CN BIOSCIENCES INC, 424B1, 1996-10-02

CN BIOSCIENCES INC
424B1, 1996-10-02
MEDICINAL CHEMICALS & BOTANICAL PRODUCTS

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<PAGE> 1

PROSPECTUS

This filing is made pursuant
to Rule 424(B)(1) under
the Securities Act of
1933 in connection with
Registration No. 333-8335

1,600,000 SHARES

LOGO

COMMON STOCK
------------------------

All of the 1,600,000 shares of Common Stock offered hereby are being sold
by CN Biosciences, Inc. ("CN Biosciences" or the "Company"). Prior to this
offering there has been no public market for the Common Stock of the Company.
See "Underwriting" for a discussion of the factors considered in determining the
initial public offering price. The Common Stock has been approved for quotation
on the Nasdaq National Market under the symbol "CNBI." The Underwriters have
reserved up to 80,000 shares of Common Stock offered hereby for sale at the
initial public offering price to officers, directors, employees and other
persons designated by the Company who have expressed an interest in purchasing
shares. See "Underwriting."

THE COMMON STOCK OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK. SEE "RISK
FACTORS" BEGINNING ON PAGE 6.

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

<TABLE>
<CAPTION>
=================================================================================================
Underwriting
Price to Discounts Proceeds to
Public and Commissions (1) Company (2)
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Share...................... $12.50 $0.875 $11.625
- -------------------------------------------------------------------------------------------------
Total (3)...................... $20,000,000 $1,400,000 $18,600,000
=================================================================================================
</TABLE>

(1) For information regarding indemnification of the Underwriters, see
"Underwriting."

(2) Before deducting expenses of the offering payable by the Company estimated
at $750,000.

(3) The Company has granted the Underwriters an option, exercisable within 30
days from the date hereof, to purchase up to 240,000 additional shares of
Common Stock on the same terms as set forth above, solely to cover
over-allotments, if any. If such option is exercised in full, the total
Price to Public will be $23,000,000, the Underwriting Discounts and
Commissions will be $1,610,000 and the Proceeds to Company will be
$21,390,000. See "Underwriting."
------------------------

The shares of Common Stock offered by the Underwriters are subject to prior
sale, receipt and acceptance by them and subject to the right of the
Underwriters to reject any order in whole or in part and to certain other
conditions. It is expected that delivery of such shares will be made through the
offices of UBS Securities LLC, 299 Park Avenue, New York, New York on or about
October 7, 1996.
------------------------
UBS SECURITIES DAIN BOSWORTH
Incorporated
October 2, 1996
<PAGE> 2

[COLOR PICTURE OF COMPANY CATALOGS SURROUNDING A CIRCLE WHICH SAYS "SIX
CATALOGS THAT NO LIFE SCIENTIST SHOULD BE WITHOUT" AND CAPTION WHICH READS "THE
COMPANY'S GENERAL AND SPECIALTY CATALOGS FEATURE IN EXCESS OF 7,000 PRODUCTS
USED WORLDWIDE IN DISEASE-RELATED LIFE SCIENCES RESEARCH".]

IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK AT
A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
TRANSACTIONS MAY BE EFFECTED ON THE NASDAQ NATIONAL MARKET, IN THE
OVER-THE-COUNTER MARKET OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE
DISCONTINUED AT ANY TIME.

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<PAGE> 3

PROSPECTUS SUMMARY

The following summary is qualified in its entirety by, and should be read
in conjunction with, the more detailed information and financial statements,
including the notes thereto, appearing elsewhere in this Prospectus, including
the information under "Risk Factors." This Prospectus contains forward-looking
statements which involve risks and uncertainties. The Company's actual results
in the future could differ significantly from the results discussed in such
forward-looking statements. Factors that could cause or contribute to such a
difference include, but are not limited to, those discussed in "Risk Factors,"
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and "Business," as well as those discussed elsewhere in this
Prospectus.

THE COMPANY

CN Biosciences, Inc. ("CN Biosciences" or the "Company") is engaged in the
development, production, marketing and distribution of a broad array of products
used worldwide in disease-related life sciences research at pharmaceutical and
biotechnology companies, academic institutions and government laboratories. The
Company's products include biochemical and biological reagents, antibodies,
assays and research kits which it sells principally through its general and
specialty catalogs under its well-established brand names, including Calbiochem
and Novabiochem. With over 7,000 products, the Company offers scientists the
convenience of obtaining from a single source both innovative and fundamental
research products, many of which are instrumental to areas of research such as
cancer, cardiovascular disease, Alzheimer's and AIDS. The Company believes it
has established a long-standing reputation in the life sciences research
products market for product quality, product reliability, extensive technical
service and strong customer support.

Industry sources estimate that there are over 300,000 scientists worldwide
currently engaged in life sciences research who utilize specialty biochemical
products such as those offered by the Company. Recent advances in understanding
physiological processes at the molecular and cellular level, genomics and the
development of other basic life sciences technologies have increased the demand
for innovative product solutions designed to assist scientists in improving the
efficiency and quality of their research. Life sciences research can often
involve experimentation carried out over months or even years, and as a result
researchers seek quality products to minimize extraneous variables in their
research protocols. Research products range broadly in complexity, purity,
scarcity, cost and function, and their availability, consistency and quality are
often critical to a project's success. In its most recent industry survey
published in 1994, Frost & Sullivan estimated that $1.6 billion was spent
worldwide in 1992 on specialty biochemical products, such as those offered by
the Company for research in biochemistry, immunology, cellular biology and
molecular biology. According to Frost & Sullivan, the compounded annual growth
rate from 1992 through 1999 for the U.S. life sciences research products market
(which represents approximately one-third of the worldwide market) is estimated
to be approximately 13%.

The Company believes that it is strategically positioned with both the
breadth of research products and critical mass that are characteristic of the
industry's larger providers, as well as the innovative research and development
capabilities that are characteristic of the industry's smaller specialty
companies. The larger companies typically generate revenues from the sale of a
broad range of equipment, laboratory supplies and other products, including
research products which compete with many of the Company's product offerings.
The smaller companies, the majority of which are substantially smaller than the
Company, typically supply a highly focused product offering to very specific
markets. Based upon the Company's strategic positioning, it believes it can
establish itself as a leading supplier of higher margin research products for
selected emerging, high growth niche research markets by offering innovative
products through specialty catalogs. In recent years, the Company has
implemented its niche research market strategy in areas that the Company
believes to be particularly strong areas of growth. In 1994, the Company
published its first specialty catalog in the area of signal transduction, which
it followed with the introduction of its Apoptosis and Combinatorial Chemistry
specialty catalogs in February 1996.

3
<PAGE> 4

The life sciences research products industry is highly fragmented and may
offer opportunities for consolidation. One key element of the Company's strategy
is the selective acquisition of companies with research and development
capabilities and product offerings in areas targeted for future growth. In
August 1995, the Company significantly expanded its immunochemical and molecular
biology capabilities with the $6.2 million cash purchase of the Oncogene
Research Products business from Oncogene Science, Inc. ("OSI"), a publicly
traded biopharmaceutical company. The acquisition of this business enhanced the
depth and breadth of the Company's scientific resources, while providing a
complementary base of products and customers which has been successfully
integrated into the Company's operations and infrastructure. As a result of this
acquisition, the Company added over 700 new product offerings, many of which are
included in the Company's Apoptosis specialty catalog.

During 1995, the Company sold products to over 6,900 accounts, including
individual research scientists, institutions, companies and distributors, filled
over 70,000 orders in 46 countries and generated sales of $27.0 million and net
income of $1.0 million. The Company's numerous products, represented by over
13,000 stock keeping units (SKUs), are principally sold through its three
general catalogs and four specialty catalogs. The Company also develops and
distributes a variety of supporting publications designed to highlight its new
products and target specific market segments with selected product offerings.
These catalogs and supporting publications are distributed utilizing the
Company's proprietary database of more than 100,000 research scientists and
institutions. The Company's customers include many leading pharmaceutical and
biotechnology companies, academic institutions and government laboratories. The
Company continually adds new products and expects to introduce in excess of 800
products during 1996. Development, marketing and distribution activities are
supported by the Company's highly experienced scientific staff, which includes
40 professionals holding Ph.D.s in a variety of life sciences disciplines, as
well as other personnel located at seven facilities in the United States,
Europe, Japan and Australia.

The Company was incorporated by Warburg, Pincus Investors, L.P.
("Warburg"), ABS MB (C-N) Limited Partnership ("ABS") and certain current and
former members of management to acquire the businesses conducted by the
Company's subsidiaries. See "Certain Transactions." The Company was incorporated
under the laws of the State of Delaware on March 11, 1992 as
Calbiochem-Novabiochem International, Inc. and changed its name to CN
Biosciences, Inc. on July 17, 1996. The Company's principal executive offices
are located at 10394 Pacific Center Court, San Diego, California 92121, and its
telephone number is (619) 450-5500.

As used in this Prospectus, references to the "Company" and "CN
Biosciences" refer to CN Biosciences, Inc. and its direct and indirect
subsidiaries, unless otherwise indicated or the context otherwise requires. The
Company's subsidiaries, all of which are wholly owned, include a U.S. operating
subsidiary based in San Diego and international subsidiaries organized under the
local laws of their jurisdiction of operation. Calbiochem(R), Novabiochem(R) and
Clinalfa(R) are registered trademarks of the Company. References are made herein
to trademarks of companies other than the Company.

4
<PAGE> 5

THE OFFERING

<TABLE>
<S> <C>
Common Stock Offered............................. 1,600,000 shares
Common Stock Outstanding after the Offering...... 4,912,114 shares (1)
Use of Proceeds.................................. Repayment of all amounts outstanding under the
Company's bank credit facility (approximately
$8.2 million), working capital, general corporate
purposes and possible acquisitions.
Nasdaq National Market Symbol.................... CNBI
</TABLE>

SUMMARY CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
SIX MONTHS ENDED
PERIOD FROM INCEPTION YEARS ENDED DECEMBER 31, JUNE 30,
(MARCH 11, 1992) TO --------------------------- -----------------
DECEMBER 31, 1992 1993 1994 1995 1995 1996
--------------------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENTS OF OPERATIONS
DATA:
Sales..................................... $17,719 $22,771 $24,188 $26,966 $13,075 $16,565
Cost of sales............................. 9,691 14,195 13,183 13,185 6,691 7,602
------- ------- ------- ------- ------- -------
Gross profit.............................. 8,028 8,576 11,005 13,781 6,384 8,963
------- ------- ------- ------- ------- -------
Operating expenses:
Research and development................ 290 462 736 1,338 488 1,065
Selling, general and administrative..... 7,742 10,292 10,343 10,608 4,802 6,185
------- ------- ------- ------- ------- -------
Total operating expenses.............. 8,032 10,754 11,079 11,946 5,290 7,250
------- ------- ------- ------- ------- -------
Income (loss) from operations............. (4) (2,178) (74) 1,835 1,094 1,713
Interest expense, net..................... 61 170 326 527 159 394
------- ------- ------- ------- ------- -------
Income (loss) before income taxes......... (65) (2,348) (400) 1,308 935 1,319
Provision (benefit) for income taxes...... 401 (195) 62 291 208 462
------- ------- ------- ------- ------- -------
Net income (loss)..................... $ (466) $(2,153) $ (462) $ 1,017 $ 727 $ 857
======= ======= ======= ======= ======= =======
Pro forma net income per share............ $ .30 $ .25
======= =======
Pro forma shares used in per share
computations (2)........................ 3,367 3,477
</TABLE>

<TABLE>
<CAPTION>
JUNE 30, 1996
-------------------------
ACTUAL AS ADJUSTED (3)
------- ---------------
<S> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Cash and cash equivalents........................................................ $ 1,118 $10,801
Working capital.................................................................. 15,286 26,386
Total assets..................................................................... 32,228 41,911
Long-term debt and other obligations, net of current portion..................... 8,201 1,451
Redeemable preferred stock....................................................... 18,343 --
Common stockholders' equity (deficit)............................................ (184) 36,009
</TABLE>

- ---------------

(1) Excludes (i) 393,914 shares of Common Stock, par value $.01 per share (the
"Common Stock"), issuable upon the exercise of outstanding stock options
issued under the Company's 1992 Stock Option Plan, as amended (the "Stock
Option Plan"), (ii) an additional 359,559 shares of Common Stock reserved
for future issuance under the Company's Stock Option Plan and (iii) 3,028
shares issuable upon the exercise of an outstanding warrant (the "Warrant").

(2) See Note 1 to notes to consolidated financial statements for an explanation
of the method used to determine the number of shares used to compute pro
forma share amounts.

(3) Adjusted to give effect to the conversion of all outstanding shares of the
Company's Series A Convertible Preferred Stock, par value $1.00 per share,
into 788,814 shares of Class A Common Stock and the subsequent conversion
into an equal number of shares of Common Stock, the exchange of all
outstanding shares of the Company's Series B Preferred Stock, par value
$1.00 per share, for 1,435,424 shares of Common Stock, in each case upon the
consummation of the offering, the sale of 1,600,000 shares of Common Stock
offered hereby, and the receipt and application of the net proceeds
therefrom. See "Use of Proceeds" and "Capitalization."
------------------------

Except as otherwise specified, all information in this Prospectus assumes
no exercise of the Underwriters' over-allotment option and has been adjusted to
give effect to (i) a 2.36585-for-one stock split in the form of a stock dividend
effected on July 17, 1996, (ii) the conversion upon the consummation of this
offering of all outstanding shares of Series A Convertible Preferred Stock into
an aggregate of 788,814 shares of Class A Common Stock and subsequent conversion
into an equal number of shares of Common Stock and (iii) the exchange upon the
consummation of this offering of all outstanding shares of Series B Preferred
Stock for an aggregate of 1,435,424 shares of Common Stock. See "Description of
Capital Stock" and "Certain Transactions."

5
<PAGE> 6

RISK FACTORS

Prospective investors in the shares of Common Stock offered hereby should
carefully consider the following risk factors, in addition to the other
information appearing in this Prospectus. This Prospectus contains
forward-looking statements which involve risks and uncertainties. The Company's
actual results in the future could differ significantly from the results
discussed in such forward-looking statements. Factors that could cause or
contribute to such a difference include, but are not limited to, those discussed
in "Risk Factors" below, "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and "Business," as well as those discussed
elsewhere in this Prospectus.

Dependence on Research and Development Budgets and Government Research
Funding. The Company's customers include research scientists at pharmaceutical
and biotechnology companies, academic institutions and government and private
research laboratories. Fluctuations in the research and development budgets of
these companies and institutions can have a significant effect on the demand for
the Company's products. Such budgets are based on a wide variety of factors
including the resources available to make such expenditures, the spending
priorities among various types of research and the policies regarding such
expenditures during recessionary periods. Any decrease in life sciences research
and development expenditures by such companies and institutions could have a
material adverse effect on the Company's business, financial condition and
results of operations.

A significant portion of the Company's sales have been to research
scientists, universities, government research laboratories, private foundations
and other institutions whose funding is dependent on grants from government
agencies such as the U.S. National Institutes of Health ("NIH") and similar
domestic and international agencies. The funding associated with approved NIH
grants generally becomes available at particular times of the year, as
determined by the federal government, and may result in fluctuations in the
Company's operating results. Although research funding has increased during the
past several years, grants have, in the past, been frozen for extended periods
or have otherwise become unavailable to various institutions, sometimes without
advance notice. Furthermore, increasing political pressures to reduce or
eliminate budgetary deficits may result in reduced allocations to the NIH and
the other government agencies that fund research and development activities. If
government funding, especially NIH grants, were to become unavailable to
researchers for any extended period of time or if overall research funding were
to decrease, there could be a material adverse effect on the Company's business,
financial condition and results of operations.

Risks Inherent in Growth, Expansion and Acquisition Strategy. The Company
has sought and will continue to seek growth in sales and profitability primarily
through the internal development and acquisition of new product lines,
additional customers and new businesses. A significant portion of the Company's
historical revenue growth is attributable to internal product development,
sourcing of third-party products and, more recently, from its acquisition of the
Oncogene Research Products business. The ability of the Company to achieve its
expansion objectives and to manage its growth effectively depends upon a variety
of factors, including (i) the ability to internally develop products, (ii) the
ability to identify and license products sourced from third parties, (iii) the
ability to successfully position and market its products, (iv) the ability to
identify and consummate attractive acquisitions and (v) the ability to integrate
new businesses, facilities and personnel into existing operations. If the
Company is unable to manage growth effectively, there could be a material
adverse effect on the Company's business, financial condition and results of
operations.

The Company competes for acquisition and expansion opportunities with other
companies that have significantly greater financial and other resources than
those of the Company. There can be no assurance that suitable acquisition or
investment opportunities will be identified, consummated, or, if consummated,
integrated successfully and profitably into the Company's operations. Moreover,
there can be no assurance that the Company's historic rate of growth or
expansion will continue, or that further growth or expansion will result in
continued profitability.

Reliance on Niche Research Market Strategy. Key elements of the Company's
strategy include the targeting and penetration of emerging life sciences niche
research markets and the continued development of the niche research markets
currently served by the Company. If the Company is unable to successfully target
and penetrate these niche research markets or is unable to continue developing
the niche research markets currently served or if the Company's new products are
not accepted by research scientists, there could be a

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<PAGE> 7

material adverse effect on the Company's business, financial condition and
results of operations. In addition, the Company currently benefits from its
participation in emerging niche research markets which, as they expand, may
attract the attention of the Company's competitors. Further, as these niche
research markets mature, products that were once innovative, thus commanding
higher margins, may become commodities.

Dependence on New Products; Rapid Technological Change. The life sciences
research products market is characterized by rapid technological change and
frequent product introductions. The Company's future success will depend, in
part, on its ability to develop and introduce, on a timely basis, products that
address the evolving needs of its customers. There can be no assurance that the
Company will not experience difficulties that could delay or prevent the
successful development, introduction and marketing of products. The Company has
experienced, and may in the future experience, delays in the development and
introduction of products, and there can be no assurance that the Company will
keep pace with the rapid rate of change in life sciences research, and will not
experience additional delays in the future. In addition, there can be no
assurance that new products will adequately meet the requirements of the
marketplace or achieve market acceptance. Factors affecting whether such
products will be accepted by the market include use of the product by research
scientists, citation of the product in published research, the timing of market
entry of the product relative to competitive products and general trends in life
sciences research. If the Company is unable, for technological or other reasons,
to develop and introduce products in a timely manner in response to changing
market environments or customer requirements, there could be a material adverse
effect on the Company's business, financial condition and results of operations.

Dependence on Licensing as a Source of Products. Many of the Company's
products are manufactured or sold pursuant to license agreements under which the
Company pays royalties to the patent holder based upon a percentage of the
product's sales. There can be no assurance that the Company will be able to
continue to successfully identify new products developed by others, and if
identified, to negotiate license agreements on favorable terms. Additionally,
there can be no assurance that the Company will be able to renew any existing
license agreements upon their expiration. See "Business -- Intellectual
Property."

Highly Competitive Market. The market for the Company's products is highly
competitive, and the Company expects competition to increase. Furthermore,
although the life sciences research products market continues to grow, its rate
of growth in recent years has been declining and may continue to decline. The
Company competes with many other life sciences research products suppliers, both
larger and smaller than the Company. Some of the Company's competitors,
including two of its largest competitors, Sigma-Aldrich Corporation
("Sigma-Aldrich") and Boehringer Mannheim GmbH ("Boehringer"), offer a broad
range of equipment, laboratory supplies and other products, including many of
the research products offered by the Company. To the extent that researchers
exhibit loyalty to the supplier that first supplies them with a particular
research product, the Company's competitors may have an advantage over the
Company with respect to products first developed by such competitors. In
addition, many of the Company's competitors have significantly greater research
and development, marketing, financial and other resources than the Company, and
therefore represent and will continue to represent significant competition in
the Company's existing and future markets. Because of their size and the breadth
of their product offerings, certain of these companies have been able to
establish managed accounts by which, through a combination of direct computer
links and volume discounts, they seek to gain a disproportionate share of orders
for research products from particular academic institutions or pharmaceutical or
biotechnology companies. Such managed accounts raise significant competitive
barriers for the Company. The Company currently benefits from its participation
in emerging niche research markets which, as they expand, may attract the
attention of the Company's competitors.

Reliance on Catalogs, Distributors and Direct Marketing Efforts; Limited
Sales Force. The Company sells its products principally through catalogs
distributed to research scientists and laboratories, and uses only a very
limited number of salespeople in certain of its markets. There can be no
assurance that the Company would be able to successfully establish other methods
of marketing and sales of its products should it become necessary or desirable
in the future. Additionally, the Company's catalogs are generally reissued every
12 to 24 months and price adjustments between catalog publication dates have
historically been infrequent. A significant portion of the Company's
international sales are made through independent distributors over which the
Company has no control and who also represent products of other companies.
Additionally, the Company

7
<PAGE> 8

recently entered into a joint distribution agreement relating to its Apoptosis
specialty catalog. The loss of any of these distribution methods could have a
material adverse effect on the Company's business, financial condition and
results of operations. See "Business."

Volatility of Bulk Sales Business. In addition to sales of its core
products in standard laboratory quantity sizes (generally ranging from 100
nanograms to 100 grams), the Company offers certain products in bulk quantities
(generally up to ten kilograms) at discounts from catalog prices. Bulk sales,
which represented 23.5% of net sales in 1995, are generally characterized as
relatively high dollar sales made to a limited number of customers. Thus, the
absence or presence of a bulk sale could have a material impact on quarterly
results. Furthermore, the Company's bulk sales business fluctuates more and is
less predictable than its core business, and the uncertain timing and volatility
of bulk sales has in the past and may continue in the future to materially
affect the Company's business, financial condition and results of operations.
See "Management's Discussion and Analysis of Financial Condition and Results of
Operations."

Significant Fluctuations in Quarterly Earnings. The Company's quarterly
operating results may vary significantly from quarter to quarter as a result of
a number of factors including new editions of existing catalogs, introduction of
additional specialty catalogs and bulk sales of the Company's products. Other
factors which may affect quarterly operating results include the timing of the
U.S. Government approval of the NIH budget, lower European and academic sales
during the summer months and various holiday breaks and fluctuations in weather.
The Company's current and planned expense levels are based in part upon its
expectations as to future revenues. Consequently, if revenues in a particular
quarter do not meet expectations, the Company may not be able to adequately
adjust operating expenses to compensate for the shortfall. Operating results may
therefore vary significantly from quarter to quarter and will not necessarily be
indicative of results in subsequent periods. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Quarterly Results."

Accumulated Deficit; Uncertainty of Future Operating Results. At June 30,
1996, the Company had an accumulated deficit of $1.2 million. Although the
Company has had net income for the past eighteen months, the Company incurred
net losses for the period from its inception (March 11, 1992) through December
31, 1992 and the years ended December 31, 1993 and 1994. Future operating
results will depend on many factors, including demand for the Company's
products, the levels and timing of government and private sector funding of life
sciences research and development activities, the timing of the introduction of
products and catalogs by the Company or its competitors, and the Company's
ability to control costs. Furthermore, the Company's gross margins can be
significantly affected by the presence or absence of bulk sales during any
particular period and quarterly fluctuations in sales relative to operating
expenses. There can be no assurance that the Company will be able to grow in
future periods or remain profitable. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations."

Risks Relating to International Sales and Operations. Historically, product
sales to customers outside the United States have accounted for approximately
50% of the Company's net sales, and the Company expects that international sales
will continue to account for a significant percentage of revenues in the future.
International sales and operations may be materially adversely affected by trade
restrictions, changes in tariffs and taxes, export license requirements,
difficulties in staffing and managing international operations, problems in
establishing or managing distributor relationships and general economic
conditions. See "Business -- Government Regulation."

A majority of the Company's sales are denominated in U.S. dollars, with the
balance denominated in foreign currencies. Additionally, the Company publishes a
number of its catalogs priced in foreign currencies and price adjustments
between catalog publication dates to reflect fluctuations in the value of
foreign currencies relative to the U.S. dollar have historically been
infrequent. Consequently, fluctuations in the value of foreign currencies
relative to the U.S. dollar could have a material adverse effect on the
Company's business, financial condition and results of operations. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."

Risk of Patent Infringement. Because of the breadth of the Company's
product offerings and ambiguities in intellectual property law, the Company
periodically receives in the ordinary course of business notices of

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<PAGE> 9

potential infringement of patents held by others. Although the Company
historically has been able to satisfactorily resolve such claims and believes
that any outstanding claims will be satisfactorily resolved, there can be no
assurance that the Company may not be forced to discontinue the sale of one or
more of its products, some or all of which could be material. As the Company
develops product offerings focused on certain niche research markets,
intellectual property rights of the Company or others related to such markets
may become increasingly important, and the Company's failure to obtain and
retain such rights may have a material adverse effect on the Company's business,
financial condition and results of operations. See "Business -- Intellectual
Property."

Dependence on Key Personnel. The Company's future success depends in
significant part on the continued service of, and on the Company's continuing
ability to attract and retain, highly qualified technical, managerial and sales
personnel. Competition for such personnel is intense in the Company's industry
and geographic locations, and there can be no assurance that the Company will be
able to retain or attract such employees in the future. The loss of key
personnel or the inability to hire or retain qualified personnel could have a
material adverse effect on the Company's business, financial condition and
results of operations. The Company has entered into employment agreements with
Stelios B. Papadopoulos, its Chairman, Chief Executive Officer and President,
and Ben Matzilevich, its Vice President, Market Development -- Niche
Applications. See "Management."

Risk Relating to the Influence of the Internet on Marketing and
Catalogs. The Internet has begun to change marketing patterns in a wide variety
of industries. The high degree of personal computer usage within scientific
research organizations may lead to entirely new methods of marketing and sales
of research products. While the Company has established home pages on the
Internet for the Calbiochem and Novabiochem brands and is developing an Oncogene
Research Products brand home page, the Company may not be able to keep pace with
the rate of change in its markets brought about by the Internet and may invest
in catalogs or Internet-based projects which future changes may render obsolete.

Compliance with Government and Environmental Regulations. The Company is
subject to various forms of government regulations, including environmental and
safety laws and regulations and laws governing use and storage of hazardous
materials. The Company has in the past been notified of minor violations of
government and environmental regulations. The Company has promptly corrected
such violations without any material impact on the Company's operations. Any
future violation of, and the cost of compliance with, these laws and regulations
could have a material adverse effect on the Company's business, financial
condition and results of operations.

Because of the nature of its operations and the use of hazardous substances
in its ongoing manufacturing and research and development activities, the
Company is subject to stringent federal, state and local laws, rules,
regulations and policies governing the use, generation, manufacturing, storage,
air emission, effluent discharge, handling and disposal of certain materials and
wastes. Prior to the Company's inception, its U.S. subsidiary, at the time it
was owned by its former owners, was involved in two separate incidents related
to the release of hazardous materials into the environment at a leased facility
which is no longer occupied by the Company. The Company believes from a review
of correspondence from various regulatory agencies that these incidents were
investigated and remediated by the U.S. subsidiary's former owners. Although the
Company believes it is in material compliance with all applicable government and
environmental laws, rules, regulations, and policies, there can be no assurance
that the Company's business, financial condition and results of operations will
not be materially adversely affected by current or future environmental laws,
rules, regulations and policies or by liability arising out of any past or
future releases or discharges of materials that could be hazardous. See
"Business -- Government Regulation."

Product Liability Risk; Limited Insurance Coverage. Although the Company
does not sell products intended for use in humans, or, with the exception of its
Clinalfa products, sell products intended for use in human clinical trials, the
Company's business could expose it to potential liability risks. The Company
currently has only limited product liability insurance, and there can be no
assurance that it will be able to maintain such insurance or obtain additional
insurance on acceptable terms or that insurance will provide adequate coverage
against potential liabilities. A successful product liability claim or a series
of claims brought against the

9
<PAGE> 10

Company in excess of its insurance coverage limits could have a material adverse
effect on the Company's business, financial condition and results of operations.

Holding Company Structure. The Company is a holding company, the principal
assets of which are the capital stock of its subsidiaries, and has no
independent means of generating revenues. As a holding company, the Company
depends on dividends and other permitted payments from its subsidiaries,
including its international subsidiaries, to meet its cash needs. Under its
current bank credit facility, Calbiochem-Novabiochem Corporation, the Company's
U.S. operating subsidiary, is restricted from paying dividends and making loans
or advances to the Company, except in certain limited circumstances. These
restrictions will be eliminated upon the consummation of this offering. The
Company maintains cash balances at its various subsidiaries based upon local
results of operations. The amount of foreign-sourced earnings to be repatriated
to the United States is determined based upon foreign entity capitalization,
local cash needs, local and U.S. tax implications and requirements for cash in
the U.S. operations. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations."

Control by Principal Stockholders. Upon consummation of the offering,
Warburg and ABS will beneficially own approximately 64.3%, of the Common Stock.
Because of such ownership, these stockholders will effectively control the
election of all members of the Board of Directors and determine all corporate
actions after the sale of the shares of Common Stock offered hereby.
Additionally, pursuant to an agreement with the Company, Warburg and ABS will
each have certain rights to nominate directors as long as they continue to own
specified percentages of the outstanding shares of Common Stock. See
"Management" and "Principal Stockholders."

Broad Discretion in Application of Net Proceeds. The net proceeds to the
Company from the sale of the shares of Common Stock offered hereby are estimated
to be approximately $17.9 million. The Company expects to use approximately $8.2
million to repay the outstanding indebtedness under its bank credit facility and
the balance for working capital, general corporate purposes and possible
acquisitions. The Company has not identified specific uses for the balance of
the proceeds at this time. The Company's management and Board of Directors will
have complete discretion with respect to the application of such proceeds. See
"Use of Proceeds."

No Prior Public Market; Possible Volatility of Stock Price. Prior to this
offering there has been no public market for the Company's Common Stock, and
although the Common Stock has been approved for quotation on the Nasdaq National
Market there can be no assurance that an active public market for the Common
Stock will develop or be sustained after the offering. The initial public
offering price was negotiated between the Company and the Representatives of the
Underwriters and may not be indicative of future market prices of the Common
Stock. The trading price of the Company's Common Stock could be subject to wide
fluctuations in response to variations in quarterly operating results, failure
to meet expectations of, or a change in recommendation by, securities analysts,
announcements of technological innovations or new products by the Company or its
competitors, government policy changes, general trends in life sciences research
and other events or factors, including factors outside the Company's control. In
addition, as in the past, stock market prices and volume may fluctuate
significantly. These broad market fluctuations may adversely affect the market
price of the Company's Common Stock. See "Shares Eligible for Future Sale" and
"Underwriting."

Shares Eligible for Future Sale; Potential for Adverse Effect on Stock
Price; Registration Rights. Sales of a substantial number of shares of Common
Stock in the public market or the prospect of such sales could adversely affect
the market price of the Common Stock. The number of shares of Common Stock
available for sale in the public market is limited by restrictions under the
Securities Act of 1933, as amended (the "Securities Act"), and lock-up
agreements under which the directors, executive officers and principal
stockholders of the Company have agreed not to sell or otherwise dispose of any
of their shares of Common Stock for a period of 180 days from the date of this
Prospectus (the "Lock-Up Period") without the prior written consent of UBS
Securities LLC. UBS Securities LLC may, in its sole discretion and at any time
without notice, release all or any portion of the securities subject to lock-up
agreements. The Company has also agreed not to issue or sell any shares of
Common Stock for a period of 180 days from the date of this Prospectus, except
for the grant of

10
<PAGE> 11

additional options under the Stock Option Plan or the issuance of shares upon
the exercise of stock options or the Warrant. Upon completion of this offering,
in addition to the 1,600,000 shares offered hereby, approximately 8,043 shares
of Common Stock held by current stockholders will be eligible for immediate
sale. Commencing 90 days after the date of this Prospectus, 13,959 shares of
Common Stock issued upon the exercise of stock options will be eligible for sale
in reliance upon Rule 701 under the Securities Act ("Rule 701"). Upon expiration
of the Lock-Up Period, and subject to the limitations imposed by Rule 144 under
the Securities Act ("Rule 144"), 3,184,024 shares of Common Stock held by the
Company's directors, executive officers and principal stockholders will be
eligible for immediate sale. Promptly after the completion of this offering, the
Company intends to file a registration statement on Form S-8 under the
Securities Act covering approximately 393,914 shares of Common Stock reserved
for issuance pursuant to stock options outstanding as of September 30, 1996 and
359,559 shares of Common Stock reserved for future issuance under the Stock
Option Plan. Such registration statement will automatically become effective
upon filing. Accordingly, shares registered thereunder will, subject to Rule 144
volume limitations applicable to affiliates, be available for sale in the open
market, except to the extent that such shares are subject to vesting
restrictions with the Company or certain contractual restrictions on sale or
transfer. Holders of options to purchase 228,068 shares of Common Stock have
agreed not to sell or otherwise transfer their shares obtained upon exercise of
such options during the Lock-Up Period, 161,824 of which will be exercisable
upon the expiration of such Lock-Up Period. The holders of 3,278,281 shares of
Common Stock and the holder of the 3,028 shares of Common Stock issuable upon
the exercise of the Warrant are entitled to certain registration rights with
respect to such shares. If such holders, by exercising their registration
rights, cause a large number of shares to be registered and sold in the public
market, such sales could have an adverse effect on the market price of the
Common Stock. If the Company were required to include in a Company-initiated
registration shares held by such holders pursuant to the exercise of their
registration rights, such sales could have a material adverse effect on the
Company's ability to raise needed capital. See "Management -- Stock Option
Plan," "Description of Capital Stock -- Registration Rights" and "Shares
Eligible for Future Sale."

Immediate and Substantial Dilution. The initial public offering price is
substantially higher than the book value per share of the Common Stock.
Investors participating in this offering will incur immediate and substantial
dilution of $6.37 per share. To the extent that outstanding options to purchase
the Company's Common Stock are exercised, there will be further dilution to such
investors. See "Dilution."

No Intention to Pay Dividends. The Company has never paid a cash dividend
on the Common Stock and does not anticipate paying any cash dividends on the
Common Stock in the foreseeable future. The Company is a guarantor of its U.S.
subsidiary's bank credit agreement providing for term loans and a line of credit
(the "Credit Facility"). The Credit Facility restricts the payment of cash
dividends by the Company and also restricts the Company's U.S. subsidiary from
paying cash dividends and making loans or advances to the Company, except in
certain limited circumstances. These restrictions with respect to the U.S.
subsidiary will be eliminated upon the consummation of this offering, although
the restriction on the payment of cash dividends by the Company will continue.
See "Dividend Policy."

Anti-Takeover Effects of Certificate of Incorporation and Delaware
Law. Under the Company's Amended and Restated Certificate of Incorporation (the
"Certificate of Incorporation"), the Company's Board of Directors has the
authority to issue up to 5,000,000 shares of Preferred Stock and to determine
the price, rights, preferences and privileges of those shares without any
further vote or action by the stockholders. The rights of the holders of Common
Stock will be subject to, and may be adversely affected by, the rights of the
holders of any Preferred Stock that may be issued in the future. The issuance of
Preferred Stock, while providing desirable flexibility in connection with
possible acquisitions and other corporate purposes, could have the effect of
making it more difficult for a third party to acquire a majority of the
outstanding voting stock of the Company. The Company has no present plans to
issue shares of Preferred Stock. In addition, the Company is subject to the
provisions of Section 203 of the Delaware General Corporation Law, an
anti-takeover law. See "Description of Capital Stock."

11
<PAGE> 12

USE OF PROCEEDS

The net proceeds to be received by the Company from the sale of the shares
of Common Stock offered hereby are estimated to be $17.9 million ($20.6 million
if the Underwriters' over-allotment option is exercised in full), after
deducting the estimated underwriting discounts and commissions and expenses
associated with the offering. The Company intends to use the net proceeds (i) to
repay all amounts outstanding under the Credit Facility (approximately $8.2
million) and (ii) for working capital, general corporate purposes and possible
acquisitions. Pending such uses, the net proceeds of this offering will be
invested in short-term, investment grade, interest-bearing securities. The debt
to be repaid consists of $825,000 outstanding under the Company's line of
credit, which bears interest at 8.25% and matures in June 1998, and $7.4 million
outstanding under term loans, which bear interest at 8.625% and requires monthly
payments of principal and interest through August 2000. Borrowings under the
line of credit were incurred for working capital and general corporate purposes.
Approximately $6.0 million of the term loans was incurred to finance the
Company's acquisition of the Oncogene Research Products business, with the
balance used to refinance the Company's previous credit facility. Although the
Company has from time to time engaged in discussions with respect to possible
acquisitions, it has no present understandings, commitments or agreements, nor
is it currently in negotiations with respect to any acquisition.

DIVIDEND POLICY

The Company has never paid a cash dividend on the Common Stock and does not
anticipate paying any cash dividends on the Common Stock in the foreseeable
future. Instead, it intends to retain any earnings to finance the expansion of
its business and for working capital and general corporate purposes. Any payment
of dividends will be at the discretion of the Company's Board of Directors and
will depend upon earnings, financial condition, capital requirements, level of
indebtedness, contractual restrictions with respect to payment of dividends and
other factors. The Company is a holding company which conducts substantially all
of its operations through its subsidiaries. The Company is a guarantor under the
Credit Facility. The Credit Facility restricts the payment of cash dividends by
the Company and also restricts Calbiochem-Novabiochem Corporation, the Company's
U.S. subsidiary, from paying cash dividends and making loans or advances to the
Company, except in certain limited circumstances. These restrictions with
respect to the U.S. subsidiary will be eliminated upon the consummation of this
offering, although the restriction on the payment of cash dividends by the
Company will continue.

12
<PAGE> 13

CAPITALIZATION

The following table sets forth at June 30, 1996, the (i) actual
capitalization of the Company, (ii) pro forma capitalization of the Company
giving effect to the conversion of all outstanding shares of the Company's
Series A Convertible Preferred Stock, par value $1.00 per share (the "Series A
Convertible Preferred Stock"), into 788,814 shares of the Company's Class A
Common Stock, par value $.01 per share (the "Class A Common Stock"), and the
subsequent conversion into an equal number of shares of Common Stock and the
exchange of all outstanding shares of the Company's Series B Preferred Stock,
par value $1.00 per share (the "Series B Preferred Stock"), for 1,435,424 shares
of Common Stock (determined by dividing the aggregate liquidation preference of
the Series B Preferred Stock ($17,942,800) by the initial public offering price
of $12.50 per share), in each case upon consummation of this offering and (iii)
capitalization as adjusted to give effect to the sale of 1,600,000 shares of
Common Stock offered by the Company hereby and the application of the estimated
net proceeds therefrom, and after deducting the estimated underwriting discounts
and commissions and other estimated offering expenses. See "Use of Proceeds."
This table should be read in conjunction with "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and the consolidated
financial statements of the Company and related notes included elsewhere in this
Prospectus.

<TABLE>
<CAPTION>
JUNE 30, 1996
-------------------------------------
ACTUAL PRO FORMA AS ADJUSTED
------- --------- -----------
(IN THOUSANDS)
<S> <C> <C> <C>
Current portion of long-term debt.......................... $ 1,417 $ 1,417 $ --
======= ======= =======
Long-term debt and other obligations, net of current
portion.................................................. $ 8,201 $ 8,201 $ 1,451
Redeemable preferred stock (1)............................. 18,343 -- --
Stockholders' equity (deficit):
Preferred stock, $.01 par value, no shares authorized;
5,000,000 shares authorized and no shares issued and
outstanding actual, pro forma or as adjusted.......... -- -- --
Common stock, $.01 par value; 30,000,000 shares
authorized; 1,087,876 shares issued and outstanding
actual; 3,312,114 shares issued and outstanding pro
forma; 4,912,114 shares issued and outstanding as
adjusted (2).......................................... 11 33 49
Additional paid-in capital............................... 351 18,672 36,506
Accumulated deficit...................................... (1,207) (1,207) (1,207)
Foreign currency translation adjustment.................. 757 757 757
Note receivable from stockholder......................... (96) (96) (96)
------- ------- -------
Total stockholders' equity (deficit)............. (184) 18,159 36,009
------- ------- -------
Total capitalization............................. $26,360 $26,360 $37,460
======= ======= =======
</TABLE>

- ---------------

(1) Represents the outstanding shares of Series A Convertible Preferred Stock
and Series B Preferred Stock. See Note 5 of Notes to Consolidated Financial
Statements.

(2) Excludes (i) 393,914 shares of Common Stock issuable upon the exercise of
outstanding stock options under the Stock Option Plan and (ii) 3,028 shares
issuable upon the exercise of the Warrant.

13
<PAGE> 14

DILUTION

The pro forma net tangible book value of the Company as of June 30, 1996
was $12.3 million, or $3.71 per share. Pro forma net tangible book value per
share represents the tangible net worth (total tangible assets less total
liabilities) of the Company divided by the pro forma number of shares of Common
Stock outstanding prior to the offering. After giving effect to the offering of
1,600,000 shares of Common Stock hereby (after deducting underwriting discounts
and commissions and estimated offering expenses), the pro forma net tangible
book value of the Company as of June 30, 1996 would have been $30.1 million, or
$6.13 per share, representing an immediate increase in net tangible book value
of $2.42 per share to existing stockholders and an immediate dilution of $6.37
per share to the investors purchasing the shares of Common Stock offered hereby.

The following table illustrates this dilution to new investors:

<TABLE>
<S> <C> <C>
Initial public offering price per share.................... $12.50
Pro forma net tangible book value per share as of June 30,
1996..................................................... $ 3.71
Increase per share attributable to the offering............ 2.42
-----
Pro forma net tangible book value per share after the
offering................................................. 6.13
------
Dilution per share to new investors........................ $ 6.37
======
</TABLE>

The following table sets forth, on a pro forma basis as of June 30, 1996,
the number of shares of Common Stock acquired from the Company, the total
consideration paid to the Company and the average price per share paid by
existing stockholders and by the new investors:

<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION
--------------------- ----------------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
--------- ------- ----------- ------- -------------
<S> <C> <C> <C> <C> <C>
Existing stockholders............... 3,312,114 67.4% $18,886,724 48.6% $ 5.70
New investors....................... 1,600,000 32.6 20,000,000 51.4 12.50
--------- ----- ----------- -----
Total..................... 4,912,114 100.0% $38,886,724 100.0%
========= ===== =========== =====
</TABLE>

If the Underwriters' over-allotment option is exercised in full, the pro
forma net tangible book value of the Company as of June 30, 1996 would have been
$32.9 million, or $6.39 per share, representing an immediate increase in net
tangible book value of $2.68 per share to existing stockholders and an immediate
dilution of $6.11 per share to the investors purchasing the shares of Common
Stock offered hereby. The foregoing table excludes (i) 393,914 shares of Common
Stock issuable upon the exercise of outstanding stock options issued under the
Stock Option Plan at a weighted average exercise price of approximately $.54 per
share and (ii) 3,028 shares issuable upon the exercise of the Warrant at an
exercise price of $1.06 per share. Assuming all such outstanding stock options
and the warrant were exercised in full, the dilution per share of Common Stock
to new investors in the offering would be increased by $.41 per share to a total
of $6.78 per share.

14
<PAGE> 15

SELECTED CONSOLIDATED FINANCIAL DATA

The following selected consolidated financial data should be read in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and the consolidated financial statements and the
related notes included elsewhere in this Prospectus. The consolidated statement
of operations data for each of the three years in the period ended December 31,
1995 and the consolidated balance sheet data at December 31, 1994 and 1995 are
derived from the Company's consolidated financial statements, which have been
audited by Ernst & Young LLP, independent auditors, included elsewhere in this
Prospectus. The consolidated statement of operations data for the period from
inception (March 11, 1992) through December 31, 1992 and the consolidated
balance sheet data at December 31, 1992 and 1993 are derived from the Company's
audited consolidated financial statements not included in this Prospectus. The
consolidated statement of operations data for the six months ended June 30, 1995
and 1996 and the consolidated balance sheet data at June 30, 1996 have been
derived from unaudited interim financial statements and include all adjustments
(consisting only of normal recurring adjustments) that the Company considers
necessary for a fair presentation of the financial position and results of
operations at that date and for such periods. The operating results for the six
months ended June 30, 1996 are not necessarily indicative of the results to be
expected for the full year or for any future period.

<TABLE>
<CAPTION>
YEARS ENDED SIX MONTHS ENDED
PERIOD FROM INCEPTION DECEMBER 31, JUNE 30,
(MARCH 11, 1992) TO --------------------------- -----------------
DECEMBER 31, 1992 1993 1994 1995 1995 1996
--------------------- ------- ------- ------- ------- -------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF OPERATIONS DATA:
Sales................................... $17,719 $22,771 $24,188 $26,966 $13,075 $16,565
Cost of sales........................... 9,691 14,195 13,183 13,185 6,691 7,602
------- ------- ------- ------- ------- -------
Gross profit............................ 8,028 8,576 11,005 13,781 6,384 8,963
------- ------- ------- ------- ------- -------
Operating expenses:
Research and development.............. 290 462 736 1,338 488 1,065
Selling, general and administrative... 7,742 10,292 10,343 10,608 4,802 6,185
------- ------- ------- ------- ------- -------
Total operating expenses............ 8,032 10,754 11,079 11,946 5,290 7,250
------- ------- ------- ------- ------- -------
Income (loss) from operations........... (4) (2,178) (74) 1,835 1,094 1,713
Interest expense, net................... 61 170 326 527 159 394
------- ------- ------- ------- ------- -------
Income (loss) before income taxes....... (65) (2,348) (400) 1,308 935 1,319
Provision (benefit) for income taxes.... 401 (195) 62 291 208 462
------- ------- ------- ------- ------- -------
Net income (loss)................... $ (466) $(2,153) $ (462) $ 1,017 $ 727 $ 857
======= ======= ======= ======= ======= =======
Pro forma net income per share.......... $ .30 $ .25
======= =======
Pro forma shares used in per share
computations (1)...................... 3,367 3,477
</TABLE>

<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
------------------------------------- --------
1992 1993 1994 1995 1996
------- ------- ------- ------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Cash and cash equivalents................................. $ 1,238 $ 1,839 $ 935 $ 1,203 $ 1,118
Working capital........................................... 13,000 12,946 13,017 15,424 15,286
Total assets.............................................. 23,980 24,046 23,495 31,197 32,228
Long-term debt and other obligations, net of current
portion................................................. 850 2,834 3,266 8,601 8,201
Redeemable preferred stock................................ 18,025 18,175 18,319 18,343 18,343
Common stockholders' equity (deficit)..................... (24) (2,291) (2,053) (544) (184 )
</TABLE>

- ---------------
(1) See Note 1 to notes to consolidated financial statements for an explanation
of the method used to determine the number of shares used to compute pro
forma share amounts.

15
<PAGE> 16

MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following analysis and discussion of the Company's financial condition
and results of operations should be read in conjunction with the Company's
consolidated financial statements and notes thereto included elsewhere in this
Prospectus. This analysis and discussion contains forward-looking statements
which involve risks and uncertainties. The Company's actual results in the
future could differ significantly from the results discussed in such
forward-looking statements. Factors that could cause or contribute to such a
difference include, but are not limited to, those discussed in "Risk Factors"
and "Business," as well as those discussed below.

OVERVIEW

CN Biosciences was formed in 1992 with the purchase of the Company's
subsidiaries, including the Calbiochem biochemical and immunochemical operations
headquartered in San Diego, California, and the Novabiochem peptide operations
headquartered in Laufelfingen, Switzerland, from Biodor Holding AG, Ixora
Holding AG and Biodor US Holding Corporation. During 1993, the Company hired its
current Chief Executive Officer and reorganized its worldwide operations to
better focus its business and corporate strategy on core products. In 1993, the
Company recorded a one-time charge of approximately $2.0 million principally
related to its European operations to reserve for costs of facilities no longer
required, impaired inventory and costs of terminating employees. From 1993 to
1995, the Company invested in excess of $3.2 million for capital expenditures,
principally for infrastructure upgrades to its facilities, automated fulfillment
systems and computer information systems. The Company also hired additional
scientific personnel, particularly employees holding Ph.D.s, to enable it to
expand its internal development and manufacturing capabilities. These
initiatives contributed to improved operating results, and in 1994 the Company
commenced its niche research market strategy with the introduction of the Signal
Transduction specialty catalog.

In August 1995, the Company expanded its immunochemical and molecular
biology capabilities with the purchase of the Oncogene Research Products
business from OSI for $6.2 million cash, which was funded by bank debt. Assets
acquired included primarily inventory and property and equipment. Approximately
30 employees, including four holding Ph.D.s, all of whom were previously
employed by OSI in the Oncogene Research Products business, joined the Company
upon the consummation of the acquisition. The acquisition and successful
integration of this business enhanced the depth and breadth of the Company's
scientific resources, while providing a complementary base of products and
customers. The Company believes that, due to the highly fragmented nature of the
life sciences research products industry, significant opportunities for
consolidation exist. Based on its experience with the acquisition of the
Oncogene Research Products business, the Company believes it can capitalize on
these opportunities, although no assurances can be given that the Company will
be able to identify and successfully consummate additional acquisitions.

The Company uses general and specialty catalogs to market a broad range of
brand-name research products to life sciences researchers worldwide at
pharmaceutical and biotechnology companies, academic institutions and government
laboratories. The Company invests significantly in producing each of its
catalogs, and associated costs are capitalized and amortized over the estimated
useful life of the catalog, generally 12 to 24 months. The Company believes that
researchers tend to purchase the Company's products as a result of exposure to
multiple catalogs, as well as the Company's numerous other periodic publications
and advertisements.

Since 1993, the Company has increasingly focused its strategy on its higher
margin core business of providing standard laboratory quantity sizes of products
(generally ranging from 100 nanograms to 100 grams), and has reduced the focus
on its bulk business. Bulk quantities (generally up to ten kilograms) are
generally offered at discounts to catalog prices, and bulk sales are
characterized as relatively high dollar sales made to a limited number of
customers. Thus, the absence or presence of bulk sales has had and could have a
material impact on results of operations in any individual period.

The Company maintains significant levels of inventory relative to its net
sales in order to meet short delivery times required by researchers. In
addition, products manufactured internally are made in economic batch sizes
which often represent quantities sufficient to supply more than one year of
sales. The Company's

16
<PAGE> 17

products generally have a relatively long shelf life, often in excess of five
years, and quality and storage conditions are continually monitored to ensure
that quality products are delivered to customers. The Company regularly
evaluates the level and composition of inventory through the analysis of recent
sales history and forecasted product demand to ensure that inventory reserve
levels are adequate to properly reflect their net realizable value. Fluctuations
in inventory reserve levels, other than those related to reserves recorded in
1993 for impaired inventory described above, have not been material to the
Company's financial position or results of operations.

The Company's reporting currency is the U.S. dollar. Historically, a
majority of the Company's sales have been denominated in U.S. dollars, with the
balance denominated in foreign currencies. These foreign currency sales have
been effected principally by the Company's international subsidiaries. In
accordance with U.S. accounting requirements, sales denominated in foreign
currencies are translated into the local functional currency and then into U.S.
dollars, at an average exchange rate in effect during the period. In addition,
the Company incurs manufacturing costs in Swiss Francs in connection with its
Swiss operations and also incurs operating expenses in local currencies at each
of its other international locations. Thus, changes from reporting period to
reporting period in the exchange rates between various foreign currencies and
the U.S. dollar have had, and will in the future continue to have, an impact on
revenues and expenses reported by the Company, and such effect may be material
in any individual reporting period.

To the extent that the Company incurs operating expenses in local
currencies at its foreign subsidiaries, the Company has a natural hedge against
a portion of the possible fluctuation in foreign currency exchange rates of
billings in such currencies. Although the Company does not engage in significant
amounts of foreign currency hedging transactions, the Company has, from time to
time, entered into forward contracts to hedge certain of its foreign currency
exposures, principally related to fixed expense commitments of its Japanese
subsidiary.

RESULTS OF OPERATIONS

The following table sets forth, for the periods indicated, items from the
Company's Consolidated Statements of Operations expressed as a percentage of
sales.

<TABLE>
<CAPTION>
PERCENTAGE OF SALES
-----------------------------------------------
SIX MONTHS
YEARS ENDED DECEMBER 31, ENDED JUNE 30,
------------------------- ---------------
1993 1994 1995 1995 1996
----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
Sales:
Core........................................... 67.7% 68.3% 76.5% 73.7% 81.8%
Bulk........................................... 32.3 31.7 23.5 26.3 18.2
----- ----- ----- ----- -----
Total sales...................................... 100.0 100.0 100.0 100.0 100.0
Cost of sales.................................... 62.3 54.5 48.9 51.2 45.9
----- ----- ----- ----- -----
Gross profit..................................... 37.7 45.5 51.1 48.8 54.1
Research and development....................... 2.0 3.0 5.0 3.7 6.4
Selling, general and administrative............ 45.2 42.8 39.3 36.7 37.3
----- ----- ----- ----- -----
Income (loss) from operations.................... (9.5) (0.3) 6.8 8.4 10.4
Interest expense, net............................ 0.8 1.4 2.0 1.2 2.4
----- ----- ----- ----- -----
Income (loss) before income taxes................ (10.3) (1.7) 4.8 7.2 8.0
Provision (benefit) for income taxes............. (0.9) 0.2 1.0 1.6 2.8
----- ----- ----- ----- -----
Net income (loss)........................... (9.4)% (1.9)% 3.8% 5.6% 5.2%
===== ===== ===== ===== =====
</TABLE>

Six Months Ended June 30, 1996 and 1995

Sales. Sales increased 26.7% to $16.6 million for the six-month period
ended June 30, 1996 from $13.1 million for the comparable period in 1995. This
increase resulted primarily from a 40.5% increase in core product sales,
including sales of Oncogene Research Products brand products, offset by a
decrease in bulk sales

17
<PAGE> 18

of 12.1%. Oncogene Research Products sales during the period included initial
stocking orders of approximately $292,000, principally to international
distributors, in connection with the Company's new Apoptosis specialty catalog
issued in February 1996. Sales of core products during the period, excluding
Oncogene Research Products brand sales, grew by 8.9% as compared to sales in the
comparable prior period. These gains in sales were achieved despite a general
strengthening of the U.S. dollar which had the effect of decreasing the dollar
value of sales denominated in foreign currencies recorded in the six months
ended June 30, 1996. Additional factors which management believes contributed to
the increase in sales during the period included the issuance of a new, updated
Calbiochem general catalog in February 1996, increased recognition of the
Company's specialty catalogs, and other marketing initiatives, including
advertising in various publications. The decrease in bulk sales related
primarily to the Company's decision to discontinue sales of a product which had
been provided in bulk form to the veterinary industry in order to avoid
subjecting the Company to increased costs associated with a variety of
regulatory requirements.

Gross Profit. The Company's gross profit percentage increased to 54.1% for
the six-month period ended June 30, 1996 from 48.8% for the comparable period in
1995. This increase was primarily the result of sales of the higher gross margin
Oncogene Research Products brand products, improved margins on the Company's
Calbiochem and Novabiochem brand products and a decrease in lower margin bulk
sales. Management believes that factors which contributed to improvements in
gross margins of Calbiochem and Novabiochem brand products include improved
operating efficiencies from increased volume and increased focus on higher
margin products directed to niche research markets, particularly those products
included in the Company's Signal Transduction, Apoptosis and Combinatorial
Chemistry specialty catalogs.

Research and Development. Research and development expenditures increased
118.2% to $1.1 million for the six-month period ended June 30, 1996 from
$488,000 for the comparable period in 1995. This increase resulted from
additional development activity related to Oncogene Research Products brand
products, research and development costs in connection with products included in
the Company's new Apoptosis specialty catalog launched during the period, and
increased research in the area of glycobiology. The Company anticipates
maintaining at least the current levels of spending for research and
development.

Selling, General and Administrative. Selling, general and administrative
expenditures increased 28.8% to $6.2 million for the six-month period ended June
30, 1996 from $4.8 million for the comparable period in 1995, and increased to
37.3% of sales for the period from 36.7% for the comparable period in 1995. The
dollar increase in expenses was primarily the result of incremental operational
costs relating to the Oncogene Research Products business, increased
administrative salaries and increased selling costs related to expanded
advertising programs and additional specialty catalogs launched during the
period. The increase in expenses as a percentage of sales reflected the
additional costs of increased specialty catalogs and upgraded advertising
programs, as the Company's strategy continued to emphasize expansion of its
focus on niche research markets in 1996. The Company anticipates a modest growth
in administrative expenses resulting from the Company's ongoing reporting
obligations and investor relations activities once the Common Stock becomes
publicly traded.

Interest Expense, Net. Interest expense, net increased to $394,000 for the
six-month period ended June 30, 1996 from $159,000 for the comparable period in
1995 primarily as a result of increased borrowings in connection with the
acquisition of the Oncogene Research Products business.

Income Taxes. Income tax expense increased to $462,000 for the six-month
period ended June 30, 1996 from $208,000 for the comparable period in 1995 as a
result of increased profitability and increased estimated tax rates having
utilized certain operating loss carryforwards generated in prior years.

Net Income. As a result of the above factors, net income increased 17.9% to
$857,000 for the six-month period ended June 30, 1996 from $727,000 for the
comparable period in 1995.

Years Ended December 31, 1995 and 1994

Sales. Sales increased 11.5% to $27.0 million for 1995 from $24.2 million
for 1994. This increase resulted primarily from a 24.9% increase in core product
sales, including sales of Oncogene Research Products brand

18
<PAGE> 19

products, offset by a decrease in bulk sales of 17.5%. Sales of core products
during 1995, excluding Oncogene Research Products brand products, increased by
13.5%, primarily as a result of the continuing success of the Company's niche
research market strategy and growth in sales of amino acids, peptides, linkers
and resins featured in the Company's Novabiochem general catalog. The decrease
in bulk sales was related primarily to the Company's decision to discontinue
sales of a product which had been provided in bulk form to the veterinary
industry in order to avoid subjecting the Company to increased costs associated
with a variety of regulatory requirements. Gains in sales included the results
of a general weakening of the U.S. dollar which had the effect of increasing the
dollar value of sales denominated in foreign currencies recorded in 1995.

Gross Profit. The Company's gross profit percentage increased to 51.1% for
1995 from 45.5% for 1994. This increase was primarily the result of sales of the
higher gross margin Oncogene Research Products brand products for a portion of
the year and increased gross margins in the Company's core and bulk operations
as a result of continued improvement in operating efficiencies subsequent to the
Company's restructuring in 1993. In particular, the Company experienced
improvement in margins of certain products featured in the Company's Novabiochem
general catalog, many of which were manufactured by the Company's Swiss
subsidiary, which was substantially restructured in 1993.

Research and Development. Research and development expenditures increased
81.8% to $1.3 million for 1995 from $736,000 for 1994. This increase resulted
from increased research and development related to Oncogene Research Products
brand products for a portion of the year, and research and development costs of
products developed for inclusion in the Apoptosis specialty catalog being
prepared for launch in 1996. This increase included salaries of additional
scientific personnel, as well as increased costs of materials and expenses.

Selling, General and Administrative. Selling, general and administrative
expenditures increased 2.6% to $10.6 million for 1995 from $10.3 million for
1994, and decreased to 39.3% of sales for 1995 from 42.8% for 1994. The dollar
increase in selling, general and administrative was the result of adding the
Oncogene Research Products business' operations for a portion of the year,
offset by reductions in operating costs of the Company's Swiss subsidiary in
1995 compared to 1994. The decrease as a percentage of sales reflects the
continued results of the Company's 1993 restructuring and incremental sales
which did not result in comparable growth in expenses.

Interest Expense, Net. Interest expense, net increased to $527,000 for 1995
from $326,000 for 1994 primarily as a result of additional borrowings in
connection with the acquisition of the Oncogene Research Products business.

Income Taxes. Income tax expense increased to $291,000 for 1995 from
$62,000 for 1994 as a result of increased profitability in 1995.

Net Income (Loss). As a result of the above factors, net income increased
to $1,017,000 for 1995 from a net loss of $462,000 for 1994.

Years Ended December 31, 1994 and 1993

Sales. Sales increased 6.2% to $24.2 million for 1994 from $22.8 million
for 1993. This increase resulted primarily from a 7.1% increase in core product
sales, as well as an increase in bulk sales of 4.3%. The increase in core
products sales resulted primarily from the initial introduction of the Company's
Signal Transduction specialty catalog in March 1994. Gains in sales included the
results of a general weakening of the U.S. dollar which had the effect of
increasing the dollar value of sales denominated in foreign currencies recorded
in 1994.

Gross Profit. The Company's gross profit percentage increased to 45.5% for
1994 from 37.7% for 1993. This increase was primarily the result of the 1993
restructuring, a portion of which was included in 1993 cost of sales, and
improvements in operations, particularly at the Company's Swiss manufacturing
operation and the installation of automated order fulfillment and other systems.

Research and Development. Research and development expenditures increased
59.3% to $736,000 for 1994 from $462,000 for 1993. This increase reflected the
Company's expansion of its scientific staff and product development operations,
particularly in San Diego, California.

19
<PAGE> 20
Selling, General and Administrative. Selling, general and administrative
expenditures were $10.3 million for 1994 and 1993, but decreased to 42.8% of
sales for 1994 from 45.2% for 1993. This decrease in selling, general and
administrative as a percentage of sales reflects the results of the 1993
restructuring and incremental sales which did not result in comparable growth in
expenses.

Interest Expense, Net. Interest expense, net increased to $326,000 for 1994
from $170,000 for 1993 primarily as a result of equipment leases for the
Company's San Diego manufacturing facility, as well as additional bank
borrowings for working capital purposes.

Income Taxes. Income tax expense increased to $62,000 for 1994 from a
benefit of $195,000 for 1993 as a result of improved financial performance in
1994. Income tax expense represented minimum taxes due in the various taxing
jurisdictions.

Net Loss. As a result of the above factors, the net loss of $462,000 for
1994 improved from the net loss of $2.2 million for 1993.

QUARTERLY RESULTS

The following tables present the Company's unaudited quarterly consolidated
results of operations, in dollars and as a percentage of sales, for the ten
quarters ended June 30, 1996. This information has been prepared by the Company
on a basis consistent with the Company's audited consolidated financial
statements and, in the opinion of management, includes all adjustments,
consisting only of normal recurring accruals, necessary for a fair presentation
of the results for such periods.

<TABLE>
<CAPTION>
QUARTERS ENDED
------------------------------------------------------------------
MARCH 31, JUNE 30, SEPT. 30, DEC. 31, MARCH 31, JUNE 30,
1994 1994 1994 1994 1995 1995
--------- -------- --------- -------- --------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Sales:
Core.................. $ 4,030 $4,232 $ 4,150 $4,096 $ 4,813 $4,827
Bulk.................. 2,086 2,349 1,745 1,500 1,923 1,512
------- ------ ------ ------ ------ ------
Total sales............. 6,116 6,581 5,895 5,596 6,736 6,339
Cost of sales........... 3,380 3,503 3,144 3,156 3,508 3,183
------- ------ ------ ------ ------ ------
Gross profit............ 2,736 3,078 2,751 2,440 3,228 3,156
Research and
development........... 192 147 186 211 218 270
Selling, general and
administrative...... 2,489 2,658 2,557 2,639 2,264 2,539
------- ------ ------ ------ ------ ------
Income (loss) from
operations............ 55 273 8 (410) 746 347
Interest expense, net... 53 72 90 111 74 85
------- ------ ------ ------ ------ ------
Income (loss) before
income taxes.......... 2 201 (82) (521) 672 262
Provision (benefit) for
income taxes.......... 3 42 2 15 150 58
------- ------ ------ ------ ------ ------
Net income (loss)... $ (1) $ 159 $ (84) $ (536) $ 522 $ 204
======= ====== ====== ====== ====== ======

<CAPTION>
QUARTERS ENDED
-------------------------------------------
SEPT. 30, DEC. 31, MARCH 31, JUNE 30,
1995 1995 1996 1996
--------- -------- --------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Sales:
Core.................. $ 5,293 $5,693 $ 6,597 $6,949
Bulk.................. 1,572 1,333 1,621 1,398
------- ------ ------ ------
Total sales............. 6,865 7,026 8,218 8,347
Cost of sales........... 3,224 3,270 3,794 3,808
------- ------ ------ ------
Gross profit............ 3,641 3,756 4,424 4,539
Research and
development........... 401 449 541 524
Selling, general and
administrative...... 2,785 3,020 3,015 3,170
------- ------ ------ ------
Income (loss) from
operations............ 455 287 868 845
Interest expense, net... 157 211 206 188
------- ------ ------ ------
Income (loss) before
income taxes.......... 298 76 662 657
Provision (benefit) for
income taxes.......... 66 17 198 264
------- ------ ------ ------
Net income (loss)... $ 232 $ 59 $ 464 $ 393
======= ====== ====== ======
</TABLE>

20
<PAGE> 21

<TABLE>
<CAPTION>
QUARTERS ENDED
----------------------------------------------------------------------------------------------------------------
MARCH 31, JUNE 30, SEPT. 30, DEC. 31, MARCH 31, JUNE 30, SEPT. 30, DEC. 31, MARCH 31, JUNE 30,
1994 1994 1994 1994 1995 1995 1995 1995 1996 1996
--------- -------- --------- -------- --------- -------- --------- -------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Sales:
Core.......... 65.9% 64.3% 70.4% 73.2% 71.5% 76.1% 77.1% 81.0% 80.3% 83.3%
Bulk.......... 34.1 35.7 29.6 26.8 28.5 23.9 22.9 19.0 19.7 16.7
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Total sales..... 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of sales... 55.3 53.3 53.3 56.4 52.1 50.3 47.0 46.5 46.2 45.6
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Gross profit.... 44.7 46.7 46.7 43.6 47.9 49.7 53.0 53.5 53.8 54.4
Research and
development... 3.1 2.2 3.2 3.8 3.2 4.2 5.8 6.4 6.6 6.3
Selling,
general and
administrative... 40.7 40.4 43.4 47.1 33.6 40.1 40.6 43.0 36.7 38.0
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Income (loss)
from
operations.... 0.9 4.1 0.1 (7.3) 11.1 5.4 6.6 4.1 10.5 10.1
Interest
expense,
net........... 0.9 1.1 1.5 2.0 1.1 1.3 2.3 3.0 2.5 2.2
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Income (loss)
before income
taxes......... 0.0 3.0 (1.4) (9.3) 10.0 4.1 4.3 1.1 8.0 7.9
Provision
(benefit) for
income
taxes......... 0.0 0.6 0.0 0.3 2.2 0.9 0.9 0.3 2.4 3.2
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Net income
(loss).... 0.0% 2.4% (1.4)% (9.6)% 7.8% 3.2% 3.4% 0.8% 5.6% 4.7%
===== ===== ===== ===== ===== ===== ===== ===== ===== =====
</TABLE>

The Company's quarterly operating results may vary significantly from
quarter to quarter as a result of a number of factors including new product
offerings, new editions of existing catalogs, introduction of additional
specialty catalogs and bulk sales. Other factors which may affect quarterly
operating results include the timing of the U.S. Government approval of the NIH
budget, lower European and academic sales during the summer months and various
holiday breaks and fluctuations in weather. The Company's current and planned
expense levels are based in part upon its expectations as to future revenues.
Consequently, if revenues in a particular quarter do not meet expectations, the
Company may not be able to adequately adjust operating expenses to compensate
for the shortfall. Operating results may therefore vary significantly from
quarter to quarter and will not necessarily be indicative of results in
subsequent periods.

In addition, sales of bulk products offered by the Company could cause
fluctuations in the level of bulk sales from quarter to quarter, and such sales
could have a significant impact on results of operations in any specific
quarter. For example, bulk sales in the quarter ended March 31, 1996 of $1.6
million were approximately 15.8% lower than bulk sales of $1.9 million in the
comparable quarter in the prior year and 23.1% higher than bulk sales of $1.3
million in the preceding quarter ended December 31, 1995.

LIQUIDITY AND CAPITAL RESOURCES

The Company used $239,000 of cash in operating activities in 1993 and
$29,000 of cash in operating activities in 1994. Since 1994, the Company has
financed its operations primarily from cash provided by operations, which
contributed $97,000 in the six months ended June 30, 1996 and $2.0 million in
1995. Cash used for operating activities in 1993 was less than the net loss due
to the fact that reserves were provided for impaired inventory, idled facilities
and terminated employees before the cash funds were actually expended, partially
offset by increased expenditures for inventories to replace those inventories
impaired during the period. Cash used for operating activities in 1994 was less
than the net loss primarily due to the liquidation of inventories offset by
increases in accounts receivable due to increased sales. Cash provided from
operating activities in 1995 resulted from positive operating results, which
were principally offset by catalog costs capitalized in other assets. Cash
provided from operating activities for the six months ended June 30, 1996 was
less than net income for the period primarily due to costs incurred related to
capitalized catalog costs.

Net cash used in investing activities was $158,000 in the six months ended
June 30, 1996, $6.8 million in 1995, $1.2 million in 1994 and $1.0 million in
1993. During 1995, the Company acquired the Oncogene Research Products business
in a purchase transaction requiring an investment of approximately $6.2 million.
Investing activities, other than the purchase of the Oncogene Research Products
business, consisted primarily of capital expenditures for property and
equipment, principally in connection with infrastructure upgrades.

21
<PAGE> 22

Net cash provided by financing activities was $2,000 in the six months
ended June 30, 1996, $5.1 million in 1995, $232,000 in 1994 and $2.0 million in
1993, consisting primarily of borrowings from financial institutions, offset by
repayments. During 1995, the Company incurred $6.0 million of additional debt in
connection with the purchase of the Oncogene Research Products business.

The Company is a holding company, the principal assets of which are the
capital stock of its subsidiaries, and has no independent means of generating
revenues. As a holding company, the Company depends on dividends and other
permitted payments from its subsidiaries, including its international
subsidiaries, to meet its cash needs. The Credit Facility restricts the payment
of cash dividends by the Company and also restricts the Company's U.S.
subsidiary from paying cash dividends and making loans or advances to the
Company, except in certain limited circumstances. These restrictions with
respect to the U.S. subsidiary will be eliminated upon the consummation of this
offering, although the restriction on the payment of cash dividends by the
Company will continue. The Company maintains cash balances at its various
subsidiaries based upon local results of operations. The amount of
foreign-sourced earnings to be repatriated to the United States is determined
based upon foreign entity capitalization, local cash needs, local and U.S. tax
implications and requirements for cash in the U.S. operations.

At June 30, 1996, the Company had cash of $1.1 million and working capital
of $15.3 million. Outstanding borrowings under the Credit Facility consist of
approximately $7.7 million of term debt, plus borrowings under a line of credit
of $500,000. The line of credit provides for borrowings up to a maximum of $2.0
million, based upon percentages of eligible accounts receivable and inventory.
At June 30, 1996, $1.5 million was available under this line of credit. The
Credit Facility, which is guaranteed by the Company and its Swiss subsidiary and
secured by the assets of Calbiochem-Novabiochem Corporation and the stock of the
Company's subsidiaries, requires, among other things, compliance with minimum
financial and operating covenants, and bank approval for certain mergers and
acquisitions, asset sales, the incurrence of debt, the making of loans and the
repurchase, redemption or other acquisition of shares of the Company's stock.
The line of credit expires in June 1998, and will convert to an unsecured $5.0
million line of credit upon the consummation of the offering. In addition to
releasing its collateral and eliminating the restrictions on the payment of cash
dividends, loans and advances by the Company's U.S. subsidiary to the Company,
the lender will modify certain financial covenants contained in the Credit
Facility to appropriately adjust for the increased equity resulting from this
offering. The general terms of the existing facility will otherwise continue.
See Note 4 of Notes to Consolidated Financial Statements. All bank borrowings
(approximately $8.2 million at June 30, 1996) are expected to be repaid out of
the net proceeds from this offering.

The Company believes that its existing capital resources together with the
anticipated net proceeds from this offering will be sufficient to fund its
operations through at least 1997. If, however, the Company were to undertake a
significant acquisition or if working capital or other capital requirements are
greater than currently anticipated, the Company could be required to seek
additional funds through sales of equity, debt or convertible securities or
increased credit facilities. There can be no assurance that additional financing
will be available or that, if available, the financing will be on terms
favorable to the Company and its stockholders.

22
<PAGE> 23

BUSINESS
THE COMPANY

The Company believes that it is strategically positioned with both the
breadth of research products and critical mass that are characteristic of the
industry's larger providers, as well as the innovative research and development
capabilities that are characteristic of the industry's smaller specialty
companies. Based upon this strategic positioning, the Company believes it can
establish itself as a leading supplier of higher margin research products to
selected emerging, high growth niche research markets by offering innovative
products through specialty catalogs. In recent years, the Company has
implemented its niche research market strategy in areas such as signal
transduction, apoptosis and combinatorial chemistry. The Company intends to
continue to penetrate emerging niche research markets through internal
development and the selective acquisitions of companies with products in areas
targeted for future growth. The Company's successful acquisition and integration
of the Oncogene Research Products business is an example of the implementation
of this strategy. As a result of this acquisition, the Company significantly
expanded its capabilities in molecular biology and immunology, and added over
700 new product offerings, many of which are included in the Company's Apoptosis
specialty catalog.

A key element of the Company's growth strategy is to leverage certain
existing assets of the Company including (i) its comprehensive general catalog
product offerings, customer base and reputation, (ii) its global manufacturing
and distribution infrastructure, including its highly automated order
fulfillment system and (iii) the scientific expertise of its staff in
immunochemistry, biochemistry, molecular biology and synthetic peptides. During
1995, the Company sold products to over 6,900 accounts, filled over 70,000
orders in 46 countries and generated sales of $27.0 million and net income of
$1.0 million. The Company's development, marketing and distribution activities
are supported by the Company's highly experienced scientific staff, which
includes 40 professionals holding Ph.D.s in a variety of life sciences
disciplines, as well as other personnel located at seven facilities in the
United States, Europe, Japan and Australia.

INDUSTRY OVERVIEW

The life sciences research industry has experienced dramatic advances in
biology and chemistry over the past three decades, particularly as they relate
to the understanding of the origin of diseases at the molecular and cellular
level. These advances have led to the rapid expansion of drug discovery programs
and the development of new methodologies of research. Industry sources estimate
that there are over 300,000 scientists worldwide currently engaged in life
sciences research. In 1995, U.S. pharmaceutical and biotechnology companies
spent over $18 billion on research and development. In addition, academic
institutions and government laboratories receive a portion of their research
funding from organizations such as the NIH, which had a budget for 1995
exceeding $11 billion. Over the past ten years, the NIH budget has grown at a
compounded annual rate of approximately 7.5%. In its most recent industry survey
published in 1994, Frost & Sullivan estimated that $1.6 billion was spent
worldwide in 1992 on specialty biochemical products, such as those offered by
the Company for research in biochemistry, immunology, cellular biology and
molecular biology. According to Frost & Sullivan, the compound annual growth
rate from 1992 through 1999 for the U.S. life sciences research products market
(which represents approximately one-third of the worldwide market) is estimated
to be approximately 13%. Furthermore, the Company believes that certain segments
of life sciences research, such as apoptosis, signal transduction and
combinatorial chemistry, are particularly strong areas of growth.

23
<PAGE> 24

Life sciences researchers utilize specialty biochemical products to conduct
their research. These research products range broadly in complexity, purity,
scarcity, cost and function, and their availability and quality are often
critical to a project's success. Furthermore, recent advances in understanding
physiological processes at the molecular and cellular level, genomics and the
development of other basic life sciences technologies have increased the demand
for innovative product solutions designed to assist scientists in improving the
efficiency and quality of their research. Examples of such solutions include
specific protein or peptide fragments, monoclonal antibodies or DNA probes
tailored to a given research protocol that would be too time consuming or
complex for a researcher to prepare at his or her own lab bench. Other examples
include kits designed to reduce complex multi-step procedures, thereby
shortening the time required for experiments, improving the quality of
information provided in many cases and ensuring repeatability of the experiment
in subsequent research. The Company believes that researchers are typically
concerned primarily with product performance, quality, rapid availability, time
savings and the value added by innovative products such as specialized assays
and research kits, and are relatively less sensitive to price. Because life
sciences research can often involve experimentation carried out over months or
even years, and because researchers seek to minimize extraneous variables in
their research protocols, the consistency of research products is essential. As
a result, the Company believes that researchers tend to exhibit loyalty to the
supplier that first supplies them with a particular research product.

The life sciences research products industry is highly fragmented. The
industry is comprised of several very large public companies and a large number
of smaller companies which are typically privately held. The larger companies
typically generate revenues from the sale of a broad range of equipment,
laboratory supplies and other products, including research products which
compete with many of the Company's product offerings. These larger suppliers
generally place greater emphasis on high-revenue generating products and on the
breadth of their product offering than on providing innovative products early to
market. The smaller companies, the majority of which are substantially smaller
than the Company, typically supply a highly focused product offering to very
specific market niches. These smaller companies generally specialize in
addressing the emerging needs of life sciences researchers by emphasizing
innovative products. Such smaller companies often lack the distribution network
and capital resources required to grow beyond providing a limited and highly
specialized offering to a relatively narrow market. As the market expands and
the need to cost-effectively distribute products to a larger, more
geographically diverse customer base increases, the Company believes that
customer access will be increasingly difficult for smaller companies lacking
significant marketing and distribution infrastructure. The Company believes that
the industry's fragmented structure and underlying dynamics may create
opportunities for consolidation.

STRATEGY

CN Biosciences' goal is to become a leading provider of innovative research
products to the life sciences research market. To achieve this goal, CN
Biosciences' strategy includes the following elements:

Target Emerging, High Growth Niche Research Markets. The Company seeks to
establish leading positions early in the evolution of the market's faster
growing, higher margin niche research markets. The Company identifies a
potentially attractive niche research market through a comprehensive review by
its scientific personnel and interaction with the Company's Technology Council
and network of other scientific advisers. In deciding which niche research
markets to pursue, the Company considers a number of factors, including
potential market size, synergies with existing areas of research, resources
required to develop both the product offering and related catalog and the
potential for establishing a leading position early in the market's development.
Once the Company has identified a niche research market, it assembles a targeted
product offering from its existing products, new products developed by its own
scientific staff and products sourced from third parties. These products are
then distributed primarily through specialty catalogs designed to provide
scientists working in a specific field with a single comprehensive source
integrating both innovative products often not found elsewhere and a broad range
of related products. During 1996, the Company introduced new specialty catalogs
for the niche research markets of apoptosis and combinatorial chemistry, and
issued an updated version of its Signal Transduction specialty catalog. The
Company expects to follow these specialty catalogs with product offerings to
researchers studying glycobiology and is investigating other niche research

24
<PAGE> 25

markets such as neuroimmunology. CN Biosciences seeks to be first to
comprehensively market products in each of its targeted niche research markets
and to be in a leading position early in such market's development.

Expand Product Offerings to Existing Customer Base. The Company intends to
expand sales through the introduction of new product offerings to its existing
customer base. The Company's new product development efforts, both for its
specialty and general catalogs, are supported by its significant commitment to
research and development. New product ideas are generated through active
dialogues among the Company, its customers and its extensive network of
scientific advisers, participation in national and international conferences,
and comprehensive reviews of selected scientific literature. The Company
believes that successfully penetrating further niche research markets will, in
addition to generating revenues from sales of products contained in its
specialty catalogs, also increase the number of research scientists and
institutions seeking to license their discoveries to the Company for production
and distribution, and generate increased sales of products in the Company's
comprehensive general catalogs.

Pursue Strategic Acquisitions. The Company intends to penetrate emerging
niche research markets and expand product offerings to existing customers
through the selective acquisition of companies with research and development
capabilities and product offerings in areas targeted for future growth. In
August 1995, the Company consummated the strategic acquisition of the Oncogene
Research Products business, which has enabled the Company to substantially
expand its offerings of assays, kits, monoclonal antibodies and polyclonal
antibodies. The Company believes that, due to the highly fragmented nature of
the life sciences research products industry, significant opportunities for
consolidation exist, although no assurances can be made that the Company will be
able to identify and successfully consummate additional acquisitions. The
Company believes that the industry's smaller companies are typically privately
held and individually generate less than $10 million in annual revenues, yet
conduct a significant portion of the industry's innovative research,
particularly in specific niche research markets. The Company has numerous
contacts with many of these smaller research products companies for which the
Company often acts as a distributor or licensee, and believes that these
relationships may facilitate both the identification and consummation of
acquisitions.

Maximize Operating Efficiencies. The Company's investment in and refinement
of its product sourcing, procurement, production, inventory management and order
fulfillment capabilities, as well as its worldwide distribution network and
computer systems will continue to enable the Company to operate more cost-
effectively and to achieve greater service efficiency at higher sales volumes.
Additionally, the Company believes that this infrastructure provides
opportunities for the Company to service and support increased net sales without
the need for commensurate increases in expenses. The Company utilizes a
"technology center" concept for each brand which allows for product development,
customer service, technical support and brand-specific marketing capabilities at
its manufacturing locations, while retaining centralization of many
administrative and routine operations at its San Diego headquarters.

CORE COMPETENCIES

The Company believes that its past success is attributable to a number of
factors, including:

Experienced Management Team, Scientific Staff and Network of Scientific
Advisers. The Company's executive officers have an average of over ten years of
experience in the research products industry. In addition, over the past three
years, the Company has expanded its scientific staff to include 40 professionals
holding Ph.D.s in a variety of life sciences disciplines. With its expanded
scientific staff and its particular expertise in immunochemistry, biochemistry,
molecular biology and synthetic peptides, the Company is able to offer a broad
range of products and to support such product offerings with both a high level
of scientific content in its catalogs and knowledgeable technical support
personnel. The Company regularly interacts with a network of scientific advisers
within the life sciences research industry including its four member Technology
Council, members of academic institutions with which the Company collaborates,
as well as its customers. These interactions have enabled the Company to
identify the specialized needs of researchers in several emerging fields of life
sciences research and to provide innovative product solutions to facilitate
research in these targeted areas.

25
<PAGE> 26

Merchandising and Marketing Expertise. The Company believes its skill in
positioning and merchandising its products has enabled it to expand its share of
the life sciences research products market. The Company employs a variety of
marketing techniques to enable it to produce catalogs that the Company believes
are more informative and more visually appealing than those of its competitors.
In structuring its catalog offerings, the Company effectively combines basic
product information with a significant amount of related scientific reference
data and technical advice. In addition, with each new edition of the Company's
catalogs, the Company has increased the level of indexes and cross
references -- by application, product category and individual product -- and
developed a variety of color coded reference aids, all of which are designed to
facilitate the ease with which a scientist can find the product needed to
conduct his or her research. Capitalizing on these skills, its established
catalog brand names and its comprehensive list of product offerings, the Company
has identified opportunities to target high growth emerging niche research
markets using specialty catalogs to more effectively bring its products to the
attention of research scientists.

Total Quality Management, Technical Service and Customer Support. Research
scientists require that the products used in their research conform to exacting
quality standards. The Company utilizes its Total Quality Management program to
ensure that customers receive consistent, high quality products which meet or
exceed customer requirements and catalog specifications. Quality control
functions designed to provide controls over the products distributed, whether
internally manufactured or externally sourced, have been fully integrated into
the Company's development and manufacturing process. In addition, the Company
provides extensive technical service to customers, primarily over the telephone,
in situations where customers have questions regarding complex product
applications, research protocols and background regarding use of the Company's
products. The Company also provides strong customer support through its customer
service staff of trained professionals at various worldwide locations, who are
primarily responsible for answering customer telephone inquiries, receiving
orders and following up on general product matters.

Highly Automated Order Fulfillment. The nature of life sciences research
and the rapid pace with which it is conducted is such that results achieved one
day may subtly change the course of the scientist's experiments for the next
day. As a result, research scientists will often require specific research
products delivered on short notice, and the speed and accuracy with which such
products are delivered can affect the success or failure of the researcher's
work. The Company has a highly automated order fulfillment system capable of
delivering substantially all customer orders worldwide on a next-day basis. The
Company believes that this system enables the Company to compete with its larger
competitors and gives it a competitive advantage over its smaller competitors,
while at the same time making the Company an attractive distribution outlet for
these smaller companies.

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<PAGE> 27

PRODUCTS

The Company sells over 7,000 products represented by over 13,000 stock
keeping units (SKUs). Through the ongoing efforts of its scientific and
technical staff, its contacts with researchers in academic and commercial
research laboratories and its open dialogue with scientific advisers, the
Company continually adds new products to its product offerings.

The broad categories of the Company's products include:

<TABLE>
<CAPTION>
PRODUCT CATEGORY DESCRIPTION OF PRODUCTS
------------------------------- ----------------------------------------------------
<S> <C>
Biochemicals................... Includes 25 major categories of products comprised
of enzymes, proteins, detergents, inhibitors,
antibiotics and others.
Immunochemicals................ Includes monoclonal and polyclonal antibodies,
antibodies to various receptor proteins, signaling
proteins, glycoproteins, proto-oncogenes, enzymes,
neurotoxins and others.
Amino Acids and Peptides....... Includes Fmoc and Boc amino acid derivatives and
hundreds of biologically active peptides.
Kits and Assays................ Includes a family of free radical marker ELISA kits
for oxidative stress research as well as a rapidly
growing line of ELISA kits for use in apoptosis
research such as NMP, Fas and cdk1.
Resins and Linkers............. Includes tentagel and polystyrene resins, together
with a variety of trityl linkers.
</TABLE>

The Company's products are marketed through four brands, each targeting
different segments of life sciences research, although some overlap exists
between the markets and products of each brand.

- Calbiochem. Calbiochem brand products target the immunology, cell biology
and biochemistry segments of life sciences research. Calbiochem has been
providing research products for over 40 years and is a well-recognized
name in the life sciences research industry.

- Novabiochem. The Company's Novabiochem brand covers products for the
biochemistry and peptide chemistry segments of life sciences research.
Novabiochem brand products have been offered since 1986.

- Oncogene Research Products. The Company currently co-brands Oncogene
Research Products with the Calbiochem brand. These products target the
immunology and molecular biology segments of life sciences research.

- Clinalfa. The Company's Clinalfa brand offers biologically active
peptides and related biological products for use in limited human trials
for research purposes. Clinalfa products are distributed principally in
Europe.

In addition to sales of its core products in standard laboratory quantity
sizes (generally from 100 nanograms to as large as 100 grams), the Company
offers certain products in bulk quantities (generally up to ten kilograms) at
discounts from catalog prices. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations."

27
<PAGE> 28

PRODUCT POSITIONING AND MARKETING

The Company's products are principally sold through its three general and
four specialty catalogs. The Company also periodically distributes a number of
other publications to supplement its catalogs. The following table identifies
each of the Company's catalogs and gives the most recent publication dates, the
approximate number of copies published, the approximate number of products
included, the principal product focus and the brand names featured:

SUMMARY OF CATALOGS

<TABLE>
<CAPTION>
NUMBER OF APPROXIMATE
CATALOGS NUMBER
CATALOGS LAST PUBLISHED PUBLISHED OF PRODUCTS PRINCIPAL PRODUCT FOCUS BRAND NAMES
---------------------- --------------- --------- ----------- ----------------------- --------------------
<S> <C> <C> <C> <C> <C>
GENERAL
Calbiochem March 1996 158,000 3,070 Biochemicals and - Calbiochem
Immunochemicals - Novabiochem
- Oncogene Research
Products
Novabiochem September 1996 58,000 2,100 Peptides, Boc and Fmoc - Novabiochem
Amino Acids and Peptide
Synthesis Reagents
Oncogene Research March 1995 40,000 900 Antibodies, Markers, - Oncogene Research
Products Reagents and Kits Products
SPECIALTY
Signal Transduction April 1996 85,000 1,400 G Proteins, Kinases, - Calbiochem
Nitric Oxide, Calcium - Novabiochem
Metabolism and p53 - Oncogene Research
Products
Apoptosis February 1996 60,000 330 Antibodies, Assays, - Calbiochem
ELISAs, Kits and - Oncogene Research
Reagents Products
Combinatorial February 1996 20,000 110 Resins, Linkers, Fmoc - Novabiochem
Chemistry Amino Acids and Peptide
Synthesis Reagents
Clinalfa March 1996 8,000 40 Biologically Active - Clinalfa
Peptides
</TABLE>

General Catalogs

The Company utilizes general catalogs summarizing the complete product
offerings under each of its principal brands to reach a broad audience of life
sciences research scientists. The following is a brief summary of each of the
Company's three general catalogs:

- Calbiochem General Catalog. The Calbiochem general catalog has been
published since 1954. The March 1996 catalog summarizes the Company's
offering of approximately 3,070 biochemicals and immunochemicals,
including more than 700 products new to the catalog. Approximately
158,000 copies of the most recent edition of the catalog have been
published. The Calbiochem general catalog combines Calbiochem brand
products, along with selected Oncogene Research Products and Novabiochem
brand products, to provide a broad offering to research scientists.
Important product categories contained in this catalog include
G-proteins, calcium metabolism, protein kinases, nitric oxide and protein
phosphates.

- Novabiochem General Catalog. The Novabiochem general catalog summarizes
the Company's 2,100 item product offering of resins, amino acid
derivatives and reagents for peptide synthesis, as well as biologically
active peptides and enzyme substrates and inhibitors. Published since
1986, 58,000 copies of the newest edition of the Novabiochem general
catalog were published in September 1996. The catalog includes unique
"synthesis notes" prepared by the Company which provide a comprehensive
and current review of solid phase peptide synthesis methodology.

28
<PAGE> 29

- Oncogene Research Products General Catalog. Approximately 900 products
are included in this catalog which focuses primarily on scientific
research in the areas of cancer, heart disease, signal transduction and
neurobiology. Approximately 40,000 copies of the March 1995 catalog have
been published. The Oncogene Research Products general catalog is
scheduled to be updated in the fourth quarter of 1996. Key products in
the catalog include antibodies, assays, kits, peptides and probes.

Specialty Catalogs

Commencing in 1994, with the publication of its first specialty catalog in
the area of signal transduction, the Company's strategy has included the
development of specialty catalogs focused on niche research markets to meet the
specific needs of researchers in newer, high growth areas of life sciences
research. One key element of this strategy has been to significantly increase
the scientific background data contained in its catalogs, so that researchers
view the Company's catalogs not only as compendiums of product listings, but
also as significant technical resources. A recent implementation of this
strategy is the Company's Apoptosis specialty catalog which contains text-book
quality descriptions, illustrations and schematics of central elements in the
current understanding of the phenomenon of apoptosis, as well as detailed
methods and protocols for some of the most commonly utilized procedures needed
to conduct research in this area.

- Signal Transduction Specialty Catalog. Approximately 1,400 products from
the Calbiochem, Novabiochem and Oncogene Research Products brands have
been integrated into this specialty catalog which addresses the needs of
researchers doing work in signal transduction. Approximately 85,000
copies of the Company's third edition of this catalog were published in
April 1996 and contained over 500 products new to the catalog focusing on
this growing area of scientific research. Over the past several years,
the level of signal transduction research has grown as scientists in many
disciplines have increasingly focused on the impact on their research of
both intercellular and intracellular communication. In addition to
detailed product listings, the catalog provides literature reviews,
product structures, molecular weights, application comments, technical
protocols and comparative tables of use to many signal transduction
researchers.

- Apoptosis Specialty Catalog. The newest of the Company's specialty
catalogs focuses on research in the area of apoptosis. Apoptosis, or
"programmed cell death," is a process whereby various stimuli activate a
genetic program to implement a specific series of events that culminate
in the death and efficient disposal of a cell with minimal damage to
surrounding cells or tissue. Apoptosis is essential for normal
development of cells, and disruption to the apoptotic process can lead to
a spectrum of defects thought by some researchers to be important to
various diseases including cancer, AIDS and Alzheimer's. The potential
for drugs that modulate the regulation of apoptosis provides a new and
growing opportunity for the treatment of many disease states, and the
Company anticipates continued growth in this area of research. The
February 1996 catalog combines existing Calbiochem and Oncogene Research
Products brand products with newly developed, innovative products focused
on addressing this new and growing area of scientific research.
Approximately 60,000 copies of the Apoptosis specialty catalog have been
published. The catalog includes extensive literature citations, materials
and methods, information and scientific diagrams to assist the researcher
working in this relatively new field of study. The Company's Apoptosis
specialty catalog is printed in two versions, one marketed exclusively
under the Calbiochem name and another marketed jointly under the
Calbiochem and Amersham International plc names.

- Combinatorial Chemistry Specialty Catalog. Combinatorial chemistry has
emerged as a powerful new tool used by pharmaceutical companies in the
drug discovery process. The Company's February 1996 Combinatorial
Chemistry catalog, 20,000 copies of which have been published, provides
approximately 110 products focused primarily on solid supports,
condensation reagents, resins and linkers of interest to companies
utilizing combinatorial chemistry techniques.

- Clinalfa Specialty Catalog. This catalog contains Clinalfa brand products
which capitalize upon existing strengths in the Company's manufacturing
capabilities to provide a selection of ultra-pure peptides of interest to
a specialized group of researchers focused on human clinical research
applications, principally in the European market. Approximately 8,000
copies of the March 1996 Clinalfa specialty

29
<PAGE> 30

catalog have been published. The Company's Clinalfa brand product
offering is produced under appropriate good manufacturing practices
("GMP") which meet the requirements of government regulations and its
clinical research customers in this area.

Other Publications

In addition to its general and specialty catalogs, the Company utilizes its
internal staff in developing and distributing a variety of supporting
publications designed to highlight its new products and target specific market
segments with selected product offerings. These publications include:

- Biologics. The Calbiochem brand general biochemical and immunochemical
newsletter is published two to three times per year and is distributed to
the entire Calbiochem mailing list, including biochemists,
neurobiologists, biologists and immunologists. This broad-based
publication introduces new product offerings under the Calbiochem brand
(including inhibitors, enzymes and detergents) and also includes updated
scientific articles and references.

- Flagship Brochures. The Company's Flagship Brochures present the complete
product line of five areas within signal transduction that the Company
has singled out for special market emphasis, comprised of protein
kinases, calcium metabolism, G-proteins, nitric oxide and protein
phosphatases. The first of these brochures was introduced by the Company
in October 1995.

- Technical Bulletins. The Company maintains more than 50 Technical
Bulletins relating to Calbiochem brand products. These are two to six
page publications that focus on specific products and product lines,
including detergents, protease inhibitors, lipoproteins and ionophores.
These publications are used for targeted direct mailings as well as for
distribution at trade shows, scientific conferences and exhibitions.

- Letters, Innovations and Technical Notes. These are an interrelated trio
of support publications for Novabiochem brand products and are
distributed to customers interested in peptide synthesis and
combinatorial chemistry. Letters is published two to three times per year
to inform customers of the Company's new and innovative products being
developed for use in their drug discovery programs. Each edition features
new linkers, resins and amino acid derivative products useful for a
variety of peptide and small molecule synthesis techniques. Innovations
is published four to six times per year and provides a much more
expansive description of the products introduced in Letters. It includes
procedures for new product use along with up-to-date literature
references. Novabiochem Technical Notes are released one or two times per
year and are based on the most recent techniques used in solid phase
peptide synthesis or solid phase organic synthesis. Novabiochem Technical
Notes contain detailed descriptions, explanations and suggestions for
using certain Novabiochem brand products.

- Oncogene Research Products Publications. Oncogene Research Product
brand's New Product Guide is published one to two times per year and is
widely distributed to researchers studying cell cycle, cell
proliferation, apoptosis and signal transduction as well as to Oncogene
Research Products customers studying heart disease and metastasis, tumor
suppressor genes and neuroimmunology. A variety of applications brochures
and mailers focusing on the Oncogene Research Products brand are
distributed six to eight times per year, focusing on various new and
existing product portfolios applicable to select market segments,
including proteases, apoptosis kits, cdk1 and ELISAs.

DEVELOPMENT OF NEW PRODUCTS

The Company maintains research and development centers in San Diego,
California, Cambridge, Massachusetts and Laufelfingen, Switzerland. The
Company's research scientists internally develop new products, source new
products from third parties and refine manufacturing techniques for existing
products. The Company introduced over 1,100 new products in 1995 including over
700 products introduced as a result of the acquisition of the Oncogene Research
Products business and expects to introduce in excess of 800 new products in
1996. The Company's historical experience indicates that a significant number of
its products have relatively long life cycles, often in excess of five years.
The Company identifies potential new products from

30
<PAGE> 31

many sources, including through customer input, its Technology Council and
extensive network of scientific advisers, review of selected scientific
literature, established relationships with research institutes and universities
and participation in industry trade shows.

Product introductions are developed and monitored by the Company and
offered under one of the Company's brand names and through one or more of its
catalogs and supporting publications. The following table illustrates both the
breadth of the Company's product offerings from its 1996-1997 Calbiochem general
catalog published in March 1996 and the extent to which products not previously
offered through this catalog were added.

1996-1997 CALBIOCHEM GENERAL CATALOG PRODUCT OFFERINGS

<TABLE>
<CAPTION>
TOTAL NUMBER PRODUCTS
PRODUCT CLASS OF PRODUCTS NEW TO CATALOG
------------------------------------------------------------------- ------------ --------------
<S> <C> <C>
Amino Acids........................................................ 62 --
Antibiotics........................................................ 46 1
Antibodies (monoclonal and polyclonal)............................. 470 245
Buffers............................................................ 30 --
Carbohydrates...................................................... 57 --
Chromatography Reagents............................................ 7 --
Detergents......................................................... 92 4
Dyes, Stains and Probes............................................ 68 11
Enzyme Inhibitors.................................................. 369 106
Enzyme Substrates.................................................. 98 19
Enzymes............................................................ 204 29
Growth Factors and Cytokines....................................... 56 17
Hormones and Steroids.............................................. 18 --
Immunochemicals.................................................... 533 117
Ionophores and Channel Formers..................................... 40 12
Lipids and Phospholipids........................................... 43 --
Nucleotides and Bases.............................................. 94 --
Neurochemicals..................................................... 110 70
Neurotoxins........................................................ 100 13
Organics and Inorganics............................................ 42 --
Peptides........................................................... 171 31
Plant Biology Reagents............................................. 13 --
Protein and Nucleic Acid Modification Reagents..................... 35 5
Proteins and Derivatives........................................... 147 47
Signal Transduction Reagents....................................... 124 8
Vitamins and Coenzymes............................................. 20 --
Miscellaneous...................................................... 21 6
----- ---
Total...................................................... 3,070 741
============ ==============
</TABLE>

SALES AND DISTRIBUTION

Catalogs and Supporting Publications. The Company markets its products
directly to its customers through the delivery of its catalogs and supporting
publications. The Company believes that the quality and presentation of its
catalogs represent a competitive advantage. The Company devotes significant
resources to creating and designing catalogs that have a high degree of
scientific and technical content and are, the Company believes, considerably
more visually appealing than those of its competitors. The Company's catalogs
generally are extensively indexed and cross referenced -- by application,
product category and individual product -- and contain a variety of color coded
reference aids which are designed to facilitate the ease with which a scientist
can find the product needed to conduct his or her research. In addition, new
product offerings are extensively highlighted. Catalogs generally contain
detailed technical information concerning the catalog's products, including
current citations to scientific research papers in which the

31
<PAGE> 32

products have been used, as well as background information regarding focused
areas of research in which various subgroups of research products may be
utilized. Catalogs are published for distribution in the United States with
pricing in U.S. dollars. In addition, a number of the Company's catalogs and
brochures are printed for foreign distribution with pricing in local currencies.

The Company's marketing communications group utilizes in-house desktop
publishing systems in coordination with the Company's management information
systems and databases to assist in the production of camera-ready masters of
certain catalogs and publications. This enables the Company to revise and
reprint certain catalogs in 12 to 18 month cycles and to distribute other
publications more frequently. To further differentiate its publications from
those of many of its competitors, the Company has increasingly shifted to high
quality four color printing for its catalogs and brochures, and utilizes its
internal staff to significantly increase their graphic content.

The Company directly distributes its catalogs and supporting publications
using its proprietary database containing profiles of more than 100,000 research
scientists and institutions. The Company believes that a substantial portion of
its revenue represents sales to repeat customers. During 1995, the Company sold
products to more than 6,900 accounts, with more than 70% of these customers
making purchases multiple times during the year. The Company also selectively
mails catalogs and other publications to potential customers, information about
whom is obtained from trade shows, responses to Company advertisements, foreign
distributors and sales representatives, and the Company's home pages on the
Internet. The Company also advertises its catalogs in scientific journals,
publicizes them at industry trade shows and other scientific functions and
utilizes its network of sales representatives, distributors and industry
contacts to attract additional potential customers whose profiles can then be
added to the Company's database.

Sales Offices and Customer Service Representatives. In addition to its San
Diego headquarters, the Company maintains sales and customer support offices in
Cambridge, Massachusetts, Switzerland, the United Kingdom, Germany, Australia
and Japan. The Company's staff of 22 customer service representatives receive
telephone orders directly from customers. The customer service representatives
utilize a computerized data-entry system which enables them to immediately
access detailed customer and product information, quote prices and check product
availability. The Company has the ability to process standing orders and to
schedule periodic shipments according to the needs of its customers. Orders are
also submitted by mail and fax. Standard payment terms are net 30 days, but the
Company also accepts Visa, MasterCard and American Express. The Company employs
a limited sales force of seven individuals, principally in the United States and
Europe, and has a network of 50 independent foreign distributors who resell the
Company's products to their customers in selected markets.

Technical Support. The Company employs a staff of 11 technical service
specialists throughout its worldwide locations who are available during business
hours to consult with research scientists concerning the use of the Company's
products. These service specialists (eight of which hold Ph.D.s) are actively
involved in the development and are knowledgeable about the use of the Company's
products. Technical support is also available through the Company's foreign
sales offices and distributors.

Internet. The Company maintains home pages on the Internet for the
Calbiochem and Novabiochem brands with information about the Company and its
products and catalogs and is developing an Oncogene Research Products brand home
page. The Company believes that the Internet may become an increasingly
important channel of customer communication and intends to further develop its
Internet presence to keep pace with changes in technology and the market for its
products.

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<PAGE> 33

CUSTOMERS

During 1995 the Company sold products to over 6,900 accounts including
individual research scientists, institutions, companies and distributors
worldwide. No single account exceeded 10% of the Company's total sales for the
year ended December 31, 1995 or the six months ended June 30, 1996. The Company
maintains extensive local databases of current and potential customers which are
utilized for targeted mailings of catalogs and other publications. Selected
customers of the Company include research scientists at:

<TABLE>
<CAPTION>
GOVERNMENT AND OTHER
PHARMACEUTICAL BIOTECHNOLOGY ACADEMIC RESEARCH INSTITUTIONS
- ---------------------- ----------------------- --------------------------- -------------------------------
<S> <C> <C> <C>
Abbott Laboratories Amgen Columbia University Dana Farber Cancer Institute
Eli Lilly and Company Biogen Incorporated Harvard University Food and Drug Administration
GlaxoWellcome Chiron Corporation Johns Hopkins University Massachusetts General Hospital
Merck & Company Genentech Incorporated University of California Mayo Clinic
Pfizer & Company Genetics Institute University of Michigan National Institutes of Health
SmithKline Beecham Genzyme University of Pennsylvania The Scripps Research Institute
</TABLE>

Details regarding the Company's operations by geographic area are included
in Note 9 of Notes to Consolidated Financial Statements.

COLLABORATIONS

An important part of the Company's business is its many collaborations with
institutions and life sciences researchers. These collaborations range from
licensing and producing products discovered by a single research scientist to
joint marketing and distribution arrangements.

Amersham International plc. In connection with the Company's targeting of
the apoptosis niche research market, the Company entered into a distribution
agreement in March 1996 with Amersham International plc ("Amersham"), a U.K.
based health science company (total 1995 company-wide sales of over L350
million) which, among other things, supplies products to the life sciences
research market. In connection with this distribution agreement, the Company's
Apoptosis specialty catalog is printed in two versions, one marketed exclusively
by the Company under the Calbiochem name and another marketed jointly under the
Calbiochem and Amersham names. The Company believes that Amersham's worldwide
network of sales representatives with specialized knowledge of the assays and
kits markets will contribute to the Company's future success in the apoptosis
niche research market. In addition, the distribution agreement contemplates that
the Company and Amersham will enter into further collaborative agreements under
which the Company would add Amersham-developed products to the Apoptosis
specialty catalog, and the Company and Amersham would jointly develop new
products.

The Scripps Research Institute. In September 1995, the Company entered into
a sublicense agreement with The Scripps Research Institute which will allow it
to produce various enzymes, substrates and other products of interest to
research scientists working in the field of glycobiology, through the use of
recombinant technology. The availability of such products, which will be
manufactured and distributed by the Company on an exclusive basis in the
research products market, will be combined with additional products to provide
research scientists with cost-effective tools needed to study complex
carbohydrates. Recent publications have focused on the potential of glycobiology
in the area of pharmaceutical drug discovery research. The Company believes that
its offering of these important products through its general and a new specialty
catalog may establish the Company as a leader in the growing niche research
market of glycobiology.

Other. In addition to featuring products developed internally by the
Company's research and development staff, the Company offers products developed
through a wide range of sources. Accordingly, the identification of new and
useful products developed by others is an important part of its business.
Drawing on its connections in the industry and its multi-disciplined expertise,
the Company is constantly evaluating and searching out these products. Once
these products are identified, the Company will either license the technology
and distribution rights and produce the products in its own manufacturing
facilities or purchase manufactured products wholesale and distribute such
products to the Company's customers. In either case, the

33
<PAGE> 34

end products will ultimately be sold under one of the Company's brand names.
Providers of these products generally will be individual research scientists or
specialty companies which lack adequate manufacturing and distribution
facilities. Through a collaboration with the Company, these individuals and
smaller companies achieve wider distribution of their products while continuing
to focus on developing innovative products.

TECHNOLOGY COUNCIL AND CONSULTING ARRANGEMENT

The Company has a Technology Council composed of a number of leading
research scientists in the areas of molecular biology, immunology, cell biology
and biochemistry. The primary purpose of the Technology Council is to provide
independent, external, scientific guidance to the Company, and assist in the
decision making process related to niche research market definition, areas of
product focus and development, and general trends in many areas of scientific
research. The Company's scientific and management staff consult with members of
the Technology Council frequently on an informal basis in the normal course of
operations to address current market trends, current trends in science, broad
strategic areas of Company, including its product offerings, and industry focus
and to review the Company's current view of the life sciences research market.
Each member of the Technology Council receives $500 for each formal Technology
Council meeting attended.

The members of the Company's Technology Council are:

William H. Beers, Ph.D., the Chairman of the Company's Technology Council,
has served as Senior Vice President and Chief Operating Officer of The Scripps
Research Institute since 1991. Prior to joining The Scripps Research Institute
in 1987 as a Member of the Departments of Cell Biology and Molecular Biology,
Dr. Beers was a Professor of Biology and Cell Biology at the New York University
Medical School for nine years. Dr. Beers also presently serves as Director of
the Foundation for Medical Research, Washington, D.C., Treasurer and Member of
the Board of Trustees for the Skaggs Institute for Research, member of the Board
of Scientific Advisors of Allegheny-Singer Research Institute, Pittsburgh,
trustee of National University, San Diego and Chairman of the Torrey Pines
Institute for Molecular Studies. Dr. Beers earned his Ph.D. in Biochemistry and
Pharmacology from Rockefeller University and obtained an A.B. in Biochemical
Sciences from Harvard University.

Dennis R. Burton, Ph.D., has served as a Member of the Departments of
Immunology and Molecular Biology at The Scripps Research Institute since 1991
and was a lecturer at Oxford University and the University of Sheffield for ten
years before joining The Scripps Research Institute. Dr. Burton earned his Ph.D.
in Physical Chemistry from University of Lund (Lund, Sweden) and obtained a B.S.
in Chemistry from Oxford University. Dr. Burton is the author of 140 published
scientific papers.

Norton B. Gilula, Ph.D., has served as the Dean of Graduate Studies and the
Chairman of the Department of Cell Biology at The Scripps Research Institute
since 1991. Prior to joining The Scripps Research Institute as a Member of the
Department of Molecular Biology, Dr. Gilula was a Professor of Cell Biology at
Baylor College of Medicine for six years. Dr. Gilula presently is the
Editor-in-Chief of the Journal of Cell Biology, an editor of Current Opinion in
Cell Biology and is on the Scientific Advisory Board of the Wills Foundation.
Dr. Gilula earned his Ph.D. in Physiology from the University of California,
Berkeley and earned a B.A. and M.A. in Physiology and Chemistry from Southern
Illinois University. Dr. Gilula is the author of over 100 published scientific
papers.

Chi-Huey Wong, Ph.D., has served as Chairman of the Department of Chemistry
at The Scripps Research Institute since 1989. Before joining The Scripps
Research Institute as a Member of the Department of Chemistry in 1989, Dr. Wong
served as an Assistant, Associate and then full Professor of Chemistry at Texas
A&M University for seven years. Dr. Wong presently is the Editor-in-Chief of the
Journal of Bioorganic and Medicinal Chemistry and is a founding scientist of
Combichem, a provider of combinatorial chemistry products. Dr. Wong earned his
Ph.D. in Organic Chemistry from the Massachusetts Institute of Technology
("MIT") and obtained his B.A. in Chemistry and Biochemical Science and M.S. in
Biochemical Science at the National Taiwan University. Dr. Wong is the author of
247 published scientific papers and one book and holds 34 patents.

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<PAGE> 35

When the Technology Council was formed in October 1993, each member of the
Technology Council, other than the Chairman, received options to purchase 11,829
shares of Common Stock at an exercise price of $.42 per share. At such time, the
Chairman of the Technology Council, Dr. Beers, received options to purchase
23,659 shares at an exercise price of $.42 per share.

In addition to formal and informal consultations with the members of the
Technology Council, the Company has extensive contacts throughout the life
sciences research industry who also provide guidance and feedback regarding many
aspects of the Company's business. These contacts include senior researchers at
a number of institutions including Cold Spring Harbor Laboratories, Dana Farber
Cancer Institute, Harvard University, MIT, University of California and the Salk
Institute. The Company also utilizes consultants with specific scientific
expertise, particularly in the area of new product development and trends in
specific areas of scientific research.

The Company currently has a consulting agreement with Robert A. Weinberg,
Ph.D. Dr. Weinberg is a Professor of Biology at MIT and a Member of the
Whitehead Institute for Biomedical Research in Cambridge, Massachusetts. Dr.
Weinberg is world renowned for his research in cancer biology and cell cycle. He
has received thirty-two individual awards and honors during his career. In
addition to his research and academic duties at MIT, Dr. Weinberg serves on the
Board of Scientific Advisors to Hoffman-LaRoche, Inc., as an honorary Director
of the American Cancer Society, on the Scientific and Academic Advisory
Committee at the Weitzmann Institute of Science, as an Awards Assembly Member of
the General Motors Cancer Research Foundation and on the Research Advisory
Board, Massachusetts General Hospital. Dr. Weinberg is the author of 250
published scientific papers. During 1996, Dr. Weinberg is providing guidance and
assistance to the Company, principally relating to the Oncogene Research
Products business, under a consulting agreement providing for compensation
aggregating $10,000.

MANUFACTURING AND QUALITY ASSURANCE

The Company has manufacturing facilities in San Diego, California,
Cambridge, Massachusetts and Laufelfingen, Switzerland. All products are
distributed from either the Company's North American distribution center in San
Diego or the Company's European distribution center in Nottingham, U.K. For the
twelve-month period ended June 30, 1996, the Company's level of total
outstanding product backorders averaged approximately $329,000, calculated by
averaging backorder amounts at each month end during the period. The Company
ships products in accordance with customer requests, generally next-day or
second-day delivery, using principally United Parcel Service and Federal
Express. Based on the Company's monthly shipping statistics, over 99% of
customer orders are accurately fulfilled.

The Company produces products through its internal manufacturing process
and selective sourcing of additional products that can be more cost effectively
included in the product offering by purchasing from outside suppliers. Initial
batches of externally sourced products may be subject to inspection by the
Company's quality control personnel, and subsequent purchases are monitored to
ensure consistent quality of supply. In substantially all cases, members of the
Company's scientific staff have physically visited the manufacturing facility of
suppliers from whom the Company purchases sourced product. In addition, periodic
inspections of supplier facilities may be performed in connection with the
Company's supplier management process. Based upon 1995 sales data, approximately
45% of the Company's sales were derived from internally manufactured products.
The level of manufacturing content in individual products produced internally
varies depending upon the state of raw materials purchased. In some cases, such
as the production of peptides, internally synthesized biochemicals and
antibodies, assays and kits produced at the Company's Cambridge, Massachusetts
facility, the entire manufacturing process is controlled by the Company. In
other cases, it is more cost effective for the Company to purchase materials in
various states of completion and provide "value-added" manufacturing processes
such as purification, lyophilization and subdivision/packaging prior to delivery
to customers.

The Company's manufacturing activities consist primarily of antibody
production, synthesis of chemical compounds, synthesis of peptides and amino
acids and assembly of assays and kits. In the case of certain products provided
primarily to pharmaceutical and diagnostic customers from the Company's Swiss
manufacturing facility, appropriate GMP manufacturing guidelines are adhered to.
In addition, the Swiss facility has

35
<PAGE> 36

received ISO 9001 certification of policies and procedures utilized in the
procurement, manufacturing and distribution of products. The Company also
maintains a central quality assurance department in its San Diego headquarters,
with the principal focus of ensuring that quality processes are maintained
worldwide which ensure consistent, high quality product is delivered in
connection with all product offerings.

FULFILLMENT AND INTEGRATED INFORMATION SYSTEMS

The Company has a highly automated order fulfillment system capable of
delivering substantially all customer orders worldwide on a next-day basis. The
Company believes that this system enables the Company to compete with its larger
competitors and gives it a competitive advantage over its smaller competitors,
while at the same time making the Company an attractive distribution outlet for
these smaller companies.

The Company utilizes an Oracle-based relational database system to manage
substantially all operations of the Company's U.S. and international locations.
The Company's U.S., U.K., German and Swiss operations are part of a network that
is linked together through the use of leased phone lines with back-up
capabilities. The Company's information systems provide integrated on-line
automation of major business operations including purchasing, receiving,
production planning, inventory management, manufacturing, quality control, order
entry, shipping, sales analysis and all financial systems. This system allows
the Company to enter orders for any product brand from any of its networked
locations, and provides for invoicing of customers in any of the currencies
quoted in the various product catalogs. In addition, the Company has an
integrated software interface between the primary information system and the
computer software which organizes products to be picked from the automated
fulfillment system maintained at the Company's North American distribution
center in San Diego, California.

COMPETITION

The market for the Company's products is highly competitive, and the
Company expects competition to increase. Furthermore, although the life sciences
research products market continues to grow, its rate of growth in recent years
has been declining and may continue to decline. The Company competes with many
other life sciences research products suppliers, both larger and smaller than
the Company. Some of the Company's competitors, including two of its largest
competitors, Sigma-Aldrich and Boehringer, offer a broad range of equipment,
laboratory supplies and products, including many of the research products
offered by the Company. To the extent that researchers exhibit loyalty to the
supplier that first supplies them with a particular research product, the
Company's competitors may have an advantage over the Company with respect to
products first developed by such competitors. In addition, many of the Company's
competitors have significantly greater research and development, marketing,
financial and other resources than the Company, and therefore represent and will
continue to represent significant competition in the Company's existing and
future markets. Because of their size and the breadth of their product
offerings, certain of these companies have been able to establish managed
accounts by which, through a combination of direct computer links and volume
discounts, they seek to gain a disproportionate share of orders for research
products from a particular academic institution or pharmaceutical or
biotechnology company. Such managed accounts raise significant competitive
barriers for the Company. The Company currently benefits from its participation
in emerging niche research markets which, as they expand, may attract the
attention of the Company's competitors.

GOVERNMENT REGULATION

The Company is subject to governmental regulation under the Occupational
Safety and Health Act, the Environmental Protection Act, the Toxic Substances
Control Act, and other similar laws of general application, as to all of which
the Company believes itself to be in material compliance. The Company has in the
past been notified of minor violations of government and environmental
regulations. The Company has promptly corrected such violations, without any
material impact on the Company's operations. Any future violation of, and the
cost of compliance with, these laws and regulations could have a material
adverse effect on the Company's business, financial condition and results of
operations.

36
<PAGE> 37

Because of the nature of its operations and the use of hazardous substances
in its ongoing manufacturing and research and development activities, the
Company is subject to stringent federal, state and local laws, rules,
regulations and policies governing the use, generation, manufacturing, storage,
air emission, effluent discharge, handling and disposal of certain materials and
wastes. Prior to the Company's inception, its U.S. subsidiary, at the time it
was owned by its former owners, was involved in two separate incidents related
to the release of hazardous materials into the environment at a leased facility
which is no longer occupied by the Company. The Company believes from a review
of correspondence from various regulatory agencies that these incidents were
investigated and remediated by the U.S. subsidiary's former owners. Although the
Company believes it is in material compliance with all applicable government and
environmental laws, rules, regulations and policies, there can be no assurance
that the Company's business, financial condition and results of operations will
not be materially adversely affected by current or future environmental laws,
rules, regulations and policies or by liability arising out of any past or
future releases or discharges of materials that could be hazardous.

The Company's products are generally sold for non-human research purposes
and do not subject the Company to the regulatory requirements of the U.S. Food
and Drug Administration (the "FDA"). In certain limited situations, the
Company's Clinalfa products are sold to U.S. customers involved in limited human
clinical research which requires that the Company's customer obtain FDA approval
of an Investigational New Drug application (IND). Products sold to such
customers are produced by the Company at its Swiss manufacturing facilities in
material compliance with appropriate GMPs. Clinalfa products supplied to non-
U.S. customers for similar human clinical research are also subject to
applicable regulatory requirements and production is also done in material
compliance with appropriate GMPs.

The Company recently became aware of regulations requiring the issuance of
export licenses for the exportation of certain neurotoxins in its product line.
The products involved represent 30 of the Company's 7,000 products and accounted
in each of the last three years for approximately $150,000 in sales. Upon
becoming aware of these regulations, the Company immediately ceased the
exportation of these toxins, began the process of applying for the appropriate
export licenses and made a voluntary self disclosure to the U.S. Department of
Commerce ("DOC") regarding its prior exports of these products. The Company has
advised the DOC that it will cooperate fully in any investigation that it may
undertake regarding these exports. The Company may be subject to the payment of
penalties for its failure to have obtained such licenses in the past, but based
upon discussions with the DOC and published reports regarding similar violations
by other companies, the Company does not believe that such penalties, if levied,
will have a material adverse effect on the Company.

INTELLECTUAL PROPERTY

Although the Company owns certain patents and licenses patents from others,
none of these patents individually, nor in the aggregate, are material to the
Company's operations. Due to the rapid pace of technological change in the field
of biotechnology, the degree of protection that a patent provides is uncertain,
and requires the Company to continually develop and seek out new technologies.
The Company has obtained the rights to products and technologies under a number
of license agreements with academic institutions, private and public
foundations, biotechnology companies and others. The Company intends to continue
its current practice of licensing technologies and products as a supplement to
its own internally developed innovations.

A number of the Company's products, including Oncogene Research Products
antibodies, are manufactured under license agreements which provide for payment
of royalties based upon the product's sales. As of June 30, 1996, the Company
had in excess of 175 license agreements which provided for royalty payments
generally ranging from 5% to 7% of net sales of such products. During the year
ended December 31, 1995 and the six months ended June 30, 1996, the Company
expensed an aggregate of $112,000 and $159,000, respectively, in connection with
cash royalties owed pursuant to license agreements.

Because of the breadth of the Company's product offerings and ambiguities
in intellectual property law, the Company periodically receives in the ordinary
course of business notices of potential infringement of patents held by others.
Although the Company historically has been able to satisfactorily resolve such
claims

37
<PAGE> 38

and believes that any outstanding claims will be satisfactorily resolved, there
can be no assurance that the Company may not be forced to discontinue the sale
of one or more of its products, some or all of which could be material. As the
Company develops product offerings focused on certain niche research markets,
intellectual property rights of the Company or others related to such markets
may become increasingly important, and the Company's failure to obtain and
retain such rights may have a material adverse effect on the Company's business,
financial condition and results of operations.

The Company's significant registered trademarks are its Calbiochem,
Novabiochem and Clinalfa brand names. In connection with the Oncogene Research
Products acquisition, OSI granted the Company the right to use the phrase
"Oncogene Research Products" for a three-year period which will expire in August
1998. All new Oncogene Research Products promotional materials, including the
Apoptosis specialty catalog, and all packaged products now identify Oncogene
Research Products as a product line of Calbiochem. The Company intends to
develop a strategy to transition its Oncogene Research Products brand and does
not anticipate that such transition will have an adverse effect on the Company's
business, financial condition and results of operations.

HUMAN RESOURCES

As of September 30, 1996, the Company employed 192 persons on a full-time
and part-time basis, including 40 employees who hold Ph.D.s. None of the
Company's employees are covered by a collective bargaining agreement, and the
Company considers relations with its employees to be good.

FACILITIES

The Company leases approximately 60,000 square feet of space in San Diego,
California, for use as its corporate headquarters, North American distribution
center and technology center (including manufacturing facilities) for the
Calbiochem brand. This lease expires in June 2008 and may be renewed for two
five-year terms at the option of the Company.

The Company also leases approximately 10,000 square feet of space in
Cambridge, Massachusetts for use as a technology center (including manufacturing
facilities) for the Oncogene Research Products brand. Such space is subleased
from OSI pursuant to a sublease agreement expiring in August 1998. The sublease
may be renewed, at the Company's option, for additional one-year terms through
2003. In connection with the OSI sublease, the Company entered into a Shared
Services Agreement which provides that OSI will share certain building
facilities with the Company, in exchange for the Company's contributing to the
costs of such shared facilities. The Company also leases approximately 3,000
square feet of additional laboratory space in Cambridge under a three-year
lease.

The Company leases approximately 7,500 square feet of space in Nottingham,
U.K., for use as its European distribution center and a sales office under a
lease expiring in February 2009. The Company leases approximately 2,100 square
meters of space in Laufelfingen, Switzerland. The Novabiochem brand technology
center (including manufacturing facilities) occupies 1,500 square meters of this
space under a lease expiring in June 2004. The remaining approximately 600
square meters has been unoccupied since the restructuring of the Company's Swiss
operations in 1993, and is under lease until June 2000. The Company also rents
space for sales offices in Australia, Japan and Germany on a short-term basis.

The Company believes that its properties are generally in good condition,
are well maintained, and are suitable and adequate to carry on its business.

LEGAL PROCEEDINGS

The Company is not currently a party to any legal proceedings.

38
<PAGE> 39

MANAGEMENT

EXECUTIVE OFFICERS AND DIRECTORS

The following table sets forth certain information regarding the Company's
executive officers and directors as of September 30, 1996:

<TABLE>
<CAPTION>
NAME AGE POSITION
- --------------------------- --- -----------------------------------------------------------------
<S> <C> <C>
Stelios B. Papadopoulos.... 56 Chairman of the Board; Chief Executive Officer and President
James G. Stewart........... 43 Vice President, Administration; Chief Financial Officer and
Secretary
John T. Snow............... 52 Vice President, New Business Development
Ben Matzilevich............ 48 Vice President, Market Development -- Niche Applications
Douglas J. Greenwold....... 54 Vice President, Sales and Marketing
Frederick L. 42 Director
Bryant(1)(3).............
Joseph P. Landy(1)(3)...... 35 Director
S. Joshua Lewis(2)......... 34 Director
Robert E. McGill, III(2)... 65 Director
</TABLE>

- ---------------
(1) Member of the Compensation Committee.

(2) Member of the Audit Committee.

(3) Member of the Stock Option Committee.

Stelios B. Papadopoulos has served as Chairman of the Board and Chief
Executive Officer of the Company since January 1993 and President of the Company
since June 1995. From June 1992 to December 1992, Mr. Papadopoulos served as
President of Fisher Scientific Worldwide Inc. (now Fisher Scientific
International Inc.) ("Fisher") and was responsible for the day-to-day operations
of Fisher's worldwide organization which provides equipment, laboratory
supplies, and various other products to customers in the life sciences research
market. From May 1989 to June 1992, Mr. Papadopoulos served as President of
Fisher Scientific Company, the principal operating unit of Fisher. Prior to
joining Fisher Scientific Company, Mr. Papadopoulos served in a number of
companies involved in the life sciences industry including Instrumentation
Laboratory and Orion Research.

James G. Stewart has served as Vice President, Administration, Chief
Financial Officer and Secretary of the Company since June 1995. From April 1994
to April 1995, Mr. Stewart served as Vice President -- Finance and Chief
Financial Officer of Fightertown Entertainment, Inc., and from October 1988 to
April 1994, Mr. Stewart served as Vice President -- Finance and Chief Financial
Officer of VERTEQ, Inc. Mr. Stewart is a certified public accountant and a
former partner of Arthur Young & Company (now Ernst & Young LLP).

John T. Snow, Ph.D., has served as Vice President, New Business Development
of the Company since March 1992, and was Vice President, Marketing and Sales of
the Company from April 1989 until March 1992. Dr. Snow has been employed by the
Company and its predecessors in various other capacities since 1975 and is the
author and co-author of over 40 published scientific papers.

Ben Matzilevich has served as Vice President, Market Development -- Niche
Applications since joining the Company in April 1995, and has served as General
Manager of the Oncogene Research Products business since its acquisition in
August 1995. From August 1993 to March 1995, Mr. Matzilevich served as Vice
President -- Sales and Marketing with Endogen, Inc., a producer and seller of
research products for the study of cytokines. In November 1989, Mr. Matzilevich
co-founded Biosource International, Inc., a research products company, and
through August 1993, was primarily responsible for day-to-day operations,
product development and development of the sales and marketing organization.
Prior to founding Biosource, Mr. Matzilevich held various positions at
NEN/E. I. du Pont de Nemours and Company and acted as an industry consultant to
a number of research products companies serving the life sciences research
industry.

Douglas J. Greenwold has served as Vice President, Sales and Marketing of
the Company since January 1994. From 1990 to 1993, Mr. Greenwold was employed in
various capacities, including Vice President --

39
<PAGE> 40

Sales and Marketing, Research Products Americas at Life Technologies, Inc., a
supplier of research products to the life sciences research market. Prior to
joining Life Technologies, Mr. Greenwold held a number of sales and marketing
positions at Survival Technology, Inc., a supplier of cardiac monitoring and
drug delivery technologies and Xerox Corporation.

Frederick L. Bryant has served as a director of the Company since March
1992. Since December 1993, he has been principally employed as a General Partner
of ABS Partners, L.P., the general partner of ABS Capital Partners, L.P., a
private equity fund. For more than five years prior to that date, he was
principally employed as a Managing Director of Alex. Brown & Sons Incorporated,
investing private equity funds. Mr. Bryant serves on the Board of Directors as a
nominee of ABS. Mr. Bryant also serves as a director of Transaction Systems
Architects, Inc. and several privately held companies.

Joseph P. Landy has served as a director of the Company since March 1992.
Since January 1994, Mr. Landy has been a Managing Director of E.M. Warburg,
Pincus & Co., Inc., where he has been employed in various capacities since 1985.
Mr. Landy serves on the Board of Directors as a nominee of Warburg. Mr. Landy
also serves as a director of Level One Communications, Inc., Nova Corporation
and several privately held companies.

S. Joshua Lewis has served as a director of the Company since June 1995.
Mr. Lewis is a Vice President of E.M. Warburg, Pincus & Co., Inc. where he has
been employed in various capacities since 1989. Mr. Lewis serves on the Board of
Directors as a nominee of Warburg. Mr. Lewis also serves as a director of
Cambridge Neuroscience, Inc.

Robert E. McGill, III has served as a director of the Company since
November 1995. For more than the past five years, Mr. McGill has served as a
member of the Board of Managers of seven variable annuity managed separate
accounts and a Trustee of five mutual funds sponsored by The Travelers Insurance
Company. From 1989 to December 1994, Mr. McGill served as Executive Vice
President -- Finance and Administration of The Dexter Corporation, where he also
served as a director from 1983 to April 1995. Mr. McGill also serves as a
director of Connecticut Surety Corporation and Chemfab Corporation.

The Company's Board of Directors is currently composed of five directors,
one of whom is an employee of the Company. Directors serve until the next annual
stockholders' meeting or until their successors have been duly elected and
qualified. During 1995, the Board of Directors had six meetings. The Company
intends to add an additional independent director with life sciences industry
experience.

Warburg and ABS currently have certain rights with respect to the
nomination and election of directors to the Company's Board of Directors, which
rights, by their terms, terminate upon the consummation of the offering. To
induce Warburg and ABS to agree with the Company to exchange their shares of
Series B Preferred Stock for shares of Common Stock, the Company has agreed to
grant to Warburg and ABS the following rights which will become effective upon
the consummation of the offering: (i) for so long as Warburg owns beneficially
at least 20% of the outstanding shares of Common Stock, the Company will
nominate and use reasonable efforts to have two individuals designated by
Warburg and reasonably acceptable to the Company elected to the Company's Board
of Directors, and from the date that Warburg owns beneficially less than 20% of
the outstanding shares of Common Stock but for so long as it owns beneficially
at least 10% of the outstanding shares of Common Stock, the Company will
nominate and use reasonable efforts to have one individual designated by Warburg
and reasonably acceptable to the Company elected to the Company's Board of
Directors; and (ii) for so long as ABS owns beneficially at least 10% of the
outstanding shares of Common Stock, the Company will nominate and use reasonable
efforts to have one individual designated by ABS and reasonably acceptable to
the Company elected to the Company's Board of Directors.

COMMITTEES OF THE BOARD OF DIRECTORS

Compensation Committee. The Company has a Compensation Committee consisting
of Messrs. Bryant and Landy. The Compensation Committee provides recommendations
concerning salaries and incentive compensation for the Company's officers and
administers the Company's benefit plans, other than the Stock Option Plan.

40
<PAGE> 41

Audit Committee. The Company has an Audit Committee consisting of Messrs.
Lewis and McGill. The Audit Committee recommends to the Board of Directors the
engagement of the Company's independent public accountants and reviews the scope
and results of their audits and other services. The Audit Committee meets with
management and with the independent public accountants to review matters
relating to the quality of the Company's financial reporting and internal
accounting controls, including the nature, extent and results of the audits,
proposed changes to the Company's accounting principles and otherwise maintains
communications between the independent public accountants and the Board of
Directors.

Stock Option Committee. The Company has a Stock Option Committee consisting
of Messrs. Bryant and Landy. The Stock Option Committee determines grants under
and otherwise administers the Company's Stock Option Plan.

COMPENSATION OF DIRECTORS

Directors, other than Warburg's nominees, are reimbursed for expenses
incurred in attending meetings of the Board of Directors. In addition, Mr.
McGill, who is not an employee and not otherwise affiliated with a principal
stockholder of the Company, is paid $500 for each Board of Directors meeting
attended. At the time that Mr. McGill joined the Board of Directors, he was
granted options to purchase 11,829 shares of Common Stock at an exercise price
of $3.38 per share. Additionally, under an agreement with the Company, Mr.
McGill from time to time provides certain consulting services for which he is
compensated at the rate of $1,000 per day. During 1995, the Company paid Mr.
McGill a consulting fee of $1,000.

EXECUTIVE COMPENSATION

The following table sets forth information concerning compensation of the
Company's Chief Executive Officer and the five other most highly compensated
executive officers including the Company's former President (collectively, the
"Named Executive Officers") for the year ended December 31, 1995.

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
ANNUAL COMPENSATION ------------
-------------------------- SECURITIES
OTHER ANNUAL UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION SALARY($) COMPENSATION($) OPTIONS(#) COMPENSATION($)
- --------------------------------------------- --------- --------------- ------------ ---------------
<S> <C> <C> <C> <C>
Stelios B. Papadopoulos (1)
Chief Executive Officer and President...... $ 204,327 $ 162,640 -- $ 2,112
Richard B. Slansky (2)
President.................................. 63,600 93,015 -- 147,190
Douglas J. Greenwold (3)
Vice President, Sales and Marketing........ 115,000 -- -- 3,352
John T. Snow (4)
Vice President, New Business Development... 110,021 -- -- 3,804
James G. Stewart (5)
Vice President, Administration, Chief
Financial Officer and Secretary............ 80,865 21,518(6) 47,317 45,471
Ben Matzilevich (7)
Vice President, Market Development -- Niche
Applications............................... 87,692 -- 23,659 --
</TABLE>

- ---------------

(1) Other annual compensation represents forgiveness of principal and interest
related to a note receivable from Mr. Papadopoulos in connection with his
purchase of capital stock of the Company pursuant to his employment
agreement. Other compensation includes $1,098 in premiums for personal
beneficiary life insurance in excess of non-taxable group limits, and $1,014
of Company matching 401(k) contributions.

(2) Resigned from the Company in June 1995. Other annual compensation represents
severance pay. Other compensation includes $144,460 of compensation from
exercise of non-qualified stock options and $2,730 of Company matching
401(k) contributions.
(Footnotes continued on next page)

41
<PAGE> 42

(3) Other compensation includes $580 in premiums for personal beneficiary life
insurance in excess of non-taxable group limits and $2,772 of Company
matching 401(k) contributions.

(4) Other compensation includes $1,035 in premiums for personal beneficiary life
insurance in excess of non-taxable group limits and $2,769 of Company
matching 401(k) contributions.

(5) Joined the Company in June 1995. Other compensation includes $39,231
relocation expense reimbursement, $4,680 of premiums for personal
beneficiary life insurance in excess of non-taxable group limits and $1,560
of Company matching 401(k) contributions.

(6) Represents tax reimbursement payments related to relocation.

(7) Joined the Company in April 1995.

The following table summarizes the number of shares and the terms of stock
options granted to the Named Executive Officers in 1995:

OPTION GRANTS DURING YEAR ENDED DECEMBER 31, 1995

<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES OF STOCK
NUMBER OF % OF TOTAL PRICE APPRECIATION
SECURITIES OPTIONS FOR OPTION
UNDERLYING GRANTED TO TERM($)(2)(3)
OPTIONS EMPLOYEES IN EXERCISE PRICE EXPIRATION ---------------------
NAME GRANTED(#) FISCAL YEAR ($/SHARE)(1) DATE 5% 10%
- ---------------------------------- ---------- ------------ -------------- ---------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
James G. Stewart.................. 47,317 46.5% $.42 6/12/00 $ 5,526 $ 12,210
Ben Matzilevich................... 23,659 23.3 .42 7/03/00 2,763 6,105
</TABLE>

- ---------------

(1) The exercise price of options is equal to 100% of the fair market value of
the Common Stock as determined by the Company's Board of Directors on the
date of grant.

(2) The options have a five-year term, subject to earlier termination under
certain circumstances.

(3) The potential realizable value is calculated based on the term of the option
at its time of grant and is calculated by assuming that the stock price on
the date of grant as determined by the Board of Directors appreciates at the
indicated annual rate compounded annually for the entire term of the option
and that the option is exercised and sold on the last day of its term for
the appreciated price. The 5% and 10% assumed rates of appreciation are
derived from the rules of the Securities and Exchange Commission (the
"Commission") and do not represent the Company's estimate or projection of
the future market price of the Common Stock.

The following table summarizes options exercised in 1995 by the Named
Executive Officers, the number of unexercised options held by the Named
Executive Officers at the end of 1995, and their value at that date if they were
in-the-money.

AGGREGATED 1995 OPTION EXERCISES AND FISCAL YEAR-END OPTION VALUES

<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING OPTIONS AT IN-THE-MONEY OPTIONS AT
SHARES DECEMBER 31, 1995(#) DECEMBER 31, 1995($)(1)
ACQUIRED --------------------------- ---------------------------
NAME ON EXERCISE(#) VALUE REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- --------------------------- -------------- ----------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Stelios B. Papadopoulos.... -- -- 55,124 55,124 $ 167,061 $ 167,061
Richard B. Slansky......... 47,696 $ 144,460 -- -- -- --
Douglas J. Greenwold....... -- -- 18,927 28,390 57,360 86,040
John T. Snow............... -- -- -- 6,624 -- 20,076
James G. Stewart........... -- -- -- 47,317 -- 143,400
Ben Matzilevich............ -- -- -- 23,659 -- 71,700
</TABLE>

- ---------------

(1) Based on a value of $3.45 per share, the fair market value on December 31,
1995 as determined by the Board of Directors.

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<PAGE> 43

EMPLOYMENT AGREEMENTS

The Company has employment agreements with Messrs. Papadopoulos and
Matzilevich currently providing for their employment at annual base salaries of
$225,000 and $124,000, respectively. Mr. Papadopoulos' employment agreement
provides that the Board of Directors will review his compensation at least once
each year and award such bonuses and effect such increases in base salary as the
Board of Directors, in its sole discretion, determines are merited, based upon
his performance and consistent with the Company's compensation policies. Mr.
Matzilevich's employment agreement provides that in addition to any annual
adjustment made to his salary, he is eligible for a bonus up to 35% of base
salary, based on the achievement of certain agreed-upon objectives. In addition,
both of these executives may participate in such fringe benefits as are
generally provided to the Company's executives.

Unless terminated earlier in accordance with their respective terms, Mr.
Papadopoulos' employment agreement terminates on January 4, 1998, and Mr.
Matzilevich's employment agreement terminates on April 3, 1998. In addition,
each of these agreements provides that the Company and the executive will, not
later than 90 days prior to the termination thereof, begin to negotiate in good
faith the terms of any extension of the employment agreement.

If Mr. Papadopoulos' employment is terminated without cause, if there is a
material change in his duties, or if the Company does not offer to continue his
employment with the Company after the agreement's expiration at a base salary at
least equal to his then most recent salary, Mr. Papadopoulos will be entitled to
receive salary continuation pay for the 12-month period from the date of such
termination equal to his base salary under the terms of his employment
agreement. In addition, Mr. Papadopoulos' employment agreement provides that
upon such a termination, any options to purchase Common Stock then held by him
will become exercisable to the full extent that they would otherwise have become
exercisable on January 4, 1998, without regard to certain restrictions or
deferrals of the right to exercise such options. In the event that Mr.
Matzilevich is terminated without cause, he will be entitled to continue to
receive compensation under his employment agreement for the remainder of its
term.

The Company maintains $1.0 million of key man life insurance on the lives
of Messrs. Papadopoulos and Matzilevich and Dr. Snow, naming the Company as
beneficiary.

Messrs. Stewart and Greenwold and Dr. Snow are eligible for incentive
bonuses up to approximately 35% of their base salaries, based on the achievement
of certain agreed-upon objectives, and are eligible for severance payments up to
six months of their base salary in the event they are terminated without cause.

STOCK OPTION PLAN

The Stock Option Plan, including all amendments, has been adopted by the
Board of Directors and approved by the Company's stockholders. The Stock Option
Plan authorizes the grant of both incentive stock options ("ISOs") within the
meaning of Section 422 of the Internal Revenue Code of 1986, as amended (the
"Code"), and nonqualified stock options ("NQSOs") to key employees, officers,
directors and consultants of the Company and its subsidiaries. ISOs, however,
may only be granted to participants who are employees of the Company or its
subsidiaries. Options to purchase an aggregate of 835,000 shares of Common Stock
are authorized under the Stock Option Plan. As of September 30, 1996, 78,073
ISOs and 315,841 NQSOs were outstanding under the Stock Option Plan, and 359,559
shares were available for future awards.

The Stock Option Plan is presently administered by a committee (the "Stock
Option Committee") appointed by the Board of Directors. The Stock Option
Committee has the discretion to determine the key employees, officers, directors
and consultants to whom options are granted and the terms of such options,
including the exercise price, vesting provisions and expiration date. The
minimum exercise price for ISOs, however, must be the fair market value of the
Common Stock on the date of grant, as determined by the Company's Board of
Directors. Options granted under the Stock Option Plan may, at the Stock Option
Committee's discretion, provide for full vesting upon a "change in control" of
the Company. No options may be granted with a term longer than ten years.

All options granted under the Stock Option Plan are evidenced by a written
option agreement between the option holder and the Company. Option holders have
no voting, dividend or other rights of stockholders

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<PAGE> 44

with respect to shares of Common Stock covered by their options prior to
exercising such options and becoming the holders of record of shares of Common
Stock.

The Board of Directors may at any time terminate the Stock Option Plan or
from time to time make such modifications or amendments to the Stock Option Plan
as it may deem advisable; provided that the Board of Directors may not, without
the approval of the Company's stockholders, increase the maximum number of
shares of Common Stock for which options may be granted under the Stock Option
Plan.

Federal Tax Consequences. Set forth below is a brief description of the
federal income tax consequences applicable to ISOs and NQSOs granted under the
Stock Option Plan.

ISOs. No taxable income is realized by the option holder upon the grant or
exercise of an ISO. If Common Stock is issued to an option holder pursuant to
the exercise of an ISO, and if no disqualifying disposition of such shares is
made by such option holder within the earlier of two years after the date of
grant or within one year after the exercise of such options, then (i) upon the
sale of such shares of Common Stock, any amount realized in excess of the option
price will be taxed to such option holder as a long-term capital gain and any
loss sustained will be taxed to such option holder as a long-term capital loss,
and (ii) no deduction will be allowed to the Company for federal income tax
purposes.

If the Common Stock acquired upon the exercise of an ISO is disposed of
prior to the expiration of either holding period described above, then generally
(i) the option holder will realize ordinary income in the year of disposition in
an amount equal to the excess, if any, of the fair market value of such shares
at the time of exercise (or, if less, the amount realized on the disposition of
such shares) over the option price paid for such shares, and (ii) the Company
will be entitled to deduct the same amount as compensation expense for federal
income tax purposes. Any further gain (or loss) realized by the option holder
will be taxed as short-term or long-term capital gain (or loss), as the case may
be, and will not result in any deduction by the Company.

NQSOs. With respect to NQSOs, (i) no income is realized by the option
holder at the time the option is granted, (ii) generally, upon exercise,
ordinary income is realized by the option holder in an amount equal to the
difference between the option price paid for the shares and the fair market
value of the shares, if unrestricted, on the date of exercise, and the Company
is generally entitled to a federal income tax deduction in the same amount as
compensation expense, subject to applicable withholding requirements and (iii)
at sale, appreciation (or depreciation) after the date of exercise is treated as
either short-term or long-term capital gain (or loss), depending on how long the
shares have been held.

The foregoing summary with respect to federal income taxation does not
purport to be complete and reference is made to the applicable provisions of the
Code.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

No officer or employee of the Company currently serves as a member of the
Compensation Committee. Messrs. Landy and Bryant, the current members of the
Compensation Committee, have in the past served as officers of the Company,
including, in the case of Mr. Landy, during fiscal 1995. Messrs. Landy and
Bryant may be deemed to have an indirect pecuniary interest (within the meaning
of Rule 16a-1 under the Securities and Exchange Act of 1934, as amended (the
"Exchange Act"), in an indeterminate portion of the securities of the Company
beneficially owned by Warburg and ABS, respectively. See "Principal
Stockholders" and "Certain Transactions -- Acquisition of the Company."

LIMITATIONS ON DIRECTORS' AND OFFICERS' LIABILITY

The Certificate of Incorporation provides that, to the fullest extent
permitted by Delaware law, the Company's directors shall not be personally
liable to the Company and its stockholders for monetary damages for breach of
their fiduciary duties as directors, except for liability for (i) breach of the
directors' and officers' duty of loyalty, (ii) acts or omissions not in good
faith or which involve intentional misconduct or a knowing violation of the law,
(iii) the unlawful payment of a dividend or unlawful stock purchase or
redemption and (iv) any transaction from which the director derives an improper
personal benefit. Delaware law does not permit a corporation to eliminate a
director's duty of care, and this provision of the Company's Certificate of
Incorporation has no effect on the availability of equitable remedies, such as
injunction or rescission, based upon a director's breach of the duty of care.

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<PAGE> 45

In addition, the Company's Certificate of Incorporation and By-Laws provide
that the Company shall indemnify its directors and officers to the fullest
extent permitted by Delaware law. The Company has entered into indemnification
agreements with certain of its directors and officers pursuant to which the
Company provides indemnification and contribution against expenses and losses
incurred for claims brought against them by reason of their being a director or
officer of the Company. Members of the Stock Option Committee are also
indemnified by the Company in connection with their administration of the Stock
Option Plan.

The Company believes that these provisions will assist the Company in
attracting and retaining qualified individuals to serve as directors and
officers.

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<PAGE> 46

CERTAIN TRANSACTIONS

The following is a summary of certain transactions among the Company and
its directors, executive officers and principal stockholders:

CONVERSION OF SERIES A CONVERTIBLE PREFERRED STOCK AND EXCHANGE OF SERIES B
PREFERRED STOCK

The Company has agreed with Warburg that upon consummation of the offering
of Common Stock, Warburg will convert its 4,001 shares of Series A Convertible
Preferred Stock into 788,814 shares of Class A Common Stock. Promptly after such
conversion, Warburg will, in turn, make the requisite certification required
under the Certificate of Incorporation regarding its share ownership to the
Company and will convert such shares of Class A Common Stock into Common Stock.
See "Description of Capital Stock."

The Company has agreed with the holders of the Series B Preferred Stock
that upon consummation of this offering, each share of Series B Preferred Stock
will be exchanged for that number of shares of Common Stock as will be equal to
the liquidation preference of a share of Series B Preferred Stock ($100) divided
by the initial public offering price of the Common Stock set forth on the cover
page of this Prospectus. As as a result, all of the shares of Series B Preferred
Stock will be converted into an aggregate of 1,435,424 shares. Warburg, ABS, Mr.
Papadopoulos and Dr. Snow are the holders of the Series B Preferred Stock,
holding 124,023 shares, 50,356 shares, 4,377 shares and 672 shares, respectively
and will, accordingly, be issued 992,184, 402,848, 35,016 and 5,376 shares of
Common Stock, respectively, upon such exchange.

The Company granted certain registration rights to the holders of the
Series A Convertible Preferred Stock and Series B Preferred Stock with respect
to the shares of Common Stock issuable upon conversion or exchange, as
applicable. See "Description of Capital Stock -- Registration Rights."
Additionally, the Company has agreed that Warburg and ABS will each have certain
rights to nominate directors as long as they continue to own specified
percentages of the outstanding shares of Common Stock. See "Management."

ACQUISITION OF THE COMPANY

In March 1992, the Company acquired all of the issued and outstanding
capital stock, together with certain bank and intercompany indebtedness, of the
Company's subsidiaries from Biodor Holding AG, Ixora Holding AG and Biodor US
Holding Corporation. Warburg, ABS and certain current and former employees of
the Company provided the principal equity financing for these acquisitions by
purchasing from the Company 1,012,984 shares of Common Stock at $.42 per share,
4,001 shares of Series A Convertible Preferred Stock at $100 per share and
178,166 shares of Series B Preferred Stock at $100 per share, representing a
total investment of approximately $18.6 million. In addition, these investors
received certain registration rights. See "Description of Capital
Stock -- Registration Rights."

TRANSACTIONS WITH OFFICERS

On January 4, 1993, Mr. Papadopoulos, the Company's Chairman of the Board,
Chief Executive Officer and President, purchased 44,100 shares of Common Stock
at $.42 per share and 4,377 shares of Series B Preferred Stock at $100 per
share, in exchange for $4,000 and a $452,000 promissory note. The Company has
granted Mr. Papadopoulos certain registration rights for such shares of Common
Stock. See "Description of Capital Stock -- Registration Rights." This unsecured
note bore interest at the rate of 8% per annum and matured on January 4, 1996.
In accordance with the terms of the note, as a result of Mr. Papadopoulos'
continued employment with the Company, one-third of the principal amount,
together with accrued interest, was forgiven on each of the first three
anniversaries of the note.

Effective June 9, 1995, Richard B. Slansky, the former President and Chief
Operating Officer of the Company, resigned to pursue other business
opportunities. In connection therewith, the Company and Mr. Slansky entered into
an agreement which provided for the payment to Mr. Slansky of six months
severance pay and also provided for the sale by Mr. Slansky to the Company of
59,726 shares of Common Stock at a price of approximately $3.45 per share and
1,199 shares of Series B Preferred Stock at a price of $100 per share.

On January 31, 1996, Mr. Matzilevich, the Company's Vice President, Market
Development-Niche Applications, purchased 28,390 shares of Common Stock at $3.38
per share from the Company in exchange for a $96,000 promissory note. The note
bears interest at the rate of 5.65% per annum, matures on January 31, 1998, and
is secured by such shares of Common Stock. The Company has granted Mr.
Matzilevich certain registration rights for such shares of Common Stock. See
"Description of Capital Stock -- Registration Rights."

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<PAGE> 47

PRINCIPAL STOCKHOLDERS

The following table presents certain information regarding beneficial
ownership of the Company's Common Stock as of September 30, 1996, by (i) each
person known by the Company to be the beneficial owner of more than 5% of the
outstanding shares of Common Stock, (ii) each director of the Company, (iii)
each Named Executive Officer and (iv) all directors and executive officers as a
group. Unless otherwise indicated, each person in the table has sole voting and
investment power as to the shares shown.

<TABLE>
<CAPTION>
SHARES OF COMMON STOCK SHARES OF COMMON STOCK
BENEFICIALLY OWNED PRIOR BENEFICIALLY OWNED
TO OFFERING(1) AFTER OFFERING(2)
------------------------------------- ------------------------------------
NAME NUMBER PERCENT NUMBER PERCENT
- --------------------------------------------------- ---------------------- ------------ --------------------- ------------
<S> <C> <C> <C> <C>
Warburg, Pincus Investors, L.P. (3)................ 618,901 49.9% 2,248,485 45.8%
466 Lexington Avenue
New York, New York 10017
ABS MB (C-N) Limited Partnership (4)............... 507,342 46.6 910,190 18.5
135 East Baltimore Street
Baltimore, Maryland 21202
Stelios B. Papadopoulos (5)........................ 126,786 10.8 161,802 3.2
10394 Pacific Center Court
San Diego, California 92121
James G. Stewart (6)............................... 9,463 * 9,463 *
John T. Snow (7)................................... 33,221 3.0 38,597 *
Ben Matzilevich (8)................................ 33,122 3.0 33,122 *
Douglas J. Greenwold (6)........................... 18,927 1.7 18,927 *
Frederick L. Bryant (9)............................ 507,342 46.6 910,190 18.5
Joseph P. Landy (10)............................... 618,901 49.9 2,248,485 45.8
S. Joshua Lewis.................................... -- -- -- --
Robert E. McGill, III (6).......................... 2,366 * 2,366 *
Richard B. Slansky................................. -- -- -- --
Directors and Executive Officers as a group (10
persons) (11).................................... 1,350,128 99.0 3,422,952 68.0
</TABLE>

- ---------------
* Less than 1%.

(1) Prior to giving effect to the conversion of the outstanding shares of
Series A Convertible Preferred Stock into shares of Class A Common Stock
and the exchange of the outstanding shares of Series B Preferred Stock for
shares of Common Stock.

(2) Gives effect to the conversion of all outstanding shares of Series A
Convertible Preferred Stock into an aggregate of 788,814 shares of Class A
Common Stock and the subsequent conversion into an equal number of shares
of Common Stock, and the exchange of all outstanding shares of Series B
Preferred Stock, based upon the initial public offering price of $12.50 per
share, for an aggregate of 1,435,424 shares of Common Stock.

(3) The sole general partner of Warburg is Warburg, Pincus & Co., a New York
general partnership ("WP"). Lionel I. Pincus is the managing partner of WP
and may be deemed to control it. E.M. Warburg, Pincus & Company, a New York
general partnership that has the same partners as WP ("E.M. Warburg"),
manages Warburg. WP has a 20% interest in the profits of Warburg and,
through its wholly owned subsidiary, E.M. Warburg, Pincus & Co., Inc.
("EMW"), owns 1.13% of the limited partnership interests in Warburg. Mr.
Landy, a director of the Company, is a Managing Director of EMW and a
general partner of WP and E.M. Warburg. As such, Mr. Landy may be deemed to
have an indirect pecuniary interest (within the meaning of Rule 16a-1 under
the Exchange Act) in an indeterminate portion of the shares of Common Stock
beneficially owned by Warburg, WP, E.M. Warburg and EMW. See Note (10)
below. Shares beneficially owned prior to the offering includes 151,414
shares of Common Stock which may be acquired upon the conversion of shares
of Series A Convertible Preferred Stock into Class A Common Stock and the
subsequent conversion into Common Stock.

(4) The general partner of ABS is ABS MB Ltd. ("ABS Ltd."). Mr. Bryant, a
director of the Company, is a Vice President and a director of ABS Ltd. As
such, Mr. Bryant may be deemed to share voting and investment power over
the shares of Common Stock owned by ABS. Additionally, Mr. Bryant is a
direct and indirect limited partner of ABS, and as such, may be deemed to
have an indirect pecuniary interest (within the meaning of Rule 16a-1 under
the Exchange Act) in an indeterminate portion of the shares of Common Stock
beneficially owned by ABS and ABS Ltd. See Note (9) below.

(5) Includes 82,686 shares of Common Stock which may be acquired pursuant to
stock options exercisable within 60 days of September 30, 1996.

(6) Represents shares of Common Stock which may be acquired pursuant to stock
options exercisable within 60 days of September 30, 1996.

(7) Includes 6,624 shares of Common Stock which may be acquired pursuant to
stock options exercisable within 60 days of September 30, 1996.

(8) Includes 4,732 shares of Common Stock which may be acquired pursuant to
stock options exercisable within 60 days of September 30, 1996.

(9) All of the shares of Common Stock indicated as owned by Mr. Bryant are
owned directly by ABS and are included because of Mr. Bryant's affiliation
with ABS and ABS Ltd. Mr. Bryant disclaims "beneficial ownership" of these
shares within the meaning of Rule 13d-3 under the Exchange Act, except to
the extent of his indirect pecuniary interest. See Note (4).

(10) All of the shares of Common Stock indicated as owned by Mr. Landy are owned
directly by Warburg and are included because of Mr. Landy's affiliation
with Warburg, WP and E.M. Warburg. Mr. Landy disclaims "beneficial
ownership" of these shares within the meaning of Rule 13d-3 under the
Exchange Act, except to the extent of his indirect pecuniary interest. See
Note (3).

(11) Includes shares of Common Stock which may be acquired within 60 days of
September 30, 1996. See Notes (5), (6), (7), (8), (9) and (10).

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<PAGE> 48

DESCRIPTION OF CAPITAL STOCK

The following summary does not purport to be complete and is subject to,
and qualified in its entirety by, the Certificate of Incorporation and the
By-Laws, which are included as exhibits to the registration statement of which
this Prospectus forms a part, and by the provisions of applicable law. The
Company intends to file an amended and restated certificate of incorporation
immediately following the consummation of the offering to eliminate the Series A
Convertible Preferred Stock and Series B Preferred Stock. Upon the consummation
of this offering and following such amendment and restatement, the authorized
capital stock of the Company will consist of 30,000,000 shares of Common Stock,
par value $.01 per share, 800,000 shares of Class A Common Stock, par value $.01
per share, and 5,000,000 shares of Preferred Stock, par value $.01 per share
(the "Preferred Stock").

COMMON STOCK

As of September 30, 1996, there were 1,087,876 shares of Common Stock
outstanding held of record by 19 persons. Upon the consummation of the offering
of shares of Common Stock offered hereby, there will be 4,912,114 shares of
Common Stock outstanding (5,152,114 shares if the Underwriters' over-allotment
option is exercised in full), including 1,435,424 shares of Common Stock
issuable upon the exchange of the outstanding shares of Series B Preferred
Stock, and 788,814 shares of Common Stock issuable upon conversion of the shares
of Class A Common Stock. An aggregate of 393,914 shares of Common Stock are
issuable upon the exercise of outstanding stock options and 359,559 shares of
Common Stock are reserved for future issuance under the Company's Stock Option
Plan.

Holders of Common Stock are entitled to one vote per share in all matters
to be voted on by the stockholders of the Company and do not have cumulative
voting rights. Subject to preferences that may be applicable to any Preferred
Stock outstanding at the time, holders of Common Stock are entitled to receive
ratably such dividends, if any, as may be declared from time to time by the
Board of Directors out of funds legally available therefor. See "Dividend
Policy." In the event of a liquidation, dissolution or winding up of the
Company, holders of Common Stock are entitled to share ratably in all assets
remaining after payment of the Company's liabilities and the liquidation
preference, if any, of any outstanding Preferred Stock. Holders of shares of
Common Stock have no preemptive, subscription, redemption or conversion rights.
There are no redemption or sinking fund provisions applicable to the Common
Stock. All of the outstanding shares of Common Stock are, and the shares offered
by the Company in this offering will be, when issued and paid for, fully paid
and non-assessable. The rights, preferences and privileges of holders of Common
Stock are, subject to, and may be adversely affected by, the rights of the
holders of shares of any series of Preferred Stock which the Company may
designate and issue in the future.

CLASS A COMMON STOCK

Following the conversion of all outstanding shares of Series A Convertible
Preferred Stock upon the consummation of this offering, there will be 788,814
shares of Class A Common Stock outstanding, all shares of which will be held by
Warburg. Except as otherwise provided by law, the holders of the Class A Common
Stock are not entitled to notice of, or to vote at, any meeting of the
stockholders of the Company nor to vote upon any matter relating to the business
or affairs of the Company. The dividend, liquidation and other rights of the
Class A Common Stock are identical to those of the Common Stock. Each share of
Class A Common Stock is convertible into one share of Common Stock at any time
provided that either (i) the holder thereof is not Warburg or any affiliate, or
(ii) upon such conversion and after giving effect thereto, such holder and all
affiliates will collectively own beneficially and of record no more than 50% of
the then outstanding shares of Common Stock. Warburg is expected to be able to
certify to the Company that it meets the latter requirement and, accordingly,
will convert all of its shares of Class A Common Stock into an equal number of
shares of Common Stock. The Company does not presently intend to issue any
additional shares of its Class A Common Stock following such conversion.

PREFERRED STOCK

As of the date of this Prospectus, there were no outstanding shares of
Preferred Stock, other than the 4,001 shares of Series A Convertible Preferred
Stock and the 179,428 shares of Series B Preferred Stock, all of the

48
<PAGE> 49

shares of which will be converted or exchanged for Class A Common Stock or
Common Stock upon the consummation of the offering. Following the conversion of
all outstanding shares of Series A Convertible Preferred Stock and the exchange
of all outstanding shares of Series B Preferred Stock, in each case upon the
consummation of this offering, there will be no shares of Series A Convertible
Preferred Stock or Series B Preferred Stock outstanding. See "Certain
Transactions -- Conversion of Series A Convertible Preferred Stock and Exchange
of Series B Preferred Stock."

The Board of Directors will have the authority, without any further vote or
action by the stockholders, to provide for the issuance of up to 5,000,000
shares of Preferred Stock from time to time in one or more series with such
designations, rights, preferences and limitations as the Board of Directors may
determine, including the consideration received therefor. The Board also will
have the authority to determine the number of shares comprising each series,
dividend rates, redemption provisions, liquidation preferences, sinking fund
provisions, conversion rights and voting rights without approval by the holders
of the Common Stock. Although it is not possible to state the effect that any
issuance of Preferred Stock might have on the rights of holders of Common Stock,
the issuance of Preferred Stock may have one or more of the following effects:
(i) restriction of Common Stock dividends if Preferred Stock dividends have not
been paid, (ii) dilution of the voting power and equity interest of holders of
Common Stock to the extent that any series of Preferred Stock has voting rights
or is convertible into Common Stock or (iii) prevention of current holders of
Common Stock from participating in the Company's assets upon liquidation until
any liquidation preferences granted to holders of Preferred Stock are satisfied.
In addition, the issuance of Preferred Stock may, under certain circumstances,
have the effect of discouraging a change in control of the Company by, for
example, granting voting rights to holders of Preferred Stock that require
approval by the separate vote of the holders of Preferred Stock for any
amendment to the Certificate of Incorporation or for any reorganization,
consolidation, merger or other similar transaction involving the Company. As a
result, the issuance of such Preferred Stock may discourage bids for the Common
Stock at a premium over the market price therefor, and could have a materially
adverse effect on the market value of the Common Stock. See "Risk
Factors -- Anti-Takeover Effects of Certificate of Incorporation and Delaware
Law."

WARRANT

As of the date of this Prospectus, there was an outstanding warrant to
purchase 3,028 shares of Common Stock (subject to adjustment upon certain
dilutive events) at an exercise price of $1.06 per share (the "Warrant"). The
Warrant is currently exercisable in whole or in part, and expires on July 28,
2000. The holder or holders of the shares of Common Stock issuable upon exercise
of the Warrant are entitled to certain registration rights. See
" -- Registration Rights."

REGISTRATION RIGHTS

Holders of 3,278,271 shares of Common Stock (the "Registrable Securities")
are entitled to certain rights with respect to the registration of such shares
under the Securities Act. In the event that the Company proposes to register any
of its securities under the Securities Act for its own account or otherwise on a
form which permits the registration of such Registrable Securities (other than
Form S-4 or Form S-8 or their successor forms), such holders are entitled to
include their Registrable Securities in such registrations, subject to certain
conditions and limitations. These limitations include the right of the managing
underwriter of any such offering to exclude some of the Registrable Securities
from such registration if it determines that marketing forces require a
limitation on the number of shares to be underwritten. All such holders have
agreed to not exercise any registration rights in connection with this offering
and until the expiration of the Lock-Up Period without the prior written consent
of UBS Securities LLC.

The holder or holders of in excess of 50% of the Registrable Securities
then outstanding are also entitled to request that the Company register at least
20% (or a lesser percent under certain circumstances) of the Registrable
Securities then outstanding ("Demand Registrations"), subject to certain
limitations. The Company is not obligated to effect more that three Demand
Registrations, and generally will bear all expenses incurred in connection with
the registration of Registrable Securities, other than underwriting discounts
and commissions. In addition, the holder or holders of shares of the 3,028
shares of Common Stock issuable upon exercise of the Warrant may include their
shares in Company-initiated registrations or Demand Registrations by other
holders of Registrable Securities.

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<PAGE> 50

SECTION 203 OF THE DELAWARE GENERAL CORPORATION LAW

The Company is subject to the provisions of Section 203 of the Delaware
General Corporation Law ("Section 203"). Under Section 203, certain "business
combinations" between a Delaware corporation whose stock is publicly traded or
held of record by more than 2,000 stockholders and an "interested stockholder"
are prohibited for a three-year period following the date that such stockholder
became an interested stockholder, unless (i) the corporation has elected in its
original certificate of incorporation not to be governed by Section 203 (the
Company did not make such an election), (ii) the business combination was
approved by the Board of Directors of the corporation before the other party to
the business combination became an interested stockholder, (iii) upon
consummation of the transaction that made it an interested stockholder, the
interested stockholder owned at least 85% of the voting stock of the corporation
outstanding at the commencement of the transaction (excluding voting stock owned
by directors who are also officers or held in employee benefit plans in which
the employees do not have a confidential right to tender or vote stock held by
the plan) or (iv) the business combination was approved by the Board of
Directors of the corporation and ratified by two-thirds of the voting stock
which the interested stockholder did not own. The three-year prohibition also
does not apply to certain business combinations proposed by an interested
stockholder following the announcement or notification of certain extraordinary
transactions involving the corporation and a person who was not an interested
stockholder during the previous three years or who became an interested
stockholder with the approval of the majority of the corporation's directors.
The term "business combination" is defined generally to include mergers or
consolidations between a Delaware corporation and an "interested stockholder,"
transactions with an "interested stockholder" involving the assets or stock of
the corporation or its majority-owned subsidiaries and transactions which
increase an "interested stockholder's" percentage ownership of stock. The term
"interested stockholder" is defined generally as a stockholder who, together
with its affiliates and associates, owns (or, within three years prior, did own)
15% or more of a Delaware corporation's voting stock. Section 203 could prohibit
or delay a merger, takeover or other change in control of the Company and
therefore could discourage attempts to acquire the Company.

TRANSFER AGENT AND REGISTRAR

The Transfer Agent and Registrar for the Common Stock is ChaseMellon
Shareholder Services, L.L.C.

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<PAGE> 51

SHARES ELIGIBLE FOR FUTURE SALE

Upon completion of this offering, the Company will have outstanding
4,912,114 shares of Common Stock (assuming no exercise of the Underwriters
over-allotment option). Of these shares, 1,600,000 shares sold in this offering
will be freely tradable without restriction or further registration under the
Securities Act unless purchased by "affiliates" of the Company as that term is
defined under Rule 144. The remaining 3,312,114 shares outstanding upon
completion of this offering will be "restricted securities" as that term is
defined under Rule 144 (the "Restricted Shares"). The Company's directors,
executive officers and principal stockholders, who in the aggregate hold
approximately 3,298,154 shares of Common Stock, have agreed not to sell or
otherwise dispose of any shares of Common Stock for a period of 180 days after
the date of this Prospectus without the prior written consent of UBS Securities
LLC. The Company has also agreed not to issue or sell any shares of Common Stock
for a period of 180 days from the date of this Prospectus, except for the grant
of additional options under the Stock Option Plan or the issuance of shares upon
the exercise of stock options or the Warrant. See "Underwriting." The number of
shares of Common Stock available for sale in the public market is further
limited by restrictions under the Securities Act.

Upon completion of this offering, in addition to the 1,600,000 shares
offered hereby, approximately 8,043 shares of Common Stock held by current
stockholders will be eligible for immediate sale. Commencing 90 days after the
date of this Prospectus, 13,959 shares of Common Stock issued upon the exercise
of options granted under the Stock Option Plan will be eligible for sale in
reliance on Rule 701. Upon expiration of the 180-day Lock-up Period, and subject
to the limitations imposed by Rule 144, 3,184,024 shares of Common Stock held by
the Company's directors, executive officers and principal stockholders will be
eligible for immediate sale. Promptly after the completion of the offering, the
Company intends to file a registration statement on Form S-8 under the
Securities Act covering approximately 393,914 shares of Common Stock reserved
for issuance pursuant to stock options outstanding as of September 30, 1996, and
359,559 shares of Common Stock reserved for future issuance under the Stock
Option Plan. See "Management -- Stock Option Plan." Such registration statement
will automatically become effective upon filing. Accordingly, shares registered
thereunder will, subject to Rule 144 volume limitations applicable to
affiliates, be available for sale in the open market, except to the extent that
such shares are subject to vesting restrictions or certain contractual
restrictions on sale or transfer. Holders of options to purchase 228,068 shares
have agreed not to sell or otherwise transfer shares obtained upon exercise of
such options during the Lock-Up Period, 161,824 of which will be exercisable
upon the expiration of such Lock-Up Period.

In general, under Rule 144 as currently in effect, a person (or persons
whose shares are aggregated) who has beneficially owned Restricted Shares for at
least two years, including persons who may be deemed affiliates of the Company,
would be entitled to sell within any three-month period a number of shares that
does not exceed the greater of 1% of the number of shares of Common Stock then
outstanding or the average weekly trading volume of the Common Stock as reported
by the Nasdaq National Market during the four calendar weeks preceding the
filing of a Form 144 with respect to such sale. Sales under Rule 144 are also
subject to certain manner-of-sale provisions and notice requirements and to the
availability of current public information about the Company. In addition, a
person who is not deemed to have been an affiliate of the Company at any time
during the 90 days preceding a sale, and who has beneficially owned for at least
three years the shares proposed to be sold, would be entitled to sell such
shares under Rule 144(k) without regard to the requirements described above.

The Commission has proposed certain amendments to Rule 144 that would
reduce by one year the holding periods required for shares subject to Rule 144
to become eligible for resale in the public market. This proposal, if adopted,
would accelerate by one year the dates on which shares of Common Stock will
become eligible for resale described above. No assurance can be given concerning
whether or when the proposal will be adopted by the Commission.

Any employee, officer or director of or consultant to the Company who was
granted options or purchased his or her shares upon exercise of such options
pursuant to a written compensatory plan or contract ("Rule 701 Shares") is
entitled to rely upon the resale provisions of Rule 701. Rule 701 permits
non-affiliates to sell their Rule 701 Shares without having to comply with the
public information, holding period, volume limitation or notice provisions of
Rule 144 and permits affiliates to sell their Rule 701 Shares without having to
comply with the holding period restrictions of Rule 144, in each case commencing
90 days after the date of this Prospectus.

51
<PAGE> 52

After this offering, subject to the lock-up agreements described above,
holders of 3,278,281 shares of Common Stock, or their transferees, and the
holder or holders of the 3,028 shares of Common Stock issuable upon exercise of
the Warrant, are entitled to certain rights with respect to the registration of
such shares under the Securities Act. Registration of such shares under the
Securities Act would result in such shares becoming freely tradable without
restriction under the Securities Act (except for shares purchased by affiliates)
immediately upon the effectiveness of such registration. The holders of such
3,278,281 shares of Common Stock have agreed to not exercise any registration
rights in connection with this offering and until the expiration of the Lock-Up
Period without the prior written consent of UBS Securities LLC. See "Description
of Capital Stock -- Registration Rights."

52
<PAGE> 53

UNDERWRITING

Subject to the terms and conditions of the Underwriting Agreement, the
underwriters named below (the "Underwriters"), for whom UBS Securities LLC and
Dain Bosworth Incorporated are acting as representatives (the
"Representatives"), have agreed to purchase from the Company the following
respective number of shares of Common Stock:

<TABLE>
<CAPTION>
UNDERWRITERS SHARES
------------------------------------------------------------------ ----------
<S> <C>
UBS Securities LLC................................................ 600,000
Dain Bosworth Incorporated........................................ 600,000
Bear, Stearns & Co. Inc. ......................................... 40,625
Alex. Brown & Sons Incorporated................................... 40,625
Cowen & Company................................................... 40,625
Donaldson, Lufkin & Jenrette Securities Corporation............... 40,625
Hambrecht & Quist LLC............................................. 40,625
Lehman Brothers Inc. ............................................. 40,625
Montgomery Securities............................................. 40,625
Volpe, Welty & Company............................................ 40,625
First Analysis Securities Corporation............................. 25,000
Needham & Company, Inc............................................ 25,000
Tucker Anthony Incorporated....................................... 25,000
-------
Total................................................... 1,600,000
=======
</TABLE>

The Underwriting Agreement provides that the obligations of the
Underwriters are subject to certain conditions precedent, including the absence
of any material adverse change in the Company's business and the receipt of
certain certificates, opinions and letters from the Company and its counsel. The
nature of the Underwriters' obligation is such that they are committed to
purchase all shares of Common Stock offered hereby if any such shares are
purchased. The Underwriting Agreement contains certain provisions whereby if any
underwriter defaults in its obligation to purchase shares, and the aggregate
obligations of the Underwriters so defaulting do not exceed 10% of the shares
offered hereby, the remaining Underwriters, or some of them, must assume such
obligations.

The Representatives have advised the Company that the Underwriters propose
to offer the shares of Common Stock directly to the public at the offering price
set forth on the cover page of this Prospectus, and to certain dealers at such
price less a concession not in excess of $0.53 per share. The Underwriters may
allow and such dealers may reallow a concession not in excess of $0.10 per share
to certain other dealers. After the public offering of the shares of Common
Stock, the offering price and other selling terms may be changed by the
Underwriters.

The Company has granted to the Underwriters an option, exercisable no later
than 30 days after the date of this Prospectus, to purchase up to 240,000
additional shares of Common Stock to cover over-allotments, if any, at the
public offering price set forth on the cover page of this Prospectus, less the
underwriting discounts and commissions. To the extent that the Underwriters
exercise this option, each of the Underwriters will have a firm commitment to
purchase approximately the same percentage thereof which the number of shares of
Common Stock to be purchased by it shown in the table above bears to the total
number of shares of Common Stock offered hereby. The Company will be obligated,
pursuant to the option, to sell such shares to the Underwriters.

The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act.

The executive officers, directors, and principal stockholders of the
Company who beneficially own an aggregate of 3,422,952 shares of Common Stock
outstanding immediately prior to this offering have agreed that they will not,
without the prior written consent of UBS Securities LLC, offer, sell or
otherwise dispose of any shares of Common Stock, options or warrants to acquire
shares of Common Stock or securities

53
<PAGE> 54

exchangeable for or convertible into shares of Common Stock owned by them for a
period of 180 days after the date of this Prospectus. The Company has agreed
that it will not, without the prior written consent of UBS Securities LLC,
offer, sell or otherwise dispose of any shares of Common Stock, options or
warrants to acquire shares of Common Stock for a period of 180 days after the
date of this Prospectus, except that the Company may grant additional options
under the Stock Option Plan or issue shares upon the exercise of stock options
or the Warrant.

The offering is being conducted in accordance with Rule 2720 ("Rule 2720")
of the National Association of Securities Dealers, Inc. (the "NASD") which
provides that, among other things, when an NASD member firm participates in the
offering of equity securities of a company with whom such member has a "conflict
of interest" (as defined in Rule 2720), the initial public offering price can be
no higher than that recommended by a "qualified independent underwriter" (as
defined in Rule 2720) (a "QIU"). Dain Bosworth Incorporated is serving as the
QIU in the offering and has recommended a price in compliance with the
requirements of Rule 2720. Dain Bosworth Incorporated has performed due
diligence investigations and reviewed and participated in the preparation of
this Prospectus and the Registration Statement of which this Prospectus forms a
part. Dain Bosworth Incorporated, in its capacity as QIU, will receive no
additional compensation as such in connection with the offering.

The Representatives have informed the Company that the Underwriters do not
intend to confirm sales to any accounts over which they exercise discretionary
authority.

At the request of the Company, the Underwriters have reserved up to 80,000
shares of Common Stock for sale at the initial public offering price to certain
officers, directors, employees and other persons designated by the Company. The
number of shares of Common Stock available for sale to the general public will
be reduced to the extent such persons purchase such reserved shares. Any
reserved shares not so purchased will be offered by the Underwriters to the
general public on the same basis as the other shares offered hereby.

Prior to this offering, there has been no public market for the Common
Stock. The initial public offering price was determined through negotiations
among the Company and the Representatives. The material factors considered in
determining the initial public offering price, in addition to prevailing market
and economic conditions, were certain financial information of the Company, the
history of, and the prospects for, the Company and the industry in which it
competes, an assessment of the Company's management, its past and present
operations, the prospects, and timing of, future revenues of the Company, the
present stage of the Company's development and the above factors in relation to
market values and various valuation measures of other companies engaged in
activities similar to the Company. The initial public offering price set forth
on the cover page of this Prospectus should not, however, be considered an
indication of the actual value of the Common Stock. Such price is subject to
change as a result of market conditions and other factors. There can be no
assurance that an active trading market will develop for the Common Stock or
that the Common Stock will trade in the public market subsequent to this
offering at or above the initial offering price.

LEGAL MATTERS

The validity of the Common Stock offered hereby will be passed upon for the
Company by Willkie Farr & Gallagher, New York, New York. Certain legal matters
relating to this offering will be passed upon for the Underwriters by Cooley
Godward LLP, San Diego, California.

EXPERTS

The financial statements of CN Biosciences, Inc. at December 31, 1994 and
1995, and for each of the three years in the period ended December 31, 1995
appearing in this Prospectus and Registration Statement have been audited by
Ernst & Young LLP, independent auditors, as set forth in their report thereon
appearing elsewhere herein and in the Registration Statement, and are included
in reliance upon such report given upon the authority of such firm as experts in
accounting and auditing.

54
<PAGE> 55

The Company acquired the Oncogene Research Products business effective
August 1, 1995, in a business combination which has been accounted for as a
purchase. The financial statements of the Oncogene Research Products business
for each of the two years ended September 30, 1993 and 1994 and the ten-month
period ended July 31, 1995 appearing in this Prospectus and Registration
Statement have been audited by KPMG Peat Marwick LLP, independent auditors, as
set forth in their report thereon appearing elsewhere herein and in the
Registration Statement, and are included in reliance upon such report given upon
the authority of such firm as experts in accounting and auditing.

CHANGE IN ACCOUNTANTS

At a meeting held on November 10, 1995, (i) the Audit Committee and the
Board of Directors ratified the Company's dismissal on October 13, 1995 of
Coopers & Lybrand L.L.P. as the Company's independent auditors and (ii) the
Audit Committee recommended, and the Board of Directors approved, the engagement
of Ernst & Young LLP as the Company's independent auditors for the fiscal year
ending December 31, 1995.

The reports of Coopers & Lybrand L.L.P. on the Company's financial
statements for the years ended December 31, 1993 and 1994 did not contain
adverse opinions or disclaimers of opinions and were not qualified or modified
as to uncertainty, audit scope, or accounting principles.

In connection with the audit of the Company's financial statements for the
fiscal years ended December 31, 1993 and 1994, and at all times subsequent
thereto through the date of dismissal, there were no disagreements with Coopers
& Lybrand L.L.P. on any matters of accounting principles or practices, financial
statement disclosure, or auditing scope or procedure which, if not resolved to
the satisfaction Coopers & Lybrand L.L.P., would have caused Coopers & Lybrand
L.L.P. to make a reference to the matter in their report.

ADDITIONAL INFORMATION

The Company has filed with the Commission under the Securities Act a
Registration Statement on Form S-1 with respect to the Common Stock offered
hereby. This Prospectus does not contain all of the information set forth in the
Registration Statement in accordance with the rules and regulations of the
Commission. For further information pertaining to the Company and the Common
Stock offered hereby, reference is made to the Registration Statement, including
the exhibits thereto and the financial statements, notes and schedules filed as
a part thereof. Statements contained in this Prospectus as to the contents of
any contract or other document are not necessarily complete and, in each
instance, reference is made to the copy of such contract or document filed as an
exhibit to the Registration Statement, each such statement being qualified in
all respects by such reference. The Registration Statement may be inspected and
copied at the public reference facilities maintained by the Commission at 450
Fifth Street, N.W., Washington, D.C. 20549 and at the Commission's Regional
Offices located in New York at Seven World Trade Center, New York, New York
10007 and in Chicago at Citicorp Center, Suite 1400, 500 West Madison Street,
Chicago, Illinois 60611. Copies of such material can be obtained from the public
reference section of the Commission at prescribed rates by writing to the Public
Reference Section of the Commission at 450 Fifth Street, N.W., Washington, D.C.
20549. The Registration Statement may also be accessed electronically on the
Commission's World Wide Web site (http://www.sec.gov). Copies of the
Registration Statement may also be inspected at the offices of Nasdaq
Operations, 1735 K Street, N.W., Washington, D.C. 20006.

55
<PAGE> 56

INDEX TO FINANCIAL STATEMENTS

<TABLE>
<S> <C>
CN BIOSCIENCES, INC.
Report of Independent Auditors....................................................... F-2
Consolidated Balance Sheets as of December 31, 1994 and 1995 and June 30, 1996
(Unaudited)........................................................................ F-3
Consolidated Statements of Operations for each of the three years in the period ended
December 31, 1995 and the six months ended June 30, 1995 and 1996 (Unaudited)...... F-4
Consolidated Statements of Stockholders' Equity (Deficit) for each of the three years
in the period ended December 31, 1995 and the six months ended June 30, 1996
(Unaudited)........................................................................ F-5
Consolidated Statements of Cash Flows for each of the three years in the period ended
December 31, 1995 and the six months ended June 30, 1995 and 1996 (Unaudited)...... F-6
Notes to Consolidated Financial Statements........................................... F-7
ONCOGENE SCIENCE, INC. RESEARCH PRODUCTS BUSINESS (A BUSINESS SECTOR OF ONCOGENE
SCIENCE, INC.)
Report of Independent Auditors....................................................... F-20
Statements of Operations for the years ended September 30, 1993 and 1994 and the ten
months ended July 31, 1995......................................................... F-21
Statements of Cash Flows for the years ended September 30, 1993 and 1994 and the ten
months ended July 31, 1995......................................................... F-22
Notes to Financial Statements........................................................ F-23
CN BIOSCIENCES, INC. PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED)........................................................................ F-25
</TABLE>

F-1
<PAGE> 57

REPORT OF INDEPENDENT AUDITORS

Board of Directors and Stockholders
CN Biosciences, Inc.

We have audited the accompanying consolidated balance sheets of CN
Biosciences, Inc. as of December 31, 1994 and 1995 and the related consolidated
statements of operations, stockholders' equity (deficit) and cash flows for each
of the three years in the period ended December 31, 1995. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.

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 consolidated financial position of
CN Biosciences, Inc. at December 31, 1994 and 1995 and the consolidated results
of its operations and its cash flows for each of the three years in the period
ended December 31, 1995, in conformity with generally accepted accounting
principles.

ERNST & YOUNG LLP

San Diego, California
July 16, 1996

F-2
<PAGE> 58

CN BIOSCIENCES, INC.

CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
PRO FORMA
REDEEMABLE
PREFERRED STOCK
AND
STOCKHOLDERS'
EQUITY AT
DECEMBER 31, JUNE 30, JUNE 30,
------------------------- ----------- ----------------
1994 1995 1996 1996
----------- ----------- ----------- ----------------
(UNAUDITED)
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................ $ 935,000 $ 1,203,000 $ 1,118,000
Accounts receivable, trade, net of
allowance for doubtful accounts of
$589,000 in 1994, $472,000 in 1995 and
$428,000 in 1996 (unaudited).......... 3,264,000 4,099,000 4,761,000
Inventories.............................. 12,292,000 14,443,000 14,372,000
Other current assets..................... 489,000 476,000 903,000
----------- ----------- -----------
Total current assets....................... 16,980,000 20,221,000 21,154,000
Property and equipment, net................ 3,655,000 4,030,000 3,838,000
Intangible assets, net..................... 2,096,000 6,067,000 5,874,000
Other assets............................... 764,000 879,000 1,362,000
----------- ----------- -----------
Total assets............................... $23,495,000 $31,197,000 $32,228,000
=========== =========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
(DEFICIT)
Current liabilities:
Borrowings under lines of credit......... $ 569,000 $ -- $ --
Accounts payable, trade.................. 1,114,000 1,491,000 1,550,000
Accrued expenses......................... 665,000 1,556,000 1,596,000
Other current liabilities................ 1,115,000 583,000 1,305,000
Current portion of long-term debt........ 500,000 1,167,000 1,417,000
----------- ----------- -----------
Total current liabilities.................. 3,963,000 4,797,000 5,868,000
Long-term debt, net of current portion..... 1,667,000 7,000,000 6,750,000
Other liabilities.......................... 1,599,000 1,601,000 1,451,000
Commitments
Redeemable preferred stock, net of note
receivable from preferred stockholder of
$144,000 in 1994......................... 18,319,000 18,343,000 18,343,000 $ --
Stockholders' equity (deficit):
Preferred stock, $.01; 5,000,000 shares
authorized, none issued and
outstanding........................... -- -- -- --
Common stock, $.01 par value; 30,000,000
shares authorized, 1,060,869 shares in
1994, 1,058,065 in 1995 and 1,087,876
shares in 1996 issued and outstanding
(3,312,114 shares unaudited pro
forma)................................ 11,000 11,000 11,000 33,000
Additional paid-in capital............... 437,000 255,000 351,000 18,672,000
Accumulated deficit...................... (3,081,000) (2,064,000) (1,207,000) (1,207,000)
Foreign currency translation
adjustment............................ 586,000 1,254,000 757,000 757,000
Notes receivable from common
stockholder........................... (6,000) -- (96,000) (96,000)
----------- ----------- ----------- -----------
Total stockholders' equity (deficit)....... (2,053,000) (544,000) (184,000) $ 18,159,000
===========
----------- ----------- -----------
Total liabilities and stockholders'
equity................................... $23,495,000 $31,197,000 $32,228,000
=========== =========== ===========
</TABLE>

See accompanying notes.

F-3
<PAGE> 59

CN BIOSCIENCES, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31, SIX MONTHS ENDED JUNE 30,
--------------------------------------- -------------------------
1993 1994 1995 1995 1996
----------- ----------- ----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Sales.......................... $22,771,000 $24,188,000 $26,966,000 $13,075,000 $16,565,000
Cost of sales.................. 14,195,000 13,183,000 13,185,000 6,691,000 7,602,000
----------- ----------- ----------- ----------- -----------
Gross profit................... 8,576,000 11,005,000 13,781,000 6,384,000 8,963,000
Operating expenses:
Selling, general and
administrative............ 10,292,000 10,343,000 10,608,000 4,802,000 6,185,000
Research and development..... 462,000 736,000 1,338,000 488,000 1,065,000
----------- ----------- ----------- ----------- -----------
Total operating expenses....... 10,754,000 11,079,000 11,946,000 5,290,000 7,250,000
----------- ----------- ----------- ----------- -----------
Income (loss) from
operations................... (2,178,000) (74,000) 1,835,000 1,094,000 1,713,000
Interest expense, net.......... 170,000 326,000 527,000 159,000 394,000
----------- ----------- ----------- ----------- -----------
Income (loss) before income
taxes........................ (2,348,000) (400,000) 1,308,000 935,000 1,319,000
Provision (benefit) for income
taxes........................ (195,000) 62,000 291,000 208,000 462,000
----------- ----------- ----------- ----------- -----------
Net income (loss)......... $(2,153,000) $ (462,000) $ 1,017,000 $ 727,000 $ 857,000
=========== =========== =========== =========== ===========
Pro forma net income per
share........................ $ .30 $ .25
=========== ===========
Pro forma shares used in per
share computations........... 3,367,000 3,477,000
=========== ===========
</TABLE>

See accompanying notes.

F-4
<PAGE> 60

CN BIOSCIENCES, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)

YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995 AND THE SIX MONTHS ENDED JUNE 30,
1996 (UNAUDITED)

<TABLE>
<CAPTION>
FOREIGN NOTE
COMMON STOCK ADDITIONAL CURRENCY RECEIVABLE
------------------ PAID-IN ACCUMULATED TRANSLATION FROM COMMON
SHARES AMOUNT CAPITAL DEFICIT ADJUSTMENT STOCKHOLDER TOTAL
--------- ------- ---------- ----------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at January 1, 1993................... 1,017,244 $10,000 $420,000 $ (466,000 ) $ 22,000 $ (10,000) $ (24,000)
Issuance of note receivable for common
stock...................................... 44,100 1,000 18,000 -- -- (19,000) --
Forgiveness of stockholder note receivable... -- -- -- -- -- 7,000 7,000
Cancellation of note receivable from
stockholder................................ (23,659) -- (10,000) -- -- 10,000 --
Exercise of stock options.................... 6,624 -- 2,000 -- -- -- 2,000
Net loss..................................... -- -- -- (2,153,000 ) -- -- (2,153,000)
Translation adjustment....................... -- -- -- -- (123,000) -- (123,000)
------- ------ -------- ----------- --------- -------- -----------
Balance at December 31, 1993................. 1,044,309 11,000 430,000 (2,619,000 ) (101,000) (12,000) (2,291,000)
Forgiveness of stockholder note receivable... -- -- -- -- -- 6,000 6,000
Exercise of stock options.................... 16,561 -- 7,000 -- -- -- 7,000
Net loss..................................... -- -- -- (462,000 ) -- -- (462,000)
Translation adjustment....................... -- -- -- -- 687,000 -- 687,000
------- ------ -------- ----------- --------- -------- -----------
Balance at December 31, 1994................. 1,060,870 11,000 437,000 (3,081,000 ) 586,000 (6,000) (2,053,000)
Forgiveness of stockholder note receivable... -- -- -- -- -- 6,000 6,000
Repurchase of stock.......................... (59,726) -- (206,000) -- -- -- (206,000)
Exercise of stock options.................... 56,922 -- 24,000 -- -- -- 24,000
Net income................................... -- -- -- 1,017,000 -- -- 1,017,000
Translation adjustment....................... -- -- -- -- 668,000 -- 668,000
------- ------ -------- ----------- --------- -------- -----------
Balance at December 31, 1995................. 1,058,066 11,000 255,000 (2,064,000 ) 1,254,000 (544,000)
Exercise of stock options (unaudited)........ 1,420 -- -- -- -- -- --
Issuance of note receivable for common stock
(unaudited)................................ 28,390 -- 96,000 -- -- (96,000) --
Net income (unaudited)....................... -- -- -- 857,000 -- -- 857,000
Translation adjustment (unaudited)........... -- -- -- -- (497,000) -- (497,000)
------- ------ -------- ----------- --------- -------- -----------
Balance at June 30, 1996 (unaudited)......... 1,087,876 $11,000 $351,000 $(1,207,000) $ 757,000 $ (96,000) $ (184,000)
======= ====== ======== =========== ========= ======== ===========
</TABLE>

See accompanying notes.

F-5
<PAGE> 61

CN BIOSCIENCES, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE
YEARS ENDED DECEMBER 31, 30,
------------------------------------- -----------------------
1993 1994 1995 1995 1996
----------- ----------- ----------- ---------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net income (loss)...................... $(2,153,000) $ (462,000) $ 1,017,000 $ 727,000 $ 857,000
Adjustments to reconcile net income
(loss) to net cash provided by (used
in) operations:
Depreciation and amortization........ 1,368,000 1,448,000 1,856,000 807,000 892,000
Additions to inventory reserve....... 1,744,000 192,000 317,000 150,000 20,000
Additions/(reductions) to allowance
for doubtful accounts............. 4,000 217,000 (129,000) 48,000 7,000
Loss on disposal of property and
equipment......................... 268,000 2,000 10,000 8,000 5,000
Forgiveness of note receivable from
stockholder....................... 152,000 150,000 150,000 -- --
Changes in assets and liabilities:
Accounts receivable, trade........ 574,000 (327,000) (409,000) (480,000) (868,000)
Inventories....................... (1,956,000) 709,000 (370,000) 134,000 (365,000)
Other current assets.............. (405,000) (12,000) 329,000 (23,000) (447,000)
Deferred income taxes............. (70,000) 42,000 26,000 -- --
Other assets...................... (112,000) (475,000) (1,153,000) (376,000) (753,000)
Accounts payable, trade........... 258,000 (784,000) 148,000 (174,000) 181,000
Accrued expenses.................. (281,000) (436,000) 781,000 235,000 44,000
Other current liabilities......... (62,000) (655,000) (590,000) (146,000) 294,000
Other liabilities................. 432,000 362,000 9,000 (184,000) 230,000
----------- ----------- ----------- ----------- ----------
Net cash provided by (used in)
operating activities................. (239,000) (29,000) 1,992,000 726,000 97,000
INVESTING ACTIVITIES
Purchases of property and equipment.... (994,000) (1,436,000) (805,000) (187,000) (164,000)
Proceeds from sale of property and
equipment............................ -- 51,000 22,000 -- 6,000
Purchase of business................... -- -- (6,213,000) -- --
Other.................................. -- 154,000 150,000 -- --
----------- ----------- ----------- ----------- ----------
Net cash used in investing
activities........................... (994,000) (1,231,000) (6,846,000) (187,000) (158,000)
----------- ----------- ----------- ----------- ----------
FINANCING ACTIVITIES
Proceeds from lines of credit.......... -- 258,000 809,000 484,000 700,000
Payments on lines of credit............ (216,000) (33,000) (1,404,000) (474,000) (200,000)
Proceeds from long-term debt........... 2,500,000 2,500,000 8,500,000 -- --
Payments on long-term debt............. (333,000) (2,500,000) (2,500,000) (250,000) (498,000)
Proceeds from sale of common stock..... 2,000 7,000 24,000 -- --
Proceeds from sale of redeemable
preferred stock...................... 4,000 -- -- -- --
Payments for repurchase of stock....... -- -- (326,000) -- --
----------- ----------- ----------- ----------- ----------
Net cash provided by (used in)
financing activities................. 1,957,000 232,000 5,103,000 (240,000) 2,000
----------- ----------- ----------- ----------- ----------
Effect of exchange rate changes on
cash................................. (123,000) 124,000 19,000 55,000 (26,000)
----------- ----------- ----------- ----------- ----------
Net increase (decrease) in cash and
cash equivalents..................... 601,000 (904,000) 268,000 354,000 (85,000)
Balance at beginning of period......... 1,238,000 1,839,000 935,000 935,000 1,203,000
----------- ----------- ----------- ----------- ----------
Balance at end of period............... $ 1,839,000 $ 935,000 $ 1,203,000 $1,289,000 $ 1,118,000
=========== =========== =========== =========== ==========
Supplemental cash flow information:
Interest paid during the period...... $ 530,000 $ 316,000 $ 548,000 $ 160,000 $ 420,000
=========== =========== =========== =========== ==========
Income taxes paid during the
period............................ $ 52,000 $ 86,000 $ 313,000 $ 52,000 $ 12,000
=========== =========== =========== =========== ==========
</TABLE>

See accompanying notes.

F-6
<PAGE> 62

CN BIOSCIENCES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(INFORMATION SUBSEQUENT TO DECEMBER 31, 1995 AND PERTAINING TO JUNE 30, 1996
AND THE SIX-MONTH PERIODS ENDED JUNE 30, 1995 AND 1996 IS UNAUDITED)

1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Organization

CN Biosciences, Inc. (formerly known as Calbiochem-Novabiochem
International, Inc.) is engaged in the development, production, marketing and
distribution of a broad array of products used worldwide in disease-related life
sciences research at pharmaceutical and biotechnology companies, academic
institutions and government laboratories. The Company's products include
biochemical and biological reagents, antibodies, assays and research kits which
it sells principally through its general and specialty catalogs under its well
established brand names, such as Calibochem and Novabiochem. With over 7,000
products, the Company offers scientists the convenience of obtaining from a
single source both innovative and fundamental research products, many of which
are instrumental to research in areas such as cancer, cardiovascular disease,
Alzheimer's and AIDS.

Basis of Presentation

The consolidated financial statements include the accounts of the Company
and its wholly-owned subsidiaries. All significant intercompany balances and
transactions have been eliminated in consolidation.

Interim Financial Information (Unaudited)

The accompanying financial statements at June 30, 1996 and for the six
months ended June 30, 1995 and 1996 are unaudited but include all adjustments
(consisting of normal recurring adjustments) which, in the opinion of
management, are necessary for a fair statement of the financial position and the
operating results and cash flows for the interim date and periods presented.
Results for the interim periods are not necessarily indicative of results for
the entire year or future periods.

Use of Estimates

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.

Cash Equivalents

For purposes of financial statement preparation, the Company considers all
demand deposits with banks or other financial institutions and investments with
initial maturities of three months or less at the date of purchase as cash
equivalents.

Concentration of Credit Risk and Revenue Recognition

The Company deposits its cash in financial institutions. At times, such
deposits may be in excess of insured limits. To date, the Company has not
experienced any losses on its cash investments.

The Company records revenue upon shipment. Accounts receivable are derived
from sales which are generally for small amounts and denominated in various
currencies. The Company grants credit to its customers based on an evaluation of
the customer's financial condition and collateral is generally not required.
Management believes the allowance for doubtful accounts is sufficient to provide
for any future losses. Credit losses have traditionally been minimal and within
management's expectations.

F-7
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CN BIOSCIENCES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION SUBSEQUENT TO DECEMBER 31, 1995 AND PERTAINING TO JUNE 30, 1996
AND THE SIX-MONTH PERIODS ENDED JUNE 30, 1995 AND 1996 IS UNAUDITED)

Inventories

Inventories are maintained to support customer deliveries worldwide, often
on a next-day or second-day basis, of many sizes and quantities of each brand of
catalog items. Based upon economic production runs for certain products, the
Company from time to time manufactures quantities of product in excess of a
one-year supply. Inventories are valued at the lower of cost (first-in,
first-out basis) or market, with costs including material, labor and
manufacturing overhead.

Property and Equipment

Property and equipment is stated at cost. Depreciation is provided under
the straight-line method over 3 to 5 years for equipment and office fixtures and
over the shorter of the remaining lease life or 15 years for leasehold
improvements.

Intangible Assets

Intangible assets represent the excess of the purchase price over the fair
market value of assets acquired. Intangibles are being amortized over 15 to 25
years.

The Company assesses the carrying value of the intangibles on a periodic
basis and if the facts indicate that the intangible assets are not recoverable,
as determined based on the undiscounted cash flows of the business over the
remaining amortization period, the carrying value is reduced to its estimated
fair value.

Deferred Charges

In accordance with Statement of Position No. 93-7, the Company expenses the
production costs of advertising the first time the advertising takes place,
except for direct-response advertising, the costs of which are capitalized and
amortized into advertising expense over the expected period of future benefits
which varies from one to two years.

Direct-response advertising consists of costs relating to the preparation,
printing and distribution of the Company's product catalogs. The capitalized
costs of direct-response advertising are included in other assets.

Foreign Currency Translation

The financial statements of foreign subsidiaries are translated to U.S.
dollars. All assets and liabilities are translated at year end exchange rates,
and stockholders' equity is translated at historical exchange rates. The
resulting translation adjustment is recorded as a separate component of
stockholders' equity. Sales and expense transactions are translated at average
exchange rates. Foreign currency gains and losses were not material during any
of the three years in the period ended December 31, 1995.

Income Taxes

The Company provides for income taxes in accordance with the provisions of
Statement of Financial Accounting Standards No. 109, Accounting for Income Taxes
("SFAS 109"). SFAS 109 requires a company to recognize deferred tax liabilities
and assets for the expected future tax consequences of events that have been
recognized in a company's financial statements or tax returns. Under this
method, deferred tax liabilities and assets are determined based on the
difference between the financial statement carrying amounts and tax basis of
assets and liabilities using enacted tax rates in effect in the years in which
the differences are expected to reverse. Valuation allowances are established
when necessary to reduce deferred tax assets to the amounts

F-8
<PAGE> 64

CN BIOSCIENCES, INC.

expected to be realized. Income tax expense represents the tax payable for the
period and the change during the period in the deferred tax assets and
liabilities.

Net Income (Loss) Per Share

Historical net income (loss) per share is computed using the weighted
average number of shares of common stock and common stock equivalents
outstanding during the periods presented. Common share equivalents result from
outstanding options and warrants to purchase common stock. For loss periods,
common share equivalents were not included in computing net loss per share since
the effect would have been antidilutive. The Securities and Exchange Commission
requires stock issued during the twelve months immediately preceding the initial
public offering, plus the number of equivalent shares of common stock granted or
issued during the same period, be included in the calculation of shares used in
computing net income (loss) per share as if these shares were outstanding for
all periods presented (using the treasury stock method and the assumed initial
public offering price).

Historical net income (loss) per share information is as follows:

<TABLE>
<CAPTION>
SIX MONTHS
ENDED
YEARS ENDED DECEMBER 31, JUNE 30,
--------------------------- ---------------
1993 1994 1995 1995 1996
------ ------ ----- ----- -----
<S> <C> <C> <C> <C> <C>
Net income (loss) per share....................... $(1.97) $ (.42) $ .51 $ .41 $ .41
====== ====== ===== ===== =====
Shares used in computing net income (loss) per
share (in thousands)............................ 1,094 1,104 1,987 1,763 2,097
====== ====== ===== ===== =====
</TABLE>

Supplemental earnings per share has been computed as described above and
also gives effect to the repayment of the Company's outstanding indebtedness
under the Company's U.S. subsidiary's bank credit facility, and resulting
reduction of interest expense, as if the proceeds, in an amount equal to the
outstanding balance under the credit facility, anticipated by this initial
public offering had been received at the original date of issuance of the credit
facility and the number of shares of Common Stock whose proceeds are to be used
to retire the debt were outstanding from that same date. (See Note 4).

<TABLE>
<CAPTION>
YEAR ENDED SIX MONTHS
DECEMBER 31, ENDED JUNE 30,
1995 1996
------------ --------------
<S> <C> <C>
Supplemental net income per share................................. $ .60 $ .45
====== ======
Shares used in computing supplemental net income per share
(in thousands).................................................. 2,240 2,704
====== ======
</TABLE>

Pro Forma Net Income Per Share and Unaudited Pro Forma Stockholders' Equity

Pro forma net income per share has been computed as described above and
also gives effect to the conversion and exchange of the shares of preferred
stock upon completion of the Company's initial public offering using the
if-converted method from the original date of issuance.

As discussed in Note 5, the Company has 4,001 shares of Series A preferred
stock which is convertible into a total of 788,814 shares of common stock.
Additionally, the Company has 179,428 shares of Series B preferred stock
outstanding with a liquidation preference of $17,943,000. Upon the consummation
of the offering contemplated by this Prospectus, all of the Series A preferred
stock will be converted into Class A common stock and each outstanding share of
Series B preferred stock will be exchanged for a number of shares of common
stock based upon the initial public offering price for the common stock.
Unaudited pro forma stockholders' equity as of June 30, 1996 is adjusted for the
conversion and exchange of the preferred stock into common stock.

F-9
<PAGE> 65

CN BIOSCIENCES, INC.

Stock Options

The Company has elected to follow Accounting Principles Board Opinion No.
25, "Accounting for Stock Issued to Employees" ("APB 25") and related
Interpretations in accounting for its employee stock options. Under APB 25,
because the exercise price of the Company's employee stock options equals the
market price of the underlying stock on the date of grant, no compensation
expense is recognized.

In October 1995, the Financial Accounting Standards Board issued SFAS No.
123, "Accounting for Stock-Based Compensation" ("SFAS No. 123"), effective for
fiscal years beginning after December 15, 1995. SFAS 123 establishes the fair
value-based method of accounting for stock-based compensation arrangements,
under which compensation is determined using the fair value of the stock option
at the grant date and the number of options vested, and is recognized over the
periods in which the related services are rendered. The Company has made the
decision to continue with the current intrinsic value-based method, as allowed
by SFAS 123, and will be required to disclose the pro forma effect of adopting
the fair value-based method in future fiscal years beginning with the fiscal
year ending December 31, 1996.

Accounting Standard on Impairment of Long-Lived Assets

In March 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 121 "Accounting for Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed Of " ("SFAS 121") regarding the
impairment of the long-lived assets, identifiable intangibles and goodwill
related to those assets. SFAS 121 is effective for financial statements for
fiscal years beginning after December 15, 1995. The Company adopted this
standard effective January 1, 1996 and such adoption did not have a material
effect on the Company's financial position or results of operations.

2. ACQUISITION

On August 1, 1995, the Company acquired certain assets and assumed certain
liabilities of the Oncogene Research Products Business ("ORP") of Oncogene
Science, Inc., a biopharmaceutical company, in exchange for $5,932,000 in cash
plus acquisition costs of $281,000. The acquisition has been accounted for as a
purchase and, accordingly, the purchase price has been allocated to the assets
acquired and liabilities assumed based on the estimated fair values at the date
of acquisition. This allocation resulted in $4,335,000 of costs in excess of net
assets acquired which is being amortized over 15 years. ORP's results of
operations have been included in the consolidated results of the Company from
August 1, 1995.

The ORP purchase price allocation is summarized as follows:

<TABLE>
<S> <C>
Inventories...................................................... $1,507,000
Property and equipment........................................... 350,000
Other current assets............................................. 121,000
Costs in excess of net assets acquired........................... 4,335,000
----------
Total assets..................................................... 6,313,000
Liabilities assumed.............................................. (100,000)
----------
Net assets acquired.............................................. $6,213,000
==========
</TABLE>

The following unaudited pro forma information presents the combined results
of operations of the Company and ORP for the years ended December 31, 1994 and
1995 as though the acquisition had occurred January 1, 1994. The unaudited pro
forma information is included for comparative purposes only and is not

F-10
<PAGE> 66

CN BIOSCIENCES, INC.

necessarily indicative of the results of operations that would have occurred had
the acquisition been made on the date indicated or of future results of the
combined companies.

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
1994 1995
----------- -----------
<S> <C> <C>
Net sales................................................. $28,908,000 $29,937,000
Net income (loss)......................................... (332,000) 979,000
Historical net income (loss) per share.................... $ (.30) $ .49
</TABLE>

3. FINANCIAL STATEMENT DETAILS

Inventories consist of the following:

<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
------------------------- -----------
1994 1995 1996
----------- ----------- -----------
<S> <C> <C> <C>
Finished products............................... $12,728,000 $13,987,000 $13,898,000
Semi-finished products, raw materials and
supplies...................................... 3,131,000 3,958,000 3,794,000
Work-in-progress................................ 256,000 415,000 500,000
----------- ----------- -----------
16,115,000 18,360,000 18,192,000
Reserves for excess materials................... (3,823,000) (3,917,000) (3,820,000)
----------- ----------- -----------
$12,292,000 $14,443,000 $14,372,000
=========== =========== ===========
</TABLE>

Other current assets consist of the following:

<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
------------------------- -----------
1994 1995 1996
----------- ----------- -----------
<S> <C> <C> <C>
Other........................................... $ 380,000 $ 394,000 $ 821,000
Deferred income taxes........................... 109,000 82,000 82,000
-------- -------- --------
$ 489,000 $ 476,000 $ 903,000
======== ======== ========
</TABLE>

Property and equipment consist of the following:

<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
------------------------- -----------
1994 1995 1996
----------- ----------- -----------
<S> <C> <C> <C>
Equipment and office fixtures................... $ 5,133,000 $ 6,365,000 $ 7,160,000
Leasehold improvements.......................... 912,000 1,131,000 1,274,000
----------- ----------- -----------
6,045,000 7,496,000 8,434,000
Accumulated depreciation........................ (2,390,000) (3,466,000) (4,596,000)
----------- ----------- -----------
$ 3,655,000 $ 4,030,000 $ 3,838,000
========== ========== ==========
</TABLE>

Intangible assets consist of the following:

<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
------------------------- -----------
1994 1995 1996
----------- ----------- -----------
<S> <C> <C> <C>
Intangible assets............................... $ 2,376,000 $ 6,561,000 $ 6,561,000
Accumulated depreciation........................ (280,000) (494,000) (687,000)
----------- ----------- -----------
$ 2,096,000 $ 6,067,000 $ 5,874,000
========== ========== ==========
</TABLE>

F-11
<PAGE> 67

CN BIOSCIENCES, INC.

Other assets consist of the following:

<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
------------------------- -----------
1994 1995 1996
----------- ----------- -----------
<S> <C> <C> <C>
Deferred charges................................ $ 547,000 $ 171,000 $ 658,000
Other........................................... 217,000 708,000 704,000
----------- ----------- -----------
$ 764,000 $ 879,000 $ 1,362,000
========== ========== ==========
</TABLE>

Amortization of capitalized direct-response advertising for the years ended
December 31, 1993, 1994 and 1995 and the six months ended June 30, 1995 and 1996
was $429,000, $400,000, $714,000, $357,000 and $192,000, respectively.

4. BANK DEBT

The Company's U.S. subsidiary's credit agreement with a commercial bank
provides for borrowings under a revolving line of credit up to a maximum of
$2,000,000 based upon percentages of eligible accounts receivable (as defined)
and inventory. The facility provides that the Company can elect that borrowings
bear interest at the bank's prime rate or LIBOR plus 2.85% (8.50% at December
31, 1995). There were no borrowings outstanding under this facility at December
31, 1995.

Additionally, the credit agreement provides for $8,500,000 in term loans
which bear interest at the bank's prime rate plus .375% or LIBOR plus 3.22%,
with interest and principal payable monthly through July 2000. Borrowings
outstanding under the term loans at December 31, 1995 were $8,167,000 bearing
interest at 8.875%.

In June 1996, the Company's U.S. subsidiary's credit agreement was amended,
modifying the interest rates and extending the expiration date of the revolving
line of credit to June 1998. Upon consummation of the initial public offering
contemplated by this Prospectus, the bank credit facility will convert to an
unsecured $5 million line of credit. In addition to releasing its collateral and
eliminating the restrictions on the payment of cash dividends, loans and
advances to the Company, the lender will modify certain financial covenants
contained in the existing facility to appropriately adjust for the increased
equity resulting from this offering, but the general terms of the existing
facility will otherwise continue, including the restriction on the payment of
cash dividends by the Company.

Borrowings under the credit agreement are collateralized by all the assets
of the Company's U.S. subsidiary, guaranteed by the Company and the Company's
Swiss subsidiary and are secured by pledges of the stock of the Company's
subsidiaries. The credit facility requires, among other things, compliance with
minimum financial and operating covenants, and bank approval for certain mergers
and acquisitions, asset sales, the incurrence of debt, the making of loans and
the repurchase, redemption or other acquisition of shares of the Company's
stock. At December 31, 1995 the Company was in compliance with all restrictive
covenants. In addition to scheduled monthly payments, at the option of the
lender, the Company may be required to pay annually an amount equal to 25% of
excess cash flows (as defined) to further reduce outstanding indebtedness under
the term loans. The lender did not require any additional payments based on the
1995 cash flows.

F-12
<PAGE> 68

CN BIOSCIENCES, INC.

As of December 31, 1995, future annual minimum payments under the term loan
are as follows:

Interest expense charged against operations was $211,000 in 1993, $349,000
in 1994, $574,000 in 1995 and $179,000 and $412,000 for the six months ended
June 30, 1995 and 1996, respectively.

5. REDEEMABLE PREFERRED STOCK AND STOCKHOLDERS' EQUITY

In March 1992, the Company and certain of its current stockholders entered
into a Subscription and Shareholder Agreement (the "Shareholder Agreement") for
purposes of issuing redeemable preferred stock and common stock for a total
investment of approximately $18.6 million.

Redeemable Preferred Stock

The Series A redeemable preferred stock and Series B redeemable preferred
stock are referred to collectively as the "preferred stock" and the number of
authorized shares, number of issued and outstanding shares and the liquidation
preference by series is as follows:

<TABLE>
<CAPTION>
ISSUED AND
AUTHORIZED OUTSTANDING LIQUIDATION
SHARES SHARES PREFERENCE
---------- ----------- -----------
<S> <C> <C> <C>
Series A............................................ 5,000 4,001 $ 400,100
Series B............................................ 200,000 179,428 17,943,000
</TABLE>

The Series A preferred stock has a $100 per share, plus declared and unpaid
dividends, preference over common shares in liquidation and is entitled to
preferential non-cumulative dividends at the rate of $8 per share per annum,
when and if declared by the Board of Directors. The Series A preferred stock is
convertible at a rate of one share of Series A preferred stock for 197.1541
shares of Class A common stock, subject to adjustment for certain anti-dilution
provisions. The Series A preferred stock is convertible at any time at the
option of the holder into shares of Class A common stock (provided that such
holder has the consent of the holders of at least 50% of the then outstanding
shares of Series A preferred stock) or upon vote by a majority of the holders of
shares of Series A preferred stock. In addition, at any time, the Company has
the right to redeem at its option, with the consent of a majority of the holders
of the Series A preferred stock, any or all of the outstanding Series A
preferred stock provided that no redemption of the Series A preferred stock
shall be effected until all of the Series B preferred stock is first redeemed.

The Series B preferred stock is entitled to preferential non-cumulative
dividends at the rate of $10 per share per annum when and if declared by the
Board of Directors. In the event of liquidation, the Series B preferred stock is
entitled to receive $100 per share, plus declared and unpaid dividends, in
preference to any distribution to the Series A preferred stock. In addition, at
any time, the Company has the right to redeem at its option, with the consent of
a majority of the holders of the Series B preferred stock, any or all of the
outstanding Series B preferred stock.

F-13
<PAGE> 69

CN BIOSCIENCES, INC.

The preferred stock is subject to mandatory redemption at a price of $100
per share, plus all accrued and unpaid dividends in the year of redemption, 25%
annually beginning December 31, 1999 through December 31, 2002.

The Company has agreed with the holders of the preferred stock, that upon
consummation of the offering contemplated by this Prospectus, the holders of the
preferred stock will convert the 4,001 shares of the Series A preferred stock
into 788,814 shares of Class A common stock and exchange the Series B preferred
stock for shares of common stock based upon the initial public offering price
for the common stock.

Common Stock

In connection with the Shareholder Agreement, the Company issued 1,017,244
shares of common stock, $.01 par value, in exchange for $420,000 and a note for
$10,000. During 1993, the note was canceled (see Note 6). The Shareholder
Agreement contains certain restrictions on the sale of securities by
stockholders.

In January 1995, the Company authorized 500,000 shares, $.01 par value, of
nonvoting Class A common stock. Each share of Class A common stock is
convertible into one fully paid and nonassessable share of voting common stock
at any time at the election of the holder subject to certain terms and
conditions. Currently, no Class A common stock has been issued.

Stock Options

The Company has reserved 835,000 shares of common stock for grant or sale
to employees, officers, directors and consultants under the 1992 stock option
plan (the "Plan"). The following table summarizes stock option transactions for
each of the three years and the six months in the period ended June 30, 1996:

<TABLE>
<CAPTION>
EXERCISE
SHARES PRICE
------- ----------
<S> <C> <C>
Balance at January 1, 1993..................................... 192,817 $ .42
Granted...................................................... 242,736 .42
Exercised.................................................... (6,624) .42
Canceled..................................................... (45,945) .42
------- -----------
Outstanding at December 31, 1993............................... 382,984 .42
Granted...................................................... 23,659 .42
Exercised.................................................... (16,561) .42
Canceled..................................................... (10,410) .42
------- -----------
Outstanding at December 31, 1994............................... 379,672 .42
Granted...................................................... 101,732 .42-$3.38
Exercised.................................................... (56,922) .42
Canceled..................................................... (29,148) .42
------- -----------
Outstanding at December 31, 1995............................... 395,334 .42-$3.38
Exercised.................................................... (1,420) $.42
------- -----------
Outstanding at June 30, 1996................................... 393,914 $.42-$3.38
======= ===========
</TABLE>

The options vest over four or five years from the date of grant. All
outstanding options expire five years after the date of grant. As of June 30,
1996, options to acquire 182,289 shares of common stock were exercisable and
359,559 were available for future grant, after giving effect to the authorized
increase in reserved shares as described below.

F-14
<PAGE> 70

CN BIOSCIENCES, INC.

Warrants

During 1995, the Company issued a warrant to purchase 3,028 shares of the
Company's common stock at $1.06 per share. The value of the warrant on the date
of issuance was not considered significant. The warrant is currently exercisable
and expires in July 2000.

Stock Split and Increase in Shares Authorized

On July 16, 1996, the Board of Directors authorized a 2.36585 for 1 stock
split of all outstanding common stock. All share and per share amounts and stock
option data have been restated to retroactively reflect the stock split.
Additionally, on July 16, 1996, the Board of Directors modified the Company's
capital structure to authorize: 30,000,000 shares of common stock ($.01 par
value), 800,000 shares of Class A common stock ($1.00 par value), 5,000 shares
of Series A preferred stock ($1.00 par value), 200,000 shares of Series B
preferred stock ($1.00 par value) and 5,000,000 shares of preferred stock ($.01
par value). The shares reserved for issuance under the 1992 Stock Option Plan
were increased to 835,000.

6. TRANSACTIONS WITH EMPLOYEE/STOCKHOLDERS

In 1993, the Company entered into an employment agreement with the Chairman
and Chief Executive Officer of the Company. As part of this agreement, the
Company granted an option to purchase 110,249 shares of common stock at $.42 per
share. The options vest over four years and expire in January 1998. In addition,
the Company issued 44,100 shares of common stock at $.42 per share and 4,377
shares of Series B preferred stock at $100 per share in exchange for $4,000 in
cash and a note for $452,000. The note bears interest at 8% per annum, payable
annually. Amounts forgiven in 1993, 1994 and 1995 related to this note, charged
to current operations were $152,000, $150,000 and $150,000, respectively.

In 1993, an employee/stockholder resigned from the Company. As part of the
termination agreement, 23,659 shares of common stock and 2,348 shares of Series
B preferred stock were returned to the Company in exchange for the cancellation
of the related notes receivable from the employee/stockholder of $245,000. In
addition, options to purchase 42,396 shares of common stock were canceled.

Effective June 9, 1995, an officer/stockholder of the Company resigned and,
in connection therewith in October 1995, the Company entered into an agreement
to reacquire 59,726 shares of common stock at a price of $3.4515 per share and
1,199 shares of Series B preferred stock at a price of $100 per share, resulting
in a total cost of $326,000. The cost of the reacquired shares was applied
against preferred stock ($120,000) and paid-in-capital ($206,000).

In January 1996, the Company sold 28,390 shares of common stock to an
officer of the Company in exchange for a note receivable of $96,000 bearing
interest at 5.65%.

F-15
<PAGE> 71

CN BIOSCIENCES, INC.

7. INCOME TAXES

The significant components of the provision (benefit) for income taxes are
as follows:

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------------
1993 1994 1995
--------- ------- --------
<S> <C> <C> <C>
Current:
Federal.......................................... $(148,000) $17,000 $ 52,000
State............................................ 13,000 2,000 17,000
--------- ------- --------
(135,000) 19,000 69,000
Deferred:
Federal.......................................... (36,000) 43,000 139,000
State............................................ (34,000) -- 36,000
--------- ------- --------
(70,000) 43,000 175,000
--------- ------- --------
(205,000) 62,000 244,000
Foreign............................................ 10,000 -- 47,000
--------- ------- --------
$(195,000) $62,000 $291,000
========= ======= ========
</TABLE>

Temporary differences and carryforwards which give rise to a significant
portion of the net deferred tax asset included in the accompanying consolidated
balance sheets at December 31, 1994 and 1995 are shown below. As of December 31,
1994 and 1995, a valuation allowance of $4,064,000 and $3,296,000 respectively,
has been recognized as an offset to the deferred tax assets related to the
jurisdictions in which realization of such assets is uncertain.

<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------
1994 1995
----------- -----------
<S> <C> <C>
Deferred tax assets:
Inventory reserves...................................... $ 693,000 $ 548,000
Accounts receivable reserves............................ 84,000 65,000
Net operating losses.................................... 3,137,000 2,397,000
Deferred rent........................................... 114,000 102,000
Other................................................... 309,000 283,000
----------- -----------
Total deferred tax assets................................. 4,337,000 3,395,000
Valuation allowances...................................... (4,064,000) (3,296,000)
----------- -----------
273,000 99,000
Deferred tax liability:
Depreciation............................................ (164,000) (15,000)
----------- -----------
Net deferred tax assets................................... $ 109,000 $ 84,000
=========== ===========
</TABLE>

F-16
<PAGE> 72

CN BIOSCIENCES, INC.

Income tax expense (benefit) differs from the amount obtained by applying
the statutory federal income tax rate to earnings before tax as follows:

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------------
1993 1994 1995
--------- --------- ---------
<S> <C> <C> <C>
Provision at federal statutory rate.............. $(798,000) $(136,000) $ 445,000
State income taxes, net of federal benefit....... (14,000) 1,000 56,000
Nondeductible expenses, including amortization of
costs in excess of net assets acquired......... 60,000 63,000 71,000
Change in valuation allowance, net of write-offs
and adjustments................................ 557,000 134,000 (298,000)
Other, net....................................... -- -- 17,000
--------- --------- ---------
Total income tax expense (benefit)............... $(195,000) $ 62,000 $ 291,000
========= ========= =========
</TABLE>

At December 31, 1995, the Company has state net operating loss
carryforwards of approximately $1,500,000 which begin to expire in 1998 unless
previously utilized. The Company also has approximately $1,318,000 and $568,000
of foreign net operating losses in Germany and the United Kingdom, respectively,
which are available indefinitely. Additionally, the Company has approximately
$6,185,000 and $4,965,000 of net operating losses for Swiss Federal and Cantonal
purposes, respectively. These loss carryforwards will begin to expire in 1997
and 1996, respectively, unless previously utilized.

For the six months ended June 30, 1995 and 1996, income taxes have been
provided based on the estimated annual effective tax rate applied to pretax
income for the interim period.

8. COMMITMENTS AND CONTINGENCIES

The Company leases certain facilities and equipment under various operating
leases. Lease expense on the facilities and equipment for the years ended
December 31, 1993, 1994 and 1995 was $1,369,000, $1,157,000 and $1,126,000,
respectively. Lease expense for the six months ended June 30, 1995 and 1996 was
$708,000 and $563,000, respectively.

The Company is party to a fifteen year lease agreement for premises which
were first occupied during 1993. The Company has two options to extend the term
of the lease for five years each.

In addition, the Company leases certain equipment under capital leases.
Cost and accumulated amortization of equipment under capital leases at December
31, 1994 were approximately $1,173,000 and $415,000, respectively, and at
December 31, 1995 were $1,514,000 and $587,000, respectively. Amortization of
assets held under capital leases is included with depreciation expenses.

F-17
<PAGE> 73

CN BIOSCIENCES, INC.

Future annual minimum payments under the operating and capital leases as of
December 31, 1995 are as follows:

<TABLE>
<CAPTION>
OPERATING CAPITAL
LEASES LEASES
----------- ---------
<S> <C> <C>
1996........................................................ $ 1,529,000 $ 367,000
1997........................................................ 1,483,000 307,000
1998........................................................ 1,329,000 112,000
1999........................................................ 1,157,000 67,000
2000........................................................ 1,098,000 24,000
Thereafter.................................................. 7,618,000 2,000
----------- ---------
$14,214,000 879,000
===========
---------
Less amounts representing interest.......................... (119,000)
---------
Present value of future minimum lease payments.............. 760,000
---------
Less current portion (included in other current
liabilities).............................................. (307,000)
---------
Capital lease obligation, net of current portion (included
in other liabilities)..................................... $ 453,000
=========
</TABLE>

9. CUSTOMER AND GEOGRAPHIC INFORMATION

The Company operates in one business segment, the development, production,
marketing and distribution of a broad array of products used in disease-related
life sciences research at pharmaceutical and biotechnology companies, academic
institutions and government laboratories. No single customer accounted for more
than 10% of total revenue during any of the three years in the period ended
December 31, 1995 or either of six month periods ended June 30, 1995 and 1996.
United States export sales, principally to Europe and Asia, aggregated
$1,857,000, $2,524,000 and $4,429,000, for the years ended December 31, 1993,
1994 and 1995, respectively, and $1,773,000 and $3,402,000 for the six months
ended June 30, 1995 and 1996, respectively.

Information with respect to the Company's operations by significant
geographic area is set forth below. Transfers between geographic areas have been
shown at the agreed upon transfer price, computed by applying discount
percentages to local currency list prices. All transactions denominated in
foreign currency have been translated at the average exchange rate during the
period.

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1993
--------------------------------------------------------------
(IN THOUSANDS)
CONSOLIDATED
UNITED STATES EUROPE OTHER ELIMINATIONS TOTAL
------------- ------- ------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Sales to unaffiliated customers............ $11,557 $ 9,242 $1,972 $ -- $ 22,771
Transfers between geographic areas......... 2,842 3,144 280 (6,266) --
------- ------- ------ ------- -------
Total revenue.............................. $14,399 $12,386 $2,252 $ (6,266) $ 22,771
======= ======= ====== ======= =======
Income (loss) before income taxes.......... $ 144 $(2,403) $ (15) $ (75) $ (2,349)
======= ======= ====== ======= =======
Identifiable assets........................ $15,220 $ 9,188 $ 412 $ (774) $ 24,046
======= ======= ====== ======= =======
</TABLE>

F-18
<PAGE> 74

CN BIOSCIENCES, INC.

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1994
--------------------------------------------------------------
(IN THOUSANDS)
CONSOLIDATED
UNITED STATES EUROPE OTHER ELIMINATIONS TOTAL
------------- ------- ------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Sales to unaffiliated customers............ $12,554 $ 9,329 $2,305 $ -- $ 24,188
Transfers between geographic areas......... 2,996 3,581 701 (7,278) --
------- ------- ------ ------- -------
Total revenue.............................. $15,550 $12,910 $3,006 $ (7,278) $ 24,188
======= ======= ====== ======= =======
Income (loss) before income taxes.......... $ (251) $ (126) $ 67 $ (90) $ (400)
======= ======= ====== ======= =======
Identifiable assets........................ $15,624 $ 8,315 $ 395 $ (839) $ 23,495
======= ======= ====== ======= =======
</TABLE>

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1995
--------------------------------------------------------------
(IN THOUSANDS)
CONSOLIDATED
UNITED STATES EUROPE OTHER ELIMINATIONS TOTAL
------------- ------- ------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Sales to unaffiliated customers............ $13,202 $11,353 $2,411 $ -- $ 26,966
Transfers between geographic areas......... 3,735 4,435 339 (8,509) --
------- ------- ------ ------- -------
Total revenue.............................. $16,937 $15,788 $2,750 $ (8,509) $ 26,966
======= ======= ====== ======= =======
Income before taxes........................ $ 211 $ 1,058 $ 36 $ 3 $ 1,308
======= ======= ====== ======= =======
Identifiable assets........................ $22,557 $ 8,978 $ 482 $ (820) $ 31,197
======= ======= ====== ======= =======
</TABLE>

<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30, 1996
--------------------------------------------------------------
(IN THOUSANDS)
CONSOLIDATED
UNITED STATES EUROPE OTHER ELIMINATIONS TOTAL
------------- ------- ------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Sales to unaffiliated customers............ $ 8,402 $ 6,364 $1,799 $ -- $ 16,565
Transfers between geographic areas......... 2,527 2,325 192 (5,044) --
------- ------- ------ ------- -------
Total revenue.............................. $10,929 $ 8,689 $1,991 $ (5,044) $ 16,565
======= ======= ====== ======= =======
Income (loss) before taxes................. $ 666 $ 631 $ 22 -- $ 1,319
======= ======= ====== ======= =======
Identifiable assets........................ $24,202 $ 8,352 $ 547 $ (873) $ 32,228
======= ======= ====== ======= =======
</TABLE>

10. EMPLOYEE BENEFIT PLAN

The Company sponsors a Defined Contribution Plan (the "Plan") which covers
substantially all domestic employees who meet certain age requirements.
Employees may contribute up to 15% of their compensation per year (subject to a
maximum limit imposed by federal tax law). The Company is obligated to make
matching contributions equal to a maximum of 30% of each participant's
contribution per year. The contributions charged to operations totaled $38,000,
$31,000 and $67,000 for the three years ended December 31, 1993, 1994 and 1995
and $24,000 and $51,000 for the six month periods ended June 30, 1995 and 1996,
respectively.

F-19
<PAGE> 75

REPORT OF INDEPENDENT AUDITORS

Board of Directors
Oncogene Science, Inc.

We have audited the accompanying statements of operations and cash flows of
Oncogene Science, Inc. Research Products Business (a business sector of Oncogene
Science, Inc.) (the Business) for each of the years in the two-year period ended
September 30, 1994 and for the ten-month period ended July 31, 1995. These
financial statements are the responsibility of the Business' management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

In our opinion, the financial statements referred to above of Oncogene
Science, Inc. Research Products Business present fairly, in all material
respects, the results of its operations and its cash flows for each of the years
in the two-year period ended September 30, 1994 and for the ten-month period
ended July 31, 1995 in conformity with generally accepted accounting principles.

KPMG PEAT MARWICK LLP

Jericho, New York
September 22, 1995

F-20
<PAGE> 76

ONCOGENE SCIENCE, INC.
RESEARCH PRODUCTS BUSINESS

STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
YEARS ENDED TEN MONTHS
SEPTEMBER 30, ENDED
------------------------- JULY 31,
1993 1994 1995
---------- ---------- ----------
<S> <C> <C> <C>
Net sales.............................................. $4,743,740 $4,719,942 $4,108,910
Cost of goods sold..................................... 1,777,851 1,804,099 1,415,399
---------- ---------- ----------
Gross profit........................................... 2,965,889 2,915,843 2,693,511
Grant revenue.......................................... 133,360 45,539 --
---------- ---------- ----------
3,099,249 2,961,382 2,693,511
---------- ---------- ----------
Operating expenses:
Selling, general and administrative.................. 2,460,117 2,520,767 2,076,922
Research and development............................. 658,508 310,949 255,737
---------- ---------- ----------
3,118,625 2,831,716 2,332,659
---------- ---------- ----------
Net income (loss)...................................... $ (19,376) $ 129,666 $ 360,852
========= ========= =========
Pro forma information (unaudited):
Income (loss) before pro forma income taxes............ $ (19,376) $ 129,666 $ 360,852
Pro forma provision for income taxes................... -- 45,200 148,000
---------- ---------- ----------
Pro forma net income (loss)............................ $ (19,376) $ 84,466 $ 212,852
========= ========= =========
</TABLE>

See accompanying notes to financial statements.

F-21
<PAGE> 77

ONCOGENE SCIENCE, INC.
RESEARCH PRODUCTS BUSINESS

STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
YEARS ENDED TEN MONTHS
SEPTEMBER 30, ENDED
----------------------- JULY 31,
1993 1994 1995
--------- --------- ----------
<S> <C> <C> <C>
Cash flows from operations:
Net income (loss)...................................... $ (19,376) $ 129,666 $ 360,852
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Bad debt expense.................................... 6,025 24,000 20,000
Depreciation expense................................ 94,487 95,769 88,570
Amortization expense................................ 293,540 293,540 244,620
Changes in assets and liabilities:
Accounts receivable............................... 132,270 (9,262) (187,678 )
Inventory......................................... (82,911) (145,910) 120,255
Prepaid expenses and other current assets......... 12,693 (10,164) (40,197 )
Other assets...................................... (95) (39,905) 10,400
Accounts payable and accrued liabilities.......... (10,002) (62,771) (27,365 )
--------- --------- ---------
Net cash provided by operations................ 426,631 274,963 589,457
--------- --------- ---------
Cash flows from investing activities:
Additions to property and equipment.................... (314,036) (193,121) (22,706 )
--------- --------- ---------
Net cash used by investing activities.......... (314,036) (193,121) (22,706 )
--------- --------- ---------
Net increase in cash and cash equivalents................ 112,595 81,842 566,751
Excess of cash remitted to Oncogene Science, Inc. and (112,595) (81,842) (566,751 )
subsidiary over disbursements..........................
========= ========= =========
Cash at beginning of period.............................. -- -- --
--------- --------- ---------
Cash at end of period.................................... $ -- $ -- $ --
========= ========= =========
</TABLE>

SUPPLEMENTAL CASH FLOW INFORMATION:

The excess of cash remitted to Oncogene Science, Inc. and subsidiary
represents the net result of the intercompany transactions between the Business
and Oncogene Science, Inc. and its wholly-owned subsidiary, Oncogene Science
S.A.

See accompanying notes to financial statements.

F-22
<PAGE> 78

ONCOGENE SCIENCE, INC.
RESEARCH PRODUCTS BUSINESS

NOTES TO FINANCIAL STATEMENTS

JULY 31, 1995

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Business

The financial statements of Oncogene Science, Inc. Research Products
Business (the "Business") include the accounts of the research products
operations at Oncogene Science, Inc. ("Oncogene" or the "Company"). The Business
has not operated as a stand-alone company, thus certain allocations have been
made to present the financial statements of the Business as a separate entity.
In general, salaries and the related personnel costs of researchers and
laboratory supplies are allocated based on direct responsibilities and direct
usage, respectively; facility costs are allocated based on a percentage of
square footage occupied; and general and administrative expenses are allocated
based on project salaries. Management believes that the allocation methods used
are reasonable.

The Business is engaged in the development and marketing of products for
the basic research and clinical research markets. The Business' research
products catalogue includes over 800 research reagent products, including
monoclonal and polyclonal antibodies, as well as a variety of
immunohistochemistry kits, DNA probes, quantitative immunoassays and accessory
reagents. The acquisition of the cancer business of Applied bioTechnology by
Oncogene in 1991 resulted in the expansion of the Business' research reagent
products lines. The financial statements for the ten months ended July 31, 1995,
and the fiscal years ended September 30, 1994 and 1993 include only the accounts
specifically related to the Research Products Business and allocations of such
business.

On June 26, 1995, Oncogene entered into an agreement to sell certain assets
of its Research Products business to CN Biosciences, Inc. (formerly
Calbiochem-Novabiochem International, Inc.), consisting primarily of
inventories, laboratory equipment, office furniture and office equipment, for
approximately $5.9 million in cash. The closing of the purchase agreement
occurred on August 2, 1995.

Revenue Recognition

Revenue from the sale of research reagent products is recognized at time of
shipment.

Research and Development Costs

Research and development costs are charged to operations as incurred and
include direct costs of research scientists and equipment and an allocation of
laboratory facility and administrative costs.

Grant Revenue

Grant revenues relate to National Cancer Institute funds awarded to the
Business of approximately $133,000 and $46,000 for the years ended September 30,
1993 and 1994, respectively.

Depreciation and Amortization

Depreciation of equipment is provided over the estimated useful lives of
the respective asset groups on a straight-line basis. Leasehold improvements are
amortized on a straight-line basis over the lesser of the estimated useful lives
or the remaining term of the lease.

Income Taxes

Effective October 1, 1993, Oncogene adopted the provisions of Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes" (SFAS
109). SFAS 109 requires that Oncogene recognize deferred tax liabilities and
assets for the expected future tax consequences of events that have been
included in the financial statements or tax returns. Under SFAS 109, deferred
tax liabilities and assets are determined on the basis of the difference between
the tax basis of assets and liabilities and their respective financial reporting
amounts (temporary differences) at enacted tax rates in effect for the years in
which the differences are expected to reverse.

F-23
<PAGE> 79

ONCOGENE SCIENCE, INC.
RESEARCH PRODUCTS BUSINESS

NOTES TO FINANCIAL STATEMENTS

JULY 31, 1995

The adoption of SFAS 109 did not have any impact on the financial position
of operations of Oncogene or the Business. Oncogene, in years prior to fiscal
1994, accounted for taxes in accordance with Accounting Principles Board Opinion
No. 11, "Accounting for Income Taxes". The Business' results of operations are
included in the consolidated tax returns of Oncogene. No provision for income
taxes has been provided by the Business since Oncogene has incurred operation
losses since inception and has established a valuation allowance equal to the
total deferred tax asset.

Assuming the business filed separate income tax returns, pro forma
provision for income taxes and the resulting pro forma net income/(loss) have
been presented in the accompanying statement of operations.

2. RELATED PARTY TRANSACTIONS

Oncogene's wholly-owned subsidiary, Oncogene Science S.A. (OSSA), was
established in France to distribute products to the French market. Sales by the
Business to OSSA were approximately $111,000, $237,000 and $140,000, for the
fiscal years ended September 30, 1993 and 1994 and the ten months ended July 31,
1995, respectively, with related costs of sales of approximately $33,000,
$69,000 and $51,000, respectively.

The Business also recognized expenses payable to OSSA in 1995 and 1994 in
connection with any marketing efforts performed by OSSA on behalf of the
Business. Expenses were $96,000 and $24,000, for the fiscal year ended September
30, 1994 and the ten months ended July 31, 1995, respectively.

The Business also had sales to Becton Dickinson, a party with whom Oncogene
has existing collaborative agreements, and CN Biosciences, the party purchasing
the Business from Oncogene (Note 1), during the ten months ended July 31, 1995
of approximately $152,000 and $21,000, respectively.

3. COMMITMENT

The Company leases office, operating and laboratory space under various
lease agreements.

Rent expense related to the Business' facility was $49,844, $98,000 and
$81,720 for the fiscal years ended September 30, 1993 and 1994 and for the ten
months ended July 31, 1995, respectively.

The following is a schedule by fiscal years of future minimum rental
payments relating to the Business' facilities required as of July 31, 1995,
assuming expiration of all lease agreements by December 31, 2003 for the
Business.

<TABLE>
<S> <C>
Two months ended September 30, 1995............................... $ 30,184
1996.............................................................. 90,950
1997.............................................................. 91,888
1998.............................................................. 95,781
1999.............................................................. 97,500
2000 and thereafter............................................... 421,781
--------
$828,084
========
</TABLE>

4. EMPLOYEE SAVINGS AND INVESTMENT PLAN

On September 16, 1987, the Company's Board of Directors adopted a Savings
and Investment Plan under Section 401(k) of the Internal Revenue Code effective
September 1, 1987. This plan allows employees to defer from 2% to 10% of their
income on a pre-tax basis through contributions into designated investment
funds. For each dollar the employee invests up to 6% of his or her earnings, the
Company will contribute an additional 50 cents into the funds. For the fiscal
years ended September 30, 1993 and 1994 and the ten months ended July 31, 1995,
the Business' expenses related to the plan were approximately $32,000, $35,000
and $31,000, respectively.

F-24
<PAGE> 80

CN BIOSCIENCES, INC.

PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1995

The following unaudited pro forma condensed consolidated statement of
operations for the year ended December 31, 1995 gives effect to the acquisition
of Oncogene Science, Inc. Research Products Business as if it was acquired on
January 1, 1995.

The pro forma condensed consolidated statement of operations is based on
historical financial statements of CN Biosciences, Inc. and Oncogene Science,
Inc. Research Products Business, giving effect to the acquisition applying the
purchase method of accounting and the assumptions and adjustments as discussed
in the accompanying notes to the pro forma condensed consolidated statement of
operations. This pro forma condensed consolidated statement of operations has
been prepared by the management of CN Biosciences, Inc. based upon the audited
consolidated financial statements of CN Biosciences, Inc., as of December 31,
1995 and for the year then ended, and the unaudited condensed statement of
operations of Oncogene Science, Inc. Research Products Business for the seven
months ended July 31, 1995. The unaudited pro forma condensed consolidated
financial statement should be read in conjunction with the historical financial
statements and notes thereto and narrative sections included elsewhere herein.
The pro forma condensed consolidated statement of operations is not necessarily
indicative of what actual results of operations would have been for the periods
had the transactions occurred on the date indicated and do not purport to
indicate the results of future operations.

<TABLE>
<CAPTION>
HISTORICAL
----------------------------
ONCOGENE PRO FORMA PRO FORMA
CN BIOSCIENCES, SCIENCE, ADJUSTMENTS REFLECTING
INC. INC. (NOTE 2) ACQUISITION
--------------- -------- ----------- -----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
Sales.................................... $26,966 $2,971 $ -- $29,937
Operating expenses....................... 25,131 2,710 --(a) 27,841
------- ------ ------ -------
Operating income......................... 1,835 261 -- 2,096
Interest expense, net.................... 527 -- 322(b) 849
------- ------ ------ -------
Income before income taxes............... 1,308 261 (322) 1,247
Provision for income taxes............... 291 -- (23)(c) 268
------- ------ ------ -------
Net income............................... $ 1,017 $ 261 $ 299 $ 979
======= ====== ====== =======
Net income per share..................... $ .49
=======
Shares used in computing net income per
share.................................. 1,987
=======
</TABLE>

See accompanying notes to Pro Forma Condensed Consolidated Statement of
Operations.

F-25
<PAGE> 81

CN BIOSCIENCES, INC.

NOTES TO PRO FORMA CONDENSED CONSOLIDATED
STATEMENT OF OPERATIONS (UNAUDITED)

DECEMBER 31, 1995

1. On August 1, 1995, CN Biosciences, Inc. (the "Company") acquired certain
assets and assumed certain liabilities of Oncogene Science, Inc. Research
Products Business ("Oncogene"). The purchase price was $6,213,000, including
acquisition costs of $281,000. The transaction was accounted for as a
purchase.

The purchase price has been allocated to the tangible and intangible assets
acquired and liabilities assumed based on their respective fair values on the
date of acquisition as follows:

<TABLE>
<S> <C>
Inventories...................................................... $1,507,000
Property and equipment........................................... 350,000
Other current assets............................................. 121,000
Cost in excess of net assets acquired............................ 4,335,000
----------
Total assets................................................... 6,313,000
Liabilities assumed.............................................. (100,000)
----------
Net assets acquired............................................ $6,213,000
==========
</TABLE>

2. The accompanying unaudited pro forma condensed consolidated statement of
operations for the year ended December 31, 1995 gives effect to the
acquisition of Oncogene as if it had occurred as of January 1, 1995.

The pro forma adjustments are summarized as follows:

(a) The increase in amortization expense of intangibles for the
goodwill related to the acquisition of Oncogene was entirely
offset by the elimination of the amortization of goodwill on the
books of Oncogene at the time of the acquisition by the Company.

(b) Increase interest expense for the debt incurred to complete the
acquisition.

F-26
<PAGE> 82

INSIDE BACK COVER PAGE

[COLOR PICTURE OF TWO SCIENTISTS WORKING IN LABORATORY WITH CAPTION WHICH
READS "THE COMPANY'S SCIENTIFIC STAFF, INCLUDING OVER 40 PH.D.S, DEVELOPS AND
MANUFACTURES A LARGE ARRAY OF BIOCHEMICAL AND BIOLOGICAL REAGENTS, ANTIBODIES,
PEPTIDES, ASSAYS AND RESEARCH KITS."]

[COLOR PHOTO OF EMPLOYEE HOLDING BOTTLE OF BIOCHEMICAL PRODUCT WITH CAPTION
WHICH READS "CUSTOMER ORDERS ARE FULFILLED, GENERALLY WITH NEXT-DAY OR
SECOND-DAY SHIPMENTS, FROM THE SAN DIEGO, CA AND NOTTINGHAM, U.K. DISTRIBUTION
CENTERS"]

[COLOR PHOTO OF WORLD MAP WITH DOTS INDICATING LOCATIONS OF COMPANY
FACILITIES IN COUNTRIES WHERE THE COMPANY'S PRODUCTS ARE SOLD WITH CAPTION WHICH
READS "CUSTOMERS IN 46 COUNTRIES ARE SERVED BY THE COMPANY FROM ITS SEVEN
LOCATIONS."]

[COLOR PHOTO SHOWING AN ARRAY OF COMPANY PUBLICATIONS WITH CAPTION WHICH
READS "THE COMPANY INTRODUCES NEW PRODUCTS, PROVIDES TECHNICAL INFORMATION AND
REGULARLY COMMUNICATES WITH ITS CUSTOMERS THROUGH A BROAD ARRAY OF SUPPLEMENTAL
PUBLICATIONS."]
<PAGE> 83

No dealer, salesperson or any other person has been authorized to give any
information or make any representation not contained in this Prospectus in
connection with the offer made by this Prospectus and, if given or made, such
information or representation must not be relied upon as having been authorized
by the Company or the Underwriters. This Prospectus does not constitute an offer
to sell or a solicitation of an offer to buy any of the securities offered
hereby to anyone in any jurisdiction in which such offer or solicitation is not
authorized or in which the person making such offer or solicitation is not
qualified to do so or to anyone to whom it is unlawful to make such offer or
solicitation. Neither the delivery of this Prospectus nor any sale made
hereunder shall, under any circumstances, create any implication that the
information herein is correct as of any time subsequent to the date of this
Prospectus.
---------------------------

Table of Contents

<TABLE>
<CAPTION>
Page
----
<S> <C>
Prospectus Summary.................... 3
Risk Factors.......................... 6
Use of Proceeds....................... 12
Dividend Policy....................... 12
Capitalization........................ 13
Dilution.............................. 14
Selected Consolidated Financial
Data................................ 15
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 16
Business.............................. 23
Management............................ 39
Certain Transactions.................. 46
Principal Stockholders................ 47
Description of Capital Stock.......... 48
Shares Eligible for Future Sale....... 51
Underwriting.......................... 53
Legal Matters......................... 54
Experts............................... 54
Change in Accountants................. 55
Additional Information................ 55
Index to Financial Statements......... F-1
</TABLE>

---------------------------

Until October 27, 1996 (25 days after the date of this Prospectus), all
dealers effecting transactions in the registered securities, whether or not
participating in this distribution, may be required to deliver a Prospectus.
This is in addition to the obligation of dealers to deliver a Prospectus when
acting as underwriters and with respect to their unsold allotments or
subscriptions.

1,600,000 SHARES
LOGO

COMMON STOCK
---------------------------------
PROSPECTUS
OCTOBER 2, 1996
---------------------------------
UBS SECURITIES

DAIN BOSWORTH
Incorporated