy and gene transfer products, and drug
activation technology for the prevention and treatment of a broad range of human
diseases. Chiron's gene therapy program includes collaborations with Ribozyme
Pharmaceuticals, Inc., Progenitor, Inc., and the Virus Research Institute.
Chiron, in collaboration with Johnson & Johnson, is developing a series of
growth factors to treat topical wounds. In September 1995, Chiron and Johnson &
Johnson announced that the two companies have reviewed favorable preliminary
Phase 3 clinical trial data on their wound healing agent
Regranex-Registered Trademark- (becaplermin), a formulation containing
recombinant human platelet-derived growth factor (rhPDGF), and are proceeding
with regulatory applications. Chiron manufactures rhPDGF in bulk for final
formulation into Regranex-Registered Trademark-. Johnson & Johnson is
responsible for clinical development, regulatory matters, marketing and sales.
Chiron is collaborating with Cephalon, Inc. ("Cephalon") to develop and
market products for the treatment of neurological disorders. During 1995, Chiron
and Cephalon announced that Myotrophin-TM- (insulin-like growth factor, IGF-1)
had shown a favorable result in Phase 2/3 trials in the United States and Europe
for the treatment of amytrophic lateral sclerosis (ALS or Lou Gehrig's Disease).
Subsequently, the FDA asked for further information about these trials. If the
requested information is deemed insufficient by the FDA, additional clinical
trials may be required before a marketing application can be submitted by Chiron
and Cephalon. Following an analysis of data from a Phase 2 trial, Chiron has
decided to discontinue its own clinical development of IGF-1 for acute renal
failure. Chiron is considering further clinical development of IGF-1.
In the area of cardiovascular disease, Chiron has begun a collaboration with
G.D. Searle & Co. ("Searle"), to develop tissue factor pathway inhibitor
("TFPI"), a coagulation inhibitor with potential applications in thrombotic and
inflammatory diseases, trauma and critical care. Chiron and Searle have begun a
Phase 2 clinical trial studying the use of TFPI in microvascular surgery.
COMPETITION
Chiron competes against a large number of other biotechnology and
pharmaceutical companies in the United States and internationally, and although
no single company competes in every area of Chiron's interests, the competition
is intense and expected to increase. Biotechnology and drug discovery are
rapidly evolving fields in which new developments frequently result in product
obsolescence and price competition. To compete effectively, Chiron's direct and
joint businesses invest heavily in research, maintain multiple sales forces that
concentrate efforts on individual classes of customers, and spend significant
amounts on advertising, promotion and selling. Substantial consolidation is
underway in the global healthcare industry, and is expected to produce greater
efficiencies and even more intense competition.
In the diagnostic market, the major competitor to both the Chiron-Ortho
joint business and to the Chiron Diagnostics business is Abbott. In addition,
although initial patents for the Chiron HCV invention have been issued and are
being upheld through litigation, the joint business faces continued competition
from a number of unlicensed sellers of HCV tests including Murex Diagnostics,
Ltd., a subsidiary of International Murex Technologies Corp., and United
Biomedical, Inc. (see Part I, Item 3.). Other companies in Japan and Europe have
introduced, or may be preparing to introduce, competing HCV tests. In addition
to Abbott, Chiron faces competition in the immunoassay market from Boehringer
Mannheim and Johnson & Johnson, which purchased the diagnostic and clinical
chemistry business of Eastman Kodak. Chiron's bDNA probe tests compete with
products from affiliates of Roche (which is developing tests based on polymerase
chain reaction), Abbott and Digene
4
and may compete with Gene-Trak Systems and Gen-Probe Incorporated. In the
critical blood analyte market, Chiron Diagnostics faces competition from
Radiometer Medical A/S and Instrumentation Laboratory Company.
Four large companies hold the greatest share of the worldwide vaccine
market: Merck and SmithKline Beecham ("SmithKline"), both of which market
pediatric vaccines and the only widely sold recombinant vaccines for hepatitis B
infection; Lederle Praxis Biologics ("Lederle"), a division of American Home
Products; and the combination of Connaught Laboratories, Inc. ("Connaught"), and
Pasteur Merieux Serums et Vaccins (which separately has a strategic alliance
with Merck), both of which sell pediatric vaccines. SmithKline and Connaught
both have acellular pertussis vaccines that demonstrated superiority compared to
a currently marketed whole-cell pertussis vaccine, and have indicated that their
United States regulatory applications for such vaccines are completed.
SmithKline and Lederle are developing vaccines for genital herpes.
In the therapeutics market, Proleukin-Registered Trademark- competes with
alpha interferon sold by Schering Plough Corporation and by Roche as a treatment
for metastatic kidney cancer. Several other biotechnology companies are
developing IL-2 or other interferons as immune-system-based therapies for
cancers and infectious diseases, including Roche, Genentech, Inc. ("Genentech"),
and Amgen Inc. Approximately 30 companies compete in the United States market
for anticancer chemotherapies, including Bristol-Myers Squibb Company, which
accounts for nearly half the market. Chiron's therapeutic products in
development for cancer, infectious diseases and cardiovascular disease face
competition from companies such as Genetics Institute, Immunex Corporation,
Genentech and many other biotechnology companies. Aredia-Registered Trademark-
may face competition from other bone growth factors.
Chiron Vision competes against numerous healthcare, pharmaceutical and
biotechnology companies in the research, development and marketing of devices
and therapeutic products for the ophthalmic surgery market. Chiron Vision's
competition in its largest product line, intraocular lenses, includes Alcon
Laboratories, Inc., a division of Nestle SA; Allergan, Inc.; Pharmacia AB; Storz
Instrument Company, a subsidiary of American Home Products; and Staar Surgical
Co. Gilead Sciences, Inc., has a systemically injectable pharmaceutical that may
compete against Chiron Vision's ganciclovir Vitrasert-TM- Implant, and which has
been recommended for regulatory approval. Summit Technology, Inc. has received
approval, and has begun marketing in the United States, an excimer laser to
correct vision. VISX, Inc., which has cross-licensed its patents with those of
Chiron Vision outside the United States, has an excimer laser under review at
the FDA.
Betaseron-Registered Trademark-, the only product licensed in the United
States to treat relapsing-remitting multiple sclerosis, began usage by patients
in October 1993. Potential competing products to Betaseron-Registered Trademark-
in the United States and Europe include two products that have completed
clinical trials. Of these two products, a recombinant beta interferon from
Biogen, Inc. ("Biogen") has been recommended for regulatory approval in the
United States. Other companies have entered, or are preparing to enter, products
into clinical trials for multiple sclerosis. In Europe, Schering's product,
Betaferon-TM-, faces competition from Ares Serono. In Italy and Spain, Ares
Serono sells an extracted form of beta interferon which is used for, among other
purposes, treatment of multiple sclerosis, and holds licenses for other
indications in several countries, including Germany.
A significant amount of research in biotechnology is performed in
universities and nonprofit research organizations. These entities are becoming
more active in seeking patent protection and licensing revenues for their
discoveries. The competition among large pharmaceutical companies and smaller
biotechnology companies to acquire technologies from these entities also is
intensifying. While Chiron actively collaborates with such entities in research
and has and will continue to license their technologies for further development,
these institutions also compete with Chiron to recruit scientific personnel and
to establish proprietary technology positions.
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MANUFACTURING
Chiron currently has licensed manufacturing facilities in Emeryville,
California, for the production of biologicals. During 1995, construction was
completed on additional manufacturing facilities in Vacaville, California.
Chiron also has manufacturing facilities in Puerto Rico and Amsterdam, The
Netherlands. During 1995, the Company began producing certain quantities of
rhPDGF and TFPI in the Vacaville facility and anticipates utilizing the St.
Louis facility to produce clinical grade materials for Phase 1, 2, and 3
clinical trials for HSV, CMV and HIV products. Due to lower than expected
domestic commercial demand for the Company's Betaseron-Registered Trademark-
product, the Puerto Rico facility was idled and the regulatory approval process
for Betaseron-Registered Trademark- fermentation in the Amsterdam facility was
suspended. The Amsterdam facility is currently being used for the production of
bacterial vaccines and clinical grade materials and as a pilot plant for process
development.
In 1995, the Company began construction activities for a manufacturing
facility in Italy to be used in the production of bacterial vaccines, including
acellular pertussis. Regulatory approvals for each of the facilities described
above are necessary before Chiron can begin any new commercial production.
Failure to obtain all necessary approvals and permits would materially and
adversely affect the continued development and introduction of Chiron products.
Following the acquisition of IOLAB, Chiron Vision consolidated the majority
of its domestic operations at IOLAB's facilities in Claremont, California. This
consolidation resulted in the closure of leased manufacturing facilities in
Huntington, West Virginia; and Rapid City, South Dakota. Chiron Vision leases
additional manufacturing facilities in Irvine, California; Lyon, France; and
Munich, Germany.
CCD owns manufacturing facilities in Oberlin, Ohio; and Walpole,
Massachusetts. Other manufacturing sites are leased including Irvine,
California; Alameda, California; Medfield, Massachusetts; and Sudbury, England.
All CCD facilities were certified ISO 9000 in 1995.
MAJOR CUSTOMERS
During 1995, no single customer contributed ten percent or more to total
revenues. Ciba and its affiliates are related parties and collectively
contributed 11 percent and 13 percent of total revenues in 1994 and 1993,
respectively. Johnson & Johnson and its affiliates are related parties and
collectively contributed 22 percent and 32 percent of total revenues during 1994
and 1993, respectively. Sales of Betaseron-Registered Trademark- to Chiron's
marketing partner accounted for less than ten percent of total revenues in 1995
and 1993, and 23 percent in 1994.
For a discussion of revenues by geographic area, see Part II, Item 8., Note
11 of Notes to Consolidated Financial Statements.
RESEARCH AND DEVELOPMENT
The Company's two primary sources of new product candidates are internal
research and development and collaboration and licensing with other healthcare
companies. Research and development expense for the years ended December 31,
1995, 1994 and 1993, including payments to collaborative partners, was $343.8
million, $166.2 million and $140.0 million, respectively. Under contracts where
reimbursement is based upon work performed, the related research and development
expenses were $51.8 million, $72.4 million and $61.5 million in 1995, 1994 and
1993, respectively.
RAW MATERIALS
Raw materials and laboratory supplies utilized in the Company's research are
generally available from several commercial sources. In certain projects, sample
tissues and cell strains used for the Company's research and development may be
difficult to obtain. The Company relies upon its good relations with other
researchers and institutions to obtain the majority of such strains and samples.
Sources include blood banks, hospitals, universities and national laboratories.
Most raw materials necessary for process development, production scale-up and
commercial manufacturing are generally available from multiple commercial
sources. However, certain processes require materials from sole
6
sources or materials that are difficult for suppliers to produce and certify to
the Company's specifications or for which the raw materials may be in short
supply. Although Chiron maintains an awareness of the condition of these
suppliers, their ability to supply the Company's needs and the market conditions
for these materials, there is a risk that material shortages could impact
production efforts. The Company believes that its relationships with its
commercial suppliers are good.
GOVERNMENT REGULATION
Regulation by governmental agencies in the United States and other countries
is a significant and changing factor in Chiron's research and development
effort, and in the Company's plans to produce and market both approved products
and those nearing approval. Intent to market products in Europe brings an added
regulatory burden, as the role of the European Economic Community has increased
significantly in recent years.
The Company's products (both marketed and investigational) in the United
States are primarily biologicals, but also include drugs, diagnostic tests and
instruments and ophthalmic devices. All are regulated under the Food, Drug, and
Cosmetic Act ("FDCA") and supporting regulations. The biological products are
additionally regulated under the Public Health Service Act ("PHSA") and
supporting regulations. Licensing of a biological product in the United States
is accompanied by a requirement to simultaneously license the manufacturing
establishment.
Licensing of the establishment includes a requirement that all facilities
used to manufacture, fill, test and distribute the product in interstate
commerce be inspected and approved by the FDA's Center for Biologics Evaluation
and Research. The review and inspection process includes a review of all
labeling, including the vial, carton, box and packers, as well as promotional
and advertising materials.
The FDA is proposing to amend the biologics regulation to eliminate the
establishment license application requirement for well-characterized
biotechnology products licensed under the PHSA. The proposed rule would exempt
well-characterized biotechnology products, licensed under the PHSA, from certain
biologics regulations and harmonize the requirements applicable to these
products with those applicable to similar drug products approved under the FDCA.
Since every FDA decision requires submission of an application and
substantial supporting documentation (such as a New Drug Application, Premarket
Approval Application, Product License Application, or Establishment License
Application), the preparation of the documentation, its submission and audit
review determines the speed with which a research program is translated into a
marketed product.
Licensing procedures in the European Union ("EU") were revised in 1995
leading to the estab-
lishment of the following two new registration procedures: a Centralized
Procedure for licensing of medicinal products derived from the use of high
technology/biotechnology processes, and a Decentralized Procedure whereby a
license granted in one Member State of the EU is mutually recognized by other
Member States, leading to the granting of equivalent licenses in those Member
States recognizing the original license.
The Centralized Procedure is mandatory for those medicinal products derived
from genetic engineering/monoclonal antibody technologies and optional for other
high technology-derived medicinal products and any drug with a new chemical
entity as an active substance, a new delivery system of significant innovation,
or an entirely new indication of significant therapeutic interest. This
procedure leads to the granting of a single license for the entire EU by the
newly established European Medicines Evaluation Agency based in London.
For existing national licensing procedures, a transition period to January
1, 1998 will exist. At that time, the Decentralized Procedure will replace
independent national licensing of products in the EU.
Due to insufficient experience to date, it is unclear what impact, if any,
these revised procedures will have for the registration of products in Europe.
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PATENTS AND PROPRIETARY RIGHTS
Intellectual property (e.g., patents, trade secrets and trademarks) is
important to the business of the Company. Chiron and its subsidiaries have a
substantial number of pending patent applications and granted patents in the
United States and in foreign countries. It is not known how many of these
pending patent applications will be granted as patents, and at least some of the
pending applications will be abandoned. A number of patents and patent
applications owned by third parties have been licensed exclusively,
semi-exclusively or nonexclusively to Chiron and its subsidiaries for one or
more fields of use. Chiron and its subsidiaries also own a number of trademarks
in the United States and foreign countries.
Due to unresolved issues regarding the scope of protection provided by such
patents, as well as the possibility of patents being granted to others, there
can be no assurance that the patents owned or licensed to Chiron and its
subsidiaries will provide substantial protection or commercial benefit. The
rapid rate of development and the intense research efforts throughout the world
in biotechnology, the significant time lag between the filing of a patent
application and its review by appropriate authorities and the lack of
significant legal precedent involving biotechnology inventions make it difficult
to predict accurately the breadth or degree of protection that patents will
afford Chiron's or its subsidiaries' biotechnology products or their underlying
technology. It is also difficult to predict whether valid patents will be
granted based on biotechnology patent applications or, if such patents are
granted, to predict the nature and scope of the claims of such patents or the
extent to which they may be enforceable.
Important legal questions remain to be resolved as to the extent and scope
of available patent protection in the United States and abroad. Under United
States law, although a patent has a statutory presumption of validity, the
issuance of a patent is not conclusive as to validity or as to the enforceable
scope of its claims. Accordingly, there can be no assurance that Chiron's
patents will afford legal protection against competitors with similar
inventions, nor can there be any assurance that the patents will not be
infringed or designed around by others or that others will not obtain patents
that Chiron would need to license or design around.
Trade secrets and confidential information are likely to be important to
Chiron's commercial success. Although Chiron and its subsidiaries seek to
protect trade secrets and confidential information they believe to be
significant, there can be no assurance that others will not either develop
independently the same or similar trade secrets or confidential information or
obtain access to such trade secrets or confidential information. Furthermore,
there can be no assurance others have not obtained or will not obtain patent
protection that will preclude Chiron or its subsidiaries from using their trade
secrets or confidential information.
Most countries limit the enforceability of patents against government
agencies or government contractors. Generally, the patent owner may be limited
to monetary relief and may be unable to enjoin infringement. This can be of
particular importance in countries where a major customer of Chiron or its
licensees is a governmental agency. The inability to enjoin such infringement
and the necessity of relying exclusively on monetary compensation could
materially diminish the value of a particular patent. Furthermore, many
countries (including European countries) have compulsory licensing laws under
which third parties may compel the grant of non-exclusive licenses under certain
circumstances (for example, failure to "work" the invention in the country,
patenting of improvements by a third party or failure to supply a product
related to health and safety). The mere existence of such limits on injunctive
relief and compulsory licensing systems could force Chiron to grant a license it
would not have otherwise granted.
Chiron is aware that others, including various competitors, educational
institutions and governmental organizations have intellectual property,
particularly patents and pending patent applications, in the United States and
other countries potentially useful or necessary to Chiron's and its
subsidiaries' businesses including vaccines, diagnostics, therapeutics, oncology
and ophthalmics. Some of these patents and applications claim only specific
products or methods of making such products, while
8
others claim more general processes or techniques. There may be similar
third-party intellectual property important to the business of Chiron or its
subsidiaries of which the Company is not currently aware. It is likely that in
the future others will obtain patents or develop proprietary rights that might
be necessary or useful for the manufacture, use or sale of some products by
Chiron or its subsidiaries. Certain of these patents or rights may be
sufficiently broad to prevent or delay Chiron or its subsidiaries from
practicing necessary technology, including the manufacture and/or marketing of
products important to Chiron's current and future business. The scope, validity
and enforceability of such patents, if granted, the extent to which Chiron or
its subsidiaries may wish or need to obtain licenses thereunder and the cost and
availability of such licenses are not susceptible to accurate prediction. If
Chiron or its subsidiaries do not obtain such licenses, products may be
withdrawn from the market, or delays could be encountered in market introduction
while an attempt is made to design around such patents. Alternatively, Chiron or
its subsidiaries could find that the development, manufacture or sale of such
products is foreclosed. Chiron or its subsidiaries could incur substantial costs
in challenging the validity or scope of such patents.
Chiron is currently involved in legal proceedings involving patents and
expects that litigation relating to the validity and scope of its patents and
proprietary rights and those of third parties will continue to arise in the
future (see Part I, Item 3.). Substantial costs could be incurred in defending
the validity or scope of patents owned by or licensed to Chiron or its
subsidiaries. If Chiron and its subsidiaries are unable to obtain strong
proprietary rights to protect a product after the expenditure of funds to obtain
regulatory approval, competitors may be able to market competing products
without being required to undertake the same lengthy and expensive development
efforts that Chiron and its subsidiaries already have completed. In these cases,
it is possible that price competition could become a principal competitive
factor in the marketing of such products. If Chiron or any of its subsidiaries
should lose litigation with respect to third party intellectual property rights,
Chiron and its subsidiaries could be precluded from manufacturing or marketing
certain products and incur substantial liability for damages and attorney fees.
EMPLOYEES
At December 31, 1995, Chiron and its subsidiaries employed 6,894 people on a
full-time and part-time basis in eight principal locations on four continents.
Of Chiron's employees, 3,789 were involved in research, development and
manufacturing efforts and 3,105 were involved in operations, administration,
sales and marketing and finance.
ITEM 2. PROPERTIES
Chiron's operations are conducted in owned and leased facilities located
throughout the world. Chiron's principal facilities are located in Emeryville,
California, and are used for research and development, manufacturing and
administrative activities. Although the Company leases the majority of these
facilities, Chiron owns certain facilities as well as land held for future
expansion.
The Company owns manufacturing facilities located in Vacaville, California;
St. Louis, Missouri; and Amsterdam, The Netherlands. Certain of these facilities
have available capacity due to lower than expected domestic demand for the
Company's Betaseron-Registered Trademark- product. Chiron also owns a
manufacturing facility in Puerto Rico which is currently idled due to lower than
expected demand for Betaseron-Registered Trademark-. Chiron leases and owns
manufacturing facilities in Italy for the production of pediatric and adult
vaccines. In 1995, Chiron commenced construction in Italy to build additional
manufacturing facilities for the production of bacterial vaccines.
Chiron owns manufacturing facilities in Oberlin, Ohio; and Walpole,
Massachusetts, which are used for the development and manufacture of diagnostic
products. The Company also owns a sales and administrative facility in Norwood,
Massachusetts, and a sales office and warehouse in Halstead, England. Chiron
leases manufacturing facilities relating to its diagnostic products in Irvine
and Alameda, California; Medfield, Massachusetts; and Sudbury, England.
9
The Company owns administrative and manufacturing facilities in Claremont,
California, and leases manufacturing facilities in Irvine, California; Lyon,
France; and Munich, Germany, which are used in the Company's ophthalmic
business.
Chiron leases additional facilities in 14 cities across the United States.
These properties are primarily sales and service offices. The Company also
leases additional facilities in Canada, Mexico, England, Switzerland, Sweden,
Spain, Italy, The Netherlands, Germany, France, Belgium, Austria, Portugal,
Poland, Taiwan, Singapore, Korea, Japan and Australia, primarily for sales and
service offices.
The Company believes its present facilities are adequate for its current
needs. The Company continually evaluates future requirements for its facilities.
ITEM 3. LEGAL PROCEEDINGS
ABBOTT LABORATORIES. On December 13, 1993, Chiron filed a patent
infringement action against Abbott in the United States District Court for the
Northern District of California. The suit, which alleges infringement of
Chiron's U.S. Patent No. 5,156,949 ("the '949 patent"), claiming the use of
recombinant envelope antigens in immunoassays for HIV antibodies, is based on
Abbott's sale of unlicensed HIV immunoassay tests which are believed to fall
within the scope of one or more patent claims. Abbott is defending this suit on
the basis of invalidity and non-infringement. Chiron is requesting unspecified
damages and injunctive relief. Cross motions for summary judgment on Abbott's
defenses of inequitable conduct and prior invention were filed. After argument,
the Court granted portions of Chiron's motion but denied Abbott's motion for
summary judgment. Subsequently, the United States Patent & Trademark Office
declared an interference between the '949 patent and an application owned by
Centocor and the U.S. government. Chiron is the junior party. The Court refused
Abbott's request to stay the litigation pending resolution of the interference
and has scheduled a trial for April 7, 1996.
On April 26, 1994, Abbott filed suit against Chiron in the United States
District Court for the Northern District of Illinois, Eastern Division, alleging
that the Company has, by making, using and selling nucleic acid hybridization
assays, infringed three U.S. patents owned by third parties and licensed to
Abbott. Abbott is seeking injunctive relief and damages in an unspecified
amount. The Company believes that it has substantial defenses and is defending
this suit vigorously. Trial is currently scheduled for July 15, 1996.
ALLERGAN MEDICAL OPTICS. On December 8, 1992, Allergan Medical Optics filed
a lawsuit in the United States District Court for the Central District of
California against Chiron and Chiron IntraOptics (now Chiron Vision) (together,
"Chiron"). The complaint alleged that a mechanical inserter used to place the
Chiron foldable intraocular lens in the eye during cataract surgery infringes a
patent licensed exclusively to Allergan. Allergan sought an injunction against
sales of the inserter, damages in an unspecified amount, and attorneys' fees. On
November 27, 1995, Chiron Vision and Allergan reached a settlement in the
lawsuit. Chiron signed a Final Consent Judgment in exchange for a license to the
subject patent.
ADVANCED CHEMTECH. On August 11, 1994, Advanced ChemTech, Inc. brought a
lawsuit against Chiron in the United States District Court for the Western
District of Kentucky, Louisville Division, asserting that certain Chiron patents
relating to peptide mixtures are invalid and unenforceable and that Chiron has
engaged in unfair competition and unfair business practices in asserting its
patent rights. Advanced ChemTech is asking the Court to: (1) find that the
patent at issue is invalid and unenforceable; (2) find that Advanced ChemTech
does not infringe the patents; and (3) award damages according to proof. Chiron
has answered and counterclaimed for infringement of its patents. Chiron believes
that it has substantial defenses against the claims asserted by Advanced
ChemTech.
DANIEL W. BRADLEY. On December 20, 1994, Dr. Daniel W. Bradley, a former
scientist at the U.S. Centers for Disease Control (the "CDC") brought suit in
the United States District Court for the Northern District of California against
Chiron, Ortho, certain employees of Chiron, and the United
10
States government. Subsequently, Bradley dismissed the United States as a
defendant. Bradley, who collaborated with Chiron scientists on research that led
to the discovery of HCV, alleges he had been wrongly excluded as an inventor of
HCV. He requests various forms of relief, including declarations that he is an
inventor of Chiron's patents related to HCV and that these patents are
unenforceable. Bradley further seeks monetary damages and a constructive trust
on all past and future profits derived from Chiron's HCV invention, which are
estimated by Bradley to be in excess of $1 billion, as well as penalties under
federal and state Racketeering and Corrupt Organization (RICO) statutes. Chiron
believes Bradley's claims to inventorship and his suit are without merit and
that substantial defenses exist. In 1990, Bradley and the CDC entered into a
settlement agreement regarding their respective claims of inventorship under
which any rights either might have were assigned to Chiron. Chiron believes that
the settlement agreement is valid and bars substantially all of the claims in
the subject litigation. Chiron and the other defendants filed a motion to
dismiss Bradley's First Amended Complaint. The Court dismissed Bradley's
complaint for failure to state a claim upon which relief can be granted, but
allowed Bradley to file an amended complaint. Chiron has filed a motion to
dismiss Bradley's Second Amended Complaint.
CARNEGIE MELLON UNIVERSITY. On August 20, 1994, Carnegie Mellon University
and Three Rivers Biologicals, Inc. brought a lawsuit in the United States
District Court for the Western District of Pennsylvania against Hoffmann-La
Roche, Inc., Roche Molecular Systems, Inc., the Perkin-Elmer Corporation, Chiron
and its wholly-owned subsidiary, Cetus Oncology Corporation, claiming that the
defendants infringed certain United States patents relating to plasmids for the
expression of DNA Polymerase I and to plasmids providing for nick-translation
activity. Carnegie Mellon and Three Rivers Biologicals are seeking a finding
that the defendants willfully infringed the patents at issue, injunctive relief
and damages according to proof. All defendants have answered the complaint.
Venue of the case was changed to the Northern District of California on motion
by Chiron. Discovery is ongoing. The facts of the case, including potential
indemnification rights or obligations among the defendants, are currently under
review. However, Chiron believes that it and Cetus have significant defenses.
EVANS. On November 8, 1995, the Tribunal of Brescia, an Italian Court,
dismissed a lawsuit brought by Evans Medical Limited (a division of Medeva plc)
("Evans") against Chiron's Italian vaccine business, Biocine S.p.A., and against
Nuova Chimica Medica s.r.1., a distributor. Evans sought injunctive relief via
an emergency procedure. The suit alleged that the p69 antigen used in Biocine
S.p.A.'s recombinant acellular pertussis vaccines
(Acelluvax-Registered Trademark- and Acelluvax-Registered Trademark- DTP)
infringed Evans' Italian counterpart to its European patent No. 162,639 ("the
'639 patent"). This patent is licensed by Evans exclusively to SmithKline
Beecham Biologicals S.A. Counterpart patents are pending or have been issued in
other jurisdictions, including the United States. Earlier in the year, Evans had
brought a similar proceeding against Biocine S.p.A. and its distributor for
emergency injunctive relief in the same Court. Following a June 26, 1995
hearing, Evans abandoned that proceeding.
Biocine S.p.A. previously had opposed issuance of the '639 patent before the
European Patent Office ("EPO") and has appealed the finding reached by the EPO
in that opposition proceeding. Biocine S.p.A. filed an action against Evans in
Milan on October 23, 1995 alleging invalidity of the same patent that formed the
basis for the two Italian suits discussed above. Biocine S.p.A. later filed a
claim against Evans for non-infringement with the Milan Court. Evans' response
to the Milan actions was filed in February 1996. Also in February 1996, Biocine
S.p.A. filed an action alleging invalidity and non-infringement of Evans' Dutch
equivalent to the '639 patent in The Netherlands. Chiron believes that it does
not infringe any valid claim in the '639 patent or in its foreign counterparts.
MUREX DIAGNOSTICS, LTD. In a series of actions, the first of which was
brought on March 2, 1992, Chiron, together with Ortho and Ortho Diagnostic
Systems, Ltd. (collectively, "Ortho"), filed suit in the High Court for England
and Wales against Murex Diagnostics, Ltd. ("Murex"), alleging infringement of
Chiron's U.K. Patent No. 2,212,511 ("the '511 patent") as a result of Murex's
manufacture and sale of HCV immunoassay kits in the U.K. Murex is a subsidiary
of International Murex Technologies Corp., a Canadian company. Chiron and Ortho
sought injunctive relief and unspecified damages.
11
On May 27, 1994, the High Court granted judgment for Chiron and Ortho, holding
the '511 patent valid and infringed, and ordered Murex to pay damages in an
amount to be determined. Both Murex and the Chiron/Ortho parties appealed
various aspects of the High Court's judgment. Chiron's and Ortho's request for
an injunction was granted on November 30, 1994. Following an interim damages
inquiry which was held in February 1996, the Court ordered Murex to pay L6
million (approximately $9 million) to Chiron/Ortho by February 23, 1996. On
February 22, 1996, Murex, which had changed its name to Specialist Diagnostics,
Ltd., filed a petition for voluntary liquidation. There can be no assurance when
or whether Chiron and Ortho will be able to collect this damage award. A damages
inquiry is scheduled for July 1996.
In a series of rulings on November 2 and 7, 1995, the U.K. Court of Appeal
held that, with the exception of one claim, the '511 patent is valid and that
Chiron could amend the patent and proceed with the damages inquiry. The parties
have applied for leave to appeal to the House of Lords.
Chiron is informed that officials within the British Ministry of Health have
in the past raised the possibility of authorizing Murex's infringement of the
'511 patent under the "Crown use" provisions of British law, with respect to the
sale of HCV immunoassay kits to the British National Health Service. Further,
Murex has stated that it will apply for a compulsory license under the '511
patent.
Infringement proceedings against Murex on German and European patents
corresponding to the '511 patent also have been filed by Chiron and Ortho in
Germany, Italy, The Netherlands and Belgium. On January 23, 1995, Chiron and
Ortho were granted an injunction in Germany. On May 8, 1995, Chiron was granted
a cross-border preliminary injunction by the Dutch Court preventing infringement
by Murex and certain of its affiliates covering The Netherlands, Belgium,
France, Spain and Luxembourg. Murex has brought an action in Australia seeking
revocation of the Australian counterpart of the '511 patent. Chiron has
counterclaimed for infringement. That matter is scheduled for trial in June of
1996.
ORGANON TEKNIKA, LTD. On May 4, 1994, Chiron instituted summary legal
proceedings against Organon Teknika, B.V., Akzo Pharma, B.V., subsidiaries of
Akzo N.V. (all subsidiaries of Akzo N.V. (collectively referred to as
"Organon")), and United Biomedical, Inc. ("UBI"), the supplier of Organon's HCV
antigens and kits, in the District Court of the Hague, The Netherlands, alleging
infringement of European Patent No. 318,216 ("the '216 patent") as a result of
the defendants' manufacture and sale of HCV immunoassay kits. On July 22, 1994,
Chiron was granted a cross-border preliminary injunction against further
infringement, including sale of the UBI kit, by Organon in Austria, Belgium,
Switzerland, Germany, Spain, France, Italy, Liechtenstein, Luxembourg, The
Netherlands and Sweden. Organon and UBI appealed the injunction. The '216 patent
is a counterpart of the British '511 patent. Infringement proceedings brought by
Chiron and Ortho were also pending against Organon in Italy and Belgium (based
on the '216 patent), and consolidated with the actions against Murex, described
above. Chiron, Ortho, and Organon settled all European HCV litigation on October
9, 1995, and Chiron and Ortho were compensated for past infringement. UBI did
not participate in the settlement, and has been ordered to pay Ortho Ltd.
damages by the U.K. Court of Appeal, along with Murex, as described above. A
damages inquiry has not yet been scheduled.
SICOR. In April 1991, Alco Chemicals, Ltd. ("Alco") and Sicor, S.p.A.
("Sicor"), former suppliers of bulk doxorubicin to Cetus Ben Venue Therapeutics
("CBVT"), filed suit in the United States District Court for the Northern
District of California against Cetus Oncology Corporation ("Cetus"), Ben Venue
Laboratories, Inc. ("Ben Venue"), CBVT and Erbamont, Inc. ("Erbamont") and its
affiliates. Plaintiffs claim that they had distribution and supply agreements
with CBVT relative to a product called doxorubicin hydrochloride. Sicor had been
prevented from manufacturing product for CBVT since September 1990. In March
1991, CBVT entered into an agreement with Erbamont which provided for, among
other things, the settlement of several legal proceedings then pending relating
to Erbamont's alleged doxorubicin proprietary rights, and the exclusive supply
of doxorubicin to CBVT by Erbamont. The Sicor complaint alleges breach of the
CBVT contract to purchase bulk doxorubicin from Sicor, as well as antitrust
violations and interference with contract and prospective advantage,
12
and sought unspecified damages. Plaintiffs assert in separate counts against all
of the Cetus parties that their contracts with CBVT have been breached, that
inducement of such breaches has been tortious, that plaintiffs' prospective
economic relations have been tortiously frustrated, that the Cetus parties are
indebted to plaintiffs on past accounts said to relate to the joint financing of
earlier litigation, and that plaintiffs' distribution and supply of doxorubicin
has been foreclosed by reason of violations of the federal antitrust laws. Cetus
has denied any entitlement to recovery in this lawsuit and has filed a
counterclaim against the plaintiffs for fraud and breach of contract based on
Sicor's failure to deliver the bulk product. Sicor's antitrust claims have been
dismissed on motion and Sicor has dismissed its claims against Erbamont. Sicor
filed a summary judgment motion with respect to the counterclaims of the Cetus
parties. On February 2, 1996, the District Court granted that motion in an
opinion which the Company is currently studying. The Company believes it has
substantial defenses to the Sicor claims. A related arbitration before the
International Chamber of Commerce in New York brought by Sicor against Chiron,
Cetus, and Ben Venue has been stayed pending the resolution of the Cetus
parties' counterclaims in the litigation described above.
In February 1995, Sicor and Alco filed a further action in the United States
District Court for the Northern District of California against CBVT for amounts
allegedly owed by CBVT to Sicor and Alco for the supply of doxorubicin, plus
interest and attorneys' fees. This case has been assigned to the same judge as
the above-referenced District Court case. The Company believes that it has
significant defenses to these claims.
SCRIPPS CLINIC. The Company is defending a lawsuit filed on November 8,
1983, by the Scripps Clinic and Research Foundation and Revlon, Inc., in the
United States District Court for the Northern District of California alleging
that Chiron's research program to synthesize a protein associated with human
blood clotting ("Factor VIII:C") through genetic engineering techniques
infringes plaintiffs' rights under a patent for purified Factor VIII:C. The suit
seeks an injunction against further infringement, an accounting, compensatory
damages of at least $10 million and punitive damages in the same amount. After
the trial court granted summary judgment in favor of Chiron, the plaintiffs
appealed. Appeal Nos. 89-1541, -1542, -1543, -1646 and -1647 were filed in the
United States Court of Appeals for the Federal Circuit. The Appellate Court
reversed the trial court, finding that summary judgment was not appropriate and
directing that a number of issues be tried, including the issues of inequitable
conduct on the part of Scripps, patent validity, and patent infringement. No
trial date has been set and it is unclear when a date will be set. Chiron
intends to vigorously assert its defenses at trial.
SUMMIT. On September 29, 1994, Summit Technology Ireland B.V., a subsidiary
of Summit Technology, Inc., a manufacturer of ophthalmic lasers, filed a patent
infringement action in the Regional Court of Dusseldorf, Germany, against two
German subsidiaries of Chiron Vision (Chiron Technolas and Chiron Adatomed), and
their respective managing directors. The suit alleged that the manufacture and
sale in Germany of the Technolas-Registered Trademark-
Keracor-Registered Trademark- '116 excimer laser infringed the German
counterpart of a European patent held by Summit. Summit sought injunctive relief
and damages which it estimated at Deutsche mark 2 million. On August 3, 1995,
the German Court granted judgment in favor of Summit, granted an injunction
against defendants' further infringement and awarded damages for past
infringement in an amount to be determined. On September 1, 1995, Summit
enforced the judgment and the injunction by posting security in the amount of
Deutsche mark 2 million. The Company's appeal of the Regional Court's decision
is pending. Chiron Technolas, Chiron Vision's sole source of ophthalmic lasers,
continues to manufacture ophthalmic excimer lasers, which are distributed by
Chiron Vision and its subsidiaries. The Company believes these activities are
outside the scope of the judgment and injunction of the German Regional Court.
The Company has also initiated a separate judicial action in Germany seeking to
invalidate Summit's patent.
AMERICAN HOME PRODUCTS. On April 27, 1995, American Home Products
Corporation ("AHP") filed suit against Chiron in the Superior Court in New
Castle County, Delaware, claiming compensatory, consequential and punitive
damages based on an alleged breach and repudiation by Chiron of a contract
pursuant to which Chiron had agreed to purchase certain assets from AHP. The
case has been settled and was ordered dismissed on December 2, 1995.
13
BRILLIANT TRADING CO., WOLFSON. Following the announcement by Chiron of the
signing of a definitive agreement to acquire Viagene, Inc. ("Viagene"), two
lawsuits purporting to be class actions were filed on April 24 and May 1, 1995,
respectively, in the Court of Chancery of the State of Delaware against named
directors and officers of Viagene and against Viagene and Chiron. In one case,
Chiron is sued on a theory that it aided and abetted alleged breaches of
fiduciary duty by Viagene's directors and officers in approving the proposed
acquisition by Chiron. In the other case, Chiron is sued for alleged breaches of
fiduciary duty as a controlling stockholder of Viagene. Plaintiffs seek
declaratory and injunctive relief, an accounting and costs and disbursements.
Defendants have received an open extension of time to answer or otherwise
respond. Chiron believes these suits are without merit.
STOCKHOLDER LITIGATION. In November 1994, Chiron, its directors, and
certain of its officers were sued in three essentially identical actions filed
as class actions on behalf of Chiron stockholders, alleging that the directors
had violated their fiduciary duty by failing to maximize stockholder value in
connection with the series of transactions affected with Ciba which were
announced on November 20, 1994, by, among other things, not taking all possible
steps to seek out and encourage the best offer for the Company once the Company
had been put in play. Two of the actions filed respectively on November 14, 1994
and November 22, 1994 (HANNA V. CHIRON CORP., ET AL., C.A. No. 13874, and DEZUBE
V. CHIRON CORPORATION ET AL., C.A. 13896) were filed in the Court of Chancery of
the State of Delaware in and for New Castle County. The complaints in both cases
ask for injunctive relief, rescission and attorneys' fees. Plaintiff in the
HANNA action additionally seeks damages in an unspecified amount. Plaintiff in
the DEZUBE action additionally seeks an accounting. The complaints have been
answered by all defendants, who deny the material allegations of the complaints.
The third action was filed in the Superior Court of California, Alameda County,
Northern Division, on December 1, 1994 (PERERA ET AL., V. CHIRON CORPORATION ET
AL., C.A. No. 744522-2). Plaintiff sought injunctive and declaratory relief, and
an accounting, costs and disbursements, including attorneys' and experts' fees,
and other relief.
On October 17, 1995, the PERERA plaintiffs commenced a new action (the
"Federal Action") in the United States District Court for the Northern District
of California, against the same defendants and Ciba-Geigy, Ltd., Ciba-Geigy's
Chairman Alex Krauer, Ciba-Geigy Corporation, and Ciba Biotech Partnership, Inc.
(collectively, the "Ciba Defendants"). The Federal Action asserts both state and
federal claims, including a claim under Sections 10(b), 14(d) and 14(e) of the
Securities Exchange Act of 1934, and seeks damages and injunctive relief. On
October 23, 1995, in light of the filing of the Federal Action, the PERERA
action was dismissed by stipulation of the parties.
Plaintiffs and all of the defendants other than the Ciba Defendants have
entered into an agreement to settle the Federal Action on a class-wide basis,
subject to approval by the Court. Under the terms of that settlement agreement,
Chiron will pay plaintiffs' counsel up to $300,000 in attorneys fees and
expenses, as may be awarded by the Court, and will pay the costs of class
notice. Chiron has no other financial obligations under the settlement
agreement, which also contemplates that the HANNA and DEZUBE actions will be
dismissed as moot following approval of the settlement and dismissal of the
Federal Action. It is presently expected that the settlement will be presented
to the District Court for preliminary approval at a status conference in March
1996, and that a final approval hearing will be scheduled within two months
thereafter, following notice to the plaintiff class.
14
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were brought to a vote of Chiron's stockholders in the quarter
ended December 31, 1995.
EXECUTIVE OFFICERS OF THE REGISTRANT
The executive officers of the Company, who serve at the discretion of the
Board of Directors, are as follows:
NAME AGE TITLE
- -------------------------------- --- -----------------------------------------
William J. Rutter, Ph.D. 67 Chairman of the Board
Edward E. Penhoet, Ph.D. 55 President and Chief Executive Officer
Renato Fuchs, Ph.D. 53 Senior Vice President, Manufacturing and
Development Operations
William G. Green, Esq. 51 Senior Vice President, General Counsel
and Secretary
Pablo D.T. Valenzuela, Ph.D. 54 Senior Vice President, Biologicals
Research and Development; Office of the
President, Chiron Diagnostics
Lewis T. Williams, M.D., Ph.D. 47 Senior Vice President; President, Chiron
Technologies
Dennis L. Winger 48 Senior Vice President, Finance and
Administration, and Chief Financial
Officer
Robert P. Blackburn, Esq. 39 Vice President and Chief Patent Counsel
Kenneth J. Conway 47 Senior Vice President, Ciba Corning
Diagnostics; Office of the President,
Chiron Diagnostics
Keith A. Costa 58 Executive Vice President, Ciba Corning
Diagnostics; Office of the President,
Chiron Diagnostics
Rajen K. Dalal 42 Vice President, Corporate Planning and
Business Development
Dino Dina, M.D. 49 Vice President, Virology and Vaccine
Development; President, Chiron Biocine
Company
Alain Herrera, M.D. 45 Vice President; President, Chiron
Therapeutics Europe
Edward Kenney 51 Division Vice President, Chiron
Therapeutics
William J. Link, Ph.D. 49 Vice President; Chairman and Chief
Executive Officer, Chiron Vision
Mario Lorenzoni 54 Vice President; Chief Executive Officer,
Biocine S.p.A.
Bernardita Mendez, Ph.D. 43 Vice President, Regulatory and Quality
Affairs
Walter H. Moos, Ph.D. 41 Vice President, Research and Development,
Chiron Technologies
Frances L. Tuttle 48 Senior Vice President, Ciba Corning
Diagnostics; Office of the President,
Chiron Diagnostics
Mickey S. Urdea, Ph.D. 43 Vice President, Nucleic Acid Systems
Research and Development
15
DR. RUTTER, a co-founder of the Company, has served as its Chairman of the
Board since the Company's inception in 1981. He was Director of the Hormone
Research Institute at the University of California, San Francisco Medical
Center, from 1983 to May 1989 and has been on the faculty at the University of
California, San Francisco, since 1969, becoming Professor Emeritus in 1991. He
has served as Director of Ciba-Geigy Ltd. since 1995.
DR. PENHOET, a co-founder of the Company, has been Chief Executive Officer
and a Director since the Company's inception in 1981, and was President from
1981 to 1989 and Vice Chairman from 1989 until 1993. Dr. Penhoet reassumed the
title of President, effective April 1, 1993. He has been a faculty member at the
University of California, Berkeley, for 24 years.
DR. FUCHS joined the Company as Senior Vice President, Manufacturing and
Development Operations, in 1993. From 1988 until joining Chiron, he was with
Centocor, Inc., most recently as Senior Vice President of Pharmaceutical
Development, responsible for process development of antibody products.
MR. GREEN joined the Company as Vice President and General Counsel in
October 1990, having served as Secretary or Assistant Secretary since the
Company's inception in 1981. In February 1992, he became Senior Vice President,
Secretary and General Counsel. From 1981 to 1990, he was a partner in the San
Francisco law firm of Brobeck, Phleger & Harrison.
DR. VALENZUELA, a co-founder of the Company, became Senior Vice President in
March 1989, and a member of the Office of the President, Chiron Diagnostics, in
October 1995, having served as Vice President and Director of Research since the
Company's inception in 1981. He was associated with the University of
California, San Francisco, and also has held adjunct faculty positions at
Catholic University in Santiago, Chile.
DR. WILLIAMS joined the Company in August 1994 as Senior Vice President and
President of Chiron Technologies. From 1988 until joining the Company, he was a
professor of medicine at the University of California, San Francisco. Prior to
joining UCSF, he was on the faculty of Harvard Medical School. In addition, he
was a co-founder and director of COR Therapeutics, Inc. from 1988 until joining
the Company.
MR. WINGER joined the Company in August 1989 as Vice President, Finance and
Administration, and Chief Financial Officer. He became Senior Vice President,
Finance and Administration, and Chief Financial Officer, in February 1992. He
was Vice President and Chief Financial Officer of The Cooper Companies from 1987
to 1989.
MR. BLACKBURN joined the Company in April 1989 as Director of Intellectual
Property. He became Vice President and Chief Patent Counsel in February 1992.
Prior to joining the Company, he was a partner in the law firm of Ciotti &
Murashige, Irell & Manella.
MR. CONWAY joined the Company in January 1995 as Senior Vice President of
CCD, as a result of the Company's acquisition of CCD. He has held that position
since 1991. In October 1995, he was appointed as a member of the Office of the
President for Chiron Diagnostics.
MR. COSTA joined the Company in January 1995 as Executive Vice President of
CCD, a position he has held since December 1988. In October 1995, he was
appointed as a member of the Office of the President for Chiron Diagnostics.
MR. DALAL joined Chiron in December 1991 as Vice President, Corporate
Planning. From 1983 until joining Chiron, he was employed by the international
consulting firm of McKinsey & Company, where he performed general management
consulting in the firm's pharmaceuticals, medical devices and diagnostics
industries practice.
DR. DINA joined the Company as Director of Virology in 1982. In November
1990, he became Vice President, Virology and Vaccine Development, and in
February 1993, Vice President, Virology and Vaccine Development, and President,
Chiron Biocine.
16
DR. HERRERA was promoted to Vice President and President of Chiron
Therapeutics Europe in 1993. From 1991 until 1993, he was Managing Director of
the Company's EuroCetus office in France. From 1987 until joining Chiron, he was
Managing Director of Pierre Fabre Oncologie Laboratories.
MR. KENNEY joined the Company in 1991 as a result of the acquisition of
Cetus Corporation as Vice President, Marketing and Sales. Prior to that date, he
held the position of Senior Director, Marketing Group, at Cetus for
approximately four years.
DR. LINK joined the Company as President of Chiron Ophthalmics, Inc. (now
"Chiron Vision") in February 1986 and held that title until 1995. In November
1990 he became Vice President of the Company, in January 1992 he became Chief
Executive Officer, Chiron Vision, and in April 1995 he became Chairman, Chiron
Vision.
MR. LORENZONI joined the Company in January 1995 as Vice President and Chief
Executive Officer of Biocine S.p.A. Prior to joining the Company, he had been
Chief Executive Officer of Biocine S.p.A. since 1994, and Managing Director of
Biocine S.p.A. since 1992. Prior to 1992, he was Vice Director of Ciba Italy.
DR. MENDEZ joined the Company in 1984 in Scientific Affairs, following
post-doctoral studies at the University of California, Berkeley. She became
Director of Regulatory and Patent Affairs in 1987, Vice President, Regulatory
Affairs, in February 1992 and, in February 1993, became Vice President,
Regulatory and Quality Affairs.
DR. MOOS joined Chiron in October 1991 as a Vice President of Research and
Development and Director of Chemical Therapeutics. He became Vice President,
Chemical Therapeutics Research and Development, in February 1992 and Vice
President, Research and Development, Chiron Technologies, in 1994. From 1982
until joining Chiron, he was with the Parke-Davis Pharmaceutical Research
Division of the Warner-Lambert Company, where he last held the position of Vice
President, Neuro-
science and Biological Chemistry. Dr. Moos has been an Adjunct Professor of
Pharmaceutical Chemistry at the University of California, San Francisco, since
1992.
MS. TUTTLE joined the Company in January 1995 as Senior Vice President of
CCD in charge of Worldwide Marketing and Strategic Planning, a position she held
from 1994 to February 1996. In October 1995, she was appointed as a member of
the Office of the President for Chiron Diagnostics. From 1990 to 1994, she was
Executive Director of Manufacturing Operations for CCD.
DR. URDEA joined the Company in 1981 after a post-doctoral fellowship at the
University of California, San Francisco, and has directed nucleic acid
diagnostic research and development efforts at Chiron since that time. He became
Vice President, Nucleic Acid Systems Research and Development, in February 1992.
17
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
The information under the caption "Market Price of Common Stock" on page 49
of the 1995 Consolidated Financial Statements, which is included as Exhibit 13
to this Form 10-K Report, is incorporated herein by reference.
ITEM 6. SELECTED FINANCIAL DATA
YEAR ENDED DECEMBER 31,
-----------------------------------------------------------------------
1995 1994 1993 1992 1991
-------------- ------------- ------------ ------------ ------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
Consolidated Statement of Operations
Data:
Total revenues......................... $ 1,100,582 $ 453,979 $ 317,535 $ 246,260 $ 141,498
Income (loss) from operations.......... (482,428) 42,400 15,138 (95,544) (455,765)
Other income (expense), net............ (8,346) (10,403) 7,949 6,973 12,997
Income (loss) before extraordinary
item.................................. (512,463) 18,325 18,384 (92,595) (444,650)
Net income (loss)...................... (512,463) 18,325 18,384 (99,252) (444,650)
Income (loss) per share before
extraordinary item.................... (12.62) 0.53 0.55 (3.07) (22.54)
Net income (loss) per share............ (12.62) 0.53 0.55 (3.29) (22.54)
Weighted average shares outstanding.... 40,610 34,293 33,681 30,200 19,724
DECEMBER 31,
-----------------------------------------------------------------------
1995 1994 1993 1992 1991
-------------- ------------- ------------ ------------ ------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
Consolidated Balance Sheet Data:
Working capital........................ $ 268,408 $ 314,174 $ 256,419 $ 250,874 $ 486,826
Total assets........................... 1,490,198 1,049,742 968,597 701,115 907,162
Long-term debt, excluding current
portion............................... 413,248 338,061 332,991 110,681 247,466
Accumulated deficit.................... (1,087,699) (575,236) (593,561) (611,945) (511,783)
Stockholders' equity................... 672,412 572,631 522,289 478,681 505,617
Number of employees...................... 6,894 2,668 2,179 1,867 1,706
On January 8, 1992, Chiron combined with IntraOptics, Inc. in a transaction
accounted for as a pooling-of-interests. All periods have been restated for the
effects of this combination. On December 12, 1991, Chiron acquired Cetus
Corporation ("Cetus") in a merger accounted for by the purchase method;
therefore, the operating results of Cetus are included from the date of the
acquisition.
On May 10, 1994, Chiron acquired Laboratoires Domilens, S.A. ("Domilens"),
in a transaction accounted for by the purchase method; therefore, the operating
results of Domilens are included from the date of the acquisition.
Effective January 1, 1995, under a series of agreements between Chiron and
Ciba, Chiron acquired CCD and Ciba's interest in Chiron Biocine Company and
Biocine S.p.A. The acquisition of those entities was accounted for by the
purchase method; therefore, the operating results for those entities are
included for the entire year. On March 31, 1995, Chiron Vision acquired the
surgical division of IOLAB from Johnson & Johnson in a transaction accounted for
by the purchase method; therefore, the operating results of IOLAB are included
from the date of the acquisition. On September 29, 1995, Chiron acquired
Viagene, Inc. in a transaction accounted for by the purchase method; therefore,
the operating results of Viagene, Inc. are included from the date of the
acquisition.
18
The Company has paid no cash dividends and does not expect to pay dividends
in the foreseeable future.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The information under the caption "Management's Discussion and Analysis of
Financial Condition and Results of Operations" on pages 1-12 of the 1995
Consolidated Financial Statements which is included as Exhibit 13 to this Form
10-K Report is incorporated herein by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements and supplementary data on pages 13-47 of the 1995
Consolidated Financial Statements which is included as Exhibit 13 to this Form
10-K Report are incorporated herein by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
The Company's current reports on Form 8-K dated March 7, 1994, and March 25,
1994, are incorporated herein by reference.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information under the captions "Election of Directors" and "Compliance
with Section 16(a) of the Securities Exchange Act of 1934" in the Registrant's
Proxy Statement for the Annual Meeting of Stockholders to be held on May 16,
1996, is incorporated herein by reference.
Information as to Chiron's executive officers appears at the end of Part I
of this Report.
ITEM 11. EXECUTIVE COMPENSATION
The information under the caption "Executive Compensation" in the
Registrant's Proxy Statement for the Annual Meeting of Stockholders to be held
on May 16, 1996, is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information under the captions "Principal Stockholders" and "Security
Ownership of Management" in the Registrant's Proxy Statement for the Annual
Meeting of Stockholders to be held on May 16, 1996, is incorporated herein by
reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information under the captions "Related Transactions" and "Compensation
Committee Interlocks and Insider Participation" in the Registrant's Proxy
Statement for the Annual Meeting of Stockholders to be held on May 16, 1996, is
incorporated herein by reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
a) 1. FINANCIAL STATEMENTS
The Consolidated Financial Statements and Notes to Consolidated Financial
Statements appearing on pages 13-47 of the 1995 Consolidated Financial
Statements, which is included as Exhibit 13 to this Form 10-K Report and the
Reports of Independent Auditors appearing on pages 30 and 31 of this Form 10-K,
are incorporated herein by reference.
19
2. FINANCIAL STATEMENT SCHEDULES
Schedule II -- Valuation and Qualifying Accounts
All other schedules are omitted, since the required information is not
present or is not present in amounts sufficient to require submission of the
schedule, or because the information required is included in the consolidated
financial statements and notes hereto.
b) REPORTS ON FORM 8-K
On November 13, 1995, Chiron filed Amendment No. 1 to its current report on
Form 8-K, dated September 29, 1995, to include under Item 7 the audited
financial statements of Viagene, Inc. and proforma combined condensed financial
information.
c) EXHIBITS
EXHIBIT
NUMBER EXHIBIT
- ----------- ------------------------------------------------------------------------------------
2.01 Agreement and Plan of Merger, made as of February 6, 1987, incorporated by reference
to Exhibit 2.01 of the Registrant's Form 10-Q report for the period ended September
30, 1994.
3.01 Restated Certificate of Incorporation of the Registrant, dated August 18, 1987,
incorporated by reference to Exhibit 3.01 of the Registrant's Form 10-K report for
fiscal year 1991.
3.02 Certificate of Amendment of Restated Certificate of Incorporation of the Registrant,
dated December 12, 1991, incorporated by reference to Exhibit 3.01 of the
Registrant's Form 10-K report for fiscal year 1991.
3.03 Bylaws of the Registrant, as amended, incorporated by reference to Exhibit 3.03 of
the Registrant's Form 10-K report for fiscal year 1994.
4.01 Indenture, dated as of May 21, 1987, between Cetus Corporation and Bankers Trust
Company, Trustee, incorporated by reference to Exhibit 4.01 of the Registrant's Form
10-Q report for the period ended September 30, 1994.
4.02 First Supplemental Indenture, dated as of December 12, 1991, by and among
Registrant, Cetus Corporation, and Bankers Trust Company, incorporated by reference
to Exhibit 4.02 of the Registrant's Form 10-K report for fiscal year 1992.
4.03 Indenture, dated as of November 15, 1993, between Registrant and The First National
Bank of Boston, as Trustee, incorporated by reference to Exhibit 4.03 of the
Registrant's Form 10-K report for fiscal year 1993.
4.04 Rights Agreement, dated as of August 25, 1994, between the Company and Continental
Stock Transfer & Trust Company, which includes the Certificate of Designations for
the Series A Junior Participating Preferred Stock as Exhibit A, the form of Right
Certificate as Exhibit B and the Summary of Rights to Purchase Preferred Shares as
Exhibit C, incorporated by reference to Exhibit 4.04 of the Registrant's current
report on Form 8-K dated August 25, 1994.
4.05 Amendment No. 1 to Rights Agreement dated as of November 20, 1994, between Chiron
Corporation and Continental Stock Transfer & Trust Company, incorporated by
reference to Exhibit 4.05 of the Registrant's current report on Form 8-K, dated
November 20, 1994.
4.06 $1,000,000 County of Lorain, Ohio Variable Rate Industrial Revenue Bonds dated as of
July 1, 1984, due July 1, 2014, incorporated by reference to Exhibit 4.06 of the
Registrant's Form 10-Q report for the period ended April 2, 1995. The Registrant
agrees to furnish to the Commission upon request a copy of such agreement which it
has elected not to file under the provisions of Regulation 601(b)(4)(iii).
20
EXHIBIT
NUMBER EXHIBIT
- ----------- ------------------------------------------------------------------------------------
4.07 $1,000,000 Walpole Industrial Development Authority 6.75% Industrial Revenue Bonds
dated as of July 1, 1979, due July 1, 2004, incorporated by reference to Exhibit
4.07 of the Registrant's Form 10-Q report for the period ended April 2, 1995. The
Registrant agrees to furnish to the Commission upon request a copy of such agreement
which it has elected not to file under the provisions of Regulation 601(b)(4)(iii).
10.01 Lease between Registrant and BGR Associates, a California limited partnership, dated
May 26, 1989, incorporated by reference to Exhibit 10.01 of the Registrant's Form
10-Q report for the period ended September 30, 1994.
10.02 First Amendment to Lease between Registrant and BGR Associates, a California limited
partnership.
10.03 Lease between Registrant and BGR Associates II, a California limited partnership,
dated May 26, 1989, incorporated by reference to Exhibit 10.02 of the Registrant's
Form 10-Q report for the period ended September 30, 1994.
10.04 First Amendment to Lease between Registrant and BGR Associates II, a California
limited partnership, dated as of March 15, 1995.
10.05 Agreement and Plan of Merger dated as of April 23, 1995 between Viagene, Inc., a
Delaware corporation, and Chiron Corporation, incorporated by reference to Exhibit
10.67 of the Registrant's current report on Form 8-K dated April 24, 1995.
10.06 Stockholders' Agreement dated as of April 23, 1995 among certain stockholders of
Viagene, Inc., a Delaware corporation, and Chiron Corporation, incorporated by
reference to Exhibit 10.68 of the Registrant's current report on Form 8-K dated
April 24, 1995.
10.07 Stock and Asset Purchase Agreement dated as of March 6, 1995, by and among Johnson &
Johnson, a New Jersey corporation, Site Microsurgical Systems, Inc., a Pennsylvania
corporation, and Chiron Corporation and Amendment No. 1 to Stock and Asset Purchase
Agreement, entered into March 31, 1995 by and among Johnson & Johnson, Site
Microsurgical Systems, Inc. and Chiron Corporation, incorporated by reference to
Exhibit 10.05 of the Registrant's Form 10-Q report for the period ended April 2,
1995.
10.08 Revolving Credit Facility dated as of March 24, 1995, between Chiron Corporation and
Swiss Bank Corporation, San Francisco Branch, incorporated by reference to Exhibit
10.06 of the Registrant's Form 10-Q report for the period ended April 2, 1995.
10.09 Joint Venture Agreement by and between Chiron Biocine Corporation, a California
corporation, and CIBA-GEIGY Biocine Corporation, a Delaware corporation, dated April
15, 1987 (with certain confidential information deleted), incorporated by reference
to Exhibit 10.23 of the Registrant's Form 8 filed with the Commission on February
14, 1992.
10.10 Amendment to Biocine Joint Venture Agreement by and between Chiron Biocine
Corporation, a California corporation, and CIBA-GEIGY Biocine Corporation, a
Delaware corporation, effective as of January 1, 1992, incorporated by reference to
Exhibit 10.63 to Registrant's Form 10-Q report for the period ended June 30, 1992.
10.11 Research and License Agreement by and between Registrant and The Biocine Company, a
Delaware partnership, dated April 15, 1987 (with certain confidential information
deleted), incorporated by reference to Exhibit 10.24 of the Registrant's Form 8
filed with the Commission on February 14, 1992.
10.12 License Agreement by and between CIBA-GEIGY Biocine Corporation, a Delaware
corporation, and The Biocine Company, a Delaware partnership, dated April 15, 1987
(with certain confidential information deleted), incorporated by reference to
Exhibit 10.25 of the Registrant's Form 8 filed with the Commission on February 14,
1992.
21
EXHIBIT
NUMBER EXHIBIT
- ----------- ------------------------------------------------------------------------------------
10.13 License Agreement by and between Chiron Biocine Corporation, a California
corporation, and The Biocine Company, a Delaware partnership, dated April 15, 1987
(with certain confidential information deleted), incorporated by reference to
Exhibit 10.26 of the Registrant's Form 8 filed with the Commission on February 14,
1992.
10.14 Letter Agreement signed by CIBA-GEIGY Corporation, dated April 15, 1987,
incorporated by reference to Exhibit 10.13 of the Registrant's Form 10-Q report for
the period ended September 30, 1994.
10.15 Agreement between the Registrant and Ortho Diagnostic Systems, Inc., a New Jersey
corporation, dated August 17, 1989, and Amendment to Collaboration Agreement between
Ortho Diagnostic Systems, Inc. and Registrant, dated December 22, 1989 (with certain
confidential information deleted), incorporated by reference to Exhibit 10.14 of the
Registrant's Form 10-Q report for the period ended September 30, 1994.
10.16 License and Supply Agreement between Ortho Diagnostic Systems, Inc., a New Jersey
corporation, the Registrant and Abbott Laboratories, an Illinois corporation, dated
August 17, 1989 (with certain confidential information deleted), incorporated by
reference to Exhibit 10.15 of the Registrant's Form 10-Q report for the quarter
ended June 30, 1994.
10.17 Chiron 1991 Stock Option Plan, as amended, incorporated by reference to Annex 1 of
the Registrant's Proxy Statement dated April 18, 1995.*
10.18 Forms of Option Agreements, Chiron 1991 Stock Option Plan, as amended, incorporated
by reference to Exhibit 10.17 of the Registrant's Form 10-K report for fiscal year
1993.*
10.19 Forms of Option Agreements, Cetus Corporation Amended and Restated Common Stock
Option Plan, incorporated by reference to Exhibit 10.33 of Registrant's Form 10-K
report for fiscal year 1991.*
10.20 Forms of Supplemental Letter concerning the assumption of Cetus Corporation options
by Chiron, incorporated by reference to Exhibit 10.34 of Registrant's Form 10-K
report for fiscal year 1991.*
10.21 Agreement and Plan of Reorganization dated as of October 11, 1991 by and among the
Registrant, Chiron Ophthalmics, Inc., COI Acquisition Corp., IntraOptics, Inc. and
James R. Cook, M.D., incorporated by reference to Exhibit 28.2 of Registrant's
current report on Form 8-K dated October 14, 1991.
10.22 Indemnification Agreement between the Registrant and Dr. William J. Rutter, dated as
of February 12, 1987 (which form of agreement is used for each member of
Registrant's Board of Directors), incorporated by reference to Exhibit 10.21 of the
Registrant's Form 10-Q report for the period ended September 30, 1994.
10.23 Stock Purchase Agreement by and between the Registrant and Johnson & Johnson
Development Corporation, a corporation organized and existing under the laws of the
State of New Jersey, dated as of October 3, 1986, incorporated by reference to
Exhibit 10.22 of the Registrant's Form 10-Q report for the period ended September
30, 1994.
10.24 Ciba Corning Diagnostics Corp. Policies, Guidelines and Procedures regarding
Severance Pay.*
10.25 Form of Debenture Purchase Agreement between the Registrant and CIBA-GEIGY, Limited,
a corporation organized and existing under the laws of Switzerland, dated June 22,
1990, incorporated by reference to Exhibit 10.25 of the Registrant's Form 10-K
report for fiscal year 1994.
10.26 Chiron Corporation 1.90% Convertible Subordinated Note due 2000, Series B,
incorporated by reference to Exhibit 10.25 of the Registrant's Form 10-K report for
fiscal year 1993.
22
EXHIBIT
NUMBER EXHIBIT
- ----------- ------------------------------------------------------------------------------------
10.27 Investment Agreement dated as of November 20, 1994 among Ciba-Geigy Limited, Ciba-
Geigy Corporation, Ciba Biotech Partnership, Inc. and Chiron Corporation,
incorporated by reference to Exhibit 10.54 of the Registrant's current report on
Form 8-K dated November 20, 1994.
10.28 Governance Agreement dated as of November 20, 1994 among Ciba-Geigy Limited, Ciba-
Geigy Corporation and Chiron Corporation, incorporated by reference to Exhibit 10.55
of the Registrant's current report on Form 8-K dated November 20, 1994.
10.29 Subscription Agreement dated as of November 20, 1994 among Ciba-Geigy Limited, Ciba-
Geigy Corporation, Ciba Biotech Partnership, Inc. and Chiron Corporation,
incorporated by reference to Exhibit 10.56 of the Registrant's current report on
Form 8-K dated November 20, 1994.
10.30 Cooperation and Collaboration Agreement dated as of November 20, 1994, between Ciba-
Geigy Limited and Chiron Corporation, incorporated by reference to Exhibit 10.57 of
the Registrant's current report on Form 8-K dated November 20, 1994.
10.31 Registration Rights Agreement dated as of November 20, 1994 between Ciba Biotech
Partnership, Inc. and Chiron Corporation, incorporated by reference to Exhibit 10.58
of the Registrant's current report on Form 8-K dated November 20, 1994.
10.32 Market Price Option Agreement dated as of November 20, 1994 among Ciba-Geigy
Limited, Ciba-Geigy Corporation, Ciba Biotech Partnership, Inc. and Chiron
Corporation, incorporated by reference to Exhibit 10.59 of the Registrant's current
report on Form 8-K dated November 20, 1994.
10.33 Amendment dated as of January 3, 1995 among Ciba-Geigy Limited, Ciba-Geigy
Corporation, Ciba Biotech Partnership, Inc. and Chiron Corporation, incorporated by
reference to Exhibit 10.60 of the Registrant's current report on Form 8-K dated
January 4, 1995.
10.34 Supplemental Agreement dated as of January 3, 1995 among Ciba-Geigy Limited,
Ciba-Geigy Corporation, Ciba Biotech Partnership, Inc. and Chiron Corporation,
incorporated by reference to Exhibit 10.61 of the Registrant's current report on
Form 8-K dated January 4, 1995.
10.35 Amendment with Respect to Employee Stock Option Arrangements dated as of January 3,
1995 among Ciba-Geigy Limited, Ciba-Geigy Corporation, Ciba Biotech Partnership,
Inc. and Chiron Corporation, incorporated by reference to Exhibit 10.62 of the
Registrant's current report on Form 8-K dated January 4, 1995.*
10.36 Supplemental Benefits Agreement, dated July 21, 1989, between the Registrant and Dr.
William J. Rutter, incorporated by reference to Exhibit 10.27 of the Registrant's
Form 10-Q report for the period ended September 30, 1994.*
10.37 Lease dated as of July 1, 1983 between Cetus Corporation and H.B. Chapman, Jr.,
incorporated by reference to Exhibit 10.28 of the Registrant's Form 10-Q report for
the period ended September 30, 1994.
10.38 Amendment to Lease, made as of March 20, 1990, amending Lease dated July 1, 1983,
between Harold B. Chapman, Jr. and Cetus Corporation, incorporated by reference to
Exhibit 10.37 of the Registrant's Form 10-Q report for the period ended April 2,
1995.
10.39 Second Amendment to Lease made as of January 1, 1995 between Harold B. Chapman, Jr.
and the Registrant.
10.40 Lease commencing March 1, 1987, between EuroCetus B.V. and the Municipal Land
Company of the City of Amsterdam (Translation).
23
EXHIBIT
NUMBER EXHIBIT
- ----------- ------------------------------------------------------------------------------------
10.41 Form of Option Agreement (with Purchase Agreements attached thereto) between Cetus
Corporation and each former limited partner of Cetus Healthcare Limited Partnership,
a California limited partnership, incorporated by reference to Exhibit 10.31 of the
Registrant's Form 10-Q report for the period ended September 30, 1994.
10.42 Form of Option Agreement (with forms of Purchase Agreements attached thereto), dated
December 30, 1986, between Cetus Corporation and each former limited partner of
Cetus Healthcare Limited Partnership II, a California limited partnership,
incorporated by reference to Exhibit 10.32 of the Registrant's Form 10-Q report for
the period ended September 30, 1994.
10.43 Big-O Property Purchase and Leaseback Agreement, dated as of October 31, 1988,
between Cetus Corporation and Richard K. Robbins, incorporated by reference to
Exhibit 10.33 of the Registrant's Form 10-Q report for the period ended September
30, 1994.
10.44 Triple Net Lease dated as of January 20, 1989, between Cetus Corporation and BGR
Associates III, a California limited partnership, and Marin County Exchange
Corporation, incorporated by reference to Exhibit 10.34 of the Registrant's Form
10-Q report for the period ended September 30, 1994.
10.45 License Agreement between the Registrant and the Board of Trustees of the Leland
Stanford Junior University, dated December 15, 1981, incorporated by reference to
Exhibit 10.07 of the Registrant's Form 10-Q report for the period ended September
30, 1994.
10.46 Stock Purchase and Warrant Agreement dated May 9, 1989, between Cetus Corporation
and Hoffmann-La Roche Inc., incorporated by reference to Exhibit 10.36 of the
Registrant's Form 10-Q report for the period ended September 30, 1994.
10.47 Letter Agreement, dated as of December 12, 1991, relating to Stock Purchase and
Warrant Agreement between Registrant and Hoffmann-La Roche Inc., incorporated by
reference to Exhibit 10.59 of Registrant's Form 10-K report for fiscal year 1991.
10.48 Agreement and Plan of Merger dated as of July 21, 1991, by and among Registrant,
Chiron Acquisition Subsidiary, Inc. and Cetus Corporation, incorporated by reference
to Exhibit 28.2 of Registrant's Form 8-K report dated July 22, 1991.
10.49 Letter Agreement dated September 26, 1990 between the Registrant and William G.
Green, incorporated by reference to Exhibit 10.41 of the Registrant's Form 10-K
report for fiscal year 1992.*
10.50 Letter Agreement dated December 18, 1991 between Registrant and Jack Schuler,
incorporated by reference to Exhibit 10.42 of the Registrant's Form 10-K report for
fiscal year 1992.*
10.51 Lease between Sclavo S.p.A. and Biocine Sclavo S.p.A., dated January 7, 1992,
incorporated by reference to Exhibit 10.49 of the Registrant's Form 10-Q report for
the period ended April 2, 1995.
10.52 Agreement made as of November 11, 1993 by and between Kodak Clinical Diagnostics
Limited, a company registered in England, and Ciba Corning Diagnostics Corp., a
Delaware corporation, and Letter dated October 7, 1994 from Kodak Clinical
Diagnostics Limited to Ciba Corning Diagnostics Corp., incorporated by reference to
Exhibit 10.50 of Amendment No. 1 to the Registrant's Form 10-Q report for the period
ended April 2, 1995. [Certain information has been omitted from the Agreement
pursuant to a request by Registrant for confidential treatment pursuant to Rule
24b-2.]
10.53 Letter Agreement dated September 9, 1991 between the Registrant and Walter Moos,
incorporated by reference to Exhibit 10.47 of the Registrant's Form 10-K report for
fiscal year 1992.*
24
EXHIBIT
NUMBER EXHIBIT
- ----------- ------------------------------------------------------------------------------------
10.54 Letter Agreement between the Registrant and Walter Moos, dated February 1, 1993,
incorporated by reference to Exhibit 10.48 of the Registrant's Form 10-K report for
fiscal year 1992.*
10.55 Letter Agreement between Registrant and Renato Fuchs, dated May 13, 1993,
incorporated by reference to Exhibit 10.47 of the Registrant's Form 10-K report for
fiscal year 1993.*
10.56 Agreement made as of December 6, 1984, by and between Corning Glass Works, a New
York corporation, and Bioanalysis Limited, a company incorporated in England and
Wales, and Letter dated July 26, 1985 from Bioanalysis Limited to Corning Glass
Works, incorporated by reference to Exhibit 10.54 of the Registrant's Form 10-Q
report for the period ended April 2, 1995. [Certain information has been omitted
from the Agreement pursuant to a request by Registrant for confidential treatment
pursuant to Rule 24b-2.]
10.57 Description of Executive Officer Variable Compensation Program.
10.58 Chiron Corporation 1995 Executive Officer Variable Cash Compensation Plan,
incorporated by reference to Annex 2 of the Registrant's Proxy Statement dated April
18, 1995.*
10.59 Regulatory Filing, Development and Supply Agreement between the Registrant, Cetus
Oncology Corporation, a wholly-owned subsidiary of the Registrant, and Schering AG,
a German company, dated as of May 10, 1993 (with certain confidential information
deleted), incorporated by reference to Exhibit 10.50 of the Registrant's current
report on Form 8-K dated February 9, 1994.
10.60 Letter Agreement dated December 30, 1993 by and between Registrant and Schering AG,
a German company (with certain confidential information deleted), incorporated by
reference to Exhibit 10.51 of the Registrant's Form 10-K report for fiscal year
1993.
10.61 Guaranty, dated as of September 29, 1994, made by Registrant, in favor of Bankers
Trust Company, as trustee, incorporated by reference to Exhibit 10.52 of the
Registrant's Form 10-Q report for the period ended September 30, 1994.
10.62 Guaranty, dated as of September 29, 1994, made by Cetus Corporation, in favor of The
First National Bank of Boston, as trustee, incorporated by reference to Exhibit
10.53 of the Registrant's Form 10-Q report for the period ended September 30, 1994.
10.63 Letter Agreements dated September 11, 1992, July 15, 1994 and September 14, 1994
between the Registrant and Lewis T. Williams, incorporated by reference to Exhibit
10.54 of the Registrant's Form 10-Q report for the period ended September 30, 1994.*
10.64 Letter dated January 4, 1995 to C. William Zadel, incorporated by reference to
Exhibit 10.65 of the Registrant's Form 10-K report for fiscal year 1994.*
10.65 Letter dated June 28, 1995 to C. William Zadel.
10.66 Letter to Dino Dina dated April 24, 1984, incorporated by reference to Exhibit 10.66
of the Registrant's Form 10-K report for fiscal year 1994.*
10.67 Research Agreement, dated as of July 15, 1985, between Ciba-Geigy Limited, a Swiss
corporation, and Ciba Corning Diagnostics Corp., a Delaware corporation,
incorporated by reference to Exhibit 10.64 of the Registrant's Form 10-Q report for
the period ended April 2, 1995.
10.68 Licensing Agreement, effective December 18, 1986, by and between Miles Laboratories,
Inc., a Delaware corporation, and Ciba Corning Diagnostics Corp., a Delaware
corporation, and Letter dated December 18, 1992 from Ciba Corning Diagnostics Corp.
to Miles Laboratories, Inc., incorporated by reference to Exhibit 10.65 of Amendment
No. 1 to the Registrant's Form 10-Q report for the period ended April 2, 1995.
[Certain information has been omitted from the Agreement pursuant to a request by
Registrant for confidential treatment pursuant to Rule 24b-2.]
25
EXHIBIT
NUMBER EXHIBIT
- ----------- ------------------------------------------------------------------------------------
10.69 Magnetocluster Binding Assay Technology Agreement, dated as of January 21, 1983, by
and between Bioclinical Group, Inc., a Delaware corporation, and Corning Glass
Works, a New York corporation, incorporated by reference to Exhibit 10.66 of
Amendment No. 1 to the Registrant's Form 10-Q report for the period ended April 2,
1995. [Certain information has been omitted from the Agreement pursuant to a request
by Registrant for confidential treatment pursuant to Rule 24b-2.]
10.70 Turn-back License Agreement, dated as of May 30, 1986, by and between Ciba Corning
Diagnostics Corp., a Delaware corporation, and Advanced Magnetics, Inc., a Delaware
corporation, incorporated by reference to Exhibit 10.67 of the Registrant's Form
10-Q report for the period ended April 2, 1995. [Certain information has been
omitted from the Agreement pursuant to a request by Registrant for confidential
treatment pursuant to Rule 24b-2.]
10.71 Settlement Agreement, dated August 30, 1989, between Ciba Corning Diagnostics Corp.
and Advanced Magnetics, Inc., incorporated by reference to Exhibit 10.68 of the
Registrant's Form 10-Q report for the period ended April 2, 1995. [Certain
information has been omitted from the Agreement pursuant to a request by Registrant
for confidential treatment pursuant to Rule 24b-2.]
10.72 Lease made and entered into December 17, 1984 between BGR Associates, a California
limited partnership, and Cetus Corporation and Amendment to Lease dated December 17,
1984 entered into effective February 1, 1986, incorporated by reference to Exhibit
10.69 of the Registrant's Form 10-Q report for the period ended April 2, 1995.
10.73 Second Amendment to Lease dated as of March 15, 1995 between BGR Associates, a
California limited partnership, and Registrant.
10.74 Agreement, effective as of December 21, 1988, by and between Hoffmann-La Roche Inc.,
a New Jersey corporation, and Cetus Corporation, incorporated by reference to
Exhibit 10.70 of the Registrant's Form 10-Q report for the period ended April 2,
1995. [Certain information has been omitted from the Agreement pursuant to a request
by Registrant for confidential treatment pursuant to Rule 24b-2.]
10.75 Agreement, effective as of December 21, 1988, by and among F. Hoffmann-La Roche
Ltd., a Swiss corporation, Cetus Corporation, and EuroCetus International, B.V., a
Netherlands Antilles corporation, incorporated by reference to Exhibit 10.71 of the
Registrant's Form 10-Q report for the period ended April 2, 1995. [Certain
information has been omitted from the Agreement pursuant to a request by Registrant
for confidential treatment pursuant to Rule 24b-2.]
10.76 Agreement, by and between Cetus Oncology Corporation, EuroCetus International, N.V.,
and F. Hoffmann-La Roche Ltd., incorporated by reference to Exhibit 10.72 of the
Registrant's Form 10-Q report for the period ended April 2, 1995. [Certain
information has been omitted from the Agreement pursuant to a request by Registrant
for confidential treatment pursuant to Rule 24b-2.]
10.77 Agreement commencing January 1, 1991, between EuroCetus B.V. and the Municipal
Development Corporation (Translation), incorporated by reference to Exhibit 10.41 of
the Registrant's Form 10-K report for fiscal year 1994.
10.78 Settlement Agreement on Purified IL-2, made as of April 14, 1995, by and between
Cetus Oncology Corporation, dba Chiron Therapeutics, a Delaware corporation, and
Takeda Chemical Industries, Ltd., a Japanese corporation, incorporated by reference
to Exhibit 10.74 of the Registrant's Form 10-Q report for the period ended July 2,
1995. [Certain information has been omitted from the Agreement pursuant to a request
by Registrant for confidential treatment pursuant to Rule 24b-2.]
26
EXHIBIT
NUMBER EXHIBIT
- ----------- ------------------------------------------------------------------------------------
10.79 License Agreement made and entered into December 1, 1987, by and between Sloan
Kettering Institute for Cancer Research, a not-for-profit New York corporation, and
Cetus Corporation, incorporated by reference to Exhibit 10.75 of the Registrant's
Form 10-Q report for the period ended July 2, 1995. [Certain information has been
omitted from the Agreement pursuant to a request by Registrant for confidential
treatment pursuant to Rule 24b-2.]
10.80 Chiron Funding L.L.C. Limited Liability Company Agreement, entered into and
effective as of December 28, 1995, among the Registrant, Chiron Biocine Company and
Biocine S.p.A. and Ciba-Geigy Corporation. [Certain information has been omitted
from the Agreement pursuant to a request by Registrant for confidential treatment
pursuant to Rule 24b-2.]
10.81 Agreement between Ciba-Geigy Limited and the Registrant made November 15, 1995.
[Certain information has been omitted from the Agreement pursuant to a request by
Registrant for confidential treatment pursuant to Rule 24b-2.]
10.82 Reimbursement Agreement dated as of March 24, 1995, between Ciba-Geigy Limited, a
Swiss corporation, and the Registrant, incorporated by reference to Exhibit 10.76 of
the Registrant's Form 10-Q report for the period ended July 2, 1995.
10.83 Promissory Note, as amended and restated, dated January 1, 1995 by Ciba Corning
Diagnostics Corp.
10.84 Commercial lease between Domilyon Corporation and Domilens Laboratories and
Amendment No. 1 to Commercial Lease dated May 9, 1994.
10.85 Agreement between the Registrant and Cephalon, Inc. dated as of January 7, 1994, and
Letter Agreements between the Registrant and Cephalon dated January 13, 1995 and May
23, 1995. [Certain information has been omitted from the Agreements pursuant to a
request by Registrant for confidential treatment pursuant to Rule 24b-2.]
11 Statement of Computation of Earnings per Share.
13 Consolidated Financial Statements.
21 List of Subsidiaries of the Registrant.
23.1 Consent of KPMG Peat Marwick LLP, Independent Auditors. The consent set forth on
page 32 is incorporated herein by reference.
23.2 Consent of Ernst & Young LLP, Independent Auditors. The consent set forth on page 33
is incorporated herein by reference.
24 Power of Attorney. The Power of Attorney set forth on pages 28 and 29 is
incorporated herein by reference.
27 Financial Data Schedule.
- ------------------------
* Management contract, compensatory plan or arrangement.
27
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Report to be signed on
its behalf by the undersigned, thereunto duly authorized.
Date: March 28, 1996
CHIRON CORPORATION
By /s/ EDWARD E. PENHOET
-----------------------------------
Edward E. Penhoet, Ph.D.
PRESIDENT AND CHIEF EXECUTIVE
OFFICER
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS:
That the undersigned officers and directors of Chiron Corporation do hereby
constitute and appoint Edward E. Penhoet, Ph.D., and William J. Rutter, Ph.D.,
and each of them, the lawful attorney and agent or attorneys and agents with
power and authority to do any and all acts and things and to execute any and all
instruments which said attorneys and agents, or either of them, determine may be
necessary or advisable or required to enable Chiron Corporation to comply with
the Securities Exchange Act of 1934, as amended, and any rules or regulations or
requirements of the Securities and Exchange Commission in connection with this
Form 10- K Report. Without limiting the generality of the foregoing power and
authority, the powers granted include the power and authority to sign the names
of the undersigned officers and directors in the capacities indicated below to
this Form 10-K report or amendments or supplements thereto, and each of the
undersigned hereby ratifies and confirms all that said attorneys and agents or
either of them, shall do or cause to be done by virtue hereof. This Power of
Attorney may be signed in several counterparts.
28
IN WITNESS WHEREOF, each of the undersigned has executed this Power of
Attorney as of the date indicated opposite his name.
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
SIGNATURE TITLE DATE
- ----------------------------------- ------------------------- ----------------
/s/ EDWARD E. PENHOET
- ----------------------------------- President and Chief March 28, 1996
Edward E. Penhoet, Ph.D. Executive Officer
Senior Vice President,
Finance and
/s/ DENNIS L. WINGER Administration, Chief
- ----------------------------------- Financial Officer, and March 28, 1996
Dennis L. Winger Principal Accounting
Officer
/s/ WILLIAM J. RUTTER
- ----------------------------------- Chairman of the Board of March 28, 1996
William J. Rutter, Ph.D. Directors
/s/ LEWIS W. COLEMAN
- ----------------------------------- Director March 28, 1996
Lewis W. Coleman
/s/ PIERRE E. DOUAZE
- ----------------------------------- Director March 28, 1996
Pierre E. Douaze
/s/ DONALD GLASER
- ----------------------------------- Director March 28, 1996
Donald Glaser, Ph.D.
/s/ ALEX KRAUER
- ----------------------------------- Director March 28, 1996
Alex Krauer, Ph.D.
/s/ FRANCOIS L'EPLATTENIER
- ----------------------------------- Director March 28, 1996
Francois L'Eplattenier, Ph.D.
/s/ HENRI SCHRAMEK
- ----------------------------------- Director March 28, 1996
Henri Schramek, Ph.D.
/s/ JACK SCHULER
- ----------------------------------- Director March 28, 1996
Jack Schuler
/s/ PIETER J. STRIJKERT
- ----------------------------------- Director March 28, 1996
Pieter J. Strijkert, Ph.D.
29
REPORT OF KPMG PEAT MARWICK LLP, INDEPENDENT AUDITORS
The Board of Directors and Stockholders
Chiron Corporation:
We have audited the accompanying consolidated balance sheets of Chiron
Corporation and subsidiaries as of December 31, 1995 and 1994 and the related
consolidated statements of operations, stockholders' equity and cash flows for
the years then ended. In connection with our audits of the consolidated
financial statements, we also have audited the financial statement schedule as
listed in the accompanying index. These consolidated financial statements and
the financial statement schedule are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements and the financial statement schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Chiron
Corporation and subsidiaries as of December 31, 1995 and 1994, and the results
of their operations and their cash flows for the years then ended, in conformity
with generally accepted accounting principles. Also in our opinion, the related
financial statement schedule, when considered in relation to the basic
consolidated financial statements taken as a whole, presents fairly, in all
material respects, the information set forth therein.
KPMG Peat Marwick LLP
San Francisco, California
February 20, 1996
30
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
The Board of Directors and Stockholders
Chiron Corporation
We have audited the consolidated statements of operations, stockholders'
equity and cash flows of Chiron Corporation for the year ended December 31,
1993, included in the 1995 Consolidated Financial Statements of Chiron
Corporation included as Exhibit 13. Our audit also included the financial
statement schedule of Chiron Corporation for the year ended December 31, 1993,
listed in the Index at Item 14(a). These financial statements and schedule are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements and schedule based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated results of
operations, changes in stockholders' equity and cash flows of Chiron Corporation
for the year ended December 31, 1993, in conformity with generally accepted
accounting principles. Also, in our opinion, the related financial statement
schedule, when considered in relation to the basic consolidated financial
statements taken as a whole, presents fairly in all material respects the
information set forth therein.
ERNST & YOUNG LLP
San Francisco, California
February 25, 1994
31
CONSENT OF KPMG PEAT MARWICK LLP, INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statements
(File Numbers 33-20181, 33-35182, 2-90595, 33-23899, 33-58305, 33-44477,
33-65024, 33-65177, 33-45822, 33-63297 and 33-65175 on Form S-8 and File Number
33-43574 on Form S-3) pertaining to the Chiron Corporation 1982 Stock Option
Plan, the 1988 Employee Stock Purchase Plan, the 1991 Stock Option Plan, the
IntraOptics, Inc. 1986 Incentive Stock Option Plan, as amended, the 1989 Stock
Option Plan of Viagene, Inc., the Viagene Employee Stock Purchase Plan and the
shares issuable to certain warrant holders and in the related prospectuses of
our report dated February 20, 1996, relating to the consolidated balance sheets
of Chiron Corporation and subsidiaries as of December 31, 1995 and 1994, and the
related consolidated statements of operations, stockholders' equity, and cash
flows for the years then ended and the related schedule, which report appears in
the December 31, 1995 annual report on Form 10-K of Chiron Corporation.
KPMG Peat Marwick LLP
San Francisco, California
March 26, 1996
32
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statements
of Chiron Corporation (Forms S-8, Nos. 33-20181, 33-35182, 2-90595, 33-23899,
33-44477, 33-45822, 33-65024, 33-58305, 33-63297, 33-65175 and 33-65177, Form
S-3 No. 33-43574 and Form S-4 No. 33-60503) pertaining to the 1982 Stock Option
Plan, the 1988 Employee Stock Purchase Plan, and the 1991 Stock Option Plan of
Chiron Corporation, the IntraOptics, Inc. 1986 Incentive Stock Option Plan,
certain warrants (the "Cetus Warrants"), the 1989 Stock Option Plan, the 1993
Incentive Stock Option Plan, and the Employee Stock Purchase Plan of Viagene,
Inc. and certain shares related to the acquisition of Viagene, Inc. and in the
related prospectuses of our report dated February 25, 1994, with respect to the
consolidated statements of operations, stockholders' equity and cash flows and
schedule of Chiron Corporation for the year ended December 31, 1993 included and
incorporated herein by reference in this Annual Report (Form 10-K) for the year
ended December 31, 1995.
ERNST & YOUNG LLP
San Francisco, California
March 26, 1996
33
CHIRON CORPORATION
INDEX TO FINANCIAL STATEMENTS AND
FINANCIAL STATEMENT SCHEDULES
PAGES OF 1995
CONSOLIDATED
FINANCIAL
STATEMENTS
INCORPORATED FORM 10-K
BY REFERENCE PAGE
--------------- ---------------
Financial Statements and Notes............................................... 1-47 --
Report of KPMG Peat Marwick LLP.............................................. -- 30
Report of Ernst & Young LLP.................................................. -- 31
Schedule II -- Valuation and Qualifying Accounts............................. -- 35
34
CHIRON CORPORATION
SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
(IN THOUSANDS)
ADDITIONS
-------------------------
BALANCE AT CHARGED TO CHARGED TO BALANCE
BEGINNING COSTS AND OTHER AT END
DESCRIPTION OF YEAR EXPENSES ACCOUNTS DEDUCTIONS RECLASSIFICATIONS OF YEAR
- ---------------------------------- ----------- ----------- ------------ ----------- --------------- ---------
1995:
Accounts receivable............. $ 7,210 $ 8,815 $ 6,680(1) $ (4,181) $ -- $ 18,524
1994:
Accounts receivable............. 5,194 5,880 2,424(1) (4,880) (1,408)(2) 7,210
1993:
Accounts receivable............. 2,525 4,012 -- (1,343) -- 5,194
- ------------------------
(1) Represents accounts receivable allowances as of the acquisition date related
to acquired businesses.
(2) Represents amounts reclassified to other current liabilities.
35