BIOSOURCE INTERNATIONAL INC, 424B1, 1996-05-31

BIOSOURCE INTERNATIONAL INC
424B1, 1996-05-31
IN VITRO & IN VIVO DIAGNOSTIC SUBSTANCES

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<PAGE> 1

As filed pursuant to Rule 424(b)(1)
under the Securities Act of 1933
Registration No. 333-3336

2,500,000 Shares

LOGO

Common Stock
------------------------

Of the 2,500,000 shares of Common Stock offered hereby, 2,362,000 shares
are being sold by BioSource International, Inc. ("BioSource" or the "Company")
and 138,000 shares are being sold by certain stockholders of the Company (the
"Selling Stockholders"). See "Principal and Selling Stockholders." The Company
will not receive any proceeds from the sale of shares by the Selling
Stockholders. The Company's Common Stock is quoted on the Nasdaq National
Market under the symbol "BIOI." On May 30, 1996, the last reported sales price
of the Common Stock was $10.88 per share. See "Price Range of Common Stock."
------------------------

PROSPECTIVE INVESTORS SHOULD CONSIDER CAREFULLY THE
DISCUSSION UNDER "RISK FACTORS" BEGINNING ON PAGE 6.
------------------------

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

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UNDERWRITING PROCEEDS TO
PRICE TO DISCOUNTS AND PROCEEDS TO SELLING
PUBLIC COMMISSIONS(1) COMPANY(2) STOCKHOLDERS
- --------------------------------------------------------------------------------------------------
Per Share..................... $9.25 $0.6475 $8.6025 $8.6025
- --------------------------------------------------------------------------------------------------
Total(3)...................... $23,125,000 $1,618,750 $20,319,105 $1,187,145
- --------------------------------------------------------------------------------------------------
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</TABLE>

(1) Excludes a non-accountable expense allowance payable to the representatives
(the "Representatives") of the several Underwriters and the value of
warrants to be issued to the Representatives to purchase up to 118,100
shares of Common Stock (the "Representatives' Warrants"). The Company and
the Selling Stockholders have agreed to indemnify the Underwriters against
certain liabilities under the Securities Act of 1933, as amended (the
"Act"). See "Underwriting."

(2) Before deducting expenses estimated at $900,000 payable by the Company,
including the Representatives' non-accountable expense allowance. See
"Underwriting."

(3) The Company has granted an option to the Underwriters, exercisable within
forty-five (45) days from the date of this Prospectus, to purchase up to
288,253 additional shares of Common Stock on the same terms and conditions
set forth above, solely to cover over-allotments, if any. If the
Underwriters' over-allotment option is exercised in full, the total Price to
Public, Underwriting Discounts and Commissions and Proceeds to Company will
be $25,791,340, $1,805,394 and $22,798,801, respectively. See
"Underwriting."
------------------------

The shares of Common Stock are offered by the Underwriters when, as and if
delivered to and accepted by the Underwriters, subject to the right to reject
any order in whole or in part and certain other conditions. It is expected that
delivery of such shares will be made through the offices of Cruttenden Roth
Incorporated, Irvine, California, or the facilities of The Depository Trust
Company on or about June 5, 1996.
------------------------

CRUTTENDEN ROTH COMMONWEALTH ASSOCIATES
I N C O R P O R A T E D

The date of this Prospectus is May 31, 1996
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[PICTURES]

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

IN CONNECTION WITH THIS OFFERING, CERTAIN UNDERWRITERS MAY ENGAGE IN
PASSIVE MARKET MAKING TRANSACTIONS IN THE COMMON STOCK ON THE NASDAQ NATIONAL
MARKET IN ACCORDANCE WITH RULE 10B-6A UNDER THE SECURITIES EXCHANGE ACT OF 1934.
SEE "UNDERWRITING."

BioSource, CYTOscreen, PRIMESCREEN and TAGOImmunologicals are trademarks of
BioSource International, Inc. Medgenix and DynaMix are trademarks of Medgenix
Diagnostics, S.A.
<PAGE> 3

CERTAIN SCIENTIFIC TERMS USED IN THIS PROSPECTUS ARE DEFINED IN THE GLOSSARY
APPEARING AT PAGES 50 AND 51.

PROSPECTUS SUMMARY

The following summary is qualified in its entirety by the more detailed
information and financial statements, including notes thereto, appearing
elsewhere in this Prospectus. Except as otherwise noted, the information
contained in this Prospectus assumes that the Underwriters' over-allotment
option and the Representatives' Warrants are not exercised.

THE COMPANY

BioSource International, Inc. ("BioSource" or the "Company") develops,
manufactures, markets and distributes products which are widely used in
biomedical research and are instrumental in the development of new medical
diagnostic methods and pharmaceutical products. The Company's products enable
scientists to understand better the biochemistry, immunology and cell biology of
the human body, aging and certain diseases such as cancer, arthritis and other
inflammatory diseases, AIDS and certain other sexually transmitted diseases. The
Company's products include immunological reagents, including bioactive proteins
(cytokines, growth factors and adhesion molecules) and monoclonal and polyclonal
antibodies. The Company also develops, manufactures, markets and distributes
oligonucleotides and Enzyme Linked Immunosorbent Assay ("ELISA") test kits, and
uses recombinant DNA technology to produce cytokines and other proteins.

The biomedical research industry is a large and growing segment of the
biotechnology industry. Most industrialized nations, led by the United States,
Japan and the countries of Western Europe, support some level of biomedical
research. BioSource's products are used by thousands of physicians and
scientists who are employed by or affiliated with medical laboratories and
research centers in universities, government institutions and private
pharmaceutical and biotechnology firms around the world. Some of the Company's
customers include Eli Lilly, Hoffman LaRoche, Amgen, Genentech, the National
Institutes of Health, the Centers for Disease Control and the research centers
of many of the major universities in the United States.

The Company's primary business strategy has been to capitalize on the
growth of the biotechnology industry by creating "building block" reagents and
test kits which are sold only for research, and thus are not subject to
regulation by the U.S. Food and Drug Administration ("FDA"). By pursuing this
strategy, the Company does not undertake the risks typically associated with the
research and development of new drugs. BioSource has followed this strategy
through an aggressive program of internal new product development, and through
the selective acquisition of complementary businesses. The Company intends to
focus new research and development efforts towards the development of medical
products which will be used to detect and diagnose disease at a molecular level.
Unlike the Company's current products, which are offered exclusively for
research uses, these new products would be offered for the detection of diseases
in humans and animals. See "Risk Factors -- New Product Development; Government
Regulation."

Since 1993, BioSource has focused on internal new product development, and
currently offers more than 800 products to more than 1,700 medical laboratories
and research centers in universities, government institutions and pharmaceutical
and biotechnology firms. The Company's products are marketed and sold
domestically by its own sales force and throughout the world by international
distributors. The Company's growth has also been stimulated by acquisitions. For
example, the Company recently acquired Keystone Laboratories, Inc. ("Keystone"),
located in Menlo Park, California, which manufactures and sells
oligonucleotides. Oligonucleotides are used in the study and research of
cellular and molecular biology. This acquisition provided a captive source of
supply for needed oligonucleotides, enhanced the Company's ability to clone
specific genes into bacterial cell lines, provided an expanded product line and
customer base and resulted in the contribution of additional revenue from
Keystone's existing product line. The acquisition has also given the Company the
ability to develop and produce internally the oligonucleotides it uses in the
production of cytokines and in turn in its ELISA test kits. Thus, the Company
has become less dependent on certain suppliers and has been able to reduce cost
of goods sold for various products, thereby increasing its gross margins.

The Company has entered into an agreement to acquire certain assets and
selected liabilities of Medgenix Diagnostics, S.A. ("Medgenix") related to its
in vitro diagnostic business (the "Medgenix Business"). BioSource believes that
the acquisition of the Medgenix Business will expand and broaden its product
lines,

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<PAGE> 4

and provide a European manufacturing capability, access to an additional animal
facility and a direct sales force in Europe. The Medgenix acquisition is
expected to significantly increase BioSource's consolidated revenue. During the
years ended October 31, 1994 and 1995, the Medgenix Business reported revenue of
$11.6 million and $11.3 million, respectively, and net losses of $2.7 million
and $2.5 million, respectively. Assuming the Medgenix Business had been acquired
on January 1, 1995, pro forma combined results of the Company and the Medgenix
Business for the year ended December 31, 1995 reflect revenue of $19.9 million
and a net loss of $1.4 million (or a loss of $0.17 per share after giving effect
to this offering) as compared to actual revenue and net income of the Company of
$8.6 million and $1.2 million (or $0.20 per share before giving effect to this
offering), respectively. For the three months ended January 31, 1995 and 1996,
the Medgenix Business reported revenue of $2.7 million and $2.9 million,
respectively, and net losses of $483,000 and $151,000, respectively. Assuming
the Medgenix Acquisition had occurred on January 1, 1996, pro forma combined
results of the Company and the Medgenix Business for the three months ended
March 31, 1996 reflect revenue of $5.4 million and net income of $342,000 (or
$0.04 per share after giving effect to this offering) as compared to actual
revenue and net income of the Company of $2.5 million and $520,000 (or $.09 per
share before giving effect to this offering), respectively.

The Company believes that acquiring the Medgenix Business will provide the
Company with a number of strategic advantages that will enhance its existing
business. BioSource further believes that those synergies, and its ability to
acquire the Medgenix Business without assuming many of the costs associated with
Medgenix' historical operations, will permit the Company to reverse Medgenix'
recent history of unprofitable operations. See "Business -- Acquisition of
Medgenix Business."

The Company maintains laboratory facilities at its executive offices in
Camarillo, California, manufactures oligonucleotides at laboratory facilities
located in Menlo Park, California, and has direct access to animal facilities in
Northern California which are used to produce antibodies. The breadth and name
recognition of the Company's product lines including, CYTOscreen and
TAGOImmunologicals give the Company a strong presence in the academic, hospital
and research communities around the world. Management believes that none of the
Company's competitors offer a more broadly based product line and few can match
the specifications that the Company's products provide. BioSource has an
advanced scientific research staff, a broad product line and an established
trade name, giving it a strong presence in the biomedical research market.

THE OFFERING

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Common Stock offered:

By the Company........................ 2,362,000 shares

By the Selling Stockholders........... 138,000 shares

Total....................... 2,500,000 shares

Common Stock to be outstanding after
this offering......................... 8,310,003(1)

Use of Proceeds....................... The net proceeds will be used to
provide funds to acquire the Medgenix
Business, for research and
development, to pay off the balance
due on an installment note and
capital lease obligation and for
working capital. See "Risk
Factors -- Business Acquisition" and
"Use of Proceeds."

Risk Factors.......................... Prospective investors should consider
carefully the factors set forth under
"Risk Factors."

Nasdaq National Market Symbol......... BIOI
</TABLE>
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(1) Includes 31,000 shares of Common Stock to be sold by certain Selling
Stockholders that will be issued by the Company upon exercise of outstanding
warrants, and excludes (i) 153,100 shares of Common Stock subject to
outstanding warrants and (ii) 1,106,459 shares of Common Stock subject to
outstanding options as of May 30, 1996.

4
<PAGE> 5

SUMMARY FINANCIAL DATA(1)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEARS ENDED DECEMBER 31, MARCH 31,
---------------------------------------------------------- ------------------------------
PRO FORMA PRO FORMA
AS ADJUSTED AS ADJUSTED
1991 1992 1993 1994(2) 1995 1995(3)(4) 1995 1996 1996(3)(4)
------ ------ ------ -------- ------ ----------- ------ ------ ------------
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CONSOLIDATED STATEMENT OF
OPERATIONS DATA:
Revenue.......................... $3,144 $4,317 $6,113 $ 7,367 $8,608 $19,921 $1,925 $2,519 $5,445
Gross profit................... 2,013 2,370 3,555 4,234 5,612 12,520 1,067 1,670 3,436
Operating expenses:
Research and development....... 278 242 609 722 1,074 2,729 288 244 632
Selling, general and
administrative............... 2,155 2,479 2,454 3,070 2,923 10,609 661 697 2,282
Compensation recognized under
performance escrow share
arrangement.................. -- -- -- 577 -- -- -- -- --
Total operating expenses..... 2,433 2,721 3,063 4,369 3,997 13,338 949 941 2,914
Operating income (loss)...... (420) (351) 492 (135) 1,615 (818) 118 729 522
Net income (loss).............. $ (406) $ (390) $ 513 $ (210) $1,160 $(1,422) $ 115 $ 520 $ 342
Net income (loss) per share.... $(0.12) $(0.12) $ 0.11 $ (0.04) $ 0.20 $ (0.17) $ .02 $ .09 $ .04
Weighted average number of common
shares outstanding............. 3,261 3,339 4,880 5,724 5,946 8,339 5,817 5,957 8,350
</TABLE>

<TABLE>
<CAPTION>
AT MARCH 31, 1996
---------------------------------------------
PRO FORMA
ACTUAL PRO FORMA(3) AS ADJUSTED(3)(4)
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CONSOLIDATED BALANCE SHEET DATA:
Working capital....................................................... $4,690 $ 8,745 $21,356
Total assets.......................................................... 9,420 18,288 30,899
Current maturities of notes payable................................... 665 849 849
Notes payable less current maturities................................. 785 785 785
Net stockholders' equity.............................................. 6,645 6,645 26,124
</TABLE>

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(1) The data reflects the acquisitions of TAGO, Inc. ("TAGO"), effected on May
19, 1993, and Keystone, effected on November 21, 1995, each of which was
accounted for as a pooling of interests. See "The Company," and Note 2 of
Notes to Consolidated Financial Statements.

(2) The Company recognized compensation expense of $577,452 in 1994 related to
the release from escrow of 469,180 shares of Common Stock held by directors,
officers and others deemed to be able to affect the financial results of the
Company. No expense was recognized with respect to 635,763 shares of Common
Stock held by other stockholders which were also released from escrow. In
addition, the Company recorded a one-time charge in 1994 of $312,000 in
connection with the closure of its Northern California facility. These
changes affect the comparability of operating results during 1993, 1994 and
1995. See Note 6 to Notes to Consolidated Financial Statements.

(3) The Company has entered into an agreement to acquire certain assets and
selected liabilities of Medgenix which is to occur concurrently with
completion of this offering. The table gives pro forma effect to such
acquisition, to be accounted for as a purchase, as of the beginning of the
period for consolidated statement of operations data and at March 31, 1996
for consolidated balance sheet data. The pro forma results do not
necessarily indicate results which can be expected for future periods. See
"Risk Factors -- Business Acquisition," "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Acquisition of
Medgenix Business," "Business -- Acquisition of Medgenix Business" and the
Unaudited Pro Forma Condensed Consolidated Financial Statements included
elsewhere in this Prospectus.

(4) As adjusted to reflect the sale of 2,393,000 shares of Common Stock in
connection with this offering (including the sale of 31,000 shares of Common
Stock to be issued by the Company upon exercise of warrants by two of the
Selling Stockholders for which the Company will receive net proceeds of
$59,750) and the application of the net proceeds therefrom. See "Use of
Proceeds" and "Principal and Selling Stockholders."

5
<PAGE> 6

RISK FACTORS

An investment in the shares offered hereby involves a high degree of risk.
Many of the matters discussed in this Prospectus are forward-looking statements
that inherently involve risks and uncertainties. Factors associated with such
forward looking statements which could cause actual results to differ materially
from those projected in the statements appear below. In addition to the other
information contained in this Prospectus, prospective investors should carefully
consider the following risk factors and cautionary statements before purchasing
any of the shares offered hereby.

GROWTH STRATEGY AND EXPANSION. The Company has and will continue to seek
to increase sales and profitability primarily through the acquisition or
internal development of new product lines, additional customers and new
businesses. The Company's historical revenue growth is primarily attributable to
the Company's acquisitions and new product development and, to a lesser extent,
to increased revenues from the Company's existing products. Concurrently with
the completion of this offering, the Company plans to acquire a new business,
for which a substantial portion of the proceeds of this offering will be
allocated. See "-- Business Acquisition," "Use of Proceeds" and
"Business -- Acquisition of Medgenix Business." The Company expects that in
connection with its acquisition of the Medgenix Business, it will experience
increased working capital requirements which will likely precede by several
months any material contribution by the Medgenix Business to the income of the
Company. It is likely that subsequent acquisitions, if successfully consummated,
will have a similar effect on the Company's short-term financial condition. The
ability of the Company to achieve its expansion objectives and to manage its
growth effectively depends upon a variety of factors, including (i) the ability
to internally develop new products, (ii) the ability to make profitable
acquisitions, (iii) the integration of new facilities into existing operations,
(iv) the hiring, training and retention of qualified personnel, (v) the
establishment of new relationships or expansion of existing relationships with
suppliers, (vi) the identification and lease of suitable premises on competitive
terms and (vii) the availability of capital. In addition, the implementation of
the Company's growth strategy will place significant strain on the Company's
administrative, operational and financial resources and increased demands on its
systems and controls. The Company's ability to manage its growth successfully
will require it to continue to improve and expand such systems and controls. If
the Company's management is unable to manage growth effectively, the Company's
operating results could be adversely affected. In addition, the Company competes
for acquisition and expansion opportunities with companies which have
significantly greater financial and management resources than those of the
Company. There can be no assurance that suitable acquisition or investment
opportunities will be identified, that any such transactions can be consummated,
or that, if acquired, such new businesses can be integrated successfully and
profitably into the Company's operations. Moreover, there can be no assurance
that the Company's historic rate of growth will continue, that the Company will
continue to successfully expand, or that growth or expansion will result in
profitability.

BUSINESS ACQUISITION. On April 30, 1996, the Company entered into an
agreement (the "Acquisition Agreement") to acquire certain assets and assume
selected liabilities of the Medgenix Business (the "Medgenix Acquisition").
Medgenix is located in Fleurus, Belgium. The assets consist of certain product
lines which are similar to those of the Company, customer accounts, laboratory
and animal facilities, real property leasehold interests and an existing
employee base, all of which are used in the Medgenix Business. The purchase
price for the Medgenix Business is $6.9 million, payable in cash, and the
assumption of certain Medgenix liabilities, which liabilities were approximately
$2.0 million at January 31, 1996. The Company plans to fund the cash portion of
the purchase price of the Medgenix Business from a portion of the net proceeds
of this offering and to close the Medgenix Acquisition concurrently with the
closing of this offering. See "Use of Proceeds." During the years ended October
31, 1994 and 1995, the Medgenix Business reported revenue of $11.6 million and
$11.3 million respectively, and net losses of $2.7 million and $2.5 million,
respectively. Assuming the Medgenix Acquisition had occurred on January 1, 1995,
pro forma combined results of the Company and the Medgenix Business for the year
ended December 31, 1995 reflect revenue of $19.9 million and a net loss of $1.4
million (or a loss of $0.17 per share after giving effect to this offering) as
compared to actual sales and net income of the Company of $8.6 million and $1.2
million (or $.20 per share before giving effect to this offering), respectively.
For the three months ended January 31, 1995 and 1996, the Medgenix Business
reported revenue of $2.7 million and $2.9 million, respectively, and net losses
of $483,000

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<PAGE> 7

and $151,000, respectively. Assuming the Medgenix Acquisition had occurred on
January 1, 1996, pro forma combined results of the Company and the Medgenix
Business for the three months ended March 31, 1996 reflect revenue of $5.4
million and net income of $342,000 (or $0.04 per share after giving effect to
this offering) as compared to actual revenue and net income of the Company of
$2.5 million and $520,000 (or $.09 per share before giving effect to this
offering), respectively. See Unaudited Pro Forma Condensed Consolidated
Financial Statements, the Consolidated Financial Statements of the Company and
the Combined Financial Statements of Medgenix, each of which is included
elsewhere herein. The Company's ability to operate the Medgenix Business
profitably will depend upon a variety of factors, including (i) integration of
the management, administration and personnel of the Medgenix Business into the
Company, (ii) the ability of the Company to successfully reduce the cost of
sales, including distribution costs, and operating costs of the Medgenix
Business, (iii) continued market acceptance of the products of the Medgenix
Business following the acquisition, (iv) establishing and maintaining favorable
relations with Medgenix employees and (v) the ability of the Company to both
market its existing products through Medgenix into Europe and Medgenix products
through the Company into the United States. The Company also intends to
manufacture oligonucleotides at Medgenix following the acquisition, a business
in which Medgenix is currently not involved. Profitability will be impacted by
the ability of the Company to implement successfully the manufacturing and sale
of oligonucleotides at and from the Medgenix facilities. In addition, the
profitability of the Medgenix Business may be dependent upon the factors
identified in "-- Growth Strategy and Expansion" and "-- International Sales."

NEW PRODUCT DEVELOPMENT; GOVERNMENT REGULATION. The Company anticipates
that in addition to its currently planned research and development expenses, it
may spend up to $1 million from the net proceeds of this offering over a two to
three year period to fund research and development of certain technologies
related to the area of molecular diagnostics. This effort will be directed
towards the development of medical products which will be used to detect or
diagnose disease at a molecular level. See "Business -- Research and
Development." There can be no assurance that any such diagnostic products will
be successfully developed or that if developed, will be commercially successful.
Unlike the Company's current products, which are offered exclusively for
research uses, the new products would be offered for the detection of diseases
in humans and animals. Prior to any such use, the Company will be required to
have such products approved by the FDA following extensive clinical trials.
Management believes that its $1 million investment in these products will be
sufficient to cover the development of these products and all necessary clinical
trials; however, there can be no assurance that this level of investment will be
sufficient. Furthermore, the Company's investment will be made with no assurance
that development efforts or clinical trials will be successful, or that the FDA
will approve such products. In the event that the Company is unable to develop a
commercialized product from its research and development efforts, or the FDA
does not permit the Company to manufacture and sell such products, or the
Company is unable or unwilling to allocate amounts beyond the $1 million
investment, the Company could lose its entire investment in such products. If
required to increase its investment beyond the $1 million allocated from this
offering, there can be no assurance that financing will be available on
reasonable terms, or at all. See "Business -- Government Regulation."

COMPETITION. The Company is engaged in a segment of the health care
products industry that is highly competitive. Competitors in the United States
and elsewhere are numerous and include major pharmaceutical, chemical and
biotechnology companies, many of which have substantially greater capital
resources, marketing experience, research and development staffs and facilities
than the Company. These companies may succeed in developing products competitive
with those of the Company that are more effective than any that have been or may
be developed by the Company and may also be more successful than the Company in
producing and marketing their products. See "Business -- Competition."

SIGNIFICANT UNALLOCATED NET PROCEEDS. The principal purposes of this
offering are to acquire the Medgenix Business and to substantially increase the
Company's research and development of new products. The Company also expects to
use the net proceeds from this offering for working capital and general
corporate purposes, including enhancing its ability to make potential future
acquisitions of complementary businesses, products or technologies. The Company
from time to time evaluates potential acquisitions of complementary businesses,
products or technologies and expects that it may likely undertake one or more
such acquisitions

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during 1996 in addition to the acquisition of the Medgenix Business. As of the
date of this Prospectus, the Company has no negotiations, understandings,
commitments or agreements with respect to any acquisition, other than the
acquisition of the Medgenix Business. Consequently, the Company's management
will have discretion over the use of a significant portion of the proceeds of
this offering for the foreseeable future. See "Use of Proceeds."

INTERNATIONAL SALES. International sales accounted for approximately 25%
and 27% of the Company's revenues in 1994 and 1995, respectively. The Company
believes that there is large demand for its products internationally and is
aggressively pursuing such sales. While the Company expects that international
sales will increase as a percentage of revenue in future periods, particularly
as a result of the acquisition of the Medgenix Business, the Company may not be
successful in expanding its international sales. The products of the Company or
of the Medgenix Business (including oligonucleotides which the Company intends
to manufacture at Medgenix for international sale) may not continue to meet with
the same market acceptance as they currently receive, other competitive products
may be more attractive to international customers and the cost of selling the
Company's products overseas may result in a competitive disadvantage. In
addition, international sales are subject to certain inherent risks, including
unexpected changes in regulatory requirements and tariffs, difficulties in
staffing and managing foreign operations, longer payment cycles, problems in
collecting accounts receivable and potentially adverse tax consequences. The
Company currently depends on third party distributors for substantially all of
its international sales, although the Company expects such dependence to
decrease if the acquisition of the Medgenix Business is consummated. Certain of
the Company's third party distributors may also act as resellers for competitors
of the Company and could devote greater effort and resources to marketing
competitive products. The loss of, or other significant reduction in sales to,
certain of these third party distributors could have a material adverse effect
on the Company's business and results of operations.

Giving effect to the Medgenix Acquisition on January 1, 1995, pro forma
combined revenues of the Company and the Medgenix Business made in currencies
other than U.S. dollars amounted to approximately 56.8% of total pro forma
combined revenue during the year ended December 31, 1995 and 53.7% for the three
months ended March 31, 1996. A substantial portion of the Medgenix Business'
sales are invoiced in non-Belgian currencies, primarily German, French and
Italian, while the costs associated with these sales are based primarily on the
Belgian franc. The Company's gross margins from the Medgenix Business may,
therefore, be materially adversely affected by significant exchange rate
fluctuations between the Belgian franc and these other currencies. In addition,
because Medgenix' sales are not made in U.S. dollars, currency exchange rate
fluctuations could materially impact Medgenix' results of operations. Although
the Company may be able to hedge against all or a portion of these currency
exchange rate exposures, the Company does not currently have plans to do so and,
if the Company chooses to do so, there can be no assurance that the Company will
be able to do so successfully. Currently all of the Company's sales are made in
U.S. dollars, and increases in the exchange rate of the dollar against specific
currencies could cause the Company's products to become relatively more
expensive to customers in an affected country, leading to a reduction in sales
or profitability in that country.

DEPENDENCE ON KEY MANAGEMENT. The Company's success will continue to
depend to a significant extent on the members of its management and scientific
staff, particularly its Chief Executive Officer, James H. Chamberlain. The
Company has an employment contract with Mr. Chamberlain which expires at the end
of 1998. The Company maintains "key man" life insurance on Mr. Chamberlain in
the amount of $1 million, of which the Company is the sole beneficiary but there
can be no assurance that the proceeds will be sufficient to offset the loss to
the Company in the event of his death. The Company does not maintain any
insurance on the lives of its other senior management or scientific staff. As
the Company continues to grow, it will continue to hire, appoint or otherwise
change senior management and members of its scientific staff. There can be no
assurance that the Company will be able to retain its executive officers and key
personnel or attract additional qualified members to management in the future.
The loss of services of Mr. Chamberlain or of any key employee could have a
material adverse effect upon the Company's business. See "Management."

HISTORY OF LOSSES. The Company reported net losses of $406,000, $390,000,
and $210,000 in each of the years ended December 31, 1991, 1992 and 1994,
respectively, although the Company's net loss in 1994

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includes substantial non-cash charges. See "Summary Financial Data" and
"Selected Consolidated Financial Data." At March 31, 1996, the Company had an
accumulated deficit of $2.9 million. While the Company reported net income of
$513,000, $1,160,000 and $520,000 during the years ended December 31, 1993 and
1995 and the three months ended March 31, 1996, respectively, there can be no
assurance that the Company will report net income in any future year or period.

VOLATILITY OF STOCK PRICE. Until April 29, 1996, the Company's Common
Stock was quoted on the Nasdaq Small Cap Market, and there was substantial
volatility in the market price of such Common Stock. The trading price of the
Common Stock has been and is likely to continue to be subject to significant
fluctuations in response to variations in quarterly operating results, the gain
or loss of significant contracts, changes in management, announcements of
technological innovations or new products by the Company or its competitors,
legislative or regulatory changes, general trends in the industry,
recommendations by securities industry analysts and other events or factors. In
addition, the stock market has experienced extreme price and volume fluctuations
which have affected the market price of the common stock of many technology
companies in particular and which have at times been unrelated to operating
performance of the specific companies whose stock is affected. In addition, in
the past the Company has not experienced significant trading volume in its
Common Stock, has not been actively followed by stock market analysts and has
had limited market-making support from broker-dealers. If market-making support
does not continue at present or greater levels and/or the Company does not
continue to receive analyst coverage, the average trading volume in the
Company's Common Stock may not increase or even sustain its current levels, in
which case, there can be no assurance that an adequate trading market will exist
to sell large positions in the Company's Common Stock. See "Price Range of
Common Stock."

POTENTIAL ISSUANCE OF PREFERRED STOCK; ANTI-TAKEOVER PROVISIONS. The
Company's Certificate of Incorporation authorizes the issuance of 1,000,000
shares of Preferred Stock with such designations, rights and preferences as may
be determined from time to time by the Board of Directors, without any further
vote or action by the stockholders. The rights of the holders of the Common
Stock will be subject to, and may be adversely affected by, the rights of the
holders of any Preferred Stock that may be issued in the future. The issuance of
Preferred Stock, while providing desirable flexibility in connection with
possible acquisitions and other corporate purposes, could have the effect of
making it more difficult for a third party to acquire a majority of the
outstanding voting stock of the Company, thereby delaying, deferring or
preventing a change in control of the Company. Furthermore, such Preferred Stock
may have other rights, including economic rights senior to the Common Stock, and
as a result, the issuance of such Preferred Stock could have a material adverse
effect on the market value of the Common Stock. Although the Company has no
present intention to issue any shares of its Preferred Stock, there can be no
assurance that the Company will not do so in the future. These provisions, as
well as other provisions contained in the Company's Certificate of
Incorporation, also may have the effect of discouraging, delaying or preventing
a change in control of the Company. See "Description of Capital
Stock -- Anti-Takeover Provisions."

9
<PAGE> 10

THE COMPANY

The Company was originally incorporated as a California corporation in
1989, and was reincorporated as a Delaware corporation on May 19, 1993 through
the consolidation of BioSource Industries, Inc. ("Old BioSource") and TAGO. TAGO
was incorporated in 1973 to succeed to the business of what had then been
operated as a general partnership. TAGO developed and manufactured immunological
reagents derived from antibodies produced in goats and other animals as well as
test kits incorporating such reagents. The TAGO product line consisted mainly of
polyclonal and monoclonal antibodies. Old BioSource was a Canadian holding
company incorporated under the laws of British Columbia, Canada, in 1989, which
had one wholly-owned operating subsidiary, BioSource California, Inc., a
California corporation, incorporated in 1989. Old BioSource packaged and
distributed a variety of high quality reagents and other products, including
bioactive peptides, monoclonal and polyclonal antibodies, enzyme substrates and
various ELISA test kits used in biomedical research. Following the consolidation
of TAGO and Old BioSource, the Company has continued to carry on its
predecessors' historical businesses.

On November 21, 1995, the Company acquired Keystone, located in Menlo Park,
California, by issuing 500,000 shares of its Common Stock in exchange for all of
the issued and outstanding common stock of Keystone. Keystone manufactures and
sells oligonucleotides, which are used in the study and research of cellular and
molecular biology. This acquisition has enhanced the Company's ability to clone
specific genes into bacterial cell lines, provided an expanded product line and
customer base and resulted in the contribution of additional revenue from
Keystone's existing product line. The acquisition has also given the Company the
ability to internally develop and produce the oligonucleotides used in the
production of cytokines which in turn are used in its ELISA test kits.

The Company's executive offices are located at 820 Flynn Road, Camarillo,
California 93012, and its telephone number is (800) 242-0607.

USE OF PROCEEDS

The net proceeds to the Company from the sale of the 2,362,000 shares of
Common Stock being offered by the Company hereby (at an initial public offering
price of $9.25 per share), after deducting the estimated underwriting discounts
and offering expenses, are estimated to be approximately $19.5 million ($21.9
million if the over-allotment option is exercised in full). The Company will not
receive any proceeds from the sale of Common Stock by the Selling Stockholders;
however, the Company will receive approximately $59,750 upon the exercise by two
of the Selling Stockholders of warrants to purchase 31,000 shares of Common
Stock contemporaneously with the closing of this offering.

The Company's principal purpose for this offering is to acquire the
Medgenix Business and the Company will use approximately $6.9 million of the net
proceeds for that purpose. See "Risk Factors -- Business Acquisition,"
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Acquisition of Medgenix Business" and "Business -- Acquisition of
Medgenix Business." The Company will also use up to $1.0 million of the net
proceeds for additional research and development (in addition to its current
ongoing research and development activities) related to the commercialization of
new molecular diagnostic products. See "Risk Factors -- New Product Development;
Government Regulation" and "Business -- Research and Development." The Company
also intends to use a portion of the proceeds to pay off the balance on an
installment note issued to the bank providing the Company's credit facility and
a capital lease obligation. At December 31, 1995, the aggregate balance due on
these obligations was $130,000. For information concerning the interest rate and
maturities of these obligations, see Note 5 of Notes to Consolidated Financial
Statements. The Company has no specific plans to use the balance of the net
proceeds, however a significant purpose of this offering is to take advantage of
currently favorable conditions in the public equity market in order to raise a
portion of the capital the Company may require over a period of several years.
Consequently, the balance of the net proceeds will be used for general corporate
purposes, including marketing and related expenditures associated with expansion
of the Company's domestic and international business, expenditures associated
with the Company's ongoing research and development efforts and the introduction
of new products and product enhancements. In addition, the Company may use a
portion of the

10
<PAGE> 11

net proceeds to acquire businesses, products or technologies complementary to
the Company's current business. Except for the acquisition of the Medgenix
Business, the Company has no such commitments and no such acquisitions are
currently being negotiated or planned. Pending these uses, the net proceeds of
this offering will be invested in deposits with banks, investment grade
securities and short-term, income-producing investments, including government
obligations and other money market instruments.

PRICE RANGE OF COMMON STOCK

The Company's Common Stock commenced trading on the Nasdaq National Market
on April 29, 1996 under the symbol "BIOI." Prior to that time, the Company's
Common Stock traded on the Nasdaq Small Cap Market under the same symbol. The
following table sets forth, for the periods indicated, certain high and low bid
information of the Common Stock as reported by IDD/Tradeline until April 29,
1996 and certain high and low sale prices of the Common Stock as reported by the
Nasdaq National Market beginning April 29, 1996. Prices before April 29, 1996
reflect inter-dealer prices, without retail mark-up, mark-down or commissions
and may not necessarily reflect actual transactions.

<TABLE>
<CAPTION>
HIGH LOW
----- ----
<S> <C> <C>
YEAR ENDED DECEMBER 31, 1994
First Quarter.................................................. $ 2 5/16 $1 11/16
Second Quarter................................................. 1 7/8 1 11/32
Third Quarter.................................................. 2 1 1/4
Fourth Quarter................................................. 1 13/16 1 9/32
YEAR ENDED DECEMBER 31, 1995
First Quarter.................................................. $ 1 19/32 $1 9/32
Second Quarter................................................. 2 1/8 1 3/8
Third Quarter.................................................. 4 3/32 1 7/8
Fourth Quarter................................................. 6 1/4 2 3/8
YEAR ENDED DECEMBER 31, 1996
First Quarter.................................................. $ 7 $4 3/4
Second Quarter (through May 30, 1996).......................... 13 1/4 5 7/8
</TABLE>

On May 30, 1996, the last reported sales price of the Common Stock as
reported on the Nasdaq National Market was $10.88 per share. As of May 29, 1996
there were 628 holders of record of the Common Stock.

DIVIDEND POLICY

The Company has never paid cash dividends on its Common Stock and does not
currently anticipate that it will do so in the foreseeable future. The Company
plans to retain earnings to finance the Company's operations. The terms of the
Company's bank line of credit restrict the payment of cash dividends.

11
<PAGE> 12

CAPITALIZATION

The following table sets forth the short term debt and capitalization of
the Company at March 31, 1996, pro forma to reflect the acquisition of the
Medgenix Business, and pro forma as adjusted to reflect the issuance and sale by
the Company of 2,362,000 shares of Common Stock offered hereby at an initial
public offering price of $9.25 per share, the receipt by the Company of $59,750
from the exercise of warrants by two of the Selling Stockholders, and the
application of the estimated net proceeds therefrom. See "Use of Proceeds."

<TABLE>
<CAPTION>
AT MARCH 31, 1996
-------------------------------------------
PRO FORMA AS
ACTUAL PRO FORMA(1) ADJUSTED(1)(2)
------- ------------ --------------
(IN THOUSANDS, EXCEPT SHARE DATA)
<S> <C> <C> <C>
Short term debt....................................... $ 665 $ 849 $ 849
======= ======= =======
Notes payable, less current maturities................ $ 785 $ 785 $ 785
Stockholders' equity:
Preferred Stock, $0.001 par value;
1,000,000 shares authorized; no shares issued or
outstanding...................................... -- -- --
Common Stock, $0.001 par value;
20,000,000 shares authorized;
5,862,565 shares outstanding;
8,255,565 shares outstanding as adjusted(2)(3)... 6 6 8
Additional paid-in capital.......................... 9,566 9,566 29,043
Accumulated deficit................................. (2,927) (2,927) (2,927)
------- ------- -------
Net stockholders' equity............................ 6,645 6,645 26,124
------- ------- -------
Total capitalization........................ $ 7,430 $ 7,430 $ 26,909
======= ======= =======
</TABLE>

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

(1) The Company has entered into an agreement to acquire certain assets and
selected liabilities of Medgenix which is to occur concurrently with
completion of this offering. The table gives pro forma effect to such
acquisition, to be accounted for as a purchase as of March 31, 1996. The pro
forma results do not necessarily indicate results which can be expected for
future periods. See "Risk Factors -- Business Acquisition," "Management's
Discussion and Analysis of Financial Condition and Results of
Operations -- Acquisition of Medgenix Business," "Business -- Acquisition of
Medgenix Business" and the Unaudited Pro Forma Condensed Consolidated
Financial Statements included elsewhere in this Prospectus.

(2) As adjusted to reflect the sale of 2,393,000 shares of Common Stock in
connection with this offering (including the sale of 31,000 shares of Common
Stock to be issued by the Company upon exercise of warrants by two of the
Selling Stockholders for which the Company will receive net proceeds of
$59,750) and the application of the net proceeds therefrom. See "Use of
Proceeds" and "Principal and Selling Stockholders."

(3) Does not include (i) 153,100 shares of Common Stock subject to outstanding
warrants and (ii) 1,903,525 shares of Common Stock reserved for issuance
under the Company's Stock Incentive Plans, under which options to purchase
an aggregate of 1,106,459 shares were outstanding at May 30, 1996 at a
weighted average exercise price of approximately $2.636 per share.

12
<PAGE> 13

SELECTED CONSOLIDATED FINANCIAL DATA

The selected consolidated financial data presented below have been derived
from the consolidated financial statements of BioSource International, Inc.,
which consolidated financial statements for the years ended December 31, 1994
and 1995 have been audited by KPMG Peat Marwick LLP, independent certified
public accountants. The consolidated financial statements as of December 31,
1995, and for each of the years in the two-year period ended December 31, 1995,
and the report thereon, are included elsewhere in this Prospectus. The selected
consolidated financial data as of December 31, 1991, 1992, 1993 and 1994 and for
each of the years in the three year period ended December 31, 1993 have been
derived from audited consolidated financial statements not included herein. The
selected consolidated financial data as of March 31, 1996 and for the three
months ended March 31, 1995 and 1996 included herein have been derived from the
Company's unaudited financial statements. In the opinion of management, the
unaudited financial statements have been prepared on the same basis as the
audited financial statements and include all adjustments, consisting of normal
recurring adjustments, necessary for a fair presentation of the financial
position and results of operations as of such dates and for such periods. The
results for the three month period ended March 31, 1996 are not necessarily
indicative of the results to be expected for the entire year or the quarters
following in 1996. The selected consolidated financial data should be read in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and the Consolidated Financial Statements and
Unaudited Pro Forma Condensed Consolidated Financial Statements and related
notes and other financial information included elsewhere in this Prospectus.

<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEARS ENDED DECEMBER 31,(1) MARCH 31,
--------------------------------------------------------- ------------------------------
PRO FORMA PRO FORMA
AS ADJUSTED AS ADJUSTED
1991 1992 1993 1994(2) 1995 1995(3)(4) 1995 1996 1996(3)(4)
------ ------ ------ ------ ------ ------------ ------ ------ ------------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenue............................. $3,144 $4,317 $6,113 $7,367 $8,608 $ 19,921 $1,925 $2,519 $ 5,445
Cost of goods sold.................. 1,131 1,947 2,558 3,133 2,996 7,401 858 849 2,009
------ ------ ------ ------ ------ ------------ ------ ------ ------------
Gross profit...................... 2,013 2,370 3,555 4,234 5,612 12,520 1,067 1,670 3,436
------ ------ ------ ------ ------ ------------ ------ ------ ------------
Operating expenses:
Research and development.......... 278 242 609 722 1,074 2,729 288 244 632
Sales and marketing............... 815 720 897 1,141 1,290 4,822 310 323 1,098
General and administrative........ 1,340 1,759 1,557 1,929 1,633 5,787 351 374 1,184
Compensation recognized under
performance escrow share
arrangement..................... -- -- -- 577 -- -- -- -- --
------ ------ ------ ------ ------ ------------ ------ ------ ------------
Total operating expenses........ 2,433 2,721 3,063 4,369 3,997 13,338 949 941 2,914
------ ------ ------ ------ ------ ------------ ------ ------ ------------
Operating income (loss)......... (420) (351) 492 (135) 1,615 (818) 118 729 522
------ ------ ------ ------ ------ ------------ ------ ------ ------------
Other income (expense), net......... 14 (37) (17) (27) (4) (53) 19 61 97
------ ------ ------ ------ ------ ------------ ------ ------ ------------
Income (loss) before income
taxes and cumulative effect of
change in accounting
principle..................... (406) (388) 475 (162) 1,611 (871) 137 790 619
Provision for income taxes.......... -- 2 65 48 451 551 22 270 277
------ ------ ------ ------ ------ ------------ ------ ------ ------------
Income (loss) before cumulative
effect
of change in accounting
principle....................... (406) (390) 410 (210) 1,160 (1,422) 115 520 342
Cumulative effect of change in
accounting principle.............. -- -- 103 -- -- -- -- -- --
------ ------ ------ ------ ------ ------------ ------ ------ ------------
Net income (loss)................. $ (406) $ (390) $ 513 $ (210) $1,160 $ (1,422) $ 115 $ 520 $ 342
====== ====== ====== ====== ====== =========== ====== ====== ===========
Income (loss) per share:
Income (loss) before cumulative
effect
of change in accounting
principle....................... (0.12) (0.12) 0.08 (0.04) 0.20 (0.17) .02 .09 .04
Cumulative effect of change in
accounting principle............ -- -- 0.03 -- -- -- -- -- --
------ ------ ------ ------ ------ ------------ ------ ------ ------------
Net income (loss) per share....... $(0.12) $(0.12) $ 0.11 $(0.04) $ 0.20 $ (0.17) $ .02 $ .09 $ .04
====== ====== ====== ====== ====== =========== ====== ====== ===========
Weighted average number of common
shares outstanding................ 3,261 3,339 4,880 5,724 5,946 8,339 5,817 5,957 8,350
====== ====== ====== ====== ====== =========== ====== ====== ===========
</TABLE>

<TABLE>
<CAPTION>
AT MARCH 31,
AT DECEMBER 31, ---------------------
------------------------------------------ PRO FORMA
1991 1992 1993 1994 1995 1996 1996(3)
------ ------ ------ ------ ------ --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital................................. $1,141 $1,285 $3,518 $3,485 $4,996 $ 4,690 $ 8,745
Total assets.................................... 2,127 3,255 5,446 5,968 7,388 9,420 18,288
Notes payable less current maturities........... 118 83 72 150 64 785 785
Net stockholders' equity........................ 1,374 1,949 4,252 4,673 5,897 6,645 6,645
</TABLE>

13
<PAGE> 14

- ---------------
(1) The data reflects the acquisitions of TAGO, effected on May 19, 1993, and
Keystone, effected on November 21, 1995, each of which was accounted for as
a pooling of interests. See "The Company," and Note 2 of Notes to
Consolidated Financial Statements.

(2) The Company recognized compensation expense of $577,452 in 1994 related to
the release from escrow of 469,180 shares of Common Stock held by directors,
officers and others deemed to be able to affect the financial results of the
Company. No expense was recognized with respect to 635,763 shares of Common
Stock held by other stockholders which were also released from escrow. In
addition, the Company incurred a one-time charge in 1994 of $312,000 in
connection with the closure of its Northern California facility. These
charges affect the comparability of operating results during 1993, 1994 and
1995. See Note 6 of Notes to Consolidated Financial Statements.

14
<PAGE> 15

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

The following discussion and analysis should be read together with the
financial statements and notes thereto included elsewhere herein.

OVERVIEW

BioSource develops, manufactures, markets and distributes products which
are widely used in biomedical research and are instrumental in the development
of new medical diagnostic methods and pharmaceutical products. The Company's
products enable scientists to understand better the biochemistry, immunology and
cell biology of the human body, aging and certain diseases such as cancer,
arthritis and other inflammatory diseases, AIDS and certain other sexually
transmitted diseases. The Company's products include immunological reagents,
including bioactive proteins (cytokines, growth factors and adhesion molecules)
and monoclonal and polyclonal antibodies. The Company also develops,
manufactures, markets and distributes oligonucleotides and ELISA test kits, and
uses recombinant DNA technology to produce cytokines and other proteins. Because
the Company's products are sold only for research, the Company is not subject to
regulation by the FDA, and therefore undertakes none of the risks associated
with the research and development of new drugs. However, the Company intends to
focus new research and development efforts towards the development of medical
products which will be used to detect and diagnose disease at a molecular level.
Unlike the Company's current products, which are offered exclusively for
research uses, these new products would be offered for the detection of diseases
in humans and animals. See "Risk Factors -- New Product Development; Government
Regulation."

The Company's growth has also been stimulated by acquisitions. On November
21, 1995, the Company acquired Keystone, located in Menlo Park, California,
which manufactures and sells oligonucleotides. Oligonucleotides are used in the
study and research of cellular and molecular biology. This acquisition provided
a captive source of supply for needed oligonucleotides, enhanced the Company's
ability to clone specific genes into bacterial cell lines, provided an expanded
product line and customer base and resulted in the contribution of additional
revenue from Keystone's existing product line. The acquisition has also given
the Company the ability to develop and produce internally the oligonucleotides
it uses in the production of cytokines and in turn in its ELISA test kits. Thus,
the Company has become less dependent on certain suppliers and has been able to
reduce cost of goods sold for various products, thereby increasing its gross
margins.

ACQUISITION OF MEDGENIX BUSINESS

The Company has entered into an agreement to acquire certain assets and
selected liabilities related to the Medgenix Business. See "Risk
Factors -- Business Acquisition" and "Business -- Acquisition of Medgenix
Business." BioSource believes that the acquisition of the Medgenix Business will
allow it to introduce several new products, including several assays and a
number of polyclonal and monoclonal antibodies. During the years ended October
31, 1994 and 1995, the Medgenix Business reported revenue of $11.6 million and
$11.3 million, respectively, and net losses of $2.7 million and $2.5 million,
respectively. Assuming the Medgenix Acquisition had occurred on January 1, 1995,
pro forma combined results of the Company and the Medgenix Business for the year
ended December 31, 1995 reflect revenue of $19.9 million and a net loss of $1.4
million (or a loss of $0.17 per share after giving effect to this offering) as
compared to actual revenue and net income of the Company of $8.6 million and
$1.2 million (or $.20 per share before

15
<PAGE> 16

giving effect to this offering), respectively. For the three months ended
January 31, 1995 and 1996, the Medgenix Business reported revenue of $2.7
million and $2.9 million, respectively, and net losses of $483,000 and $151,000,
respectively. Assuming the Medgenix Acquisition had occurred on January 1, 1996,
pro forma combined results of the Company and the Medgenix Business for the
three months ended March 31, 1996 reflect revenue of $5.4 million and net income
of $342,000 (or $0.04 per share after giving effect to this offering) as
compared to actual revenue and net income of the Company of $2.5 million and
$520,000 (or $.09 per share before giving effect to this offering),
respectively. See Unaudited Pro Forma Condensed Consolidated Financial
Statements, the Consolidated Financial Statements of the Company and the
Combined Financial Statements of Medgenix, each of which is included elsewhere
herein.

The Company believes that the Medgenix Acquisition provides the Company
with a number of strategic advantages which will enhance the Company's existing
business. The Company further believes that those synergies, and its ability to
acquire the Medgenix Business without assuming many of the costs associated with
Medgenix' historical operations, will permit the Company to reverse Medgenix'
recent history of unprofitable operations. Following the Medgenix Acquisition,
the Company intends to conform the operating expenses and overhead of the
Medgenix Business to follow BioSource's standard practices, resulting in
considerable cost savings. For the year ended October 31, 1995, the Medgenix
Business recorded allocated overhead of $602,000 from its parent, Nordion
International Inc. ("Nordion"), which expenses will not be incurred following
the Medgenix Acquisition. Additionally, sales and marketing expenses of the
Medgenix Business as a percentage of revenue for its fiscal year ended October
31, 1995 were 107% higher than that of BioSource for its year ended December 31,
1995, and general and administrative expenses were 89% higher than that of
BioSource for the same periods. It is an objective of Company's management to
control operating expenses and overhead to the greatest degree possible, while
utilizing the synergies of the Medgenix Acquisition to generate profitability in
the near term from the Medgenix Business. BioSource anticipates that the
acquisition of the Medgenix Business will require a significant amount of
financial and management resources due to the travel between California and
Europe which will be required of certain members of the management team. A
substantial amount of management time, including that of James H. Chamberlain,
BioSource's Chairman of the Board, President and Chief Executive Officer, is
expected to be required in the early stages following the Medgenix Acquisition.
In addition, the Company expects to incur significant expense initially in
connection with the consolidation of the research and development activities of
the two companies. See "Business -- Acquisition of Medgenix Business."

The purchase price of $6.9 million to be paid for the Medgenix Business was
determined through an arms-length negotiation between BioSource and Nordion. In
arriving at the amount BioSource was willing to offer for the Medgenix Business,
management considered the book value of the assets of the Medgenix Business, the
historical revenue and losses associated with the operation of the Medgenix
Business, and management's perceived ability to create more profitable operation
of the Medgenix Business as a result of the factors identified above. Management
discounted the book value of the Medgenix Business from that reflected on the
books of Medgenix primarily as a result of its belief that a portion of the
inventory was obsolete and that certain of the accounts receivable were
uncollectible. On the basis of this discount analysis, BioSource offered an
amount it believed approximated the true book value of the Medgenix Business.
Nordion and BioSource then arrived at the actual purchase price through
negotiations. No appraisal or fairness opinion with respect to the Medgenix
Business was obtained.

RESULTS OF OPERATIONS

The following table sets forth for the periods indicated, selected
information derived from the Company's Consolidated Statements of Operations
expressed as percentages of revenue. The table also presents

16
<PAGE> 17

information on the Company's consolidated results of operations expressed as a
percentage increase or decrease relative to the results of the previous period.

<TABLE>
<CAPTION>
PERCENTAGE PERCENTAGE
INCREASE INCREASE
(DECREASE) PERCENTAGE OF (DECREASE)
OVER RESULTS FOR REVENUE OVER RESULTS FOR
PERCENTAGE OF REVENUE PRIOR PERIOD --------------- PRIOR PERIOD
------------------------- ------------------ ------------------
THREE MONTHS
YEAR ENDED YEAR ENDED ENDED THREE MONTHS ENDED
DECEMBER 31, DECEMBER 31, MARCH 31, MARCH 31,
------------------------- ------------------ --------------- ------------------
1993 1994 1995 1994 1995 1995 1996 1996
----- ----- ----- ------ ------- ----- ----- ------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenue......................... 100.0% 100.0% 100.0% 20.5% 16.8% 100.0% 100.0% 30.9%
Cost of goods sold.............. 41.8 42.5 34.8 22.5 (4.4) 44.6 33.7 (1.0)
----- ----- ----- ----- -----
Gross profit.................. 58.2 57.5 65.2 19.1 32.5 55.4 66.3 56.5
Operating expenses:
Research and development...... 10.0 9.8 12.5 18.6 48.7 15.0 9.7 (15.2)
Sales and marketing........... 14.7 15.5 15.0 27.2 13.1 16.1 12.8 4.4
General and administrative.... 25.5 26.2 19.0 23.9 (15.3) 18.2 14.9 6.2
Compensation recognized under
performance escrow share
arrangement................. -- 7.8 -- 100.0 (100.0) -- -- --
----- ----- ----- ----- -----
Income (loss) from operations... 8.0 (1.8) 18.7 (127.4) 1,296.9 6.1 28.9 518.9
Other (income) expense.......... (0.2) (0.4) -- 58.8 (86.3) 1.0 2.4 215.4
----- ----- ----- ----- -----
Income (loss) before provision
for income taxes.............. 7.8 (2.2) 18.7 (134.1) 1,098.1 7.1 31.3 475.9
Provision for income taxes...... 1.1 0.7 5.2 (26.2) 835.8 1.1 10.7 1,129.2
Cumulative effect of change in
accounting principle.......... 1.7 -- -- 100.0 -- -- -- --
----- ----- ----- ----- -----
Net income (loss)............... 8.4 (2.9) 13.5 (140.9) 653.5 6.0 20.6 351.2
===== ===== ===== ===== =====
</TABLE>

THREE MONTHS ENDED MARCH 31, 1996 COMPARED TO THREE MONTHS ENDED MARCH 31, 1995

Revenue. Revenue for the three months ended March 31, 1996 increased
$594,055, or 31%, to $2,518,557 from $1,924,502 when compared to the three
months ended March 31, 1995. The primary factors contributing to revenue growth
were the continued demand for BioSource products both domestically and
internationally across all product lines, and the introduction of new ELISA test
kits, cytokines, growth factors, antibodies, oligonucleotides and other
biomedical reagents supplied by the Company.

Cost of Goods Sold. Cost of goods sold of $849,031 decreased for the three
months ended March 31, 1996 by $8,674, or 1%, when compared to $857,705 for the
three months ended March 31, 1995. The decrease was due to efficiencies in
production which were created by manufacturing larger volumes of products and
their components, thereby recognizing greater economies of scale.

Research and Development Expenses. Research and development expenses were
$244,019 for the three months ended March 31, 1996 and decreased by $43,745, or
15%, as compared to $287,764 for the three months ended March 31, 1995. The
decrease resulted from the favorable comparison to the comparable period in 1995
when the Company incurred higher research and development expenses in connection
with the expansion of its research and development efforts. The Company has
continued to maintain productive research and development efforts while
implementing expense controls. The Company believes its protein recombinant rat
IL-6, introduced in the first quarter of 1996, was the first to be commercially
available. The research department also produced other biologically active
proteins which are replacements for outsourced raw materials used in ELISA
development. In the same period, the Company introduced five new ELISA test kits
and two replacement kits using internally developed components. The Company
continues its focus on producing new proteins for commercial sale and for use in
new ELISA kits and other products used in biomedical research.

Sales and Marketing Expenses. Sales and marketing expenses for the three
months ended March 31, 1996 were $323,442, an increase of 4%, or $13,686, as
compared to $309,756 for the three months ended March 31, 1995. As a percentage
of revenue, these expenses decreased to 13% in 1996 as compared to 16% in 1995.
The increase in absolute dollars is the net effect of increased salaries for the
new fiscal year and related personnel expenses against decreased expenditures in
catalog printing, direct mail and advertising.

17
<PAGE> 18

General and Administrative Expenses. General and administrative expenses
for the three months ended March 31, 1996 were $373,540, an increase of $21,969,
or 6%, as compared to $351,571 for the three months ended March 31, 1995. As a
percentage of revenue, these expenses decreased to 15% in 1996 as compared to
18% in 1995. The increase in expenditures in absolute dollars was due primarily
to the addition of new personnel, increased salaries for the new fiscal year and
related personnel expenses. Other general and administrative expenses remained
relatively stable.

Provision for Income Taxes. The provision for income taxes for the three
months ended March 31, 1996 of $270,193 increased by $248,211, when compared to
$21,982 for the three months ended March 31, 1995. The increase resulted from
the increase in income before taxes.

YEAR ENDED DECEMBER 31, 1995 COMPARED TO YEAR ENDED DECEMBER 31, 1994

Revenue. Revenue increased $1.2 million during 1995 or 17% to $8.6 million
from $7.4 million when compared to the year ended December 31, 1994. The
increase in revenue is attributable to broad sales growth across all product
lines, including existing and newly introduced ELISA test kits, cytokines,
growth factors, antibodies, oligonucleotides and other biochemical reagents
supplied by the Company. The Company has been able to increase its revenue
domestically through increased and more efficient marketing efforts, such as
greater attendance at trade shows, increased sales personnel, greater print
advertising and direct mail programs. The Company has also increased
international sales through increased distributor training and marketing
activities. In November 1995, the Company acquired Keystone. See "The Company."
This acquisition was accounted for as a pooling of interests and, as a result,
the Company's consolidated financial statements were restated for all periods
presented to include the financial statements of Keystone. Keystone's revenue
for 1995 was $976,744, a decrease of $150,366 when compared to Keystone's 1994
revenue of $1.1 million. This decrease was primarily attributable to competitive
pricing and discounting of oligonucleotides by Keystone to meet market demands.
Management believes that the consolidation of many of the Company's operations
with those of Keystone and the utilization of BioSource's sales and marketing
staff will result in greater revenue and more profitability of the Keystone
subsidiary. BioSource is already experiencing an increase in revenue from its
Keystone subsidiary, and expects that subsidiary to contribute revenue in excess
of that earned by Keystone in 1995. Notwithstanding the decrease in revenue for
the Keystone subsidiary, BioSource's revenue (on a combined basis) increased by
17%.

The Company anticipates that revenue will increase for the year ending
December 31, 1996 as a result of the acquisition of the Medgenix Business.
Assuming the acquisition had occurred on January 1, 1995, pro forma combined
revenue of the Company and the Medgenix Business for the year ended December 31,
1995 would have been $19.9 million. See "Risk Factors -- Business Acquisition"
and "Business -- Acquisition of Medgenix Business."

Cost of Goods Sold. Cost of goods sold of $3.0 million decreased during
1995 by $136,888 or 4% when compared to the year ended December 31, 1994. Cost
of goods sold as a percentage of revenue also decreased 8% from 43% in 1994 to
35% in 1995. This decrease was a direct result of the Company recognizing
benefits in the form of decreased manufacturing expenses and economies of scale
as a result of the relocation of its manufacturing operations that had been
conducted in Northern California, to its headquarters in Camarillo, California
in October 1994. During 1995, the Company also concentrated on lowering
manufacturing expenses, including labor, materials and overhead, without
compromising product quality or reducing customer demand.

Research and Development Expenses. The Company's research and development
expenses were $1.1 million for 1995, an increase of $351,831 or 49%, as compared
to $721,902 for the year ended December 31, 1994. As a percentage of revenue,
research and development expenses increased only 2%, from 10% in 1994 to 12% in
1995. This increase contributed to the growth in the Company's product lines as
a result of the Company's directed effort at producing new ELISA test kits. In
1995, the Company produced 14 new ELISA test kits. In addition, the Company
redeveloped three existing ELISA test kits to include its own internally
produced antibodies, thereby reducing the Company's cost of goods sold and
dependence on outside suppliers. Also in 1995, the Company initiated new
projects which resulted in additional monoclonal and polyclonal antibodies. The
Company intends to continue to focus on internally developed products whenever

18
<PAGE> 19

management determines that the cost benefit associated with such production
provides a benefit as compared to sourcing such products from external
suppliers.

Sales and Marketing Expenses. Sales and marketing expenses were $1.3
million for 1995, an increase of $149,277, or 13%, as compared to $1.1 million
for the year ended December 31, 1994, but as a percentage of revenue were
unchanged at 15%. The increase in absolute dollars is primarily attributable to
greater levels of direct marketing, including advertising, distributor training
and other marketing programs, as well as increased expenses for the printing and
mailing of the Company's research product catalog. The Company also expanded its
marketing department in 1995 by adding one additional sales representative, and
three new positions in customer service, technical service and marketing
support.

General and Administrative Expenses. General and administrative expenses
were $1.6 million for 1995, a decrease of $295,538 or 15%, as compared to $1.9
million for the year ended December 31, 1994. The decrease is attributable
primarily to the elimination of duplicate expenditures as a result of the
closure of the Northern California facility in October 1994, and in part to the
in-house management of stockholder services. On March 28, 1996, the Company
purchased its Camarillo headquarters. The Company expects to see a reduction in
general and administrative expenses previously attributable to rent of
approximately $155,892 for the year ending December 31, 1996 which will be
offset in part by interest expense of $137,256 relating to the portion of the
mortgage payments attributable to interest. See "Business -- Description of
Properties."

Compensation Expense. During 1994, the Company recognized $577,452 of
non-cash compensation expense related to the release from escrow of certain
performance escrow shares which were earned out of escrow based upon the
Company's operating results as of December 31, 1994. The Company's 1994
quarterly financial statements were restated as of December 31, 1994 to
attribute the compensation expense pro rata over each quarter. For the year
ended December 31, 1995, no compensation expense was recognized and no future
compensation expense with regard to the performance escrow shares will be
recognized.

Provision for Income Taxes. The provision for income taxes for the year
ended December 31, 1995 of $451,000 increased by $402,805, when compared to
$48,195 for the year ended December 31, 1994. The increase resulted from the
increase in income before taxes, as well as an increase in the Company's
effective tax rate for the year.

LIQUIDITY AND CAPITAL RESOURCES

At March 31, 1996, the Company's current ratio was 3.4 to 1 compared to 4.8
to 1 at December 31, 1995. The decrease was due to a short-term bridge loan
provided by Heller Financial, Inc., Small Business Lending Division, which
partially funded the Company's March 28, 1996 purchase of its Camarillo
headquarters. The principal amount of the bridge loan is $596,000, subject to a
fixed rate of 9.75%. Cash generated from operating activities increased to
$128,211 for the three months ended March 31, 1996 as compared to $33,584 for
the three months ended March 31, 1995. At March 31, 1996, total cash and cash
equivalents on hand amounted to $1.3 million as compared to $1.4 million at
December 31, 1995.

At December 31, 1995 the Company's current ratio was 4.8 to 1 compared to
4.0 to 1 at December 31, 1994. Cash generated from operating activities
increased to $853,200 as compared to $16,536 at December 31, 1994. At December
31, 1995 total cash and cash equivalents on hand amounted to $1.4 million as
compared to $883,760 at December 31, 1994. Inventories at December 31, 1995 of
$3.3 million increased by $592,581 or 22% as compared to $2.7 million at
December 31, 1994. The buildup was due to the increased sales volume, new
products produced in 1995 and increased production of selected products to
reduce the amount of backorders to customers.

Capital expenditures for the year ended December 31, 1995 were $211,809, a
reduction of $480,330 when compared to $692,139 for the year ended December 31,
1994. The majority of the reduction was due to the build-out of the laboratory
facilities and the equipment needed to supply the new production and laboratory
areas in the Southern California location in 1994. Additional equipment was
purchased in 1995 for use at the Company's Camarillo facility and the Keystone
facility in order to maintain and improve research and manufacturing
capabilities.

19
<PAGE> 20

Capital expenditures for the three months ended March 31, 1996 were $1.6
million as compared to $84,325 for the three months ended March 31, 1995. The
majority of the increase was due to the March 28, 1996 purchase of the Company's
Camarillo headquarters. The Company expects to see a reduction in general and
administrative expenses previously attributable to rent of approximately
$155,892 for the year ending December 31, 1996 which will be offset in part by
interest expense of $137,256 relating to the portion of the mortgage payments
attributable to interest. This reduction is expected to improve the Company's
liquidity. See "Business -- Description of Properties."

The Company's revolving line of credit with Silicon Valley Bank, as
extended, provides for borrowings of up to $1.0 million limited to 75% of
eligible accounts receivable. The credit line expires on December 31, 1996.
Interest on the revolving line of credit is payable monthly at prime plus .75%.
The Company also has a $150,000 installment note payable to Silicon Valley Bank
payable in monthly installments of principal and interest of prime plus 1.375%
through June 30, 1998. At March 31, 1996 an aggregate balance of $96,428 was due
on the installment note and a separate capital lease obligation, and no amounts
had been drawn against the line of credit. The Company plans to repay the
installment note with a portion of the net proceeds of this offering.

International sales accounted for approximately 25% and 27% of the
Company's revenues in 1994 and 1995, respectively. Currently all of the
Company's sales are made in U.S. dollars, and increases in the exchange rate of
the dollar against specific currencies could cause the Company's products to
become relatively more expensive to customers in an affected country, leading to
a reduction in sales or profitability in that country.

The Company expects that international sales will increase as a percentage
of revenue in future periods, particularly as a result of the acquisition of the
Medgenix Business. Giving effect to the Medgenix Acquisition as of the beginning
of the respective periods, pro forma combined revenues of the Company and the
Medgenix Business made in currencies other than U.S. dollars amounted to
approximately 56.8% of total pro forma combined revenue during the year ended
December 31, 1995 and 53.7% for the three months ended March 31, 1996. A
substantial portion of the Medgenix Business' sales are invoiced in non-Belgian
currencies, primarily German, French and Italian, while the costs associated
with these sales are based primarily on the Belgian franc. The Company's gross
margins from the Medgenix Business may, therefore, be materially adversely
affected by significant exchange rate fluctuations between the Belgian franc and
these other currencies. In addition, because Medgenix' sales are not made in
U.S. dollars, currency exchange rate fluctuations could materially impact
Medgenix' results of operations. Although the Company may be able to hedge
against all or a portion of these currency exchange rate exposures, the Company
does not currently have plans to do so and, if the Company chooses to do so,
there can be no assurance that the Company will be able to do so successfully.

Management believes that the Medgenix Acquisition will result in increased
working capital requirements because senior management will be required to
travel between California and Europe, the consolidation of the business and
elimination of overlap (particularly in research and development) will result in
higher costs, and the entire Medgenix sales staff will need to be trained, much
of which will require that they travel to California. Management believes that
notwithstanding the increased working capital requirements created by the
Medgenix Acquisition, its working capital and amounts available under its line
of credit, together with internally generated funds and the proceeds of this
offering which it has allocated to working capital will provide sufficient
liquidity to enable the Company to meet its current operating and capital needs
for at least the next 12 months.

UNCERTAINTY REGARDING FUTURE PROFITABILITY

For the year ended December 31, 1995, the Company recorded a valuation
allowance of $607,000 related primarily to the uncertainty as to utilization of
its net operating loss carryforwards. Because the amount of the net operating
loss carryforwards which can be used in future years is subject to an annual
utilization limitation, it will take approximately 7 1/2 years of profitable
operations to utilize their full benefit. The Company reported net losses of
$406,000, $390,000, and $210,000 in each of the years ended December 31, 1991,
1992 and 1994, respectively, although the Company's net loss in 1994 includes
substantial non-cash charges. See "Summary

20
<PAGE> 21

Financial Data" and "Selected Consolidated Financial Data." At March 31, 1996,
the Company had an accumulated deficit of $2.9 million. While the Company
reported net income of $513,000, $1,160,000 and $520,000 during the years ended
December 31, 1993 and 1995 and the three months ended March 31, 1996,
respectively, there can be no assurance that the Company will be profitable in
any future year or period. See "Risk Factors -- History of Losses." In addition,
the acquisition of Keystone and the planned acquisition of the Medgenix
Business, and the impact of integrating these new businesses into the Company,
create additional uncertainty regarding future profitability. Consequently no
assurance can be made as to the actual amount of the net operating loss which
will be utilized in future operating periods.

NEWLY ISSUED ACCOUNTING STANDARDS

In March 1995, Statement of Financial Accounting Standards No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
Be Disposed Of," was issued. This statement provides guidelines for recognition
of impairment losses related to long-term assets. Effective January 1, 1996, the
Company adopted Statement No. 121. The adoption of this new standard did not
have a material effect on the Company's consolidated financial statements.

In October 1995, Statement of Financial Accounting Standards No. 123,
"Accounting for Stock-Based Compensation" ("Statement No. 123"), was issued.
This statement encourages, but does not require, a fair value based method of
accounting for employee stock options. The Company has elected to continue to
measure compensation costs under APB Opinion No. 25, "Accounting for Stock
Issued to Employees" and to comply with the pro forma disclosure requirements of
Statement No. 123. Effective January 1, 1996, the Company adopted Statement No.
123 which had no impact on the Company's consolidated financial statements.

21
<PAGE> 22

BUSINESS

CERTAIN SCIENTIFIC TERMS USED IN THIS PROSPECTUS ARE DEFINED IN THE GLOSSARY
APPEARING AT PAGES 50 AND 51.

Medgenix, located in Fleurus, Belgium, manufactures, markets and
distributes a series of assay test kits and a number of monoclonal and
polyclonal antibodies. While there is some overlap between the products of the
Company and those of the Medgenix Business, the Medgenix Acquisition is expected
to (i) provide several new assay products and antibodies to BioSource's existing
product lines, (ii) enable BioSource to market those products in the United
States while simultaneously providing for a direct European sales channel for
BioSource's existing products, (iii) provide economies of scale and cost savings
in the area of research and development, and (iv) allow BioSource to expand its
oligonucleotides business in Europe and into other international markets. See
" -- Acquisition of Medgenix Business."

Since its consolidation with TAGO in 1993, BioSource has concentrated on
internal development of new products, and currently offers over 800 products to
more than 1,700 medical laboratories and research centers in universities,
government institutions and pharmaceutical and biotechnology firms. In 1995,
BioSource further expanded its product lines by acquiring Keystone, enabling it
to manufacture oligonucleotides both as a new product line and for use in the
production of cytokines and its ELISA test kits. The Company believes that the
acquisition of the Medgenix Business will further benefit its business by
providing a European manufacturing capability, access to an additional animal
facility and a direct sales force in Europe. The Medgenix Acquisition is also
expected to expand and broaden BioSource's product lines. BioSource intends to
continue its focus on new product development, and to acquire businesses,
products or technologies complementary to its current business.

BioSource's branded products, including the CYTOscreen line of ELISA test
kits and TAGOImmunologicals, are basic tools used in the daily work of
researchers, including medical doctors and Ph.D.'s. The Company offers its
products to medical laboratories and research centers in universities,
government institutions and private pharmaceutical and biotechnology firms
around the world. The breadth and name recognition of the Company's product
lines, give the Company a strong presence in each of its markets. Some of the
Company's customers include Eli Lilly, Hoffman LaRoche, Amgen, Genentech, the
National Institutes of Health, the Centers for Disease Control and the research
centers of many of the major universities in the United States. Management
believes that none of the Company's competitors offer a more broadly based
product line and few can match the specifications that the Company's products
provide.

BioSource has an advanced scientific research staff, a broad product line
and an established trade name, giving it a strong presence in the biomedical
research market.

INDUSTRY OVERVIEW

The biomedical research industry has recently seen major advances in the
understanding of physiological processes at the cellular and molecular level.
New research technologies require the use of qualitative and quantitative
analysis of the way in which tissues and cells communicate with each other, what
stimulates cellular activity and how cells respond when stimulated. Biomedical
researchers around the world are constantly in search of specialty research
products necessary to conduct basic and clinical research. This research is
conducted in settings that range from university and medical school laboratories
to pharmaceutical and biotechnology research and development groups. The success
of such research in creating new health care

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<PAGE> 23

products depends upon the availability of biological reagents, including various
biological proteins, antibodies, serums and immunoassay kits, such as those
manufactured and sold by the Company.

The biomedical research industry is a large and growing segment of the
biotechnology industry. Large, highly capitalized biotechnology and
pharmaceutical companies have concentrated their efforts on the development of
human therapeutics and high volume diagnostic tests. BioSource supplies these
larger companies with the tools to assist them in achieving their scientific
goals. Because the Company's products are sold only for research, they do not
require approval from the FDA and thus the Company is not subject to many of the
regulatory risks associated with the development of pharmaceuticals.

Most industrialized nations, led by the United States, Japan and the
countries of Western Europe, support some level of biomedical research.
BioSource's products are used by thousands of physicians and scientists who are
employed by or affiliated with universities, medical schools, research
institutes and private industry. The biomedical research industry is highly
fragmented with no dominant competitors.

STRATEGY

The Company's primary business strategy has been to capitalize on the
growth of the biotechnology industry by creating "building block" reagents and
test kits which are not subject to regulatory overview or the risk and
volatility inherent in developing pharmaceuticals, and to grow through the
selective acquisition of complementary businesses. The Company's strategy
includes the following elements:

Develop Broad Product Lines. The Company offers over 800 products in
four major product lines in an effort to serve effectively a diverse and
fragmented industry. The Company believes that its many and diverse
products more fully address the needs of researchers, thereby offering them
the ability and convenience of obtaining their research products from a
single source, which will cause researchers to look first to the Company to
satisfy their needs.

Focus on Product Research. Over the last two years, the Company has
developed over 40 new products to serve the biomedical research industry.
The Company's sales force, who have education and training in the
biological sciences, continuously evaluates the direction of its customers'
biomedical research, enabling the Company's management to develop more
effectively innovative ELISA test kits, cytokines, antibodies and other
immunological reagents to address those needs. For example, the Company
capitalized on the use of mice and rats as the species of choice of most
researchers as a preclinical model for potential therapeutics by developing
ELISA test kits to measure separate cytokines for both mice and rats.

Commitment to Product Development. During 1994 and 1995, the Company
has invested 10% and 12%, respectively, of its revenue in research and
development and plans to increase its research and development expenses in
the future. The Company employs nine professionals with Ph.D. degrees in
the life sciences. The Company believes it was the first to introduce
certain ELISA test kits to measure several different human interleukins (a
type of cytokine) that researchers have associated with diseases of the
immune system.

Offer Products of Exacting Capability. The Company constantly strives
to offer products with the greatest sensitivity, precision, accuracy and
reproducibility available on the market. For example, the Company's
products are generally capable of measuring to the picogram (one trillionth
of a gram), and in certain cases to the femtogram (one quadrillionth of a
gram), more quickly than products available from certain of its
competitors.

Create Superior Value. The Company seeks to create superior value for
its customers. For instance, BioSource includes two ELISA test plates in
each package which allows for double the number of tests, at a comparable
price, compared to the test kits of most of its competitors, thereby
offering greater affordability and convenience to customers, and fostering
more economical and prolific research.

Acquire Complementary Businesses, New Products and Technologies. The
Company evaluates potential acquisitions of complementary products and
businesses from time to time and has a proven track record of profiting
from its business acquisitions. In 1993, the Company acquired TAGO, which
added polyclonal and monoclonal antibodies to its product lines and in 1995
the Company acquired

23
<PAGE> 24

Keystone, which added oligonucleotides. The Company will use a portion of
the net proceeds of this offering to acquire the Medgenix Business which
will permit it to further expand its product offerings and geographic
distribution.

Esprit de Corps. The Company seeks to create a team spirit among all
of its employees, foster awareness of the Company's objectives and
strategies at all levels within the Company, and reward meritorious
performance with compensation and other incentives. The Company believes
this creates loyalty to the Company and pride in its products, which
translates into greater product quality and enhanced customer service.

PRODUCTS

BioSource has over 800 different products in its inventory. The Company
groups its products into four principal product lines, oligonucleotides (DNA
segments), bioactive proteins (cytokines, growth factors and adhesion
molecules), monoclonal and polyclonal antibodies and ELISA test kits.

Oligonucleotides (DNA Segments). An oligonucleotide is a synthesized
polymer made up of the same building blocks which form DNA. Synthetic
oligonucleotides have been used in molecular biology for over twenty years,
basically to act as primers and templates for nucleic acid and protein
synthesis, and more recently, as the therapeutic agents for the inhibition of
either DNA transcription or RNA translation or as a diagnostic agent to identify
disease. DNA is used by almost every discipline in biomedical research in both
academic and industry areas, including molecular biology departments and cell
biology departments of major universities, and biomedical companies developing
gene therapy drugs. These researchers use synthetic oligonucleotides, such as
those made by the Company, to determine the exact sequence of a gene, or to
perform experiments leading to the potential development of pharmaceutical
drugs. Oligonucleotides are primarily developed and sold by the Company for
processes called DNA sequencing and Polymerase Chain Reaction (PCR) priming.

In DNA sequencing, oligonucleotides are custom synthesized by the Company
pursuant to customer specifications and are used to initiate a process of
sequencing a growing DNA strand. DNA sequencing is used in a wide range of other
biomedical research applications to identify specific diseases.

In PCR priming, oligonucleotides synthesized by the Company are used in
combination with other reagents to amplify a specific genetic sequence isolated
from a cell sample. After PCR amplification, gel electrophoresis is used to
identify and even to quantitate a specific DNA or RNA sequence from that sample.
PCR is an extremely powerful tool in molecular biology research. It can amplify
genetic information from as few as one copy of DNA or RNA. Using PCR technology,
the presence of the genetic message used to code for the production of protein
can be identified, thereby offering numerous possibilities in the detection of
genetic disorders, monitoring disease progression, and in understanding cellular
functions.

Bioactive Proteins (Cytokines, Growth Factors and Adhesion Molecules). The
development of an effective immune response involves complex cell-to-cell
communications which are mediated by a group of secreted proteins collectively
called cytokines. Cytokines and other similar growth factors and adhesion
molecules are instrumental in the body's defense against cancer, AIDS and other
life-threatening disorders. Cytokines are small, hormone-like, soluble proteins
secreted by activated cells of the immune system. Through their activities,
cytokines coordinate and orchestrate the proper functioning of the immune
system. Growth factors are proteins that stimulate the multiplication and
differentiation of various types of immature precursor cells. Adhesion molecules
enable cells to interact for the purpose of cell communication and are involved
in such processes as wound healing and tumor metastasis.

Cytokines, like growth factors, interact with specialized target receptors
on the surface of the cells and stimulate a chain of secondary messengers
leading to a biological response. These responses result from changes in both
the molecular capabilities and behaviors of cells. For example, cytokines can
activate cells to recognize and eliminate harmful bacteria and viruses. They
carry vital signals to the cell's genetic machinery that can trigger it to grow
or stop growing. Cytokines can also signal a cell to differentiate, that is, to
acquire the features necessary for it to take on more specialized tasks. Certain
cytokines play a key role in stimulating cells surrounding a wound to grow and
divide and also in attracting migratory cells to the site. Some cytokines have a
regulatory function, and other cytokines exert direct effects of their own.

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<PAGE> 25

Cytokines are the subject of worldwide research efforts. To date, more than
40 molecules have been identified as cytokines. Cytokines are extracted from
natural sources (human and animal platelets, leukocytes and lymphocytes) or are
produced through genetic engineering (recombinant DNA technology). These
recombinant cytokines have the same biological activities as their natural
counterparts and have been used to manipulate the immune system for research
purposes as well as therapeutically to treat various diseases. Recombinant DNA
technology offers several advantages over extraction of these proteins from
natural sources, including lower production cost and potentially unlimited
supplies.

BioSource produces and sells bulk cytokines, and also uses them in the
manufacture of its ELISA test kits. The following table shows examples of
different cytokines produced and used by BioSource:

<TABLE>
<CAPTION>
CYTOKINE CHARACTERISTICS USES
<S> <C> <C>
- -------------------------------------------------------------------------------------------------------
Interleukin 4 Human IL-4 is a protein produced IL-4 also exhibits antitumor activity
primarily by activated T-lymphocytes in a variety of animal models. In
and has many immunoregulatory antitumor experiments, IL-4 has been
properties. observed to have direct
growth-suppressive activity on a
variety of malignancies. Other
potential uses are as an
anti-inflammatory agent and in
management of T-cell mediated
autoimmune diseases such as Type I
diabetes.
- -------------------------------------------------------------------------------------------------------
Interleukin 12 IL-12 is a broad spectrum IL-12 has potential in antitumor
immunomodulatory cytokine. therapy and also plays a major part in
the control of infections and
autoimmune diseases. Its broad array
of activities suggests clinical
utility as an antitumor and antiviral
agent, in restoring immune function in
immune suppressed patients, as a
vaccine adjuvant in promoting cellular
immune response, and in combating
opportunistic infections in immune
suppressed patients.
- -------------------------------------------------------------------------------------------------------
Interleukin 15 IL-15 is a cytokine recently cloned by Researchers believe that IL-15
scientists. It is produced by a wide produced locally has a transient
variety of cells and tissues of initial push start on T-lymphocyte
lymphoid and non-lymphoid origin, and growth. Pre-clinical data also
is most abundant in epithelial and suggests that IL-15 may be an
monocyte cell lines, muscle and effective treatment for a condition
placental tissue. known as mucositis, a mouth and
digestive tract lesion which is a side
effect of cancer chemotherapy.
- -------------------------------------------------------------------------------------------------------
Interferon-Gamma IFN-Gamma is a potent in vivo IFN-Gamma's presence is required for
antiviral activity which has been well the resolution of microbial
documented, and it is also a powerful infections. It is also involved with
immunomodulator, able to induce the inflammatory response and participates
expression of many key molecules. It in the development of autoimmune
has synergistic activity with many diseases.
other cytokines.
- -------------------------------------------------------------------------------------------------------
Tumor Necrosis Factor TNF is an amino acid protein produced TNF plays a vital role in immune
primarily by macrophages in response modulation, viral replication,
to a wide variety of stimuli. inflammation and septic shock, as well
as numerous other functions. Some of
its biological activities include
inhibition of tumor cell growth,
antiviral effects, and induction of
other cytokines. TNF alone and in
combination with other substances has
been used as a potent antitumor agent.
- -------------------------------------------------------------------------------------------------------
</TABLE>

Antibodies. Antibodies are used as detector systems in the research of
normal and abnormal proteins. Antibodies are molecules generated by a particular
group of immune cells in response to foreign antigens. They have a specific
amino acid sequence by virtue of which they interact only with the antigen that
induced their synthesis. They are classified according to their mode of action.
In vivo, secreted antibodies circulate in the blood and serve as the effectors
of humoral immunity by searching out and neutralizing or eliminating foreign
antigens. Antibodies are also used in vitro for neutralization studies in
bioassay systems. Antibodies are

25
<PAGE> 26

generally produced by injecting a particular antigen into animals (usually
goats, chickens, rabbits or mice) which can cause the animal's immune system to
produce an antibody specific to that antigen.

BioSource makes its own antibodies when it is able to do so. Where the
Company perceives a need for a specific antibody that it is unable to produce
internally, it licenses from a third party a cell line specific to that antibody
(hybridoma cells) which permits the Company to obtain and purify the antibody
from the secretions of the hybridoma cell line. In some cases, the Company will
purchase bulk antibodies directly. The Company believes that the acquisition of
the Medgenix Business will enhance its ability to create antibodies because,
among other things, the Medgenix assets include an animal facility and other
laboratory facilities useful in the production of antibodies. See "Risk
Factors -- Business Acquisition" and "-- Acquisition of Medgenix Business."

The following table illustrates some of the uses for antibodies offered by
the Company:

<TABLE>
<CAPTION>
USES DESCRIPTION
<S> <C>
- ---------------------------------------------------------------------------------------------
Cell Identification Antibodies are used to identify specific cell types by the nature
of the antigens expressed on their surface. The binding of
antibodies to cells or tissue sections can be visualized by
labeling the antibody molecules with a fluorescent dye or
"fluorochrome" and examining it either through a microscope or
with other specialized instruments.
- ---------------------------------------------------------------------------------------------
Flow Cytometry Flow cytometry, a specific cell identification technique, is
becoming an increasingly common means, both in research and
diagnosis, for identifying certain cell types in blood samples. A
mixed cell population is "stained" with one or more antibodies,
specific for each of the surface antigens identifying the cell
type under investigation, using different fluorescent "colors".
The cell mixture is loaded into the flow cytometer and passes
through a beam of laser light that excites the fluorochrome. The
intensity of the fluorescence emitted by each antibody on the cell
surface is monitored by a detector and displayed on an
oscilloscope. The percentage of the cells in the mixed population
expressing the antigens for which the antibodies were specific can
then be enumerated.
- ---------------------------------------------------------------------------------------------
ELISA Uses Antibodies are used by the Company in their ELISA test kits to
detect and measure proteins (antigens) in biological fluids. An
antibody coupled with an enzyme reacts with a colorless substrate
in the presence of a sample containing the antigen of interest to
generate a colored reaction product. The color produced is
proportional to, and thereby indicates the amount of, antigen
present in the sample.
- ---------------------------------------------------------------------------------------------
Immunoblotting Immunoblotting uses antibodies to identify a specific protein in a
complex mixture of proteins. Commonly, a protein of interest is
separated by molecular weight using denaturing agarose gel
electrophoresis. This generates a series of bands each
representing a different protein. The bands are then blotted onto
a nitrocellulose support membrane. Hybridization of the
immobilized protein present on the bands with a labeled antibody
allows for the visual detection of any protein band specifically
recognized by the labeled antibody.
- ---------------------------------------------------------------------------------------------
</TABLE>

ELISA Test Kits. ELISA test kits are a combination of certain cytokines
and their antibodies and other chemical reagents, and are used to measure the
presence or quantity of a particular bioactive protein in serum, plasma or other
biological sample. In a typical ELISA test kit, an antibody is immobilized or
"bound" on a microtiter well of the kit's test plate. A sample containing
antigen is added by the researcher and allowed to react with the bound antibody.
After the well is washed, a second antibody with a specific enzymatic tag is
added and allowed to react with the bound antigen. After washing away any
remaining free antibody, the researcher adds a substrate which produces a
colored reaction. The amount of color is proportional, and thereby indicates the
amount of antigen present, and can be measured even in minute concentrations,
off a standard curve using common laboratory instruments.

ELISA technology is a valuable tool both in research and diagnostic
applications as it provides a relatively inexpensive, accurate and rapid method
of protein quantitation. Prior to the development of ELISA

26
<PAGE> 27

technologies, proteins were measured using cell-based bioassays, in which the
cytokine level in a sample was estimated by observing the experimental sample's
effect on cultured live cells, relative to a standard known effect. These tests
are highly variable, extremely tedious and time consuming. The Company's ELISA
tests produce results in a few hours, compared to days or even weeks with
bioassay. ELISA kits for human as well as other species commonly investigated in
the laboratory (mouse, rat and monkey) have been developed by the Company to
detect immune proteins in body fluids, such as serum or plasma, and in vitro
test samples, such as tissue culture fluids. Detection of fluctuations in
cytokine levels by ELISA tests whether in an in vitro cell culture experiment of
a new drug or in a patient's serum, provide researchers and scientists with
valuable information in understanding disease progression, therapy or diagnosis.

The Company gains a competitive advantage by including two ELISA test
plates in each package, which are generally sold at a comparable price to the
competitor's kits containing a single test plate. The Company currently offers
60 different ELISA test kits which are used in a broad range of biomedical
research, including, research on cancer, infectious disease, organ
transplantation, AIDS, and research by pharmaceutical or biotechnology companies
intended to lead to the development of specific therapeutic drugs. A typical use
of an ELISA test kit may be where a hospital laboratory tests a human sample
taken from a patient who recently received a transplanted organ. If that test
detects an elevated level of Human IL-2 Receptor, it is a clear sign that
infection is present which may lead to a rejection of the organ by that person's
body. Thus, the information is useful to the physician in diagnosing and
treating the patient. Some of the more common applications of ELISA test kits
are illustrated by the following table:

<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------
TEST KIT CHARACTERISTICS/APPLICATIONS
- ---------------------------------------------------------------------------------------------
<S> <C>
Interleukin-1B IL-1B is a potent activating cytokine which may be identified in
elevated levels in joint fluid of arthritis patients, in
circulation of Crohn's disease, septic shock and graft rejection
patients and in circulation after exercise. Conversely, in vitro
experiments on blood cells from certain cancer patients have shown
decreased levels of this cytokine. Detection of this cytokine in
fluids appears to be important for monitoring numerous immune
disorders.
- ---------------------------------------------------------------------------------------------
Interleukin-6 IL-6 is an important cytokine which regulates the growth and
differentiation of many cells of the immune system. Abnormal
quantities of IL-6 have been associated with several inflammatory
conditions, including septic shock, traumatic tissue injury,
infectious diseases, arthritis and graft rejection. Since
increased levels of IL-6 generally appear before the acute phase
protein response, it has been suggested as an early detection
parameter of inflammatory events.
- ---------------------------------------------------------------------------------------------
Interleukin-12 Recent findings indicate that IL-12 may be suppressed in AIDS
positive patients. It has been suggested that during monitoring
and treatment of this disease, quantitative levels of this
cytokine may provide more information about the onset and
progression of the disease, thereby providing useful information
for therapy strategies.
- ---------------------------------------------------------------------------------------------
</TABLE>

ACQUISITION OF MEDGENIX BUSINESS

The Company has entered into an agreement to acquire certain assets and
assume selected liabilities of the Medgenix Business. Medgenix is located in
Fleurus, Belgium. Fleurus is located in the southern part of Belgium, in the
Walloon region, approximately 60 miles south of Brussels. The Medgenix assets
consist of certain product lines which are similar to those of the Company,
customer accounts, laboratory and animal facilities, real property leasehold
interests and an existing employee base, all of which are used in the Medgenix
Business. The purchase price for the Medgenix Business is $6.9 million, payable
in cash, and the assumption of certain Medgenix liabilities, which liabilities
were approximately $2.0 million at January 31, 1996. The Company plans to fund
the cash portion of the purchase price of the Medgenix Business from a portion
of the net proceeds of this offering and to close the Medgenix Acquisition
concurrently with the closing of this offering. See "Use of Proceeds." In
addition, BioSource has agreed to pay a royalty of three percent (3%) for a
period of five years on the net sales (as defined in the agreement relating to
such royalties) of certain of the products from the Medgenix Business.

27
<PAGE> 28

The Acquisition Agreement provides for a threshold on indemnification such
that no indemnity is payable to BioSource, on the one hand, or to Medgenix and
Nordion, on the other hand, until the aggregate amount due with respect to
losses incurred exceeds $300,000. All amounts in excess of $300,000 are payable
pursuant to the indemnification provisions. Furthermore, the maximum amount
payable by or on behalf of BioSource to either Medgenix or Nordion, or vice
versa, with respect to any claim under the Acquisition Agreement is limited to
$6 million.

Nordion has agreed that for a period of five years from the closing of the
Medgenix Acquisition neither Nordion nor any of its affiliates will engage in an
in vitro diagnostics business which is substantially similar to or in
competition with the products sold by the Medgenix Business. In addition, for a
period of one year from the closing of the Medgenix Acquisition, Nordion has
agreed that neither Nordion nor its affiliates will interfere adversely between
BioSource and its employees, will induce any employee of the Medgenix Business
to work for or supply confidential information to any third person or will
induce any customer, supplier, or other business relation of the Medgenix
Business to cease doing business with BioSource or otherwise interfere with such
relationship.

Medgenix currently manufactures, markets and sells a series of assay test
kits, both radioactive assays and ELISA test kits, as well as a series of
monoclonal and polyclonal antibodies. Medgenix was formed in 1987 and was the
first company in the world to produce a commercial radioimmunoassay for the
measurement of Tumor Necrosis Factor-Alpha. Medgenix currently offers six
radioactive assays and 27 ELISA test kits.

In June 1995, Medgenix introduced an original and novel technique which is
incorporated in its DynaMix product line, and allows an individual to measure
the ability of a certain biological cell type to be stimulated in order to
produce a cytokine, and to simultaneously measure and quantify the amount of
cytokine being produced by that cell. Until now, cytokine production by immune
competent cells has been evaluated following a multistep procedure involving
cell isolation, culture of separated cells in the presence of activators,
followed by measurement of the cytokines in the culture fluid by immunoassay.
This multistep procedure for measuring cytokine production is subject to
artifacts created during isolation of immune cells from blood. Furthermore, it
is time consuming and cannot be automated.

The measurement of cytokine production in whole blood using the DynaMix
immunoassay technology eliminates the problems described above. In addition,
this technology for ex vivo measurement of cytokine production allows for
experiments and approaches which are not possible using traditional
immunoassays. For example, it is known that the specific pattern of cytokine
production is an indicator of relapse in multiple sclerosis ("MS") patients. The
DynaMix assays allow for the tailoring of therapy in individual MS patients by
monitoring the cytokines produced by the immune cells of the blood of MS
patients after the addition of a battery of therapeutic agents.

In addition, the DynaMix technology can be a significant aid in the
discovery of new drugs by pharmaceutical and biotechnology companies. Briefly,
the measurement of cytokine production by whole blood in the presence of
candidate drugs to treat AIDS, cancer, arthritis and autoimmune diseases, among
others, is a more accurate indicator of the drug's effect than experiments on
isolated cells in tissue culture or experiments on animals. Upon consummation of
the Medgenix Acquisition, the Company will acquire the European patent on the
DynaMix technology. A patent is pending in the United States.

28
<PAGE> 29

Medgenix currently targets biomedical research laboratories as well as
certain clinical diagnostic laboratories for selected test kits. Their marketing
efforts utilize direct sales representatives, both in Belgium and through a
series of wholly owned subsidiaries in various countries throughout Europe,
while maintaining distribution primarily from their main location in Fleurus,
Belgium. Medgenix has a strong marketing program with trade show attendance,
medical journal advertisement and an extensive customer list.

BioSource believes that the Medgenix Acquisition will provide the Company
with a number of strategic advantages, which will not only enhance the Company's
existing business but will enable the Company to reverse Medgenix' recent
history of unprofitable operations. Among these advantages are the following:

- In addition to converting a European competitor into an ally, the
Medgenix Acquisition will enable BioSource to incorporate several
new products into its product lines for both the U.S. and European
markets. These products include certain assays, ELISA test kits and
a number of monoclonal and polyclonal antibodies that BioSource does
not currently offer. Moreover, the Company immediately will be able
to expand its product lines by adding Medgenix' DynaMix test system.
The Company also intends to explore the expansion of the present use
of the DynaMix patented technology to certain cytokines and ELISA
test kits that BioSource produces.

- BioSource believes that its own sales force can market Medgenix'
products to the same customer base of research laboratories and
specialized clinical laboratories in the United States that purchase
BioSource's products and that a substantial increase in Medgenix'
sales should result. This belief is based on the Company's
assessment that Medgenix' relatively low sales volume in the United
States is a consequence of Medgenix' current distributor targeting
routine diagnostic laboratories, customers who may be appropriate
for the distributor's other products, but whom the Company believes
are inappropriate for Medgenix' ELISA test kits and antibodies that
are used in research.

- The Medgenix Acquisition will not only permit BioSource to use its
direct sales force for Medgenix' products in the United States, but
to use Medgenix' direct sales forces for BioSource's products in
Europe, particularly in Germany, which has historically accounted
for the largest volume of the Company's international sales, and
France, where the Company believes a substantial market opportunity
exists but has had disappointing sales through distributors. The
greater utilization by BioSource and Medgenix of their direct sales
forces and the corresponding reduction by them of sales through
distributors should also increase the gross margins of the
consolidated Company as the Company recognizes greater revenue from
direct sales.

- The Company intends to manufacture its products at the most
efficient site or sites and thereby reduce costs associated with
transporting the products to customers in the United States and
Europe and improve customer service. The Company plans to
manufacture oligonucleotides which it has historically sold to
European customers through Medgenix' operations and from that
expects to enjoy cost savings and improved margins for this product
line.

- BioSource can concentrate the utilization of available resources.
The Company already perceives a major opportunity for furthering its
operating synergies by utilizing Medgenix' research and development
facilities to enhance its product development. Moreover, the Company
believes that Medgenix' facilities may be more effectively used to
produce antibodies, while the Company's facilities could be used to
make cytokines, thus utilizing the most efficient resources for
certain types of production.

- Management believes that the Company's historic sensitivity to
employee morale and its accepted business strategy of seeking to
create a team spirit, fostering communication between management and
employees regarding business goals and rewarding meritorious
performance will generate the same esprit de corps among Medgenix'
employees as now exists at BioSource, and that this will translate
into greater product quality and enhanced customer service at
Medgenix.

Management's assessments of, and beliefs in, the advantages to the Company
of the Medgenix Acquisition and its plans to realize such advantages, are
forward looking. For a discussion of the risks to the Company involved in the
Medgenix Acquisition, risks that could prevent the Company from realizing any

29
<PAGE> 30

advantages from it or cause the Company to suffer as a result of it, see "Risk
Factors -- Business Acquisition."

The Medgenix Business also includes test kits which are radioimmunoassays
("RIAs"). Sales of RIAs for the year ended October 31, 1995 comprised a
significant portion of Medgenix' sales in Europe and the Company plans to
continue to sell RIAs in Europe. However, because this market is a declining one
in the United States, BioSource may elect not to market these particular
products in the United States and either discontinue their use or utilize a
distributor on an OEM basis to supply these products in the United States. The
Company believes that the complete loss of this product line in the United
States would not have a material impact on the Medgenix Business.

BioSource anticipates that the acquisition of the Medgenix Business will
require a significant amount of financial and management resources due to the
travel between California and Europe which will be required of certain members
of the management team. A substantial amount of management time, including that
of James H. Chamberlain, BioSource's Chairman of the Board, President and Chief
Executive Officer, is expected to be required in the early stages following the
Medgenix Acquisition. In addition, the Company expects to incur significant
expense initially as a result of the consolidation of the research and
development activities of the two companies.

RESEARCH AND DEVELOPMENT

General

The Company funds its own research and development costs. BioSource has
historically focused its research and development on the creation of new and
unique ELISA test kits. The Company spent $721,902 and $1.1 million on research
and development during 1994 and 1995, respectively.

Commencing in 1994, BioSource began to dramatically expand its research and
development efforts, and to focus its efforts in the area of molecular biology.
The Company's molecular biology group is now focusing its efforts on cloning and
expressing rat cytokine genes. This effort involves the use of recombinant DNA
technology to produce certain proteins which will be unique internally produced
cytokines. In addition, the Company has begun to develop a group of new products
which will build upon its current antibody product line. This includes, but is
not limited to, labeled anti-cytokine antibodies for intracellular staining
(flow cytometry) and antibody coupled magnetic beads for cell separation.

New Product Development

The Company intends to use up to $1.0 million of the proceeds of this
offering for the research and development of products in the area of molecular
diagnostics. Management believes that the Company is well-positioned to take
advantage of recent advances in genetic sequencing and molecular biology which
are leading to novel methods for rapidly diagnosing infectious and human genetic
diseases.

BioSource plans to target the oncology market by providing tests for cancer
markers using several technologies, including gene amplification, mutation
detection and fluorescent in situ hybridization. This effort will require the
expertise of individuals in the ELISA development and molecular biology
departments, as well as requiring additional staffing and equipment in both
these areas. The Company hopes to create assay kits which will initially be sold
to research laboratories which combine quantitative PCR and ELISA technologies
to detect various targets in immunocompromised patients and specific nucleic
acid targets in cancer patients. If clinical utility is established, BioSource
intends to seek FDA approval to sell these kits as diagnostic products.

Specifically, the Company plans to develop a test that combines two
technologies, quantitative PCR and ELISA technologies, to detect cancer cells in
humans that have spread to the bone marrow. Initial research and development
efforts at BioSource, which should last for approximately six months, will focus
on the optimization of detection of certain markers in samples which will serve
as surrogates of bone marrow aspirates from breast cancer patients. Once an
assay has been fully optimized, the assay will be evaluated by various medical
centers over a period of approximately four months for its efficacy on true bone
marrow aspirates. Once efficacy on these bone marrow samples has been
established, BioSource will seek pre-market approval from the FDA to engage in
clinical studies to validate the use of the assay. The clinical studies will be
conducted in a number of research centers on clinical samples obtained from a
large number of cancer

30
<PAGE> 31

patients. The clinical studies will occur over a period of approximately six
months. The data generated from these clinical studies will then be submitted to
the FDA to determine if the assay can be marketed for in vitro diagnostic use.
Typically, the FDA reviews such applications, and if appropriate, issues
marketing approval for such products in a three to six month period.

SALES AND MARKETING

The Company's sales force hold biological sciences undergraduate degrees
and undergo training in the nature and application of BioSource's products and
proven selling techniques. BioSource believes that by investing in the
scientific training of its sales force, it is able to determine the needs of
researchers and scientists in the biomedical community. Its sales force is used
not only as a traditional marketing branch of the Company, but also to provide
valuable feedback for the Company's product development.

The principal markets for BioSource products are in the United States,
Japan and Western Europe. Domestic sales accounted for approximately 75% and 73%
of total revenue for the years ended December 31, 1994 and 1995, respectively.
International sales accounted for the balance of total revenues during these
periods. Because of Medgenix' stronger position in Europe, the acquisition of
the Medgenix Business is expected to result in an increase in the Company's
consolidated revenue in future periods from international sales. See "Risk
Factors -- Business Acquisition" and "Risk Factors -- International Sales."
Domestic sales are achieved through the use of a direct sales force
strategically located in major metropolitan areas in the United States,
advertising in various scientific trade journals and catalog distribution to all
current and potential customers. The use of a direct sales force also provides
the Company with an opportunity to discuss directly with researchers and
scientists new developments and trends in the industry. The international
markets are serviced through the use of highly respected international
distributors which specifically target the foreign medical market, advertising
and catalog distribution.

Marketing. BioSource has a comprehensive and integrated marketing program
which utilizes advertisements in key journals, direct mail, trade show exhibits,
press releases, and other forms of advertisement to provide exposure to
potential end users of BioSource products. Currently, the Company is advertising
in scientific journals and through direct mail campaigns.

The Company's journal advertisements emphasize BioSource's innovative
products and attempt to depict pictorially its competitive strengths. For
example, the "think twice" advertisements focus on innovative ELISA test kits
and illustrate the fact that each BioSource kit gives double the number of
assays than competitor kits at about the same price, while providing superior
kit specifications. Other BioSource advertisements emphasize new, internally
developed products which would be of interest to a large number of end users.

The Company generally uses direct mail to support a new product launch. The
direct mail campaign is coordinated with advertisement programs in an effort to
achieve maximum product exposure. The Company's direct mail literature is
targeted to specific end user groups believed to have the highest potential for
immediate purchase of the specified product.

In 1996, BioSource expects to appear at several major trade shows and local
institutional shows. The Company selects trade shows in which to appear on the
basis of the scientific discipline sponsoring the show, expected attendance and
historical performance of a show in delivering quality sales leads.

Sales. BioSource effects sales to end users domestically through a direct
sales force and internationally through a network of distributors. Domestic
sales are made through several field territories with a direct sales
representative located in the east, midwest and western parts of the United
States. Each representative is responsible for the maintenance of existing
accounts as well as the generation of new business. Representatives are paid a
base salary and commissions. The commissions are based upon sales growth over
previous years' sales levels.

The Company requires that all field representatives have a degree in a
biological science, and either molecular or immunological laboratory research
experience. This laboratory experience allows them to understand end user
applications and match BioSource product benefits to specific needs. All
representatives

31
<PAGE> 32

are required to attend professional selling skills courses and, in most cases,
are given supplemental selling skills training each year at the Company's
expense. The Company monitors sales performance on a weekly basis in an effort
to ensure the quality and quantity of customer contacts.

BioSource's network of international distributors covers 25 countries.
Distributors can be exclusive or non-exclusive, but BioSource generally grants
exclusive distribution rights only where the distributor maintains direct field
representatives proportionate to the potential for BioSource product sales in a
defined geographical area, and is subject to mutually acceptable annual sales
goals. All BioSource distributors are required to limit their primary sales
focus to the biomedical research market. BioSource employs an international
sales manager who is responsible for all aspects of international sales,
including the addition of new distributors, the negotiation of contracts,
establishing sales goals, determining transfer pricing levels, and in-field
visits for new product training and support of marketing programs. The Company
offers all of its distributors annual training to enhance their knowledge of
product applications, solicit requests for new products and ultimately to
increase sales.

MANUFACTURING

The Company's reagent products and ELISA test kits are manufactured by
technicians in laboratories housed in its 27,000 square foot facility located in
Camarillo, California, approximately 50 miles northwest of Los Angeles. The
Company's oligonucleotides are manufactured at its Keystone subsidiary in Menlo
Park, California, approximately 30 miles south of San Francisco. The Company
recently completed an interior renovation to its Camarillo facility in order to
use more efficiently 10,000 square feet of existing space. The facility
currently has three labs, including a molecular biology lab, a protein
purification lab, and an assay development and manufacturing lab, and ELISA
development and manufacturing space and cold storage rooms sufficient to
accommodate the Company's current and projected needs.

Labeling, packaging, and shipping is carried out independently at each
facility. The Company's packaging components are purchased from outside
suppliers, and are custom designed by the Company. The Company believes there
are numerous available suppliers for its packaging components. As part of the
renovation, the Company plans to increase packaging capacity at its Camarillo
facility.

AVAILABILITY OF RAW MATERIALS

The principal raw materials for the oligonucleotides manufactured by the
Company are the nucleotides that comprise DNA which are available from numerous
sources. The Company's oligonucleotides are used to make genes. Genes are then
used to make some cytokines, which are in turn used to make antibodies. The
Company also purchases some cytokines and antibodies. ELISA test kits are
manufactured from antibodies, proteins, enzymes and various buffers, and utilize
plastic test well plates. The Company develops most of its cell lines
internally, and obtains licenses to various cell lines that are necessary to the
manufacture of key components of its product lines, on an as needed basis. The
Company believes that it maintains adequate supplies of materials on hand to
allow it to continue to manufacture products and meet customer demand, and that
those materials that it does not produce internally are readily available from
multiple sources.

COMPETITION

The Company is engaged in a segment of the health care products industry
that is highly competitive. The Company's primary competitors include major
pharmaceutical, chemical and biotechnology companies, such as Endogen, Inc.,
Techne Corporation, Genzyme Corporation, Southern Biotechnology, Jackson Labs,
Dako Corporation and Genosys Biotechnologies. Many of its competitors have been
involved in the health care industry significantly longer than BioSource and
benefit from greater name recognition. In addition, many of these companies have
greater resources to devote to research and development, sales and marketing and
engage in significant price cutting measures to achieve leadership in their
field. BioSource believes that by offering a very broad and complete product
line which enables the end user to obtain many of its product needs from one
source it gains a competitive advantage. In addition, BioSource competes by
producing high quality products with exacting capabilities at reasonable prices,
and by maintaining an aggressive marketing and sales effort. BioSource believes
that the biomedical research market is highly fragmented, and that neither
BioSource nor any of its competitors has a dominant share of any of the market
segments. Upon

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<PAGE> 33

consummation of the Medgenix Acquisition, BioSource anticipates that it will
achieve greater name recognition in Europe, will increase its marketing and
sales efforts and will obtain a larger share of the market in the European
community. See " --Acquisition of Medgenix Business," "Risk Factors -- Business
Acquisition" and "Risk Factors -- Competition."

CUSTOMERS

The Company has over 1,700 customers worldwide exclusive of the customers
of its distributors. No single customer accounted for 10% or more of the
Company's total revenue for the year ended December 31, 1995. The Company's
customers include:

<TABLE>
<CAPTION>
GOVERNMENT
PHARMACEUTICAL BIOTECHNOLOGY UNIVERSITIES INSTITUTIONS
- ---------------------- ---------------- ------------------------- ----------------------
<S> <C> <C> <C>
Bristol Meyers Squibb Amgen Duke University Centers for Disease
Pfizer Inc. Cell Genesys Johns Hopkins University Control
Schering-Plough Chiron University of Alabama FDA
Research Institute Genelabs University of Miami National Cancer
Smith Kline Beecham Technology University of Texas MD Institute
Upjohn Company Neurocrine Anderson National Institutes of
Biosciences Health
VA Medical Centers
</TABLE>

PATENTS AND TRADEMARKS

The Company does not own any patents and does not believe that patent
protection is available for any of its processes. The Company licenses a number
of products from companies that are incorporated into certain BioSource products
resulting in BioSource receiving quasi or derivative patent protection therefor.
Upon consummation of the Medgenix Acquisition, BioSource will acquire certain
United States and European Patents including those on the DynaMix product line.
See "-- Acquisition of Medgenix Business."

The Company claims "TAGOImmunologicals," "CYTOscreen," and "PRIMESCREEN" as
trademarks, although the Company believes such trademarks are of limited
importance to its business. The Company has generally sought to protect its
interests by treating its technologies and know how as trade secrets and by
requiring all employees to execute invention and assignment agreements with the
Company, including confidentiality provisions. The Company believes that its
processes can only be understood from direct observation and are not
ascertainable by examination of the end product. However, there can be no
assurance that others will not independently develop the same or similar
information, obtain unauthorized access to the Company's proprietary information
or misuse information to which the Company has granted access.

GOVERNMENT REGULATION

Approval by the FDA is not required for the sale of any of the Company's
products because the products are marketed and sold for research use only.
Therefore, the Company's research products are not currently required to comply
with the lengthy FDA approval process associated with diagnostics or
therapeutics. The Company is subject to governmental regulations under the
Occupational Safety and Health Act, the Environmental Protection Act, the Toxic
Substances Control Act, and other similar laws of general application, to all of
which the Company believes itself to be in material compliance.

In the event the Company develops products for the diagnostic market, it
may be required to obtain FDA approval prior to selling them. Such approval, if
required, would be time consuming and costly. In such event, the Company would
also be subject to the FDA Good Manufacturing Practices which include testing,
control and documentation requirements enforced by periodic site inspections.
See "Risk Factors -- New Product Development; Government Regulation."

EMPLOYEES

As of April 30, 1996, the Company employed 64 individuals, of which 61 are
full-time employees. Nine of the Company's employees at that date held Ph.Ds. At
April 30, 1996, Medgenix employed 89 individuals in the Medgenix Business.

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<PAGE> 34

DESCRIPTION OF PROPERTIES

The Company's executive offices and manufacturing facilities, consisting of
approximately 27,000 square feet located on 63,162 square feet of land, are
located in Camarillo, California. The Company purchased this property on March
28, 1996 and owns it subject to a first trust deed mortgage (the "First
Mortgage") which was made by the lender pursuant to the Small Business
Administration's Loan Guarantee Program. At the date of purchase, the First
Mortgage had an outstanding balance of $745,000 and is due on April 1, 2006. The
principal amount of the loan is being amortized over twenty years. Pursuant to
the First Mortgage, the Company is obligated to make monthly payments of $6,895,
which includes interest at 9.4% per annum. Yield maintenance charges will be
assessed on any prepayment of the principal amount of the loan which results in
a loss to the lender due to a decrease in the interest rate. The balance due at
maturity, assuming no prepayments by the Company, will be $535,178.

The property is subject to a second trust deed loan (the "Second Mortgage")
with the California Statewide Development Corp. with an outstanding principal
balance of $616,000 as of the date of sale of the debenture which is scheduled
for funding by June 1, 1996. The Second Mortgage is subject to a fixed rate of
approximately 7.75% per annum, payable and amortized over a period of 20 years,
due approximately June 1, 2016, with estimated monthly payments of principal and
interest of $5,057.

As of May 31, 1996 there is a bridge loan in the amount of $596,000 payable
to the holder of the First Mortgage, subject to a fixed rate of 9.75%. The
bridge loan will be funded upon the sale of the debenture underlying the Second
Mortgage by the California Statewide Certified Development Corporation.

Payments by the Company under the First Mortgage and the Second Mortgage
are unconditionally guaranteed by James H. Chamberlain, Chairman of the Board of
the Company.

The Company recently renovated the Camarillo facilities to provide for
additional ELISA development and manufacturing, additional office space and
additional refrigerated storage space for inventory.

The Company also leases facilities in Menlo Park, California which consist
of approximately 1,491 square feet of laboratory space. The lease commenced on
May 1, 1993 and is a 5 year lease which expires on April 30, 1998. The lease
provides for monthly rental payments of approximately $1,148.

The Company believes that its facilities are adequately covered by
insurance and, when renovated, will be adequate for its reasonably foreseeable
needs.

LEGAL PROCEEDINGS

The Company is not involved in any material legal proceedings.

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<PAGE> 35

MANAGEMENT

DIRECTORS, EXECUTIVE OFFICERS AND KEY EMPLOYEES

The current directors, executive officers and key employees of the Company
are as follows:

<TABLE>
<CAPTION>
NAME AGE POSITION
- ------------------------------------------ --- ------------------------------------------
<S> <C> <C>
James H. Chamberlain...................... 48 Chairman of the Board, President and Chief
Executive Officer
Anna M. Anderson.......................... 40 Chief Financial Officer, Executive Vice
President -- Finance
Gus E. Davis.............................. 48 Chief Operating Officer, Executive Vice
President -- Sales and Marketing
Leonard M. Hendrickson*................... 48 Director
David J. Moffa, Ph.D.*.................... 53 Director
John R. Overturf, Jr...................... 35 Director
Robert D. Weist........................... 56 Director
Key Employees
Madelyn Baran, Ph.D. ..................... 45 Vice President -- Business Development
Richard Buford............................ 48 Vice President -- Human Resources
Cirilo D. Cabradilla, Jr., Ph.D. ......... 48 President -- Keystone Subsidiary
</TABLE>

- ---------------
* Member of the Compensation and Audit Committees.

JAMES H. CHAMBERLAIN has served as Director, President and Chief Executive
Officer of the Company and its predecessor, BioSource Industries, Inc., since it
was founded in October 1989, and was elected as its Chairman of the Board in
November 1993. Previously, Mr. Chamberlain was Manager for Business Development
for Amgen, Inc., where he started and managed the Amgen Biologicals Division.
Mr. Chamberlain has held various executive positions with Browning Ferris
Industries and Amersham Corporation, a biomedical company, and was a research
biochemist for Wm. H. Rorer Pharmaceutical, a major pharmaceutical company. He
received his Bachelor of Arts degree from West Virginia University and studied
biochemistry at the University of Pittsburgh.

ANNA M. ANDERSON became Executive Vice President -- Finance and Chief
Financial Officer of the Company in 1994 and has served as corporate controller
and Chief Accounting Officer of the Company and its predecessor, BioSource
Industries, Inc., since June 1991. Prior to that time, since January 1984, Ms.
Anderson was employed in financial and accounting positions with El Camino
Management Company, Mulford and Tignino Accountancy Corporation, Brickman &
Brickman, Certified Public Accountants, and Temkin, Zisken, Kahn and Matzner,
Certified Public Accountants. Ms. Anderson is a Certified Public Accountant and
holds a Bachelor of Science degree in Business Administration from California
State University, Northridge.

GUS E. DAVIS became Executive Vice President -- Sales and Marketing and
Chief Operating Officer of the Company in June 1995. From February 1994 until
June 1995, Mr. Davis served as Vice President of Sales and Marketing of the
Company. Prior to that time, since February 1993, Mr. Davis was employed as Vice
President of Sales and Marketing at Genosis BioTechnology, a company engaged in
the manufacture of oligonucleotides. From January 1983 to January 1993, Mr.
Davis was employed as the Midwestern Area Manager for Pharmacia BioTechnology, a
company involved in the sale of reagents and capital equipment used to purify
samples. Mr. Davis received his Bachelor of Science and Masters degree in
Biology and Chemistry from Sam Houston State University.

LEONARD M. HENDRICKSON has been a Director of the Company since October
1993. Mr. Hendrickson is the President of Isotope Products Laboratories, a
privately held company, a position he has held since February 1992. From
February 1990 to January 1992, Mr. Hendrickson served as the principal
consultant for Microchemics, a marketing and business development consulting
firm which he founded. Prior to that time,

35
<PAGE> 36

Mr. Hendrickson served as the Director of Marketing for Scicor, a diagnostics
laboratory in Indianapolis, Indiana, and held various executive positions with
Amersham Corporation. Mr. Hendrickson has also held positions with Marion
Laboratories, a pharmaceutical company, and Standard Oil Company. Mr.
Hendrickson holds a Bachelor of Science degree from the University of
Pennsylvania and a Masters in Business Administration from American University
in Washington D.C.

DAVID J. MOFFA, Ph.D., has been a Director of the Company since April 1995.
Dr. Moffa serves: as the Regional Director and as special projects director for
Lab Corporation of America, Inc. (Fairmont, WV), positions he has held since
1982 and 1984, respectively; as Director of Medical Arts Lab/RBL, a position he
has held since 1985; and as Director of Lab Corporation of America, Inc.
(Altoona, PA), a position he has held since 1990. Dr. Moffa also serves as an
advisor and consultant to various diagnostic, scientific and health care
facilities, and is an owner and developer of GM Realty and Moffa Properties.
Prior to serving in his current positions, Dr. Moffa has served as a Director
and General Manager of BioMedical Reference and Roche BioMedical Labs, as
President, Chief Executive Officer and a Director of BioPreps Laboratories,
Inc., as Assistant Professor of Medical Biochemistry and Director of Dental
Biochemistry Programs at the West Virginia University School of Medicine, as NIH
Post Doctoral Fellow and Instructor in Medical Biochemistry as well as a
Graduate Research Assistant at the West Virginia University School of Medicine.
Dr. Moffa also serves on a number of committees and boards of directors of
various privately held companies and governmental offices. Dr. Moffa has
completed a post doctoral fellowship in Clinical Biochemistry at the West
Virginia University National Institutes of Health, holds a Ph.D. in Medical
Biochemistry from the West Virginia University School of Medicine, a Masters of
Science degree in Biochemistry from West Virginia University and a Bachelor of
Arts degree in Pre-Medicine from West Virginia University.

JOHN R. OVERTURF, JR. has been a Director of the Company since September
1993. Mr. Overturf serves: as the President of R.O.I., Inc., a private
investment company, a position he has held since July 1993; and as Vice
President of The Rockies Fund, Inc., a closed-end stock market fund, a position
he has held since September 1993. From June 1984 until February 1992, Mr.
Overturf served as Vice President of Colorado National Bank. Mr. Overturf holds
a Bachelor of Science degree in Finance from the University of Northern
Colorado.

ROBERT D. WEIST became a Director of the Company, effective April 5, 1996.
Mr. Weist has been President of Weist Associates (a management consulting firm)
since April 1992. From January 1986 through April 1992, Mr. Weist was a
consultant to and Senior Vice President, Administration, General Counsel and
Secretary of Amgen, Inc., having served as Vice President, General Counsel and
Secretary from March 1982 through January 1986. Mr. Weist holds a Juris Doctor
degree from New York University and a Masters in Business Administration from
the University of Chicago.

KEY EMPLOYEES

The Company also considers the following individuals to be key to its
operations.

MADELYN BARAN, Ph.D. has been Vice President of Business Development of the
Company since October 1994 and has also served as Vice President of Assay
Development since April 1993. Prior to that time, since January 1992, Dr. Baran
was a consultant to Orion, a European health care concern, where she managed the
research and development and quality control departments of Photest Diagnostics,
Inc., an in vitro diagnostics company, which was acquired by Orion in 1992. From
December 1988 to December 1991, Dr. Baran was employed as Vice President of
Research and Development of Photest Diagnostics, a company involved in the
manufacture of chemistry tests and immunoassays. Dr. Baran has also held various
research and development and technology management positions at BioRad
Laboratories and Becton Dickinson Company. Dr. Baran received a Bachelors of
Arts in Biology from Emmanual College and a Ph.D. in genetics from Cornell
University.

RICHARD BUFORD became Vice President of Human Resources of the Company in
February 1993. From 1989 to December 1992, Mr. Buford served as Vice President
of Operations of Office Mart. Mr. Buford received a Bachelors of Arts and a
Masters degree in English from University of California at Santa Barbara.

36
<PAGE> 37

CIRILO D. CABRADILLA, JR., Ph.D. became President of the Keystone
subsidiary in November 1995. From 1992 to 1995, Mr. Cabradilla served as
President of Keystone. Prior to that time, from 1988 to 1992, Mr. Cabradilla was
Vice President, Product Development, of Vasocor, a pharmaceutical company. Mr.
Cabradilla received a Bachelor of Science and a Ph.D. degree in Biochemistry
from the University of California at Davis.

SCIENTIFIC ADVISORY BOARD

The Company has established a group of scientists and other physicians to
provide advice with respect to its research and development programs and new
technological advances. All members of the Scientific Advisory Board are
employed by employers other than the Company and may have commitments to or
consulting or advisory agreements with other entities that may limit their
availability to the Company. The members of the Scientific Advisory Board meet
twice a year. Each member receives $500 per meeting and an option to purchase
10,000 shares of common stock upon appointment to the Scientific Advisory Board.

VINAY KUMAR, M.D. Dr. Kumar is associated with the University of Texas,
Southwestern Medical School, where he is Professor of Pathology.

KENNETH LANDRETH, Ph.D. Dr. Landreth is associated with West Virginia
University, where he is Associate Professor of Immunology and Pediatrics.

RICHARD SCHEUERMAN, Ph.D. Dr. Scheuerman is associated with the University
of Texas, Southwestern Medical School where he is Associate Professor of
Pathology.

EXECUTIVE COMPENSATION

The following table sets forth both cash and noncash compensation paid or
accrued by the Company during 1993, 1994 and 1995 with respect to James H.
Chamberlain, Chief Executive Officer and President of the Company, the only
executive officer whose salary and bonus exceeded $100,000 during 1995, Gus E.
Davis, Chief Operating Officer and Executive Vice President, and Anna M.
Anderson, Chief Financial Officer (together, the "Named Executive Officers").

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
------------
ANNUAL NUMBER OF
COMPENSATION SECURITIES
YEAR ENDED ------------------ UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION DECEMBER 31, SALARY BONUS OPTIONS(1) COMPENSATION
- --------------------------------------- ------------ -------- ------- ------------ ------------
<S> <C> <C> <C> <C> <C>
James H. Chamberlain................... 1995 $129,000 $15,000 100,000 $ 720(2)
Chairman of the Board, 1994 110,000 47,518 -- 720(2)
Chief Executive Officer 1993 85,000 -- 100,000 720(2)
and President
Gus E. Davis........................... 1995 $ 81,000 $13,000 55,000 $3,600(3)
Chief Operating Officer 1994 64,000 -- 10,000 3,300(3)
and Executive Vice 1993 -- -- -- --
President
Anna M. Anderson....................... 1995 $ 80,000 $ 9,000 25,000 --
Chief Financial Officer 1994 69,000 -- -- --
1993 55,000 -- 50,000 --
</TABLE>

- ---------------
(1) See "Stock Option Grants," below.

(2) Consists of country club membership dues paid by the Company.

(3) Consists of a car allowance paid by the Company.

37
<PAGE> 38

STOCK OPTION GRANTS

The following table sets forth information regarding stock options granted
in 1995 to the Named Executive Officers.

OPTION GRANTS IN LAST FISCAL YEAR

<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
-------------------------------------------------------------
PERCENT OF
NUMBER OF TOTAL
SECURITIES OPTIONS GRANTED
UNDERLYING TO EXERCISE OR
OPTIONS EMPLOYEES IN BASE PRICE EXPIRATION
NAME GRANTED(1) FISCAL YEAR(2) ($/SH.)(3) DATE
- -------------------------------------------- ---------- --------------- ----------- ----------
<S> <C> <C> <C> <C>
James H. Chamberlain,....................... 100,000 18.6% $ 1.50 1/23/05
Chairman of the Board, Chief Executive
Officer and President
Gus E. Davis................................ 30,000 10.2% $ 1.688 5/31/05
Chief Operating Officer and Executive 25,000 1.50 1/23/05
Vice President
Anna M. Anderson............................ 25,000 4.6% $ 1.50 1/23/05
Chief Financial Officer
</TABLE>

- ---------------
(1) Options granted in 1995 are fully vested upon grant, except for the grant of
25,000 incentive stock options to Gus Davis which vest over a four year
period. The options were granted for a term of ten years.

(2) Options covering an aggregate of 539,000 shares were granted to employees of
the Company and its subsidiaries during the year ended December 31, 1995.

(3) The exercise price and the tax withholding obligations related to exercise
may be paid by delivery of already owned shares, subject to certain
conditions.

STOCK OPTIONS

The following table summarizes information with respect to the number of
shares of Common Stock underlying stock options held by the Named Executive
Officers at December 31, 1995 and the value of unexercised options at December
31, 1995 based upon the closing price of the Common Stock on the Nasdaq Small
Cap Market on December 29, 1995 ($5.6875 per share) less the exercise price
thereof. None of the Named Executive Officers exercised any options during 1995.

AGGREGATED YEAR-END OPTION VALUES

<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT IN-THE-MONEY OPTIONS AT
DECEMBER 31, 1995 DECEMBER 31, 1995
----------------------------- -----------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ------------------------------------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
James H. Chamberlain(1).................... 212,500 -- $ 801,468 $ --
Chairman of the Board, Chief Executive
Officer and President
Gus E. Davis............................... 32,708 32,292 $ 131,462 $ 135,566
Chief Operating Officer and Executive
Vice President
Anna M. Anderson........................... 67,708 19,792 $ 284,423 $ 72,983
Chief Financial Officer
</TABLE>

- ---------------
(1) Since December 31, 1995, an option to purchase 137,500 shares of Common
Stock was granted at an exercise price of $5.25 per share to Mr.
Chamberlain.

38
<PAGE> 39

DIRECTOR COMPENSATION

Directors are elected annually to serve until the next annual meeting of
stockholders and until their successors are elected and qualified. Nonemployee
directors of the Company currently are paid $1,000 for each Board meeting
attended. The Company pays all out-of-pocket fees of attendance. In addition,
non-employee directors have received an annual grant of 10,000 non-statutory
stock options under the Company's 1993 Stock Incentive Plan, exercisable at the
fair market value of the Company's Common Stock on the date of grant, and which
fully vest on the date of grant. Pursuant to an amendment to the 1993 Plan
adopted by the Company's Board of Directors on April 5, 1996, after 1996, such
annual grants will be reduced to 4,000 non-statutory options.

STOCK INCENTIVE PLAN

In addition to the 1993 Stock Incentive Plan (the "1993 Plan"), the Company
has granted non-statutory stock options outside of the 1993 Plan to purchase an
aggregate of 472,500 shares of the Company's Common Stock.

The 1993 Plan provides for the issuance of options and stock purchase
rights (together, "Rights") to employees, officers and, under certain
circumstances, directors of the Company. Options granted under the 1993 Plan may
be either Incentive Stock Options or Non-Qualified Stock Options. The 1993 Plan
imposes no limit on the number of officers and other key employees to whom
awards may be made. At May 30, 1996, approximately 65 persons were eligible to
receive Rights under the 1993 Plan. An aggregate of 1,500,000 shares of the
Company's Common Stock have been reserved for issuance under the 1993 Plan. On
April 5, 1996, the Board of Directors of the Company adopted an amendment to the
1993 Plan increasing the number of shares of Common Stock reserved for issuance
thereunder from 750,000 shares to 1,500,000 shares. The amendment requires the
approval of the Company's stockholders which will be sought by the Company at
its 1996 Annual Meeting of Stockholders to be held in July 1996. The
exercisability of all options granted pursuant to the 1993 Plan, as amended, is
conditioned upon the receipt of such stockholder approval. At May 30, 1996,
633,959 options were outstanding under the 1993 Plan, 68,975 shares had been
issued upon exercise of options granted under the 1993 Plan and 472,500 options
were outstanding outside of the 1993 Plan and the Predecessor Plan.

STOCK PURCHASE PLAN

The BioSource Employee Stock Purchase Plan (the "Employee Purchase Plan")
was adopted by the Company's Board of Directors on April 7, 1995. The Employee
Purchase Plan covers an aggregate of 300,000 shares of the Company's Common
Stock, which will be shares purchased in the open market. Such shares may be
acquired by participants through quarterly offerings, as determined by the Board
in its discretion. All full-time employees of the Company or any of its
subsidiaries who are at least of the legal age of majority in their state of
residence, and who are not executive officers of the Company, shall be eligible
to participate in the Employee Purchase Plan for so long as they remain employed
by the Company or any of its subsidiaries.

All contributions by participating employees are by payroll deduction.
Payroll deductions may not be less than twenty dollars ($20.00) per individual
per pay period. There is no maximum limitation on the amount of payroll
deductions for any participating employee. Payroll deductions must be in whole
dollar amounts only and once commenced shall remain in effect for a period of at
least twelve (12) months absent a showing of special circumstances which, in the
opinion of the Company, shall warrant a change in the deduction authorization.
Non-participating employees who are eligible or become eligible may execute
payroll deduction authorizations at any time. Participating employee
contributions shall be remitted quarterly to the Custodian appointed by the
Company to act as financial agent (the "Custodian"). A participating employee
may withdraw from participation in the Employee Purchase Plan at any time by
signing a withdrawal notice.

The Company may, at the discretion of the Compensation Committee of the
Board of Directors, contribute to the Employee Purchase Plan and deposit with
the Custodian with respect to each participating employee, immediately prior to
the quarterly purchase of the shares, an amount equal to 50 percent of the
participating employee's quarterly contribution, up to four percent of the
participating employee's Base

39
<PAGE> 40

Compensation. The participating employee's "Base Compensation" means the
participating employee's salary or regular straight time earnings excluding
payments for overtime, bonuses, incentive compensation and other special
payments. Such Company contributions when made shall be applied to the quarterly
purchase of shares of the Company's Common Stock pursuant to the provisions of
the Employee Purchase Plan for allocation to each participating employee.

Upon remittance of the participating employees' contributions to the
Custodian by the Company, the funds are placed in an interest bearing account
entitled "BioSource International, Inc. Employee Stock Purchase Plan." The
interest earned on funds deposited into this account with the Custodian are used
to pay the charges of the Custodian and all costs of maintaining records and
executing transfers. To the extent that the Custodian's charges and expenses of
administering the Employee Purchase Plan exceed the interest earned on the
participating employee's contributions deposited with the Custodian, the Company
pays the expenses of the Employee Purchase Plan.

Before the close of business on the third business day following the public
announcement of the Company's quarterly earnings, the Company will remit to the
Custodian the total of all unremitted deductions and the Company contributions
to be made under the Employee Purchase Plan with respect to the previous
quarter. On behalf of each participating employee, the Custodian applies the
funds contributed by such employee and the funds contributed by the Company on
behalf of such employee, separately, to purchase that number of full shares of
the Company's Common Stock that may be purchased through open market purchases
on the Nasdaq National Market at prevailing market prices. Any funds remaining
with the Custodian after purchase of the maximum number of full shares which can
be purchased on behalf of such employee out of the remittance, are, to the
extent such funds were contributed by the employee, placed in an interest
bearing account and added to the remittance for the next calendar quarter to be
used to purchase shares on behalf of such employee, and, to the extent such
funds were contributed by the Company, returned to the Company or retained for
future share purchases. Purchases will be made in the name of the Custodian for
the account of the BioSource International, Inc. Employee Stock Purchase Plan.

A participating employee shall have a fully vested interest in the shares
purchased using funds deducted from the employee's salary immediately upon the
purchase thereof. The participating employee has the right to vote his or her
shares through proxy with the Custodian, withdraw the stock from the plan or
direct the Custodian to sell the shares subject to the requirements described
below.

Shares of stock purchased with funds contributed by the Company are
"unvested" for a period of two years from the date of purchase of such shares by
the Custodian. "Unvested" stock means stock which the participating employee has
voting, dividend and distribution rights to, however, the participating employee
may not sell or withdraw the stock from the plan until the stock becomes vested.

EMPLOYMENT AGREEMENT

Effective as of January 2, 1996, James Chamberlain entered into an
employment agreement with the Company which superseded Mr. Chamberlain's
existing Employment Agreement dated January 31, 1995. The term of the Employment
Agreement is three years. Pursuant to the terms of the Employment Agreement, Mr.
Chamberlain is to be paid an annual salary of $144,000, $154,000 and $164,000
for each of 1996, 1997 and 1998, respectively, an annual bonus determined on the
basis of the Company's existing management incentive plan which is limited to
$75,000, $85,000 and $100,000 for each of 1996, 1997 and 1998, respectively, and
is to receive certain additional benefits.

In the event there is a "change of control" of the Company, Mr. Chamberlain
may terminate his employment agreement, in which case, the Company is obligated
to continue to pay Mr. Chamberlain his then-current base salary for a period of
12 months following the effective date of such termination. A "change of
control" includes (i) the acquisition by any person or entity of shares of
capital stock of the Company entitled to exercise 35% or more of the total
voting power of the Company, (ii) the execution by the Company of an agreement
to sell or otherwise transfer all or substantially all of its assets or the
execution by the Company of an agreement to merge, consolidate or reorganize
with any other corporation or entity, which results in less than 75% of the
total voting power represented by the capital stock or other equity interests of

40
<PAGE> 41

the corporation or entity to which the Company's assets are sold or transferred
or surviving such merger, consolidation or reorganization being held by the
persons and entities who were holders of common stock of the Company on January
1, 1996, (iii) the issuance by the Company, otherwise than on a pro rata basis,
of additional shares of capital stock representing (after giving effect to such
issuance) more than 35% of the total voting power of the Company, (iv) or if the
persons who were the directors of the Company as of January 1, 1996 cease to
comprise a majority of the Board of Directors of the Company.

LIMITATION OF LIABILITY AND INDEMNIFICATION MATTERS

Article Eight of the Company's Certificate of Incorporation and Article
Five of its Bylaws provide for the indemnification by the Company of each
director, officer and employee of the Company to the fullest extent permitted by
the Delaware General Corporation Law, as the same exists or may hereafter be
amended. Section 145 of the Delaware General Corporation Law provides in
relevant part that a corporation may indemnify any person who was or is a party
or is threatened to be made a party to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the corporation) by
reason of the fact that such person is or was a director, officer, employee or
agent of the corporation, or is or was serving at the request of the corporation
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by such person in connection with such action, suit or proceeding if
such person acted in good faith and in a manner such person reasonably believed
to be in or not opposed to the best interests of the corporation, and, with
respect to any criminal action or proceeding, had no reasonable cause to believe
such person's conduct was unlawful.

In addition, Section 145 provides that a corporation may indemnify any
person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action or suit by or in the right of the
corporation to procure a judgment in its favor by reason of the fact that such
person is or was a director, officer, employee or agent of the corporation, or
is or was serving at the request of the corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise against expenses (including attorneys' fees) actually and
reasonably incurred by such person in connection with the defense or settlement
of such action or suit if such person acted in good faith and in a manner such
person reasonably believed to be in or not opposed to the best interests of the
corporation and except that no indemnification shall be made in respect of any
claim, issue or matter as to which such person shall have been adjudged to be
liable to the corporation unless and only to the extent that the Delaware Court
of Chancery or the court in which such action or suit was brought shall
determine upon application that, despite the adjudication of liability but in
view of all the circumstances of the case, such person is fairly and reasonably
entitled to indemnity for such expenses which the Delaware Court of Chancery or
such other court shall deem proper. Delaware law further provides that nothing
in the above-described provisions shall be deemed exclusive of any other rights
to indemnification or advancement of expenses to which any person may otherwise
be entitled under any bylaw, agreement, vote of stockholders or disinterested
directors or otherwise.

Article Eight of the Company's Certificate of Incorporation provides that a
director of the Company shall not be liable to the Company or its stockholders
for monetary damages for breach of fiduciary duty as a director. Section
102(b)(7) of the Delaware General Corporation Law provides that a provision so
limiting the personal liability of a director shall not eliminate or limit the
liability of a director for, among other things: breach of the duty of loyalty;
acts or omissions not in good faith or which involve intentional misconduct or a
knowing violation of the law; unlawful payment of dividends; and transactions
from which the director derived an improper personal benefit.

The Company has entered into separate but identical indemnity agreements
(the "Indemnity Agreements") with each director of the Company and certain of
its officers (the "Indemnitees"). Pursuant to the terms and conditions of the
Indemnity Agreements, the Company will indemnify each Indemnitee against any
amounts which he or she becomes legally obligated to pay in connection with any
claim against him or her based upon any action or inaction which he or she may
commit, omit or suffer while acting in his or her capacity as a director and/or
officer of the Company or its subsidiaries, provided, however, that Indemnitee

41
<PAGE> 42

acted in good faith and in a manner Indemnitee reasonably believed to be in or
not opposed to the best interests of the Company and, with respect to any
criminal action, had no reasonable cause to believe Indemnitee's conduct was
unlawful.

42
<PAGE> 43

PRINCIPAL AND SELLING STOCKHOLDERS

The following table sets forth certain information with respect to the
beneficial ownership of the Common Stock as of May 31, 1996 and as adjusted to
reflect the sale of 2,362,000 shares by the Company and the sale of 138,000
shares by the Selling Stockholders. Additionally, the table below sets forth
beneficial ownership regarding (i) each person (including any group) known by
the Company to be the beneficial owner of more than 5% of the Common Stock, (ii)
each director of the Company, (iii) each Named Executive Officer and (iv) all
directors and executive officers of the Company as a group. Except as may be
indicated in the footnotes to the table, each of such persons or entities has
sole voting and investment power with respect to all shares owned, subject to
applicable community property laws. The address of each person listed is in care
of the Company, 820 Flynn Road, Camarillo, California 93012, unless otherwise
set forth below such person's name.

<TABLE>
<CAPTION>
COMMON STOCK OWNED COMMON STOCK OWNED
PRIOR TO OFFERING(1) AFTER THE OFFERING
---------------------- SHARES ----------------------
NUMBER OF PERCENT BEING NUMBER OF PERCENT
NAME AND ADDRESS SHARES OF CLASS OFFERED SHARES OF CLASS
- --------------------------------------------- --------- -------- ------- --------- --------
<S> <C> <C> <C> <C> <C>
James H. Chamberlain(2)...................... 691,356 11.3% -- 691,356 8.1%
Leonard M. Hendrickson(3).................... 31,000 * -- 31,000 *
John R. Overturf, Jr.(4)..................... 20,000 * -- 20,000 *
David J. Moffa, Ph.D.(5)..................... 11,000 * -- 11,000 *
Robert D. Weist(6)........................... 20,000 * -- 20,000 *
Anna M. Anderson(7).......................... 81,638 1.4 -- 81,638 1.0
Gus E. Davis(8).............................. 43,542 * -- 43,542 *
Cirilo D. Cabradilla, Jr. ................... 80,645 1.4 10,000 70,645 *
961 Hamilton Avenue
Menlo Park, California 94025
Raymond S. Poon.............................. 80,645 1.4 20,000 60,645 *
210 Walter Hays Drive
Palo Alto, California 94303
Dragan Spasic................................ 80,645 1.4 20,000 60,645 *
961 Hamilton Avenue
Menlo Park, California 94025
Francis W. Chen.............................. 80,645 1.4 15,000 65,645 *
244 California Street
Suite 310
San Francisco, California 94111
Bradford W. Baer............................. 80,645 1.4 20,000 60,645 *
961 Hamilton Avenue
Menlo Park, California 94025
Alan Smith................................... 80,645 1.4 15,000 65,645 *
3769 Farm Hill Blvd.
Redwood City, California 94061
Immunoplex, Inc.(9).......................... 60,000 1.0 25,000 35,000 *
412 South Saddle Creek Road,
Omaha, Nebraska 68131
Charles Ditlow............................... 16,129 * 7,000 9,129 *
Northwestern University
Department of Otolaryngology
Searle 12-490, 320 East Superior
Chicago, Illinois 60611
The Equity Group, Inc.(10)................... 6,000 * 6,000 -- --
919 3rd Avenue, 18th Floor
New York, New York 10022
Directors and executive officers as a group
(7 persons)(11)............................ 898,536 14.3% -- 898,536 10.3%
</TABLE>

43
<PAGE> 44

- ---------------
* Less than one percent.

(1) Beneficial ownership is determined in accordance with rules of the
Securities and Exchange Commission that deem shares to be beneficially
owned by any person who has or shares voting or investment power with
respect to such shares. Unless otherwise indicated, the persons named in
this table have sole voting and sole investment power with respect to all
shares shown as beneficially owned, subject to community property laws
where applicable.

(2) Includes (i) 200,000 shares of Common Stock reserved for issuance upon
exercise of stock options which are currently exercisable; and (ii) 488,156
shares of Common Stock held in the Chamberlain Family Trust for which Mr.
Chamberlain serves as trustee.

(3) Includes (i) 20,000 shares of Common Stock reserved for issuance upon
exercise of stock options which are currently exercisable; (ii) 4,000
shares of Common Stock held of record by two of Mr. Hendrickson's minor
children; and (iii) 7,000 shares of Common Stock held in the Microchemics
Simplified Employee Pension Plan.

(4) Includes 18,000 shares of Common Stock reserved for issuance upon exercise
of stock options which are currently exercisable.

(5) Includes 10,000 shares of Common Stock reserved for issuance upon exercise
of stock options which are currently exercisable.

(6) Includes 20,000 shares of Common Stock reserved for issuance upon exercise
of stock options which are currently exercisable.

(7) Includes 62,500 shares of Common Stock reserved for issuance upon exercise
of stock options which are currently exercisable or become exercisable
within 60 days from May 31, 1996.

(8) Includes 43,542 shares of Common Stock reserved for issuance upon exercise
of stock options which are currently exercisable or become exercisable
within 60 days from May 31, 1996.

(9) Includes 60,000 shares of Common Stock which are reserved for issuance upon
exercise of a warrant granted to Immunoplex, Inc.

(10) Includes 6,000 shares of Common Stock which are reserved for issuance upon
exercise of a warrant granted to The Equity Group, Inc.

(11) Includes 374,042 shares of Common Stock reserved for issuance upon exercise
of stock options which are currently exercisable or become exercisable
within 60 days from May 31, 1996.

44
<PAGE> 45

DESCRIPTION OF CAPITAL STOCK

The Company is authorized to issue up to 20,000,000 shares of Common Stock,
par value $0.001 per share (the "Common Stock") and 1,000,000 shares of
Preferred Stock, par value $0.001 per share (the "Preferred Stock"). The
following statements are brief summaries of certain provisions relating to the
Company's capital stock.

COMMON STOCK

The holders of Common Stock are entitled to one vote for each share held of
record on all matters submitted to a vote of stockholders. Subject to any
preferences which may be granted to the holders of Preferred Stock, each holder
of Common Stock is entitled to receive ratably such dividends as may be declared
by the Board of Directors out of funds legally available therefor, as well as
any other distributions to stockholders, and, in the event of the liquidation,
dissolution or winding up of the Company, is entitled to share ratably in all
assets of the Company remaining after payment of liabilities. All of the
Company's outstanding shares of Common Stock are, and the shares to be issued
and sold by the Company in this offering and in connection with this offering,
will be, upon issuance, duly authorized, validly issued, fully paid and non-
assessable.

PREFERRED STOCK

The Board of Directors has the authority to issue the authorized and
unissued Preferred Stock in one or more classes or series with such
designations, rights and preferences as may be determined by the Board of
Directors. Accordingly, the Board of Directors is empowered, without stockholder
approval, to issue Preferred Stock with dividend, conversion, voting,
liquidation or other rights which may adversely affect the voting power or other
rights of the holders of Common Stock. In the event of issuance, the Preferred
Stock could be utilized, under certain circumstances, as a way of discouraging,
delaying or preventing an acquisition or change in control of the Company. At
present, no shares of Preferred Stock are outstanding and the Company has no
plans to issue shares of Preferred Stock.

WARRANTS

On February 1, 1996, the Company granted to Nordion a warrant (the "Nordion
Warrant") to purchase an aggregate of 100,000 shares of Common Stock of the
Company at an exercise price equal to the lesser of (i) $7.50 per share, and
(ii) 115% of the closing sale price of the Common Stock on the Nasdaq National
Market on the date of closing of the Medgenix Acquisition. The Nordion Warrant
fully vested on the date of grant and terminates on February 1, 2001. The
Nordion Warrant does not have any voting rights, dividend rights or preferences
until such time as the Nordion Warrant is exercised and converted to Common
Stock. The Nordion Warrant is not redeemable.

ANTI-TAKEOVER PROVISIONS

The Company's Certificate of Incorporation and Bylaws include some
provisions which may have the effect of discouraging persons from pursuing
non-negotiated takeover attempts. These provisions include the inability of
stockholders to take action by written consent without a meeting, and the
inability of stockholders to remove directors without cause. In its Proxy
Statement for the 1996 Annual Meeting of Stockholders, the Company has included
proposals to (i) preclude the ability of the stockholders to call a special
meeting of stockholders and (ii) divide the Board of Directors into three
classes serving staggered three-year terms. Initially, the terms of the Class I,
Class II and Class III directors expire at the 1997, 1998 and 1999 annual
meetings, respectively. Following the initial terms, at each annual meeting, one
class of directors will be elected for a three-year term.

TRANSFER AGENT

The Company's transfer agent and registrar for its Common Stock is U.S.
Stock Transfer Corporation, 1745 Gardena Avenue, Glendale, California
91204-2991.

45
<PAGE> 46

SHARES ELIGIBLE FOR FUTURE SALE

Upon completion of this offering, the Company will have 8,310,003 shares of
Common Stock outstanding. The 2,500,000 shares sold in this offering (2,788,253
shares if the Underwriters' over-allotment option is exercised in full) and
7,567,004 shares held by current stockholders will be freely tradable without
restriction under the Securities Act, except for 1,035,606 shares held by
persons who have entered into the agreement referred to below not to sell their
shares for 180 days from the date of the Prospectus, and any such shares held at
any time by an "affiliate" of the Company, as such term is defined under Rule
144 promulgated under the Securities Act. 500,000 shares were issued and sold by
the Company in private transactions and may be publicly sold only if registered
under the Securities Act or sold in accordance with an applicable exemption from
registration, such as Rule 144. Of those shares, 107,000 are being sold by
Selling Stockholders in this offering. The remaining 527,999 will be registered
for resale by such Selling Stockholders on a Registration Statement to be filed
with the Commission concurrently with the effective date of the Registration
Statement containing this Prospectus. 524,494 shares held by affiliates of the
Company will be eligible for sale subject to the resale limitations of Rule 144.
In general, under Rule 144, as currently in effect, a person who has
beneficially owned shares for at least two years, including an "affiliate," as
that term is defined in Rule 144, is entitled to sell, within any three month
period, a number of "restricted" shares that does not exceed the greater of 1%
of the then outstanding shares of Common Stock (83,100 shares immediately after
this offering) or the average weekly trading volume during the four calendar
weeks preceding such sale. Sales under Rule 144 are subject to certain manner of
sale limitations, notice requirements and the availability of current public
information about the Company. Rule 144(k) provides that a person who is not
deemed an "affiliate" and who has beneficially owned shares for at least three
years is entitled to sell such shares at any time under Rule 144 without regard
to the limitations described above.

The Company and the Company's directors and officers, the Selling
Stockholders and Nordion have agreed with the Underwriters not to sell or
otherwise dispose of any shares of Common Stock for a period of 180 days from
the date of this Prospectus without the prior written consent of Cruttenden Roth
Incorporated.

At May 30, 1996, the Company had outstanding options to purchase an
aggregate of 1,106,459 shares of its Common Stock held by employees, directors,
advisors and consultants of the Company. Of this amount options to purchase
534,647 shares are presently exercisable and options to purchase an additional
108,854 shares become exercisable within 180 days from the date of this
Prospectus. Of these amounts 410,396 shares as to which the options are
presently exercisable and 36,250 shares as to which options become exercisable
within said 180 day period are held by persons who have entered into the
agreement referred to above not to sell their shares within said 180 day period.
The options were granted at prices ranging from $1.281 to $9.375 per share. The
Company has registered the shares issuable upon exercise of the options and
option holders who have not agreed to refrain from selling may exercise their
options to the extent they are exercisable and sell their shares.

The Company has agreed, upon effectiveness of this offering, to file a
Registration Statement with the Securities and Exchange Commission to register
527,999 shares of Common Stock held by certain stockholders of the Company who
acquired their shares in connection with the Company's acquisition of Keystone,
pursuant to the exercise of an outstanding warrant concurrent with this
offering, and pursuant to the Medgenix Acquisition. Each of these stockholders
has agreed with the Underwriters not to sell or otherwise dispose of any shares
of Common Stock for a period of 180 days from the date of this Prospectus
without the prior written consent of Cruttenden Roth Incorporated.

The Company is unable to estimate the number of shares that may be sold in
the future by its existing stockholders or the effect, if any, that sales of
shares by such stockholders will have on the market price of the Common Stock
prevailing from time to time. Sales of substantial amounts of Common Stock by
existing stockholders could adversely affect prevailing market prices.

46
<PAGE> 47

UNDERWRITING

Subject to the terms and conditions set forth in the Underwriting
Agreement, the Company and the Selling Stockholders have agreed to sell to the
Underwriters named below, for whom Cruttenden Roth Incorporated and Commonwealth
Associates are acting as representatives (the "Representatives"), and the
Underwriters have severally agreed to purchase, the numbers of shares of Common
Stock set forth opposite their respective names in the table below at the public
offering price less the underwriting discount set forth on the cover page of
this Prospectus. The Underwriting Agreement provides that the obligations of the
Underwriters are subject to certain conditions and that the Underwriters are
committed to purchase all of such shares if any are purchased:

<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITER SHARES
-------------------------------------------------------------------------- ---------
<S> <C>
Cruttenden Roth Incorporated.............................................. 755,000
Commonwealth Associates................................................... 755,000
Advest, Inc............................................................... 65,000
Dain Bosworth Incorporated................................................ 65,000
Fahnestock & Co., Inc..................................................... 65,000
Principal Financial Securities, Inc....................................... 65,000
Sutro & Co. Incorporated.................................................. 65,000
Wedbush Morgan Securities Inc............................................. 65,000
Barber & Bronson, Incorporated............................................ 40,000
Brean Murray, Foster Securities Inc....................................... 40,000
JW Charles Securities, Inc................................................ 40,000
Cleary Gull Reiland & McDevitt Inc........................................ 40,000
Dabney/Resnick, Inc....................................................... 40,000
Doft & Co., Inc........................................................... 40,000
Gilford Securities Incorporated........................................... 40,000
Hampshire Securities Corporation.......................................... 40,000
Hanifen, Imhoff Inc....................................................... 40,000
John G. Kinnard and Company, Incorporated................................. 40,000
Laidlaw Equities, Inc..................................................... 40,000
Southeast Research Partners, Inc.......................................... 40,000
R.J. Steichen & Company................................................... 40,000
Summit Investment Corporation............................................. 40,000
Van Kasper & Company...................................................... 40,000
---------
Total........................................................... 2,500,000
=========
</TABLE>

The Company has been advised by the Representatives that the Underwriters
propose to offer the shares to the public at the public offering price set forth
on the cover page of this Prospectus, and to certain securities dealers at such
price less a concession of not more than $0.35 per share, and that the
Underwriters and such dealers may reallow to other dealers, including the
Underwriters, a discount not in excess of $0.10 per share. After the public
offering, the public offering price and concessions and discounts may be changed
by the Representatives.

The Company has granted an option to the Underwriters, exercisable for a
period of 45 days after the date of this Prospectus, to purchase up to an
additional 288,253 shares of Common Stock at the public offering price set forth
on the cover page of this Prospectus less the underwriting discounts and
commissions. The Underwriters may exercise this option only to cover
over-allotments, if any. To the extent such option is exercised, each
Underwriter will become obligated, subject to certain conditions, to purchase a
percentage of such additional shares approximately equal to the percentage of
shares it was obligated to purchase from the Company pursuant to the
Underwriting Agreement.

47
<PAGE> 48

At the closing of this offering, the Company has agreed to pay the
Representatives a non-accountable expense allowance of 1.5% of the total
offering proceeds, which will include proceeds from sales by the Selling
Stockholders and from the Underwriters' exercise of the over-allotment option to
the extent exercised. The Company has paid $30,000 of the non-accountable
expense allowance to the Representatives. The Representatives' expenses in
excess of the non-accountable expense allowance, including their legal expenses,
will be borne by the Representatives. If the expenses of the Representatives are
less than the non-accountable expense allowance, the excess will be deemed to be
compensation to the Representatives.

The Underwriting Agreement provides that the Company and the Seller
Stockholders will indemnify the Underwriters against certain liabilities under
the Securities Act.

The Company has also agreed to sell to the Representatives for $100
warrants (the "Representatives' Warrants") to purchase up to 118,100 shares of
Common Stock at an exercise price per share equal to 120% of the public offering
price per share. The Representatives' Warrants are exercisable for a period of
four years beginning one year from the date of this Prospectus, and are not
transferable for a period of one year except to officers of the Representatives
or any successors to the Representatives. The Representatives' Warrants include
a net exercise provision permitting the holders to pay the exercise price by
cancellation of a number of shares with a fair market value equal to the
exercise price of the Representatives' Warrants. In addition, the Company has
granted certain rights to the holders of the Representatives' Warrants to
register the Representatives' Warrants and the Common Stock underlying the
Representatives' Warrants under the Securities Act.

The rules of the Commission generally prohibit the Underwriters and other
members of the selling group from making a market in the Company's Common Stock
during the "cooling off" period immediately preceding the commencement of sales
in the offering. The Commission has, however, adopted an exemption from these
rules that permits passive market making under certain conditions. These rules
permit an Underwriter or other member of the selling group to continue to make a
market in the Company's Common Stock subject to the conditions, among others,
that its bid not exceed the highest bid by a market maker not connected with the
offering and that its net purchases on any one trading day not exceed prescribed
limits. Pursuant to these exemptions, certain Underwriters and other members of
the selling group intend to engage in passive market making in the Company's
Common Stock during the cooling off period.

LEGAL MATTERS

Counsel for the Company, Troop Meisinger Steuber & Pasich, LLP, Los
Angeles, California, have rendered an opinion to the effect that the Common
Stock offered by the Company will upon sale be duly and validly issued, fully
paid and non-assessable. Freshman, Marantz, Orlanski, Cooper & Klein, a law
corporation, Beverly Hills, California, has acted as counsel to the Underwriters
in connection with certain legal matters relating to this offering.

EXPERTS

The consolidated financial statements of BioSource International, Inc. and
Subsidiary as of December 31, 1995, and for each of the years in the two-year
period ended December 31, 1995, have been included herein and in the
Registration Statement in reliance upon the report of KPMG Peat Marwick LLP,
independent certified public accountants, appearing elsewhere herein, and upon
the authority of said firm as experts in accounting and auditing.

The combined financial statements relating to the in vitro business of
Medgenix Diagnostics, S.A. as of October 31, 1995 and for each of the years in
the two-year period ended October 31, 1995 have been included herein and in the
Registration Statement in reliance upon the report of KPMG
Bedrijfsrevisoren-Reviseurs d' Entreprises, independent statutory auditors,
appearing elsewhere herein, and upon the authority of said firm as experts in
accounting and auditing.

48
<PAGE> 49

CHANGE IN INDEPENDENT PUBLIC ACCOUNTANT

Effective August 15, 1994, KPMG Peat Marwick LLP was engaged as the
principal independent certified public accountants for the Company. KPMG Peat
Marwick LLP succeeded Coopers & Lybrand, LLP. The decision to change independent
certified public accountants was unanimously approved by the Company's Board of
Directors. There were no disagreements with Coopers & Lybrand, LLP on any matter
of accounting principles or practices, financial statement disclosure or
auditing scope or procedures.

ADDITIONAL INFORMATION

The Company has filed with the Securities and Exchange Commission in
Washington, D.C., a Registration Statement on Form SB-2 under the Securities Act
with respect to the shares offered hereby. This Prospectus does not contain all
of the information set forth in the Registration Statement and the exhibits
thereto. Statements contained in this Prospectus as to the contents of any
contract or any other document referred to are not necessarily complete, and
with respect to any contract or other document filed as an exhibit to the
Registration Statement, reference is made to the exhibit for a more complete
description of the matter involved, and each such statement is qualified in its
entirety by such reference. For further information with respect to the Company
and the shares offered hereby, reference is hereby made to the Registration
Statement and exhibits thereto. A copy of the Registration Statement, including
the exhibits thereto, may be inspected without charge at the Securities and
Exchange Commission's principal office in Washington, D.C., and copies of all or
any part thereof may be obtained from the Public Reference Section of the
Securities and Exchange Commission at 450 Fifth Street, N.W., Washington, D.C.
20549, upon payment of certain prescribed rates.

49
<PAGE> 50

GLOSSARY OF SCIENTIFIC TERMS

ALPHA INTERFERON: IFN-, one of the large family of proteins (cytokines)
released by leukocytes (white blood cells). Among their multiple regulatory
functions are interference with viral multiplication and with the proliferation
of cancer cells.

AIDS: Acquired immunodeficiency syndrome, the fatal disease caused by HIV
(Human immunodeficiency virus) that breaks down the immune system's defenses
against a variety of microorganisms.

AMINO ACIDS: The building blocks of proteins. Twenty distinctive amino
acids (e.g., serine, tryptophan, glutamic acid), in some particular sequence of
one hundred or more, constitute all cellular proteins.

ANTIBODY: a protein formed by an animal in response to invasion by a
foreign substance (e.g., bacterial, viral, plant) that binds with that substance
and neutralizes its action.

MONOCLONAL: An antibody derived from a single clone of cells. All of
the molecules of such an antibody are therefore chemically and structurally
identical.

POLYCLONAL: A population of antibodies derived from many clones of
cells, each producing antibodies that are directed against different facets
of the foreign antigen. Although similar, polyclonal antibodies are
chemically and structurally different.

ANTIGEN: A substance that can stimulate an animal to produce antibodies
that can then bind the antigen. Generally, an antigen is a foreign substance,
but, when it is produced by the same individual that produced the antibody, it
can be the cause of disease.

B CELLS: Lymphocytes formed in the bone marrow of mammals that function in
the immune system to produce antibodies both in the blood stream and secreted
onto mucous surfaces.

BIOLOGICAL: The noun denotes a product derived from cells or organisms.

CHEMOKINE: One of a family of small proteins (cytokines), functioning as
chemical attractants, that promote cellular interactions.

CYTOKINES: A group of hormone-like proteins released by some cells to
stimulate others. They include interferons, interleukins, colony stimulating
factors, growth factors and tumor necrosis factors. Cytokines produces by
lymphocytes are called lymphokines.

DNA: Deoxyribonucleic acid, the macromolecule of heredity in virtually all
organisms. The particular sequence of the four deoxynucleotide building blocks
of DNA (adenine, thymine, guanine, cytosine) spells the identity of a gene.

ELISA: Enzyme-Linked Immunosorbent Assay.

GENE: A sequence of DNA that encodes a protein or RNA; a unit of heredity
at a specific place on a chromosome.

HYBRIDOMA: A hybrid cell produced by the fusion of two cells that is
useful for the production of monoclonal antibodies.

IL: Interleukins, a family of cytokines designated IL-1 through IL-16,
named in the order of their discovery.

IMMUNE COMPLEX: A complex formed by the binding of an antibody with an
antigen.

IN VITRO: Pertaining to behavior outside a living organism; includes the
use of extracts of cells, subcellular fractions; tissue slices, and perfused
organs.

IN VIVO: Pertaining to behavior within a living organism; includes the use
of a whole plant or animal or an intact microbial cell.

LYMPHOCYTES: The white blood cells (leukocytes) that include the B cells
and T cells, but not the others (such as granulocytes and eosinophils).

50
<PAGE> 51

PCR: The polymerase chain reaction, in which DNA polymerase repeatedly
copies a segment of DNA, resulting in enormous amplification of a tiny sample.
The technique is widely used in research, medical diagnosis, and forensic
medicine.

PROTEINS: Chains of twenty distinctive amino acids in a particular
sequence of one hundred or more that perform virtually all cellular functions,
including those of enzymes, receptors, cytokines, interferons, and antibodies.

REAGENT: A substance that participates in a chemical reaction. Reagents
are commonly used to detect or determine another substance.

RECEPTOR: A molecule on the surface (membrane) of a cell that serves as a
target for the binding of a hormone, drug, virus, or other entity that triggers
a physiological or pharmacological response.

RECOMBINANT DNA: DNA prepared in the laboratory by breaking up and
splicing together DNA from several different species of organisms.

RNA: Ribonucleic acid, the many forms of which include messenger RNA,
transfer RNA and ribosomal RNA (used in the translation of messenger RNA), and
viral RNA, which functions as the genome of certain viruses.

51
<PAGE> 52

INDEX TO FINANCIAL STATEMENTS

<TABLE>
<S> <C>
BIOSOURCE INTERNATIONAL, INC. AND SUBSIDIARY
Independent Auditors' Report.......................................................... F-2
Consolidated Balance Sheet as of December 31, 1995.................................... F-3
Consolidated Statements of Operations for the years ended December 31, 1994 and
1995................................................................................ F-4
Consolidated Statements of Stockholders' Equity for the years ended December 31, 1994
and 1995............................................................................ F-5
Consolidated Statements of Cash Flows for the years ended December 31, 1994 and
1995................................................................................ F-6
Notes to Consolidated Financial Statements............................................ F-7
Unaudited Consolidated Balance Sheet as of March 31, 1996............................. F-15
Unaudited Consolidated Statements of Operations for the three months ended March 31,
1995 and 1996....................................................................... F-16
Unaudited Consolidated Statements of Cash Flows for the three months ended March 31,
1995 and 1996....................................................................... F-17
Notes to Consolidated Financial Statements............................................ F-18
ACQUIRED COMPANY:
MEDGENIX DIAGNOSTICS, S.A.
Independent Auditors' Report.......................................................... F-22
Consolidated Balance Sheet as of October 31, 1995..................................... F-23
Consolidated Statements of Operations for the years ended October 31, 1994 and 1995... F-24
Consolidated Statements of Changes in Net Assets for the years ended October 31, 1994
and 1995............................................................................ F-25
Consolidated Statements of Cash Flows for the years ended October 31, 1994 and 1995... F-26
Notes to Consolidated Financial Statements............................................ F-27
Unaudited Consolidated Balance Sheet as of January 31, 1996........................... F-30
Unaudited Consolidated Statements of Operations for the three months ended January 31,
1995 and 1996....................................................................... F-31
Unaudited Consolidated Statements of Cash Flows for the three months ended January 31,
1995 and 1996....................................................................... F-32
Notes to Consolidated Financial Statements............................................ F-33
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Introduction to the Unaudited Pro Forma Condensed Consolidated Financial
Information......................................................................... F-36
Unaudited Pro Forma Condensed Consolidated Balance Sheet as of March 31, 1996......... F-37
Unaudited Pro Forma Condensed Consolidated Statement of Operations for the year ended
December 31, 1995................................................................... F-38
Unaudited Pro Forma Condensed Consolidated Statement of Operations for the three
months ended March 31, 1996......................................................... F-39
Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements.............. F-40
</TABLE>

F-1
<PAGE> 53

INDEPENDENT AUDITORS' REPORT

The Board of Directors and Stockholders
BioSource International, Inc.:

We have audited the accompanying consolidated balance sheet of BioSource
International, Inc. and subsidiary as of December 31, 1995 and the related
consolidated statements of operations, stockholders' equity and cash flows for
each of the years in the two-year period ended December 31, 1995. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.

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

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of BioSource
International, Inc. and subsidiary as of December 31, 1995 and the results of
their operations and their cash flows for each of the years in the two-year
period ended December 31, 1995 in conformity with generally accepted accounting
principles.

KPMG PEAT MARWICK LLP

Los Angeles, California
February 9, 1996

F-2
<PAGE> 54

BIOSOURCE INTERNATIONAL, INC.
AND SUBSIDIARY

CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1995

ASSETS

<TABLE>
<S> <C>
Current assets:
Cash and cash equivalents..................................................... $ 1,393,092
Accounts receivable, less allowance for doubtful accounts of $29,000.......... 1,389,859
Inventories (note 3).......................................................... 3,301,208
Prepaid expenses and other current assets (note 11)........................... 142,321
Deferred income taxes (note 9)................................................ 91,000
-----------
Total current assets.................................................. 6,317,480
Property and equipment, net (note 4)............................................ 922,608
Other assets.................................................................... 147,515
-----------
$ 7,387,603
===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of notes payable (note 5).................................. $ 65,857
Accounts payable.............................................................. 726,631
Accrued expenses.............................................................. 186,692
Income taxes payable.......................................................... 342,176
-----------
Total current liabilities............................................. 1,321,356
-----------
Notes payable, less current maturities (note 5)................................. 64,286
Deferred income taxes (note 9).................................................. 65,000
Other liabilities............................................................... 39,654
Commitments and contingencies (notes 5 and 13)
Stockholders' equity (notes 6, 7 and 8):
Preferred stock, $.001 par value. Authorized 1,000,000 shares; none issued.... --
Common stock, $.001 par value. Authorized 20,000,000 shares; issued and
outstanding 5,845,306 shares............................................... 5,845
Additional paid-in capital.................................................... 9,338,484
Accumulated deficit........................................................... (3,447,022)
-----------
Net stockholders' equity................................................... 5,897,307
-----------
$ 7,387,603
===========
</TABLE>

See accompanying notes to consolidated financial statements.

F-3
<PAGE> 55

BIOSOURCE INTERNATIONAL, INC.
AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1994 AND 1995

<TABLE>
<CAPTION>
1994 1995
---------- ----------
<S> <C> <C>
Revenue............................................................. $7,367,257 8,608,447
Cost of goods sold.................................................. 3,132,991 2,996,103
---------- ----------
Gross profit...................................................... 4,234,266 5,612,344
---------- ----------
Operating expenses:
Research and development.......................................... 721,902 1,073,733
Sales and marketing............................................... 1,140,662 1,289,939
General and administrative........................................ 1,929,187 1,633,649
Compensation recognized under performance escrow share arrangement
(note 6)....................................................... 577,452 --
---------- ----------
Total operating expenses.................................. 4,369,203 3,997,321
---------- ----------
Operating income (loss)................................... (134,937) 1,615,023
---------- ----------
Other income (expense):
Interest expense.................................................. (28,768) (26,301)
Interest income................................................... 28,953 32,837
Other............................................................. (26,689) (10,180)
---------- ----------
Total other expense....................................... (26,504) (3,644)
---------- ----------
Income (loss) before income taxes......................... (161,441) 1,611,379
Provision for income taxes (note 9)................................. 48,195 451,000
---------- ----------
Net income (loss)......................................... $ (209,636) 1,160,379
========== ==========
Income (loss) per share:
Net income (loss) per share............................... $ (.04) .20
========== ==========
Weighted average number of common shares outstanding................ 5,724,106 5,945,900
========== ==========
</TABLE>

See accompanying notes to consolidated financial statements.

F-4
<PAGE> 56

BIOSOURCE INTERNATIONAL, INC.
AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1994 AND 1995

<TABLE>
<CAPTION>
COMMON STOCK
------------------ ADDITIONAL NET
NUMBER OF PAID-IN ACCUMULATED STOCKHOLDERS'
SHARES AMOUNT CAPITAL DEFICIT EQUITY
---------- ------ ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1993 as
previously reported.................... 5,037,580 $5,038 8,497,031 (4,397,209) 4,104,860
Pooling of interests with Keystone
Laboratories, Inc...................... 500,000 500 154,500 42,346 197,346
--------- ------ --------- ----------- ---------
Balance as restated...................... 5,537,580 5,538 8,651,531 (4,354,863) 4,302,206
Exercise of stock options................ 550 -- 484 -- 484
Conversion of allotted escrow shares
(note 6)............................... 266,898 267 28,768 -- 29,035
Compensation recognized under performance
escrow share arrangement (note 6)...... -- -- 577,452 -- 577,452
Distribution to stockholders............. -- -- -- (42,902) (42,902)
Issuance of common stock................. 8,000 8 16,242 -- 16,250
Net loss................................. -- -- -- (209,636) (209,636)
--------- ------ --------- ----------- ---------
Balance at December 31, 1994............. 5,813,028 5,813 9,274,477 (4,607,401) 4,672,889
Exercise of stock options................ 32,278 32 64,007 -- 64,039
Net income............................... -- -- -- 1,160,379 1,160,379
--------- ------ --------- ----------- ---------
Balance at December 31, 1995............. 5,845,306 $5,845 9,338,484 (3,447,022) 5,897,307
========= ====== ========= =========== =========
</TABLE>

See accompanying notes to consolidated financial statements.

F-5
<PAGE> 57

BIOSOURCE INTERNATIONAL, INC.
AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1994 AND 1995

<TABLE>
<CAPTION>
1994 1995
---------- ----------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss)................................................... $ (209,636) 1,160,379
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Depreciation and amortization.................................... 214,376 258,045
Loss on sale of property and equipment........................... 17,389 --
Compensation recognized under performance escrow share
arrangement..................................................... 577,452 --
Other............................................................ 16,250 --
Changes in assets and liabilities:
Accounts receivable.............................................. (40,022) (360,930)
Inventories...................................................... (436,752) (592,581)
Prepaid expenses and other assets................................ (75,778) (7,961)
Deferred income taxes............................................ 4,385 36,781
Accounts payable................................................. 47,488 168,927
Accrued expenses and other liabilities........................... (98,616) (151,636)
Income taxes payable............................................. -- 342,176
---------- ----------
Net cash provided by operating activities................... 16,536 853,200
---------- ----------
Cash flows from investing activities -- purchase of property and
equipment........................................................... (692,139) (211,809)
---------- ----------
Cash flows from financing activities:
Proceeds from conversion of allotted escrow shares.................. 29,035 --
Distributions to stockholders....................................... (42,902) --
Proceeds from the exercise of options............................... 484 64,039
Borrowings from bank................................................ 351,174 28,000
Repayments to bank.................................................. (83,819) (188,212)
Payments on capital lease obligations............................... (115,046) (35,886)
---------- ----------
Net cash provided by (used in) financing activities......... 138,926 (132,059)
---------- ----------
Net increase (decrease) in cash and cash equivalents........ (536,677) 509,332
Cash and cash equivalents at beginning of year........................ 1,420,437 883,760
---------- ----------
Cash and cash equivalents at end of year.............................. $ 883,760 1,393,092
========== ==========
Supplemental disclosure of cash flow information:
Cash paid during the year for:
Interest......................................................... $ 28,768 26,301
Income taxes..................................................... 34,096 87,063
========== ==========
</TABLE>

See accompanying notes to consolidated financial statements.

F-6
<PAGE> 58

BIOSOURCE INTERNATIONAL, INC.
AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995

(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation

The consolidated financial statements include the accounts of BioSource
International, Inc. and its wholly owned subsidiary. All significant
intercompany accounts and transactions have been eliminated.

The Company is engaged in the licensing, development, manufacture,
marketing and distribution of immunological reagents, test kits and
oglionucleotides used in biomedical research. The types of products supplied by
the Company include a range of bioactive proteins, enzymes, substrates,
antibodies, human and murine cytokines, growth factors and a variety of assay
systems for the detection of biological molecules. These products focus on areas
of research such as immunology, AIDS and cancer. The Company focuses its sales
efforts on academic, industrial and governmental laboratories.

Cash and Cash Equivalents

Cash and cash equivalents includes all cash balances and highly liquid
investments in debt instruments with an original maturity of three months or
less.

Inventories

Inventories are stated at the lower of cost (first-in, first-out) or market
(net realizable value) for raw materials and work in process and the
average-cost method for finished goods.

Property and Equipment

Property and equipment are stated at cost. Depreciation is provided using
the straight-line method over the estimated useful lives which range from three
to seven years. Leasehold improvements are amortized using the straight-line
method over the estimated useful life or the lease term, whichever is shorter.

License Agreements

License agreements are recorded at cost and are amortized using the
straight-line method over the shorter of the estimated useful lives of the
license or the license term (generally five to ten years). These costs are
included with other assets in the accompanying consolidated balance sheet.
Accumulated amortization at December 31, 1995 was approximately $47,000.

Revenue Recognition

Revenue and related cost of goods sold are recognized upon shipment of
products.

Research and Development Costs

Research and development costs are charged to expense as incurred.

Income Taxes

F-7
<PAGE> 59

BIOSOURCE INTERNATIONAL, INC.
AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

measured using enacted tax rates expected to apply to taxable income in the
years in which those temporary differences are expected to be recovered or
settled. Under Statement 109, the effect on deferred taxes of a change in tax
rates is recognized in income in the period that includes the enactment date.

Long Lived Assets

In March 1995, Statement of Financial Accounting Standards No. 121.
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
Be Disposed Of," was issued. This statement provides guidelines for recognition
of impairment losses related to long-term assets and is effective for fiscal
years beginning after December 15, 1995. Company management does not believe
that the adoption of this new standard will have a material effect on the
Company's consolidated financial statements.

Accounting for Stock Options

In October 1995, Statement of Financial Accounting Standards No. 123,
"Accounting for Stock-Based Compensation" ("Statement No. 123"), was issued.
This statement encourages, but does not require a fair value based method of
accounting for employee stock options and will be effective for fiscal years
beginning after December 15, 1995. While the Company is still evaluating
Statement No. 123, it currently expects to elect to continue to measure
compensation costs under APB Opinion No. 25, "Accounting for Stock Issued to
Employees" and to comply with the pro forma disclosure requirements of Statement
No. 123. If the Company makes this election, Statement No. 123 will have no
impact on the Company's consolidated financial statements.

Use of Estimates

Company management has made a number of estimates and assumptions relating
to the reporting of assets and liabilities in conformity with generally accepted
accounting principles. Actual results could differ from these estimates.

Net Income (Loss) per Share

Net income (loss) per share has been computed using the weighted average
number of common shares outstanding each year. The Company's common share
equivalents associated with dilutive stock options and warrants are immaterial,
and accordingly, primary and fully diluted net income (loss) per share are
approximately the same.

Reclassifications

Certain prior year amounts have been reclassified to conform to the current
year's presentation.

(2) BUSINESS COMBINATION

On November 21, 1995, the Company issued 500,000 shares of its common stock
in exchange for all of the outstanding common stock of Keystone Laboratories,
Inc. (Keystone). The business combination has been accounted for as a pooling of
interest combination and, accordingly, the Company's consolidated financial
statements for periods prior to the combination have been restated to include
the accounts and results of operations of Keystone.

F-8
<PAGE> 60

BIOSOURCE INTERNATIONAL, INC.
AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The results of operations previously reported by the separate enterprises
and the combined amounts presented in the accompanying consolidated financial
statements are summarized below:

<TABLE>
<CAPTION>
NINE MONTHS
ENDED
YEAR ENDED SEPTEMBER 30,
DECEMBER 31, 1995
1994 -------------
------------ (UNAUDITED)
<S> <C> <C>
Revenue
BioSource................................................ $6,240,147 5,650,102
Keystone................................................. 1,127,110 693,936
---------- ----------
Combined.............................................. $7,367,257 6,344,038
========== ==========
Net income (loss):
BioSource................................................ $ (347,304) 730,246
Keystone................................................. 137,668 63,271
---------- ----------
Combined.............................................. $ (209,636) 793,517
========== ==========
</TABLE>

Total expenses of approximately $116,000 related to the business
combination have been included in 1995 operations.

(3) INVENTORIES

Inventories at December 31, 1995 are summarized as follows:

<TABLE>
<S> <C>
Raw materials............................................ $ 18,285
Work in process.......................................... 1,791,431
Finished goods........................................... 1,491,492
----------
$3,301,208
==========
</TABLE>

(4) PROPERTY AND EQUIPMENT

Property and equipment at December 31, 1995 are summarized as follows:

<TABLE>
<S> <C>
Computer equipment....................................... $ 235,603
Office furniture and equipment........................... 236,077
Machinery and equipment.................................. 904,695
Leasehold improvements................................... 291,629
----------
1,668,004
Less accumulated depreciation and amortization........... 745,396
----------
$ 922,608
==========
</TABLE>

(5) NOTES PAYABLE

The Company had a credit agreement with a bank providing for borrowings of
up to $500,000 under a revolving line of credit limited to 70% of eligible
accounts receivable, as defined, through December 31, 1995. Interest on the
revolving line of credit is payable monthly at prime (8.5% at December 31, 1995)
plus 1%. Included under the credit agreement is a $150,000 installment note
payable with interest at prime plus 1.375% through June 30, 1998. Borrowings
under the credit agreement are secured by all Company assets. The credit

F-9
<PAGE> 61

BIOSOURCE INTERNATIONAL, INC.
AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

agreement contains restrictive covenants and conditions which require the
Company to meet certain financial tests as defined and restricts the payment of
cash dividends. As of December 31, 1995, the Company was in compliance with
these covenants.

On January 31, 1996, the credit agreement was extended through December 31,
1996. The extension agreement provides for borrowings up to $1,000,000 limited
to 75% of eligible accounts receivable. Interest is payable monthly at prime
plus .75%.

The Company leases approximately $104,000 of certain equipment under a
capital lease. The capital lease obligation is payable in monthly installments
through June 1996, including interest at approximately 11.8%. Accumulated
depreciation related to this equipment was approximately $78,000 at December 31,
1995.

Maturities under the line of credit agreement and the capital lease
obligation at December 31, 1995 are:

<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31:
<S> <C>
1996................................................. $ 65,857
1997................................................. 42,857
1998................................................. 21,429
--------
$130,143
========
</TABLE>

(6) COMMON STOCK

In 1993, BioSource International, Inc. was formed through the consolidation
of BioSource Industries, Inc. (BioSource) and TAGO, Inc. (TAGO) (the
Consolidation). At the effective date of the Consolidation, each two shares of
BioSource common stock then outstanding were converted into one share of Company
common stock and each two performance escrow shares were converted into one
Company performance escrow share. Performance escrow shares are released from
escrow on the basis of one share for every Canadian $.82 of cumulative cash
flow, as defined in the escrow agreement, generated by the Company. Also, each
two allotted escrow shares were converted into the right to receive one Company
allotted escrow share, and each outstanding share of TAGO common stock was
converted into one share of Company common stock. Each allotted share entitles
the holder to acquire one performance escrow share upon payments of Canadian
$.14 per share and once converted are subject to the same terms and conditions
as the performance escrow shares. All references to the number of shares and per
share amounts in the financial statements have been restated to reflect the
conversions.

At December 31, 1994, the Company had 1,101,494 issued and outstanding
shares held in escrow and 3,449 allotted escrow shares outstanding, all of which
had been earned under the terms of the escrow agreement. Of the performance and
allotted escrow shares, 469,180 were issued to directors, officers and others
who could have affected the financial results of the Company (Performance
Shares), and 635,763 were issued to other stockholders. Cumulative cash flow
through December 31, 1994, as defined under the escrow agreement, was sufficient
to release all the escrow and allotted shares. Accordingly, the Company
recognized $577,452 of compensation expense in 1994 related to the Performance
Shares. The 1,101,494 shares held in escrow were released in 1995 and the 3,449
allotted escrow shares were canceled.

(7) STOCK OPTION AND PURCHASE PLANS

During 1995, the Company had three separate stock option plans in effect.

Under the BioSource International, Inc. 1993 Stock Incentive Plan (the 1993
Plan), options may be granted to full-time employees, part-time employees,
directors and consultants of the Company to purchase a maximum of 750,000 shares
of common stock. Options granted under the 1993 Plan are exercisable at the rate

F-10
<PAGE> 62

BIOSOURCE INTERNATIONAL, INC.
AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

of 25% beginning one year from date of grant and an additional 1/48 vest at the
beginning of each month thereafter.

The BioSource California 1992 Stock Incentive Plan (the 1992 Plan) covered
BioSource California employees prior to the Consolidation. Options granted under
the 1992 Plan are exercisable at the rate of 50% per year beginning one year
from date of grant. All options outstanding under this plan are fully
exercisable as of December 31, 1995. Upon the completion of the Consolidation,
the 1992 Plan was replaced by the Company's 1993 Stock Incentive Plan. No
further grants will be made under the 1992 Plan.

The TAGO 1987 Stock Option Plan (the 1987 Plan) covered TAGO employees
prior to the Consolidation and converted to Company stock options upon
completion of the Consolidation. All options remaining under this plan were
exercised or canceled during 1995.

The following summarizes the stock option transactions under the 1993 Plan,
1992 Plan and 1987 Plan for the year ended December 31, 1995:

<TABLE>
<CAPTION>
SHARES OPTION PRICE
-------- ---------------
<S> <C> <C>
Options outstanding at January 1, 1995.................. 746,525 $.85227 -- 2.188
Options granted......................................... 384,000 1.281 -- 3.75
Options exercised....................................... (32,278) .85227 -- 2.188
Options canceled........................................ (269,142) .85227 -- 2.188
--------- ----------------
Options outstanding at December 31, 1995................ 829,105 1.281 -- 3.75
========= ================
Options exercisable at December 31, 1995................ 259,876 1.281 -- 3.75
========= ================
</TABLE>

At December 31, 1995, 794,105 options were outstanding under the 1993 Plan.
Exercisability of 105,000 of these options is subject to stockholder approval of
an amendment to the 1993 Plan to increase the maximum number of shares
available.

In addition to the option plans discussed previously, the Company has
several agreements with certain officers. As of December 31, 1995, 255,000
options with exercise prices ranging from $1.50 per share to $2.6875 per share
had been granted. The outstanding agreements expire from May 2003 through June
2005.

The following summarizes transactions outside the option plans for the year
ended December 31, 1995:

<TABLE>
<CAPTION>
SHARES OPTION PRICE
------- --------------
<S> <C> <C>
Options outstanding at January 1, 1995.................... 100,000 $2.00 -- 2.6875
Options granted........................................... 155,000 1.50 -- 1.6875
Options exercised......................................... -- --
Options canceled.......................................... -- --
------- ---------------
Options outstanding at December 31, 1995.................. 255,000 1.50 -- 2.6875
======= ===============
Options exercisable at December 31, 1995.................. 255,000 1.50 -- 2.6875
======= ===============
</TABLE>

Effective April 7, 1995, the Company adopted an Employee Stock Purchase
Plan to provide substantially all full-time employees, excluding officers, an
opportunity to purchase shares of its common stock through payroll deductions.
In addition, the Company provides a matching contribution equal to 50% of the
participant's contribution. All contributions are invested in the Company's
common stock, which are purchased on the open market at prevailing market
prices. Participants have a fully vested interest in the shares purchased with
payroll deductions and become fully vested in shares purchased with Company
matching contributions after two years. The Company's matching expense was
approximately $4,000 for the year ended December 31, 1995.

F-11
<PAGE> 63

BIOSOURCE INTERNATIONAL, INC.
AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(8) COMMON STOCK WARRANTS

On January 17, 1994, the Company granted warrants to purchase 24,000 shares
of the Company stock to The Equity Group, Inc., with an exercise price of $2.25
per share and an expiration date of January 17, 1999. On July 12, 1994, 18,000
of the warrants were canceled.

On May 19, 1993, the Company granted warrants to purchase 60,000 shares of
the Company stock to Immunoplex, Inc. with an exercise price of $1.85 per share
and an expiration date of May 19, 1998.

No warrants were granted or exercised during the year ended December 31,
1995.

Proceeds from the sale of common stock issued under outstanding warrant
arrangements will be credited to common stock at the time the warrants are
exercised. The Company recorded no charge to operations with respect to these
warrants since the warrants were issued at amounts approximating or exceeding
fair market value.

(9) INCOME TAXES

Effective January 1, 1993, the Company adopted Statement 109, the impact of
which was not material to the Company's financial condition or results of
operations.

The provision for income taxes is as follows:

<TABLE>
<CAPTION>
1994 1995
------- --------
<S> <C> <C>
Current
Federal....................................................... $26,476 $332,000
State and local............................................... 17,334 82,000
Deferred:
Federal....................................................... 4,700 27,000
State and local............................................... (315) 10,000
-------- --------
$48,195 $451,000
======== ========
</TABLE>

The primary components of temporary differences which give rise to deferred
taxes at December 31, 1995 are:

<TABLE>
<S> <C>
Deferred tax asset:
Accruals................................................................ $ 40,000
Reserves................................................................ 51,000
Net operating loss carryforwards........................................ 563,000
Research and development credit carryforward............................ 44,000
--------
Total........................................................... 698,000
Valuation allowance..................................................... 607,000
--------
Net deferred tax assets......................................... $ 91,000
========
Deferred tax liability -- depreciation.................................... $ 65,000
========
</TABLE>

The net change in the total valuation allowance for the years ended
December 31, 1994 and 1995 was a decrease of approximately $120,000 and
$115,000, respectively. The Company continually evaluates the likelihood of
realizing the net operating loss and research and development credit
carryforwards based on actual and anticipated profitability, and will make such
adjustments to the valuation allowance as deemed appropriate.

F-12
<PAGE> 64

BIOSOURCE INTERNATIONAL, INC.
AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Actual income tax expense differs from that obtained by applying the
Federal income tax rate of 34% to income (loss) before income taxes as follows:

<TABLE>
<CAPTION>
1994 1995
--------- ---------
<S> <C> <C>
Computed "expected" tax expense (benefit).................... $ (54,890) $ 548,000
Nondeductible items.......................................... 208,725 74,000
State taxes (net of Federal benefit)......................... 11,263 61,000
Utilization of net operating losses.......................... (112,000) (82,000)
Tax credits.................................................. (4,000) (143,000)
Other........................................................ (903) (7,000)
---------- ----------
Total.............................................. $ 48,195 $ 451,000
========== ==========
</TABLE>

As of December 31, 1995, the Company has a net operating loss (NOL)
carryforward of approximately $1,700,000 for Federal income tax purposes. The
Federal NOL has a carryover period of 15 years and is available to offset future
taxable income, if any, through 2005, subject to an annual statutory limitation.

The Company also has Federal research and development credit carryforwards
of approximately $44,000 which, unless utilized, will expire in various amounts
through 2001.

(10) 401(K) BENEFIT PLAN

The Company has a 401(k) profit sharing plan (the Plan) which covers
substantially all employees of the Company. Plan participants may make voluntary
contributions up to 20% of their earnings up to the statutory limitation. The
Company's contribution to the Plan is discretionary and no contributions were
made in fiscal years 1994 or 1995.

(11) NOTES RECEIVABLE

The Company has notes receivable due from employees of $50,537 at December
31, 1995 which are included with other current assets in the accompanying
consolidated balance sheet. The notes bear interest at an average rate of
approximately 8%.

(12) EXPORTS

The Company's export sales were approximately $1,560,000 or 25% and
$2,300,00 or 27% of total revenue for 1994 and 1995, respectively.

(13) COMMITMENTS AND CONTINGENCIES

The Company leases its facilities and certain equipment under various
noncancelable operating leases. During 1994, the Company entered into a
long-term operating lease through September 30, 2001 and consolidated its
operations into one facility. The Company incurred a lease settlement cost of
approximately $81,000 for vacating certain leased facilities prior to lease
expiration. Rental expense, including the lease settlement cost, during 1994 and
1995 was $373,000 and $200,000, respectively.

F-13
<PAGE> 65

BIOSOURCE INTERNATIONAL, INC.
AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

At December 31, 1995, the future minimum payments under these leases are as
follows:

<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31:
<S> <C>
1996.................................................... $151,743
1997.................................................... 166,898
1998.................................................... 178,845
1999.................................................... 173,607
2000.................................................... 182,291
--------
$853,384
========
</TABLE>

The Company is involved in various threatened legal actions arising in the
ordinary course of business. The potential outcome of these actions and possible
loss, if any, cannot be estimated. However, Company management believes that the
loss, if any, resulting from such legal actions, would not be material to the
financial statements of the Company.

F-14
<PAGE> 66

BIOSOURCE INTERNATIONAL, INC.
AND SUBSIDIARY

CONSOLIDATED BALANCE SHEET
MARCH 31, 1996
(UNAUDITED)

<TABLE>
<S> <C>
ASSETS
Current assets:
Cash and cash equivalents...................................................... $1,301,488
Accounts receivable, less allowance for doubtful accounts of $29,000........... 1,464,221
Inventories.................................................................... 3,384,222
Prepaid expenses and other current assets...................................... 373,993
Deferred income taxes.......................................................... 91,000
----------
Total current assets........................................................ 6,614,924
----------
Property and equipment, net.................................................... 2,439,013
Other assets................................................................... 366,455
----------
$9,420,392
=========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of notes payable............................................ $ 665,489
Accounts payable............................................................... 831,545
Accrued expenses............................................................... 190,304
Income taxes payable........................................................... 237,369
----------
Total current liabilities................................................... 1,924,707
----------
Notes payable, less current maturities........................................... 785,289
Deferred income taxes............................................................ 65,000
Stockholders' equity:
Preferred stock, $.001 par value. Authorized 1,000,000 shares; none issued..... --
Common stock, $0.001 par value. Authorized 20,000,000 shares; issued and
outstanding 5,862,565 shares................................................ 5,863
Additional paid-in capital..................................................... 9,566,806
Accumulated deficit............................................................ (2,927,273)
----------
Net stockholders' equity.................................................... 6,645,396
----------
$9,420,392
=========
</TABLE>

See accompanying notes to consolidated financial statements

F-15
<PAGE> 67

BIOSOURCE INTERNATIONAL, INC.
AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31
(UNAUDITED)

<TABLE>
<CAPTION>
1995 1996
---------- ----------
<S> <C> <C>
Revenue............................................................. $1,924,502 $2,518,557
Cost of goods sold.................................................. 857,705 849,031
---------- ----------
Gross profit...................................................... 1,066,797 1,669,526
---------- ----------
Operating expenses:
Research and development.......................................... 287,764 244,019
Sales and marketing............................................... 309,756 323,442
General and administrative........................................ 351,571 373,540
---------- ----------
Total operating expenses....................................... 949,091 941,001
---------- ----------
Operating income............................................... 117,706 728,525
---------- ----------
Other income, net................................................... 19,470 61,416
---------- ----------
Income before income taxes........................................ 137,176 789,941
Provision for income taxes.......................................... 21,982 270,193
---------- ----------
Net income..................................................... $ 115,194 $ 519,748
---------- ----------
Income per share:
Net income per share.............................................. $ 0.02 $ 0.09
========== ==========
Weighted average number of common shares outstanding................ 5,816,817 5,957,285
========== ==========
</TABLE>

See accompanying notes to consolidated financial statements

F-16
<PAGE> 68

BIOSOURCE INTERNATIONAL, INC.
AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31
(UNAUDITED)

<TABLE>
<CAPTION>
1995 1996
-------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net income........................................................ $115,194 $ 519,748
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization.................................. 39,159 55,385
Changes in assets and liabilities:
Accounts receivable............................................ (79,347) (74,361)
Inventories.................................................... (3,274) (83,014)
Prepaid expenses and other current assets...................... (90,586) (34,672)
Other assets................................................... (11,638) (218,940)
Accounts payable............................................... 88,195 104,914
Accrued expenses............................................... (24,119) (140,849)
-------- ----------
Net cash provided by operating activities................. 33,584 128,211
-------- ----------
Cash flows from investing activities:
Purchase of property and equipment................................ (84,325) (1,571,790)
-------- ----------
Cash flows from financing activities:
Proceeds from the exercise of options............................. 10,171 31,340
Borrowings from bank.............................................. 28,000 1,341,000
Repayments to bank................................................ (15,068) (10,715)
Payments of capital lease obligations............................. (8,579) (9,650)
-------- ----------
Net cash provided by financing activities................. 14,524 1,351,975
-------- ----------
Net decrease in cash and cash equivalents................. (36,217) (91,604)
Cash and cash equivalents at beginning of period.................... 883,760 1,393,092
-------- ----------
Cash and cash equivalents at end of period.......................... $847,543 $ 1,301,488
======== ==========
</TABLE>

See accompanying notes to consolidated financial statements

F-17
<PAGE> 69

BIOSOURCE INTERNATIONAL, INC.
AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The unaudited financial statements as of March 31, 1996 and for the three
month periods ended March 31, 1995 and 1996 included herein have been prepared
by the Company, without audit, pursuant to the rules and regulations of the
Securities and Exchange Commission. Certain information and footnote disclosures
normally included in financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted pursuant to such
rules and regulations. However, the Company believes that the disclosures are
adequate to prevent the information presented from being misleading. These
financial statements should be read in conjunction with the financial statements
and the notes thereto included in the Company's Form 10-KSB, which contains
financial information for the year ended December 31, 1995.

The information provided in this report reflects all adjustments that are,
in the opinion of management, necessary to present fairly the results of
operations for these periods. The results of these periods are not necessarily
indicative of the results to be expected for the full year.

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation

The Company is engaged in the licensing, development, manufacture,
marketing and distribution of immunological reagents, test kits and
oligonucleotides used in biomedical research. The types of products supplied by
the Company include a range of bioactive proteins, enzymes, substrates,
antibodies, human and murine cytokines, growth factors and a variety of assay
systems for the detection of biological molecules. These products focus on areas
of research such as immunology, AIDS and cancer. The Company focuses its sales
efforts on academic, industrial and governmental laboratories.

Cash and Cash Equivalents

Cash and cash equivalents includes all cash balances and highly liquid
investments with an original maturity of three months or less.

Inventories

Inventories are stated at the lower of cost (first-in, first-out) or market
(net realizable value) for raw materials and work in process and the
average-cost method for finished goods.

Property and Equipment

License Agreements

F-18
<PAGE> 70

BIOSOURCE INTERNATIONAL, INC.
AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Income Taxes

The Company accounts for income taxes under Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes." Statement 109
requires the use of the asset and liability method of accounting for income
taxes. Under the asset and liability method of Statement 109, deferred income
taxes are recognized for the future tax consequences attributable to differences
between the financial statement carrying amounts of existing assets and
liabilities and their respective tax bases. Deferred tax assets and liabilities
are measured using enacted tax rates expected to apply to taxable income in the
years in which those temporary differences are expected to be recovered or
settled. Under Statement 109, the effect on deferred taxes of a change in tax
rates is recognized in income in the period that includes the enacted date.

Long Lived Assets

In March 1995, Statement of Financial Accounting Standards No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
be Disposed Of," was issued. This statement provides guidelines for recognition
of impairment losses related to long-term assets. Effective January 1, 1996, the
Company adopted Statement No. 121. The adoption of this new standard did not
have a material effect on the Company's consolidated financial statements.

Accounting for Stock Options

In October 1995, Statement of Financial Accounting Standards No. 123,
"Accounting for Stock-Based Compensation" ("Statement No. 123"), was issued.
This statement encourages, but does not require a fair value based method of
accounting for employee stock options. The Company will continue to measure
compensation costs pursuant to APB Opinion No. 25, "Accounting for Stock Issued
to Employees" and comply with the pro forma disclosure requirements of Statement
No. 123. Effective January 1, 1996, the Company adopted Statement No. 123 which
had no impact on the Company's consolidated financial statements.

Net Income per Share

Net income per share has been computed using the weighted average number of
common shares outstanding each quarter. The Company's common share equivalents
associated with dilutive stock options and warrants are immaterial, and
accordingly, primary and fully diluted net income per share are approximately
the same.

2. INVENTORIES

Inventories are summarized as follows:

<TABLE>
<CAPTION>
MARCH 31,
1996
----------
<S> <C>
Raw materials............................................................ $ 27,581
Work in process.......................................................... 1,778,899
Finished goods........................................................... 1,577,742
----------
$3,384,222
==========
</TABLE>

F-19
<PAGE> 71

BIOSOURCE INTERNATIONAL, INC.
AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

3. PROPERTY AND EQUIPMENT

Property and equipment are summarized as follows:

<TABLE>
<CAPTION>
MARCH 31,
1996
----------
<S> <C>
Land..................................................................... $ 270,000
Building and improvements................................................ 1,510,769
Leasehold improvements................................................... 7,423
Computer equipment....................................................... 265,262
Office furniture and fixtures............................................ 190,694
Machinery and equipment.................................................. 995,646
----------
3,239,794
Less accumulated depreciation and amortization........................... 800,781
----------
$2,439,013
==========
</TABLE>

4. NOTES PAYABLE

On March 31, 1996 the Company had a credit agreement with a bank providing
for borrowings of up to $1,000,000 under a revolving line of credit limited to
75% of eligible accounts receivable, as defined per the borrowing agreement.
Interest on the revolving line of credit is payable monthly at prime plus .75%.
Included under the credit agreement is a $150,000 installment note payable with
interest at prime plus 1.375% through June 30, 1998. Borrowings under the credit
agreement are secured by all Company assets.

On March 28, 1996, the Company purchased its existing executive offices and
manufacturing facilities, consisting of approximately 27,000 square feet located
on 63,162 square feet of land in Camarillo, California. These offices and
manufacturing facilities, leased by the Company prior to the purchase date, are
subject to a first trust deed mortgage (the "First Mortgage") which was made by
the lender pursuant to the Small Business Administration's Loan Guarantee
Program. At March 31, 1996, the First Mortgage had an outstanding balance of
$745,000 with unpaid principal due on April 1, 2006. The principal amount of the
loan is being amortized over twenty years. Pursuant to the First Mortgage, the
Company is obligated to make monthly payments of $6,895, which include interest
at 9.4% per annum. The property is also subject to a second trust deed loan (the
"Second Mortgage") with the California Statewide Development Corp. with an
outstanding principal balance of $616,000 as of the date of sale of the
debenture which is scheduled for funding by June 1, 1996. The second mortgage is
subject to a fixed rate of approximately 7.75% per annum, payable and amortized
over twenty years, due approximately June 1, 2016, with estimated monthly
payments of principle and interest of $5,057. As of March 31, 1996 there is a
bridge loan in the amount of $596,000 payable to the holder of the First
Mortgage which is subject to a fixed rate of 9.75%. The bridge loan will be
funded upon the sale of the debenture underlying the Second Mortgage by the
California Statewide Certified Development Corporation. Payments by the Company
under the First Mortgage and the Second Mortgage are unconditionally guaranteed
by James H. Chamberlain, Chief Executive Officer and President of the Company.

F-20
<PAGE> 72

BIOSOURCE INTERNATIONAL, INC.
AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

At March 31, 1996 the estimated minimum payments on these notes are as
follows:

<TABLE>
<S> <C>
1996........................................................... $ 637,987
1997........................................................... 57,106
1998........................................................... 37,076
1999........................................................... 17,183
2000........................................................... 18,870
Thereafter..................................................... 669,206
----------
$1,437,428
==========
</TABLE>

5. COMMON STOCK WARRANTS

The Company has entered into an agreement in principle to acquire certain
assets and selected liabilities of Medgenix Diagnostics, S.A. related to its in
vitro diagnostic business (the "Medgenix acquisition").

On February 1, 1996, the Company granted a warrant to purchase 100,000
shares of the Company's common stock to Nordion International Inc. ("Nordion"),
the ultimate parent of Medgenix Diagnostics, S.A., with an exercise price equal
to the lesser of (i) $7.50 per share, or (ii) 115% of the closing sale price of
the common stock on the date of closing of the Medgenix acquisition. The warrant
was fully vested on the date of grant and expires on February 1, 2001.

The warrant was issued to provide incentive for Nordion to sign a formal
letter of intent to sell the Medgenix business to the Company. The fair value of
the warrant will be considered a component of the purchase price upon closing of
the acquisition. The fair value of the warrant of $197,000 was estimated on the
date of grant using the Black-Scholes option pricing model and has been included
as a component of "prepaid expenses and other current assets" and "additional
paid-in capital" in the consolidated balance sheet as of March 31, 1996. If the
acquisition is not completed, the fair value of the warrant will be charged to
operations.

6. LEASE COMMITMENTS

The Company leases manufacturing premises for its wholly owned subsidiary
under an operating lease expiring on April 30, 1998 and renewable for a
three-year period upon expiration of the initial term.

The subsidiary also leases approximately $104,000 of certain equipment
under a capital lease. The capital lease obligation is payable in monthly
installments through June 1996, including interest at approximately 11.8%.

At March 31, 1996 the estimated future minimum payments under these leases
are as follows:

<TABLE>
<CAPTION>
CAPITAL OPERATING
LEASES LEASES
------- ---------
<S> <C> <C>
1996............................................................ $13,350 $ 9,587
1997............................................................ -- 13,479
1998............................................................ -- 4,592
------- -------
$13,350 $27,658
======= =======
</TABLE>

7. INCOME TAXES

Income taxes for the interim periods were computed using the effective tax
rate estimated to be applicable for the full fiscal year, which is subject to
ongoing review by management.

F-21
<PAGE> 73

INDEPENDENT AUDITORS' REPORT

THE BOARD OF DIRECTORS
MEDGENIX DIAGNOSTICS, S.A.

We have audited the accompanying consolidated balance sheet of the in vitro
business segment of Medgenix Diagnostics, S.A. and subsidiaries as of October
31, 1995, and the related consolidated statements of operations, changes in net
assets and cash flows for the years ended October 31, 1994 and 1995. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.

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

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of the in vitro
business segment of Medgenix Diagnostics, S.A. and subsidiaries as of October
31, 1995 and the results of their operations and their cash flows for each of
the years ended October 31, 1994 and 1995 in conformity with generally accepted
accounting principles in the United States.

KPMG Reviseurs d'Entreprises

Brussels
May 23, 1996

F-22
<PAGE> 74

MEDGENIX DIAGNOSTICS, S.A.
(IN VITRO BUSINESS)

CONSOLIDATED BALANCE SHEET
OCTOBER 31, 1995
(IN THOUSANDS)

<TABLE>
<S> <C>
ASSETS
Current assets:
Cash and cash equivalents........................................................ $ 2,006
Accounts receivable, less allowance for doubtful accounts of $333................ 4,407
Inventories...................................................................... 3,115
Prepaid expenses and other current assets........................................ 1,050
-------
Total current assets..................................................... 10,578
Property and equipment, net........................................................ 1,196
Other assets....................................................................... 64
-------
$11,838
=======
LIABILITIES AND NET ASSETS
Current liabilities:
Notes payable to bank............................................................ $ 192
Accounts payable................................................................. 2,249
Accrued expenses................................................................. 1,923
Income taxes payable............................................................. 391
-------
Total current liabilities................................................ 4,755
Commitments and contingencies
Net Assets:
Financing in vitro business by Medgenix Diagnostics, S.A. ....................... 16,050
Consolidation difference......................................................... (3,525)
Loss brought forward since November 1, 1993...................................... (2,666)
Current year loss................................................................ (2,473)
Translation differences.......................................................... (303)
-------
Net Assets............................................................... 7,083
-------
$11,838
=======
</TABLE>

See accompanying notes to consolidated financial statements.

F-23
<PAGE> 75

MEDGENIX DIAGNOSTICS, S.A.
(IN VITRO BUSINESS)

CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED OCTOBER 31, 1994 AND 1995
(IN THOUSANDS)

<TABLE>
<CAPTION>
1994 1995
------- -------
<S> <C> <C>
Revenue.................................................................. $11,575 $11,313
Cost of goods sold....................................................... 4,710 4,405
------- -------
Gross profit........................................................... 6,865 6,908
Operating expenses:
Research and development............................................... 1,973 1,655
Selling and marketing.................................................. 4,104 3,532
General and administrative............................................. 3,353 4,045
------- -------
Total operating expenses............................................ 9,430 9,232
------- -------
Operating loss...................................................... (2,565) (2,324)
Other income (expense):
Interest expense....................................................... (163) (189)
Interest income........................................................ 142 140
------- -------
Total other expense................................................. (21) (49)
------- -------
Loss before income taxes................................................. (2,586) (2,373)
Provision for income taxes............................................. 80 100
------- -------
Net loss................................................................. $(2,666) $(2,473)
======= =======
</TABLE>

See accompanying notes to consolidated financial statements.

F-24
<PAGE> 76

MEDGENIX DIAGNOSTICS, S.A.
(IN VITRO BUSINESS)

CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS
YEARS ENDED OCTOBER 31, 1995 AND 1994
(IN THOUSANDS)

<TABLE>
<CAPTION>
FINANCING IN VITRO
BUSINESS BY
MEDGENIX ACCUMULATED CONSOLIDATION TRANSLATION
DIAGNOSTICS, S.A. DEFICIT DIFFERENCE DIFFERENCE
------------------- ----------- ------------- -----------
<S> <C> <C> <C> <C>
Balance at November 1, 1993........... $ 9,672 $ -- $(3,525) $ (58)
Additional financing in vitro......... 3,166
Net loss.............................. (2,666)
Translation difference................ (212)
------- ------- ------- -----
Balance at October 31, 1994........... 12,838 (2,666) (3,525) (270)
Additional financing in vitro......... 3,212
Net loss.............................. (2,473)
Translation difference................ (33)
------- ------- ------- -----
Balance at October 31, 1995........... $16,050 $(5,139) $(3,525) $(303)
======= ======= ======= =====
</TABLE>

See accompanying notes to consolidated financial statements.

F-25
<PAGE> 77

MEDGENIX DIAGNOSTICS, S.A.
(IN VITRO BUSINESS)

CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED OCTOBER 31, 1994 AND 1995
(IN THOUSANDS)

<TABLE>
<CAPTION>
1994 1995
------- -------
<S> <C> <C>
Cash flows from operating activities:
Net loss............................................................... $(2,666) $(2,473)
Adjustments to reconcile net loss to net cash used in operating
activities:
Depreciation and amortization....................................... 485 509
Changes in translation differences and consolidation differences.... (383) 9
Changes in assets and liabilities:
Accounts receivable................................................. 1,279 (505)
Inventories......................................................... 613 236
Prepaid expenses and other assets................................... 409 (134)
Accounts payable.................................................... (2,188) (164)
Accrued expenses.................................................... 436 (884)
Income taxes payable................................................ (13) 164
------- -------
Net cash used in operating activities.................................. (2,028) (3,242)
------- -------
Cash flows from investing activities -- purchase of property and
equipment.............................................................. 26 (317)
------- -------
Cash flows from financing activities:
Repayments to banks.................................................... (1,070) (115)
Financing in vitro..................................................... 3,166 3,212
------- -------
Net cash provided by financing activities.............................. 2,096 3,097
------- -------
Net increase (decrease) in cash and cash equivalents..................... 94 (462)
------- -------
Cash and cash equivalents at beginning of year........................... 2,374 2,468
------- -------
Cash and cash equivalents at end of year................................. $ 2,468 $ 2,006
======= =======
</TABLE>

See accompanying notes to consolidated financial statements.

F-26
<PAGE> 78

MEDGENIX DIAGNOSTICS, S.A.
(IN VITRO BUSINESS)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
OCTOBER 31, 1995

(1) DESCRIPTION OF BUSINESS

Medgenix Diagnostics, S.A. is a company incorporated under Belgian law with
subsidiaries in the United Kingdom, France, Italy, Spain, Switzerland and The
Netherlands. Medgenix Diagnostics, S.A. is a wholly owned subsidiary of Nordion
Europe, S.A. Its principal activities comprise two business segments: the in
vivo and in vitro products.

The financial statements reflect only the in vitro business segment. This
segment is involved in the development, manufacture, marketing and distribution
of immunological reagents and test kits used in biomedical research.

(2) BASIS OF PRESENTATION

The financial statements have been prepared in accordance with generally
accepted accounting principles in the United States.

The financial statements have been prepared in the context of the
acquisition by BioSource International, Inc. of the in vitro business of
Medgenix Diagnostics, S.A.

The consolidated financial statements include all significant components of
the in vitro business. They have been prepared as if the in vitro business had
operated as a separate entity during all periods presented.

The financing of the in vitro segment is presented under the heading
"Financing in vitro". No interest charge on this account has been recorded.

The consolidated financial statements do not include the assets of the in
vivo business and of Nordion Europe S.A. However, an allocation of the cost of
shared facilities as well as allocated expenses relating to corporate
accounting, financial, administrative, marketing and selling services provided
by Medgenix Diagnostics, S.A. and Nordion Europe, S.A. to the in vitro business
are included in the consolidated statements of operations. Expenses are
allocated on the basis of actual usage or using other allocation methods which
approximate actual usage. Management believes that the allocation methods are
reasonable.

(3) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation

The consolidated financial statements include all the operations and
accounts of the in vitro business of Medgenix Diagnostics, S.A. All significant
intercompany accounts and transactions have been eliminated.

The difference between the acquisition cost of the investment in the
subsidiary and the net equity as at the date of first consolidation is shown
under the heading "Consolidation Differences".

Foreign Currency Translation

In consolidating the operations, currency effects are recorded and included
in the consolidated financial statements under the heading "Translation
Difference".

The translation difference results from the translation into United States
currency of all balance sheet assets and liabilities at the year end rate and
the statement of operations at an average rate for the year.

Cash and Cash Equivalents

Cash and cash equivalents include all cash balances and highly liquid
investments in debt instruments with an original maturity of three months or
less.

F-27
<PAGE> 79

MEDGENIX DIAGNOSTICS, S.A.
(IN VITRO BUSINESS)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Inventories

Inventories are stated at the lower of cost (first-in, first-out) or market
(net realizable value) for raw materials and work in process, and at
average-cost for finished goods.

Property and Equipment

Property and equipment are stated at cost. Depreciation is provided using
the straight-line method over the estimated useful lives of the assets which
range from three to ten years. Leasehold improvements are amortized using the
straight-line method over their estimated useful lives or the lease term,
whichever is shorter.

Revenue Recognition

Revenue and related cost of goods sold are recognized upon shipment of
products.

Research and Development Costs

Research and development costs and any related subsidies obtained are
charged or credited to the Statement of Operations as incurred.

Income Taxes

The in vitro business operations are included in the respective local tax
returns of Medgenix Diagnostics, S.A. and each of its subsidiaries. The
consolidated financial statements include the provision for income taxes for the
operating entities that have a net taxable income.

The Company uses the asset and liability method for accounting for income
taxes. Under the asset and liability method, deferred income taxes are
recognized for the future tax consequences attributable to differences between
the financial statement carrying amounts of existing assets and liabilities and
their respective tax bases. Deferred tax assets and liabilities are measured
using enacted tax rates expected to apply to taxable income in the years in
which those temporary differences are expected to be recovered or settled.

The primary temporary difference which would give rise to a deferred tax
asset is net operating losses available for offset against future taxable
income. As the management of the Company is of the opinion that it is not in a
position to confirm that it is more likely than not that the Company will be
able to realize the future tax benefit resulting from these losses, a valuation
allowance has been recorded for the amount of the related deferred tax asset.
Temporary differences which give rise to deferred tax liabilities are
immaterial.

The difference between the expected tax benefit and the tax expense
recorded in 1994 and 1995 relates primarily to the provision for income taxes
for the operating entities that have a net taxable income which cannot be
compensated by the tax losses of the other entities.

In addition, as the tax losses can only be used by Medgenix Diagnostics,
S.A., no allocation between in vivo and in vitro has been made.

F-28
<PAGE> 80

MEDGENIX DIAGNOSTICS, S.A.
(IN VITRO BUSINESS)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(4) INVENTORIES

Inventories at October 31, 1995 are summarized as follows (in thousands):

<TABLE>
<S> <C>
Raw materials....................................................... $ 771
Work in process..................................................... 782
Finished goods...................................................... 1,562
------
$3,115
======
</TABLE>

(5) PROPERTY AND EQUIPMENT

Property and equipment at October 31, 1995 are summarized as follows (in
thousands):

<TABLE>
<S> <C>
Buildings........................................................... $ 26
Leasehold improvements.............................................. 498
Machinery and equipment............................................. 2,978
Furniture and equipment............................................. 405
Corporate equipment................................................. 1,253
------
5,160
Less accumulated depreciation....................................... 3,964
------
$1,196
======
</TABLE>

(6) COMMITMENTS AND CONTINGENCIES

Since 1987, Medgenix Diagnostics, S.A. has received subsidies from the
Region Wallone to finance certain of its R&D activities. If a R&D project
culminates in a commercial product, the Company will have to reimburse the
subsidies received by way of royalties on the related sales. These royalties are
recorded and charged to the income statement during the year in which they
occur.

The revenues and costs incurred are summarized as follows (in thousands):

<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Revenues...................................................... $357 $ 43
Costs......................................................... 307 258
</TABLE>

The cumulative subsidies received to date but not yet reimbursed at October
31, 1995 is summarized as follows (in thousands):

<TABLE>
<S> <C>
Subsidies:
Received....................................................... $8,511
Included in accounts receivable................................ 444
------
8,955
Royalties:
Paid........................................................... (973)
Accrued........................................................ (82)
------
Subsidies received but not yet reimbursed........................... $7,900
======
</TABLE>

At October 31, 1995, the Company had not recorded a liability for these
subsidies as it has the option of submitting all related R&D data to Region
Wallone in exchange for the subsidies received.

F-29
<PAGE> 81

MEDGENIX DIAGNOSTICS, S.A.
(IN VITRO BUSINESS)

CONSOLIDATED BALANCE SHEET
JANUARY 31, 1996
(IN THOUSANDS)
(UNAUDITED)

ASSETS

<TABLE>
<S> <C>
Current Assets:
Cash and cash equivalents...................................................... $ 2,181
Accounts receivable, less allowance for doubtful accounts of $324.............. 4,194
Inventories.................................................................... 2,958
Prepaid expenses and other current assets...................................... 1,424
-------
Total current assets................................................... 10,757
Property and equipment, net...................................................... 1,120
Other assets..................................................................... 60
-------
$11,937
=======
</TABLE>

LIABILITIES AND NET ASSETS

<TABLE>
<S> <C>
Current liabilities:
Note payable to bank........................................................... $ 184
Accounts payable............................................................... 2,386
Accrued expenses............................................................... 1,754
-------
Total current liabilities.............................................. 4,324
Commitments and contingencies:
Net Assets:
Financing in vitro business by Medgenix Diagnostics, S.A....................... 16,426
Accumulated deficit............................................................ (5,290)
Consolidation difference....................................................... (3,405)
Translation differences........................................................ (118)
-------
Net Assets............................................................. 7,613
-------
$11,937
=======
</TABLE>

See accompanying notes to consolidated financial statements.

F-30
<PAGE> 82

MEDGENIX DIAGNOSTICS, S.A.
(IN VITRO BUSINESS)

CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED JANUARY 31
(IN THOUSANDS)
(UNAUDITED)

<TABLE>
<CAPTION>
1995 1996
------ ------
<S> <C> <C>
Revenue............................................................ $2,708 $2,926
Cost of sales...................................................... 1,013 1,160
------ ------
Gross Profit..................................................... 1,695 1,766
------ ------
Operating expenses:
Research and development......................................... 364 388
Selling and marketing............................................ 852 775
General and administrative....................................... 936 783
------ ------
Total operating expenses................................. 2,152 1,946
------ ------
Operating loss........................................... (457) (180)
Other income (expense):
Interest expense................................................. (39) (14)
Interest income.................................................. 14 50
------ ------
Loss before income taxes........................................... (482) (144)
Provision for income taxes......................................... (1) (7)
------ ------
Net loss................................................. $ (483) $ (151)
====== ======
</TABLE>

See accompanying notes to consolidated financial statements.

F-31
<PAGE> 83

MEDGENIX DIAGNOSTICS, S.A.
(IN VITRO BUSINESS)

CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED JANUARY 31
(IN THOUSANDS)
(UNAUDITED)

<TABLE>
<CAPTION>
1995 1996
------ ------
<S> <C> <C>
Cash flows from operating activities:
Net loss................................................................. $ (483) $ (151)
Adjustments to reconcile net loss to net cash used in operating
activities...........................................................
Depreciation and amortization......................................... 113 166
Changes in translation differences & consolidation differences........ 75 --
Changes in assets and liabilities
Accounts receivable................................................... 467 63
Inventories........................................................... 168 51
Prepaid expenses and other assets..................................... (124) (410)
Accounts payable...................................................... 213 213
Accrued expenses...................................................... (773) (103)
Income taxes payable.................................................. (210) (378)
------ ------
Net cash used in operating activities................................. (554) (549)
Cash flows from investing activities -- purchase of property and
equipment................................................................ (18) (128)
Cash flows from financing activities:
Repayments to bank....................................................... (63) (1)
Financing in-vitro....................................................... 342 921
------ ------
Net cash provided by financing activities........................ 279 920
------ ------
Net increase (decrease) in cash and cash equivalents............. (293) 243
Cash and cash equivalents at beginning of period........................... 2,283 1,938
------ ------
Cash and cash equivalents at end of period................................. $1,990 $2,181
====== ======
</TABLE>

See accompanying notes to consolidated financial statements.

F-32
<PAGE> 84

MEDGENIX DIAGNOSTICS, S.A.
(IN VITRO BUSINESS)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The unaudited financial statements as of January 31, 1996 and for the three
month periods ended January 31, 1995 and 1996 included herein have been prepared
by the in vitro business. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted. However, the in vitro
business believes that the disclosures are adequate to prevent the information
presented from being misleading. These financial statements should be read in
conjunction with the financial statements and the notes thereto included in the
in vitro business' annual report for the year ended October 31, 1995.

(1) DESCRIPTION OF BUSINESS

Medgenix Diagnostics, S.A. is a company incorporated under Belgian law with
subsidiaries in the United Kingdom, France, Italy, Spain, Switzerland and The
Netherlands. Medgenix Diagnostics, S.A. is a wholly owned subsidiary of Nordion
Europe, S.A. Its principle activities comprise two business segments: the in
vivo and in vitro products.

(2) BASIS OF PRESENTATION

The financial statements have been prepared in accordance with generally
accepted accounting principles in the United States.

The financial statements have been prepared in the context of the
acquisition by BioSource International, Inc. of the in vitro business of
Medgenix Diagnostics, S.A.

The consolidated financial statements include all significant components of
the in vitro business. They have been prepared as if the in vitro business
operated as a separate entity during all periods presented.

The financing of the in vitro segment is presented under the heading
"Financing in vitro." No interest charge on this account has been recorded.

The consolidated financial statements do not include the assets of the in
vivo business and of Nordion Europe, S.A. However, an allocation of the cost of
shared facilities as well as allocated expenses relating to corporate
accounting, financial, administrative, marketing and selling services provided
by Medgenix Diagnostics, S.A. and Nordion Europe, S.A. to the in vitro business
are included in the consolidated statements of operations. Expenses are
allocated on the basis of actual usage or using other allocation methods which
approximate actual usage. Management believes that the allocation methods are
reasonable.

(3) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation

The difference between the acquisition cost of the investment in the
subsidiary and the net equity as at the date of first consolidation is shown
under the heading "Consolidation Differences."

F-33
<PAGE> 85

MEDGENIX DIAGNOSTICS, S.A.
(IN VITRO BUSINESS)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Foreign Currency Translation

In consolidating the operations, currency effects are recorded and included
in the consolidated financial statements under the heading "Translation
Difference."

Cash and Cash Equivalents

Cash and cash equivalents include all cash balances and highly liquid
investments in debt instruments with an original maturity of three months or
less.

Inventories

Inventories are stated at the lower of cost (first-in, first-out) or market
(net realizable value) for raw materials and work in process, and at
average-cost for finished goods.

Property and Equipment

Property and equipment are stated at cost. Depreciation is provided using
the straight-line method over the estimated useful lives of the assets which
range from three to ten years. Leasehold improvements are amortized using the
straight-line method over the estimated useful lives or the lease term,
whichever is shorter.

Revenue Recognition

Revenue and related cost of goods sold are recognized upon shipment of
products.

Research and Development Costs

Research and development costs and any related subsidies obtained are
charged or credited to the Statement of Operations as incurred.

Income Taxes

F-34
<PAGE> 86

MEDGENIX DIAGNOSTICS, S.A.
(IN VITRO BUSINESS)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The difference between the expected tax benefit and the tax benefit
recorded for the three month periods ended January 31, 1995 and 1996 relates
primarily to the provision for income taxes for the operating entities that have
a net taxable income which cannot be compensated by the tax losses of the other
entities.

In addition, as the tax losses can only be used by Medgenix Diagnostics,
S.A. no allocation between in vivo and in vitro has been made.

F-35
<PAGE> 87

BIOSOURCE INTERNATIONAL, INC. AND SUBSIDIARY

INTRODUCTION TO THE UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
FINANCIAL INFORMATION

The following Unaudited Pro Forma Condensed Consolidated Financial
Statements give effect to the following transactions as if they had occurred as
of March 31, 1996 for purposes of the pro forma condensed consolidated balance
sheet data and as of the beginning of the period for purposes of the pro forma
condensed consolidated statements of operations: (1) the acquisition of certain
assets and assumption of certain liabilities of Medgenix Diagnostics, S.A.
(Medgenix) which relate to the in vitro business of Medgenix in exchange for
cash of $6,868,000 and (2) the issuance of 2,393,000 shares of the Company's
Common Stock through a secondary offering at an initial public offering price of
$9.25 per share (including the sale of 31,000 shares of Common Stock to be
issued by the Company upon exercise of warrants by two of the Selling
Stockholders for which the Company will receive net proceeds of $59,750). The
principal use of proceeds from this offering is to fund the Medgenix in-vitro
business acquisition. Both of these transactions are expected to be consummated
in June 1996.

The Unaudited Pro Forma Condensed Consolidated Financial Statements do not
purport to present the financial position or results of operations of BioSource
had the transactions assumed therein occurred on the dates specified, nor are
they necessarily indicative of the results of operations that may be achieved in
the future.

The following Unaudited Pro Forma Condensed Consolidated Financial
Statements for the year ended December 31, 1995 and for the three months ended
March 31, 1996 do not reflect certain cost savings that management believes may
be realized as a result of the acquisition. These savings are expected to be
realized primarily through the elimination of duplicative corporate overhead
expenses, reduced work force and sales and marketing expenses. No assurances can
be made as to the amount of cost savings, if any, that actually will be
realized.

The Unaudited Pro Forma Condensed Consolidated Financial Statements are
based on certain assumptions and adjustments described in the Notes to Unaudited
Pro Forma Condensed Consolidated Financial Statements included herein and should
be read in conjunction with Management's Discussion and Analysis of Financial
Condition and Results of Operations and the Consolidated Financial Statements of
the Company and the related Notes thereto and the Combined Financial Statements
of Medgenix and the related Notes thereto included herein.

BioSource reports its financial information on the basis of a December 31
fiscal year. Medgenix reports its financial information on the basis of an
October 31 fiscal year.

F-36
<PAGE> 88

BIOSOURCE INTERNATIONAL, INC. AND SUBSIDIARY

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET

MARCH 31, 1996

<TABLE>
<CAPTION>
HISTORICAL
------------------------------------ PRO FORMA
BIOSOURCE MEDGENIX PRO FORMA CONSOLIDATED
MARCH 31, 1996 JANUARY 31, 1996 ADJUSTMENTS MARCH 31, 1996
--------------- ---------------- ----------- --------------
<S> <C> <C> <C> <C>
Current assets:
Cash and cash equivalents..... $ 1,301,488 $ 2,181,000 $19,478,855(a) $ 13,912,343
(6,868,000)(b)
(2,181,000)(c)
Accounts receivable, less
allowance for doubtful
accounts................... 1,464,221 4,194,000 (2,324,000)(d) 3,334,221
Inventories................... 3,384,222 2,958,000 6,342,222
Prepaid expenses and other
current assets............. 373,993 1,424,000 (197,000)(e) 1,600,993
Deferred income taxes......... 91,000 -- 91,000
----------- ----------- ----------- -----------
Total current
assets.............. 6,614,924 10,757,000 7,908,855 25,280,779
Unallocated excess net book
value over purchase price..... -- -- 1,436,000(f)
197,000(e) 1,633,000
Property and equipment.......... 2,439,013 1,120,000 3,559,013
Other assets.................... 366,455 60,000 426,455
----------- ----------- ----------- -----------
$ 9,420,392 $ 11,937,000 $ 9,541,855 $ 30,899,247
=========== =========== =========== ===========
Current liabilities:
Current maturities of notes
payable.................... $ 665,489 $ 184,000 $ 849,489
Accounts payable.............. 831,545 2,386,000 (1,271,000)(d) 1,946,545
Accrued expenses.............. 190,304 1,754,000 (1,053,000)(d) 891,304
Income taxes payable.......... 237,369 -- 237,369
----------- ----------- ----------- -----------
Total current
liabilities......... 1,924,707 4,324,000 (2,324,000) 3,924,707
Notes payable, less current
maturities.................... 785,289 -- 785,289
Deferred income taxes........... 65,000 -- 65,000
Commitments and contingencies:
Stockholders' equity:
Preferred stock............... -- -- --
Common stock.................. 5,863 -- 2,393(a) 8,256
Additional paid-in capital.... 9,566,806 -- 19,476,462(a) 29,043,268
Financing in vitro business by
Medgenix Diagnostics,
S.A. ...................... -- 16,426,000 --
Consolidation difference...... -- (3,405,000) --
(2,181,000)(c)
(3,972,000)(f)
(6,868,000)(b)
Accumulated deficit........... (2,927,273) (5,290,000) 5,290,000(f) (2,927,273)
Translation difference........ -- (118,000) 118,000(f) --
----------- ----------- ----------- -----------
Net stockholders'
equity.............. 6,645,396 7,613,000 11,865,855 26,124,251
----------- ----------- ----------- -----------
$ 9,420,392 $ 11,937,000 $ 9,541,855 $ 30,899,247
=========== =========== =========== ===========
</TABLE>

See notes to unaudited pro forma condensed consolidated financial statements.

F-37
<PAGE> 89

BIOSOURCE INTERNATIONAL, INC. AND SUBSIDIARY

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS

YEAR ENDED DECEMBER 31, 1995

<TABLE>
<CAPTION>
HISTORICAL
------------------------------------
BIOSOURCE MEDGENIX PRO FORMA
----------------- ---------------- -----------------
YEAR ENDED YEAR ENDED PRO FORMA YEAR ENDED
DECEMBER 31, 1995 OCTOBER 31, 1995 ADJUSTMENTS DECEMBER 31, 1995
----------------- ---------------- ------------ -----------------
<S> <C> <C> <C> <C>
Revenue.............................. $ 8,608,447 $ 11,313,000 $19,921,447
Cost of goods sold................... 2,996,103 4,405,000 7,401,103
---------- ----------- -----------
Gross profit............... 5,612,344 6,908,000 12,520,344
---------- ----------- -----------
Operating expenses:
Research and development........... 1,073,733 1,655,000 2,728,733
Sales and marketing................ 1,289,939 3,532,000 4,821,939
General and administrative......... 1,633,649 4,045,000 109,000(g) 5,787,649
---------- ----------- ------- -----------
Total operating expenses... 3,997,321 9,232,000 109,000 13,338,321
---------- ----------- ------- -----------
Operating income (loss).... 1,615,023 (2,324,000) (109,000) (817,977)
Other expenses, net.................. (3,644) (49,000) (52,644)
---------- ----------- ------- -----------
Income (loss) before income
taxes.................... 1,611,379 (2,373,000) (109,000) (870,621)
Provision for income taxes........... 451,000 100,000 551,000
---------- ----------- ------- -----------
Net income (loss).......... $ 1,160,379 $ (2,473,000) (109,000) $(1,421,621)
========== =========== ======= ===========
Income (loss) per share:
Net income (loss) per
share.................... $ 0.20 $ (0.17)
========== ===========
Weighted average number of common
shares outstanding................. 5,945,900 8,338,900
========== ===========
</TABLE>

See notes to unaudited pro forma condensed consolidated financial statements.

F-38
<PAGE> 90

BIOSOURCE INTERNATIONAL, INC. AND SUBSIDIARY

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS

THREE MONTHS ENDED MARCH 31, 1996

<TABLE>
<CAPTION>
HISTORICAL
---------------------------------
BIOSOURCE MEDGENIX PRO FORMA
-------------- ---------------- --------------
THREE MONTHS THREE MONTHS THREE MONTHS
ENDED ENDED PRO FORMA ENDED
MARCH 31, 1996 JANUARY 31, 1996 ADJUSTMENTS MARCH 31, 1996
-------------- ---------------- ------------ --------------
<S> <C> <C> <C> <C>
Revenue.................................. $2,518,557 $2,926,000 $5,444,557
Cost of goods sold....................... 849,031 1,160,000 2,009,031
---------- ---------- ----------
Gross profit................... 1,669,526 1,766,000 3,435,526
---------- ---------- ----------
Operating expenses:
Research and development............... 244,019 388,000 632,019
Sales and marketing.................... 323,442 775,000 1,098,442
General and administrative............. 373,540 783,000 27,000(g) 1,183,540
---------- ---------- -------- ----------
Total operating expenses....... 941,001 1,946,000 27,000 2,914,001
---------- ---------- -------- ----------
Operating income (loss)........ 728,525 (180,000) (27,000) 521,525
Other income, net........................ 61,416 36,000 97,416
---------- ---------- -------- ----------
Income (loss) before income
taxes........................ 789,941 (144,000) (27,000) 618,941
Provision for income taxes............... 270,193 7,000 277,193
---------- ---------- -------- ----------
Net income (loss).............. $ 519,748 $ (151,000) $(27,000) $ 341,748
========== ========== ======== ==========
Income per share:
Net income per share........... $ 0.09 $ 0.04
========== ==========
Weighted average number of common shares
outstanding............................ 5,957,285 8,350,285
========== ==========
</TABLE>

See notes to unaudited pro forma condensed consolidated financial statements.

F-39
<PAGE> 91

BIOSOURCE INTERNATIONAL, INC. AND SUBSIDIARY

NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS

The Unaudited Pro Forma Condensed Consolidated Statement of Operations for
the year ended December 31, 1995 and for the three months ended March 31, 1996
do not give effect to certain cost savings that may be realized as a result of
the acquisition. The anticipated savings are based on estimates and assumptions
that are inherently uncertain; though considered reasonable by the Company, they
are subject to significant business, economic and competitive uncertainties and
contingencies, all of which are difficult to predict and many of which are
beyond the control of management. There can be no assurances that such savings,
if any, will be achieved.

The adjustments to arrive at the Unaudited Pro Forma Condensed Consolidated
Financial Statements are as follows:

(a) To record the estimated net proceeds received from issuance of
2,393,000 shares of BioSource common stock at an initial public offering
price of $9.25 per share (including the sale of 31,000 shares of Common
Stock to be issued by the Company upon exercise of warrants by two of
the Selling Stockholders for which the Company will receive net proceeds
of $59,750) less estimated offering costs.

(b) To record the estimated cash used to purchase the in vitro business of
Medgenix Diagnostics, S.A.

(d) To record the adjustment for Medgenix receivables not acquired and
liabilities not assumed.

(e) To record the adjustment to reflect the Nordion warrant with a fair
value of $197,000 as a component of the purchase price. If the
acquisition is not completed, the fair value of the warrant will be
charged to operations.

(f) To record the adjustment to eliminate net stockholders' equity of
Medgenix.

(g) To record the amortization expense related to the unallocated excess
net book value over purchase price assuming a useful life of 15 years.
The final purchase price allocation has not been completed and
accordingly, no portion of the purchase price has been allocated to any
potential identifiable intangible assets. If any portion of the purchase
price is ultimately allocated to specific intangible assets, including
but not limited to non-compete covenants, it is likely that such related
amortization would be recognized over a shorter period than the 15 year
life assigned to the unallocated purchase price for purposes of these
pro forma financial statements.

F-40
<PAGE> 92

===============================================================================

NO DEALER, SALESPERSON OR ANY OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE
ANY INFORMATION OR MAKE ANY REPRESENTATIONS IN CONNECTION WITH THE OFFERING
COVERED BY THIS PROSPECTUS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS. IF
GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY THE COMPANY OR THE UNDERWRITER. THIS PROSPECTUS DOES
NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY OF THE
SHARES IN ANY JURISDICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH
OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN IMPLICATION THAT THERE HAS
NOT BEEN ANY CHANGE IN THE FACTS SET FORTH IN THIS PROSPECTUS OR IN THE AFFAIRS
OF THE COMPANY SINCE THE DATE HEREOF.

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

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary.................... 3
Risk Factors.......................... 6
The Company........................... 10
Use of Proceeds....................... 10
Price Range of Common Stock........... 11
Dividend Policy....................... 11
Capitalization........................ 12
Selected Consolidated Financial
Data................................ 13
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 15
Business.............................. 22
Management............................ 35
Principal and Selling Stockholders.... 43
Description of Capital Stock.......... 45
Shares Eligible For Future Sale....... 46
Underwriting.......................... 47
Legal Matters......................... 48
Experts............................... 48
Change in Independent Public
Accountant.......................... 49
Additional Information................ 49
Glossary of Scientific Terms.......... 50
Index to Financial Statements......... F-1
</TABLE>

===============================================================================

2,500,000 SHARES

[BIOSOURCE INTERNATIONAL, INC. LOGO]

COMMON STOCK

BIOSOURCE
INTERNATIONAL, INC.

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

PROSPECTUS

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

CRUTTENDEN ROTH
INCORPORATED

COMMONWEALTH ASSOCIATES

MAY 31, 1996
===============================================================================