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1,253,648 Shares
CHIRON CORPORATION
COMMON STOCK
Chiron Corporation ("Chiron" or the "Company") hereby offers to sell up to
442,815 shares of its Common Stock ("Common Stock"), to the holders of certain
Warrants to purchase Common Stock pursuant to the valid exercise of such
Warrants. Such warrants (the "Warrants") were issued by Cetus Corporation, a
wholly owned subsidiary of the Company ("Cetus"), and were assumed by Chiron
upon its acquisition of Cetus in December 1991. No fractional shares will be
sold.
The Warrants include (i) a warrant to purchase an aggregate 150,000 shares
of the Company's Common Stock at $52.50 per share (the "Roche Warrant"), and
(ii) warrants to purchase an aggregate 292,815 shares of the Company's Common
Stock at $95.33 per share (the "CHLP II Warrants").
In addition, Chiron hereby offers to sell up to 810,833 shares of its
Common Stock to the holders of certain 5-1/4 Per Cent Convertible Subordinated
Debentures due 2002 (the "Debentures") which were issued by Cetus and were
convertible, at the option of the holder, into shares of Cetus Common Stock.
Chiron, upon its acquisition of Cetus, entered into a supplemental indenture
providing that each holder of a Debenture will have the right to convert the
Debenture, in lieu of conversion into shares of Cetus Common Stock, into shares
of Chiron Common Stock. No fractional shares of Chiron Common Stock will be
issued upon conversion of the Debentures.
On December 8, 1995, the closing price for the Common Stock of the Company
in the over-the-counter market as reported on the Nasdaq National Market
("NASDAQ") was $106.50 per share. The Common Stock is traded on NASDAQ under
the symbol CHIR.
The principal executive offices of the Company are located at 4560 Horton
Street, Emeryville, California 94608, and the telephone number is (510) 655-
8730.
THE SHARES OF COMMON STOCK OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK.
SEE "RISK FACTORS."
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
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Underwriting Discounts and
Price to Public Commissions Proceeds to Company (1)
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<S> <C> <C> <C>
See "Offering of Common
See "Offering of Common Stock Upon Exercise of
Per Share Stock Upon Exercise of -- Warrants or Conversion of
Warrants or Conversion of Debentures"
Debentures"
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See "Offering of See "Offering of Common
Common Stock Upon Exer- Stock Upon Exercise of
Total cise of Warrants or -- Warrants or Conversion of
Conversion of Debentures" Debentures"
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</TABLE>
(1) Before deducting expenses relating to this offering estimated to be
approximately $74,500.
THE DATE OF THIS PROSPECTUS IS DECEMBER 11, 1995.
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TRADEMARKS
The following trademarks appear in this Prospectus: Betaseron-Registered
Trademark-is a registered trademark of Berlex Laboratories, Inc.; Proleukin-
Registered Trademark-is a registered trademark of Chiron Therapeutics, a
subsidiary of Chiron; and Myotrophin-Registered Trademark-is a registered
trademark of Cephalon Inc.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and is required to file
periodic reports, proxy statements and other information with the Securities and
Exchange Commission (the "SEC") relating to its business, financial statements
and other matters. Such reports, proxy statements and other information may be
inspected and copied at the public reference facilities maintained by the SEC at
Room 1024, 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549, and at the
Regional Offices of the SEC located at the Northwestern Atrium Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661, and Seven World Trade
Center, Suite 1300, New York, New York 10048. Copies of such material can also
be obtained from the SEC at prescribed rates from the Public Reference Section
of the SEC at 450 Fifth Street, N.W., Washington, D.C. 20549.
The Company has filed with the SEC a Form S-3 Post-Effective Amendment
No. 2 to a Form S-4 Registration Statement (herein, together with all amendments
thereto, called the "Registration Statement") under the Securities Act of 1933,
as amended, with respect to the Common Stock offered hereby. As permitted by
the rules and regulations of the SEC, this Prospectus omits certain information
contained in the Registration Statement. For further information, reference is
made to the Registration Statement, including the financial schedules and
exhibits incorporated therein by reference or filed as a part thereof.
Statements made in this Prospectus as to the contents of any contract, agreement
or other document referred to are not necessarily complete, and, in each
instance, reference is made to the copy of such document filed as an exhibit to
the Registration Statement or otherwise filed with the SEC. Each such statement
shall be deemed qualified in its entirety by such reference.
The Company's Common Stock is listed on the Nasdaq National Market. All
reports, proxy statements and other information filed by the Company with the
National Association of Securities Dealers, Inc. ("NASD") may be inspected at
the offices of the NASD at 1735 K Street, N.W., Washington, D.C. 20006.
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INFORMATION INCORPORATED BY REFERENCE
The following documents filed by the Company (File No. 0-12798) with the
SEC pursuant to the Exchange Act are hereby incorporated by reference in this
Prospectus:
(1) Annual Report on Form 10-K for the year ended December 31, 1994;
(2) Quarterly Reports on Form 10-Q for the quarters ended April 2,
1995, July 2, 1995 and October 1, 1995;
(3) Current Reports on Form 8-K dated January 4, 1995, March 6, 1995,
March 10, 1995, April 24, 1995, May 5, 1995 and September 29, 1995 and Form
8-K/A dated January 4, 1995, filed on March 17, 1995, and Form 8-K/A dated
September 29, 1995, filed on November 13, 1995;
(4) Chiron's Definitive Proxy Statement for the Annual Meeting of
Stockholders held on May 18, 1995, filed on April 19, 1995; and
(5) The description of the Company's Common Stock contained in the
Registration Statement on Form 8-A filed with the SEC on August 28, 1984
under Section 12 of the Exchange Act, including any amendment or report for
the purpose of updating that description (Registration No. 0-12798).
All documents filed by the Company with the SEC pursuant to Section 13(a),
13(c), 14 or 15(d) of the Exchange Act after the date of this Prospectus and
prior to the termination of the offering of the Common Stock offered hereby
shall be deemed to be incorporated by reference in this Prospectus and to be a
part hereof from the date any such document is filed.
Any statements contained in a document incorporated by reference in this
Prospectus shall be deemed to be modified or superseded for purposes of this
Prospectus to the extent that a statement contained in this Prospectus (or in
any other subsequently filed document which also is incorporated by reference in
this Prospectus) modifies or supersedes such statement. Any statement so
modified or superseded shall not be deemed to constitute a part of this
Prospectus except as so modified or superseded.
THE COMPANY WILL PROVIDE WITHOUT CHARGE TO EACH PERSON TO WHOM A COPY OF
THIS PROSPECTUS IS DELIVERED, UPON THE WRITTEN OR ORAL REQUEST OF SUCH PERSON, A
COPY OF ANY OR ALL OF THE DOCUMENTS INCORPORATED HEREIN BY REFERENCE (OTHER THAN
EXHIBITS TO SUCH DOCUMENTS, UNLESS SUCH EXHIBITS ARE SPECIFICALLY INCORPORATED
BY REFERENCE IN SUCH DOCUMENTS). REQUESTS FOR SUCH COPIES SHOULD BE DIRECTED TO
OFFICE OF THE SECRETARY, CHIRON CORPORATION, 4560 HORTON STREET, EMERYVILLE,
CALIFORNIA 94608, TELEPHONE NUMBER (510) 655-8730.
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THE COMPANY
Chiron applies biotechnology and other techniques of modern biology and
chemistry to develop products intended to improve the quality of life by
diagnosing, preventing and treating human disease with a goal of reducing
overall healthcare costs. Chiron is a diversified company that participates in
four global healthcare markets: diagnostics, including immunodiagnostics,
critical care diagnostics and new quantitative probe tests; therapeutics, with
an emphasis on oncology and infectious disease; pediatric and adult vaccines;
and ophthalmic surgical products for the correction of vision. Its businesses
include Chiron Diagnostics, Chiron Biocine, Chiron Therapeutics, Chiron Vision
and Chiron Technologies. Chiron Diagnostics, which includes Ciba Corning
Diagnostics Corp. ("CCD"), develops and markets automated immunodiagnostic
systems, critical blood analytes and quantitative branched DNA ("bDNA") probe
tests for human immunodeficiency virus ("HIV"), hepatitis C virus ("HCV") and
hepatitis B virus ("HBV"). Chiron also has built a joint business in the
immunodiagnostic market with Ortho Diagnostic Systems, Inc. ("Ortho"), a Johnson
& Johnson company, based largely on sales of tests used to screen blood for the
potential presence of HCV, which has been identified as a major cause of serious
liver disease throughout the world. Chiron Therapeutics is Chiron's hospital-
based direct-selling business in the United States and Europe and markets
products for use principally by oncologists, primarily Proleukin-Registered
Trademark-(aldesleukin) (or "IL-2") for metastatic kidney cancer. Chiron also
manufactures Betaseron-Registered Trademark-(Interferon beta-1b) for relapsing-
remitting multiple sclerosis. Chiron Biocine develops and markets novel adult
and pediatric vaccines, including new vaccines under development for genital
herpes, HCV, cytomegalovirus ("CMV") and HIV and a genetically engineered
acellular pertussis vaccine on the market in Italy and in clinical trials in the
United States and Europe. Chiron Vision develops and markets ophthalmic
surgical products including instruments and devices used for the surgical
correction of vision and an intraocular implant to deliver drugs into the eye.
Chiron Technologies manages development of new technologies from the company's
research including a new generation of chemical therapeutics being developed
through advanced techniques of drug design and discovery and a program in gene
therapy.
In November 1994, Chiron entered into certain agreements with Ciba-Geigy
Limited, a corporation organized under the laws of Switzerland, and certain of
its affiliates (collectively, "Ciba") pursuant to which Ciba and Chiron formed a
strategic alliance in the area of biotechnology and other new technologies in
the field of human healthcare. Pursuant to these agreements, in January 1995,
Ciba acquired approximately 49.9 percent of the outstanding Chiron Common Stock,
in part through a tender offer for approximately 11.9 million shares of Chiron
Common Stock. In addition, Chiron issued 6.6 million shares and paid $24
million in cash in exchange for all of the outstanding shares of common stock of
CCD and Ciba's interests in The Biocine Company (subsequently renamed "Chiron
Biocine Company") and JV Vax B.V. (of which Biocine S.p.A. is the primary
operating subsidiary). Chiron and Ciba have also agreed, among other things,
that Ciba will fund research and development programs at Chiron in the
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amount of up to $250 million (or, under certain circumstances, $300 million)
through 1999, and that, at Chiron's request, from time to time through 2005,
Ciba will subscribe for up to $500 million in additional shares of Chiron Common
Stock. 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.
In addition, Ciba and Chiron have agreed that, so long as Ciba owns equity
securities representing at least 30 percent of the aggregate number of votes
entitled to be voted in an election of directors of Chiron by all outstanding
voting stock, Ciba will, if certain exercise conditions exist, have the right to
purchase newly-issued shares of Chiron Common Stock (initially, up to a
percentage of voting power equal to 49.9% or, under certain circumstances, a
higher percentage as provided pursuant to such agreement). Ciba has also agreed
to guarantee a $425 million credit facility for Chiron. In addition, Ciba and
Chiron have entered into an agreement relating to the formation of potential
future research and development collaborations, the marketing and manufacturing
of bio-pharmaceutical and certain other pharmaceutical products and the
potential sharing of technologies.
During the third quarter of 1995, Chiron and Ciba entered into an
investment, research support and marketing agreement to utilize research funding
provided by Ciba, as discussed above. Under the terms of the agreement, Ciba
will fund from time to time, at Chiron's request, research and development
efforts for certain adult vaccines currently under development. In return, Ciba
will receive an interest in a stream of variable royalties on worldwide sales
and also promotional rights in countries other than those in North America and
Europe, for such vaccines. The interests in royalties are to be acquired by
Ciba through ownership of a newly organized subsidiary of Chiron. Royalties
will be paid, on a country by country basis, for the longer of ten years or to
the date of expiration of applicable product patents. Royalties generated from
product sales prior to the year 2000 will be reinvested in funding ongoing
research and development of the vaccines.
Under the terms of the agreement, Chiron was granted an option to
repurchase Ciba's interest, at cost plus an agreed-upon return. In addition, if
Chiron chooses to exercise the option, Ciba will be granted certain marketing
rights in countries other than those in North America and Europe with respect to
the adult vaccines developed from the funding. Pursuant to the agreement,
Chiron received $12 million of funding from Ciba during the third quarter of
1995. Prior to further funding by Ciba, however, Chiron and Ciba have agreed to
negotiate a restructuring of the agreement to include royalty rights for one or
more additional Chiron products. Chiron anticipates receiving additional
funding from Ciba in future periods, pursuant to the terms of the restructured
agreement.
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On March 31, 1995, Chiron Vision acquired the surgical division of IOLAB
from Johnson & Johnson for approximately $96 million. The acquisition was
accounted for under the purchase method of accounting, and resulted in a $10
million charge to earnings in the first quarter of 1995 to expense purchased in-
process technology. The Company recorded additional charges for restructuring
and integration-related expenses totaling $17 million. IOLAB's results of
operations are included in Chiron's consolidated operating results from March
31, 1995, forward.
On September 29, 1995, Chiron acquired all the outstanding common stock of
Viagene in exchange for approximately $36 million in cash and 916,000 shares of
Chiron Common Stock. Additionally, on September 29, 1995, unexercised options
to purchase Viagene common stock were converted into options to purchase
approximately 132,000 shares of Chiron Common Stock. The acquisition was
accounted for under the purchase method of accounting and resulted in an
approximately $130 million charge to earnings in the third quarter of 1995 to
expense purchased in-process technology. Viagene's results of operations are
included in Chiron's consolidated operating results from September 29, 1995,
forward.
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RISK FACTORS
In addition to the other information included in this Prospectus, the
following factors should be considered carefully in evaluating an investment in
the shares of Common Stock offered by this Prospectus. In addition, investors
should carefully review information contained in the Company's reports filed
pursuant to the Exchange Act in evaluating an investment in the shares offered
by this Prospectus. Unless otherwise indicated "Chiron" or the "Company" shall
include Chiron and its subsidiaries.
UNCERTAINTY OF FUTURE FINANCIAL RESULTS
Profitability of the Company depends upon a number of factors. These
factors include: successful integration of newly acquired businesses with
Chiron; continuation of profit contribution from CCD and the newly integrated
ophthalmic business; continuation of substantial profit contribution from the
Chiron-Ortho joint business; continued product sales of Betaseron-Registered
Trademark- in the United States and of Proleukin-Registered Trademark-
worldwide; and the successful completion of clinical trials and subsequent
FDA approval for commercialization of additional vaccines, diagnostics and
pharmaceuticals under development. There can be no assurance whether any
combination of these factors can be achieved, or that any such combination
will result in continued profitability of the Company.
The integration of CCD, Chiron Biocine Company, Biocine S.p.A., IOLAB and
Viagene will have a material impact on the results of operations of the Company
going forward. Although the Company has recorded the majority of the expected
cost of these integrations, the Company expects to incur additional charges as
these integrations are completed. Profitability of the Company is also
dependent on the continued utilization of research funding available from Ciba.
As part of the agreements with Ciba, Ciba agreed to provide the Company with
funding totaling $250 million (which may be increased up to $300 million subject
to certain reductions in the debt guarantee) over five years in support of the
Company's research programs. See the description of certain agreements with
Ciba in "The Company" above.
Chiron's 50 percent share of the operating earnings of the Chiron-Ortho
joint business has been a significant source of Chiron's revenues. The market
for immunodiagnostic viral screening tests has evolved rapidly since the
introduction of HCV tests by the Chiron-Ortho joint business and by Abbott. The
joint business may be adversely affected in future periods by increasing margin
pressures, the overall demand for current tests and new diagnostic products, and
by the introduction of competing tests by unlicensed third parties.
Furthermore, other Chiron programs will require substantial additional
investment including the cost of funding collaborative research arrangements
with third parties, the cost of clinical trials, the completion of commercial
scale manufacturing facilities, and
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marketing and sales expenses associated with product introductions. Chiron is
required to fund 50 percent of the joint expenses of its collaboration with
Cephalon Inc. and expects these expenses to increase as the parties accelerate
efforts to gain regulatory approval and prepare to commercialize Myotrophin-TM-
in the United States. Also, the acquisition and integration of Viagene will
result in increased research and development expenses in future periods.
Chiron has significantly expanded its manufacturing capability to support
both approved products and products in development which has resulted in higher
levels of operating expenses and depreciation, and may result in even higher
levels of operating expenses in future periods. The research, development and
market introduction of new products will require the application of considerable
technical and financial resources by Chiron, while revenues generated from such
products, assuming they are successfully developed, may not be realized for
several years.
Other material and unpredictable factors which could affect operating
results include: the uncertainty, timing and costs associated with product
approvals and commercialization; the issuance and use of patents and proprietary
technology by Chiron or its competitors; the effect of technology and other
business acquisitions or transactions; the increasing emphasis on controlling
healthcare costs and potential legislation or regulation of healthcare pricing;
and actions by collaborators, customers and competitors.
CHANGE IN AGREEMENT WITH BERLEX
Chiron exercised its option to revert to the terms of the original
Betaseron-Registered Trademark- supply agreement effective January 1, 1995.
Under the original terms, Chiron earns a partial payment for
Betaseron-Registered Trademark- upon shipment to Berlex Laboratories, Inc.
("Berlex") and a subsequent final payment based upon Berlex's net sales of
the product. Total 1995 shipments of Betaseron-Registered Trademark- are
expected to be slightly below 1994 levels. Total 1995 revenues from
Betaseron-Registered Trademark- shipments are expected to be lower than 1994
revenues by approximately $30 million as a result of the reversion to the
original supply agreement. Due to issues of inventory management, it is
anticipated that vials shipped by Chiron to Berlex may decrease between 1995
and 1996. There may also be royalties from European sales during 1996.
In March 1995, the Company decided to idle its Puerto Rico facility and
scale-back the manufacturing operations at the Company's Amsterdam facility.
This decision was based on the belief that current demand for
Betaseron-Registered Trademark- can be adequately supplied with the expanded
manufacturing capacity at the Company's Emeryville, California, facility.
Utilization of this idled manufacturing capacity will require a significant
increase in Betaseron-Registered Trademark- demand and/or the introduction of
new products which would require significant similar manufacturing capacity.
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DEPENDENCE ON COLLABORATIONS
Achievement and maintenance of profitability are substantially dependent
on the success of Chiron's collaborations with others. Under the joint
business agreement with Ortho, Chiron and Ortho together determine strategy
and budgets for their joint diagnostics business, but Ortho conducts all
commercial activities, except research and antigen manufacturing, and
exercises broad control over the conduct of day-to-day operations. The
Company is also dependent upon Schering AG, Germany, and its U.S. affiliate,
Berlex, for development, marketing and distribution of Betaseron-Registered
Trademark-. There can be no assurance that the corporate interests of Berlex
and Ortho, or any other corporate partners, are or will remain consistent
with those of Chiron or that any collaborator will succeed in developing new
markets or retaining and expanding the markets served by the commercial
collaborations.
REGULATIONS RESTRICT ABILITY TO COMMERCIALIZE TECHNOLOGY
FDA AND SIMILAR FOREIGN REGULATIONS
Regulation by governmental authorities in the United States and other
countries is a significant factor in the production and marketing of the
Company's products and ongoing research and development activities. In
particular, human therapeutics, vaccines and diagnostic products are subject to
rigorous preclinical and clinical testing for safety and efficacy and also are
subject to approval processes by the FDA and similar health authorities in
foreign countries. The process of establishing safety and efficacy and of
obtaining such approvals is costly and time consuming. If any phase of product
testing does not yield successful results, the Company may be required to delay
or discontinue further product testing. There can be no assurance with respect
to any product that safety and efficacy can be established at the levels
required by regulatory authorities for approvals to be obtained. Any failure to
obtain, or delay in obtaining such approvals would adversely affect the ability
to market products successfully and the ability to receive income from sales or
royalties and could also allow competitors time to introduce competing products
ahead of product introduction by the Company. Further, even following FDA
marketing approval, there can be no assurance that a product will be safe and
efficacious in patient populations.
OTHER REGULATIONS
Other regulations could limit or restrict the Company's ability to
commercialize its technology, thereby adversely affecting its operations.
Chiron is subject to regulation under the Occupational Safety and Health Act,
the Environmental Protection Act, the Toxic Substances Control Act, the National
Environmental Policy Act, the Resource Conservation and Recovery Act, the United
States Atomic Energy Act, the Clean Air Act, the Clean Water Act, national
restrictions on technology transfer, and import, export and customs regulations,
and Chiron may in the future be subject to other federal,
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state, local or foreign regulations. There can also be no assurance that
regulatory requirements will not change or become more stringent. Any change to
existing regulations or the enactment of new regulations could have a material
adverse effect on the business of the Company.
NO ASSURANCE OF ADEQUACY OF PATENTS AND PROPRIETARY TECHNOLOGY
The Company and its subsidiaries own numerous patents worldwide as well as
certain proprietary information and techniques. In addition, the Company has
applied for and will in the future apply for patents on certain aspects of its
technology. No assurance can be given that these patent applications will be
issued as patents or that any patents now or to be issued will provide the
applicant with preferred positions with respect to the covered technology.
The degree of patent protection to be afforded to biotechnological
inventions is uncertain, and a number of products important to the Company are
subject to this uncertainty. The Company is aware of certain issued patents and
pending patent applications and there may be other patents and pending
applications containing subject matter which the Company or its licensees or
collaborators may require in order to research, develop or commercialize at
least some of that company's products. There can be no assurance that licenses
under such subject matter will be available on commercially acceptable terms, or
if available, that such licenses will be exclusive. If such licenses are non-
exclusive, competitors of the Company potentially will be able to use the
technology covered by such licenses and as a result may be able to develop
products which compete directly with products of the Company. Further, if the
Company does not obtain such licenses, it could encounter delays in product
market introductions while it attempts to design around such patents, or could
find that the development, manufacture or sale of products requiring such
licenses could be foreclosed.
The Company receives grants and other public funding and collaborates with
governmental research organizations in connection with certain research
programs. Inventions resulting from such public funding or collaboration may be
subject to regulatory and contractual restrictions on the manner in which any
resulting inventions may be commercialized and the government research
organization typically retains certain rights to use such inventions itself or,
under certain circumstances, to grant rights to others. Under its agreement
with the Centers for Disease Control of the United States Department of Health
and Human Services ("CDC"), if Chiron fails to commercialize appropriately the
inventions in its existing hepatitis C patent application, the federal
government could acquire rights to use or to permit others to use such
inventions. A grant by the State of California to support research to develop
an AIDS vaccine also allows the State to license Chiron technology to others to
commercialize an AIDS vaccine if Chiron fails to do so. There can be no
assurance that these government agencies will not exercise rights that may arise
in the future to license Chiron technology to others.
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In the event of contractual breach or bankruptcy of the Company, certain of
its collaborative research contracts provide for transfer of technology
(including rights to practice under any patents or patent applications) to the
contract sponsors.
NO ASSURANCE OF HEALTHCARE REIMBURSEMENT FOR PRODUCTS
The Company's ability to successfully commercialize human healthcare
products, including Proleukin-Registered Trademark-and Betaseron-Registered
Trademark-, may depend in part on the extent to which reimbursement for the cost
of such products and related treatment will be available from government health
administration authorities, health maintenance organizations, private health
coverage insurers and other organizations. Significant uncertainty exists as to
the reimbursement status of certain healthcare products, including Proleukin-
Registered Trademark-and Betaseron-Registered Trademark-, and there can be no
assurance that adequate third-party coverage will be available for the Company
to maintain price levels sufficient for realization of an appropriate return on
investment in developing new therapies. Government and other third party payors
are increasingly attempting to contain healthcare costs by limiting both
coverage and the level of reimbursement for new therapeutic products approved by
the FDA for marketing, and by refusing, in some cases, to provide any coverage
for uses of approved products for disease indications for which the FDA has not
granted marketing approval. If adequate coverage and reimbursement levels are
not provided by government and third-party payors for uses of the Company
healthcare products, the market acceptance of these products would be adversely
affected.
POSSIBLE REGULATION OF HEALTHCARE COSTS
The Company's long-term ability to successfully commercialize human
healthcare products depends in part on the extent to which pricing of healthcare
products is regulated by the government. From time to time there have been
proposals for controlling healthcare costs through potential legislation or
regulation of healthcare pricing. The enactment of any such legislation or
regulations could have a material adverse effect on the business of the Company.
POSSIBLE VOLATILITY OF STOCK PRICE AND ABSENCE OF DIVIDENDS
The market price of the Company's Common Stock is subject to significant
volatility, particularly on a quarterly basis. Any shortfall in revenue or
earnings from levels expected by securities analysts could have an immediate and
significant adverse effect on the trading price of the Company's stock in any
given period. Additionally, announcements of technological innovations by the
Company or its competitors, developments concerning proprietary rights, public
concern as to the safety of biotechnology and economic or other external factors
may have a significant impact on the market price of the Company's Common Stock.
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Chiron has not paid any cash dividends since its inception and Chiron does
not anticipate paying cash dividends in the foreseeable future.
OFFERING OF COMMON STOCK
UPON EXERCISE OF WARRANTS OR
CONVERSION OF DEBENTURES
The Company is offering pursuant to this Prospectus to sell up to
442,815 shares of its Common Stock to the holders of the Company's outstanding
Warrants pursuant to the exercise thereof. The Roche Warrant grants to its
holder the right to purchase up to 150,000 shares of Common Stock at $52.50 per
share on or before December 31, 1998. Each CHLP II Warrant grants to its holder
the right to purchase shares of Common Stock at $95.33 per share on or before
December 15, 1996. CHLP II Warrants to purchase 292,815 shares of Common Stock
are all currently exercisable. The Roche Warrant to purchase 150,000 shares of
Common Stock becomes exercisable upon the achievement of certain worldwide sales
levels of Proleukin-Registered Trademark-. If specified levels of Proleukin-
Registered Trademark-sales are not achieved, the Roche Warrant becomes
exercisable for a ten-day period beginning December 21, 1998 and ending December
31, 1998.
The Company also is offering pursuant to this Prospectus to sell up to
810,833 shares of its Common Stock to the holders of the Debentures pursuant to
the conversion thereof. The Debentures were issued pursuant to an Indenture
dated May 21, 1987 (the "Indenture") between Cetus and Bankers Trust Company as
trustee (the "Trustee"). Pursuant to a First Supplemental Indenture entered
into by the Company, Cetus and the Trustee at the time of the Company's
acquisition of Cetus, the holder of each Debenture is entitled to convert any
portion of the principal amount thereof which is $5,000 or an integral multiple
of $5,000 into shares of Common Stock at the Conversion Price of $123.33 per
share of Chiron Common Stock.
EXERCISE OF WARRANTS
The holder of a Warrant must pay the full exercise price per share of
Common Stock upon any exercise of the Warrant. The Company will not be required
to issue fractional shares of its Common Stock, but upon exercise of a Warrant
as to any fractional share interest thereunder, the Company shall pay an amount
in cash equal to the then current market price per share of the Common Stock
multiplied by such fraction.
To exercise a Warrant, the Warrant certificate properly completed and
accompanied by full payment in the form of cash or by certified check, bank
cashier's check or wire transfer for all shares of Common Stock to be purchased,
must be surrendered to the Company. At that time, the exercising holder will be
deemed to be the record holder of the shares of Common Stock issuable upon such
exercise. Upon
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receipt of the surrendered Warrant certificate and payment in full, the Company
will mail or cause to be mailed, to or upon the written instructions of the
exercising holder, certificates representing the number of shares of Common
Stock so purchased.
CONVERSION OF DEBENTURES
The Debentures are convertible into Chiron Common Stock, initially at the
conversion price of $123.33 per share of Common Stock, at any time prior to
redemption or maturity. The right to convert Debentures called for redemption
will terminate at the close of business on the date five business days preceding
the date fixed for redemption and will be lost if not exercised prior to that
time.
The right of conversion attaching to any Debenture may be exercised by the
holder by delivering the Debenture (together with coupons as described below) at
the specified office of a conversion agent, accompanied by a duly signed and
completed notice of conversion. The conversion date shall be the date on which
the Debenture and the duly signed and completed notice shall have been so
delivered. A holder delivering a Debenture for conversion will not be required
to pay any taxes or duties payable in respect of the issue or delivery of Common
Stock on conversion but will be required to pay any tax or duty which may be
payable in respect of any transfer involved in the issue or delivery of the
Common Stock in a name other than that of the holder of the Debenture.
Certificates representing shares of Common Stock will not be issued or delivered
unless all taxes and duties, if any, payable by the holder have been paid.
Fractional shares of Common Stock will not be issued upon Conversion but,
in lieu thereof, the Company will pay a cash adjustment based on the then-
current market price of the Common Stock which shall be equal to the closing
price per share of the Common Stock on the last day prior to the day of
conversion. Each Debenture which is held in bearer form (a "Bearer Debenture")
delivered for conversion must be delivered with all unmatured coupons
appurtenant thereto as provided in the Indenture. Each Debenture which is held
in registered form (a "Registered Debenture") delivered for conversion during
the period from the close of business on any May 7 next preceding any interest
payment date to the opening of business on such interest payment date (except
Debentures called for redemption on a "Redemption Date" within such period) must
be accompanied by payment of an amount equal to the interest thereon which the
registered holder is to receive. Except where Debentures surrendered for
conversion must be accompanied by payment as described above, no payment or
adjustment for interest or dividends is to be made upon conversion.
The conversion price is subject to adjustment as set forth in the First
Supplemental Indenture in certain events, including the payment of dividends or
the making of a distribution on the capital stock in shares of Common Stock;
subdivisions, combinations and reclassifications of the Common Stock; the making
of a distribution on the Common Stock in shares of capital stock other than
Common Stock; certain
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consolidations, mergers and sales of the property of the Company; the issuance
to all holders of Common Stock of certain rights or warrants entitling them to
subscribe for Common Stock at a price per share below the then-current market
price; and the distribution to all holders of Common Stock of assets (other than
cash) or certain rights or warrants to purchase securities of the Company or its
successor. No adjustment in the conversion price will be required unless such
adjustment would require a change of at least one percent in the conversion
price then in effect; provided, however, that any adjustment that would
otherwise be made will be carried forward and taken into account in determining
any subsequent adjustment. The conversion price will not be adjusted in the
case of transactions in which the holders of Debentures are entitled to
participate or which effectuate a change in the par value or lack thereof of the
Common Stock. In addition, in the case of certain of these rights and warrants,
the Company may elect not to adjust the conversion price but instead provide
that holders of Debentures would receive the rights or warrants, if and when
they convert their Debentures into Common Stock, to the extent such rights or
warrants would be issued with other shares of Common Stock issued at the time of
conversion. The Company is entitled from time to time to reduce the conversion
price by any amount for a minimum period of 20 days, upon at least 15 days prior
notice to the holders of Debentures. The Company may also reduce the conversion
price in order to avoid taxation of its stockholders as a result of an
adjustment of, or failure to adjust, the conversion price.
FEDERAL TAX CONSEQUENCES
The following discussion was prepared by counsel to the Company, Brobeck,
Phleger & Harrison. This discussion sets forth the material United States
federal income tax consequences of the exercise of the Warrants and conversion
of the Debentures. In addition, the discussion describes the material United
States federal tax consequences of the ownership and disposition of Common Stock
by a person that, for United States federal income tax purposes, is a
nonresident alien individual, a foreign corporation, a foreign partnership or a
foreign estate or trust (a "Non-U.S. holder"). This discussion is based upon
current laws, regulations, rulings and decisions in effect as of the date of
this Prospectus, all of which are subject to change at any time, either
prospectively or retroactively. In this regard it should be noted that, in the
past, various bills have been proposed or introduced in the United States
Congress which would affect the taxation of Non-U.S. holders. In particular,
there have been proposals to tax gains on sales of stock in United States
companies by foreign persons or entities. While as of the date of this
Prospectus none of these bills have been enacted, it is likely that similar
proposals will be considered in the future.
This discussion does not consider specific facts and circumstances that may
be relevant to a particular holder's tax position. In particular, the
discussion does not discuss the effects of any applicable tax treaty.
Accordingly, each holder is urged to consult his tax advisors with respect to
the United States federal tax consequences of an exercise of the Warrants, a
conversion of the Debentures, and the holding and
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disposition of Common Stock. In addition, each holder is urged to consult his
tax advisors with respect to any tax consequences that may arise under the laws
of any foreign, state, local or other taxing jurisdiction or the provisions of
any applicable tax treaty.
EXERCISE OF WARRANTS
For federal income tax purposes, no gain or loss should be recognized by a
holder of a Warrant upon the exercise thereof. Upon the exercise of a Warrant,
the holder's adjusted tax basis in the purchased Common Stock will be the sum of
the holder's basis in such Warrant and the exercise price thereof. The holding
period for any purchased Common Stock will not include the holding period of the
Warrant.
CONVERSION OF DEBENTURES
For federal income tax purposes, gain or loss will be recognized by a
holder of a Debenture upon the conversion of the Debenture into Common Stock
based on the difference between the value of the Common Stock received (plus any
cash received in lieu of fractional shares) and the holder's tax basis in the
Debenture. This gain or loss will generally constitute a capital gain or loss
except to the extent that any gain is treated as ordinary income by virtue of
the "market discount" rules of the Internal Revenue Code of 1986, as amended.
The holder's basis in the Common Stock received upon conversion of a Debenture
will be equal to the fair market value of the Common Stock upon receipt. The
holding period of the Common Stock received upon conversion will not include the
holder's holding period for the converted Debenture.
Notwithstanding the foregoing, a Debenture holder that is a Non-U.S. holder
will not generally be subject to United States federal income tax in respect of
gain recognized on the conversion of a Debenture into Common Stock, except to
the extent that (i) the gain is considered to be effectively connected with the
trade or business of the Non-U.S. holder in the United States, (ii) the gain is
treated as being effectively connected with a U.S. trade or business of the Non-
U.S. holder because the Company is or has been a "United States real property
holding corporation" and certain other conditions are satisfied, or (iii) in the
case of an individual holder, the holder is present in the United States for 183
days or more in the taxable year of the conversion and certain other conditions
are satisfied. The Company believes that it is not currently and is not likely
to become a United States real property holding corporation. Certain other
exceptions to nontaxability may apply to particular Non-U.S. holders.
Each Debenture holder is urged to consult his tax advisors with respect to
the tax consequences to him or a conversion of the Debentures.
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FEDERAL TAX CONSEQUENCES TO NON-U.S. HOLDERS OF OWNERSHIP AND DISPOSITION OF
COMMON STOCK
DIVIDENDS
Dividends paid to a Non-U.S. holder of Common Stock will generally be
subject to withholding of United States federal income tax at a rate of 30% (or
lower rate established by any applicable tax treaty), unless the dividends are
effectively connected with the conduct of a trade or business within the United
States by the Non-U.S. holder, in which case the dividends will generally be
subject to the United States federal income tax on net income that applies to
United States persons (and, in the case of corporate holders, such dividends may
also be subject to the branch profits tax).
GAIN ON DISPOSITION OF COMMON STOCK
General Rule
Subject to special rules applicable to individuals as described below, a
Non-U.S. holder generally will not be subject to United States income tax in
respect of the gain recognized on a sale or other disposition of Common Stock
except to the extent that (i) the gain is considered to be effectively connected
with a trade or business of the Non-U.S. holder in the United States or (ii) the
Company is or has been a "United States real property holding corporation" for
United States federal income tax purposes and certain other conditions are
satisfied. The Company believes that it is not currently and is not likely to
become a United States real property holding corporation. Special rules apply
to Non-U.S. holders who are dealers in securities or otherwise hold shares of
Common Stock as inventory.
Individuals
In addition to the rules referenced above, an individual Non-U.S. holder
who holds Common Stock as a capital asset will generally be subject to tax at a
30% rate on any gain recognized on the disposition of such stock if such
individual is present in the United States for 183 days or more in the taxable
year of the sale or other disposition and certain other conditions are
satisfied. Special rules also apply to individuals who are United States
expatriates.
FEDERAL ESTATE TAXES
Common Stock held by a Non-U.S. holder at the time of death will be
included in such holder's gross estate for United States federal estate tax
purposes, unless an applicable estate tax treaty provides otherwise.
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BACKUP WITHHOLDING TAX
United States backup withholding tax (which is a withholding tax imposed at
the rate of 31% on certain payments to persons that fail to furnish the
information required under certain reporting requirements) will generally not
apply to dividends paid on shares of Common Stock to a Non-U.S. holder at an
address outside the United States. The payment of the proceeds from the
disposition of shares of Common Stock may in some circumstances be subject to
backup withholding tax. Any amounts withheld under the backup withholding rules
will be refunded or credited against the Non-U.S. holder's United States federal
income tax liability, provided that required information is furnished to the
Internal Revenue Service. The backup withholding rules are under review by the
United States Treasury and their application to the Common Stock could be
changed by future regulations.
THE UNITED STATES FEDERAL INCOME TAX DISCUSSION SET FORTH ABOVE IS INTENDED
AS A GENERAL SUMMARY ONLY AND AS SUCH MAY NOT APPLY TO THE CIRCUMSTANCES OF EACH
HOLDER. HOLDERS OF WARRANTS, DEBENTURES, AND COMMON STOCK SHOULD CONSULT WITH
THEIR OWN TAX ADVISORS REGARDING THE CONSEQUENCES OF ACQUIRING, HOLDING AND
DISPOSING OF COMMON STOCK UNDER THE UNITED STATES FEDERAL INCOME TAX LAWS AND
THE LAWS OF OTHER TAXING JURISDICTIONS.
USE OF PROCEEDS
If all the Warrants are exercised, the Company will receive an aggregate of
$35,789,054, before deducting expenses related to this offering estimated to be
$74,500. Approximately all of the proceeds would relate to Warrants with
exercise prices which are less than or which approximate recent market prices of
the Company's Common Stock. The Company expects that proceeds to be received
from the exercise of such Warrants will be employed for working capital
purposes. The Company has no specific plan for the proceeds, beyond such use
for working capital purposes. The Company has undertaken the offering pursuant
to warrant agreements entered into between Warrant holders and Cetus requiring
Cetus or a successor to use its best efforts to cause a registration statement
to be filed and maintained effective under the Securities Act of 1933 as to the
Warrants.
DETERMINATION OF OFFERING PRICE
The Roche Warrant along with a second warrant that has been exercised were
issued by Cetus as of May 1989 in connection with cross-licensing agreements it
entered into with F. Hoffmann-La Roche Ltd. and Hoffmann-La Roche Inc. The
number of shares of Common Stock to be covered by, and the per share exercise
price of, the Roche Warrants that were issued to Hoffmann-La Roche Inc.
("Roche"), which were not
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registered with the Commission, were established by negotiation between Cetus
and Roche. Upon the acquisition of Cetus by Chiron in December 1991 (the
"Merger"), the Roche Warrants were assumed by Chiron in accordance with the
terms of the warrants. Following the Merger, each Roche Warrant became
exercisable for that number of shares of Chiron Common Stock equal to the number
of shares of Cetus Common Stock for which the Warrant was exercisable multiplied
by the Exchange Ratio in the Merger, which was 0.3. The exercise price per
share was similarly adjusted by dividing the exercise price per share for the
Roche Warrants by the Exchange Ratio.
The CHLP II Warrants were issued in 1986 in connection with a registered
offering by Cetus of units in Cetus Healthcare Limited Partnership II, a
California limited partnership ("CHLP II"). Each unit consisted of a limited
partnership interest in CHLP II and warrants to purchase 150 shares of Cetus
Corporation Common Stock. Of these warrants, half of the warrants expired by
their terms on December 15, 1991 and are no longer exercisable. The remaining
warrants are exercisable until December 15, 1996. The exercise price of these
warrants was equal to a price per share equal to 130% of the average of the last
sale price of Cetus Common Stock as quoted on NASDAQ on the fifteen trading days
immediately preceding December 15, 1986. Upon assumption of the CHLP II
Warrants by Chiron, the exercise price and number of shares were adjusted by the
Exchange Ratio in the Merger.
The Debentures were issued by Cetus as of May 1987 in an offshore offering
by Cetus in Europe. The number of shares of Common Stock into which the
Debentures are convertible and the conversion price of the Debentures, which
were not registered with the Commission, were established by negotiation between
Cetus and Swiss Bank Corporation International Limited and Merrill Lynch Capital
Markets, as representatives of the managers of the Debenture offering. Upon the
Merger, the Debentures remained obligations of Cetus as a wholly-owned
subsidiary of the Company. The Company, Cetus and the Trustee entered into a
supplemental indenture which provides that each holder of an outstanding
Debenture has the right to convert the Debenture, in lieu of conversion into
shares of Cetus Common Stock, into the number of shares of Chiron Common Stock
receivable at the effective time of the Merger by a holder of the number of
shares of Cetus Common Stock into which the Debenture might have been converted
immediately prior to the effective time of the Merger (subject to adjustment in
the event of future changes in Chiron's capital stock). See "Offering of Common
Stock upon Exercise of Warrants or Conversion of the Debentures -- Conversion of
Debentures."
REGISTRATION AND RESALE OF SECURITIES
Pursuant to the Registration Statement of which this Prospectus is a part,
the Company has registered under the Securities Act the shares of Common Stock
offered by the Warrants and the shares of Common Stock offered by the
Debentures. Upon issuance, such shares of Common Stock may be freely traded
without restriction under the Securities Act, except for any shares purchased by
an "affiliate" of the Company, as
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that term is defined under the Act, which will be subject to the resale
limitations of Rule 144 under the Act. This Prospectus will be used in
connection with the offer and sale by the Company of the shares of Common Stock
issuable upon the exercise of the Warrants and the shares of Common Stock
issuable upon conversion of the Debentures.
INDEMNIFICATION
Section 145 of the General Corporation Law of the State of Delaware and the
Bylaws of the Company contain provisions covering indemnification of corporate
directors, officers and employees under certain conditions and subject to
certain limitations. In addition, the Company has entered into supplemental
indemnification agreements with its directors which broaden the scope of
indemnity beyond that expressly provided by the Bylaws or the Delaware General
Corporation Law. These supplemental contracts are permissible under Delaware
General Corporation law and have been approved by the Company's stockholders.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the Company
pursuant to the foregoing provisions, the Company has been informed that in the
opinion of the Commission such indemnification is against public policy as
expressed in the Securities Act and is, therefore, unenforceable.
LEGAL OPINIONS
The validity of the shares of Common Stock offered hereby will be passed
upon for the Company by William G. Green, Esq., Senior Vice President and
General Counsel of the Company and the federal income tax consequences of the
exercise of the Warrants and the conversion of the Debentures will be passed
upon for the Company by Brobeck, Phleger & Harrison, San Francisco, California.
EXPERTS
The consolidated financial statements of Chiron Corporation incorporated by
reference in Chiron Corporation's Annual Report (Form 10-K) for the year ended
December 31, 1993, have been audited by Ernst & Young LLP, independent auditors,
as set forth in their report thereon included therein and incorporated herein by
reference. The consolidated financial statements of Chiron Corporation
incorporated by reference in Chiron Corporation's Annual Report (Form 10-K) for
the year ended December 31, 1994, have been audited by KPMG Peat Marwick LLP,
independent auditors, as set forth in their report thereon included therein and
incorporated herein by reference. Such consolidated financial statements are
incorporated herein by reference in reliance upon such report given upon the
authority of such respective firms as experts in accounting and auditing.
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NO DEALER, SALESMAN OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS, OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS, IN CONNECTION WITH THE OFFER CONTAINED IN THIS PROSPECTUS AND, IF
GIVEN OR MADE, SUCH OTHER INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON
AS HAVING BEEN AUTHORIZED BY THE COMPANY OR THE PURCHASER. THIS PROSPECTUS DOES
NOT CONSTITUTE AN OFFER TO SELL SECURITIES IN ANY STATE TO ANY PERSON TO WHOM IT
IS UNLAWFUL TO MAKE SUCH AN OFFER IN SUCH STATE.
NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL,
UNDER ANY CIRCUMSTANCES, CREATE AN IMPLICATION THAT THERE HAS BEEN NO CHANGE IN
THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF.
PAGE
Trademarks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Available Information. . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Information Incorporated by Reference. . . . . . . . . . . . . . . . . . . . 3
The Company. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4-6
Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7-12
Offering of Common Stock Upon Exercise of Warrants or
Conversion of Debentures. . . . . . . . . . . . . . . . . . . . . . . 12-14
Federal Tax Consequences . . . . . . . . . . . . . . . . . . . . . . . . . 14-17
Use of Proceeds. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Determination of Offering Price. . . . . . . . . . . . . . . . . . . . . . 17-18
Registration and Resale of Securities. . . . . . . . . . . . . . . . . . . 18-19
Indemnification. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Legal Opinions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Experts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
