CN BIOSCIENCES INC, 424B1, 1997-04-02

CN BIOSCIENCES INC
424B1, 1997-04-02
MEDICINAL CHEMICALS & BOTANICAL PRODUCTS

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<PAGE> 1

PROSPECTUS Registration No. 333-22711
Rule 424(b)(1)

1,000,000 SHARES

[CN BIOSCIENCES LOGO]

COMMON STOCK

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

Of the 1,000,000 shares of Common Stock offered hereby, 89,810 shares are
being sold by CN Biosciences, Inc. ("CN Biosciences" or the "Company") and
910,190 shares are being sold by one of the Company's stockholders (the "Selling
Stockholder"). See "Principal and Selling Stockholders." The Company will not
receive any of the proceeds from the sale of the shares by the Selling
Stockholder.

The Common Stock is quoted on the Nasdaq National Market under the symbol
"CNBI." On March 31, 1997, the last reported sale price for the Common Stock was
$14.375 per share. See "Price Range of Common Stock."

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 COMPANY(2) PROCEEDS TO
PRICE TO DISCOUNTS PROCEEDS TO SELLING
PUBLIC AND COMMISSIONS(1) COMPANY(2) STOCKHOLDER
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Per share............... $13.50 $0.81 $12.69 $12.69
- ------------------------------------------------------------------------------------------------
Total(3)................ $13,500,000 $810,000 $1,139,689 $11,550,311
================================================================================================
</TABLE>

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

(2) Before deducting expenses of the offering payable by the Company estimated
at $450,000.

(3) The Company has granted the Underwriters an option, exercisable within 30
days from the date hereof, to purchase up to 150,000 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 $15,525,000, the Underwriting Discounts and
Commissions will be $931,500 and the Proceeds to Company will be $3,043,189.
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
April 7, 1997.

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

UBS SECURITIES DAIN BOSWORTH
Incorporated

April 2, 1997

<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 7,800 PRODUCTS USED
WORLDWIDE IN DISEASE-RELATED LIFE SCIENCES RESEARCH."]

CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS THAT
STABILIZE, MAINTAIN, OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK,
INCLUDING BY ENTERING STABILIZING BIDS OR EFFECTING SYNDICATE COVERING
TRANSACTIONS. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING."

IN CONNECTION WITH THIS OFFERING, CERTAIN UNDERWRITERS AND SELLING GROUP MEMBERS
MAY ENGAGE IN PASSIVE MARKET MAKING TRANSACTIONS IN THE COMMON STOCK ON THE
NASDAQ NATIONAL MARKET, IN THE OVER-THE-COUNTER MARKET OR OTHERWISE IN
ACCORDANCE WITH RULE 103 OF REGULATION M. SEE "UNDERWRITING."

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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." Except as otherwise specified, all
information in this Prospectus assumes no exercise of the Underwriters'
over-allotment option. 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."

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,
Novabiochem and Oncogene Research Products. With over 7,800 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.

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<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
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 1996, the Company sold products to over 8,000 accounts, including
individual research scientists, institutions, companies and distributors, filled
over 90,000 orders in 48 countries and generated sales of $33.7 million and net
income of $2.0 million. The Company's numerous products, represented by over
14,000 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, introducing in excess of 700 products
during 1996. Development, marketing and distribution activities are supported by
the Company's highly experienced scientific staff, which includes 42
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. 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 by the Company......... 89,810 shares
Common Stock Offered by the Selling
Stockholder............................... 910,190 shares
Common Stock Outstanding after the
Offering.................................. 5,262,177 shares (1)
Use of Proceeds by the Company.............. 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>
PERIOD FROM
INCEPTION YEARS ENDED DECEMBER 31,
(MARCH 11, 1992) TO -------------------------------------
DECEMBER 31, 1992 1993 1994 1995 1996
------------------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENTS OF OPERATIONS
DATA:
Sales.................................... $17,719 $22,771 $24,188 $26,966 $33,725
Cost of sales............................ 9,691 14,195 13,183 13,185 15,388
------- ------- ------- ------- -------
Gross profit............................. 8,028 8,576 11,005 13,781 18,337
------- ------- ------- ------- -------
Operating expenses:
Selling, general and administrative.... 7,742 10,292 10,343 10,608 12,700
Research and development............... 290 462 736 1,338 2,144
------- ------- ------- ------- -------
Total operating expenses............ 8,032 10,754 11,079 11,946 14,844
------- ------- ------- ------- -------
Income (loss) from operations............ (4) (2,178) (74) 1,835 3,493
Interest expense, net.................... 61 170 326 527 532
------- ------- ------- ------- -------
Income (loss) before income taxes........ (65) (2,348) (400) 1,308 2,961
Provision (benefit) for income taxes..... 401 (195) 62 291 960
------- ------- ------- ------- -------
Net income (loss)................... $ (466) $(2,153) $ (462) $ 1,017 $ 2,001
======= ======= ======= ======= =======
Net income (loss) per share.............. $ (.14) $ (.65) $ (.14) $ .30 $ .50
======= ======= ======= ======= =======
Shares used in per share computations
(2).................................... 3,242 3,318 3,328 3,422 3,995
</TABLE>

<TABLE>
<CAPTION>
DECEMBER 31, 1996
--------------------------
ACTUAL AS ADJUSTED(3)
------- --------------
<S> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Cash, cash equivalents and short-term investments.................... $14,704 $ 15,394
Working capital...................................................... 30,231 30,921
Total assets......................................................... 46,262 46,952
Long-term debt and other obligations, net of current portion......... 1,233 1,233
Stockholders' equity................................................. 38,900 39,590
</TABLE>

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

(1) Excludes (i) 638,545 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 92,675 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"). The
Company intends to seek approval from its stockholders at its 1997 annual
meeting to increase the number of shares of Common Stock reserved for future
issuance under the Stock Option Plan by an additional 250,000 shares.

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

(3) Adjusted to give effect to the sale of 89,810 shares of Common Stock offered
by the Company hereby and the receipt and application of the net proceeds
therefrom. See "Use of Proceeds" and "Capitalization."

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."

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, recent government proposals aiming to reduce or
eliminate budgetary deficits have included 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

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<PAGE> 7

currently served or if the Company's new products are not accepted by research
scientists, there could be a 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

7
<PAGE> 8

Company has no control and who also represent products of other companies.
Additionally, the Company 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 18.1% of net sales in 1996, 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."

Uncertainty of Future Operating Results. Although the Company has had net
income for the past two years, 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, Novabiochem and Oncogene Research Products brands,
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 operating 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 Company
maintains cash balances at its various subsidiaries adequate to support local
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."

Substantial Influence of Principal Stockholder. Upon consummation of the
offering, Warburg will beneficially own approximately 42.7% of the Common Stock.
Because of such ownership, Warburg will have the ability to exercise substantial
influence over the business and affairs of the Company by virtue of its voting
power with respect to election of directors and actions requiring stockholder
approval. Additionally, pursuant to an agreement with the Company, Warburg has
certain rights to nominate directors as long as it continues to own specified
percentages of the outstanding shares of Common Stock. See "Management" and
"Principal and Selling Stockholders."

Possible Volatility of Stock Price. The trading price of the 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 Common Stock. See
"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 Warburg and the Company's directors and executive
officers 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
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 1,000,000 shares offered by the Company and the Selling
Stockholder hereby and the 1,840,000 shares sold by the Company in its October
1996 initial public offering, approximately 18,332 shares of Common Stock held
by current stockholders will be eligible for immediate sale. Upon expiration of
the Lock-Up Period, and subject to the limitations imposed by Rule 144 under the
Securities Act ("Rule 144"), 2,387,003 shares of Common Stock held by Warburg
and the Company's directors and executive officers will be eligible for
immediate sale. In addition, the Company has registered under the Securities Act
753,473 shares of Common Stock issuable upon the exercise of options granted or
to be granted under the Stock Option Plan, of which options to purchase 223,889
shares are currently exercisable. 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. The Company intends to seek approval from its stockholders at its 1997
annual meeting to increase the number of shares of Common Stock reserved for
future issuance under the Stock Option Plan by an additional 250,000 shares.
Promptly following such approval, the Company intends to file a registration
statement on Form S-8 under the Securities Act covering these additional 250,000
shares of Common Stock. Holders of options to purchase 393,005 shares of Common
Stock have agreed not to sell or otherwise transfer their shares obtained upon
exercise of

10
<PAGE> 11

such options during the Lock-Up Period, 138,640 of which will be exercisable
upon the expiration of such Lock-Up Period. The holders of 3,278,271 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"
and "Description of Capital Stock -- Registration Rights."

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 (the "Credit Facility"). The Credit Facility
restricts the payment of cash dividends by the Company. See "Dividend Policy."

Anti-Takeover Provisions. 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. The Company is also
subject to the provisions of Section 203 of the Delaware General Corporation
Law, an anti-takeover law. See "Description of Capital Stock." Additionally, the
Company has entered into severance agreements with its executive officers which
provide, among other things, for severance payments if, within 90 days of a
"change in control" of the Company (as defined in the agreement), the
executive's employment is terminated other than for cause or the executive
resigns. Such agreements could have an anti-takeover effect. See
"Management -- Employment Agreements."

11
<PAGE> 12

USE OF PROCEEDS

The net proceeds to be received by the Company from the sale of the 89,810
shares of Common Stock offered by the Company hereby are estimated to be
approximately $690,000 ($2.6 million if the Underwriters' over-allotment option
is exercised in full), after deducting the estimated underwriting discounts and
commissions related thereto and other expenses associated with the offering. The
Company intends to use such net proceeds for working capital, general corporate
purposes and possible acquisitions. Pending such uses, such net proceeds will be
invested in short-term, investment grade, interest-bearing securities. The
Company has an ongoing corporate development program which regularly evaluates
acquisition opportunities; however, it has no present understandings,
commitments or agreements, nor is it currently in formal negotiations with
respect to any acquisition.

The Company will not receive any proceeds from the sale of the 910,190
shares of Common Stock offered by the Selling Stockholder.

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 also a guarantor
under the Credit Facility, which restricts the payment of cash dividends by the
Company.

12
<PAGE> 13

CAPITALIZATION

The following table sets forth at December 31, 1996, the (i) actual
capitalization of the Company, and (ii) capitalization as adjusted to give
effect to the sale of 89,810 shares of Common Stock offered by the Company
hereby and the application of the estimated net proceeds therefrom after
deducting the estimated underwriting discounts and commissions related thereto
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>
DECEMBER 31, 1996
-----------------------
ACTUAL AS ADJUSTED
------- -----------
(IN THOUSANDS)
<S> <C> <C>
Current portion of long-term debt.............................. $ -- $ --
======= =======
Long-term debt and other obligations, net of current portion... $ 1,233 $ 1,233
Stockholders' equity:
Preferred stock, $.01 par value; 5,000,000 shares authorized;
no shares issued and outstanding actual and as adjusted... -- --
Common stock, $.01 par value; 30,000,000 shares authorized;
5,152,587 shares issued and outstanding actual; 5,242,397
shares issued and outstanding as adjusted(1).............. 52 52
Additional paid-in capital................................... 38,736 39,426
Accumulated deficit.......................................... (63) (63)
Foreign currency translation adjustment...................... 271 271
Note receivable from stockholder............................. (96) (96)
------- -------
Total stockholders' equity........................... 38,900 39,590
------- -------
Total capitalization............................ $40,133 $40,823
======= =======
</TABLE>

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

(1) Excludes (i) 635,325 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 net tangible book value of the Company as of December 31, 1996 was
$34.1 million, or $6.61 per share. Net tangible book value per share represents
the tangible net worth (total tangible assets less total liabilities) of the
Company divided by the weighted average number of shares of Common Stock
outstanding prior to the offering of the shares offered by the Company hereby.
After giving effect to the offering by the Company of 89,810 shares of Common
Stock hereby (after deducting underwriting discounts and commissions and
estimated offering expenses), the net tangible book value of the Company as of
December 31, 1996 would have been $34.8 million, or $6.63 per share,
representing an immediate increase in net tangible book value of $.02 per share
to existing stockholders and an immediate dilution of $6.87 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>
Public offering price per share............................. $13.50
Net tangible book value per share as of December 31,
1996................................................. $6.61
Increase per share attributable to the offering........ .02
-----
Net tangible book value per share after the offering........ 6.63
------
Dilution per share to new investors......................... $ 6.87
======
</TABLE>

PRICE RANGE OF COMMON STOCK

The Company effected an initial public offering of 1,840,000 shares of
Common Stock on October 2, 1996 at a price of $12.50 per share. Since that date,
the Common Stock has traded on the Nasdaq National Market under the symbol
"CNBI." The following table sets forth, for the periods indicated, the high and
low sales prices for the Common Stock, as reported by the Nasdaq National
Market:

<TABLE>
<CAPTION>
HIGH LOW
------- -------
<S> <C> <C>
1997
First Quarter (through March 31)......................... $18.50 $13.75

1996
Fourth Quarter (beginning October 2)..................... $18.50 $12.75
</TABLE>

A recently reported sale price for the Common Stock is reflected on the
cover page of this Prospectus. At March 25, 1997, there were 25 holders of
record of the Common Stock.

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 thereto included elsewhere in this Prospectus. The consolidated
statement of operations data for each of the three years in the period ended
December 31, 1996 and the consolidated balance sheet data at December 31, 1996
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 year
ended December 31, 1993 and the period from inception (March 11, 1992) through
December 31, 1992 and the consolidated balance sheet data at December 31, 1992,
1993 and 1994 are derived from the Company's audited consolidated financial
statements not included in this Prospectus.

<TABLE>
<CAPTION>
PERIOD FROM
INCEPTION YEARS ENDED DECEMBER 31,
(MARCH 11, 1992) TO -------------------------------------
DECEMBER 31, 1992 1993 1994 1995 1996
------------------- ------- ------- ------- -------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF OPERATIONS
DATA:
Sales.................................... $17,719 $22,771 $24,188 $26,966 $33,725
Cost of sales............................ 9,691 14,195 13,183 13,185 15,388
------- ------- ------- ------- -------
Gross profit............................. 8,028 8,576 11,005 13,781 18,337
------- ------- ------- ------- -------
Operating expenses:
Selling, general and administrative.... 7,742 10,292 10,343 10,608 12,700
Research and development............... 290 462 736 1,338 2,144
------- ------- ------- ------- -------
Total operating expenses............ 8,032 10,754 11,079 11,946 14,844
------- ------- ------- ------- -------
Income (loss) from operations............ (4) (2,178) (74) 1,835 3,493
Interest expense, net.................... 61 170 326 527 532
------- ------- ------- ------- -------
Income (loss) before income taxes ....... (65) (2,348) (400) 1,308 2,961
Provision (benefit) for income taxes..... 401 (195) 62 291 960
------- ------- ------- ------- -------
Net income (loss)................... $ (466) $(2,153) $ (462) $ 1,017 $ 2,001
======= ======= ======= ======= =======
Net income (loss) per share.............. $ (.14) $ (.65) $ (.14) $ .30 $ .50
======= ======= ======= ======= =======
Shares used in per share computations
(1).................................... 3,242 3,318 3,328 3,422 3,995
</TABLE>

<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------------------------------
1992 1993 1994 1995 1996
------- ------- ------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Cash, cash equivalents and short-term
investments.................................... $ 1,238 $ 1,839 $ 935 $ 1,203 $14,704
Working capital.................................. 13,000 12,946 13,017 15,424 30,231
Total assets..................................... 23,980 24,046 23,495 31,197 46,262
Long-term debt and other obligations, net of
current portion................................ 850 2,834 3,266 8,601 1,233
Redeemable preferred stock....................... 18,025 18,175 18,319 18,343 --
Stockholders' equity (deficit)................... (24) (2,291) (2,053) (544) 38,900
</TABLE>

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

(1) See Note 1 of notes to consolidated financial statements for an explanation
of the method used to determine the number of shares used to compute per
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.

In October 1996, the Company completed the initial public offering of
1,840,000 shares of Common Stock at an initial public offering price of $12.50
per share. Upon the consummation of the initial public offering, (i) the
outstanding shares of the Company's Series A Convertible Preferred Stock were
converted into an aggregate of 788,814 shares of Class A Common Stock, which
shares were subsequently converted into an equal number of shares of Common
Stock, and (ii) the outstanding shares of the Company's Series B Preferred Stock
were exchanged for an aggregate of 1,435,424 shares of Common Stock.

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
-------------------------
YEARS ENDED DECEMBER 31,
-------------------------
1994 1995 1996
----- ----- -----
<S> <C> <C> <C>
Sales:
Core.............................................................. 68.3% 76.5% 81.9%
Bulk.............................................................. 31.7 23.5 18.1
----- ----- -----
Total sales......................................................... 100.0 100.0 100.0
Cost of sales....................................................... 54.5 48.9 45.6
----- ----- -----
Gross profit........................................................ 45.5 51.1 54.4
Selling, general and administrative............................... 42.8 39.3 37.7
Research and development.......................................... 3.0 5.0 6.4
----- ----- -----
Income (loss) from operations....................................... (0.3) 6.8 10.3
Interest expense, net............................................... 1.4 2.0 1.6
----- ----- -----
Income (loss) before income taxes................................... (1.7) 4.8 8.7
Provision (benefit) for income taxes................................ 0.2 1.0 2.8
----- ----- -----
Net income (loss).............................................. (1.9)% 3.8% 5.9%
===== ===== =====
</TABLE>

17
<PAGE> 18

Years Ended December 31, 1996 and 1995

Sales. Sales increased 25.1% to $33.7 million for 1996 from $27.0 million
for 1995. This increase resulted primarily from a 34.0% increase in core product
sales, offset by a decrease in bulk sales of 3.8%. Significant factors which
management believes contributed to the increase in sales of core products during
1996 included the additional sales from a full year of the Oncogene Research
Products business which was acquired in August 1995, issuance of updated
Calbiochem and Novabiochem general catalogs, issuance of an updated Signal
Transduction specialty catalog and introduction of new specialty catalogs
addressing apoptosis and combinatorial chemistry. Excluding the sales of
Oncogene Research Products, sales of core products during 1996 increased by
14.8% as compared to sales in 1995. Gains in 1996 sales were achieved despite a
general strengthening of the U.S. dollar which had the effect of modestly
decreasing the dollar value of sales denominated in foreign currencies recorded
in 1996. 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 54.4% for
1996 from 51.1% for 1995. This increase was primarily the result of increased
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 additional
factors which contributed to improvements in gross margins of Calbiochem and
Novabiochem brand products include improved operating efficiencies from
increased volume and minor price increases.

Selling, General and Administrative. Selling, general and administrative
expenditures increased 19.7% to $12.7 million for 1996 from $10.6 million for
1995, and decreased to 37.7% of sales for 1996 from 39.3% for 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 1996. The decrease in expenses
as a percentage of sales was attributable to improved operating efficiencies and
increased sales. The Company anticipates a modest growth in administrative
expenses resulting from the Company's reporting obligations and investor
relations activities as a new public company.

Research and Development. Research and development expenditures increased
60.2% to $2.1 million for 1996 from $1.3 million for 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 areas of glycobiology and
neurosciences. The Company anticipates maintaining at least the current levels
of spending for research and development in 1997.

Interest Expense, Net. Interest expense, net increased to $532,000 for 1996
from $527,000 for 1995 as a result of interest expense on bank debt related to
the acquisition of the Oncogene Research Products business in 1995, offset
partially by interest income on proceeds from the Company's initial public
offering of common stock completed in October 1996.

Income Taxes. Income tax expense increased to $960,000 for 1996 from
$291,000 for 1995. This increase was primarily the result of increased
profitability and increased tax rates due to the utilization of certain
operating loss carryforwards generated in prior years.

Net Income. As a result of the above factors, net income increased 96.8% to
$2.0 million for 1996 from $1.0 million for 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 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

18
<PAGE> 19

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.

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.

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.

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 $1.0 million for 1995 from a net loss of $462,000 for 1994.

19
<PAGE> 20

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 eight
quarters ended December 31, 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, SEPT. 30, DEC. 31,
1995 1995 1995 1995 1996 1996 1996 1996
--------- -------- --------- -------- --------- -------- --------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Sales:
Core............................... $ 4,813 $4,827 $ 5,293 $5,693 $ 6,597 $6,949 $ 7,122 $6,961
Bulk............................... 1,923 1,512 1,572 1,333 1,621 1,398 1,713 1,364
------ ------ ------ ------ ------ ------ ------ ------
Total sales.......................... 6,736 6,339 6,865 7,026 8,218 8,347 8,835 8,325
Cost of sales........................ 3,508 3,183 3,224 3,270 3,794 3,808 4,065 3,721
------ ------ ------ ------ ------ ------ ------ ------
Gross profit......................... 3,228 3,156 3,641 3,756 4,424 4,539 4,770 4,604
Selling, general and
administrative................... 2,264 2,539 2,785 3,020 3,015 3,170 3,245 3,270
Research and development........... 218 270 401 449 541 524 590 489
------ ------ ------ ------ ------ ------ ------ ------
Income from operations............... 746 347 455 287 868 845 935 845
Interest expense (income), net....... 74 85 157 211 206 188 219 (81)
------ ------ ------ ------ ------ ------ ------ ------
Income before income taxes........... 672 262 298 76 662 657 716 926
Provision for income taxes........... 150 58 66 17 198 264 250 248
------ ------ ------ ------ ------ ------ ------ ------
Net income....................... $ 522 $ 204 $ 232 $ 59 $ 464 $ 393 $ 466 $ 678
====== ====== ====== ====== ====== ====== ====== ======
</TABLE>

<TABLE>
<CAPTION>
QUARTERS ENDED
-----------------------------------------------------------------------------------------
MARCH 31, JUNE 30, SEPT. 30, DEC. 31, MARCH 31, JUNE 30, SEPT. 30, DEC. 31,
1995 1995 1995 1995 1996 1996 1996 1996
--------- -------- --------- -------- --------- -------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Sales:
Core............................... 71.5% 76.1% 77.1% 81.0% 80.3% 83.3% 80.6% 83.6%
Bulk............................... 28.5 23.9 22.9 19.0 19.7 16.7 19.4 16.4
----- ----- ----- ----- ----- ----- ----- -----
Total sales.......................... 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of sales........................ 52.1 50.3 47.0 46.5 46.2 45.6 46.0 44.7
----- ----- ----- ----- ----- ----- ----- -----
Gross profit......................... 47.9 49.7 53.0 53.5 53.8 54.4 54.0 55.3
Selling, general and
administrative................... 33.6 40.1 40.6 43.0 36.7 38.0 36.7 39.3
Research and development........... 3.2 4.2 5.8 6.4 6.6 6.3 6.7 5.9
----- ----- ----- ----- ----- ----- ----- -----
Income from operations............... 11.1 5.4 6.6 4.1 10.5 10.1 10.6 10.1
Interest expense (income), net....... 1.1 1.3 2.3 3.0 2.5 2.2 2.5 (1.0)
----- ----- ----- ----- ----- ----- ----- -----
Income before income taxes........... 10.0 4.1 4.3 1.1 8.0 7.9 8.1 11.1
Provision for income taxes........... 2.2 0.9 0.9 0.3 2.4 3.2 2.8 3.0
----- ----- ----- ----- ----- ----- ----- -----
Net income....................... 7.8% 3.2% 3.4% 0.8% 5.6% 4.7% 5.3% 8.1%
===== ===== ===== ===== ===== ===== ===== =====
</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. 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. 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.

20
<PAGE> 21

LIQUIDITY AND CAPITAL RESOURCES

The Company generated $2.0 million of cash from operating activities in
each of 1996 and 1995 and used $29,000 of cash in 1994. Cash provided from
operating activities in 1996 resulted from positive operating results, adjusted
for non-cash charges including depreciation and amortization, offset primarily
by catalog costs capitalized in other assets and increases in inventory and
accounts receivable. Cash provided by operating activities in 1995 resulted from
positive operating results, which were principally offset by catalog costs
capitalized in other assets. Cash used in 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.

Net cash used in investing activities was $4.5 million in 1996, $6.8
million in 1995 and $1.2 million in 1994. During 1995, the Company acquired the
Oncogene Research Products business in a purchase transaction requiring an
investment of approximately $6.2 million. In 1996, investing activities
consisted primarily of purchases and sales of short-term investments, and in
1994 investing activities consisted primarily of capital expenditures for
property and equipment.

Net cash provided by financing activities was $11.9 million in 1996, $5.1
million in 1995 and $232,000 in 1994. In 1996, net cash provided by financing
activities consisted of cash received from the issuance of shares of Common
Stock in the Company's initial public offering, offset by payments to fully
retire bank term debt. During 1995, the Company incurred $6.0 million of
indebtedness, consisting primarily of borrowings from financial institutions, in
connection with the purchase of the Oncogene Research Products business. In
1994, net cash provided by financing activities consisted primarily of
borrowings from financial institutions offset by repayments.

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
operating 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 Company maintains cash balances at its
various subsidiaries adequate to support local 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 December 31, 1996, the Company had cash, cash equivalents and short-term
investments of $14.7 million and working capital of $30.2 million. The Credit
Facility provides for unsecured borrowings up to a maximum of $5.0 million. At
December 31, 1996, $5.0 million was available under the Credit Facility, which
expires in June 1998.

The Company believes that its existing capital resources will be sufficient
to fund its operations for at least the next two years. 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 increased credit facilities or
sales of equity, debt or convertible securities. 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.

21
<PAGE> 22

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
1996, the Company sold products to over 8,000 accounts, filled over 90,000
orders in 48 countries and generated sales of $33.7 million and net income of
$2.0 million. The Company's development, marketing and distribution activities
are supported by the Company's highly experienced scientific staff, which
includes 42 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 1996, U.S. pharmaceutical and biotechnology companies
spent over $20 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 1996
exceeding $11.9 billion. Over the past ten years, the NIH budget has grown at a
compounded annual rate of approximately 6.7%, although recent government
proposals aiming to reduce or eliminate budgetary deficits have included reduced
allocations to the NIH and the other government agencies that fund research and
development activities. 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

22
<PAGE> 23

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.

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 costeffectively 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

23
<PAGE> 24

often not found elsewhere and a broad range of related products. During 1996,
the Company introduced an Apoptosis specialty catalog and issued an updated
version of its Signal Transduction specialty catalog. In the first quarter of
1997, the Company issued an updated version of its Combinatorial Chemistry
specialty catalog. The Company also has introduced targeted product offerings to
researchers studying glycobiology and intends to issue a Neurosciences specialty
catalog during 1997. 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, since 1993 the
Company has expanded its scientific staff to include 42 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

24
<PAGE> 25

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.

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.

PRODUCTS

The Company sells over 7,800 products represented by over 14,000 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.

25
<PAGE> 26

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)
generally at discounts from catalog prices. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations."

26
<PAGE> 27

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 OF PRINCIPAL PRODUCT
CATALOGS LAST PUBLISHED PUBLISHED PRODUCTS FOCUS BRAND NAMES
- ----------------------- -------------------- --------- ----------- --------------------- -------------
<S> <C> <C> <C> <C> <C>
GENERAL
Calbiochem First Quarter 1996 158,000 3,070 Biochemicals and - Calbiochem
Immunochemicals - Novabiochem
- Oncogene
Research
Products
Novabiochem Third Quarter 1996 58,000 2,100 Peptides, Boc and - Novabiochem
Fmoc Amino Acids and
Peptide Synthesis
Reagents
Oncogene Research Fourth Quarter 1996 80,000 865 Antibodies, Markers, - Oncogene
Products Reagents and Kits Research
Products
SPECIALTY
Signal Transduction Second Quarter 1996 85,000 1,400 G Proteins, Kinases, - Calbiochem
Nitric Oxide, Calcium - Novabiochem
Metabolism and p53 - Oncogene
Research
Products
Apoptosis First Quarter 1996 60,000 330 Antibodies, Assays, - Calbiochem
ELISAs, Kits and - Oncogene
Reagents Research
Products
Combinatorial First Quarter 1997 20,000 170 Resins, Linkers, Fmoc - Novabiochem
Chemistry Amino Acids and
Peptide Synthesis
Reagents
Clinalfa First Quarter 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 most recent catalog, published in the first
quarter of 1996, 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,

27
<PAGE> 28

58,000 copies of the newest edition of the Novabiochem general catalog
were published in the third quarter of 1996. The catalog includes unique
"synthesis notes" prepared by the Company which provide a comprehensive
and current review of solid phase peptide synthesis methodology.

- Oncogene Research Products General Catalog. Approximately 865 products
are included in this catalog which focuses primarily on scientific
research in the areas of cancer, heart disease, signal transduction and
neurobiology. Approximately 80,000 copies of the most recent version of
this catalog were published 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
second quarter of 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
initial catalog, published in the second quarter of 1996, 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. In the first quarter of 1997, the Company
published the most recent edition of its Combinatorial Chemistry
catalog. This catalog, 20,000 copies of which have been published,
provides approximately 170 products focused primarily

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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 most recent Clinalfa specialty 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 neurosciences. 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.

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<PAGE> 30

DEVELOPMENT OF NEW PRODUCTS

The Company conducts its research and development at its technology 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 introduced in excess of 700 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 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 the first quarter of 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>

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SALES AND DISTRIBUTION

Catalogs and Supporting Publications. The Company markets its products
directly to its customers through 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 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 1996, the Company sold
products to more than 8,000 accounts, with more than 75% 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 12 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 (nine 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, Novabiochem and Oncogene Research Products brands with information
about the Company and its products and catalogs. The

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<PAGE> 32

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.

CUSTOMERS

During 1996, the Company sold products to over 8,000 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, 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, Inc. 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 the other 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

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<PAGE> 33

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 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

33
<PAGE> 34

("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.

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 provided guidance and
assistance to the Company, principally relating to the Oncogene Research
Products business, under a consulting agreement and received compensation
aggregating approximately $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 December 31, 1996, the Company's level of total
outstanding product backorders averaged approximately $316,000, 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 1996 sales data, approximately
52.3% 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.

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<PAGE> 35

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 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,

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<PAGE> 36

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.

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.

In the fall of 1996, the Company 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 7,800 products
and accounted in each of the last three years for approximately $150,000 or less
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 the ongoing
investigation 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 December 31, 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 years ended December 31, 1995 and 1996, the Company expensed an aggregate of
$112,000 and $323,000, respectively, in connection with cash royalties owed
pursuant to license agreements.

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<PAGE> 37

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 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 expiring in August 1998. In
January 1997, this period was extended until August 2010. 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.

HUMAN RESOURCES

As of December 31, 1996, the Company employed 195 persons on a full-time
and part-time basis, including 42 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 material legal proceedings.

37
<PAGE> 38

MANAGEMENT

EXECUTIVE OFFICERS AND DIRECTORS

The following table sets forth certain information regarding the Company's
executive officers and directors as of March 31, 1997:

<TABLE>
<CAPTION>
NAME AGE POSITION
- ----------------------------------------------- ----- -----------------------------------------
<S> <C> <C>
Stelios B. Papadopoulos........................ 56 Chairman of the Board; Chief Executive
Officer and President
James G. Stewart............................... 44 Vice President, Administration; Chief
Financial Officer and Secretary
John T. Snow................................... 53 Vice President, New Business Development
Ben Matzilevich................................ 48 Vice President, Market Development --
Niche Applications
Douglas J. Greenwold........................... 55 Vice President, Sales and Marketing
Joseph P. Landy(1)(2).......................... 35 Director
Richard A. Lerner.............................. 58 Director
S. Joshua Lewis(3)............................. 34 Director
Robert E. McGill, III(1)(2)(3)................. 65 Director
</TABLE>

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

(1) Member of the Compensation Committee.

(2) Member of the Stock Option Committee.

(3) Member of the Audit 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.

38
<PAGE> 39

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 -- 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.

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., LLC ("EMW LLC") and its predecessor, E.M. Warburg, Pincus & Co.,
Inc. ("EMW Inc."). Mr. Landy has been employed in various capacities by EMW LLC
and EMW Inc. 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.

Dr. Richard A. Lerner has served as a director of the Company since
February 1997. Since 1991, Dr. Lerner has been the President of The Scripps
Research Institute. From 1986 to 1991, Dr. Lerner was Director of the Research
Institute of Scripps Clinic ("Scripps"). From 1982 to 1986, Dr. Lerner served as
Chairman of the Department of Molecular Biology of Scripps. Previously, he held
staff appointments at Scripps and the Wistar Institute in Philadelphia. Dr.
Lerner is a graduate of Northwestern University and Stanford Medical School and
received postdoctoral training at Scripps. Dr. Lerner is a member of the
National Academy of Science USA and numerous editorial and scientific advisory
boards.

S. Joshua Lewis has served as a director of the Company since June 1995.
Mr. Lewis is a Vice President of EMW LLC and has been employed in various
capacities by EMW LLC and EMW Inc. 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. Since February 1997, Mr. McGill has served as a Managing Director
of Berkshires Management Company, L.L.C., the general partner of The Berkshires
Capital Investors Limited Partnership. For more than the past five years, Mr.
McGill has also 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 1996, the Board of Directors had six meetings.

Frederick L. Bryant served as a director of the Company and as a member of
the Compensation and Stock Option Committees until his resignation from the
Board of Directors in February 1997. Mr. Bryant served on the Board of Directors
as a nominee of ABS.

Warburg currently has the following rights with respect to the nomination
and election of directors to the Company's Board of Directors: 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. 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. Upon consummation of the offering, ABS will no longer have this
nomination and election right.

39
<PAGE> 40

COMMITTEES OF THE BOARD OF DIRECTORS

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

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. Landy and McGill. 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 (and prior to Mr. Bryant's
resignation, ABS' nominee), are reimbursed for expenses incurred in attending
meetings of the Board of Directors. In addition, directors who are not employees
and not otherwise affiliated with a principal stockholder of the Company, are
paid $1,500 for each Board of Directors meeting attended. Prior to February
1997, such directors were 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 1996, no consulting fees were
paid by the Company to Mr. McGill. At the time that Dr. Lerner joined the Board
of Directors, he was granted options to purchase 25,000 shares of Common Stock
at an exercise price of $14.50 per share.

40
<PAGE> 41

EXECUTIVE COMPENSATION

The following table sets forth information concerning compensation of the
Company's Chief Executive Officer and the four other most highly compensated
executive officers (collectively, the "Named Executive Officers") for the
periods indicated.

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
ANNUAL COMPENSATION ------------
-------------------------------------- SECURITIES
OTHER ANNUAL UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) COMPENSATION($) OPTIONS(#) COMPENSATION($)
- ---------------------------------- ---- --------- -------- --------------- ------------ ---------------
<S> <C> <C> <C> <C> <C> <C>
Stelios B. Papadopoulos (1) 1996 $ 228,846 $45,000 $ -- 40,000 $ 2,970
Chief Executive Officer and 1995 204,327 -- 162,640 -- 2,112
President
Douglas J. Greenwold (2) 1996 118,923 30,000 -- 20,000 3,603
Vice President, Sales and 1995 115,000 -- -- -- 3,352
Marketing
John T. Snow (3) 1996 112,019 30,000 -- 20,000 3,885
Vice President, New Business 1995 110,021 -- -- -- 3,804
Development
James G. Stewart (4) 1996 152,788 35,000 -- 25,000 7,462
Vice President, Administration, 1995 80,865 -- 21,518 47,317 45,471
Chief Financial Officer and
Secretary
Ben Matzilevich (5)
Vice President, Market 1996 126,308 35,000 -- 25,000 345
Development -- Niche 1995 87,692 -- -- 23,659 --
Applications
</TABLE>

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

(1) "Other Annual Compensation" in 1995 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. "All Other Compensation" includes $1,098 and $1,098 in premiums
for personal beneficiary life insurance in excess of non-taxable group
limits, and $1,872 and $1,014 of Company matching 401(k) contributions in
1996 and 1995, respectively.

(2) "All Other Compensation" includes $753 and $580 in premiums for personal
beneficiary life insurance in excess of nontaxable group limits and $2,850
and $2,772 of Company matching 401(k) contributions in 1996 and 1995,
respectively.

(3) "All Other Compensation" includes $1,035 and $1,035 in premiums for personal
beneficiary life insurance in excess of non-taxable group limits and $2,850
and $2,769 of Company matching 401(k) contributions in 1996 and 1995,
respectively.

(4) Joined the Company in June 1995. "Other Annual Compensation" in 1995
represents tax reimbursement payments related to relocation. "All Other
Compensation" includes $39,231 relocation expense reimbursement in 1995,
$4,612 and $4,680 of premiums for personal beneficiary life insurance in
excess of non-taxable group limits and $2,850 and $1,560 of Company matching
401(k) contributions in 1996 and 1995, respectively.

(5) Joined the Company in April 1995. "All Other Compensation" represents
premiums for personal beneficiary life insurance in excess of non-taxable
group limits.

41
<PAGE> 42

The following table summarizes the number of shares and the terms of stock
options granted to the Named Executive Officers in 1996:

OPTION GRANTS DURING YEAR ENDED DECEMBER 31, 1996

<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
NUMBER OF % OF TOTAL ANNUAL RATES OF STOCK
SECURITIES OPTIONS PRICE APPRECIATION FOR
UNDERLYING GRANTED TO OPTION TERM($)(1)(2)
OPTIONS EMPLOYEES IN EXERCISE PRICE EXPIRATION ----------------------
NAME GRANTED(#) FISCAL YEAR ($/SHARE) DATE 5% 10%
- ----------------------------- ---------- ------------ -------------- ---------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
Stelios B. Papadopoulos...... 40,000 16.4% $16.50 11/13/06 $415,070 $1,051,870
Douglas J. Greenwold......... 20,000 8.2 16.50 11/13/06 207,535 525,935
John T. Snow................. 20,000 8.2 16.50 11/13/06 207,535 525,935
James G. Stewart............. 25,000 10.2 16.50 11/13/06 259,419 657,419
Ben Matzilevich.............. 25,000 10.2 16.50 11/13/06 259,419 657,419
</TABLE>

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

(1) The options have a ten-year term, subject to earlier termination under
certain circumstances. The options granted to the Named Executive Officers
vest annually in 20% increments, commencing on the first anniversary of the
date of grant.

(2) 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 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.

AGGREGATED 1996 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, 1996(#) DECEMBER 31, 1996($)(1)
ACQUIRED ON --------------------------- ---------------------------
NAME EXERCISE (#) VALUE REALIZED($) EXERCISEABLE UNEXERCISABLE EXERCISEABLE UNEXERCISABLE
- ------------------------------------------- ----------------- ------------ ------------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
Stelios B. Papadopoulos....... -- -- 82,686 67,563 $ 1,484,626 $ 569,894
Douglas J. Greenwold.......... -- -- 28,392 38,925 509,778 377,298
John T. Snow.................. -- -- 6,624 20,000 118,934 37,500
James G. Stewart.............. -- -- 9,463 62,854 169,908 726,544
Ben Matzilevich............... -- -- 4,732 43,927 84,964 386,710
</TABLE>

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

(1) Based on value of $18.375 per share, the closing price for the Common Stock
on December 30, 1996.

EMPLOYMENT AGREEMENTS

The Company has employment agreements with Messrs. Papadopoulos and
Matzilevich currently providing for their employment at annual base salaries of
$240,000 and $131,000, 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.

42
<PAGE> 43

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 severance payments equal to his base salary payable for the 12-month
period from the date of such termination. The employment agreement with Mr.
Papadopoulos also provides that if, within 90 days of a Change of Control of the
Company (as defined below), Mr. Papadopoulos resigns from the Company, he will
be entitled to receive severance payments equal to his base salary payable over
the 12-month period following such resignation. In addition, Mr. Papadopoulos'
employment agreement provides that upon any such 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.

Under Mr. Matzilevich's employment agreement, if Mr. Matzilevich's
employment is terminated other than for cause and such termination is not within
90 days of a Change of Control of the Company, Mr. Matzilevich will be entitled
to receive severance payments equal to the compensation due under his employment
agreement for the remainder of its term. If such termination without cause is
within 90 days of a Change of Control of the Company, Mr. Matzilevich will be
entitled to receive severance payments equal to the greater of (i) the
compensation due under his employment agreement for the remainder of its term or
(ii) his base salary payable over the 12-month period following such
termination. If, within 90 days of a Change of Control of the Company, Mr.
Matzilevich resigns from the Company, he will be entitled to receive severance
payments equal to his base salary payable over the 12-month period following
such resignation.

The Company has entered into agreements with each of Messrs. Stewart and
Greenwold and Dr. Snow providing for severance pay in the event of termination
of the executive's employment other than for cause or if, within 90 days of a
Change of Control of the Company, the executive's employment is terminated by
the Company other than for cause or the executive resigns. Upon termination of
employment within 90 days of a Change of Control, the executive will be eligible
to receive severance payments equal to his base salary payable over the 12-month
period following such termination. If the executive's employment is otherwise
terminated by the Company other than for cause, he will be eligible to receive
severance payments equal to his base salary payable over the six-month period
following such termination.

"Change of Control" is defined in the employment and severance agreements
discussed above, and in the agreements governing outstanding stock options, as
(i) an acquisition (other than directly from the Company) by an individual,
entity or a group (excluding the Company, an employee benefit plan of the
Company or E.M. Warburg, Pincus & Co., LLC or its affiliates) of 50% or more of
the Company's Common Stock, or voting securities; (ii) a change in a majority of
the Company's current Board of Directors (the "Incumbent Board") (excluding any
persons approved by a vote of at least a majority of the Incumbent Board or
persons elected with the concurrence of a majority of the Incumbent Board); or
(iii) the consummation of a complete liquidation or dissolution of the Company
or a merger, consolidation or sale of all or substantially all of the Company's
assets (collectively, a "Business Combination") other than a Business
Combination in which all or substantially all of the Company's stockholders
receive 50% or more of the stock of the Company resulting from the Business
Combination, at least a majority of the board of directors of the resulting
corporation were members of the Incumbent Board, and after which no person owns
50% or more of the stock of the resulting corporation, who did not own such
stock immediately before the Business Combination.

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.

43
<PAGE> 44

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. The maximum number of shares for which options may be granted
under the Stock Option Plan to any single optionee during any calendar year is
100,000 shares. Options to purchase an aggregate of 835,000 shares of Common
Stock are authorized under the Stock Option Plan. As of March 31, 1997, 296,429
ISOs and 342,116 NQSOs were outstanding under the Stock Option Plan, and 92,675
shares were available for future awards. The Company intends to seek approval
from its stockholders at its 1997 annual meeting to increase the number of
shares of Common Stock reserved for future issuance under the Stock Option Plan
by an additional 250,000 shares.

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 at the time of grant, as determined in accordance with the Stock
Option Plan. No options may be granted with a term longer than ten years. All
outstanding options provide for full vesting upon a Change of Control of the
Company. With respect to future option grants, the Stock Option Committee
retains the discretion to provide for full vesting upon a Change of Control of
the Company.

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 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 or increase the maximum number of shares for which options may be granted
under the Stock Option Plan to any single optionee during any calendar year.

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.

44
<PAGE> 45

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. Mr. Landy, a current member of the Compensation
Committee, and Frederick L. Bryant, a former director and former member of the
Stock Option Committee, served on the Compensation Committee in 1996. Messrs.
Landy and Bryant have in the past served as officers of the Company. 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 Selling 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.

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.

45
<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

Upon the consummation of the initial public offering of Common Stock in
October 1996, Warburg converted its 4,001 shares of Series A Convertible
Preferred Stock into 788,814 shares of Class A Common Stock. Thereafter, Warburg
made the requisite certification required under the Certificate of Incorporation
regarding its share ownership to the Company and converted such shares of Class
A Common Stock into 788,814 shares of Common Stock. See "Description of Capital
Stock."

Pursuant to an agreement among the Company, Warburg, ABS, Mr. Papadopoulos
and Dr. Snow (the "Conversion and Exchange Agreement"), upon the consummation of
the initial public offering of Common Stock, each share of Series B Preferred
Stock was exchanged for the number of shares of Common Stock that equalled the
liquidation preference of a share of Series B Preferred Stock ($100) divided by
the initial public offering price of the Common Stock ($12.50). As a result, all
of the shares of Series B Preferred Stock were exchanged for an aggregate of
1,435,424 shares. Warburg, ABS, Mr. Papadopoulos and Dr. Snow were the holders
of the Series B Preferred Stock, holding 124,023 shares, 50,356 shares, 4,377
shares and 672 shares, respectively and, accordingly, were 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 granted Warburg and ABS 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; RIGHTS OF WARBURG AND ABS

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."

In connection with their initial investment in the Company, Warburg and ABS
received certain rights pursuant to a subscription and shareholder agreement,
including rights with respect to the nomination and election of directors to the
Company's Board of Directors. These rights were subsequently modified at the
time of the initial public offering. Pursuant to such rights, Warburg has
maintained two nominees to the Company's Board of Directors and ABS maintained
two nominees to the Company's Board of Directors until July 1996 and one nominee
from July 1996 until February 1997. In addition to their rights to nominate and
elect directors, until terminated at the time of the initial public offering,
Warburg and ABS were also beneficiaries of certain drag along, tag along,
subscription and informational rights.

46
<PAGE> 47

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."

47
<PAGE> 48

PRINCIPAL AND SELLING STOCKHOLDERS

The following table presents certain information regarding beneficial
ownership of the Common Stock as of March 31, 1997, by (i) each person known by
the Company to be the beneficial owner of more than 5% of the outstanding shares
of Common Stock (including ABS as "Selling Stockholder"), (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 or entity
named below in the table has sole voting and investment power as to the shares
shown to be beneficially owned.

<TABLE>
<CAPTION>
SHARES OF SHARES OF SHARES OF
COMMON STOCK COMMON COMMON STOCK
BENEFICIALLY OWNED STOCK BENEFICIALLY OWNED
PRIOR TO OFFERING OFFERED HEREBY AFTER OFFERING
------------------- --------------- -------------------
NAME NUMBER PERCENT NUMBER PERCENT
- -------------------------------------------- --------- ------- --------- -------
<S> <C> <C> <C> <C> <C>
Warburg, Pincus Investors, L.P. (1)......... 2,248,485 43.5% -- 2,248,485 42.7%
466 Lexington Avenue
New York, New York 10017
ABS MB (C-N) Limited Partnership............ 910,190 17.6 910,190 -- --
One South Street
Baltimore, Maryland 21202
The Kaufmann Fund, Inc. (2)................. 419,500 8.1 -- 419,500 8.0
140 East 45th Street
New York, New York 10017
Stelios B. Papadopoulos (3)................. 191,365 3.6 -- 191,365 3.6
James G. Stewart (4)........................ 15,102 * -- 15,102 *
John T. Snow................................ 43,597 * -- 43,597 *
Ben Matzilevich (5)......................... 39,854 * -- 39,854 *
Douglas J. Greenwold (6).................... 30,190 * -- 30,190 *
Joseph P. Landy (7)......................... 2,248,485 43.5 -- 2,248,485 42.7
Richard A. Lerner........................... -- -- -- -- --
S. Joshua Lewis............................. -- -- -- -- --
Robert E. McGill, III (8)................... 4,366 * -- 4,366 *
Directors and Executive Officers as a group
(9 persons) (9)........................... 2,572,959 48.3% -- 2,572,959 47.5%
</TABLE>

- ---------------
* Less than 1%.
(1) The sole general partner of Warburg, Pincus Investors, L.P. ("Warburg") is
Warburg, Pincus & Co., a New York general partnership ("WP"). E.M. Warburg,
Pincus & Co., LLC, a New York limited liability company ("EMW LLC") manages
Warburg. The members of EMW LLC are substantially the same as the partners
of WP. Lionel I. Pincus is the managing partner of WP and the managing
member of EMW LLC and may be deemed to control both WP and EMW LLC. WP, as
the sole general partner of Warburg, has a 20% interest in the profits of
Warburg. Mr. Landy, a director of the Company, is a Managing Director and
member of EMW LLC and a general partner of WP. As such, Mr. Landy may be
deemed to have an indirect pecuniary interest (within the meaning of Rule
16a-1 under the Securities Exchange Act of 1934) in an indeterminate portion
of the shares beneficially owned by Warburg and WP. See Note (7) below.
(2) As reflected as beneficially owned at December 31, 1996 in a Statement on
Schedule 13G received by the Company on March 4, 1997.
(3) Includes 110,249 shares of Common Stock which may be acquired pursuant to
stock options exercisable within 60 days of March 31, 1997.
(4) Includes 9,463 shares of Common Stock which may be acquired pursuant to
stock options exercisable within 60 days of March 31, 1997.
(5) Includes 9,464 shares of Common Stock which may be acquired pursuant to
stock options exercisable within 60 days of March 31, 1997.
(6) Includes 28,390 shares of Common Stock which may be acquired pursuant to
stock options exercisable within 60 days of March 31, 1997.
(7) 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. 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 (1).
(8) The shares of Common Stock beneficially owned by Mr. McGill are held through
a revocable trust.
(9) Includes shares of Common Stock which may be acquired within 60 days of
March 31, 1997. See Notes (3), (4), (5) and (6).

48
<PAGE> 49

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
authorized capital stock of the Company consists 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 ("Class A Common Stock"), of which 11,186 shares may be
issued, and 5,000,000 shares of Preferred Stock, par value $.01 per share (the
"Preferred Stock").

COMMON STOCK

As of March 25, 1997, there were 5,172,367 shares of Common Stock
outstanding held of record by 25 persons. Upon the consummation of the offering
of shares of Common Stock offered by the Company hereby, there will be 5,262,177
shares of Common Stock outstanding (5,412,177 shares if the Underwriters'
over-allotment option is exercised in full). An aggregate of 638,545 shares of
Common Stock are issuable upon the exercise of outstanding stock options and
92,675 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

There are no shares of Class A Common Stock outstanding. 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. If issued and outstanding, 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. The Company does
not presently intend to issue any shares of its Class A Common Stock.

PREFERRED STOCK

As of the date of this Prospectus, there were no outstanding shares of
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

49
<PAGE> 50

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"),
including the shares of Common Stock being sold by the Selling Stockholder
hereby, 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 of such holders, other than the Selling Stockholder, 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 than 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.

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 transaction in which the
stockholder became an interested stockholder or 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

50
<PAGE> 51

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 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.

51
<PAGE> 52

UNDERWRITING

Subject to the terms and conditions of the Underwriting Agreement, the
underwriters named below (the "Underwriters") have agreed to purchase from the
Company and the Selling Stockholder the following respective number of shares of
Common Stock:

<TABLE>
<CAPTION>
UNDERWRITERS SHARES
------------------------------------------------------------------ ---------
<S> <C>
UBS Securities LLC................................................ 600,000
Dain Bosworth Incorporated........................................ 400,000
---------
Total................................................... 1,000,000
=========
</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 Underwriters have advised the Company and the Selling Stockholder 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 $0.48 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 150,000
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 and the Selling Stockholder have agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act.

Warburg and the Company's executive officers and directors, who
beneficially own an aggregate of 2,572,959 shares of Common Stock, 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 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 Underwriters were the managing underwriters of the Company's initial
public offering of Common Stock in October 1996.

Certain persons participating in this offering may overallot or effect
transactions which stabilize, maintain or otherwise affect the market price of
the Common Stock at levels above those which might otherwise prevail in the open
market, including by entering stabilizing bids or effecting syndicate covering
transactions. A stabilizing bid means the placing of any bid, or effecting any
purchase, for the purpose of pegging, fixing or

52
<PAGE> 53

maintaining the price of the Common Stock. A syndicate covering transaction
means the placing of any bid on behalf of the underwriting syndicate or the
effecting of any purchase to reduce a short position created in connection with
the offering. 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.

In general, the rules of the Commission will prohibit the Underwriters from
making a market in the Common Stock during a "restricted period" commencing one
business day prior to the pricing of the offering of Common Stock offered hereby
and extending until completion of the offering. The Commission has, however,
adopted exceptions from these rules that permit passive market making under
certain conditions. These rules permit an underwriter to continue to make a
market subject to the conditions, among others, that its bid not exceed the
highest bid by a market maker not connected with the offering and that its net
purchases on any one trading day not exceed prescribed limits. Pursuant to these
exemptions, the Underwriters, selling group members (if any) or their respective
affiliates may engage in passive market making in the Company's Common Stock
during the restricted period.

LEGAL MATTERS

The validity of the Common Stock offered hereby will be passed upon for the
Company and the Selling Stockholder 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 consolidated financial statements of CN Biosciences, Inc. at December
31, 1995 and 1996, and for each of the three years in the period ended December
31, 1996 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.

53
<PAGE> 54

AVAILABLE 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. In addition, the Company is subject to the
informational requirements of the Securities Exchange Act of 1934, as amended,
and in accordance therewith files reports, proxy statements, and other
information with the Commission. The Registration Statement, as well as the
reports, proxy statements and other information filed by the Company with the
Commission, 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, as
well as the reports, proxy statements and other information filed by the Company
with the Commission, may also be accessed electronically on the Commission's
World Wide Web site (http://www.sec.gov). The Common Stock is listed on the
Nasdaq National Market and reports and other information concerning the Company
may be inspected at the offices of Nasdaq Operations, 1735 K Street, N.W.,
Washington, D.C. 20006.

54
<PAGE> 55

INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Report of Independent Auditors......................................................... F-2
Consolidated Balance Sheets as of December 31, 1995 and 1996........................... F-3
Consolidated Statements of Operations for each of the three years in the period ended
December 31, 1996.................................................................... F-4
Consolidated Statements of Stockholders' Equity (Deficit) for each of the three years
in the period ended December 31, 1996................................................ F-5
Consolidated Statements of Cash Flows for each of the three years in the period ended
December 31, 1996.................................................................... F-6
Notes to Consolidated Financial Statements............................................. F-7
</TABLE>

F-1
<PAGE> 56

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, 1995 and 1996 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, 1996. 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 audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
CN Biosciences, Inc. at December 31, 1995 and 1996 and the consolidated results
of its operations and its cash flows for each of the three years in the period
ended December 31, 1996, in conformity with generally accepted accounting
principles.

ERNST & YOUNG LLP

San Diego, California
February 21, 1997

F-2
<PAGE> 57

CN BIOSCIENCES, INC.

CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------
1995 1996
----------- -----------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents....................................... $ 1,203,000 $10,591,000
Short-term investments.......................................... -- 4,113,000
Accounts receivable, trade, net of allowance for doubtful
accounts of $472,000 in 1995 and $341,000 in 1996............ 4,099,000 4,487,000
Inventories..................................................... 14,443,000 14,733,000
Other current assets............................................ 476,000 2,436,000
------------ ------------
Total current assets.............................................. 20,221,000 36,360,000
Property and equipment, net....................................... 4,030,000 3,688,000
Intangible assets, net............................................ 6,067,000 4,836,000
Other assets...................................................... 879,000 1,378,000
------------ ------------
Total assets...................................................... $31,197,000 $46,262,000
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable, trade......................................... $ 1,491,000 $ 2,303,000
Accrued expenses................................................ 1,556,000 1,906,000
Other current liabilities....................................... 583,000 1,920,000
Current portion of long-term debt............................... 1,167,000 --
------------ ------------
Total current liabilities......................................... 4,797,000 6,129,000
Long-term debt, net of current portion............................ 7,000,000 --
Other liabilities................................................. 1,601,000 1,233,000
Commitments
Redeemable preferred stock........................................ 18,343,000 --
Stockholders' equity (deficit):
Preferred stock, $.01 par value; 5,000,000 shares authorized,
none issued and outstanding.................................. -- --
Common stock, $.01 par value; 30,000,000 shares authorized,
1,058,065 shares in 1995 and 5,152,587 shares in 1996 issued
and outstanding.............................................. 11,000 52,000
Additional paid-in capital...................................... 255,000 38,736,000
Accumulated deficit............................................. (2,064,000) (63,000)
Foreign currency translation adjustment......................... 1,254,000 271,000
Note receivable from common stockholder......................... -- (96,000)
------------ ------------
Total stockholders' equity (deficit).............................. (544,000) 38,900,000
------------ ------------
Total liabilities and stockholders' equity........................ $31,197,000 $46,262,000
============ ============
</TABLE>

See accompanying notes.

F-3
<PAGE> 58

CN BIOSCIENCES, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------------------
1994 1995 1996
----------- ----------- -----------
<S> <C> <C> <C>
Sales............................................... $24,188,000 $26,966,000 $33,725,000
Cost of sales....................................... 13,183,000 13,185,000 15,388,000
----------- ----------- -----------
Gross profit........................................ 11,005,000 13,781,000 18,337,000
Operating expenses:
Selling, general and administrative............... 10,343,000 10,608,000 12,700,000
Research and development.......................... 736,000 1,338,000 2,144,000
----------- ----------- -----------
Total operating expenses.................. 11,079,000 11,946,000 14,844,000
----------- ----------- -----------
Income (loss) from operations....................... (74,000) 1,835,000 3,493,000
Interest expense, net............................... 326,000 527,000 532,000
----------- ----------- -----------
Income (loss) before income taxes................... (400,000) 1,308,000 2,961,000
Provision for income taxes.......................... 62,000 291,000 960,000
----------- ----------- -----------
Net income (loss)......................... $ (462,000) $ 1,017,000 $ 2,001,000
=========== =========== ===========
Net income (loss) per share......................... $ (.14) $ .30 $ .50
=========== =========== ===========
Shares used in per share computations............... 3,328,000 3,422,000 3,995,000
=========== =========== ===========
</TABLE>

See accompanying notes.

F-4
<PAGE> 59

CN BIOSCIENCES, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)

YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996

<TABLE>
<CAPTION>
NOTE
FOREIGN RECEIVABLE
COMMON STOCK ADDITIONAL CURRENCY FROM
-------------------- PAID-IN ACCUMULATED TRANSLATION COMMON
SHARES AMOUNT CAPITAL DEFICIT ADJUSTMENT STOCKHOLDER TOTAL
--------- ------- ----------- ----------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
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,
including tax benefit...... 1,893 1,000 5,000 -- -- -- 6,000
Issuance of note receivable
for common stock........... 28,390 -- 96,000 -- -- (96,000) --
Sale of common stock
net of issuance costs of
$2,923,000................. 1,840,000 18,000 20,059,000 -- -- -- 20,077,000
Conversion of preferred
stock...................... 2,224,238 22,000 18,321,000 -- -- -- 18,343,000
Net income................... -- -- -- 2,001,000 -- -- 2,001,000
Translation adjustment....... -- -- -- -- (983,000) -- (983,000)
--------- ------- ----------- ----------- ---------- -------- -----------
Balance at December 31, 1996... 5,152,587 $52,000 $38,736,000 $ (63,000) $ 271,000 $ (96,000) $38,900,000
========= ======= =========== =========== ========== ======== ===========
</TABLE>

See accompanying notes.

F-5
<PAGE> 60

CN BIOSCIENCES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------------------
1994 1995 1996
----------- ----------- ------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income (loss)................................... $ (462,000) $ 1,017,000 $ 2,001,000
Adjustments to reconcile net income (loss) to net
cash provided by (used in) operations:
Depreciation and amortization..................... 1,448,000 1,856,000 1,877,000
Additions to inventory reserve.................... 192,000 317,000 310,000
Additions (reductions) to allowance for doubtful
accounts....................................... 217,000 (129,000) 10,000
Loss on disposal of property and equipment........ 2,000 10,000 5,000
Forgiveness of note receivable from stockholder... 150,000 150,000 --
Changes in assets and liabilities:
Accounts receivable, trade..................... (327,000) (409,000) (599,000)
Inventories.................................... 709,000 (370,000) (1,325,000)
Other current assets........................... (12,000) 329,000 (842,000)
Deferred income taxes.......................... 42,000 26,000 (242,000)
Other assets................................... (475,000) (1,153,000) (1,102,000)
Accounts payable, trade........................ (784,000) 148,000 910,000
Accrued expenses............................... (436,000) 781,000 365,000
Other current liabilities...................... (655,000) (590,000) 1,300,000
Other liabilities.............................. 362,000 9,000 (643,000)
----------- ----------- -----------
Net cash provided by (used in) operating
activities........................................ (29,000) 1,992,000 2,025,000
INVESTING ACTIVITIES
Purchases of property and equipment................. (1,436,000) (805,000) (369,000)
Proceeds from sale of property and equipment........ 51,000 22,000 5,000
Purchase of business................................ -- (6,213,000) --
Purchase of short-term investments.................. -- -- (4,829,000)
Sale of short-term investments...................... -- -- 716,000
Other............................................... 154,000 150,000 --
----------- ----------- -----------
Net cash used in investing activities............... (1,231,000) (6,846,000) (4,477,000)
----------- ----------- -----------
FINANCING ACTIVITIES
Proceeds from lines of credit....................... 258,000 809,000 1,025,000
Payments on lines of credit......................... (33,000) (1,404,000) (1,025,000)
Proceeds from long-term debt........................ 2,500,000 8,500,000 --
Payments on long-term debt.......................... (2,500,000) (2,500,000) (8,167,000)
Proceeds from sale of common stock.................. 7,000 24,000 20,083,000
Payments for repurchase of stock.................... -- (326,000) --
----------- ----------- -----------
Net cash provided by financing activities........... 232,000 5,103,000 11,916,000
----------- ----------- -----------
Effect of exchange rate changes on cash ............ 124,000 19,000 (76,000)
----------- ----------- -----------
Net increase (decrease) in cash and cash
equivalents....................................... (904,000) 268,000 9,388,000
Balance at beginning of year........................ 1,839,000 935,000 1,203,000
----------- ----------- -----------
Balance at end of year.............................. $ 935,000 $ 1,203,000 $ 10,591,000
=========== =========== ===========
Supplemental cash flow information:
Interest paid during the year..................... $ 316,000 $ 548,000 $ 747,000
=========== =========== ===========
Income taxes paid during the year................. $ 86,000 $ 313,000 $ 67,000
=========== =========== ===========
</TABLE>

See accompanying notes.

F-6
<PAGE> 61

CN BIOSCIENCES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 1996

1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Organization

CN Biosciences, 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, including Calbiochem, Novabiochem and Oncogene Research
Products. With over 7,800 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.

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.

Short-term investments

The Company has classified its investments as available for sale and
accordingly carries them at fair value. Unrealized holding gains or losses, if
any, net of tax, on these securities are carried as a separate component of
stockholders' equity. The amortized cost of debt securities in this category is
adjusted for amortization of premiums and accretion of discounts to maturity.
Such amortization is included in interest income. Realized gains and losses and
declines in value judged to be other than temporary on available-for-sale
securities are also included in interest income. The cost of securities sold is
based on the specific identification method.

F-7
<PAGE> 62

CN BIOSCIENCES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

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 item. 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.

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 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.

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.

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.

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 transaction gains and losses were not material
during any of the three years in the period ended December 31, 1996.

Net Income (Loss) Per Share

For periods subsequent to the completion of the Company's initial public
offering of common stock ("IPO") in October 1996, 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

F-8
<PAGE> 63

CN BIOSCIENCES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

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. For
periods prior to the IPO, net income (loss) per share is computed pursuant to
the requirements of the Securities and Exchange Commission which require that
common stock issued during the twelve months immediately preceding the IPO, 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). In addition, the calculation of the shares used in computing
net income (loss) per share also gives effect to the conversion and exchange of
the shares of preferred stock upon completion of the IPO using the if-converted
method from the original date of issuance.

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
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
Net income (loss) per share............................... $ (.10) $ .29
</TABLE>

3. FINANCIAL STATEMENT DETAILS

Short-term investments of the Company are classified as available-for-sale
and are stated at amortized cost which approximates market value. There were no
significant unrealized or realized gains or losses related to such securities as
of December 31, 1996. The Company's available-for-sale securities and cash
equivalents consist entirely of state and municipal debt securities and mature
at various dates through 1998.

F-9
<PAGE> 64

CN BIOSCIENCES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Inventories

<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------
1995 1996
----------- -----------
<S> <C> <C>
Finished products......................................... $13,987,000 $13,777,000
Semi-finished products, raw materials and supplies........ 3,958,000 4,131,000
Work-in-progress.......................................... 415,000 525,000
----------- -----------
18,360,000 18,433,000
Reserves for excess materials............................. (3,917,000) (3,700,000)
----------- -----------
$14,443,000 $14,733,000
=========== ===========
</TABLE>

Other current assets

<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------
1995 1996
----------- -----------
<S> <C> <C>
Deferred income taxes..................................... $ 82,000 $ 1,211,000
Other..................................................... 394,000 1,225,000
-------- ----------
$ 476,000 $ 2,436,000
======== ==========
</TABLE>

Property and equipment

<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------
1995 1996
----------- -----------
<S> <C> <C>
Equipment and office fixtures............................. $ 6,365,000 $ 6,581,000
Leasehold improvements.................................... 1,131,000 1,165,000
----------- -----------
7,496,000 7,746,000
Accumulated depreciation.................................. (3,466,000) (4,058,000)
----------- -----------
$ 4,030,000 $ 3,688,000
=========== ===========
</TABLE>

Intangible assets

<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------
1995 1996
----------- -----------
<S> <C> <C>
Goodwill.................................................. $ 6,561,000 $ 5,707,000
Accumulated amortization.................................. (494,000) (871,000)
---------- ----------
$ 6,067,000 $ 4,836,000
========== ==========
</TABLE>

Goodwill represents the excess of the purchase price over the fair market
value of assets acquired, and is being amortized over 15 to 25 years. In 1995
and 1996, the Company reduced the value of goodwill by $150,000 and $854,000
respectively, based on the recognition of certain deferred tax assets which had
previously been considered unrealizable. Amortization of goodwill for the years
ended December 31, 1994, 1995 and 1996 was $100,000, $215,000, and $377,000,
respectively.

F-10
<PAGE> 65

CN BIOSCIENCES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Other assets

<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------
1995 1996
-------- ----------
<S> <C> <C>
Capitalized direct-response advertising...................... $171,000 $ 842,000
Other........................................................ 708,000 536,000
-------- ----------
$879,000 $1,378,000
======== ==========
</TABLE>

Amortization of capitalized direct-response advertising for the years ended
December 31, 1994, 1995 and 1996 was $400,000, $714,000 and $551,000,
respectively.

4. BANK DEBT

The Company's U.S. subsidiary's credit agreement with a commercial bank
provides for unsecured borrowings under a revolving line of credit up to a
maximum of $5,000,000 which expires in June 1998. The facility provides that the
Company can elect that borrowings bear interest at the bank's prime rate or
LIBOR plus 2.35% (8.25% at December 31, 1996). There were no borrowings
outstanding under this facility at December 31, 1996.

Interest expense charged against operations for the years ended December
31, 1994, 1995 and 1996 was $349,000, $574,000 and $717,000, respectively.

5. REDEEMABLE PREFERRED STOCK AND STOCKHOLDERS' EQUITY

Redeemable Preferred Stock

Upon consummation of the Company's IPO, the holder of the 4,001 outstanding
shares of Series A preferred stock converted such shares into 788,814 shares of
Class A common stock which was subsequently converted into 788,814 shares of
common stock, and the holders of the 179,428 outstanding shares of Series B
preferred stock exchanged such shares of Series B preferred stock for 1,435,424
shares of common stock.

Class A Common Stock

In January 1995, the Company authorized 500,000 shares, $.01 par value, of
nonvoting Class A common stock and in July 1996, increased the number of such
authorized shares to 800,000. 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. In
December 1996, the holder of the 788,814 outstanding shares of Class A common
stock converted such shares into 788,814 shares of common stock. At December 31,
1996, 11,186 shares of Class A common stock were available to be issued.

Stock Option Plans

The Company has elected to follow APB 25 and related Interpretations in
accounting for its employee stock options because, as discussed below, the
alternative fair value accounting provided for under FASB Statement No. 123,
"Accounting for Stock-Based Compensation" ("Statement 123") requires use of
option valuation models that were not developed for use in valuing 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.

The Company's Amended and Restated 1992 Stock Option Plan has authorized
the grant of options to employees, directors and consultants of the Company for
up to 835,000 shares of the Company's common stock. Options granted have 5 to 10
year terms and vest and become fully exercisable 4 to 5 years from the date of
grant.

F-11
<PAGE> 66

CN BIOSCIENCES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

A summary of the Company's stock option activity and related information is
as follows:

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------------------------------------
1994 1995 1996
------------------ ------------------ ------------------
WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE
EXERCISE EXERCISE EXERCISE
OPTIONS PRICE OPTIONS PRICE OPTIONS PRICE
------- -------- ------- -------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
Outstanding -- beginning of year......... 382,984 $.42 379,672 $.42 395,334 $ .45
Granted................................ 23,659 .42 101,732 .54 244,600 16.50
Exercised.............................. (16,561) .42 (56,922) .42 (1,893) .42
Forfeited.............................. (10,410) .42 (29,148) .42 (2,716) 3.05
------- --- ------- --- ------- -----
Outstanding -- end of year............... 379,672 $.42 395,334 $.45 635,325 $ 6.62
======= === ======= === ======= =====
Exercisable -- end of year............... 94,137 $.42 125,153 $.42 214,211 $ .43
------- --- ------- --- ------- -----
</TABLE>

Exercise prices for options outstanding as of December 31, 1996 ranged from
$.42 to $16.50. The weighted-average remaining contractual life of those options
is approximately 5 years.

At December 31, 1996, options for 117,675 shares were available for future
grant. At December 31, 1996, 756,028 shares of common stock were reserved for
future issuance related to stock options and warrants.

Pro forma information regarding net income and net income per share is
required by Statement 123, and has been determined as if the Company had
accounted for its employee stock options under the fair value method of that
statement. The fair value of these options was estimated at the date of grant
using the Black-Scholes option pricing model with the following weighted average
assumptions for 1995 and 1996, respectively: risk-free interest rates of 5.8% to
6.8% and 5.4% to 6.0%; dividend yields of 0%; volatility factors of the expected
market price of the Company's common stock of 0 and .3853; and a
weighted-average life of the option of 4.5 years.

The Black-Scholes option valuation model was developed for use in
estimating the fair value of traded options which have no vesting restrictions
and are fully transferable. In addition, option valuation models require the
input of highly subjective assumptions including the expected stock price
volatility. Because the Company's employee stock options have characteristics
significantly different from those of traded options, and because changes in the
subjective assumptions can materially affect the fair value estimate, in
management's opinion, the existing models do not necessarily provide a reliable
single measure of the fair value of its employee stock options.

For purposes of pro forma disclosures, the estimated fair value of the
options is amortized to expense over the vesting period of such options. The
effects of applying Statement 123 for pro forma disclosure purposes are not
likely to be representative of the effects on pro forma net income in future
years because they do not take into consideration pro forma compensation expense
related to grants made prior to 1995. The Company's pro forma information
follows:

<TABLE>
<CAPTION>
1995 1996
---------- ----------
<S> <C> <C>
Pro forma net income........................................ $1,014,000 $1,915,000
========== ==========
Pro forma net income per share.............................. $ .30 $ .48
========== ==========
Weighted-average fair value of options granted during the
year...................................................... $ .15 $ 8.74
========== ==========
</TABLE>

F-12
<PAGE> 67

CN BIOSCIENCES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

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.

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.

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%.

7. INCOME TAXES

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

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------------
1994 1995 1996
------- -------- ---------
<S> <C> <C> <C>
Current:
Federal.......................................... $17,000 $ 52,000 $ 714,000
State............................................ 2,000 17,000 52,000
------- -------- --------
19,000 69,000 766,000
Deferred:
Federal.......................................... 43,000 139,000 (277,000)
State............................................ -- 36,000 (110,000)
------- -------- --------
43,000 175,000 (387,000)
------- -------- --------
Total Federal and State............................ 62,000 244,000 379,000
Foreign............................................ -- 47,000 581,000
------- -------- --------
$62,000 $291,000 $ 960,000
======= ======== ========
</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, 1995 and 1996 are shown below. As of December 31,
1995 and 1996, a valuation allowance of $3,296,000 and $2,389,000, respectively,
has been recognized as an offset to the deferred tax assets related to the
jurisdictions in which realization of such assets is uncertain.

F-13
<PAGE> 68

CN BIOSCIENCES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------
1995 1996
----------- -----------
<S> <C> <C>
Deferred tax assets:
Inventory reserves...................................... $ 548,000 $ 472,000
Accounts receivable reserves............................ 65,000 62,000
Net operating losses.................................... 2,397,000 2,336,000
Deferred rent........................................... 102,000 148,000
Other................................................... 283,000 801,000
----------- -----------
3,395,000 3,819,000
Valuation allowances.................................... (3,296,000) (2,389,000)
----------- -----------
99,000 1,430,000
Deferred tax liabilities:
Depreciation............................................ (15,000) (157,000)
Other................................................... -- (92,000)
----------- -----------
(15,000) (249,000)
----------- -----------
Net deferred tax assets................................... $ 84,000 $ 1,181,000
=========== ===========
</TABLE>

Income tax expense 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,
--------------------------------------
1994 1995 1996
--------- --------- ----------
<S> <C> <C> <C>
Provision at federal statutory rate............. $(136,000) $ 445,000 $1,007,000
State income taxes, net of federal benefit...... 1,000 56,000 91,000
Nondeductible expenses, including amortization
of costs in excess of net assets acquired..... 63,000 71,000 42,000
Change in valuation allowance, net of write-offs
and adjustments............................... 134,000 (298,000) (113,000)
Other, net...................................... -- 17,000 (67,000)
-------- -------- --------
Total income tax expense........................ $ 62,000 $ 291,000 $ 960,000
======== ======== ========
</TABLE>

At December 31, 1996, the Company had state net operating loss
carryforwards of approximately $211,000 which begin to expire in 1998 unless
previously utilized. The Company also had approximately $1,641,000 and $258,000
of foreign net operating losses in Germany and the United Kingdom, respectively,
which are available indefinitely. Additionally, the Company has approximately
$6,492,000 and $5,727,000 of net operating losses for Swiss Federal and Cantonal
purposes, respectively, which will begin to expire in 2000 and 1997,
respectively, unless previously utilized.

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, 1994, 1995 and 1996 was $1,157,000, $1,126,000 and $1,640,000,
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, 1995 were approximately $1,514,000 and

F-14
<PAGE> 69

CN BIOSCIENCES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

$587,000, respectively, and at December 31, 1996 were $1,491,000 and $359,000,
respectively. Amortization of assets held under capital leases is included with
depreciation expenses.

Future annual minimum payments under the operating and capital leases as of
December 31, 1996 are as follows:

<TABLE>
<CAPTION>
OPERATING CAPITAL
LEASES LEASES
----------- ---------
<S> <C> <C>
1997...................................................... $ 1,486,000 $ 425,000
1998...................................................... 1,350,000 232,000
1999...................................................... 1,144,000 181,000
2000...................................................... 1,125,000 80,000
2001...................................................... 1,112,000 24,000
Thereafter................................................ 6,465,000 --
----------- ---------
$12,682,000 942,000
===========
Less amounts representing interest........................ (137,000)
---------
Present value of future minimum lease payments............ 805,000
Less current portion (included in other current
liabilities)............................................ (369,000)
---------
Capital lease obligation, net of current portion (included
in other liabilities)................................... $ 436,000
=========
</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, 1996. United States export sales, principally to Europe and Asia,
aggregated $2,524,000, $4,429,000 and $6,812,000, for the years ended December
31, 1994, 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, 1994
------------------------------------------------------------------
CONSOLIDATED
UNITED STATES EUROPE OTHER ELIMINATIONS TOTAL
------------- ------- ------ ------------ ------------
(IN THOUSANDS)
<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>

F-15
<PAGE> 70

CN BIOSCIENCES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1995
------------------------------------------------------------------
CONSOLIDATED
UNITED STATES EUROPE OTHER ELIMINATIONS TOTAL
------------- ------- ------ ------------ ------------
(IN THOUSANDS)
<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 income taxes............. $ 211 $ 1,058 $ 36 $ 3 $ 1,308
======= ======= ====== ======= =======
Identifiable assets.................... $22,557 $ 8,978 $ 482 $ (820) $ 31,197
======= ======= ====== ======= =======
</TABLE>

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1996
------------------------------------------------------------------
CONSOLIDATED
UNITED STATES EUROPE OTHER ELIMINATIONS TOTAL
------------- ------- ------ ------------ ------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Sales to unaffiliated customers........ $17,298 $12,946 $3,481 $ -- $ 33,725
Transfers between geographic areas..... 5,139 4,999 450 (10,588) --
------- ------- ------ -------- -------
Total revenue.......................... $22,437 $17,945 $3,931 $(10,588) $ 33,725
======= ======= ====== ======== =======
Income before income taxes............. $ 1,373 $ 1,555 $ 33 $ -- $ 2,961
======= ======= ====== ======== =======
Identifiable assets.................... $37,914 $ 8,926 $ 453 $ (1,031) $ 46,262
======= ======= ====== ======== =======
</TABLE>

10. EMPLOYEE BENEFIT PLAN

The Company sponsors a Defined Contribution 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 may make matching contributions equal
to a maximum of 30% of each participant's contribution per year. The
contributions charged to operations for the years ended December 31, 1994, 1995
and 1996 were $31,000, $67,000 and $87,000, respectively.

F-16
<PAGE> 71

INSIDE BACK COVER PAGE

[COLOR PICTURE OF TWO SCIENTISTS WORKING IN LABORATORY WITH CAPTION WHICH
READS "THE COMPANY'S SCIENTIFIC STAFF, INCLUDING 42 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 48 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> 72

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
Price Range of Common Stock........... 14
Selected Consolidated Financial
Data................................ 15
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 16
Business.............................. 22
Management............................ 38
Certain Transactions.................. 46
Principal and Selling Stockholders.... 48
Description of Capital Stock.......... 49
Underwriting.......................... 52
Legal Matters......................... 53
Experts............................... 53
Available Information................. 54
Index to Financial Statements......... F-1
</TABLE>

1,000,000 SHARES

[CN BIOSCIENCES LOGO]

COMMON STOCK

---------------------------------
PROSPECTUS
APRIL 2, 1997
---------------------------------

UBS SECURITIES

DAIN BOSWORTH
Incorporated