Chiron Reports Second-Quarter 2005 Adjusted Earnings of $0.08 Per Share, GAAP Earnings of Less Than $0.01 Per Share; 10 Percent Increase in Revenues Over Second-Quarter 2004

HIGHLIGHTS

-- Chiron reported adjusted income from continuing operations of $0.08 per share and GAAP income from continuing operations of less than $0.01 per share for the second quarter of 2005.

-- On July 21, 2005, the U.S. Food and Drug Administration (FDA) completed an on-site inspection of Chiron's Liverpool facility, which manufactures FLUVIRIN(R) influenza virus vaccine. Consistent with FDA process, at the conclusion of the on-site inspection, Chiron received a list of observations on a Form 483. Chiron expects to complete its response to these observations in early August. Chiron is not in a position to characterize the results of the inspection until the FDA delivers its final conclusion.

-- Chiron continues to expect 2005 income from continuing operations to be between $1.20 and $1.45 per share on an adjusted basis and between $0.86 and $1.11 per share on a GAAP basis.

Chiron reported adjusted income from continuing operations of $16million, or $0.08 per share, for the second quarter of 2005, comparedto $39 million, or $0.20 per share, for the second quarter of 2004.Chiron reported GAAP income from continuing operations of $49,000, orless than $0.01 per share, for the second quarter of 2005, compared to$23 million, or $0.12 per share, for the second quarter of 2004.

The costs associated with remediation of Chiron's Liverpoolmanufacturing facility, which produces FLUVIRIN vaccine, had amaterial impact on the financial results for the second quarter of2005. Chiron incurred an increase in idle facility costs compared tothe second quarter of 2004 of $14 million as a result of limitedFLUVIRIN vaccine production in the second quarter of 2005 and incurredFLUVIRIN vaccine remediation costs of $8 million. In addition, Chironincurred legal costs associated with the FLUVIRIN vaccine-relateddevelopments of $5 million. Chiron expects costs for the FLUVIRINremediation and legal costs related to the FLUVIRIN developments tocontinue to impact financial results in successive quarters in 2005.

The financial results for the second quarter of 2005 were alsoimpacted because, as the company reported on July 20, 2005, due to aproduct sterility issue Chiron has written off the entire BEGRIVAC(TM)influenza virus vaccine product inventory in the second quarter of2005, resulting in a $15 million charge to cost of sales. Chiron willnot supply any BEGRIVAC vaccine this influenza season. Chiron has beenworking closely with the German regulatory agency, the Paul EhrlichInstitute (PEI), toward Chiron's goal of returning to the market withBEGRIVAC vaccine next year.

Foreign exchange rates resulted in an approximate $0.01 decreasein adjusted earnings per share and an approximate $0.01 decrease inGAAP earnings per share for the second quarter of 2005.

"While the loss of the BEGRIVAC supply is a disappointment, we hada sound quarter, with revenue up 10 percent," said Howard Pien, chiefexecutive officer of Chiron.

Chiron uses adjusted financial statements to gain an understandingof the company's operating performance on a comparative basis.Adjusted amounts exclude special items relating to certainacquisitions, which may not be indicative of the company's trends orpotential future performance. Please refer to the tables at the end ofthis press release (which are also located at www.chiron.com in theInvestors section under Financial Reports) for more detail on theseitems and a reconciliation of the adjusted financial information toGAAP financial information. All references to per-share amounts areper diluted share.

Selected Financial Highlights (Amounts are both GAAP and adjusted)
---------------------------------------------------------------------

Second- Second-
Quarter Quarter
($ millions) 2005 2004 Change
---------------------------------------------------------------------
Net product sales $304 $281 8%
Total revenues 419 380 10%
Cost of sales 178 129
Gross profit margin 42% 54%
Research and development 107 100 7%
Selling, general and administrative 128 107 20%
---------------------------------------------------------------------

Net product sales for the second quarter of 2005 increased 8percent compared to the second quarter of 2004, primarily due toincreases in sales of travel vaccines, meningococcal vaccines,BETASERON(R) interferon beta-1b, PROCLEIX(R) NAT products and TOBI(R)tobramycin inhalation solution offset by declines in sales ofinfluenza vaccines, pediatric and other vaccines, and PROLEUKIN(R)(aldesleukin) for injection.

Revenues increased 10 percent primarily due to increases inproduct sales and royalty and license fee revenues. For the secondquarter of 2005, foreign exchange rates resulted in a 1 percentincrease in total revenues.

Gross profit margin declined primarily due to $14 million inincremental costs associated with the idle capacity of Chiron'sLiverpool facility, $8 million in remediation-related costs for theLiverpool facility, and a $15 million charge as a result of thewrite-off of the BEGRIVAC vaccine product inventory. Also contributingto the decrease was a reduction in the BioPharmaceuticals gross profitmargin, primarily due to increases in planned idle facility time andongoing process improvement efforts over the second quarter of 2004.

Research and development expenses increased primarily due to thecost of development efforts in the oncology franchise, meningococcalfranchise and for CUBICIN(R) (daptomycin for injection). This increasewas partially offset by eliminated costs from research and developmentprograms that were discontinued prior to the second quarter of 2005.In addition, the second quarter of 2004 included higher costs for thePhase III CAPTIVATE trial for tifacogin, which commenced in the secondquarter of 2004, due to production of clinical materials.

Selling, general and administrative expenses increased partiallydue to $5 million in legal costs associated with the FLUVIRIN(R)influenza virus vaccine-related developments and $2 million due to theeffect of foreign exchange rates. In addition, marketing andpre-launch programs for the CUBICIN product and PULMINIQ(TM)(cyclosporine, USP) inhalation solution, investment in geographicpenetration, and corporate governance costs contributed to theincrease.

BLOOD TESTING

Total Blood Testing revenues were $133 million for the secondquarter of 2005, an increase of 16 percent compared to the secondquarter of 2004.

Selected Blood Testing Revenues
----------------------------------------------------------------------
Second- Second-
Quarter Quarter
($ millions) 2005 2004 Change
----------------------------------------------------------------------
Ortho-Clinical Diagnostics $8 $7 21%
PROCLEIX(R) NAT products 66 61 9%
------------------------------
Blood Testing net product sales 74 67 10%
Revenues from joint business arrangement 31 29 9%
Royalty and license fee revenues 26 16 60%
Total Blood Testing revenues (1) $133 $115 16%
----------------------------------------------------------------------

(1) Total Blood Testing revenues consist of net product sales from
Chiron's joint business contractual arrangement with
Ortho-Clinical Diagnostics and from Chiron's PROCLEIX NAT product
line, revenues from Chiron's joint business arrangement with
Ortho-Clinical Diagnostics, collaborative agreement revenues,
royalty and license fee revenues, and other revenues. Totals may
not sum due to rounding and the inclusion of only selected
financial information.

-- PROCLEIX NAT products: The increase in sales for the second quarter of 2005 compared to the second quarter of 2004 was primarily due to the introduction of the PROCLEIX(R) ULTRIO(TM) Assay outside of the United States and continued penetration into several markets abroad.

-- Joint business arrangement with Ortho-Clinical Diagnostics: The increase in revenues was primarily due to higher profitability realized by the joint business.

-- Royalty and license fee revenues related to NAT blood screening: The increase was primarily due to recognition of the Blood Testing share of the September 2004 settlement with F. Hoffmann-La Roche (Roche) related to a U.S. patent directed to NAT methods for HIV and various settlements subsequent to the second quarter of 2004, including Chiron's settlement agreement with the Scottish National Blood Service. In addition, Roche royalties increased due to rate increases resulting from certain countries entering the European Union and an increase in reported donations.

The gross profit margin for Blood Testing products was 40 percentfor the second quarter of 2005, compared to 42 percent for the secondquarter of 2004. The decrease was primarily due to additionalPROCLEIX(R) TIGRIS(R) System support and service.

VACCINES

Vaccines net product sales were $97 million for the second quarterof 2005, an increase of 12 percent compared to the second quarter of2004.

Selected Vaccines Revenues
----------------------------------------------------------------------
Second- Second-
Quarter Quarter
($ millions) 2005 2004 Change
----------------------------------------------------------------------
Influenza vaccines $0 $8 - 106%
Meningococcal vaccines 14 5 171%
Travel vaccines 45 26 71%
Pediatric and other vaccines 39 48 - 18%
--------------------------------
Vaccines net product sales 97 87 12%
Total Vaccines revenues (2) $102 $94 8%
----------------------------------------------------------------------

(2) Total Vaccines revenues consist of net product sales,
collaborative agreement revenues, royalty and license fee
revenues, and other revenues. Totals may not sum due to rounding
and the inclusion of only selected financial information.

-- Influenza vaccines: The decrease in influenza vaccines sales for the second quarter of 2005 compared to the second quarter of 2004 was due to a manufacturing upgrade.

-- Meningococcal vaccines: The increase in meningococcal vaccines sales was primarily due to sales of MENZB(TM) meningococcal B vaccine to the Ministry of Health in New Zealand.

-- Travel vaccines: The increase in travel vaccines sales was primarily due to an additional $17 million in sales of ENCEPUR(R) tick-borne encephalitis vaccine driven by overall market growth and a number of marketing initiatives. In addition, increased demand for rabies vaccines in the United Kingdom, primarily due to a product recall from a competitor, contributed to the increase.

-- Pediatric and other vaccines: The decrease in pediatric and other vaccines sales was primarily due to a decrease in sales of measles, mumps and rubella (MMR) vaccines. In the second quarter of 2004, MMR product sales reflected sales from a tender for a large-scale MMR vaccination campaign. Sales of polio vaccines were also down due to a decrease in tenders. These decreases were partially offset by increased sales of Chiron's diptheria, tetanus and pertussis vaccine.

The gross profit margin for Vaccines products was 7 percent forthe second quarter of 2005, compared to 34 percent for the secondquarter of 2004. The decrease was primarily due to Liverpoolincremental idle facility costs of $14 million and FLUVIRIN(R)influenza virus vaccine remediation costs of $8 million, which werecharged to cost of sales because the facility had limited productionin the second quarter of 2005. In addition, Chiron wrote off theentire BEGRIVAC(TM) influenza virus vaccine product inventory in thesecond quarter of 2005, resulting in a $15 million charge to cost ofsales.

BIOPHARMACEUTICALS

BioPharmaceuticals net product sales were $132 million for thesecond quarter of 2005, an increase of 4 percent compared to thesecond quarter of 2004.

Selected BioPharmaceuticals Revenues
---------------------------------------------------------------------
Second- Second-
Quarter Quarter
($ millions) 2005 2004 Change
---------------------------------------------------------------------
TOBI(R) tobramycin inhalation
solution $57 $51 10%
PROLEUKIN(R) (aldesleukin) for
injection 32 35 - 10%
BETASERON(R) interferon beta-1b 38 32 21%
BioPharmaceuticals net product
sales (3) 132 127 4%
BETAFERON(R) interferon beta-1b
royalties 17 12 46%
Total BioPharmaceuticals
revenues (4) $154 $147 5%
---------------------------------------------------------------------

(3) Net product sales include sales from TOBI, PROLEUKIN, BETASERON
and other products.

(4) Total BioPharmaceuticals revenues consist of net product sales,
collaborative agreement revenues, royalty and license fee
revenues, and other revenues. Totals may not sum due to the
inclusion of only selected financial information.

-- TOBI: The increase in TOBI product sales for the second quarter of 2005 compared to the second quarter of 2004 was primarily due to increased patient demand in both the United States and Europe and price increases, offset by wholesaler ordering patterns.

-- PROLEUKIN: The decrease in PROLEUKIN product sales was due to decreased patient demand in the United States as a result of increased competition, a government rebate adjustment and wholesaler ordering patterns, partially offset by price increases.

-- BETASERON: The increase in BETASERON product sales to Berlex Inc. (and its parent company Schering AG) for marketing and resale was primarily due to inventory ordering patterns and price increases.

-- BETAFERON royalties: The increase in royalties was primarily due to price increases and increased patient demand.

The gross profit margin for BioPharmaceuticals products was 68percent for the second quarter of 2005, compared to 74 percent for thesecond quarter of 2004. The decrease in gross profit margin wasprimarily due to increases in planned idle facility time and ongoingprocess improvement efforts over the second quarter of 2004.

ROYALTY AND LICENSE FEE REVENUES

Total royalty and license fee revenues include royalties andlicense fees attributed to Blood Testing, Vaccines andBioPharmaceuticals. These revenues also include other royalty andlicense fees, which consist primarily of royalties from Roche, RocheMolecular Systems and Bayer HealthCare AG for clinical diagnosticproducts.

Selected Royalty and License Fee Revenues
---------------------------------------------------------------------
Second- Second-
Quarter Quarter
($ millions) 2005 2004 Change
---------------------------------------------------------------------
Blood Testing $26 $16 60%
Vaccines 1 0 N/A
BioPharmaceuticals 20 15 30%
Other 30 24 26%
Total royalty and license
fee revenues (5) $77 $55 39%
---------------------------------------------------------------------

(5) Totals may not sum due to rounding.

-- Total royalty and license fee revenues: In addition to the increases in Blood Testing, Vaccines and BioPharmaceuticals royalty and license fee revenues for the second quarter of 2005 compared to the second quarter of 2004 as explained above, other royalty and license fee revenues also increased. The increase was primarily due to revenues from the settlement with Roche in the third quarter of 2004 relating to Chiron's U.S. patent for HIV technology used in clinical diagnostics and blood-screening products. In the second quarter of 2005, $8 million of the settlement amount received from Roche became non-refundable and therefore was recognized as revenue. The blood-screening portion of the non-refundable amount is $3 million and is classified as Blood Testing royalties and license fees, and the remaining $5 million relates to clinical diagnostics and is classified as other royalty and license fee revenues.

PIPELINE AND PRODUCTS UPDATE

Blood Testing

-- Several studies of the PROCLEIX(R) ULTRIO(TM) Assay and the PROCLEIX(R) TIGRIS(R) System were presented at two symposia at the European regional congress of the International Society of Blood Transfusion, held in Athens. The data included a presentation from Dr. Emma Castro, of the Spanish Red Cross in Madrid, who described the detection of two hepatitis B-positive blood donations out of 20,000 tested by the PROCLEIX ULTRIO Assay that would have gone undetected by previously approved blood-testing assays.

Vaccines

-- As Chiron reported on July 20, 2005, due to a product sterility issue the company will not supply any BEGRIVAC(TM) influenza virus vaccine doses during the 2005-2006 influenza season. BEGRIVAC vaccine is manufactured at Chiron's facility in Marburg, Germany. Chiron had expected to supply approximately 12 million doses of BEGRIVAC vaccine to customers outside of the United States. Chiron is working to mitigate the impact by reallocating non-U.S. vaccine doses among affected markets, including incremental extra production from its facility in Siena.

-- In June 2005, Chiron announced revisions to its production estimates for FLUVIRIN(R) influenza virus vaccine for the 2005-2006 influenza season. Chiron estimates that it will produce between 18 million and 26 million doses of FLUVIRIN vaccine for the 2005-2006 influenza season. The number of doses Chiron will produce will depend upon the success of its remediation efforts, upon encountering no further adverse manufacturing developments or regulatory decisions by the U.S. Food and Drug Administration (FDA) or the UK Medicines and Healthcare products Regulatory Agency (MHRA), and upon the major factors that determine production -- volumes, yields and timing.

BioPharmaceuticals

-- Chiron received an action letter from the FDA stating that the company's New Drug Application (NDA) for PULMINIQ(TM) (cyclosporine, USP) inhalation solution is "approvable" but that an additional pre-approval study is required to confirm the efficacy of the drug. Chiron is evaluating possible next steps for PULMINIQ.

-- Cubist Pharmaceuticals Inc. announced that its Phase III Staphylococcus aureus endocarditis and bacteremia trial of CUBICIN(R) (daptomycin for injection) at 6 mg/kg once daily met its primary endpoints of non-inferiority in the intent-to-treat and per protocol populations. Chiron has licensed the right to develop and commercialize CUBICIN in certain territories, including Western and Eastern Europe, and has submitted a Marketing Authorization Application (MAA) to the European Medicines Agency (EMEA) under the European Union's Centralized Procedure for approval to market CUBICIN for the complicated skin and soft-tissue infection (cSSTi) indication.

-- Chiron announced its Phase I program of CHIR-258 in multiple myeloma, a type of cancer.

Other Recent Events

-- The National Academy of Sciences (NAS) elected Rino Rappuoli, Ph.D., for membership in the academy as a foreign associate. Dr. Rappuoli is the chief scientific officer of Chiron and head of research for Chiron Vaccines. Election to NAS recognizes distinguished and continuing achievements in original research and is considered one of the highest honors a scientist or engineer can receive.

SECOND-QUARTER 2005 EARNINGS CONFERENCE CALL

Chiron will hold a conference call and webcast on Wednesday, July27, 2005, at 4:45 p.m. EDT to review its second-quarter 2005 resultsof operations and business highlights. In addition, the company mayaddress forward-looking questions concerning business and financialmatters and trends affecting the company.

To access either the live call or the one-year webcast archive,please log on to www.chiron.com/webcast. Please connect to the websiteat least 15 minutes prior to the conference call to ensure adequatetime to download any necessary software. Alternatively, please call(800) 819-7026 from the United States or Canada or (706) 643-7768 fromother locations. Replay by phone is available approximately two hoursafter the completion of the call through 11:55 p.m. EDT, Wednesday,August 3, 2005. To access the replay, please call (800) 642-1687 fromthe United States or Canada or (706) 645-9291 from other locations.The conference ID number is 7207333.

ABOUT CHIRON

Chiron delivers innovative and valuable products to protect humanhealth by advancing pioneering science across the landscape ofbiotechnology. The company works to deliver on the limitless promiseof science and make a positive difference in people's lives. For moreinformation about Chiron, please visit www.chiron.com.

Download financial information in PDF format:

http://www.chiron.com/investors/4077/chiron_financial.pdf

View financial information online:

http://www.chiron.com/investors/finreports/index.html

This news release contains forward-looking statements, includingstatements regarding earnings and sales growth, supply of influenzavirus vaccines that Chiron expects to deliver in future influenzaseasons, improvements to manufacturing facilities, product developmentinitiatives, new product indications, new product marketing, andclinical trials that involve risks and uncertainties and are subjectto change. A discussion of the company's operations and financialcondition, including factors that may affect its business and futureprospects that could cause actual results and developments to differmaterially from those expressed or implied by these forward-lookingstatements, is contained in documents the company has filed with theSEC, including the Form 10-K for the year ended December 31, 2004, andthe Form 10-Q for the quarter ended March 31, 2005, and will becontained in all subsequent periodic filings made with the SEC. Thesedocuments identify important factors that could cause the company'sactual performance to differ from current expectations, including,among others, additional adverse developments resulting from thesuspension of Chiron's UK license to manufacture FLUVIRIN(R) influenzavirus vaccine from October 5, 2004, through March 2, 2005, theannouncement of such suspension and the litigation and investigationsrelating to those matters, the outcome of clinical trials, regulatoryreview and approvals, manufacturing capabilities, intellectualproperty protections and defenses, litigation, stock-price andinterest-rate volatility, marketing effectiveness and the severity ofthe 2005-2006 influenza season. In particular, there can be noassurance that additional issues with respect to BEGRIVAC(TM)influenza virus vaccine or FLUVIRIN vaccine or Chiron's manufacturinggenerally will not arise in the future, or that Chiron will be able tocover vaccine shortfalls, successfully address matters raised in awarning letter from the FDA with respect to its FLUVIRIN vaccinemanufacturing facilities, resume sale of FLUVIRIN vaccine for the2005-2006 influenza season or BEGRIVAC vaccine for the 2006-2007influenza season, increase sales of existing products, successfullydevelop and receive approval to market new products, or achieve marketacceptance for such new products. In addition, the company may faceadditional competition in the influenza market in the future andchallenges in distribution arrangements as a result of the recentBEGRIVAC and FLUVIRIN vaccine developments. In addition, the companymay engage in business opportunities, the successful completion ofwhich is subject to certain risks, including approval by Novartis AG,stockholder and regulatory approvals, and the integration ofoperations.

Chiron does not undertake an obligation to update theforward-looking information the company is giving today.

NOTE: BEGRIVAC, ENCEPUR, FLUVIRIN, MENZB, PROCLEIX, PROLEUKIN,PULMINIQ, TOBI and ULTRIO are trademarks of Chiron. BETASERON andBETAFERON are trademarks of Schering AG. TIGRIS is a trademark ofGen-Probe Incorporated. CUBICIN is a trademark of CubistPharmaceuticals.
CHIRON CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands, except per share data)

Three Months Ended
June 30, 2005
--------------------------------
Adjusted (1) Adjustments Actual
----------- ----------- -------

Revenues:
Product sales, net $303,575 $ - $303,575
Revenues from joint business
arrangement 31,003 - 31,003
Collaborative agreement revenues 3,453 - 3,453
Royalty and license fee revenues 76,522 - 76,522
Other revenues 4,204 - 4,204
-------- -------- --------

Total revenues 418,757 - 418,757
-------- -------- --------

Operating expenses:
Cost of sales 177,569 - 177,569
Research and development 107,472 - 107,472
Selling, general and administrative 128,492 - 128,492
Amortization expense - (20,613) 20,613
Other operating expenses 2,056 - 2,056
-------- -------- --------

Total operating expenses 415,589 (20,613) 436,202
-------- -------- --------

Income (loss) from operations 3,168 20,613 (17,445)


Interest expense (8,094) - (8,094)
Interest and other income, net 26,298 - 26,298
Minority interest (662) - (662)
-------- -------- --------

Income from continuing operations
before income taxes 20,710 20,613 97
Provision for income taxes 5,118 5,070 48
-------- -------- --------

Income from continuing operations 15,592 15,543 49
======== ======== ========

Gain from discontinued operations - - -
-------- -------- --------

Net income $ 15,592 $ 15,543 $ 49
======== ======== ========

Basic earnings per share:
Income from continuing operations $ 0.08 $ - (a)
======== ========
Net income $ 0.08 $ - (a)
======== ========

Diluted earnings per share:
Income from continuing operations $ 0.08 $ - (a)
======== ========
Net income $ 0.08 $ - (a)
======== ========


Shares used in calculating basic
earnings per share 187,532 187,532
======== ========

Shares used in calculating diluted
earnings per share 188,968 188,968
======== ========




Three Months Ended
June 30, 2004 Restated (2)
-------------------------------

-------------------------------
Adjusted (1) Adjustments Actual
----------- ----------- ------
Revenues:
Product sales, net $281,221 $ - $281,221
Revenues from joint business
arrangement 28,532 - 28,532
Collaborative agreement revenues 3,828 - 3,828
Royalty and license fee revenues 55,196 - 55,196
Other revenues 10,975 - 10,975
-------- -------- --------

Total revenues 379,752 - 379,752
-------- -------- --------

Operating expenses:
Cost of sales 129,228 - 129,228
Research and development 100,326 - 100,326
Selling, general and administrative 106,857 - 106,857
Amortization expense - (21,179) 21,179
Other operating expenses 4,644 - 4,644
-------- -------- --------

Total operating expenses 341,055 (21,179) 362,234
-------- -------- --------

Income (loss) from operations 38,697 21,179 17,518


Interest expense (6,452) - (6,452)
Interest and other income, net 19,809 - 19,809
Minority interest (459) - (459)
-------- -------- --------

Income from continuing operations
before income taxes 51,595 21,179 30,416
Provision for income taxes 12,899 5,295 7,604
-------- -------- --------

Income from continuing operations 38,696 15,884 22,812
======== ======== ========

Gain from discontinued operations 12,459 - 12,459
-------- -------- --------

Net income $ 51,155 $ 15,884 $ 35,271
======== ======== ========

Basic earnings per share:
Income from continuing operations $ 0.21 $ 0.12
======== ========
Net income $ 0.27 $ 0.19
======== ========

Diluted earnings per share:
Income from continuing operations $ 0.20 $ 0.12
======== ========
Net income $ 0.27 $ 0.18
======== ========


Shares used in calculating basic
earnings per share 188,275 188,275
======== ========

Shares used in calculating diluted
earnings per share 190,985 190,985
======== ========


(a) Less than $0.01 per share.

(1) Adjusted amounts exclude the amortization expense on acquired
intangible assets related to the acquisitions of PathoGenesis,
Chiron Behring, Pulmopharm and PowderJect Pharmaceuticals.

(2) Chiron determined that certain sales of a travel vaccine
recorded as revenues in the second quarter of 2004 should not have
been recorded as revenue at that time, and that portions of those
sales should have been recorded as revenues in the third and
fourth quarters of 2004 and possibly in later quarters.

On a GAAP and adjusted basis, as a result of the restatement, for
the three months ended June 30, 2004, product sales were reduced
by $13.9 million, cost of sales were reduced by $1.5 million and
income taxes were reduced by $3.1 million. This resulted in a $9.3
million reduction in income from continuing operations and net
income and a $0.05 reduction of diluted income from continuing
operations per share ($0.12 per share instead of the $0.17 per
share as previously reported on a GAAP basis and $0.20 per share
instead of $0.25 per share as previously reported on an adjusted
basis).

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



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

Six Months Ended
June 30, 2005
-------------------------------
Adjusted (3) Adjustments Actual
------------ ----------- ------

Revenues:
Product sales, net $580,738 $ - $580,738
Revenues from joint business
arrangement 67,061 - 67,061
Collaborative agreement revenues 7,980 - 7,980
Royalty and license fee revenues 156,583 - 156,583
Other revenues 13,751 - 13,751
-------- -------- --------

Total revenues 826,113 - 826,113
-------- -------- --------

Operating expenses:
Cost of sales 340,529 - 340,529
Research and development 217,311 - 217,311
Selling, general and administrative 260,400 - 260,400
Amortization expense - (41,876) 41,876
Other operating expenses 9,202 - 9,202
-------- -------- --------

Total operating expenses 827,442 (41,876) 869,318
-------- -------- --------

(Loss) income from operations (1,329) 41,876 (43,205)


Interest expense (15,173) - (15,173)
Interest and other income, net 47,745 - 47,745
Minority interest (1,192) - (1,192)
-------- -------- --------

Income (loss) from continuing
operations before income taxes 30,051 41,876 (11,825)
Provision for (benefit of) income
taxes 7,453 10,385 (2,932)
-------- -------- --------

Income (loss) from continuing
operations 22,598 31,491 (8,893)
======== ======== ========

Gain from discontinued operations - - -
-------- -------- --------

Net income (loss) $ 22,598 $ 31,491 $ (8,893)
======== ======== ========

Basic earnings (loss) per share:
Income (loss) from continuing
operations $ 0.12 $ (0.05)
======== =========
Net income (loss) $ 0.12 $ (0.05)
======== =========

Diluted earnings (loss) per share:
Income (loss) from continuing
operations $ 0.12 $ (0.05)
======== =========
Net income (loss) $ 0.12 $ (0.05)
======== =========


Shares used in calculating basic
earnings (loss) per share 187,321 187,321
======== =========

Shares used in calculating diluted
earnings (loss) per share 188,652 187,321
======== =========




Six Months Ended
June 30, 2004 Restated (4)
--------------------------------
Adjusted (3) Adjustments Actual
------------ ----------- -------

Revenues:
Product sales, net $562,287 $ - $562,287
Revenues from joint business
arrangement 58,893 - 58,893
Collaborative agreement revenues 10,343 - 10,343
Royalty and license fee revenues 109,988 - 109,988
Other revenues 17,913 - 17,913
-------- -------- --------

Total revenues 759,424 - 759,424
-------- -------- --------

Operating expenses:
Cost of sales 255,929 - 255,929
Research and development 198,736 - 198,736
Selling, general and administrative 211,597 - 211,597
Amortization expense - (42,511) 42,511
Other operating expenses 6,760 - 6,760
-------- -------- --------

Total operating expenses 673,022 (42,511) 715,533
-------- -------- --------

(Loss) income from operations 86,402 42,511 43,891


Interest expense (12,377) - (12,377)
Interest and other income, net 35,883 - 35,883
Minority interest (1,079) - (1,079)
-------- -------- --------

Income (loss) from continuing
operations before income taxes 108,829 42,511 66,318
Provision for (benefit of) income
taxes 27,207 10,628 16,579
-------- -------- --------

Income (loss) from continuing
operations 81,622 31,883 49,739
======== ======== ========

Gain from discontinued operations 25,304 - 25,304
-------- -------- --------

Net income (loss) $106,926 $ 31,883 $ 75,043
======== ======== ========

Basic earnings (loss) per share:
Income (loss) from continuing
operations $ 0.43 $ 0.26
======== ========
Net income (loss) $ 0.57 $ 0.40
======== ========

Diluted earnings (loss) per share:
Income (loss) from continuing
operations $ 0.43 $ 0.26
======== ========
Net income (loss) $ 0.56 $ 0.39
======== ========

Shares used in calculating basic
earnings (loss) per share 187,952 187,952
======== ========

Shares used in calculating diluted
earnings (loss) per share 191,402 191,402
======== ========

(3) Adjusted amounts exclude the amortization expense on acquired
intangible assets related to the acquisitions of PathoGenesis,
Chiron Behring, Pulmopharm and PowderJect Pharmaceuticals.

(4) Chiron determined that certain sales of a travel vaccine
recorded as revenues in the second quarter of 2004 should not have
been recorded as revenue at that time, and that portions of those
sales should have been recorded as revenues in the third and
fourth quarters of 2004 and possibly in later quarters.

On a GAAP and an adjusted basis, as a result of the restatement,
for the six months ended June 30, 2004, product sales were reduced
by $13.9 million, cost of sales were reduced by $1.5 million and
income taxes were reduced by $3.1 million. This resulted in a $9.3
million reduction in income from continuing operations and net
income on a GAAP and an adjusted basis. The restatement also
resulted in a $0.05 reduction of diluted income from continuing
operations per share on a GAAP basis ($0.26 per share instead of
the $0.31 per share as previously reported) and a $0.04 reduction
of diluted income from continuing operations per share on an
adjusted basis ($0.43 per share instead of the $0.47 per share as
previously reported).

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



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


June 30, December 31,
2005 2004
-------- ------------

Assets
----------------------------------------------
Current assets:
Cash and short-term investments $ 583,983 $ 603,621
Accounts receivable, net 338,168 402,094
Inventories, net 238,894 221,154
Other current assets 174,415 167,154
---------- ----------
Total current assets 1,335,460 1,394,023
Non-current investments in marketable debt
securities 435,287 409,421
Property, plant, equipment and leasehold
improvements, net 808,378 799,415
Other non-current assets 1,562,360 1,702,644
---------- ----------
Total assets $4,141,485 $4,305,503
========== ==========

Liabilities and stockholders' equity
----------------------------------------------
Current liabilities $ 424,312 $ 434,444
Long-term debt 938,248 936,652
Long-term portion of capital lease 156,828 156,952
Non-current unearned revenue 31,568 26,175
Other non-current liabilities 108,333 140,226
Minority interest 10,258 9,350
Stockholders' equity 2,471,938 2,601,704
---------- ----------
Total liabilities and
stockholders' equity $4,141,485 $4,305,503
========== ==========



CHIRON CORPORATION
SUPPLEMENTAL SCHEDULE OF COMPUTATION OF EARNINGS PER SHARE
(Unaudited)
(In thousands, except per share data)


Three Months Ended
June 30,
2005 2004 Restated
------------------- -------------------
Adjusted Actual Adjusted Actual
--------- --------- --------- ---------

Computation for earnings per
share - continuing
operations
Income (Numerator):
Income from continuing
operations $ 15,592 $ 49 $ 38,696 $ 22,812
======== ========= ======== ========

Shares (Denominator):
Weighted-average common
shares outstanding 187,532 187,532 188,275 188,275
Effect of dilutive
securities:
Stock options and
equivalents 1,436 1,436 2,710 2,710
-------- -------- -------- --------
Weighted-average common
shares outstanding, plus
impact from assumed
conversions 188,968 188,968 190,985 190,985
======== ========= ======== ========


Basic earnings per share from
continuing operations
$ 0.08 $ - (a) $ 0.21 $ 0.12
======== ========= ======== ========
Diluted earnings per share
from continuing operations
$ 0.08 $ - (a) $ 0.20 $ 0.12
======== ========= ======== ========

Computation for earnings per
share - net income
Income (Numerator):
Net income $ 15,592 $ 49 $ 51,155 $ 35,271
======== ========= ======== ========

Shares (Denominator):
Weighted-average common
shares outstanding 187,532 187,532 188,275 188,275
Effect of dilutive
securities:
Stock options and
equivalents 1,436 1,436 2,710 2,710
-------- -------- -------- --------
Weighted-average common
shares outstanding, plus
impact from assumed
conversions 188,968 188,968 190,985 190,985
======== ========= ======== ========


Basic earnings per share

$ 0.08 $ - (a) $ 0.27 $ 0.19
======== ========= ======== ========
Diluted earnings per share

$ 0.08 $ - (a) $ 0.27 $ 0.18
======== ========= ======== ========


(a) Less than $0.01 per share.


CHIRON CORPORATION
SUPPLEMENTAL SCHEDULE OF COMPUTATION OF EARNINGS (LOSS) PER SHARE
(Unaudited)
(In thousands, except per share data)


Six Months Ended
June 30,
2005 2004 Restated
------------------ -------------------
Adjusted Actual Adjusted Actual
--------- --------- --------- ---------

Computation for earnings
(loss) per share - continuing
operations
Income (loss) (Numerator):
Income (loss) from
continuing operations $ 22,598 $ (8,893) $ 81,622 $ 49,739
======== ========= ======== ========

Shares (Denominator):
Weighted-average common
shares outstanding 187,321 187,321 187,952 187,952
Effect of dilutive securities:
Stock options and
equivalents 1,331 - 3,450 3,450
-------- -------- -------- --------
Weighted-average common
shares outstanding, plus
impact from assumed
conversions 188,652 187,321 191,402 191,402
======== ========= ======== ========


Basic earnings (loss) per
share from continuing
operations $ 0.12 $ (0.05) $ 0.43 $ 0.26
======== ======== ======== ========
Diluted earnings (loss) per
share from continuing
operations $ 0.12 $ (0.05) $ 0.43 $ 0.26
======== ======== ======== ========

Computation for earnings
(loss) per share - net income
Income (loss) (Numerator):
Net income (loss) $ 22,598 $ (8,893) $106,926 $ 75,043
======== ========= ======== ========

Shares (Denominator):
Weighted-average common
shares outstanding 187,321 187,321 187,952 187,952
Effect of dilutive securities:
Stock options and
equivalents 1,331 - 3,450 3,450
-------- -------- -------- --------
Weighted-average common
shares outstanding, plus
impact from assumed
conversions 188,652 187,321 191,402 191,402
======== ========= ======== ========

Basic earnings (loss)
per share $ 0.12 $ (0.05) $ 0.57 $ 0.40
======== ======== ======== ========
Diluted earnings (loss)
per share $ 0.12 $ (0.05) $ 0.56 $ 0.39
======== ======== ======== ========



CHIRON CORPORATION
Supplemental Revenue Summary (Adjusted)
USD $ (in thousands)


Change
Current Prior from
Quarter Quarter Prior Change
Q2 2005 Q1 2005 QTR %
------------------------------- --------- --------- -------- --------
Product Sales
Blood Testing
Ortho $ 7,988 $ 6,462 $ 1,526 23.6%
NAT 66,104 64,431 1,673 2.6%
-------- -------- ------- --------
Total Blood Testing 74,092 70,893 3,199 4.5%

Vaccines
Influenza Vaccines (492) 3,571 (4,063) (113.8)%
Meningococcus Vaccines 13,605 9,153 4,452 48.6%
Travel Vaccines (TBE,
Rabies, Arilvax and
Dukoral) 45,014 43,759 1,255 2.9%
Pediatric/Other Vaccines 39,127 30,493 8,634 28.3%
-------- -------- ------- --------
Total Vaccines 97,254 86,976 10,278 11.8%

Biopharmaceuticals
Proleukin 31,727 29,535 2,192 7.4%
TOBI 56,600 52,935 3,665 6.9%
Betaseron (b) 38,132 26,634 11,498 43.2%
Other 5,770 10,190 (4,420) (43.4)%
-------- -------- ------- --------
Total Biopharmaceuticals 132,229 119,294 12,935 10.8%

TOTAL PRODUCT SALES, NET $303,575 $277,163 $26,412 9.5%
======== ======== ======= ========


Revenues From Joint Business
Arrangement $ 31,003 $ 36,058 $(5,055) (14.0)%
Collaborative Agreement
Revenues 3,453 4,527 (1,074) (23.7)%
Royalty and License Fees
Revenues 76,522 80,061 (3,539) (4.4)%
Other Revenues 4,204 9,547 (5,343) (56.0)%
-------- -------- ------- --------
TOTAL REVENUES $418,757 $407,356 $11,401 2.8%
-------- -------- ------- --------

Gross Margins
Blood Testing 40% 44% (4)%
Vaccines 7% (3)% 10%
Biopharmaceuticals 68% 72% (4)%
-------- -------- ------- --------
TOTAL GROSS MARGINS 42% 41% 1%
-------- -------- ------- --------

------------------------------- --------- --------- ------- --------
(b) Excludes Betaferon Royalty $ 16,943 $ 15,477 $ 1,466 9.5%
------------------------------- -------- -------- ------- --------


Change
Restated from
Quarter Prior Change
Q2 2004 Year %
-------------------------------------------------- -------- --------
Product Sales
Blood Testing
Ortho $ 6,608 $ 1,380 20.9%
NAT 60,589 5,515 9.1%
-------- ------- --------
Total Blood Testing 67,197 6,895 10.3%

Vaccines
Influenza Vaccines 8,207 (8,699) (106.0)%
Meningococcus Vaccines 5,016 8,589 171.2%
Travel Vaccines (TBE, Rabies,
Arilvax and Dukoral) 26,261 18,753 71.4%
Pediatric/Other Vaccines 47,619 (8,492) (17.8)%
-------- ------- --------
Total Vaccines 87,103 10,151 11.7%

Biopharmaceuticals
Proleukin 35,057 (3,330) (9.5)%
TOBI 51,342 5,258 10.2%
Betaseron (b) 31,626 6,506 20.6%
Other 8,896 (3,126) (35.1)%
-------- ------- --------
Total Biopharmaceuticals 126,921 5,308 4.2%

TOTAL PRODUCT SALES, NET $281,221 $22,354 7.9%
======== ======= ========


Revenues From Joint Business
Arrangement $ 28,532 $ 2,471 8.7%
Collaborative Agreement Revenues 3,828 (375) (9.8)%
Royalty and License Fees Revenues 55,196 21,326 38.6%
Other Revenues 10,975 (6,771) (61.7)%
-------- ------- --------
TOTAL REVENUES $379,752 $39,005 10.3%
-------- ------- --------

Gross Margins
Blood Testing 42% (2)%
Vaccines 34% (27)%
Biopharmaceuticals 74% (6)%
-------- ------- --------
TOTAL GROSS MARGINS 54% (12)%
-------- ------- --------

--------------------------------------------------- ------- --------
(b) Excludes Betaferon Royalty $ 11,585 $ 5,358 46.2%
----------------------------------------- -------- ------- --------


CHIRON CORPORATION
Supplemental YTD Revenue Summary (Adjusted)
USD $ (in thousands)



Six Months Ended Change
June 30, from
2004 Prior Change
2005 Restated Year %
------------------------------- -------- --------- --------- -------
Product Sales
Blood Testing
Ortho $ 14,450 $ 12,842 $ 1,608 12.5%
NAT 130,535 122,475 8,060 6.6%
-------- -------- -------- -------
Total Blood Testing 144,985 135,317 9,668 7.1%

Vaccines
Influenza Vaccines 3,079 15,912 (12,833) (80.6)%
Meningococcus Vaccines 22,758 9,565 13,193 137.9%
Travel Vaccines (TBE,
Rabies, Arilvax and
Dukoral) 88,773 49,271 39,502 80.2%
Pediatric/Other Vaccines 69,620 98,801 (29,181) (29.5)%
-------- -------- -------- -------
Total Vaccines 184,230 173,549 10,681 6.2%

Biopharmaceuticals
Proleukin 61,262 66,925 (5,663) (8.5)%
TOBI 109,535 103,866 5,669 5.5%
Betaseron (b) 64,766 61,762 3,004 4.9%
Other 15,960 20,868 (4,908) (23.5)%
-------- -------- -------- -------
Total Biopharmaceuticals 251,523 253,421 (1,898) (0.7)%

TOTAL PRODUCT SALES, NET $580,738 $562,287 $ 18,451 3.3%
======== ======== ======== =======


Revenues From Joint Business
Arrangement $ 67,061 $ 58,893 $ 8,168 13.9%
Collaborative Agreement
Revenues 7,980 10,343 (2,363) (22.8)%
Royalty and License Fees
Revenues 156,583 109,988 46,595 42.4%
Other Revenues 13,751 17,913 (4,162) (23.2)%
-------- -------- -------- -------
TOTAL REVENUES $826,113 $759,424 $ 66,689 8.8%
-------- -------- -------- -------

Gross Margins
Blood Testing 42% 42% 0%
Vaccines 2% 34% (32)%
Biopharmaceuticals 70% 75% (5)%
-------- -------- --------
TOTAL GROSS MARGINS 41% 54% (13)%
-------- -------- --------

------------------------------- --------- --------- -------- -------
(b) Excludes Betaferon Royalty $ 32,420 $ 25,392 $ 7,028 27.7%
------------------------------- -------- -------- -------- -------