CHIRON CORP, 8-K/A, 1995-03-17

CHIRON CORP
8-K/A, 1995-03-17
IN VITRO & IN VIVO DIAGNOSTIC SUBSTANCES

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

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

FORM 8-K/A

AMENDMENT NO. 1 TO CURRENT REPORT ON FORM 8-K
PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

Date of Report (Date of earliest event reported):
JANUARY 4, 1995

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

CHIRON CORPORATION
(Exact name of registrant as specified in its charter)

DELAWARE 0-12798 94-2754624
(State or other jurisdiction (Commission (I.R.S. Employer
of incorporation) File Number) Identification No.)

4560 HORTON STREET,
EMERYVILLE, CALIFORNIA 94608-2916
(Address of principal
executive offices) (Zip Code)

Registrant's telephone number, including area code:
(510) 655-8730

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NOT APPLICABLE
(Former name or former address, if changed since last report.)

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<PAGE>
AMENDMENT NO. 1

ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS

The undersigned registrant hereby amends the following portion of its
Current Report on Form 8-K dated January 4, 1995, as set forth below:

(a) FINANCIAL STATEMENTS OF BUSINESSES ACQUIRED

Chiron Corporation ("Chiron" or the "Company") is filing with this amendment
the financial statements required by Item 7 (a) of this Form. The following
financial statements are included in Exhibit 13 and incorporated herein by
reference:

1. Audited Consolidated Balance Sheets, Statements of Operations and
Cash Flows of Ciba Corning Diagnostics Corp. as of December 31, 1994 and
December 31, 1993 and for each of the years in the three-year period ended
December 31, 1994, together with the report thereon by Ernst & Young LLP,
independent accountants for Ciba Corning Diagnostics Corp.

2. Audited Balance Sheets, Statements of Operations and Cash Flows of
The Biocine Company as of December 31, 1994 and December 31, 1993 and for
each of the years in the three-year period ended December 31, 1994, together
with the report thereon by KPMG Peat Marwick LLP, independent accountants
for The Biocine Company.

3. Audited Consolidated Balance Sheets, Statements of Operations and
Cash Flows of JV Vax B.V. as of November 30, 1994 and November 30, 1993 and
for each of the three periods ended November 30, 1994, 1993 and 1992,
together with the report thereon by Reconta Ernst & Young, independent
accountants for JV Vax B.V.

(b) PRO FORMA FINANCIAL INFORMATION

Pro forma financial information for the transaction described in Item 2,
consisting of an Unaudited Pro Forma Combined Condensed Statement of Operations
for the year ended December 31, 1994 and an Unaudited Pro Forma Combined
Condensed Balance Sheet as of December 31, 1994, together with notes thereto,
are attached hereto and incorporated herein by reference.

The following Unaudited Pro Forma Combined Condensed Balance Sheet as of
December 31, 1994, and the Unaudited Pro Forma Combined Condensed Statement of
Operations for the year ended December 31, 1994, give effect to Chiron's
acquisitions from Ciba-Geigy Limited ("Ciba") of Ciba Corning Diagnostics Corp.
("CCD") and Ciba's interests in The Biocine Company and JV Vax B.V. accounted
for under the purchase method of accounting. The Unaudited Pro Forma Combined
Condensed Financial Statements are based on the historical Consolidated
Financial Statements of Chiron, Ciba Corning Diagnostics Corp., The Biocine
Company, and JV Vax B.V. and give effect to the assumptions and adjustments set
forth in the accompanying Notes to the Unaudited Pro Forma Combined Condensed
Financial Statements.

The Unaudited Pro Forma Combined Condensed Balance Sheet assumes that the
acquisitions were consummated on December 31, 1994, and the Unaudited Pro Forma
Combined Condensed Statement of Operations assumes the acquisitions were
consummated on January 1, 1994.

The pro forma adjustments are based on the agreements between Ciba and
Chiron, which provide for Ciba to receive 6.6 million shares of newly issued
Chiron common stock and a cash payment of $23.5 million in exchange for Ciba
Corning Diagnostics Corp. and Ciba's interests in The Biocine

1
<PAGE>
Company and JV Vax B.V. For purposes of developing the Unaudited Pro Forma
Combined Condensed Balance Sheet, the value of the Chiron common stock is based
upon a per share price of $61.75. The estimated aggregate amount to be allocated
to the assets acquired consists of (in thousands):

<TABLE>
<S> <C>
Chiron common stock issued to Ciba....................................... $ 407,550
Cash payment to Ciba..................................................... 23,504
Estimated costs and expenses............................................. 2,344
---------
$ 433,398
---------
---------
</TABLE>

The actual allocation will be based on the estimated fair values of the
tangible and intangible assets and liabilities of the acquired companies on
January 1, 1995. For purposes of the pro forma financial statements, such
allocation has been estimated as follows (in thousands):

<TABLE>
<S> <C>
Current assets.......................................................... $ 279,154
Property, plant and equipment........................................... 133,554
Liabilities............................................................. (251,524)
Other assets............................................................ 20,603
Intangible assets....................................................... 33,004
In-process technology................................................... 218,607
---------
$ 433,398
---------
---------
</TABLE>

The allocation is based upon preliminary estimates. In accordance with
generally accepted accounting principles, the amount allocated to in-process
technology will be charged to expense in the first quarter of 1995. This
adjustment has been excluded from the Unaudited Pro Forma Combined Condensed
Statement of Operations as it is a nonrecurring item. In addition, the Company
expects to incur other nonrecurring charges in the first quarter of 1995 related
to Ciba's investment in Chiron, including payments to employees and the related
taxes, as well as investment advisor and legal fees associated with the
transaction. These additional charges are estimated to total approximately $50
million and have also been excluded from the Unaudited Pro Forma Combined
Condensed Statement of Operations as they are nonrecurring items.

The Unaudited Pro Forma Combined Condensed Statement of Operations excludes
any potential benefits that might result from the acquisitions due to synergies
that may be derived and from the elimination of any duplicate efforts. The
Unaudited Pro Forma Combined Condensed Financial Statements do not purport to be
indicative of the results that actually would have occurred if the acquisitions
occurred on the dates indicated or indicative of results which may be obtained
in the future. The Unaudited Pro Forma Combined Condensed Financial Statements
should be read in conjunction with the historical Consolidated Financial
Statements and accompanying Notes for Chiron, Ciba Corning Diagnostics Corp.,
The Biocine Company and JV Vax B.V.

<TABLE>
<C> <S>
13.1 Consolidated financial statements of Ciba Corning Diagnostics Corp.
13.2 Financial statements of The Biocine Company
13.3 Consolidated financial statements of JV Vax B.V.
23.1 Consent of Ernst & Young LLP, Independent Auditors
23.2 Consent of KPMG Peat Marwick LLP, Independent Auditors
23.3 Consent of Reconta Ernst & Young, Independent Auditors
</TABLE>

2
<PAGE>
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1994
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
CIBA ADJUSTMENTS
CORNING THE AND
CHIRON DIAGNOSTICS JV VAX BIOCINE ELIMINATION PRO FORMA
CORPORATION CORP. B.V. COMPANY TOTAL ENTRIES COMBINED
------------ ----------- ------- -------- -------- ------------ ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues:
Product sales......................... $275,966 $447,125 $56,676 $ -- $779,767 $ -- $779,767
Equity in earnings of unconsolidated
joint businesses..................... 82,395 -- -- -- 82,395 (7,144)(4) 75,251
Collaborative agreement revenues...... 67,501 -- -- -- 67,501 -- 67,501
Other revenues........................ 28,117 8,550 2,578 -- 39,245 (1,937)(8) 34,608
(2,700)(5)
------------ ----------- ------- -------- -------- ------------ ---------
Total revenues...................... 453,979 455,675 59,254 -- 968,908 (11,781) 957,127
Expenses:
Research and development.............. 166,175 61,484 9,233 54,875 291,767 (54,875)(4) 236,830
(62)(1)
Cost of sales......................... 128,209 208,916 24,105 -- 361,230 (12,265)(1) 348,965
Selling, general and administrative... 112,107 157,811 21,789 1,937 293,644 (1,937)(8) 291,557
(150)(1)
Other operating expenses.............. 5,088 12,627 -- -- 17,715 1,486(2) 19,201
Loss on divestiture................... -- (3,757) -- -- (3,757) -- (3,757)
------------ ----------- ------- -------- -------- ------------ ---------
Total expenses...................... 411,579 437,081 55,127 56,812 960,599 (67,803) 892,796
------------ ----------- ------- -------- -------- ------------ ---------
Income (loss) from operations........... 42,400 18,594 4,127 (56,812) 8,309 56,022 64,331
Other income (expense), net............. (10,403) (12,482) 10,868 683 (11,334) 3,971(3) (7,363)
------------ ----------- ------- -------- -------- ------------ ---------
Income (loss) before income taxes....... 31,997 6,112 14,995 (56,129) (3,025) 59,993 56,968
Provision for income taxes.............. 13,672 4,006 3,103 -- 20,781 4,501(6) 25,282
------------ ----------- ------- -------- -------- ------------ ---------
Net income (loss)....................... $ 18,325 $ 2,106 $11,892 $(56,129) $(23,806) $ 55,492 $ 31,686
------------ ----------- ------- -------- -------- ------------ ---------
------------ ----------- ------- -------- -------- ------------ ---------
Net income per share.................... $0.53 $0.77(7)
------------ ---------
------------ ---------
Shares used in calculation of net income
per share.............................. 34,293 40,893(7)
------------ ---------
------------ ---------
</TABLE>

See accompanying notes.

3
<PAGE>
NOTES TO UNAUDITED PRO FORMA COMBINED
CONDENSED STATEMENT OF OPERATIONS

The Unaudited Pro Forma Combined Condensed Statement of Operations has been
prepared to reflect the acquisitions as if they occurred on January 1, 1994. In
the case of JV Vax B.V., the amounts included herein are for the year ended
November 30, 1994. The acquisitions have been accounted for under the purchase
method of accounting. The amount of the purchase price allocated to base
technology has been recorded as an intangible asset and is being amortized on a
straight-line basis over 10-15 years.

The following is a summary of reclassifications and adjustments reflected in
the Unaudited Pro Forma Combined Condensed Statement of Operations:

1) Represents adjustments to depreciation and amortization resulting
from the fair market value adjustments to fixed assets, intangible assets,
and other assets recorded in connection with the acquisitions.

2) Represents the amortization of identifiable intangible assets
primarily over 10 to 15 years.

3) Represents the adjustments to interest income and interest expense
resulting from (a) a reduction in Ciba Corning Diagnostics Corp.'s debt to
amounts specified in the acquisition agreements at a weighted average
interest rate of 6.8%, and (b) a reduction in interest income earned due to
the $23.5 million payment made to Ciba in connection with the acquisition.

4) Represents the elimination of Chiron's share of the net income of JV
Vax B.V. and research expense billed by Chiron to The Biocine Company.
Revenues of $40.9 million earned by Chiron from The Biocine Company were not
eliminated as Ciba has agreed to provide research funding of at least $250
million over five years in support of research at Chiron. However, the
specific programs to be funded are subject to Ciba's approval. In the event
Chiron utilizes this research funding arrangement, Chiron will be obligated
to offer to Ciba the opportunity to share in the market opportunities of any
resulting products. Alternatively, Chiron is entitled to re-acquire all
rights to any resulting products by repaying to Ciba, in cash or common
stock, an amount equal to the funding plus interest.

5) Represents the elimination of revenues recorded by CCD in connection
with research collaboration arrangements with Ciba.

6) Represents the tax effect, where applicable, of the Unaudited Pro
Forma Combined Condensed Statement of Operations adjustments based on the
statutory rate in effect for the period shown.

7) Pro forma combined net income per share amounts as presented in the
accompanying Unaudited Pro Forma Combined Condensed Statement of Operations
are based on the weighted average number of Chiron shares used in the
calculation of historical net income per share, adjusted to reflect the
issuance of 6.6 million new shares of Chiron common stock to Ciba.

8) Represents the elimination of intercompany transactions.

9) As required under generally accepted accounting principles, amounts
allocated to acquired in-process technology have been written off in the
accompanying Unaudited Pro Forma Combined Condensed Balance Sheet. This
$218.6 million charge has been excluded from the Unaudited Pro Forma
Combined Condensed Statement of Operations as it represents a material,
nonrecurring item. Additionally, the Company expects to incur charges of
approximately $50 million related to legal and investment advisory fees and
employee payments and the related taxes in connection with this transaction.
These charges have also been excluded from the Unaudited Pro Forma Combined
Condensed Statement of Operations as they represent material, nonrecurring
items but they have been reflected in the accompanying Unaudited Pro Forma
Combined Condensed Balance Sheet.

4
<PAGE>
UNAUDITED PRO FORMA COMBINED CONDENSED BALANCE SHEET
DECEMBER 31, 1994
(IN THOUSANDS)

<TABLE>
<CAPTION>
CIBA ADJUSTMENTS
CORNING AND
CHIRON DIAGNOSTICS JV VAX THE BIOCINE ELIMINATION PRO FORMA
CORPORATION CORP. B.V. COMPANY TOTAL ENTRIES COMBINED
----------- ----------- --------- ----------- ---------- ------------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Current assets:
Cash and cash equivalents........... $ 84,876 $ 14,953 $ 12,203 $ 10,573 $ 122,605 $ (23,504)(5) $ 99,101
Short-term investments in marketable
debt securities.................... 137,619 -- -- -- 137,619 -- 137,619
Accounts receivable, net............ 140,476 126,386 34,503 -- 301,365 (17,283)(1) 283,352
(730)(2)
Inventories......................... 47,592 72,636 12,926 -- 133,154 9,068 (2) 142,222
Other current assets................ 23,252 7,516 582 -- 31,350 -- 31,350
----------- ----------- --------- ----------- ---------- ------------- ----------
Total current assets.............. 433,815 221,491 60,214 10,573 726,093 (32,449) 693,644
Noncurrent investments in marketable
debt securities...................... 171,328 -- -- -- 171,328 -- 171,328
Property, equipment and leasehold
improvements, net.................... 286,174 141,095 27,082 -- 454,351 (21,082)(2) 433,269
Intangible assets, net................ 85,803 16,272 268 -- 102,343 235,205 (2) 118,941
(218,607)(4)
Investments in equity securities and
affiliated companies................. 51,425 -- -- -- 51,425 (21,630)(6) 29,795
Other assets.......................... 21,197 23,740 358 -- 45,295 (3,316)(2) 41,979
----------- ----------- --------- ----------- ---------- ------------- ----------
$1,049,742 $ 402,598 $ 87,922 $ 10,573 $1,550,835 $ (61,879) $1,488,956
----------- ----------- --------- ----------- ---------- ------------- ----------
----------- ----------- --------- ----------- ---------- ------------- ----------
Current liabilities:
Accounts payable.................... $ 27,778 $ 26,469 $ 14,874 $ -- $ 69,121 $ -- $ 69,121
Accrued compensation and related
expenses........................... 24,010 16,983 3,154 -- 44,147 2,400 (2) 46,547
Current portion of long-term debt
and bank borrowings................ 3,461 38,804 4,266 -- 46,531 -- 46,531
Taxes payable....................... 10,060 7,964 178 -- 18,202 -- 18,202
Due to affiliates................... 8,645 68,652 1,219 17,283 95,799 (25,928)(1) 1,219
(68,652)(3)
Other current liabilities........... 45,687 32,472 6,212 -- 84,371 10,949 (2) 122,964
27,644 (5)
----------- ----------- --------- ----------- ---------- ------------- ----------
Total current liabilities......... 119,641 191,344 29,903 17,283 358,171 (53,587) 304,584
Due to affiliates..................... -- 55,405 -- -- 55,405 (3,981)(3) 51,424
Long-term debt........................ 338,061 5,791 9,271 -- 353,123 -- 353,123
Postretirement benefits............... -- 40,951 -- -- 40,951 (27,211)(3) 13,740
Other noncurrent liabilities.......... 19,409 4,913 5,488 -- 29,810 -- 29,810
Stockholders' equity:
Partners' capital................... -- -- -- (6,710) (6,710) 8,645 (1) --
(1,935)(6)
Common stock and additional paid-in
capital............................ 1,162,276 255,657 93,191 -- 1,511,124 432,250 (5) 1,594,526
(348,848)(6)
Accumulated deficit................. (575,236) (159,559) (49,931) -- (784,726) 209,491 (6) (843,842)
(218,607)(4)
(50,000)(5)
Unrealized loss from investments.... (12,690) -- -- -- (12,690) -- (12,690)
Cumulative foreign currency
translation adjustment............. (1,719) 8,096 -- -- 6,377 (8,096)(6) (1,719)
----------- ----------- --------- ----------- ---------- ------------- ----------
Total stockholders' equity........ 572,631 104,194 43,260 (6,710) 713,375 22,900 736,275
----------- ----------- --------- ----------- ---------- ------------- ----------
$1,049,742 $ 402,598 $ 87,922 $ 10,573 $1,550,835 $ (61,879) $1,488,956
----------- ----------- --------- ----------- ---------- ------------- ----------
----------- ----------- --------- ----------- ---------- ------------- ----------
</TABLE>

See accompanying notes.

5
<PAGE>
NOTES TO UNAUDITED PRO FORMA
COMBINED CONDENSED BALANCE SHEET

The Unaudited Pro Forma Combined Condensed Balance Sheet was prepared to
reflect the acquisitions accounted for under the purchase method of accounting
on December 31, 1994. In the case of JV Vax B.V., the amounts included herein
are as of November 30, 1994.

The following is a summary of reclassifications and adjustments reflected in
the Unaudited Pro Forma Combined Condensed Balance Sheet:

1) Represents the elimination of intercompany receivables and payables
between Chiron, The Biocine Company, and JV Vax B.V. as of December 31,
1994.

2) Represents the adjustments of the acquired companies' assets and
liabilities to their estimated fair values at the date of the acquisition
and the allocation of negative goodwill of approximately $65 million to
reduce amounts assigned to noncurrent assets acquired and purchased
in-process technology.

3) Represents adjustments for pension liabilities not assumed and a
reduction of total indebtedness to $100 million, as specified in the
acquisition agreements.

4) Represent the write-off of acquired in-process technology at the
acquisition date. This adjustment is excluded from the Unaudited Pro Forma
Combined Condensed Statement of Operations as it is a nonrecurring item.

5) Represents the issuance of 6.6 million shares of Chiron common stock
at a fair market value of $61.75 per share, the payment of $23.5 million to
Ciba and the accrual of costs and expenses associated with the transaction.
Also, represents the accrual of approximately $50 million for transaction
related charges related to legal and investment advisor fees, as well as
employee payments and related taxes. Employee payments totaling $24.7
million will be repaid by Ciba in the form of a capital contribution.

6) Represents the elimination of Chiron's equity investments in The
Biocine Company and JV Vax B.V. and the elimination of historical equity of
the acquired companies.

6
<PAGE>
SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Report to be signed on its behalf by the
undersigned hereunto duly authorized.

CHIRON CORPORATION

By /s/ DENNIS L. WINGER

-----------------------------------
Dennis L. Winger
SENIOR VICE PRESIDENT,
FINANCE AND ADMINISTRATION
AND CHIEF FINANCIAL OFFICER

Dated: March 17, 1995

7
<PAGE>
EXHIBIT INDEX

<TABLE>
<S> <C>
Exhibit 13.1 Consolidated financial statements of Ciba Corning Diagnostics Corp.
Exhibit 13.2 Financial statements of The Biocine Company
Exhibit 13.3 Consolidated financial statements of JV Vax B.V.
Exhibit 23.1 Consent of Ernst & Young LLP, Independent Auditors
Exhibit 23.2 Consent of KPMG Peat Marwick LLP, Independent Auditors
Exhibit 23.3 Consent of Reconta Ernst & Young, Independent Auditors
</TABLE>

<PAGE>
EXHIBIT 13.1

CIBA CORNING DIAGNOSTICS CORP.
CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED JANUARY 1, 1995, JANUARY 2, 1994
AND NOVEMBER 29, 1992

F-2
<PAGE>
REPORT OF INDEPENDENT AUDITORS

To the Board of Directors
Ciba Corning Diagnostics Corp.

We have audited the accompanying consolidated balance sheets of Ciba Corning
Diagnostics Corp. (the Company) as of January 1, 1995 and January 2, 1994, and
the related consolidated statements of operations, stockholder's equity, and
cash flows for the years ended January 1, 1995, January 2, 1994 and November 29,
1992. 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 financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Ciba Corning
Diagnostics Corp. at January 1, 1995 and January 2, 1994, and the results of its
operations and its cash flows for the years ended January 1, 1995, January 2,
1994 and November 29, 1992.

ERNST & YOUNG LLP

January 27, 1995

F-3
<PAGE>
CIBA CORNING DIAGNOSTICS CORP.
CONSOLIDATED BALANCE SHEETS
ASSETS

<TABLE>
<CAPTION>
JANUARY 1, JANUARY 2,
1995 1994
------------ ------------
(IN THOUSANDS OF DOLLARS)
<S> <C> <C>
Current assets:
Cash and cash equivalents........................................................... $ 14,953 $ 9,518
Accounts receivable, less allowance of $5,109 in 1994 and
$4,481 in 1993..................................................................... 126,386 104,799
Inventories, net (Note 3)........................................................... 72,636 71,096
Prepaid expenses and other current assets........................................... 7,516 6,379
------------ ------------
Total current assets.............................................................. 221,491 191,792
Property, plant and equipment (Notes 5 and 11):
Land................................................................................ 2,788 2,349
Buildings........................................................................... 74,082 47,136
Machinery and equipment............................................................. 179,840 147,312
Leasehold improvements.............................................................. 9,134 9,072
------------ ------------
265,844 205,869
Less accumulated depreciation and amortization........................................ (124,749) (102,554)
------------ ------------
141,095 103,315
Net investment in sales-type leases (Note 5).......................................... 17,531 9,766
Intangibles, net (Note 6)............................................................. 16,272 30,061
Other assets.......................................................................... 6,209 4,366
------------ ------------
Total assets...................................................................... $ 402,598 $ 339,300
------------ ------------
------------ ------------

LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Short-term borrowings (Note 7)...................................................... $ 38,804 $ 35,786
Accounts payable, trade............................................................. 26,469 24,986
Due to affiliates (Note 8).......................................................... 68,652 67,568
Income taxes (Note 9)............................................................... 7,964 5,008
Other current liabilities (Note 10)................................................. 49,455 54,330
------------ ------------
Total current liabilities......................................................... 191,344 187,678
Due to affiliates (Note 8)............................................................ 55,405 53,000
Long-term obligations (Note 11)....................................................... 5,791 5,390
Pensions and other postretirement benefits (Note 12).................................. 40,951 38,071
Other liabilities..................................................................... 4,913 6,429
Commitments and contingencies (Notes 11 and 15)
Stockholder's equity:
Common stock, $10 par value, authorized, issued and
outstanding 10,000 shares.......................................................... 100 100
Additional contributed capital........................................................ 255,557 205,557
Accumulated deficit................................................................... (159,559) (161,665)
Cumulative foreign currency translation adjustment.................................... 8,096 4,740
------------ ------------
Total stockholder's equity............................................................ 104,194 48,732
------------ ------------
Total liabilities and stockholder's equity............................................ $ 402,598 $ 339,300
------------ ------------
------------ ------------
</TABLE>

See accompanying notes.

F-4
<PAGE>
CIBA CORNING DIAGNOSTICS CORP.
CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
YEAR ENDED
------------------------------------------
JANUARY 1, JANUARY 2, NOVEMBER 29,
1995 1994 1992
------------ ------------- -------------
<S> <C> <C> <C>
(IN THOUSANDS OF DOLLARS, EXCEPT
PER SHARE AMOUNTS)
Net sales............................................................ $ 455,675 $ 423,145 $ 370,686
Costs and expenses:
Cost of sales...................................................... 208,916 197,158 186,663
Selling, general and administrative................................ 157,811 149,350 132,628
Research and development (Notes 4 and 8)........................... 61,484 61,999 63,139
Amortization of intangibles (Note 6)............................... 12,627 8,829 8,615
Provision for (recovery of) loss on divestiture of business (Note
4)................................................................ (3,757) 19,275 --
Interest -- affiliates............................................. 8,162 8,866 7,944
Interest -- banks.................................................. 2,163 2,212 2,706
Other, net......................................................... 2,157 (112) (188)
------------ ------------- -------------
449,563 447,577 401,507
------------ ------------- -------------
Income (loss) before income taxes.................................... 6,112 (24,432) (30,821)
Provision for income taxes (Note 9).................................. 4,006 2,083 6,221
------------ ------------- -------------
Net income (loss).................................................... $ 2,106 $ (26,515) $ (37,042)
------------ ------------- -------------
------------ ------------- -------------
Earnings (loss) per share............................................ $ 210.60 $ (2,651.50) $ (3,704.20)
------------ ------------- -------------
------------ ------------- -------------
</TABLE>

See accompanying notes.

F-5
<PAGE>
CIBA CORNING DIAGNOSTICS CORP.

CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY

<TABLE>
<CAPTION>
ADDITIONAL CUMULATIVE
COMMON CONTRIBUTED TRANSLATION ACCUMULATED
STOCK CAPITAL ADJUSTMENT DEFICIT
----------- ----------- ----------- -----------
(IN THOUSANDS OF DOLLARS)
<S> <C> <C> <C> <C>
Balances at December 1, 1991, as previously
reported......................................... $ 100 $ 155,557 $ 8,981 $ (97,170)
Cumulative effect of the 1993 change in accounting
for income taxes................................. -- -- -- 1,488
----- ----------- ----------- -----------
Balances at December 1, 1991, as restated......... 100 155,557 8,981 (95,682)
Net loss.......................................... -- -- -- (37,042)
Currency translation adjustment................... -- -- (2,971) --
----- ----------- ----------- -----------
Balances at November 29, 1992..................... 100 155,557 6,010 (132,724)
Net loss.......................................... -- -- -- (26,515)
Adjustment for five-week transition period of
operations....................................... -- -- (471) (2,426)
Capital contribution.............................. -- 50,000 -- --
Currency translation adjustment................... -- -- (799) --
----- ----------- ----------- -----------
Balances at January 2, 1994....................... 100 205,557 4,740 (161,665)
Net income........................................ -- -- -- 2,106
Capital contributions............................. -- 50,000 -- --
Currency translation adjustment................... -- -- 3,356 --
----- ----------- ----------- -----------
Balances at January 1, 1995....................... $ 100 $ 255,557 $ 8,096 $(159,559)
----- ----------- ----------- -----------
----- ----------- ----------- -----------
</TABLE>

See accompanying notes.

F-6
<PAGE>
CIBA CORNING DIAGNOSTICS CORP.

CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
YEAR ENDED
------------------------------------
JANUARY 1, JANUARY 2, NOVEMBER 29,
1995 1994 1992
---------- ---------- ------------
(IN THOUSANDS OF DOLLARS)
<S> <C> <C> <C>
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
OPERATING ACTIVITIES
Net income (loss)....................................................... $ 2,106 $ (26,515) $ (37,042)
Adjustments to reconcile net income or loss to net cash provided by
operating activities:
Depreciation and amortization......................................... 44,930 34,493 27,133
Provision for (recovery of) loss on divestiture of business........... (3,757) 19,275 --
Deferred interest payable to affiliate................................ -- 7,074 5,868
Provision (benefit) for deferred income taxes......................... (1,768) (1,863) 945
Provision for pension and other postretirement benefits............... 6,769 6,659 3,824
Research and development costs recognized at acquisition.............. -- -- 12,794
Net unrealized foreign currency exchange loss......................... 3,400 415 1,480
Changes in assets and liabilities, net of businesses acquired and/or
disposed of:
Accounts receivable................................................... (15,329) (5,555) (12,550)
Inventories........................................................... 581 (7,384) 1,271
Prepaid expenses...................................................... 516 3,165 (137)
Lease receivables..................................................... (10,184) (4,556) (1,869)
Accounts payable...................................................... 1,180 (6,006) 4,745
Amounts due to affiliates............................................. (22,498) (816) --
Other liabilities..................................................... 3,539 (183) 3,490
---------- ---------- ------------
Net cash provided by operating activities................................. 9,485 18,203 9,952
---------- ---------- ------------
INVESTING ACTIVITIES
Additions to property, plant and equipment.............................. (68,312) (54,010) (36,183)
Payments for business acquired.......................................... (7,850) (7,150) --
Additions to intangible assets.......................................... (1,750) (5,507) --
Other, net.............................................................. (429) (674) (2,087)
---------- ---------- ------------
Net cash used in investing activities..................................... (78,341) (67,341) (38,270)
FINANCING ACTIVITIES
Net short-term borrowings from (repayments to) affiliates............... 25,300 (9,210) 29,345
Net short-term borrowings from (repayments to) banks.................... (1,403) 4,463 367
Repayment of long-term debt obligations................................. (104) (457) (2,095)
Contributed capital..................................................... 50,000 50,000 --
---------- ---------- ------------
Net cash provided by financing activities................................. 73,793 44,796 27,617
Effect of exchange rate changes on cash and cash equivalents.............. 498 1,146 (1,306)
---------- ---------- ------------
Net increase (decrease) in cash and cash equivalents...................... 5,435 (3,196) (2,007)
Cash and cash equivalents at beginning of year............................ 9,518 12,714 12,411
---------- ---------- ------------
Cash and cash equivalents at end of year.................................. $ 14,953 $ 9,518 $ 10,404
---------- ---------- ------------
---------- ---------- ------------
</TABLE>

See accompanying notes.

F-7
<PAGE>
CIBA CORNING DIAGNOSTICS CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

JANUARY 1, 1995
(IN THOUSANDS OF DOLLARS)

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

BASIS OF PRESENTATION

On July 15, 1985, Ciba Corning Diagnostics Corp. (the Company) was formed
pursuant to an equity venture agreement between Corning Incorporated (Corning)
and CIBA-GEIGY Limited (Ciba-Geigy), whereby each owned 50% of the Company's
outstanding capital stock. The net assets contributed to the equity venture were
generally recorded at their historical cost, but not in excess of net realizable
value.

On December 14, 1989, Ciba-Geigy acquired Corning's shares of common stock
of the Company; thus, the Company became a wholly-owned subsidiary of
Ciba-Geigy.

On January 4, 1995, Ciba-Geigy sold its shares of common stock of the
Company to Chiron Corporation; thus, the Company became a wholly-owned
subsidiary of Chiron Corporation.

CHANGE IN FISCAL YEAR

The Company changed its fiscal year end from the Sunday nearest November 30
to the Sunday nearest December 31 effective January 4, 1993. Accordingly, fiscal
years 1994, 1993 and 1992 ended on January 1, 1995, January 2, 1994 and November
29, 1992, respectively.

PRINCIPLES OF CONSOLIDATION

The consolidated financial statements include the accounts of the Company,
its wholly-owned subsidiaries and a 49%-owned affiliate in which the Company has
effective control. All significant intercompany transactions and accounts have
been eliminated in consolidation.

RECLASSIFICATIONS

Certain reclassifications have been made in the accompanying financial
statements for 1993 and 1992 in order to be consistent with the current year's
presentation.

TRANSLATION OF FOREIGN CURRENCIES

Assets and liabilities of foreign subsidiaries are translated into U.S.
dollars at year-end rates of exchange. Income and expense accounts are
translated into U.S. dollars at weighted-average rates of exchange prevailing
during the period. Gains or losses resulting from translating foreign currency
financial statements and intercompany balances of a long-term investment nature
are accumulated in a separate component of stockholder's equity.

Gains or losses resulting from foreign currency transactions (transactions
denominated in a currency other than the entity's local currency) are included
in the statement of operations.

CASH EQUIVALENTS

For purposes of the consolidated statements of cash flows, the Company
considers all highly liquid debt instruments purchased with an original maturity
of three months or less to be cash equivalents.

INVENTORIES

Inventories are stated at the lower of cost or market, cost being determined
using principally the last-in, first-out (LIFO) method for U.S. inventories and
the first-in, first-out (FIFO) method for non-U.S. inventories.

F-8
<PAGE>
CIBA CORNING DIAGNOSTICS CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

JANUARY 1, 1995
(IN THOUSANDS OF DOLLARS)

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment are carried on the basis of cost. Capital
leases are recorded at the lower of fair value or the present value of future
minimum lease payments. Depreciation and amortization, which includes the
amortization of assets recorded under capital leases, is computed using the
straight-line method over the estimated useful lives of the assets as follows:

<TABLE>
<S> <C>
Buildings...................................................... 25-40 years
Machinery and equipment........................................ 3-10 years
</TABLE>

Leasehold improvements are amortized over the term of the related leases or
their estimated useful lives, whichever is shorter.

INTANGIBLES

The costs of intangible assets, including patents and licensed technology,
are amortized on a straight-line basis over their respective estimated useful
lives, ranging from 5 to 11 years. Goodwill represents the excess of purchase
price over fair value at date of acquisition of net assets of businesses
acquired. Goodwill is being amortized on the straight-line method over periods
of not longer than 20 years.

REVENUE RECOGNITION

Revenues from sales of equipment and supplies are recognized generally at
the time the products are shipped. Service contract revenue is recognized
ratably over the term of the contract. Revenues from the sale of equipment under
sales-type leases are recognized at the inception of the lease. Revenues from
operating leases are recognized as rentals become receivable according to the
provisions of the leases.

INCOME TAXES

Income tax expense is based on reported income before income taxes. Deferred
income taxes are recorded to reflect the tax consequences on future years of
temporary differences between the amount of assets and liabilities recognized
for financial reporting purposes and such amounts recognized for tax purposes.

EARNINGS PER SHARE

Earnings per share is computed by dividing net income by the
weighted-average number of common shares outstanding.

2. ACCOUNTING CHANGE
In 1992, the Financial Accounting Standards Board issued Statement No. 109
(SFAS No. 109), "Accounting for Income Taxes." The Company adopted the
provisions of the Standard in its 1993 financial statements and restated its
1992 financial statements. The effect of adapting SFAS No. 109 was immaterial to
the net loss reported for the year ended November 29, 1992. The cumulative
effect of adapting SFAS No. 109 as of December 1, 1991 decreased the beginning
balance of accumulated deficit by $1,488.

Under SFAS No. 109, the liability method is used in accounting for income
taxes. Under this method, deferred tax assets and liabilities are determined
based on differences between financial reporting and tax bases of assets and
liabilities and are measured using the enacted tax rates and laws that will be
in effect when the differences are expected to reverse. Prior to the adoption of

F-9
<PAGE>
CIBA CORNING DIAGNOSTICS CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

JANUARY 1, 1995
(IN THOUSANDS OF DOLLARS)

2. ACCOUNTING CHANGE (CONTINUED)
SFAS No. 109, income tax expense was determined using the liability method
prescribed by SFAS No. 96, which is superseded by SFAS No. 109. Among other
changes, SFAS No. 109 changes the recognition and measurement criteria for
deferred tax assets included in SFAS No. 96.

3. INVENTORIES
Inventories at January 1, 1995 and January 2, 1994 are classified and valued
as indicated in the following summary:

<TABLE>
<CAPTION>
1994 1993
--------- ---------
<S> <C> <C>
Classification:
Finished goods....................................................... $ 49,614 $ 45,563
Work-in-process...................................................... 5,474 8,708
Raw material and supplies............................................ 17,548 16,825
--------- ---------
$ 72,636 $ 71,096
--------- ---------
--------- ---------
Valued at lower of cost or market:
LIFO basis........................................................... $ 25,828 $ 23,946
FIFO basis........................................................... 33,555 33,054
Average cost basis................................................... 13,253 14,096
--------- ---------
$ 72,636 $ 71,096
--------- ---------
--------- ---------
</TABLE>

Inventories valued on the LIFO basis at January 1, 1995 and January 2, 1994
were approximately $10,600 and $9,400, respectively, less than the amounts of
such inventories valued at current costs.

4. ACQUISITIONS AND DIVESTITURES
In 1993, the Company adopted a plan to dispose of its near patient testing
business and provided for a $19,275 loss on divestiture. Upon disposition of the
business in 1994, the Company determined that $3,757 of certain divestiture
costs would not be incurred. Accordingly, the financial statements for 1994
reflect a reversal of the loss provided in an amount totalling $3,757.

In 1992, the Company entered into an agreement to purchase substantially all
of the assets of the in vitro cancer diagnostic business of Triton Diagnostics
Inc. (Triton), a wholly-owned subsidiary of Shell Oil Company (Shell), for
$20,000 in cash. The purchase price was paid over a period of two years; $5,000
at closing, $7,150 in 1993 and $7,850 in 1994.

The acquisition was accounted for as a purchase and the consideration issued
by the Company was allocated to the tangible and intangible assets of Triton.
The purchase price exceeded the fair value of the tangible and identifiable
intangible assets by $12,800. This amount was allocated to in-process and funded
research and development and charged to research and development expense in
1992.

The purchase agreement also required the Company and Shell to establish in
1992 a limited partnership for further product research and development, under
which Shell agreed to fund the partnership a total of $12,000 through 1994, plus
an additional $1,000 in each of the subsequent two years. At the same time, the
Company entered into a research and development contract with the partnership
under which the Company agreed to perform research and development of certain
products. In consideration of the performance of such services, the partnership
paid the Company $5,850 in 1994 and $5,700 in 1993, which approximated the
actual costs incurred by the Company.

F-10
<PAGE>
CIBA CORNING DIAGNOSTICS CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

JANUARY 1, 1995
(IN THOUSANDS OF DOLLARS)

4. ACQUISITIONS AND DIVESTITURES (CONTINUED)
The limited partnership is owned 99% by Shell, the limited partner, and 1%
by the Company, the general partner, who has agreed to license the Triton
technology to the partnership in return for the option to acquire Shell's
ownership interest at predetermined values. Under certain circumstances, Shell
may require the Company to purchase its ownership interest at predetermined
values. On January 5, 1995, Shell exercised its option to require the Company to
purchase its interest at a price of $2,000, plus other predetermined values,
effective January 3, 1997.

5. SALES TYPE AND OPERATING LEASES
The Company leases its instruments to customers primarily through operating
leases, substantially all of which expire within one year. The Company's net
investment in instruments leased to customers under operating leases, included
in machinery and equipment in the accompanying balance sheet, was as follows at
January 1, 1995 and January 2, 1994:

<TABLE>
<CAPTION>
1994 1993
--------- ---------
<S> <C> <C>
Equipment.............................................................. $ 54,170 $ 38,324
Less accumulated depreciation.......................................... 28,956 17,358
--------- ---------
Net investment......................................................... $ 25,214 $ 20,966
--------- ---------
--------- ---------
</TABLE>

The Company also leases instruments to customers under sales-type leases as
defined in Statement of Financial Accounting Standards No. 13. The leases expire
over the next five years. The components of the net investment in sales-type
leases were as follows at January 1, 1995 and January 2, 1994:

<TABLE>
<CAPTION>
1994 1993
--------- ---------
<S> <C> <C>
Minimum lease payments receivable...................................... $ 27,109 $ 15,854
Less unearned interest income.......................................... 2,456 1,385
--------- ---------
24,653 14,469
Less current portion................................................... 7,122 4,703
--------- ---------
Long-term portion of leases receivable................................. $ 17,531 $ 9,766
--------- ---------
--------- ---------
</TABLE>

Future minimum lease payments due from customers under sales-type leases as
of January 1, 1995 are as follows:

F-11
<PAGE>
CIBA CORNING DIAGNOSTICS CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

JANUARY 1, 1995
(IN THOUSANDS OF DOLLARS)

6. INTANGIBLE ASSETS
Intangible assets at January 1, 1995 and January 2, 1994 consisted of the
following:

<TABLE>
<CAPTION>
1994 1993
--------- ---------
<S> <C> <C>
Patents, technology licensing agreements and other intangible assets,
less accumulated amortization (1994, $11,848; 1993, $5,587)........... $ 11,689 $ 18,337
Goodwill, less accumulated amortization (1994, $1,672; 1993, $992)..... 4,583 4,636
Covenant not to compete, less accumulated amortization (1994, $38,499;
1993, $31,314)........................................................ -- 7,088
--------- ---------
$ 16,272 $ 30,061
--------- ---------
--------- ---------
</TABLE>

In 1994, the Company, after a review of its intangible assets for
recoverability of their carrying amounts in the future, recorded an impairment
loss in the amount of $4,891, based on the estimated future cash flows expected
to result from use of certain intangible assets or their eventual disposition.
This impairment loss was included in amortization expense of intangibles in the
accompanying consolidated statement of income.

In 1993, the Company entered into an agreement to pay a company $12.9
million over a period of ten years for a license to use patented technology in
certain of the Company's products. The agreement requires the Company to make
fixed payments annually, beginning with an initial payment of $5 million in
1993, in lieu of ongoing royalties on sales of the licensed products. The
Company recorded the fixed obligation at present value in the amount of
approximately $9.6 million in 1993 and is amortizing the intangible asset of a
corresponding amount over the remaining 11-year life of the underlying patents.

In connection with Ciba-Geigy's acquisition of Corning's interest in the
Company in 1990, the Company entered into a covenant not to compete for
Corning's agreement not to compete in the diagnostic products market for a
period of five years. This asset was fully amortized effective January 1, 1995.

7. SHORT-TERM BORROWINGS
Short-term borrowings at January 1, 1995 and January 2, 1994 consisted of
the following:

<TABLE>
<CAPTION>
1994 1993
--------- ---------
<S> <C> <C>
Foreign bank overdrafts................................................ $ 38,462 $ 35,377
Current portion of long-term obligations............................... 342 409
--------- ---------
$ 38,804 $ 35,786
--------- ---------
--------- ---------
</TABLE>

The Company's international subsidiaries have overdraft facilities with
foreign banks up to a limit of $69,020, at rates ranging from 3% to 17% at
January 1, 1995. At January 1, 1995 and January 2, 1994, the weighted average
interest on short-term borrowings was approximately 3.8% and 3.7%, respectively.

8. RELATED-PARTY TRANSACTIONS
The Company is dependent upon its parent for current and future financing
and has significant transactions therewith.

F-12
<PAGE>
CIBA CORNING DIAGNOSTICS CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

JANUARY 1, 1995
(IN THOUSANDS OF DOLLARS)

8. RELATED-PARTY TRANSACTIONS (CONTINUED)
Amounts due to affiliates were as follows at January 1, 1995 and January 2,
1994:

<TABLE>
<CAPTION>
1994 1993
--------- ---------
<S> <C> <C>
Current:
Revolving credit agreements.......................................... $ 68,576 $ 36,000
Overdraft facility................................................... -- 9,000
Other payables....................................................... 76 22,568
--------- ---------
$ 68,652 $ 67,568
--------- ---------
--------- ---------
Long-term:
Note payable and accrued interest.................................... $ 55,405 $ 53,000
--------- ---------
--------- ---------
</TABLE>

At January 1, 1995, the Company had amounts due Ciba-Geigy of $123,493, at
interest rates ranging from 5.8% to 9.5%, with a weighted-average interest rate
of 6.8%. At January 2, 1994, the weighted-average interest rate was 4.8%.

In 1990, the Company borrowed $53,000 from a foreign affiliate of
Ciba-Geigy. The note was due in 1995 and bore interest at a rate of 9.5% per
annum. Interest payments for the first three years were deferred and were paid
in 1994, together with interest on such deferred interest payments, which was
calculated at an annual compounded rate of 9.5%.

On January 4, 1995, Ciba-Geigy sold its shares of stock in the Company to
Chiron Corporation. In connection with this transaction, effective as of the
first day of business in 1995, Ciba-Geigy contributed $68,576 in capital to the
Company. At the same time, the Company repaid debt payable to Ciba-Geigy in the
same amount and entered into a new note payable for $55,405 for the remaining
debt of $54,917 plus accrued interest of $488. The principal and all accrued
interest will be due and payable on January 1, 2000. The interest rate will be
the applicable cost of funds borrowed by Chiron Corporation under a credit
facility with Ciba-Geigy.

Total interest expense incurred in 1994, 1993 and 1992 on borrowings from
affiliates of Ciba-Geigy was approximately $8,162, $8,866 and $7,944,
respectively.

The Company had an arrangement to provide research and development to
Ciba-Geigy through 1994 for a total value of $7,100. Of this total amount,
$2,700, $2,700 and $1,700 was received in 1994, 1993 and 1992, respectively.

In 1994 and 1993, Ciba-Geigy contributed capital of $50,000 in each year.

9. INCOME TAXES
The components of the provision (benefit) for income taxes were as follows:

<TABLE>
<CAPTION>
1994 1993 1992
--------- --------- ---------
<S> <C> <C> <C>
Current:
State...................................................... $ 315 $ 370 $ --
International.............................................. 5,459 3,096 5,276
Deferred:
International.............................................. (1,768) (1,383) 945
--------- --------- ---------
$ 4,006 $ 2,083 $ 6,221
--------- --------- ---------
--------- --------- ---------
</TABLE>

F-13
<PAGE>
CIBA CORNING DIAGNOSTICS CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

JANUARY 1, 1995
(IN THOUSANDS OF DOLLARS)

9. INCOME TAXES (CONTINUED)
The source of income (loss) before income taxes was as follows:

<TABLE>
<CAPTION>
1994 1993 1992
--------- ---------- ----------
<S> <C> <C> <C>
United States............................................. $ 450 $ (25,288) $ (42,906)
International............................................. 5,662 856 12,085
--------- ---------- ----------
$ 6,112 $ (24,432) $ (30,821)
--------- ---------- ----------
--------- ---------- ----------
</TABLE>

Components of deferred tax balances as of January 1, 1995 and January 2,
1994 were as follows:

<TABLE>
<CAPTION>
1994 1993
---------- ----------
<S> <C> <C>
Deferred tax liabilities:
Depreciation....................................................... $ -- $ 14
Inventory expensed................................................. 1,658 1,922
---------- ----------
Total deferred tax liabilities....................................... 1,658 1,936
---------- ----------
Deferred tax assets:
Inventory and other reserves....................................... 5,178 11,906
Depreciation....................................................... 3,307 6,862
Purchased technologies............................................. 5,571 3,945
Accrued compensation and severance................................. 557 312
Net operating loss and business credit carryforwards............... 31,360 23,950
Pension benefits................................................... 13,890 13,096
Other.............................................................. 579 --
---------- ----------
Total deferred tax assets............................................ 60,442 60,071
---------- ----------
Less valuation allowance............................................. (54,520) (56,484)
---------- ----------
Net deferred income tax assets....................................... $ 4,264 $ 1,651
---------- ----------
---------- ----------
</TABLE>

The net change in the valuation allowance for deferred tax assets in 1994
was a decrease of $1,964.

A reconciliation between taxes computed at the federal statutory rate and
the consolidated tax provision follows:

<TABLE>
<CAPTION>
1994 1993 1992
--------- --------- ----------
<S> <C> <C> <C>
Computed at federal statutory rate.......................... $ 2,139 $ (8,551) $ (10,479)
Foreign income subject to tax greater than statutory rate... 899 713 412
Operating losses providing no benefit....................... 431 10,039 14,533
Nondeductible expenses...................................... 226 1,214 1,900
Other....................................................... 311 (1,332) (145)
--------- --------- ----------
Consolidated tax provision.................................. $ 4,006 $ 2,083 $ 6,221
--------- --------- ----------
--------- --------- ----------
</TABLE>

At January 1, 1995, no U.S. income taxes have been provided for $16,990 of
unremitted earnings on international subsidiaries due to the availability of
foreign tax credits. Amounts that would be required to be withheld by non-U.S.
tax jurisdictions upon repatriation of such earnings are immaterial.

F-14
<PAGE>
CIBA CORNING DIAGNOSTICS CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

JANUARY 1, 1995
(IN THOUSANDS OF DOLLARS)

9. INCOME TAXES (CONTINUED)
At January 1, 1995, the Company had operating loss carryforwards for tax
purposes of $71,441. The Company's alternative minimum tax loss carryforwards
for tax purposes was $43,975. The operating loss carryforwards expire through
the year 2009. Additionally, the Company had tax credit carryforwards for tax
purposes of $5,605 expiring through the year 2009.

10. OTHER CURRENT LIABILITIES
Other current liabilities at January 1, 1995 and January 2, 1994 consisted
of the following:

<TABLE>
<CAPTION>
1994 1993
--------- ---------
<S> <C> <C>
Wages and related benefits............................................. $ 16,983 $ 15,198
Deferred service revenue............................................... 11,451 7,437
Warranty reserve....................................................... 2,949 2,768
Business acquisition obligation........................................ -- 7,850
Accrued losses on divestiture.......................................... -- 4,330
Other.................................................................. 18,072 16,747
--------- ---------
$ 49,455 $ 54,330
--------- ---------
--------- ---------
</TABLE>

11. LONG-TERM OBLIGATIONS AND COMMITMENTS
Long-term obligations at January 1, 1995 and January 2, 1994 consisted of
the following:

<TABLE>
<CAPTION>
1994 1993
--------- ---------
<S> <C> <C>
Industrial revenue bonds, 5.68% average interest rate, due 2000 through
2014.................................................................... $ 2,000 $ 2,000
Capital lease obligations................................................ 3,791 3,390
--------- ---------
$ 5,791 $ 5,390
--------- ---------
--------- ---------
</TABLE>

Future minimum payments, under both capital and noncancellable operating
leases with terms of one year or more consisted of the following at January 1,
1995:

<TABLE>
<CAPTION>
CAPITAL OPERATING
LEASES LEASES
--------- ---------
<S> <C> <C>
1995.................................................................... $ 693 $ 5,971
1996.................................................................... 685 4,423
1997.................................................................... 660 3,299
1998.................................................................... 660 2,482
1999.................................................................... 618 2,516
2000 and thereafter..................................................... 2,945 13,349
--------- ---------
Total minimum lease payments............................................ 6,261 $ 32,040
---------
---------
Amounts representing interest........................................... 2,128
---------
Present value of future minimum lease payments.......................... 4,133
Less amounts due within one year........................................ 342
---------
$ 3,791
---------
---------
</TABLE>

F-15
<PAGE>
CIBA CORNING DIAGNOSTICS CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

JANUARY 1, 1995
(IN THOUSANDS OF DOLLARS)

11. LONG-TERM OBLIGATIONS AND COMMITMENTS (CONTINUED)
Property, plant and equipment include the following amounts for leases which
have been capitalized at January 1, 1995 and January 2, 1994:

<TABLE>
<CAPTION>
1994 1993
--------- ---------
<S> <C> <C>
Land..................................................................... $ 584 $ 528
Buildings................................................................ 3,737 3,380
Machinery and equipment.................................................. 537 1,333
--------- ---------
4,858 5,241
Accumulated amortization................................................. (616) (1,080)
--------- ---------
$ 4,242 $ 4,161
--------- ---------
--------- ---------
</TABLE>

Rental expense for all operating leases was $12,099 in 1994, $12,344 in 1993
and $11,685 in 1992.

12. EMPLOYEE BENEFIT PLANS

PENSIONS -- UNITED STATES

The Company has a noncontributory defined benefit pension plan that covers
all of its U.S. employees. The benefits are based on length of service and the
employees' career average compensation. The Company's policy is to fund the
pension plan in amounts which comply with contribution limits imposed by law.
Plan assets consist of commingled and master trust funds invested mainly in
equities and fixed-income securities.

The components of net periodic pension cost and the significant assumptions
for the U.S. plan consisted of the following:

<TABLE>
<CAPTION>
1994 1993 1992
--------- --------- ---------
<S> <C> <C> <C>
SERVICE COST -- BENEFITS EARNED DURING THE PERIOD.............. $ 3,258 $ 2,848 $ 2,513
Interest cost on projected benefit obligations................. 3,312 2,781 2,413
Actual return on plan assets................................... (257) (2,358) (1,954)
Net amortization and deferral.................................. (2,461) 21 8
--------- --------- ---------
Net periodic pension cost...................................... $ 3,852 $ 3,292 $ 2,980
--------- --------- ---------
--------- --------- ---------
Discount rate for obligations.................................. 8.5% 7.5% 8.0%
Rate of increase in compensation levels........................ 5.0% 4.0% 5.0%
Expected long-term rate of return.............................. 9.0% 9.0% 9.0%
</TABLE>

F-16
<PAGE>
CIBA CORNING DIAGNOSTICS CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

JANUARY 1, 1995
(IN THOUSANDS OF DOLLARS)

12. EMPLOYEE BENEFIT PLANS (CONTINUED)
The reconciliation of the funded status of the U.S. plan follows based upon
a measurement date of September 30:

<TABLE>
<CAPTION>
1994 1993
--------- ---------
<S> <C> <C>
Actuarial present value of projected benefits obligation, based on
employment service to date and current salary levels:
Vested employees....................................................... $ 33,084 $ 32,307
Nonvested employees.................................................... 2,850 2,817
Accumulated benefit obligation......................................... 35,934 35,124
Additional amounts related to projected salary increases............... 8,212 8,073
--------- ---------
Total projected benefit obligation..................................... 44,146 43,197
Plan assets at fair value.............................................. 38,054 35,902
--------- ---------
Plan assets less than projected benefit obligation..................... (6,092) (7,295)
Unamortized net asset existing at date of adoption of SFAS No. 87
(October 1, 1985)..................................................... (1,003) (1,170)
Unrecognized prior service cost........................................ 3,937 2,547
Unrecognized net actuarial gain........................................ (6,781) (2,800)
--------- ---------
Unfunded accrued pension cost recognized in consolidated balance
sheet................................................................. $ (9,939) $ (8,718)
--------- ---------
--------- ---------
</TABLE>

PENSIONS -- INTERNATIONAL

The Company has defined benefit pension plans covering employees in certain
countries outside of the United States as well. Benefit plans in the United
Kingdom, Japan and Germany are based on length of service and employee
compensation near retirement. In the United Kingdom and Japan, the Company's
funding is in accordance with local laws and income tax regulations, while the
German pension plan is largely unfunded. Plan assets in the United Kingdom
consist primarily of equities and fixed-income securities. In Japan, plan assets
consist of an insurance contract.

The components of net periodic pension cost and the significant assumptions
for the international plans consisted of the following:

<TABLE>
<CAPTION>
1994 1993 1992
------------ ------------ ------------
<S> <C> <C> <C>
Service costs..................................... $ 1,514 $ 1,315 $ 1,333
Interest cost..................................... 1,245 1,112 1,253
Return on assets.................................. (1,034) (715) (901)
Net amortization and deferral..................... 13 115 171
------------ ------------ ------------
$ 1,738 $ 1,827 $ 1,856
------------ ------------ ------------
------------ ------------ ------------
Discount rate for obligations..................... 5.5%-9.0% 5.5%-7.5% 5.5%-9.0%
Rate of increase in compensation.................. 3.5%-7.5% 4.0%-6.0% 5.5%-7.5%
Expected long-term rate of return................. 3.0%-9.0% 3.0%-9.0% 3.0%-9.0%
</TABLE>

F-17
<PAGE>
CIBA CORNING DIAGNOSTICS CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

JANUARY 1, 1995
(IN THOUSANDS OF DOLLARS)

12. EMPLOYEE BENEFIT PLANS (CONTINUED)
The reconciliation of the funded status of the international plans follows
based upon a measurement date of September 30:

<TABLE>
<CAPTION>
1994 1993
--------------------------- ---------------------------
ASSETS ASSETS
EXCEED ACCUMULATED EXCEED ACCUMULATED
ACCUMULATED BENEFITS ACCUMULATED BENEFITS
BENEFITS EXCEED ASSETS BENEFITS EXCEED ASSETS
------------ ------------- ------------ -------------
<S> <C> <C> <C> <C>
Actuarial present value of projected benefit
obligation, based on employment service to
date and current salary levels:
Vested employees............................ $ 10,692 $ 2,014 $ 11,633 $ 1,574
Nonvested employees......................... 733 585 53 497
------------ ------------- ------------ -------------
Accumulated benefit obligation.............. 11,425 2,599 11,686 2,071
Additional amounts related to projected salary
increases.................................... 3,259 1,227 3,081 1,027
------------ ------------- ------------ -------------
Total projected benefit obligation............ 14,684 3,826 14,767 3,098
Plan assets at fair value..................... 15,106 387 13,285 329
------------ ------------- ------------ -------------
Plan assets greater (less) than projected
benefit obligation........................... $ 422 $ (3,439) $ (1,482) $ (2,769)
Unamortized net liability existing at date of
adoption of SFAS No. 87 (October 1, 1989).... 926 187 950 197
Unrecognized net actuarial loss (gain)........ (1,978) 227 102 168
------------ ------------- ------------ -------------
Accrued pension cost recognized in
consolidated balance sheet................... $ (630) $ (3,025) $ (430) $ (2,404)
------------ ------------- ------------ -------------
------------ ------------- ------------ -------------
</TABLE>

OTHER POSTRETIREMENT BENEFITS

The Company also sponsors two defined benefit postretirement plans that
cover substantially all of its U.S. employees. One plan provides medical and
dental benefits (health care plan) and the other provides life insurance
benefits. The postretirement health care plan is contributory, with retiree
contributions adjusted annually; the life insurance plan is noncontributory. The
funding policy for both plans is to pay claims and/or insurance premiums as they
come due.

In 1993, the Company amended its postretirement benefit plans other than
pensions to (1) change the eligibility for medical care and life insurance by
increasing the minimum years of service from 5 to 10 years; (2) shift the cost
sharing for the medical plan to the retiree by increasing the proportion of
costs paid by the retiree based on years of service and limiting the overall
proportion paid by the Company to the level paid by active employees and (3)
contain future medical cost increases paid by the Company by sharing such
increases with the retiree proportionately until 2010, after which date cost
increases would be paid entirely by the retiree.

F-18
<PAGE>
CIBA CORNING DIAGNOSTICS CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

JANUARY 1, 1995
(IN THOUSANDS OF DOLLARS)

12. EMPLOYEE BENEFIT PLANS (CONTINUED)
Net periodic postretirement benefit cost included the following components:

<TABLE>
<CAPTION>
1994 1993 1992
--------- --------- ---------
<S> <C> <C> <C>
Service cost -- benefits attributable to service during the
period........................................................ $ 955 $ 908 $ 2,076
Interest cost on accumulated postretirement benefit
obligation.................................................... 1,070 929 1,754
Amortization of prior service cost............................. (652) (645) --
Net amortization and deferral.................................. (194) (236) (45)
--------- --------- ---------
Net periodic postretirement benefit cost....................... $ 1,179 $ 956 $ 3,785
--------- --------- ---------
--------- --------- ---------
</TABLE>

The following table sets forth the plans' combined funded status reconciled
with the amounts recognized in the Company's consolidated balance sheet based
upon a measurement date of September 30:

<TABLE>
<CAPTION>
1994 1993
---------- ----------
<S> <C> <C>
Accumulated postretirement benefit obligation:
Retirees........................................................... $ 3,959 $ 2,356
Fully eligible active plan participants............................ 4,963 4,702
Other active plan participants..................................... 5,398 7,314
---------- ----------
14,320 14,372
Plan assets at fair value............................................ -- --
---------- ----------
Accumulated postretirement benefit obligation in excess of plan
assets.............................................................. (14,320) (14,372)
Unrecognized prior service cost...................................... (8,396) (9,049)
Unrecognized net actuarial gain...................................... (6,231) (4,568)
---------- ----------
Unfunded accrued postretirement benefit cost recognized in
consolidated balance sheet.......................................... $ (28,947) $ (27,989)
---------- ----------
---------- ----------
</TABLE>

For measurement purposes, a 9.1% increase in pre-age 65 premiums and a 8.1%
increase in post-age 65 premiums was assumed for 1995. Thereafter, the rate of
increase was assumed to be 10.0% and then decrease gradually to 5.0% for the
2005-2006 year and remain at that level. The health care cost trend rate
assumption has a significant effect on the amounts reported. To illustrate,
increasing the assumed health care cost trend rates by one percentage point in
each year would increase the accumulated postretirement benefit obligation as of
January 1, 1995 by $2,308 and the aggregate of the service and the interest cost
components of net periodic postretirement benefit cost for the year then ended
by $414.

The weighted-average discount rate and the rate of increase in future
compensation used in levels determining the accumulated postretirement benefit
obligation of the medical and life insurance plans were 8.5% and 5%,
respectively.

INCENTIVE COMPENSATION

The Company has additional compensation plans covering certain key
employees. Pay-outs under these plans are computed under various formulas
recognizing individual achievement and overall corporate performance. Additional
compensation earned by Company employees under these plans amounted to $2,700 in
1994, $3,842 in 1993 and $3,568 in 1992.

F-19
<PAGE>
CIBA CORNING DIAGNOSTICS CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

JANUARY 1, 1995
(IN THOUSANDS OF DOLLARS)

12. EMPLOYEE BENEFIT PLANS (CONTINUED)
OTHER

U.S. employees are eligible to participate in the Ciba Corning Diagnostics
Corp. Investment Plan. Participants may contribute up to 15% of their annual
compensation to the plan (subject to certain limitations prescribed by the
Internal Revenue Code), and the Company will match the participants'
contributions, on a 50% to 100% basis, depending on years of service, up to 6%
of compensation. Participants' contributions may be made on either an after-tax
basis or a pre-tax salary reduction basis in accordance with the provisions of
Section 401(k) of the Internal Revenue Code. Total contributions made by the
Company were approximately $2,300 in 1994, $1,800 in 1993 and $1,400 in 1992.

13. FOREIGN OPERATIONS
Aggregate foreign currency exchange losses included in other expense were
$3,767, $1,479 and $900 in 1994, 1993 and 1992, respectively.

14. SUPPLEMENTAL CASH FLOW INFORMATION
The Company's noncash financing and investing activities and cash payments
for interest and income taxes were as follows:

<TABLE>
<CAPTION>
1994 1993 1992
--------- --------- ---------
<S> <C> <C> <C>
Cost of business acquisitions (Payable in
1993 and 1994)............................................. $ -- $ -- $ 20,783
Capital leases initiated.................................... -- -- 640
Cash paid during the year for:
Interest.................................................. 31,369 4,170 4,137
Income taxes.............................................. 5,002 5,196 2,824
</TABLE>

15. CONTINGENCIES
The Company is subject to various legal proceedings and claims which arise
in the ordinary course of its business. In the opinion of management, however,
the amount of ultimate liability with respect to these actions will not
materially affect the financial position or results of operations of the
Company.

16. INSURANCE
Under the Company's insurance programs, coverage is obtained for
catastrophic exposures as well as those risks required to be insured by law or
contract. It is the policy of the Company to retain a significant portion of
certain expected losses related primarily to physical loss to property, business
interruption resulting from such loss and comprehensive general, product and
vehicle liability. Provisions for losses expected under these programs are
recorded based upon the Company's estimates of the aggregate liability for
claims incurred.

17. FINANCIAL INSTRUMENTS AND RELATED DISCLOSURES
The carrying values of the Company's financial instruments approximate fair
value due to their short maturities or market interest rates over the term of
the agreement.

The Company hedges certain exposures to foreign currency fluctuations in net
monetary assets and liabilities denominated in foreign currencies. Forward
exchange contracts and currency options used to hedge net monetary assets and
liabilities generally have maturities which do not exceed eight months.

F-20
<PAGE>
CIBA CORNING DIAGNOSTICS CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

JANUARY 1, 1995
(IN THOUSANDS OF DOLLARS)

17. FINANCIAL INSTRUMENTS AND RELATED DISCLOSURES (CONTINUED)
At January 1, 1995 and January 2, 1994, the Company had contracts to
exchange foreign currencies, principally the French franc and German mark in
1994, and Australian dollar in 1993, as follows:

<TABLE>
<CAPTION>
1994 1993
--------- ---------
<S> <C> <C>
Purchased currency options.................................................. $ 3,000 $ --
Forward exchange contracts.................................................. -- 609
</TABLE>

Gains and losses on these contracts are recognized in the statement of
income as incurred. Losses on option contracts are limited to the premiums paid.

The Company sells its products directly to a large number of hospitals,
clinical laboratories and research facilities, as well as through a number of
distributors, that are dispersed across different geographic areas around the
world. The Company performs periodic credit evaluations of its customers'
financial condition and generally does not require collateral. Credit losses
historically have been small, which is consistent with management's
expectations.

18. INDUSTRY SEGMENT AND GEOGRAPHIC INFORMATION
The Company operates in one principal industry segment: the design,
manufacture, sale and service of in vitro medical diagnostic test systems for
use by hospitals, clinical laboratories and research facilities.

F-21
<PAGE>
CIBA CORNING DIAGNOSTICS CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

JANUARY 1, 1995
(IN THOUSANDS OF DOLLARS)

18. INDUSTRY SEGMENT AND GEOGRAPHIC INFORMATION (CONTINUED)
Geographic financial information is as follows:

<TABLE>
<CAPTION>
ADJUSTMENTS
UNITED AND
STATES EUROPE ASIA OTHER ELIMINATIONS CONSOLIDATED
--------- --------- --------- --------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Sales to unaffiliated
customers............... 1994 $ 180,029 $ 141,073 $ 106,238 $ 28,335 $ -- $ 455,675
1993 174,785 129,324 96,313 22,723 -- 423,145
1992 152,814 119,038 81,659 17,175 -- 370,686
Transfers between
geographic areas........ 1994 116,168 10,596 266 -- (127,030) --
1993 106,460 10,729 281 -- (117,470) --
1992 85,068 11,007 209 -- (96,284) --
Operating income
(loss).................. 1994 13,314 7,253 3,735 (2,569) (5,296) 16,437
1993 (16,446) (223) 2,412 1,730 (827) (13,354)
1992 (31,104) 10,804 2,938 1,663 (4,472) (20,171)
Interest expense......... 1994 -- -- -- -- -- 10,325
1993 -- -- -- -- -- 11,078
1992 -- -- -- -- -- 10,650
Income (loss) before
income taxes............ 1994 -- -- -- -- -- 6,112
1993 -- -- -- -- -- (24,432)
1992 -- -- -- -- -- (30,821)
Identifiable assets at
end of year............. 1994 249,756 107,859 77,366 18,297 (70,883) 382,395
1993 214,495 88,716 66,710 18,925 (62,651) 326,195
1992 190,846 92,735 53,195 12,313 (49,923) 299,166
Corporate assets......... 1994 -- -- -- -- -- 20,203
1993 -- -- -- -- -- 13,105
1992 -- -- -- -- -- 11,904
Total assets at year
end..................... 1994 -- -- -- -- -- 402,598
1993 -- -- -- -- -- 339,300
1992 -- -- -- -- -- 311,070
</TABLE>

Net sales to unaffiliated customers by geographic area is based on the
location where the transaction originates. Transfers between geographic areas
are recorded at amounts generally above cost and in accordance with the rules
and regulations of the respective governing tax authorities. Operating income
consists of total net sales less operating expenses and does not include either
interest expense or income taxes. Identifiable assets of geographic areas are
those assets used in the Company's operations in each area. Corporate assets
include cash and cash equivalents and deferred income taxes.

F-22

<PAGE>
EXHIBIT 13.2

THE BIOCINE COMPANY
(A DELAWARE GENERAL PARTNERSHIP)
FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1994 AND 1993 AND
FOR EACH OF THE YEARS IN THE
THREE YEAR PERIOD ENDED DECEMBER 31, 1994

F-23
<PAGE>
INDEPENDENT AUDITORS' REPORT

The Executive Committee
The Biocine Company

We have audited the accompanying balance sheets of The Biocine Company (the
Partnership) as of December 31, 1994 and 1993, and the related statements of
operations, partners' capital (deficit) and cash flows for each of the years in
the three-year period ended December 31, 1994. These financial statements are
the responsibility of the Partnership's management. Our responsibility is to
express an opinion on these financial statements based on our audits.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of The Biocine Company as of
December 31, 1994 and 1993, and the results of its operations and its cash flows
for each of the years in the three-year period ended December 31, 1994, in
conformity with generally accepted accounting principles.

KPMG Peat Marwick LLP

San Francisco, California
February 17, 1995

F-24
<PAGE>
THE BIOCINE COMPANY
(A DELAWARE GENERAL PARTNERSHIP)
BALANCE SHEETS
(IN THOUSANDS)

<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1994 1993
--------- ---------
<S> <C> <C>
ASSETS:

Current assets:
Cash and cash equivalents................................................................ $ 10,573 $ 5,711
--------- ---------
$ 10,573 $ 5,711
--------- ---------
LIABILITIES AND PARTNERS' CAPITAL (DEFICIT):

Current liabilities:
Accounts payable to Chiron Corporation................................................... $ 17,283 $ 13,497
Partners' Capital:
Ciba-Geigy Biocine Corporation......................................................... 1,935 --
Chiron Biocine Corporation............................................................. -- --
Equity Due from Partners:
Ciba-Geigy Biocine Corporation......................................................... -- (800)
Chiron Biocine Corporation............................................................. (8,645) (6,986)
--------- ---------
Total partners' capital (deficit).................................................... (6,710) (7,786)
--------- ---------
$ 10,573 $ 5,711
--------- ---------
--------- ---------
</TABLE>

See accompanying notes to financial statements

F-25
<PAGE>
THE BIOCINE COMPANY
(A DELAWARE GENERAL PARTNERSHIP)
STATEMENTS OF OPERATIONS
(IN THOUSANDS)

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------
1994 1993 1992
--------- --------- ---------
<S> <C> <C> <C>
Revenue:
Contract revenue............................................................. $ -- $ -- $ 50
Expenses:
Research and development -- Chiron Corp...................................... 54,875 44,449 27,031
Research and development -- Ciba-Geigy Ltd................................... -- 38 738
General and administrative -- Biocine S.A.R.L................................ 1,893 193 282
General and administrative -- other.......................................... 44 122 6
--------- --------- ---------
Total expenses............................................................. 56,812 44,802 28,057
--------- --------- ---------
Loss from operations........................................................... 56,812 44,802 28,007
Interest income................................................................ 683 357 319
--------- --------- ---------
Net loss....................................................................... $ 56,129 $ 44,445 $ 27,688
--------- --------- ---------
--------- --------- ---------
</TABLE>

See accompanying notes to financial statements

F-26
<PAGE>
THE BIOCINE COMPANY
(A DELAWARE GENERAL PARTNERSHIP)
STATEMENTS OF PARTNERS' CAPITAL (DEFICIT)
(IN THOUSANDS)

<TABLE>
<CAPTION>
CIBA-GEIGY CHIRON
BIOCINE CORPORATION BIOCINE CORPORATION
----------------------- -----------------------
PARTNER'S DUE FROM PARTNER'S DUE FROM
CAPITAL PARTNER CAPITAL PARTNER TOTAL
---------- ----------- ---------- ----------- ----------
<S> <C> <C> <C> <C> <C>
Balances at December 31, 1991........................ $ (1,183) $ -- $ (2,195) $ -- $ (3,378)
Capital contributions................................ 16,856 -- 16,869 -- 33,725
Net loss............................................. (13,844) -- (13,844) -- (27,688)
---------- ----------- ---------- ----------- ----------
Balances at December 31, 1992........................ 1,829 -- 830 -- 2,659
Capital contribution................................. 34,000 -- -- -- 34,000
Net loss............................................. (35,829) (800) (830) (6,986) (44,445)
---------- ----------- ---------- ----------- ----------
Balances at December 31, 1993........................ -- (800) -- (6,986) (7,786)
Capital contributions................................ 45,000 800 4,419 6,986 57,205
Net loss............................................. (43,065) -- (4,419) (8,645) (56,129)
---------- ----------- ---------- ----------- ----------
Balances at December 31, 1994........................ $ 1,935 $ -- $ -- $ (8,645) $ (6,710)
---------- ----------- ---------- ----------- ----------
---------- ----------- ---------- ----------- ----------
</TABLE>

See accompanying notes to financial statements

F-27
<PAGE>
THE BIOCINE COMPANY
(A DELAWARE GENERAL PARTNERSHIP)
STATEMENTS OF CASH FLOWS
(IN THOUSANDS)

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------
1994 1993 1992
-------- -------- --------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss........................................ $(56,129) $(44,445) $(27,688)
Adjustments to reconcile net loss to net cash
used in
operating activities:
Changes to:
Accounts payable -- Chiron Corp............. 3,786 5,567 3,209
Accounts payable -- Ciba-Geigy Ltd.......... -- (170) 170
-------- -------- --------
Net cash used in operating activities..... (52,343) (39,048) (24,309)
Cash flows from financing activities:
Partners' capital contributions................. 57,205 34,000 33,725
-------- -------- --------
Net increase (decrease) in cash and cash
equivalents.............................. 4,862 (5,048) 9,416
Cash and cash equivalents at beginning of the
period........................................... 5,711 10,759 1,343
-------- -------- --------
Cash and cash equivalents at end of period........ $ 10,573 $ 5,711 $ 10,759
-------- -------- --------
-------- -------- --------
</TABLE>

See accompanying notes to financial statement

F-28
<PAGE>
THE BIOCINE COMPANY
(A DELAWARE GENERAL PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1994

NOTE 1 -- THE PARTNERSHIP AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

THE PARTNERSHIP

The Biocine Company ("Biocine" or the "Partnership") is a Delaware General
Partnership formed on April 15, 1987 for the purpose of conducting vaccine
research. The Partnership was formed in accordance with the terms of a joint
venture agreement between Ciba-Geigy Biocine Corporation (a wholly owned
subsidiary of Ciba-Geigy Limited, referred to as "Ciba-Geigy") and Chiron
Biocine Corporation (a wholly owned subsidiary of Chiron Corporation, referred
to as "Chiron"), each having a 50% interest in the Partnership. The joint
venture agreement requires that Chiron and Ciba-Geigy each contribute certain
technology and licenses to the joint venture, and that Chiron perform certain
reimbursable research activities for the Partnership. At inception, the
Partnership entered into a research agreement with Chiron, whereby Chiron
performs certain research, development and manufacturing activities on behalf of
the Partnership. On a quarterly basis, the Partnership pays Chiron for its fully
burdened cost of performing such activities. Biocine S.A.R.L, a corporation
jointly owned by Ciba-Geigy Limited and Chiron, also performs certain
administrative and marketing services on behalf of the Partnership. The
Partnership pays Biocine S.A.R.L. for its fully burdened cost of performing such
activities.

The Partnership is controlled by an Executive Committee consisting of six
members, of which three are appointed by each partner.

PARTNERS' CAPITAL

Under the terms of the joint venture agreement, Ciba-Geigy initially
contributed cash totaling $27.5 million and licenses to certain technology
valued at $10 million. Chiron contributed licenses to certain technology valued
at $37.5 million. Until 1992, cash contributions beyond the initial
contributions were provided equally by each partner. Losses of the Partnership
were initially allocated to Ciba-Geigy to the extent of Ciba-Geigy's initial
cash contribution. Thereafter, losses are allocated equally to each partner.

In 1992, Chiron and Ciba-Geigy amended the joint venture agreement such that
Ciba-Geigy agreed to fund Chiron's share of future capital contributions, up to
a maximum of $45 million during the period from January 1, 1992 to December 31,
1995, subject to specified annual limits, in exchange for a preferred interest
in the future profits and cash flows of the Partnership. Through December 31,
1994, Ciba-Geigy has funded $28.9 million of Chiron's share of capital
contributions ($15 million in 1994 and $13.9 million in 1993). Chiron had an
option to restore its 50 percent interest in the earnings and cash flows of the
Partnership by paying an amount equal to Ciba-Geigy's excess contributions plus
interest (see Note 2).

CASH EQUIVALENTS AND CASH INVESTMENTS

Cash and cash equivalents consist principally of money market instruments
including time deposits, Eurodollar certificates of deposits, commercial paper,
and government or government agency securities. All highly liquid investments
with an original maturity of three months or less at the date of purchase are
considered to be cash equivalents. Cash and cash equivalents have carrying
values which approximate fair values.

RESEARCH AND DEVELOPMENT EXPENSES

All costs of research and development are expensed in the period incurred.

F-29
<PAGE>
THE BIOCINE COMPANY
(A DELAWARE GENERAL PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1994

NOTE 1 -- THE PARTNERSHIP AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES (CONTINUED)
INCOME TAXES

The Partnership is not subject to income taxes as the allocated Partnership
losses are deducted by corporate partners. Accordingly, the accompanying
financial statements include no provision for income taxes.

CONCENTRATION OF CREDIT AND MARKET RISK

The Partnership invests cash which is not required for immediate operating
needs principally in money market instruments. These investments are generally
not collateralized and are available upon demand. The Partnership has not
experienced any losses on these investments.

NOTE 2 -- SUBSEQUENT EVENTS
Effective January 1, 1995, Chiron Corporation acquired from Ciba-Geigy
Limited all of the outstanding shares of common stock of Ciba Corning
Diagnostics Corp. and Ciba-Geigy Limited's interest in The Biocine Company and
JV Vax B.V. in exchange for $23.5 million in cash and 6.6 million newly-issued
shares of Chiron's common stock.

F-30

<PAGE>
EXHIBIT 13.3

JV VAX B.V.

CONSOLIDATED FINANCIAL STATEMENTS
AS OF NOVEMBER 30, 1994 AND 1993 AND
FOR EACH OF THE PERIODS
ENDED NOVEMBER 30, 1994, 1993 AND 1992.

F-31
<PAGE>
REPORT OF RECONTA ERNST & YOUNG, INDEPENDENT AUDITORS

Board of Directors
J.V. Vax B.V.

We have audited the accompanying consolidated balance sheets of JV Vax B.V.
and its subsidiaries at November 30, 1994 and 1993, and the related consolidated
statements of operations, shareholders' equity and cash flows for each of the
periods ended November 30, 1994, 1993 and 1992. 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 in the United States of America. 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 financial statements referred to above present fairly,
in all material respects, the consolidated financial position of JV Vax B.V. and
subsidiaries at November 30, 1994 and 1993, and the consolidated results of
their operations and cash flows for each of the periods ended November 30, 1994,
1993 and 1992 in conformity with generally accepted accounting principles in the
United States of America.

Milan, Italy
February 28, 1995

F-32
<PAGE>
JV VAX B.V. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN MILLIONS OF ITALIAN LIRE, UNLESS OTHERWISE NOTED)
ASSETS

<TABLE>
<CAPTION>
NOVEMBER 30,
-----------------------------------
1994 1994 1993
------------ --------- ----------
<S> <C> <C> <C>
(IN 000 US$)
Current assets:
Cash...................................................................... $ 12,203 19,745 4,908
Accounts receivable, trade, net of allowances (Note 3).................... 34,503 55,826 53,763
Inventories (Note 4)...................................................... 12,926 20,915 19,332
Due from affiliates....................................................... 145 234 1,020
Deferred income taxes (Note 7)............................................ -- -- 377
Prepaid expenses and other current assets................................. 437 707 697
------------ --------- ----------
Total current assets...................................................... 60,214 97,427 80,097
Property, plant and equipment, net (Note 5)................................. 27,082 43,818 44,696
Intangible assets, net of accumulated amortization of Lit. 3,316 in 1994 and
Lit. 2,518 in 1993 (Note 2)................................................ 268 434 6,002
Investments in consortia.................................................... 59 95 35
Deferred income taxes (Note 7).............................................. 299 484 484
------------ --------- ----------
Total assets............................................................ $ 87,922 142,258 131,314
------------ --------- ----------
------------ --------- ----------

LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Bank borrowings (Note 10)................................................. $ 4,266 6,903 23,057
Accounts payable, trade................................................... 8,544 13,825 12,037
Other payables (Note 8)................................................... 6,330 10,242 5,929
Accrued compensation and related expenses................................. 3,154 5,103 4,098
Income taxes payable (Note 7)............................................. 178 288 416
Due to affiliates (Note 12)............................................... 1,219 1,972 9,047
Accrued expenses and sundry liabilities................................... 3,862 6,247 5,501
Accrual for expected costs (Note 8)....................................... 2,350 3,803 4,000
------------ --------- ----------
Total current liabilities............................................... 29,903 48,383 64,085
Termination indemnities..................................................... 5,488 8,880 7,650
Accrual for expected costs (Note 8)......................................... -- -- 8,824
Long-term debt (Note 11).................................................... 9,271 15,000 --
------------ --------- ----------
44,662 72,263 80,559
Commitments and Contingencies (Note 14)..................................... -- -- --
Shareholders' equity:
Common stock, 400,000, and 224,700 shares authorized, issued and
outstanding, respectively, at November 30, 1994 and 1993, par value 1,000
NLG...................................................................... 92,426 149,545 149,545
Additional paid-in-capital................................................ 765 1,238 1,238
Accumulated Deficit....................................................... (49,931 ) (80,788) (100,028)
------------ --------- ----------
43,260 69,995 50,755
------------ --------- ----------
Total liabilities and shareholders' equity.............................. $ 87,922 142,258 131,314
------------ --------- ----------
------------ --------- ----------
</TABLE>

The accompanying notes are an integral part of the consolidated financial
statements.

F-33
<PAGE>
JV VAX B.V. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN MILLIONS OF ITALIAN LIRE, UNLESS OTHERWISE NOTED)

<TABLE>
<CAPTION>
FOR THE PERIODS ENDED NOVEMBER 30,
-------------------------------------------------
1994 1994 1993 1992
------------ --------- ----------- -----------
<S> <C> <C> <C> <C>
(IN 000 US$) (NOTE 2)

Net sales..................................................... $ 56,676 91,701 71,376 60,975
Other revenue (Note 12)....................................... 2,578 4,172 1,549 134
------------ --------- ----------- -----------
59,254 95,873 72,925 61,109
Costs and expenses:
Cost of sales............................................... 24,105 39,002 31,224 26,359
Research and development (Note 2)........................... 9,233 14,938 9,870 11,507
Write-off of in-process technology (Note 1)................. -- -- -- 98,803
Selling, general and administrative expenses................ 21,789 35,255 29,186 23,576
------------ --------- ----------- -----------
55,127 89,195 70,280 160,245
------------ --------- ----------- -----------
Income (loss) from operations................................. 4,127 6,678 2,645 (99,136)
Interest expense, net (789) (1,278) (2,053) (1,144)
Other income, net (Note 8).................................... 11,153 18,046 4,032 5,291
Gain on remeasurement to functional currency.................. 567 918 33 380
Foreign currency exchange losses (Note 2)..................... (63) (103) (736) (458)
------------ --------- ----------- -----------
Income (loss) before provision for income taxes............... 14,995 24,261 3,921 (95,067)
Provision for income taxes (Note 7)........................... 3,103 5,021 5,404 3,478
------------ --------- ----------- -----------
Net income (loss)............................................. $ 11,892 19,240 (1,483) (98,545)
------------ --------- ----------- -----------
------------ --------- ----------- -----------
</TABLE>

The accompanying notes are an integral part of the consolidated financial
statements.

F-34
<PAGE>
J.V. VAX B.V. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
FOR THE PERIODS ENDED NOVEMBER 30, 1994, 1993 AND 1992
(IN MILLIONS OF ITALIAN LIRE, UNLESS OTHERWISE NOTED)

<TABLE>
<CAPTION>
ADDITIONAL
COMMON PAID IN ACCUMULATED
STOCK CAPITAL DEFICIT TOTAL
----------- ----------- ------------ -----------
<S> <C> <C> <C> <C>
Balance at November 30, 1991.................................. 26 -- -- 26
Shares issued on acquisition of Biocine SpA (Note 1)........ 149,519 -- -- 149,519
Net loss in 1992............................................ -- -- (98,545) (98,545)
----------- ----------- ------------ -----------
Balance at November 30, 1992.................................. 149,545 -- (98,545) 51,000
Additional paid in capital (Note 1)......................... -- 1,238 -- 1,238
Net income in 1993.......................................... -- -- (1,483) (1,483)
----------- ----------- ------------ -----------
Balance at November 30, 1993.................................. 149,545 1,238 (100,028) 50,755
Net income in 1994.......................................... -- -- 19,240 19,240
----------- ----------- ------------ -----------
Balance at November 30, 1994.................................. 149,545 1,238 (80,788) 69,995
----------- ----------- ------------ -----------
----------- ----------- ------------ -----------
Balance at November 30, 1994 in U.S. $000
(Note 1)..................................................... $ 92,426 $ 765 $ (49,931) $ 43,260
----------- ----------- ------------ -----------
----------- ----------- ------------ -----------
</TABLE>

The accompanying notes are an integral part of the consolidated financial
statements.

F-35
<PAGE>
JV VAX B.V. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN MILLIONS OF ITALIAN LIRE, UNLESS OTHERWISE NOTED)

<TABLE>
<CAPTION>
FOR THE PERIODS ENDED NOVEMBER 30,
------------------------------------------------
IN 000 US$ 1994 1993 1992
----------- --------- ----------- -----------
<S> <C> <C> <C> <C>
(NOTE 2)

Net Income/(loss).............................................. $ 11,892 19,240 (1,483) (98,545)
Adjustments:
Depreciation expense......................................... 4,032 6,524 5,785 5,022
Amortization of intangibles.................................. 493 798 1,260 1,258
Write-off of in-process technology........................... -- -- -- 98,803
Provision for losses and returns on receivables.............. 1,208 1,954 1,894 4,292
Reserves for inventory....................................... -- -- -- 769
Reduction in accrual for expected costs...................... (2,240) (3,624) (3,640) --
Gain on remeasurement to functional currency................. (568) (918) (33) (380)
Deferred income taxes........................................ 3,181 5,148 6,135 2,201
Termination indemnities charge............................... 1,021 1,652 1,313 1,030
Other, net................................................... -- (1) (339) 85
Changes in operating assets and liabilities:
Accounts receivable, trade................................. (1,494) (2,417) (17,214) (41,818)
Accounts receivable, other................................. (1,116) (1,806) 4,926 (16,800)
Accounts receivable, affiliate............................. 486 786 (806) (214)
Inventories................................................ (978) (1,583) 5,625 1,262
Prepaid expenses and other current assets.................. (6) (10) 1,001 (1,143)
Accounts payable, trade.................................... 1,105 1,788 (461) 11,852
Accounts payable, other.................................... 2,666 4,313 4,379 904
Accounts payable, affiliate................................ (1,333) (2,156) (5,397) (2,095)
Accrued compensation and related expenses.................. 621 1,005 353 3,566
Income taxes payable....................................... (79) (128) (807) 1,223
Accrual for expected costs................................. (2,472) (4,000) (2,513) (1,900)
Accrued expenses and sundry liabilities.................... 308 498 1,337 950
Payments of termination indemnities.......................... (281) (454) (190) (407)
----------- --------- ----------- -----------
Net cash provided (used) by operating activities............... 16,446 26,609 1,125 (30,085)
Investing activities:
Purchase of property, plant and equipment.................... (3,498) (5,660) (5,635) (4,202)
Investments in consortia..................................... (37) (60) (25) (10)
----------- --------- ----------- -----------
Net cash used in investing activities.......................... (3,535) (5,720) (5,660) (4,212)
Financing activities:
Net change in short-term borrowings.......................... (9,984) (16,154) 17,032 6,025
Proceeds from long term loan................................. 9,271 15,000 -- --
Proceeds and (repayments) of debt from affiliate............. (3,041) (4,919) (8,284) 13,203
Cash acquired in exchange for shares issued (Note 1)......... -- -- -- 15,802
----------- --------- ----------- -----------
Net cash provided (used) by financing activities............... (3,754) (6,073) 8,748 35,030
----------- --------- ----------- -----------
Effect of exchange rate change on cash......................... 13 21 (63) (1)
----------- --------- ----------- -----------
Net increase in cash........................................... 9,170 14,837 4,150 732
Cash at beginning of the period................................ 3,033 4,908 758 26
----------- --------- ----------- -----------
Cash at end of the period...................................... $ 12,203 19,745 4,908 758
----------- --------- ----------- -----------
----------- --------- ----------- -----------
Supplemental disclosure:
Interest paid.................................................. $ 965 1,561 1,808 153
----------- --------- ----------- -----------
----------- --------- ----------- -----------
Income taxes paid.............................................. $ 23 37 110 89
----------- --------- ----------- -----------
----------- --------- ----------- -----------
</TABLE>

The accompanying notes are an integral part of the consolidated financial
statements.

F-36
<PAGE>
JV VAX B.V. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOVEMBER 30, 1994, 1993, 1992
(IN MILLIONS OF ITALIAN LIRE)

1. BACKGROUND AND ORGANIZATION
J.V. Vax B.V. (VAX) is a holding company incorporated in the Netherlands,
which was formed by Ciba-Geigy in 1990. Since 1992, VAX has held the investment
in Biocine S.p.A. and Biocine S.A.R.L. Ciba-Geigy and the Chiron Corporation
each owned a 50% interest in VAX from January 1992 until January 4, 1995, when
the Chiron Corporation purchased Ciba-Geigy's 50% interest in VAX.

On January 23, 1992, Ciba-Geigy AG of Basle, Switzerland, on behalf of
itself and the Chiron Corporation, a United States based corporation, acquired
the business of Biocine Sclavo S.p.A. (later renamed Biocine S.p.A.) of Siena,
Italy. The acquisition was funded equally by both parties. Immediately after the
acquisition, Ciba-Geigy AG transferred all the issued and outstanding shares of
Biocine S.p.A. to VAX at a price equal to the fair value of the net assets
acquired by it.

VAX issued 224,190 shares of its common stock at par value, in consideration
for the shares of Biocine S.p.A. The value assigned to the shares issued (Lit.
150,757) represented the fair value of the net assets received (including cash
amounting to Lit. 15,802). The value of the shares issued was allocated as
follows: Lit. 149,519 to common stock and Lit. 1,238 to additional paid in
capital.

The acquisition of Biocine S.p.A. has been accounted for under the purchase
method of accounting with an effective date of January 1, 1992, as the economic
substance of the transaction had been completed by that date.

During the allocation period, Biocine S.p.A. was advised as to significant
deficiencies by the Food and Drug Administration (FDA) in the United States with
respect to compliance with regulatory standards in the production of vaccines.
Additionally, it became known that certain receivables due as well as amounts
potentially recoverable under a warranty agreement from the seller of Biocine
S.p.A. would probably not be recovered. VAX, therefore, in the allocation
process provided approximately Lit. 35,000 to cover the expected costs of
bringing the production facility to FDA standards and for the anticipated losses
on receivables, since it was then assessed that the seller did not have the
financial capacity to honor guarantees and representations made with respect to
the facility or make payment on the receivables. The remainder of the excess of
cost over assets acquired and liabilities assumed has been allocated, based upon
independent appraisal, to base technology of approximately Lit. 9,900 and
in-process technology of Lit. 98,803. The base technology is being amortized
over 10 years, using the straight line method and the amount allocated to
in-process technology was charged to earnings in 1992.

In May 1992, VAX formed Biocine S.A.R.L., a French based company. The
results of this company are included in operations since the date of formation.

Biocine S.p.A.'s principal business activity is the research, manufacture
and distribution of vaccines for use against infectious diseases. It also
provides research services to third parties. Biocine S.A.R.L. provides
management and consultancy services to affiliated companies.

To comply with the appropriate statutory requirements, the entities included
in the consolidation maintain their accounts to prepare financial statements in
accordance with accounting principles generally accepted in the countries in
which they are domiciled: Italy, the Netherlands and France. Adjustments have
been made to such financial statements to present the accompanying financial
statements in conformity with generally accepted accounting principles in the
United States of America (U.S. GAAP). The nature of such adjustments relate
primarily to accounting for business combinations, accounting for intangible
assets and income taxes.

F-37
<PAGE>
JV VAX B.V. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOVEMBER 30, 1994, 1993, 1992
(IN MILLIONS OF ITALIAN LIRE)

1. BACKGROUND AND ORGANIZATION (CONTINUED)
The local currency accounting records of VAX and its French subsidiary have
been remeasured into Lire as management has decided that the Italian Lire is the
functional currency. The remeasurement of the local currency accounting records
into Italian Lire creates exchange gains and losses which are included in net
income.

2. SIGNIFICANT ACCOUNTING POLICIES

PRINCIPLES OF CONSOLIDATION

The consolidated financial statements include the financial statements of
VAX and its wholly-owned subsidiaries Biocine S.p.A. and Biocine S.A.R.L. (the
"Company"). Significant intercompany accounts and transactions have been
eliminated in consolidation.

Though VAX's year end is December 31, the consolidated financial statements
are dated at and as of November 30, since Biocine S.p.A., included in the
consolidation as of November represents 99% and more than 80% of the group's
consolidated revenue and assets, respectively, for each of the three periods
ended November 30, 1994, 1993 and 1992. The period ended November 30, 1992
represents the eleven months of operations from date of acquisition, January 1,
1992. For statutory purposes Biocine S.p.A.'s year end is December 31.

INVENTORIES

Raw materials and finished goods are valued at the lower of cost or market
using the LIFO (last-in, first-out) method. Work-in-process is valued at the
lower of cost or market using the average cost method.

PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment are stated at cost. Depreciation on property,
plant and equipment is computed by the straight-line method as follows:
buildings -- 20 years; machinery and equipment -- 5 to 8 years and office
furniture, fixtures and transportation equipment -- 4 to 6 years. Leasehold
improvements are amortized by the straight-line method over the lesser of the
lease term or their estimated useful lives.

INTANGIBLE ASSETS

Intangible assets consist of base technology, trademarks and patents that
are amortized on a straight-line basis over their estimated useful lives of 10
years.

REVENUE RECOGNITION

Revenues from product sales are recognized when ownership is transferred to
customers, generally upon shipment. Revenue from research services performed on
behalf of third parties is recognized proportionately based on the stage of
completion. Revenue from affiliates is for managerial and consultancy services
provided and is recognized as services are rendered.

RESEARCH AND DEVELOPMENT COSTS

All costs of research and development, including acquired in-process
technology, are charged to earnings as incurred.

INCOME TAXES

The Company accounts for income taxes under the liability method of
accounting in accordance with FAS Statement No. 109, Accounting for Income
Taxes. Statement 109 requires an asset and liability approach to account for
income tax and allows for the recognition and measurement of deferred tax assets
based on the likelihood of realization of tax benefits in future years.

F-38
<PAGE>
JV VAX B.V. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOVEMBER 30, 1994, 1993, 1992
(IN MILLIONS OF ITALIAN LIRE)

2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
STATEMENTS OF CASH FLOWS

The Company's short term borrowings arise primarily under its bank
overdraft, export and import purchase facilities. These short term borrowings
have maturities of less than three months. The cash flows from these items are
included under the caption "net change in short term borrowings" in the
Consolidated Statement of Cash Flows.

FOREIGN CURRENCY TRANSACTIONS

Accounts receivable and payable transactions denominated in foreign
currencies, have been recorded at the exchange rate in effect on the relevant
transaction dates. Such receivables and payables are adjusted to current
exchange rates as of the balance sheet date, and unrealized gains and losses are
recorded in income.

CONCENTRATION OF RISK

The Company has not experienced significant credit losses from its trade
customers, which consist principally of numerous state guided public health and
not-for-profit entities. No single customer accounted for 10% or more of total
sales in any of the periods ended November 30, 1994, 1993 and 1992. The Company
performs on going credit evaluations of its customers and reserves are
maintained for potential credit losses. Losses incurred on trade receivables
have been within management's expectation.

The Company hedges a portion of its receivables and payables which are
denominated in foreign currencies by depositing or borrowing in the appropriate
currencies to provide an economic hedge against fluctuations in foreign currency
exchange rates.

FAIR VALUE OF FINANCIAL INSTRUMENTS

The carrying value of cash, investments, accounts receivable and payable are
a reasonable estimate of their fair values. The carrying amounts of the
Company's borrowings under its short-term revolving credit lines approximate
their fair value. The fair value of the Company's long term debt is estimated
using discounted cash flow analysis based on the Company's incremental borrowing
rates.

TERMINATION INDEMNITIES

The termination indemnity relates to the Italian subsidiary, Biocine S.p.A.
In accordance with Italian laws, an employee benefit is accrued for service to
date and is payable immediately upon separation. The termination indemnity
liability is calculated in accordance with local civil and labor laws based on
each employee's length of service, employment category and renumeration. The
termination liability is adjusted annually by a cost of living index provided by
the Italian Government. There is no vesting period or funding requirement
associated with the liability.

INFORMATION EXPRESSED IN U.S. DOLLARS

The consolidated financial statements are stated in Italian Lire. The
translation of Italian Lire amounts of the most recent fiscal year into U.S.
dollar amounts is included solely for informational purposes and has been made
at the rate of Lit. 1,618 to U.S. $1, the approximate rate of exchange at
November 30, 1994.

Such translation should not be construed as a representation that the
Italian Lire amounts could be converted into U.S. dollars at that or any other
rate.

F-39
<PAGE>
JV VAX B.V. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOVEMBER 30, 1994, 1993, 1992
(IN MILLIONS OF ITALIAN LIRE)

3. ACCOUNTS RECEIVABLE ALLOWANCES
Allowances provided for accounts receivable are as follows:

<TABLE>
<CAPTION>
1994 1993
--------- ---------
<S> <C> <C>
Doubtful accounts........................................................... 923 569
Customer returns............................................................ 1,600 1,600
--------- ---------
2,523 2,169
--------- ---------
--------- ---------
</TABLE>

The amounts charged to bad debt expense were Lit. 275, Lit. 294 and Lit. 354
in 1994, 1993 and 1992, respectively.

4. INVENTORIES
Inventories consist of the following:

<TABLE>
<CAPTION>
1994 1993
--------- ---------
<S> <C> <C>
Raw material and supplies................................................ 6,085 4,766
Work in process.......................................................... 12,264 12,218
Finished goods........................................................... 2,566 2,348
--------- ---------
20,915 19,332
--------- ---------
--------- ---------
</TABLE>

The excess of the current cost over LIFO values assigned to raw materials
and finished goods at November 30, 1994 and 1993, were Lit. 588 and Lit. 347,
respectively.

5. PROPERTY, PLANT AND EQUIPMENT

<TABLE>
<CAPTION>
1994 1993
--------- ---------
<S> <C> <C>
Land and buildings...................................................... 18,968 18,793
Machinery, furniture and transportation equipment....................... 39,386 34,842
Leasehold improvements.................................................. 2,927 2,139
Construction in progress................................................ 261 271
--------- ---------
61,542 56,045
Less: accumulated depreciation.......................................... (17,724) (11,349)
--------- ---------
43,818 44,696
--------- ---------
--------- ---------
</TABLE>

6. SHAREHOLDERS' EQUITY
Italian law requires that 5% of net income be retained as a legal reserve
until such reserve equals 20% of share capital. This reserve is restricted for
the payment of dividends.

F-40
<PAGE>
JV VAX B.V. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOVEMBER 30, 1994, 1993, 1992
(IN MILLIONS OF ITALIAN LIRE)

7. INCOME TAXES
The provision for income taxes is as follows:

<TABLE>
<CAPTION>
1994 1993 1992
--------- --------- ---------
<S> <C> <C> <C>
Current:
National (IRPEG)................................................. (277) (507) 881
Local (ILOR)..................................................... 43 (228) 396
Foreign taxes.................................................... 107 4 --
--------- --------- ---------
(127) (731) 1,277
Deferred........................................................... 5,148 6,135 2,201
--------- --------- ---------
Total.............................................................. 5,021 5,404 3,478
--------- --------- ---------
--------- --------- ---------
</TABLE>

The components of temporary differences which gave rise to deferred tax
assets and liabilities at November 30, are as follows:

<TABLE>
<CAPTION>
1994 1993
--------- ---------
<S> <C> <C>
Deferred tax liabilities:
Accelerated amortization on intangibles................................ -- 908
Accelerated depreciation on property, plant and equipment.............. 835 --
Intangibles (purchased technology)..................................... -- 1,467
--------- ---------
Total deferred tax liabilities......................................... 835 2,375
--------- ---------
--------- ---------
Deferred tax assets:
Accrual for expected costs in connection with acquisition.............. 8,913 12,892
Intangible assets...................................................... 484 861
--------- ---------
Total deferred tax assets.............................................. 9,397 13,753
Valuation allowance.................................................... (8,078) (10,517)
--------- ---------
Deferred tax assets, net............................................... 1,319 3,236
Deferred tax liabilities............................................... (835) (2,375)
--------- ---------
Net deferred tax assets.................................................. 484 861
--------- ---------
--------- ---------
</TABLE>

A valuation allowance has been recognized to offset the deferred tax asset
relating to the accrual for expected costs to be incurred in connection with the
acquisition since it was more likely than not that most of the deferred tax
asset would not be realized. The tax benefits of the reduction in the
liabilities for which the deferred tax asset was originally recognized have been
applied to reduce noncurrent intangible assets related to the acquisition.

In accordance with FAS Statement 109, deferred tax assets and liabilities
are classified as current or noncurrent in the accompanying balance sheets based
on the classification of the related asset or liability.

F-41
<PAGE>
JV VAX B.V. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOVEMBER 30, 1994, 1993, 1992
(IN MILLIONS OF ITALIAN LIRE)

7. INCOME TAXES (CONTINUED)
The following summarizes the differences between the Company's effective tax
rates and the statutory rates:

<TABLE>
<CAPTION>
1994 1993 1992
--------- --------- ---------
<S> <C> <C> <C>
Tax @ Italian statutory rates of 53.2% in 1994 and 52.2% in
1993 and 1992................................................. 12,907 2,047 (49,789)
Subsidiary taxes at lower rates................................ (15) -- --
Permanent differences:
Write-off of in-process technology........................... -- -- 51,575
Tax on capital and other net................................. 286 3,357 1,692
Non-taxable income........................................... (8,157) -- --
--------- --------- ---------
Provision for income taxes..................................... 5,021 5,404 3,478
--------- --------- ---------
--------- --------- ---------
</TABLE>

8. ACCRUAL FOR EXPECTED COSTS AND LOSSES IN CONNECTION WITH ACQUIRED BUSINESS
OF BIOCINE S.P.A.
As more fully explained in note 1, VAX provided an accrual amounting to Lit.
35,000 in the allocation process, in connection with the acquisition of Biocine
to cover the expected costs of restoring the facility to US manufacturing
standards required by the Federal Drug Administration (FDA) in the United States
and loss on receivables. Since 1992 significant costs have been incurred by
Biocine to comply with FDA standards and the collectibility of the accounts
receivable proved to be doubtful.

As a result of the sightings by the FDA, Biocine spent Lit. 4,000, Lit.
4,600 and Lit. 1,900 in 1994, 1993 and 1992, respectively. The amounts incurred
were charged to the accrual.

In December 1992, Ciba-Geigy, on behalf of VAX, brought legal actions
against the seller of Biocine S.p.A. claiming reparation from the seller, who
had guaranteed that the facility met the FDA and other regulatory standards. In
December 1993, to alleviate further controversies, both parties, the seller and
Ciba-Geigy, agreed to settle the claim for an all-inclusive sum of Lit. 14,300,
the seller waiving rights to future income of Biocine S.p.A.. The proceeds from
the claim were received by VAX in 1994.

Upon receipt of the settlement, which represented the guarantee and
representation the seller had made concerning the facility upon acquisition, VAX
recognized it as income in 1994.

The remaining balance of the accrual for expected costs in the amount of
Lit. 3,803 at November 30, 1994, is the additional cost the Company expects to
incur to complete the program to upgrade the production facility to comply with
regulatory standards.

As was anticipated, based on available facts at the date of Biocine S.p.A.'s
acquisition, it became increasingly more evident that receivables due from the
seller would probably not be recovered. In addition, to these receivables, the
Company had agreed at acquisition, to share the facilities occupied by Sclavo
and to provide each other with certain administrative services for a fee.
Furthermore, due to certain legal requirements which needed to be observed,
Sclavo continued to bill and collect accounts receivable from customers on
behalf of Biocine through June 1992. As such, the Company provided for this
exposure during the allocation period. At November 30, 1994, amounts due from
Sclavo are fully reserved for by the accrual for expected costs and losses. At
November 30, 1994 and 1993, Biocine has amounts payable to the Sclavo companies
in the amount of Lit. 10,242 and Lit. 5,929, respectively. No right of set-off
exists.

F-42
<PAGE>
JV VAX B.V. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOVEMBER 30, 1994, 1993, 1992
(IN MILLIONS OF ITALIAN LIRE)

9. INVESTMENTS IN CONSORTIA
Biocine S.p.A. has holdings in three consortia, NIRE.Co (Lit. 10 - 33%),
CIS.NE (Lit. 25 - 50%) and Consortio Siena Ricerche (Lit. 60 - 16.7%). The three
consortia are substantially dormant and have been established solely to
facilitate the application for research grants. The Company recognized revenue
in the amount of Lit. 2,569 from these consortia in 1994 (see Note 12).

10. LINES OF CREDIT
The Company's subsidiary, Biocine S.p.A. has unsecured, short-term revolving
credit lines with seven banks, renewable at the options of either parties, which
provides for borrowings of up to Lit. 44,400. The lines of credit bear interest
at a weighted average rate of 7.8%. The lines of credit are allocated to provide
for an overdraft facility, borrowings up to a certain percentage of accounts
receivable that have been placed with banks by customers guaranteeing payment to
the Company and for hedging of the Company's receivables and payables in foreign
currencies.

At November 30, 1994, the Company has approximately Lit. 37,700 available
for borrowings from the credit lines.

In December 1992, Ciba-Geigy, AG, which owned a 50% interest in VAX, made
available to Biocine S.p.A., through its financing subsidiary, CI GE FI, S.p.A.,
a credit line which allows Biocine to borrow from Lit. 7,000 to Lit. 37,000. The
facility was reduced to a maximum amount of Lit. 33,000 in 1993. The credit line
bears interest at prevailing market rate of 8.5%. At November 30, 1994, the
Company had no amounts outstanding from the line of credit. Interest paid
relating to outstanding borrowings were Lit. 275, Lit. 858 and Lit. 142 in 1994,
1993, and 1992, respectively.

11. LONG-TERM DEBT
In 1994, the Company borrowed Lit. 15,000 from Monte dei Paschi di Siena
bank which bears interest at a variable rate (approximately 4.7% at November 30,
1994). The loan is payable in semi-annual installments starting in February
1996. The terms of the loan, which bears interest below the Italian prime rate,
requires that Biocine S.p.A. retains its research facility in Siena. The loan is
guaranteed by the Chiron Corporation and Ciba-Geigy, AG.

The fair value of the long term debt is approximately Lit. 12,858.

Maturities of this debt are as follows: Lit. 2,200 in 1996; Lit. 2,325 in
1997; Lit. 2,435 in 1998; Lit. 2,550 in 1999; Lit. 2,671 in 2000 and; Lit. 2,819
thereafter.

12. OTHER INCOME AND TRANSACTIONS WITH AFFILIATES
Other revenue consists of the following:

<TABLE>
<CAPTION>
1994 1993 1992
--------- --------- ---------
<S> <C> <C> <C>
Research services................................................... 2,569 91 --
Revenue from affiliates............................................. 1,603 1,458 134
--------- --------- ---
4,172 1,549 134
--------- --------- ---
--------- --------- ---
</TABLE>

Biocine S.A.R.L. provides services to its affiliates. Revenues earned from
the Biocine Company are as indicated above.

The Chiron Corporation, which had a 50% interest in VAX, provides managerial
and consultancy services to Biocine S.p.A. Charges for such services and
additional clinical trial costs paid by Chiron

F-43
<PAGE>
JV VAX B.V. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOVEMBER 30, 1994, 1993, 1992
(IN MILLIONS OF ITALIAN LIRE)

12. OTHER INCOME AND TRANSACTIONS WITH AFFILIATES (CONTINUED)
Corporation on behalf of Biocine S.p.A. amounted to Lit. 5,868, Lit. 6,833 and
Lit. 6,479 in 1994, 1993 and 1992, respectively. Amounts due to the Chiron
Corporation at November 30, 1994 and 1993 were Lit. 1,078 and Lit. 3,489,
respectively:

An affiliate, Zyma S.p.A., acts as an agent on behalf of Biocine S.p.A. and
earns commission on sales. Commission expenses incurred by Biocine in connection
with this arrangement in 1994, 1993, and 1992 were Lit. 643, Lit. 850 and Lit.
975, respectively. Amounts due to Zyma S.p.A. at November 30, 1994 and 1993,
were Lit. 633 and Lit. 600, respectively.

13. INFORMATION REGARDING EXPORT SALES
The company operates in the single industry segment for the research,
manufacture and distribution of vaccines for use against infectious diseases.

Total export sales by geographic area are as follows:

<TABLE>
<CAPTION>
1994 1993 1992
--------- --------- ---------
<S> <C> <C> <C>
European countries, other than Italy........................... 6,888 4,385 4,659
North America.................................................. 2,893 2,134 1,203
Latin America.................................................. 8,404 5,546 3,316
Asia........................................................... 3,705 2,210 1,363
Middle East.................................................... 4,386 3,742 281
Africa......................................................... 2,304 -- 43
Other.......................................................... 1,743 1,817 474
--------- --------- ---------
30,323 19,834 11,339
--------- --------- ---------
--------- --------- ---------
</TABLE>

14. COMMITMENTS, CONTINGENCIES AND OTHER

LEASE COMMITMENTS

The Company leases computer and office equipment under non-cancellable
leases which expire at various dates through year 1998. Approximate minimum
rental commitments, under operating leases at November 30, 1994 are as follows:

Rent expense under operating leases approximated Lit. 741, Lit. 280 and Lit.
91 in 1994, 1993 and 1992, respectively.

ROYALTY AGREEMENTS

The Company has licensing agreements with four companies which allow the
Company to utilize certain processes developed by those companies in the
production of the Company's vaccines.

The licensing agreements provide for the Company to pay royalties ranging
from 2.5% to 7.5% of the net sales relating to the product in which the
processes or technical knowledge were used, in certain territories. Royalty
expenses were Lit. 3,157, Lit. 834 and Lit. 295 in 1994, 1993 and 1992,
respectively.

F-44
<PAGE>
JV VAX B.V. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOVEMBER 30, 1994, 1993, 1992
(IN MILLIONS OF ITALIAN LIRE)

14. COMMITMENTS, CONTINGENCIES AND OTHER (CONTINUED)
GUARANTEES

The Company has performance bonds outstanding in the amount of Lit. 1,683
and Lit. 1,017 in 1994 and 1993, respectively, in connection with sales to
public health authorities.

LITIGATION

The Company is involved in various legal proceedings arising in the normal
course of business. Management believes that the final outcome of these
proceedings will not have a material adverse effect on the Company's results of
operations or financial position.

OTHER

Since the acquisition of Biocine S.p.A. in January 1992, the Company has
mutually occupied two campuses, one in Siena, Italy and one in Rosia, Italy with
a group of companies, collectively known as "The Marcucci Group". Sclavo S.p.A.
owns the facilities in Siena and Biocine S.p.A. owns the facilities in Rosia.

In accordance with the original terms of the purchase agreement, Biocine
S.p.A. pays a nominal rent (Lit. 1 per annum) for the buildings it occupies at
the Siena campus. The original agreement provided for rental terms of up to 12
years from Sclavo S.p.A. Within the first year of this arrangement disputes
arose between Biocine S.p.A. and Sclavo which led to litigation that was settled
in 1994. As part of these disputes Biocine S.p.A. was requested by Sclavo to
submit a plan to evacuate the Siena property to Sclavo S.p.A. Therefore, in
1992, no value was assigned to this rental agreement in the allocation process
because Biocine S.p.A. considered the occupation period to be indeterminate, due
in part to the financial capacity of the seller.

The current plan calls for the moving of the entire operations of Biocine
S.p.A. to the Rosia campus. The first phase of this expansion began in 1994.

15. SUBSEQUENT EVENTS

On January 4, 1995, Chiron purchased the remaining 50% of VAX from
Ciba-Geigy.

F-45

<PAGE>
EXHIBIT 23.1

CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS

We consent to the incorporation by reference in the Registration Statements
(Forms S-8, File Numbers 33-20181, 33-35182, 2-90595, 33-44477, 33-23899,
33-65024, 33-45822 and Form S-3 File Number 33-43574) pertaining to the Chiron
Corporation 1991 Stock Option Plan, the 1988 Employee Stock Purchase Plan, the
IntraOptics, Inc. 1986 Incentive Stock Option Plan, as amended, the 1982 Stock
Option Plan and the shares issuable to certain warrant holders and in the
related prospectuses of our report dated January 27, 1995, with respect to the
consolidated balance sheets of Ciba Corning Diagnostics Corp. as of January 1,
1995 and January 2, 1994, and the related consolidated statements of operations,
stockholders' equity and cash flows for the years ended January 1, 1995, January
2, 1994 and November 29, 1992, included in the Current Report (Form 8-K/A) of
Chiron Corporation dated March 17, 1995.

ERNST & YOUNG LLP

Boston, Massachusetts
March 14, 1995

<PAGE>
EXHIBIT 23.2

CONSENT OF KPMG PEAT MARWICK LLP, INDEPENDENT AUDITORS

We consent to the incorporation by reference in the Registration Statements
(File Numbers 33-20181, 33-35182, 2-90595, 33-44477, 33-65024, 33-23899 and
33-45822 on Form S-8 and File Number 33-43574 on Form S-3) of Chiron Corporation
and in the related prospectuses of our report dated February 17, 1995, relating
to the balance sheets of The Biocine Company as of December 31, 1994 and 1993,
and the related statements of operations, partners' capital (deficit) and cash
flows for each of the years in the three-year period ended December 31, 1994,
which report appears in the Form 8-K of Chiron Corporation dated March 17, 1995.

KPMG Peat Marwick LLP

San Francisco, California
March 14, 1995

<PAGE>
EXHIBIT 23.3

CONSENT OF RECONTA ERNST & YOUNG, INDEPENDENT AUDITORS

We consent to the incorporation by reference in the Registration Statements
(Forms S-8, File Numbers 33-20181, 33-35182, 2-90595, 33-44477, 33-23899,
33-65024, 33-45822 and Form S-3 File Number 33-43574) pertaining to the Chiron
Corporation 1991 Stock Option Plan, the 1988 Employee Stock Purchase Plan, the
IntraOptics, Inc. 1986 Incentive Stock Option Plan, as amended, the 1982 Stock
Option Plan and the shares issuable to certain warrant holders and in the
related prospectuses of our report dated February 28, 1995, with respect to the
consolidated balance sheets of JV Vax B.V. as of November 30, 1994 and 1993, and
the related consolidated statements of operations, shareholders' equity and cash
flows for each of the periods ended November 30, 1994, 1993 and 1992 included in
the Current Report (Form 8-K/A) of Chiron Corporation dated March 17, 1995.

RECONTA ERNST & YOUNG

Milan, Italy
March 16, 1995