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Executive Summary

Chiron's diversified product lines and steady but quiet clinical progress helped the firm escape the latest biotech meltdown caused by market high fliers failing to meet inflated expectations and by worries over the Clinton Administration's plans for health care reform. Chiron emerged almost unscathed from the February fallout for biotech stocks, dropping just 3/4 of a point to close at 49-1/2. The slight dip stood out as a high point in a month that ended with two top-tier companies, Amgen and Synergen, taking spectacular falls. Amgen lost close to half its value (down 25-3/4 to 36-1/4) when it announced Feb. 24 that sales of Neupogen would likely not meet Street expectations in the first quarter. Synergen's 42-1/2 point free-fall to 15-1/4, a 73.6% decline, came after disappointing Phase III results for the sepsis treatment Antril were announced Feb. 22. In the ensuing sell-off, a third of the 65 pharmaceutical stocks on the "F-D-C" Index lost more than 20% of their value. Investor's growing doubts about the ability of first-tier companies such as Amgen and Biogen to sustain their previous rate of profit increases, combined with the failure of "blockbusters" like Centoxin and Antril to meet expectations, may make Chiron, with a diversified product mix and lack of a high-profile/high- risk clinical project, appear to be a safe haven for shocked investors. Chiron reported a loss of $102.6 mil. in 1992. The firm, however, is expected to return to profitability in 1993. Chiron markets vaccines, ophthalmic devices, diagnostics and cancer drugs. A majority of the analysts following Chiron were bullish on the stock, with 10 of 18 rating the stock a "strong buy" or a "buy" as of March 2; seven others took a more conservative view with "neutral" ratings and one recommended selling the stock, according to Zacks Investment Research Inc. In May, Chiron was vying with Synergen to supplant Xoma and Centocor as the perceived leader in the sepsis race with its anti- TNF monoclonal antibody, licensed to Miles. The agreement with Miles has kept investors from bidding up Chiron on the basis of the product - or from punishing the stock for slower-than-expected progress. A North American trial of anti-TNF is currently being analyzed, Miles said, but any U.S. licensing application will await completion of an ongoing international trial. Chiron attracted some attention in February with the announcement that the multiple sclerosis drug, Betaseron (recombinant interferon beta), will be reviewed by FDA's Peripheral & Central Nervous System Drugs Advisory Committee March 19. Berlex has marketing rights to the product, which Chiron will manufacture.

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