CHIR Chiron (MM)

Chiron Corporation (Nasdaq:CHIR) -- Company is working to cover BEGRIVAC vaccine shortfall with other non-U.S. influenza virus vaccines -- No change to financial guidance Chiron Corporation (Nasdaq:CHIR) today announced that it has reduced its supply expectations for its BEGRIVAC(TM) influenza virus vaccine for the 2005-2006 influenza season by approximately 8 million doses and may delay shipments until early October. Chiron had expected to supply approximately 12 million doses of BEGRIVAC vaccine to customers outside of the United States. Chiron now expects to supply approximately 4 million doses of BEGRIVAC vaccine in these markets. BEGRIVAC vaccine is manufactured at Chiron's facility in Marburg, Germany. In conducting its regular internal quality assurance tests, Chiron identified a small number of lots of the BEGRIVAC vaccine that did not meet product sterility specifications. Chiron has taken presumptive corrective action, and is working closely with the German regulatory agency, the Paul Ehrlich Institute (PEI), to complete additional testing in order to determine the full extent of the issue. Chiron will not release any BEGRIVAC vaccine until those tests are complete. It is possible that the timing or results of such additional tests, or any additional manufacturing or regulatory developments, may result in Chiron being unable to supply any BEGRIVAC vaccine doses to non-U.S. markets this season. Chiron manufactures influenza vaccine in two facilities for Europe and other non-U.S. markets. Chiron's facility in Marburg produces BEGRIVAC vaccine predominantly for the German and UK markets, and Chiron's facility in Siena/Rosia, Italy, produces AGRIPPAL(R) S1 influenza virus vaccine and FLUAD(R) influenza virus vaccine. Chiron is working to mitigate the impact of the reduced supply of BEGRIVAC vaccine by reallocating non-U.S. vaccine doses among affected markets, and by allocating the shipment of the company's non-U.S. influenza virus vaccines from extra production in Siena. Chiron does not expect to record any sales of BEGRIVAC vaccine in the third quarter of 2005. However, Chiron still expects to be within the range of its updated 2005 financial guidance of income from continuing operations of between $1.20 and $1.45 per share on an adjusted (pro forma) basis and between $0.86 and $1.11 per share on a GAAP basis. Chiron management uses adjusted financial statements to gain an understanding of the company's operating performance on a comparative basis. Adjusted guidance excludes amortization expense on acquired intangible assets related to the acquisitions of PathoGenesis, Chiron Behring, Pulmopharm and PowderJect Pharmaceuticals, totaling approximately $0.34 per share. About Chiron Chiron delivers innovative and valuable products to protect human health by advancing pioneering science across the landscape of biotechnology. The company works to deliver on the limitless promise of science and make a positive difference in people's lives. For more information, please visit www.chiron.com. This news release contains forward-looking statements, including statements regarding supply of BEGRIVAC(TM) influenza virus vaccine and other influenza virus vaccines that Chiron expects to deliver to non-U.S. markets, and assumptions regarding supply of FLUVIRIN(R) influenza virus vaccine that Chiron expects to deliver to the U.S. market, in future influenza seasons, sales and earnings expectations and improvements to manufacturing facilities, that involve risks and uncertainties and are subject to change. A discussion of the company's operations and financial condition, including factors that may affect its business and future prospects that could cause actual results and developments to differ materially from those expressed or implied by forward-looking statements, is contained in documents the company has filed with the SEC, including the Form 10-K for the year ended December 31, 2004, and the Form 10-Q for the quarter ended March 31, 2005, and will be contained in all subsequent periodic filings made with the SEC. These documents identify important factors that could cause the company's actual performance to differ from current expectations, including, among others, additional adverse developments resulting from the suspension of Chiron's UK license to manufacture FLUVIRIN vaccine from October 5, 2004, through March 2, 2005, the announcement of such suspension and the litigation and investigations relating to those matters, the outcome of clinical trials, regulatory review and approvals, manufacturing capabilities, intellectual property protections and defenses, litigation, stock-price and interest-rate volatility, marketing effectiveness, and the severity of the 2005-2006 influenza season. In particular, there can be no assurance that additional issues with respect to the BEGRIVAC or FLUVIRIN vaccines or Chiron's manufacturing generally will not arise in the future or that Chiron will be able to sell BEGRIVAC for the 2005-2006 influenza season, will be able to cover vaccine shortfalls, or will successfully address matters raised in a warning letter from the FDA with respect to its FLUVIRIN vaccine manufacturing facility or resume sale of FLUVIRIN vaccine for the 2005-2006 influenza season. In addition, the company may face additional competition in the influenza market in the future and challenges in distribution arrangements as a result of the recent BEGRIVAC and FLUVIRIN vaccine developments. In addition, the company may engage in business opportunities, the successful completion of which is subject to certain risks, including approval by Novartis AG, shareholder and regulatory approvals, and the integration of operations. Chiron does not undertake an obligation to update the forward-looking information the company is giving today. NOTE: AGRIPPAL, BEGRIVAC, FLUAD and FLUVIRIN are trademarks of Chiron Corporation.