<PAGE>

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

                                      FORM 10-Q

(Mark One)
    [X]  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
         EXCHANGE ACT OF 1934
    For the quarterly period ended September 28, 1997
                                          OR
    [ ]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
         EXCHANGE ACT OF 1934
    For the transition period from ____________ to ____________

    Commission File Number: 0-12798

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

    Delaware                                     94-2754624
--------------------------------------------------------------------------------
(State or other jurisdiction of               (I.R.S. Employer
incorporation or organization)               Identification No.)

4560 Horton Street, Emeryville, California                      94608
--------------------------------------------------------------------------------
 (Address of principal executive offices)                    (Zip code)

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

                                    Not Applicable
--------------------------------------------------------------------------------
                       (Former name, former address and former
                      fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
                   Yes        x        No
                        ------------       ---------------

Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.

     Class                        Outstanding at October 31, 1997
     -----                        -------------------------------

Common Stock, $0.01 par value                   175,620,272

<PAGE>

                                  CHIRON CORPORATION
                                  TABLE OF CONTENTS
--------------------------------------------------------------------------------


                                                                       PAGE NO.
                                                                       --------
PART I.  FINANCIAL INFORMATION

    ITEM 1.   FINANCIAL STATEMENTS

         Consolidated Balance Sheets as of
         September 30, 1997 and December 31, 1996. . . . . . . . . . . . . .3

         Consolidated Statements of Operations for the
         three months and nine months ended September 30,
         1997 and 1996 . . . . . . . . . . . . . . . . . . . . . . . . . . .4

         Consolidated Statements of Cash Flows for the
         nine months ended September 30, 1997 and 1996 . . . . . . . . . . .5

         Notes to Consolidated Financial Statements. . . . . . . . . . . . .6

    ITEM 2.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF
              FINANCIAL CONDITION AND RESULTS OF OPERATIONS. . . . . . . . 11


PART II. OTHER INFORMATION

    ITEM 1.   LEGAL PROCEEDINGS. . . . . . . . . . . . . . . . . . . . . . 24

    ITEM 6.   EXHIBITS AND REPORTS ON FORM 8-K.. . . . . . . . . . . . . . 25


SIGNATURE  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38


                                          2
<PAGE>

                                  CHIRON CORPORATION
                             CONSOLIDATED BALANCE SHEETS
                                    (IN THOUSANDS)
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>


                                                                   September 30,        December 31,
                                                                        1997                1996
                                                                   -------------        ------------
                                                                    (Unaudited)
                                    ASSETS
<S>                                                                 <C>                  <C>
Current assets:
  Cash and cash equivalents                                         $   103,537         $    68,114
  Short-term investments in marketable debt securities                   40,342              38,694
                                                                    -----------         -----------
         Total cash and short-term investments                          143,879             106,808
  Accounts receivable                                                   324,185             351,971
  Inventories                                                           185,355             180,534
  Other current assets                                                   72,292              57,455
                                                                    -----------         -----------
         Total current assets                                           725,711             696,768
Noncurrent investments in marketable debt securities                     34,299              22,027
Property, plant, equipment and leasehold improvements, at cost:
  Land and buildings                                                    208,820             231,998
  Laboratory, production and office equipment                           415,622             381,421
  Leasehold improvements                                                120,724             114,282
  Construction in progress                                               62,383              69,120
                                                                    -----------         -----------
                                                                        807,549             796,821
  Less accumulated depreciation and amortization                       (257,059)           (213,217)
                                                                    -----------         -----------
         Net property, plant, equipment and leasehold improvements      550,490             583,604
Purchased technology, net                                                57,653              65,592
Other intangible assets, net                                             77,128              76,669
Investments in equity securities and affiliated companies               193,741             184,328
Other assets                                                             62,740              59,682
                                                                    -----------         -----------
                                                                    $ 1,701,762         $ 1,688,670
                                                                    -----------         -----------
                                                                    -----------         -----------


                        LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
  Accounts payable                                                  $    77,458          $   96,157
  Accrued compensation and related expenses                              50,823              56,695
  Short-term borrowings                                                 150,812             137,467
  Current portion of unearned revenue                                    23,787              19,638
  Taxes payable                                                          39,399              33,407
  Other current liabilities                                             124,145             129,805
                                                                    -----------         -----------
         Total current liabilities                                      466,424             473,169
Long-term debt                                                          395,640             419,589
Other noncurrent liabilities                                             25,281              31,057
                                                                    -----------         -----------
         Total liabilities                                              887,345             923,815
                                                                    -----------         -----------
Commitments and contingencies
Stockholders' equity:
  Common stock                                                            1,750               1,707
  Additional paid-in capital                                          1,826,603           1,774,406
  Accumulated deficit                                                (1,014,157)         (1,032,554)
  Cumulative foreign currency translation adjustment                    (24,103)             (6,318)
  Unrealized gain from investments                                       24,933              28,574
  Notes receivable from stock sales                                        (609)               (960)
                                                                    -----------         -----------
         Total stockholders' equity                                     814,417             764,855
                                                                    -----------         -----------
                                                                    $ 1,701,762         $ 1,688,670
                                                                    -----------         -----------
                                                                    -----------         -----------


</TABLE>


           THE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ARE
                         AN INTEGRAL PART OF THIS STATEMENT.


                                          3
<PAGE>

                                  CHIRON CORPORATION
                        CONSOLIDATED STATEMENTS OF OPERATIONS
                                     (UNAUDITED)
                        (IN THOUSANDS, EXCEPT PER SHARE DATA)
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>


                                                       Three Months Ended                     Nine Months Ended
                                                --------------------------------       ----------------------------------
                                                September 30,      September 30,       September 30,        September 30,
                                                    1997                1996                 1997                1996
                                                -------------      -------------       -------------        -------------
<S>                                             <C>                <C>                 <C>                  <C>
Revenues:
  Product sales, net                             $  205,326          $  193,380          $  609,762          $  582,904
  Equity in earnings of unconsolidated
    joint businesses                                 28,849              30,073              82,835              75,689
  Collaborative agreement revenues                   36,398              31,231              92,374              85,792
  Other revenues                                     19,331              16,954              65,916              44,285
                                                 ----------          ----------          ----------          ----------
       Total revenues                               289,904             271,638             850,887             788,670
                                                 ----------          ----------          ----------          ----------

Expenses:
  Cost of sales                                      91,292              84,272             257,344             245,079
  Research and development                           97,540              85,232             279,760             252,206
  Selling, general and administrative                76,907              76,060             231,778             224,495
  Impairment loss on long-lived assets (Note 2)      31,300                   -              31,300                   -
  Other operating expenses                            1,124               1,050               3,491               2,440
                                                 ----------          ----------          ----------          ----------
       Total expenses                               298,163             246,614             803,673             724,220
                                                 ----------          ----------          ----------          ----------

Income (loss) from operations                        (8,259)             25,024              47,214              64,450

Gain on sale of interest in affiliated company            -                 160                   -              12,226
Interest expense                                     (8,545)             (8,747)            (24,823)            (22,713)
Other income, net                                     6,796               1,408              12,003               5,103
                                                 ----------          ----------          ----------          ----------

Income (loss) from continuing operations before
  income taxes                                      (10,008)             17,845              34,394              59,066

Provision for income taxes                            4,179               5,017              17,393              16,608
                                                 ----------          ----------          ----------          ----------

Income (loss) from continuing operations            (14,187)             12,828              17,001              42,458
                                                 ----------          ----------          ----------          ----------

Discontinued operations (Note 3):
  Income (loss) from discontinued operations
   (net of income tax benefit of $685 for
   the three months ended September 30, 1997
   and provision for income taxes of
   $177, $85 and $1,308 for the three months
   ended September 30, 1996 and nine months
   ended September 30, 1997 and 1996,
   respectively)                                     1,506               (1,050)              1,396              (2,582)
                                                 ----------          ----------          ----------          ----------

Net income (loss)                                $  (12,681)         $   11,778          $   18,397          $   39,876
                                                 ----------          ----------          ----------          ----------
                                                 ----------          ----------          ----------          ----------

Net income (loss) per share:
  Income (loss) from continuing operations       $    (0.08)         $     0.07          $     0.10          $     0.24
                                                 ----------          ----------          ----------          ----------
                                                 ----------          ----------          ----------          ----------
  Net income (loss)                              $    (0.07)         $     0.07          $     0.10          $     0.22
                                                 ----------          ----------          ----------          ----------
                                                 ----------          ----------          ----------          ----------

Weighted average number of shares
  used in computing per share amounts               174,221             175,848             177,553             177,292
                                                 ----------          ----------          ----------          ----------
                                                 ----------          ----------          ----------          ----------
</TABLE>


             THE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                       ARE AN INTEGRAL PART OF THIS STATEMENT.


                                          4
<PAGE>

                                  CHIRON CORPORATION
                        CONSOLIDATED STATEMENTS OF CASH FLOWS
                                     (UNAUDITED)
                                    (IN THOUSANDS)
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                                                          Nine Months Ended
                                                                   ---------------------------------
                                                                   September 30,       September 30,
                                                                        1997                1996
                                                                   -------------        ------------
<S>                                                                 <C>                  <C>
Cash flows from operating activities:
  Net income                                                          $  18,397           $  39,876
  Adjustments to reconcile net income to net cash provided by
   (used in) operating activities:
     Depreciation and amortization                                       77,555              82,036
     Impairment loss on long-lived assets                                31,300                   -
     Gain on sale of interest in affiliated company                           -             (12,226)
     Gain on sale of equity securities                                   (3,637)                  -
     Other, net                                                             (84)              7,347
     Changes, excluding effect of acquisitions, to:
        Accounts receivable                                              12,557             (57,072)
        Inventories                                                     (41,172)            (44,073)
        Other current assets                                             (8,174)            (10,588)
        Accounts payable                                                (16,130)            (14,904)
        Accrued compensation and related expenses                        (1,982)             (5,257)
        Current portion of unearned revenue                               4,505                 730
        Taxes payable                                                     6,358               6,746
        Other current liabilities                                         6,340              12,343
        Other noncurrent liabilities                                     (2,123)              5,087
                                                                      ---------           ---------
           Net cash provided by operating activities                     83,710              10,045
                                                                      ---------           ---------
Cash flows from investing activities:
  Purchases of investments in marketable debt securities                (58,523)            (55,008)
  Proceeds from sale and maturity of investments in
    marketable debt securities                                           44,810             128,648
  Capital expenditures                                                  (49,904)            (69,514)
  Purchases of investments in equity securities and
    affiliated companies                                                (10,942)           (133,700)
  Proceeds from sale of equity securities and interest in
    affiliated company                                                      951              14,000
  Increase in other assets                                              (11,835)            (33,076)
                                                                      ---------           ---------
           Net cash used in investing activities                        (85,443)           (148,650)
                                                                      ---------           ---------
Cash flows from financing activities:
  Net payments under line of credit arrangements                              -             (23,899)
  Proceeds from issuance of short-term debt                              15,931             111,040
  Repayment of notes payable and capital leases                         (31,237)             (5,725)
  Proceeds from issuance of common stock                                 52,462              36,838
                                                                      ---------           ---------
           Net cash provided by financing activities                     37,156             118,254
                                                                      ---------           ---------
           Net increase (decrease) in cash and cash equivalents          35,423             (20,351)
Cash and cash equivalents at beginning of the period                     68,114              74,318
                                                                      ---------           ---------
Cash and cash equivalents at end of the period                        $ 103,537           $  53,967
                                                                      ---------           ---------
                                                                      ---------           ---------
</TABLE>


             THE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                       ARE AN INTEGRAL PART OF THIS STATEMENT.


                                          5
<PAGE>

                                  CHIRON CORPORATION
                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                                  SEPTEMBER 30, 1997
--------------------------------------------------------------------------------

1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

    BASIS OF PRESENTATION

         The information at September 30, 1997, and for the three months and 
    nine months ended September 30, 1997 and 1996, is unaudited, but includes 
    all normal recurring adjustments which the management of Chiron Corporation 
    (the "Company" or "Chiron") believes to be necessary for fair presentation 
    of the periods presented.  Included in the Company's results for the nine 
    months ended September 30, 1997 were the impact of certain changes in 
    estimated accruals recorded during the second quarter of 1997, including a 
    $6.6 million reduction in cost of sales due to a revised estimate of 
    royalties to be paid on sales of certain products; a $4.7 million reduction
    in selling, general and administrative expenses due to changes in estimated
    accruals created in prior periods; and $0.9 million of other revenues 
    recognized as a result of a reduction in estimated royalty reserves created 
    in the first quarter of 1997.  The consolidated balance sheet amounts at 
    December 31, 1996 have been derived from audited financial statements.  
    Interim results are not necessarily indicative of results for a full year.  
    This information should be read in conjunction with Chiron's audited 
    consolidated financial statements for the year ended December 29, 1996, 
    which are included in the Annual Report on Form 10-K filed by the Company
    with the Securities and Exchange Commission.

         Certain previously reported amounts have been reclassified to conform
    with the current period presentation.

    FISCAL YEAR

         The fiscal year of the Company is a 52 or 53-week year ending on the
    Sunday nearest the last day in December of each year.  As a result, the
    third quarters of 1997 and 1996 represent the thirteen-week periods ended
    September 28, 1997 and September 29, 1996, respectively.  For presentation
    purposes, dates used in the consolidated financial statements and notes
    refer to the calendar month end.

    INVENTORIES

         Pharmaceutical inventories are stated at the lower of cost or market
    using the average cost method or, in the case of vaccine products, using
    the last-in, first-out ("LIFO") method. Diagnostic and ophthalmic products
    are valued at cost, using the first-in, first-out ("FIFO") method which is
    less than market value. Inventories consist of the following:

                             SEPTEMBER 30,       DECEMBER 31,
                                  1997               1996
                             -------------       ------------
                                       (IN THOUSANDS)
         Finished goods      $    90,068         $    94,875
         Work in process          53,815              45,874
         Raw materials            41,472              39,785
                             -----------         -----------
                             $   185,355         $   180,534
                             -----------         -----------
                             -----------         -----------

    INCOME TAXES

         Income tax expense for the three and nine months ended September 30,
    1997 and 1996 is based on estimated annual effective income tax rates.  The
    charge for the impairment loss on long-lived assets during the third
    quarter of 1997 did not create a corresponding current income tax benefit
    and, therefore, increased the effective tax rate for the 1997 year-to-date
    period.  Without such charge, the annual estimated effective tax rate
    decreased to 26 percent from 31 percent in 1996 and the first two quarters
    of 1997.  This decrease is principally due to changes in estimates of the
    mix of foreign versus domestic


                                          6
<PAGE>

    profits, changes in estimates of the benefits of certain tax credits and
    loss carryforwards, and anticipated foreign sales corporation benefits.
    Application of the reduced annual estimated effective tax rate to pre-tax
    income recognized during the first half of 1997 resulted in a tax benefit
    of $2.3 million during the third quarter of 1997 due to the change in
    estimate.

    PER SHARE DATA

         Per share data is based on the weighted average number of common and
    dilutive common equivalent shares outstanding.  Common equivalent shares
    result from the assumed exercise of outstanding stock options and warrants
    that have a dilutive effect when applying the treasury stock method.
    Shares assumed to be issued upon conversion of the Company's convertible
    debentures are not included for any of the periods presented since their
    inclusion would be anti-dilutive.  Fully diluted per share data has not
    been presented, as the amounts would not differ materially from primary per
    share data.

    NEW ACCOUNTING STANDARDS

         In February 1997, the Financial Accounting Standards Board issued
    Statement of Financial Accounting Standards No. 128, "Earnings per Share"
    ("SFAS 128"), which will be effective for financial statements for periods
    ending after December 15, 1997, including interim periods, and establishes
    standards for computing and presenting earnings per share.  Earlier
    application is not permitted.  In its consolidated financial statements for
    the year ending December 31, 1997, the Company will make the required
    disclosures of basic and diluted earnings per share and provide a
    reconciliation of the numerator and denominator of its basic and diluted
    earnings per share computations.  All prior period earnings per share data
    will be restated by the Company upon adoption of SFAS 128.  Basic earnings
    per share excludes dilution and is computed by dividing income available to
    common stockholders by the weighted-average number of common shares
    outstanding for the period.  Basic and diluted earnings per share would
    have been as follows for each of the periods presented:

<TABLE>
<CAPTION>


                                                         Three Months Ended                     Nine Months Ended
                                                 ---------------------------------       ---------------------------------
                                                 September 30,       September 30,       September 30,       September 30,
                                                     1997                 1996                1997                1996
                                                 -------------       -------------       -------------       -------------
    <S>                                          <C>                 <C>                 <C>                 <C>
     Basic Earnings Per Share:
    ------------------------
       Income (loss) from continuing operations   $   (0.08)          $    0.08           $    0.10           $    0.25
       Income (loss) from discontinued operations $    0.01           $   (0.01)          $    0.01           $   (0.01)
       Net income (loss)                          $   (0.07)          $    0.07           $    0.11           $    0.24

     Diluted Earnings Per Share:
    --------------------------
       Income (loss) from continuing operations   $   (0.08)          $    0.07           $    0.10           $    0.24
       Income (loss) from discontinued operations $    0.01           $    0.00           $    0.00           $   (0.02)
       Net income (loss)                          $   (0.07)          $    0.07           $    0.10           $    0.22

</TABLE>


         In June 1997, the Financial Accounting Standards Board issued
    Statement of Financial Accounting Standards Nos. 130 and 131, "Reporting
    Comprehensive Income" ("SFAS 130") and "Disclosures about Segments of an
    Enterprise and Related Information" ("SFAS 131"), respectively
    (collectively, the "Statements").  The Statements are effective for fiscal
    years beginning after December 15, 1997.  SFAS 130 establishes standards
    for reporting of comprehensive income and its components in annual
    financial statements.  SFAS 131 establishes standards for reporting
    financial and descriptive information about an enterprise's operating
    segments in its annual financial statements and selected segment
    information in interim financial reports.  Reclassification or restatement
    of comparative financial statements or financial information for earlier
    periods is required upon adoption of SFAS 130 and SFAS 131, respectively.
    Application of the Statements' disclosure requirements will have no impact
    on the Company's


                                          7
<PAGE>

    consolidated financial position, results of operations or earnings per
    share data as currently reported.

2.  IMPAIRMENT LOSS ON LONG-LIVED ASSETS

         In accordance with Statement of Financial Accounting Standards No. 121
    ("SFAS 121"), "Accounting for the Impairment of Long-Lived Assets and for
    Long-Lived Assets to be Disposed of," the Company reviews, as circumstances
    dictate, the carrying amount of its long-lived assets, including the 
    Company's idle pharmaceutical fill and finishing facility in Puerto Rico 
    (the "Puerto Rico facility").  The purpose of these reviews is to determine
    whether the carrying amounts are recoverable.  Recoverability for assets 
    held for use is determined by comparing the projected undiscounted net cash
    flows of the long-lived assets against their respective carrying amounts.  
    The amount of impairment, if any, is measured based on the excess of the 
    carrying value over the fair value.

         The cumulative impact on the Company's manufacturing needs of recent
    product developments prompted management to conclude that the Company
    currently has excess manufacturing capacity relative to its projected
    needs.  Specifically, management concluded that its need for the Puerto
    Rico facility, originally outfitted as a second manufacturing site of
    Betaseron-Registered Trademark- (interferon beta-1b), was eliminated due to
    manufacturing process improvements and the cumulative impact of the
    introduction of a competing product in the second quarter of 1996.  In
    September 1997, management determined that it could not find a suitable use
    for the Puerto Rico facility consistent with its previous expectations for
    the facility's use as a contract manufacturing plant.  As a result, the 
    Company reviewed the carrying amount of the Puerto Rico facility and
    related machinery and equipment assets for impairment.  Consequently, 
    during the third quarter of 1997, the Company recorded a $31.3 million 
    impairment loss to record the Puerto Rico facility and related machinery 
    and equipment assets at their individual estimated fair market values, 
    determined on the basis of independent appraisals.  Chiron continues to 
    investigate options concerning the Puerto Rico facility, including possible
    sale.

3.  DISCONTINUED OPERATIONS

         On October 21, 1997, the Company and Bausch & Lomb
     Incorporated ("B&L") signed a definitive agreement (the "Agreement")
     under which B&L has agreed to acquire 100 percent of the common stock of
     the Company's wholly-owned subsidiary, Chiron Vision Corporation ("Chiron
     Vision"), for a purchase price of approximately $300 million in cash.  Cash
     and cash equivalents aggregating $10.8 million at September 30, 1997 and
     certain Chiron Vision real estate assets will be transferred to the Company
     at actual balances upon closing of the transaction.  For a period of three 
     years following the closing of the transaction, B&L has the right to use
     the currently occupied portion of those real estate assets exclusively and
     on a rent-free basis.  Consummation of the transaction is subject to
     standard closing conditions, including receipt of required regulatory
     approvals, and is expected to occur no later than the first quarter of
     1998.  Additionally, the Company has agreed to provide customary
     indemnities under the terms of the Agreement.

         In accordance with Accounting Principles Board Opinion No. 30, 
    "Reporting the Results of Operations - Reporting the Effects of Disposal of 
    a Segment of a Business, and Extraordinary, Unusual and Infrequently 
    Occurring Events and Transactions," Chiron Vision is reported as a 
    discontinued operation in each of the three and nine month periods ended 
    September 30, 1997 and 1996.  Management's current best estimate indicates
    that a net gain will result from disposal of the discontinued operation.


                                          8
<PAGE>

         Chiron Vision recognized total revenues of $47.6 million and $49.9
    million in the three months ended September 30, 1997 and 1996,
    respectively.  For the nine months ended September 30, 1997 and 1996,
    Chiron Vision recognized total revenues of $150.7 million and $154.4
    million, respectively.  The net assets of discontinued operations, which 
    include the real estate assets referred to above, are summarized as follows:


                                  SEPTEMBER 30,         DECEMBER 31,
                                        1997               1996
                                  -------------       --------------
                                           (IN THOUSANDS)
         Net current assets       $     49,317        $     58,273
         Net noncurrent assets         115,024             119,173
                                  ------------        ------------
                                  $    164,341        $    177,446
                                  ------------        ------------
                                  ------------        ------------


4.  COLLABORATION ARRANGEMENT

         HYSEQ, INC.  In May 1997, the Company entered into an agreement with
    Hyseq, Inc. ("Hyseq") to collaborate in the identification of genetic
    targets for the development of pharmaceutical treatments for cancer.
    Subject to the collaboration and in return for a license and other rights,
    Chiron made an initial payment of $1.0 million, which was recorded as
    research and development expense during the three months ended June 30,
    1997.  In addition, the Company is obligated to fund allowable research
    costs, in amounts not less than $8.5 million in the first year and $5.5
    million in each of the second and third years of the collaboration term,
    incurred by Hyseq in performing research requested by the Company.  As a
    result,


                                          9
<PAGE>

    research funding of $2.1 million was recognized by the Company as research
    and development expense in the third quarter of 1997.  Under the agreement,
    Chiron is required to make certain additional payments upon achievement of
    specified milestones. In addition, Hyseq will receive a royalty from any
    commercial sales of products resulting from the collaboration.

         Concurrent with this collaboration agreement, Hyseq and Chiron entered
    into a stock purchase agreement whereby Chiron invested $5 million in
    Hyseq's convertible preferred stock, which was converted to common stock
    upon closing of Hyseq's initial public offering in August 1997 (the "IPO").
    Pursuant to the stock purchase agreement, Chiron invested an additional
    $2.5 million in the common stock of Hyseq upon closing of the IPO.  The
    Company's aggregate investment, representing approximately 4.6 percent of
    the outstanding common stock of Hyseq, is accounted for under the cost
    method and is reflected in the accompanying consolidated balance sheets 
    at fair value in accordance with SFAS 115, "Accounting for Certain 
    Investments in Debt and Equity Securities," as investments in equity 
    securities and affiliated companies as of September 30, 1997.

5.  LONG-TERM DEBT

         In January 1997, the Company purchased a manufacturing facility and 
    related buildings for $29.8 million that had previously been leased under 
    a long-term capital lease obligation.  As a result, the Company eliminated 
    the related obligation which totaled $29.4 million.

6.  CONTINGENCIES

         The Company is party to various claims, investigations and legal
    proceedings arising out of the normal course of its business.  These
    claims, investigations and legal proceedings relate to intellectual
    property rights, including claims brought separately by two competitors
    that the Company's acellular pertussis vaccine infringes claims under four
    distinct patents.  Pending claims also relate to contractual rights and
    obligations, employment matters, shareholder derivative claims, claims of
    product liability, and other issues. While there can be no assurance that
    an adverse determination of any such matters could not have a material
    adverse impact in any future period, management does not believe, based
    upon information known to it, that the final resolution of these matters
    will have a material adverse effect upon the Company's consolidated
    financial position and annual results of operations and cash flows.


                                          10
<PAGE>

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

OVERVIEW

    THE DISCUSSION BELOW CONTAINS FORWARD-LOOKING STATEMENTS THAT INVOLVE RISKS
AND UNCERTAINTIES RELATING TO THE FUTURE FINANCIAL PERFORMANCE OF CHIRON
CORPORATION (THE "COMPANY" OR "CHIRON"), AND ACTUAL EVENTS OR RESULTS MAY DIFFER
MATERIALLY.  IN EVALUATING SUCH STATEMENTS, STOCKHOLDERS AND INVESTORS SHOULD
SPECIFICALLY CONSIDER THE VARIOUS FACTORS IDENTIFIED UNDER THE CAPTION "FACTORS
THAT MAY AFFECT FUTURE OPERATING RESULTS" WHICH COULD CAUSE ACTUAL RESULTS TO
DIFFER MATERIALLY FROM THOSE INDICATED BY SUCH FORWARD-LOOKING STATEMENTS. THE
COMPANY UNDERTAKES NO OBLIGATION TO PUBLICLY RELEASE THE RESULTS OF ANY
REVISIONS TO THESE FORWARD-LOOKING STATEMENTS WHICH MAY BE MADE TO REFLECT
EVENTS OR CIRCUMSTANCES AFTER THE DATE HEREOF OR TO REFLECT THE OCCURRENCES OF
UNANTICIPATED EVENTS.

    THE DISCUSSION BELOW SHOULD BE READ IN CONJUNCTION WITH PART I, ITEM 1,
"FINANCIAL STATEMENTS," OF THIS QUARTERLY REPORT ON FORM 10-Q AND PART II, ITEMS
7 AND 8, "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS" AND "FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA,"
RESPECTIVELY, OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED
DECEMBER 29, 1996.

    Chiron is a healthcare company that applies biotechnology and other 
techniques of modern biology and chemistry to develop, produce and sell products
intended to improve the quality of life by diagnosing, preventing and treating 
human disease.  Chiron participates in three human healthcare markets: (i) 
diagnostics, including blood screening tests, automated immunodiagnostic 
systems, critical blood analyte systems and new quantitative probe tests; (ii) 
therapeutics, with an emphasis on oncology, serious infectious diseases and 
critical care diseases; and (iii) adult and pediatric vaccines.  Chiron also 
develops or acquires new technologies, employing these technologies to discover
new products for the Company or for its partners.  In October 1997, the 
Company and Bausch & Lomb Incorporated ("B&L") signed a definitive agreement 
under which B&L has agreed to acquire the Company's ophthalmic business unit.

RESULTS OF OPERATIONS

REVENUES

    The Company's revenues are derived from a variety of sources, including
product sales, joint business arrangements, collaborative agreements and product
royalty agreements.  Product sales, Chiron's largest revenue category, consists
of the following product lines for each of the three-month and nine-month
periods ended September 30:

                                   THREE MONTHS              NINE MONTHS
                                 ENDED SEPTEMBER 30,     ENDED SEPTEMBER 30,
                                   1997        1996        1997        1996
                                ---------   ---------   ---------   ---------
                                                (IN THOUSANDS)

  Diagnostic products           $ 148,106   $ 137,577   $ 452,057   $ 419,692
  Vaccine products                 16,386      21,374      52,096      61,680
  Betaseron-Registered
    Trademark- sales               14,385      16,807      42,478      49,948
  Oncology products                18,186      16,595      53,389      48,415
  Other products                    8,263       1,027       9,742       3,169
                                ---------   ---------   ---------   ---------
                                $ 205,326   $ 193,380   $ 609,762   $ 582,904
                                ---------   ---------   ---------   ---------
                                ---------   ---------   ---------   ---------

    As Chiron continues to increase the sales of certain seasonal products and
expand its presence in international markets, particularly European markets,
seasonal fluctuations in product sales and the related gross profit amounts


                                          11
<PAGE>

have become more significant. For this reason, revenues and gross profit amounts
from certain product lines are generally higher in the first half and fourth
quarter of the year.  As a result, Chiron's results in any one quarter are not
necessarily indicative of results to be expected for a full year.

    Diagnostic product sales include sales-type leases of fully-automated, 
random-access immunodiagnostic testing systems (ACS:180-Registered Trademark- 
automated chemiluminescence system) and reagents for these systems; direct 
sales of ACS:180-Registered Trademark- instruments and related operating 
leases;  and sales of critical care systems, clinical chemistry products, 
manual immunodiagnostic systems and branched DNA ("bDNA") probe kits for 
human immunodeficiency virus ("HIV").  Sales of diagnostic products increased 
in both the third quarter and first nine months of 1997 as compared with the 
same periods in 1996, primarily due to increased sales of ACS:System 
immunodiagnostic products and research sales of bDNA probe kits, reflecting 
the continued overall growth in viral load testing for HIV.  The growth in 
ACS:System immunodiagnostic product sales of $5.1 million and $17.2 million 
during the third quarter and first nine months of 1997, respectively, 
resulted from increases during both periods in sales volume of reagents 
resulting from the compounding effect of increased ACS:180-Registered 
Trademark- system placements as compared with the prior year. Sales of bDNA 
probe kits increased $4.4 million and $18.8 million in the third quarter and 
first nine months of 1997, respectively, as compared with the same periods of 
1996.  The overall increases in diagnostic product sales in the third quarter 
and first nine months of 1997 were partially offset by reduced sales of 
manual immunodiagnostic systems and critical care products, as well as the 
impact of unfavorable foreign currency exchange rates, primarily in Germany, 
France and Japan.  When compared with rates in effect for the third quarter 
and first nine months of 1996, the increases in diagnostic products sales 
were reduced by $9.1 million and $22.6 million, respectively, in the 
comparable periods of 1997.

    Vaccine product sales consist primarily of sales by Chiron's Italian 
subsidiary of pediatric and flu vaccines in Italy and certain international 
markets.  The overall decrease in vaccine product sales in both the third 
quarter and first nine months of 1997 as compared with the same periods of 
1996 is substantially due to unfavorable changes in foreign currency exchange 
rates between years and decreased sales of certain pediatric vaccines.  Sales 
of Polioral-TM-, a pediatric oral polio vaccine, decreased $1.8 million and 
$4.9 million in the third quarter and first nine months of 1997, 
respectively, from the same periods of the prior year.  Sales of Morupar-TM-, 
a pediatric measles, mumps and rubella vaccine, decreased $1.3 million and 
$1.6 million in the third quarter and first nine months of 1997, 
respectively, as compared with the same periods of 1996.  Supply constraints 
during the third quarter of 1997, as well as during the second quarter of 
1997 with respect to Polioral-TM-, resulted in the decreases in sales during 
these periods. Decreased sales of TriAcelluvax-TM-(formerly Acelluvax 
DTP-TM-), a recombinant pediatric acellular pertussis vaccine, contributed 
$2.3 million and $4.2 million to the overall decrease in vaccine product 
sales during the third quarter and first nine months of 1997, respectively, 
due to supply constraints during the third quarter of 1997 and higher sales 
volume in the prior year resulting from introduction of the acellular 
pertussis vaccine in late 1995.

    Under the terms of a development and supply agreement with Schering AG, 
Germany ("Schering"), and its U.S. affiliate, Berlex Laboratories, Inc. 
("Berlex"), Chiron manufactures Betaseron-Registered Trademark- (interferon 
beta-1b) for Berlex and Schering.  Under the terms of the agreement, Chiron 
earns an initial partial payment for Betaseron-Registered Trademark- upon 
shipment to Berlex and Schering and a subsequent secondary payment for 
Betaseron-Registered Trademark- upon net sales of the product to patients. 
Beginning July 1997, the terms of payment changed, with a larger portion due 
when sales are realized rather than at the time of initial shipment.  
Betaseron-Registered Trademark- product sales during the third quarter 
decreased from $16.8 million in 1996 to $14.4 million in 1997 primarily due 
to reductions in the number of commercial vials shipped to Berlex and in 
contracted initial revenues per vial from sales of Betaseron-Registered 
Trademark-. Partially offsetting the overall decrease in Betaseron-Registered 
Trademark- product sales during the third quarter of 1997 was an increase in 
average secondary revenues per vial of Betaseron-Registered Trademark- as 
compared with the third quarter of the prior year.  In the first nine months 
of 1997, Betaseron-Registered Trademark- product sales decreased $7.5 million 
as compared with the same period of 1996 due to a decrease in commercial 
vials shipped to Berlex during the first and third quarters of 1997, as 
Berlex continued to reduce its existing inventory, and an overall decrease in 
secondary revenues as a result of the introduction of a competing product in 
the second quarter of 1996.

                                          12
<PAGE>

The number of commercial vials shipped to Berlex in the second quarter of 1997
increased, primarily as the result of a voluntary reduction during the second
quarter of 1996 in shipments to Berlex pending FDA approval of certain labeling
changes. Betaseron-Registered Trademark- product sales recognized by the Company
represent a fraction of the total revenues derived from Betaseron-Registered
Trademark- sales by Berlex and Schering.

    Future levels of Chiron's Betaseron-Registered Trademark- sales will depend 
upon the rate at which new patients are enrolled from existing and future 
markets, the extent to which patients, once enrolled, remain compliant with the
prescribed treatment regimen and continue to regularly receive
Betaseron-Registered Trademark-, and the impact of competing products, including
other beta interferon products that were approved for sale in the U.S. during
1996.  In addition, based upon the level of inventories carried by Berlex, the
timing of future shipments to Berlex and the related revenue may vary.

    Sales of oncology products, principally consisting of 
Proleukin-TM-(aldesleukin, interleukin-2), increased $1.6 million and $5.0 
million in the third quarter and first nine months of 1997, respectively, 
over the comparable periods of 1996.  These increases were substantially due 
to overall 7 percent and 10 percent increases in the third quarter and first 
nine months of 1997, respectively, in Proleukin-TM- units sold.  The overall 
7 percent increase in unit sales in the third quarter of 1997 as compared 
with the third quarter of 1996 reflects a 9 percent increase in vials sold in 
European markets and a 5 percent increase in vials sold in the U.S.   In the 
first nine months of 1997, sales of Proleukin-TM- reflect an increase in unit 
sales of 10 percent and 9 percent over the same period of 1996 in European 
and domestic markets, respectively. Worldwide average selling price, which 
increased slightly during the third quarter of 1997 and decreased slightly 
during the first nine months of 1997 as compared with the same periods of 
1996, generally fluctuates between periods due to changes in foreign currency 
exchange rates and the geographic mix of units sold.  Additionally, the 
worldwide average selling price during the third quarter and first nine 
months of 1997 reflects a domestic sales price increase in April 1997.

     The Company's first sales of platelet-derived growth factor, or PDGF, 
the active ingredient in Johnson & Johnson's Regranex-Registered 
Trademark-(Becaplermin) Gel (recombinant human platelet-derived growth factor 
-rhPDGF-BB), a wound healing agent, contributed $7.6 million to Chiron's net 
product sales during the third quarter and first nine months of 1997.  On 
July 14, 1997, the Dermatologic and Ophthalmic Drugs Advisory Committee to 
the Food and Drug Administration ("FDA"), voted in an 11 to 4 decision that 
Regranex-Registered Trademark- is safe and effective for the treatment of 
diabetic ulcers that occur on the lower limbs and feet.  Biological License 
Applications for Regranex-Registered Trademark- were filed with the FDA in 
December 1996.  Sales of PDGF in the third quarter of 1997 to Ortho Biotech 
Inc., a pharmaceuticals group of Johnson & Johnson ("J&J"), were made in 
preparation for J&J's commercial launch of Regranex-Registered Trademark-, 
which is planned to occur if and when the product is approved by the FDA.  
Sales of PDGF will likely fluctuate in future periods depending upon the 
timing of FDA approval of Regranex-Registered Trademark-, if such approval is 
granted, and J&J's demand, neither of which Chiron can control.  A definitive 
agreement under which the Company will supply PDGF on an ongoing basis is 
currently under negotiation with J&J.

    The Company markets many of its commercial products internationally.  As 
a result, product revenues in almost all product lines are affected by 
fluctuating foreign currency exchange rates. Foreign product sales were 
approximately $115.5 million and $360.4 million for the third quarter and 
first nine months of 1997, respectively, as compared with $115.1 million and 
$349.9 million for the third quarter and first nine months of 1996, 
respectively.  The overall increases in foreign product sales between periods 
were due primarily to increased international sales of diagnostic products, 
partially offset by decreased sales by Chiron's Italian subsidiary of 
pediatric vaccines. For the third quarter and first nine months of 1997, 
approximately 56 percent and 59 percent, respectively, of Chiron's product 
sales were denominated in foreign currencies. Product sales would have been 
$13.3 million and $31.0 million higher in the third quarter and first nine 
months of 1997, respectively, if currency exchange rates had remained 
constant with the same periods of 1996.  Changing currency exchange rates 
have had, and will continue to have, an impact on Chiron's results.  The 
Company's other revenues, discussed below, are largely denominated in U.S. 
dollars but are affected by the Company's joint partners' and collaborators' 
non-U.S. operations.

    Equity in earnings of unconsolidated joint businesses consists
substantially of Chiron's one-half interest in the pretax operating earnings of
its joint diagnostics business with Ortho Diagnostic Systems, Inc. ("Ortho"), a
J&J


                                          13
<PAGE>

company. The joint business sells tests used to screen blood for the 
potential presence of hepatitis C virus ("HCV") and HIV.  The joint business 
also holds the immunodiagnostic rights to Chiron's hepatitis and retrovirus 
technology and receives royalties from several companies, including Abbott 
Laboratories ("Abbott"), Pasteur Sanofi Diagnostics and International Murex 
Technologies, Inc., for their sales of certain tests.  Chiron and Ortho 
separately are developing new instrument systems expected to contain broad 
menus of immunodiagnostic tests to serve the clinical diagnostic segment of 
the market. Chiron must obtain Ortho's agreement in order that hepatitis and 
retrovirus tests may be marketed for use on Chiron Diagnostics' new systems.  
There can be no assurance that Chiron can obtain such agreement on acceptable 
terms or at all.

    In the third quarter of 1997, Chiron's share of the pretax operating 
earnings of the joint business, which is recorded by Chiron on a one-month 
lag based upon estimates supplied by Ortho, decreased to $23.7 million from 
$30.0 million for the comparable period of 1996.  This decrease resulted 
primarily from $6.9 million of royalties resulting from a settlement with 
Abbott in the third quarter of 1996 related to prior sales of HIV 
immunodiagnostic tests (the "Abbott settlement").  Under the terms of the 
Abbott settlement, the joint business continues to receive a royalty from 
Abbott based on the sale of products incorporating technology covered by 
certain of Chiron's HIV patents. Excluding the impact of the Abbott 
settlement, Chiron's share of the pretax operating earnings of the joint 
business in the third quarter of 1997 increased slightly from the third 
quarter of the prior year.  In the first nine months of 1997, Chiron's share 
of the pretax operating earnings of the joint business, including the impact 
during the first quarters of 1997 and 1996 of the final annual accounting, 
decreased to $72.1 million from $73.2 million for the first nine months of 
1996.  The overall decrease in the first nine months of 1997 was due to the 
Abbott settlement and a reduction of revenue derived from the final annual 
accounting, partially offset by increased royalties and increased sales by 
the joint business of HCV and HIV tests.  In the first quarter of 1997, 
Chiron recognized joint business revenue of $0.8 million from the final 
accounting for 1996, as compared with $3.8 million recognized in the first 
quarter of 1996 from the final accounting for 1995.

    Equity in earnings of unconsolidated joint businesses also includes
Chiron's 49 percent share of the after-tax operating results of a joint venture
with Behringwerke AG of Germany, which was acquired in July 1996. Results from
the joint venture are recorded by Chiron on a one-month lag.  Chiron's share of
earnings in the third quarter and first nine months of 1997 was $3.5 million and
$9.7 million, respectively.  The operating results of the joint venture in the
third, second and first quarters of 1997 of $3.5 million, $6.1 million and $0.1
million, respectively, reflect the seasonal nature of the business.
Additionally, these results were negatively affected by unfavorable changes in
foreign currency exchange rates between years.  Chiron's share of earnings in
the first nine months of 1997 also included amortization of intangibles and
Chiron's share of a $2.0 million up-front license fee that was expensed by the
joint venture during the first quarter of 1997.

    Equity in earnings of unconsolidated joint businesses for the third quarter
and first nine months of 1996 also included a $0.6 million loss and $1.9 million
of income, respectively, related to Chiron's 50 percent interest in a generic
cancer chemotherapeutics business with Ben Venue Laboratories, Inc. ("Ben
Venue").  Effective May 1, 1996, Chiron sold its interest to Ben Venue for $14.0
million in cash, resulting in a $12.2 million gain arising from the sale during
the first nine months of 1996.

    Collaborative agreement revenues consist of fees received for research
services as they are performed, fees received for completed research or
technology, fees received upon attainment of benchmarks specified in the related
research agreements, and proceeds from sales of biological materials to research
partners for clinical and preclinical testing.  Collaborative agreement revenues
for the third quarter of 1997 increased to $36.4 million from $31.2 million in
the third quarter of 1996, largely as the result of $7.5 million of revenues
recognized by Chiron under a technology transfer and development agreement with
Japan Tobacco Inc. ("JT").  Pursuant to this agreement, the pharmaceutical
division of JT acquired a non-exclusive, perpetual license to apply certain of
Chiron's combinatorial chemistry technologies in JT's research and product
development programs.  In the first quarter of 1996, Chiron also recognized
revenues of $7.5 million from JT upon signing the technology transfer and
development agreement.  License fees of $3.8 million related to royalty-bearing
licenses for certain herpes simplex virus thymidine kinase ("HSV-tk") patent
rights, discussed below, also contributed to the overall increase in


                                          14
<PAGE>

collaborative agreement revenues in the third quarter of 1997 as compared 
with the third quarter of the prior year. These increases were partially 
offset by a reduction in research and development funding, discussed below, 
from Novartis AG ("Novartis"), the successor to Ciba-Geigy Ltd. ("Ciba"), 
and $1.8 million of revenues recognized during the third quarter of 1996 from 
Ribozyme Pharmaceuticals Inc. for Chiron's expenditures on various gene 
therapy and delivery research projects.  Collaborative agreement revenues for 
the first nine months of 1997 increased to $92.4 million from $85.8 million 
in the first nine months of 1996, largely due to $11.3 million of license 
fees related to HSV-tk patent rights, discussed below.  Partially offsetting 
the overall increase in collaborative agreement revenues in the first nine 
months of 1997 as compared with the same period of the prior year were the 
$1.8 million of revenues recognized during the third quarter of 1996 from 
Ribozyme Pharmaceuticals Inc. and a $1.7 million reduction in Novartis 
research and development funding, discussed below.  A $1.6 million decrease 
in revenues recognized from Chiron Viagene's collaborative agreement with 
Green Cross Corporation of Japan for HIV gene therapy research and clinical 
development also partially offset the overall increase in collaborative 
agreement revenues during the first nine months of 1997 as compared with the 
same period of the prior year.

    During the third quarter and first nine months of 1997, Chiron recognized
$3.8 million and $11.3 million, respectively, of collaborative agreement
revenues pursuant to a November 1996 agreement with Novartis, which was
primarily executed in conjunction with a consent and agreement that resolved the
Federal Trade Commission's review of the merger between Ciba and Sandoz Ltd.
which created Novartis.  In partial consideration for Chiron agreeing to grant
royalty-bearing licenses for certain patent rights on the HSV-tk gene in the
field of gene therapy, Novartis agreed to pay Chiron up to $60.0 million over
the next five years, $15.0 million of which relates to 1997 and will be
recognized ratably throughout the year.

    Collaborative agreement revenues also include amounts from Novartis.  
Pursuant to the terms of a December 1995 research and development funding 
agreement, Novartis agreed to provide $250 million (which may be increased to 
$300 million subject to certain conditions) over five years in support of 
research and development at Chiron, subject to aggregate annual funding 
limitations.  As a result, the Company recognized revenues of $16.5 million 
and $21.0 million under this agreement during the third quarters of 1997 and 
1996, respectively.  In the first nine months of 1997 and 1996, Chiron 
recognized revenues of $50.3 million and $52.0 million, respectively, from 
Novartis' research and development funding.  Through September 30, 1997, 
Chiron has cumulatively recognized revenues of $149.3 million pursuant to 
this agreement.  Through the first nine months of 1997, the Company has 
utilized the entire amount of its aggregate annual funding limitation for 
1997.  No additional funding will be utilized during the fourth quarter of 
1997 unless the Company's aggregate annual funding limitation is increased by 
the mutual agreement of Chiron and Novartis. Subject to current and future 
aggregate annual funding limitations, Chiron anticipates continued 
utilization of the research and development funding provided by Novartis.

    Other revenues consist principally of product royalties, including 
royalty revenues resulting from Schering's European sales of 
Betaferon-Registered Trademark-, and revenues generated from Aredia-TM- 
(pamidronate disodium for injection).  Other revenues increased $2.4 million 
and $21.6 million in the third quarter and first nine months of 1997, 
respectively, over the comparable periods of 1996.  In the third quarter and 
first nine months of 1996, Chiron recognized $5.6 million and $16.8 million, 
respectively, of sales fees earned by the Company for Aredia-TM- sales and 
marketing services provided on behalf of Novartis.  Chiron provided these 
services pursuant to an agreement with Novartis which provided Chiron 
exclusive promotional rights to Aredia-TM- in the U.S. This agreement expired 
in March 1997.  Pursuant to a November 1996 agreement with Novartis, Chiron 
began to co-promote Aredia-TM- in the U.S. for a 2-1/2 year period beginning 
April 1997.  During the first nine months of 1997, Chiron recognized $11.6 
million of revenues related to Aredia-TM- co-promotion services provided to 
Novartis during the second and third quarters and $12.5 million of sales fees 
under the exclusive agreement which expired in March.  Discussions, which 
could result in early termination of the co-promotion period, are continuing 
regarding a definitive agreement covering many of the terms of the 
co-promotion arrangement.  These discussions may extend into 1998.  Royalty 
revenues resulting from Schering's European sales of Betaferon-Registered 
Trademark-, which started during the second quarter of 1996, contributed $3.5 
million and $12.4 million to the overall increase in other revenues during 
the third quarter and first nine months of 1997, respectively, as compared 
with the same periods of 1996. The sale of certain oncology-

                                          15
<PAGE>

related marketing rights for $2.0 million during the second quarter of 1997 
and increased royalties related to hepatitis B also contributed to the 
overall increase in other revenues during the first nine months of 1997 as 
compared with the first nine months of 1996.  A contractual reduction in 
royalties related to insulin partially offset the overall increase in other 
revenues in the third quarter and first nine months of 1997 as compared with 
the same periods of 1996.

COSTS AND EXPENSES

    Gross profit margin remained constant at 56 percent of net product sales 
for the third quarters of 1997 and 1996.  Improvements in gross profit margin 
percentage in the third quarter of 1997 as compared with the third quarter of 
1996 resulted from sales of PDGF, increased secondary revenues from Berlex's 
net sales of Betaseron-Registered Trademark- and increased sales of bDNA 
probe kits. Gross profit margin percentage for vaccine product sales 
increased in the third quarter of 1997 relative to the third quarter of 1996 
due to charges recorded in the prior year related to inventory reserves and 
temporarily idled manufacturing facilities in Italy.  These improvements in 
gross profit margin percentage during the third quarter of 1997 were offset 
by the impact of declining average selling prices of ACS:180-Registered 
Trademark- diagnostic assays, as well as a $2.3 million charge recorded 
during the third quarter of 1997 for inventory-related reserves.  For the 
first nine months of 1997 and 1996, the gross profit margin remained constant 
at 58 percent of net product sales.  During the second quarter of 1997, a 
$6.6 million reduction in cost of sales was recognized within Chiron 
Diagnostics due to a revised estimate of royalties to be paid on sales of 
certain products. Excluding the impact of this reduction in cost of sales, 
gross profit margin in the first nine months of 1997 decreased approximately 
1 percentage point, to 57 percent of net product sales, as compared with the 
same period of the prior year.  In the first nine months of 1997, this 
decrease in gross profit margin percentage resulted primarily from an adverse 
sales mix of lower margin critical blood analyte systems to foreign 
distributors, as well as sales of clinical chemistry products in certain 
lower margin international markets.  Partially offsetting the decrease in 
gross profit margin percentage in the first nine months of 1997 as compared 
with the first nine months of 1996 were improvements in gross profit margin 
resulting from sales of PDGF and bDNA probe kits, as well as the charges 
recorded in the third quarter of 1996 related to inventory reserves and 
temporarily idled manufacturing facilities in Italy. Gross profit margin 
percentages may fluctuate significantly in future periods as the Company's 
product mix continues to evolve.

    Research and development expenses increased in the third quarter from 
$85.2 million in 1996 to $97.5 million in 1997.  In the first nine months of 
the year, research and development expenses increased from $252.2 million in 
1996 to $279.8 million in 1997.  Chiron's research and development expenses 
fluctuate from period to period depending upon the extent of clinical 
trial-related activities, including the manufacturing of material; the number 
of products under development and their progress; and the acquisition of 
companies and new technology and licensing rights.  These increases in 
research and development expenses were due to the continued development of 
bDNA probes and PDGF, as well as additional amounts related to research 
involving gene therapies and HCV, pertussis and other vaccines.  
Additionally, during the third quarter of 1997, Chiron recorded $4.6 million 
of research and development expenses related to license and assignment 
agreements with Pharmacia & Upjohn Inc. ("Pharmacia & Upjohn"), discussed 
below.  During the second quarter of 1997, Chiron made $1.0 million upfront 
payments to both Biomira, Inc. ("Biomira"), under a May 1997 agreement to 
co-develop Biomira's Theratope-TM- immunotherapeutic vaccine, and to Hyseq 
Inc. ("Hyseq"), under a May 1997 collaboration agreement for the 
identification of genetic targets for the development of pharmaceutical 
treatments for cancer.  In addition to the upfront payment to Hyseq, Chiron 
also recorded research and development expenses of $2.1 million in the third 
quarter of 1997 related to its funding of allowable research costs incurred 
by Hyseq in performing research requested by the Company.  During the second 
quarter of 1997, Chiron also made a $1.0 million milestone payment to 
DepoTech Corporation upon submission to the FDA of the first new drug 
application ("NDA") in the U.S. for DepoCyt-TM- (injectable sustained-release 
cytarabine), an anticancer agent. During the first quarter of 1997, Chiron 
made a $1.5 million payment to Novartis resulting from the February 1997 
filing of a NDA with the FDA for Myotrophin-TM-(rhIGF-1 or mecasermin 
[recombinant DNA origin]) Injection.  On May 8, 1997, an FDA advisory 
committee found that there was not substantial evidence that Myotrophin-TM- 
Injection is effective in the treatment of amyotrophic lateral sclerosis ("ALS"
or Lou Gehrig's disease).  Chiron and its collaborative partner, Cephalon, 
Inc., have provided additional information to the FDA in support of their 
jointly filed application for approval to market Myotrophin-TM- for 
ALS.  The Company expects that the FDA will act on the application in 
November 1997.

                                          16
<PAGE>

Continued development during the first half of 1997 of the ACS:Centaur-TM-, a 
more powerful immunoassay system designed to increase laboratory productivity 
and provide a platform for proprietary analytes that will help clinicians 
manage disease progression, also contributed to the increase in research and 
development expenses in the first nine months of 1997 as compared with the 
same period of the prior year.  Partially offsetting the increases in 
research and development expenses in the third quarter and first nine months 
of 1997 from the comparable periods of 1996 were expenses incurred in the 
third quarter of 1996 related to Chiron's effort to obtain FDA approval of 
Pertugen-TM-, a diphteria, tetanus and genetically engineered 
acellular pertussis ("DTaP") vaccine for infants and children.

    During 1995 and 1996, Chiron, together with J&J, co-funded the development
and introduction of a home HIV testing service business, Direct Access
Diagnostics.  Chiron elected not to exercise its option, which expired in May
1997, to participate in this venture with J&J.  During the third quarter and
first nine months of 1996, Chiron recognized research and development expenses
of $2.5 million and $7.6 million, respectively, related to its option to
participate in this venture.

    In July 1997, Chiron and Pharmacia & Upjohn entered into license and
assignment agreements whereby Pharmacia & Upjohn granted to Chiron a semi-
exclusive, royalty-bearing worldwide license related to the rhIGF-1
manufacturing process and a non-exclusive, royalty-bearing worldwide license to
a cardiovascular indication.  In exchange for the assignment to Chiron of
certain intellectual property rights, Chiron granted to Pharmacia & Upjohn a
worldwide, non-exclusive, non-transferable royalty-free license to such
intellectual property for any use. Upon execution of the agreements, Chiron
recorded research and development expense of $4.6 million, and made an initial
payment of $3.3 million, in July 1997.  The remainder, or $1.3 million, is
payable by Chiron on January 1, 1998.

    Selling, general and administrative ("SG&A") expenses represented 37
percent and 38 percent of net product sales during the third quarter and first
nine months of 1997, respectively.  In both the third quarter and first nine
months of 1996, SG&A expenses represented 39 percent of net product sales.
Selling and marketing expenses continued to represent the largest portion of
total SG&A expenses, as Chiron devoted significant resources to support sales
volumes in its existing product lines as well as new products, such as Chiron's
bDNA probes. During the third quarter and first nine months of 1997, total SG&A
expenses were offset by $2.6 million and $7.2 million, respectively, of changes
to estimated accruals created in prior periods.

IMPAIRMENT LOSS ON LONG-LIVED ASSETS

     As circumstances dictate, Chiron's management reviews the carrying value 
of all facilities to determine whether an impairment of the carrying value 
has occurred in accordance with Statement of Financial Accounting Standards 
No. 121, "Accounting for the Impairment of Long-Lived Assets and for 
Long-Lived Assets to be Disposed of." The purpose of these reviews is to 
determine whether the carrying amounts are recoverable. Recoverability for 
assets held for use is determined by comparing the projected undiscounted net 
cash flows of the long-lived assets against their respective carrying 
amounts.  The amount of impairment, if any, is measured based on the excess 
of the carrying value over the fair value.

     The cumulative impact on the Company's manufacturing needs of recent 
product developments prompted management to conclude that the Company 
currently has excess manufacturing capacity relative to its projected needs. 
Specifically, management concluded that its need for the Puerto Rico 
facility, originally outfitted as a second manufacturing site of 
Betaseron-Registered Trademark- (interferon beta-1b), was eliminated due to 
manufacturing process improvements and the cumulative impact of the 
introduction of a competing product in the second quarter of 1996.  In 
September 1997, management determined that it could not find a suitable use 
for the Puerto Rico facility consistent with its previous expectations for 
the facility's use as a contract manufacturing plant.  As a result, the 
Company reviewed the carrying amount of the Puerto Rico facility and related 
machinery and equipment assets for impairment.  Consequently, during the 
third quarter of 1997, the Company recorded a $31.3 million impairment loss 
to record the Puerto Rico facility and related machinery and

                                          17
<PAGE>

equipment assets at their individual estimated fair market values, determined 
on the basis of independent appraisals.  Chiron continues to investigate 
options concerning the Puerto Rico facility, including possible sale.

    To date, management has concluded that no impairment of the carrying value
of any of its facilities, other than the Puerto Rico facility, has occurred.
There, however, can be no assurance that global manufacturing needs for existing
products will continue unchanged and product development programs will be
successful.  Accordingly, changes in assumptions and manufacturing plans, needs
and capacity may occur in the future which may require a reduction of the
carrying value of certain facilities to their fair value.

OTHER ITEMS

    Effective May 1, 1996, Chiron sold its 50 percent interest in a generic
cancer chemotherapeutics business to Ben Venue, Chiron's joint venture partner,
for $14.0 million in cash, resulting in a $12.2 million gain reported as gain on
sale of interest in affiliated company during the first nine months of 1996.

    Interest expense in the third quarters of 1997 and 1996 remained relatively
constant.  In the first nine months of 1997, interest expense increased $2.1
million over the first nine months of 1996 due to increased average borrowings 
outstanding during the period.

    Other income, net, consists primarily of investment income on the 
Company's cash and investment balances and other non-operating gains and 
losses. Other income, net, increased in the third quarter and first nine 
months of 1997 over the comparable periods of 1996, primarily as the result 
of realized gains of $3.6 million on sales of equity securities during the 
third quarter of 1997, as well as foreign exchange hedging gains realized in 
the current year.  The cost of equity securities sold was based on the 
average cost method.  The overall increase in other income, net, in the first 
nine months of 1997 as compared with the same period in 1996 also reflects a 
$1.5 million loss on an investment recorded by Chiron in the first quarter of 
1996.  Partially offsetting the increase in other income, net, in the first 
nine months of 1997 was a reduction of $1.5 million in investment income 
arising from a lower average balance in the Company's investment portfolio 
during 1997.

     The provision for income taxes in 1997 and 1996 is based on estimated
annual effective income tax rates. The estimated effective rate is determined
based on management's estimate of taxable income and is subject to change in
future periods. The charge for the impairment loss on long-lived assets during
the third quarter of 1997 did not create a corresponding current income tax
benefit and, therefore, increased the effective tax rate for the 1997 year-to-
date period.  Without such charge, the annual estimated effective tax rate
decreased to 26 percent from 31 percent in 1996 and the first two quarters of
1997.  This decrease is principally due to changes in estimates of the mix of
foreign versus domestic profits, changes in estimates of the benefits of certain
tax credits and loss carryforwards, and anticipated foreign sales corporation
benefits. The 1997 rate is less than the U.S. Federal statutory rate primarily
due to the utilization of foreign and U.S. net operating losses.  Application of
the reduced annual estimated effective tax rate to pre-tax income recognized
during the first half of 1997 resulted in a tax benefit of $2.3 million during
the third quarter of 1997 due to the change in estimate.

LIQUIDITY AND CAPITAL RESOURCES

    Chiron's capital requirements have been generally funded from cash and 
investments on hand, debt borrowings and sales of equity.  In addition to 
these sources of capital, future capital requirements may be financed through 
a combination of research and development funding provided by Novartis, 
possible off-balance-sheet financing and cash generated from operations.  
Chiron's cash and investments, which totaled $178.2 million at September 30, 
1997, are invested in a diversified portfolio of investment grade financial 
instruments, including money market instruments, corporate notes and bonds, 
government or government agency securities, and other debt securities. By 
policy, the amount of credit exposure to any one institution is limited.  
These investments are generally not collateralized and primarily mature 
within three years.  Investments with maturities in excess of one year are 
presented on the balance sheet as noncurrent investments.

                                          18
<PAGE>

     Chiron attempts to reduce its exposure to fluctuations in foreign currency
exchange rates by entering into forward currency contracts ("forwards") and
options.  The Company is primarily exposed to fluctuations in currencies in
western European countries and Japan.  Forwards are used to hedge balance sheet
exposure resulting from completed transactions denominated in a foreign
currency, and options are used to hedge certain anticipated transactions.
Forward contracts are settled quarterly, and option contracts expire quarterly
through December 1998. As of September 30, 1997, the Company held forward and
option contracts totaling $76.6 million and $112.8 million, respectively.

     At September 30, 1997, the Company had borrowed $100.0 million in the U.S.
under an aggregate $200.0 million in revolving, committed, unsecured credit
lines with three separate financial institutions.  One of the agreements,
providing for borrowings up to $100.0 million, expired in October 1997 and was
simultaneously amended to extend the availability through December 12, 1997
under the same terms and conditions as those in the original credit agreement.
The Company intends to execute a replacement multi-year revolving credit
agreement providing for borrowings up to $100.0 million, under similar terms and
conditions, with the same financial institution.

     Chiron selectively enters into cross currency interest rate swaps ("swaps")
to modify the interest and currency characteristics of specific outstanding debt
obligations.  In June 1997, Chiron entered into a five-year swap agreement with
a notional amount of $26.4 million, effectively converting debt denominated in
U.S. Dollars to Japanese Yen and modifying the interest rate from a variable
rate to a fixed Japanese Yen rate of 2.1 percent.

     In future periods, Chiron expects to incur substantial capital spending.
Chiron's liquidity may be further affected in future periods by its decision to
fund its share of expenses in certain of its joint ventures and collaboration
arrangements.  Over the next several years, Chiron anticipates funding
collaborations with a number of its research partners, and may make additional
equity investments in collaborative partners.

CASH FLOWS

     During the nine months ended September 30, 1997, cash and investments in 
marketable debt securities increased by $49.3 million. The increase was 
primarily due to $83.7 million of cash provided by operations, $52.5 million 
of proceeds related to the issuance of common stock under the Company's stock 
option and employee stock purchase plans and $15.9 million of incremental 
short-term debt borrowings.  These cash inflows were partially offset by 
$49.9 million of capital expenditures, the repayment of a long-term capital 
lease obligation totaling $29.4 million, an increase in other noncurrent 
assets of $11.8 million and $10.9 million of purchases of investments in 
equity securities and affiliated companies. In January 1997, Chiron purchased 
a manufacturing facility and related buildings in Emeryville, California that 
had been previously leased under the long-term capital lease obligation.

     During the nine months ended September 30, 1996, cash and investments in 
marketable debt securities decreased by $94.4 million.  The decrease was 
primarily due to $133.7 million of purchases of investments in equity 
securities and affiliated companies, $69.5 million of capital expenditures, 
an increase in other noncurrent assets of $33.1 million, $23.9 million of net 
payments under line of credit arrangements and the repayment of notes payable 
and capital leases totaling $5.7 million.  These decreases were partially 
offset by cash inflows resulting from $111.0 million of proceeds from 
issuance of short-term debt, $36.8 million of proceeds related to the 
issuance of common stock under the Company's stock option and employee stock 
purchase plans, $14.0 million of proceeds from the sale of Chiron's interest 
in Ben Venue and $10.0 million of cash provided by operations.

     Cash provided by operations of $83.7 million in the first nine months of 
1997, as compared with cash provided by operations of $10.0 million in the 
first nine months of 1996, primarily reflects the decrease in accounts 
receivable at September 30, 1997 and increase in accounts receivable at 
September 30, 1996 over respective prior year end amounts.  The decrease in 
accounts receivable in 1997 resulted primarily from significant collections 
by Chiron's Italian subsidiary, the timing of payments from Novartis and the 
Chiron-Ortho joint business, and from a greater receivable balance at 
December 31, 1996 than at December 31, 1995 due to revenue growth in the 
fourth quarter of 1996.  The increase in accounts receivable in 1996 resulted 
primarily from research and development funding from

                                       19
<PAGE>


Novartis, increased royalties receivable and amounts due from collaborative 
partners.

     Chiron believes that its cash and investments, funds provided by operations
and capital market transactions, as well as the proceeds from the sale of Chiron
Vision, discussed below, will be sufficient to meet its cash requirements during
the upcoming twelve months and through the foreseeable future.

DISCONTINUED OPERATIONS

      On October 21, 1997, the Company and Bausch & Lomb Incorporated ("B&L") 
signed a definitive agreement (the "Agreement") under which B&L has agreed to 
acquire 100 percent of the common stock of the Company's wholly-owned 
subsidiary, Chiron Vision Corporation ("Chiron Vision"), for a purchase price 
of approximately $300 million in cash.  Cash and cash equivalents aggregating 
$10.8 million at September 30, 1997 and certain Chiron Vision real estate 
assets will be transferred to the Company at actual balances upon closing of 
the transaction.  For a period of three years following the closing of the 
transaction, B&L has the right to use the currently occupied portion of those 
real estate assets exclusively and on a rent-free basis.  Consummation of the 
transaction is subject to standard closing conditions, including receipt of 
required regulatory approvals, and is expected to occur no later than the 
first quarter of 1998.  Additionally, the Company has agreed to provide 
customary indemnities under the terms of the Agreement.

      In accordance with Accounting Principles Board Opinion No. 30, 
"Reporting the Results of Operations - Reporting the Effects of Disposal of a 
Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring 
Events and Transactions," Chiron Vision is reported as a discontinued 
operation in each of the three and nine month periods ended September 30, 
1997 and 1996.   Management's current best estimate indicates that a net gain 
will result from disposal of the discontinued operation.

NEW ACCOUNTING STANDARDS

      In February 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 128, "Earnings per Share" ("SFAS
128"), which will be effective for financial statements for periods ending after
December 15, 1997, including interim periods, and establishes standards for
computing and presenting earnings per share.  Earlier application is not
permitted.  In its consolidated financial statements for the year ending
December 31, 1997, the Company will make the required disclosures of basic and
diluted earnings per share and provide a reconciliation of the numerator and
denominator of its basic and diluted earnings per share computations.  All prior
period earnings per share data will be restated by the Company upon adoption of
SFAS 128. Refer to Note 1 in the accompanying Notes to Consolidated Financial 
Statements.

                                       20
<PAGE>

     In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards Nos. 130 and 131, "Reporting Comprehensive
Income" ("SFAS 130") and "Disclosures about Segments of an Enterprise and
Related Information" ("SFAS 131"), respectively (collectively, the
"Statements").  The Statements are effective for fiscal years beginning after
December 15, 1997.  SFAS 130 establishes standards for reporting of
comprehensive income and its components in annual financial statements.  SFAS
131 establishes standards for reporting financial and descriptive information
about an enterprise's operating segments in its annual financial statements and
selected segment information in interim financial reports.  Reclassification or
restatement of comparative financial statements or financial information for
earlier periods is required upon adoption of SFAS 130 and SFAS 131,
respectively.  Application of the Statements' disclosure requirements will have
no impact on the Company's consolidated financial position, results of
operations or earnings per share data as currently reported.

FACTORS THAT MAY AFFECT FUTURE OPERATING RESULTS

     Chiron wishes to caution stockholders and investors that the following
important factors, among others, in some cases have affected, and in the future
could affect, Chiron's actual results and could cause Chiron's actual
consolidated results for the fourth quarter of 1997, and beyond, to differ
materially from those expressed in any forward-looking statements made by, or on
behalf of, Chiron.  The statements under this caption are intended to serve as
cautionary statements within the meaning of the Private Securities Litigation
Reform Act of 1995.  The following information is not intended to limit in any
way the characterization of other statements or information under other captions
as cautionary statements for such purpose:

     -    Delays, difficulties or failure in obtaining regulatory approval
          (including approval of its systems, procedures and facilities for
          production) for the Company's products.  These may include, for
          example, approval of the Company's Italian manufacturing facilities
          and processes as satisfying regulatory requirements for production of
          the Company's diphtheria, tetanus and genetically engineered acellular
          pertussis and adjuvanted flu vaccines, approval for Myotrophin-TM- for
          which additional clinical trials may be required by the FDA, and
          approval for Quantiplex-TM- for HIV and follow-on bDNA probe products,
          for which the FDA may require substantial additional process and
          systems validation.

     -    Charges that may be incurred and accrued resulting from implementation
          of restructuring plans currently under consideration, including
          possible disposal of excess manufacturing and other general
          facilities.

     -    Inability to maintain or initiate third party arrangements which
          generate revenues, in the form of license fees, research and
          development support, royalties, sales fees and other payments, in
          return for rights in technology or products under development or
          promotional or other services provided by the Company.

     -    The issuance and use of patents and proprietary technology by Chiron
          and its competitors, including the possible negative effect on the
          Company's ability to develop, manufacture and sell its products if it
          is


                                       21
<PAGE>


          unable to obtain licenses to patents which may be required for such
          products.

     -    Failure of corporate partners to successfully commercialize the
          Company's products or to retain and expand the markets served by the
          commercial collaborations; conflicts of interest, priorities and
          commercial strategies which may arise between the Company and such
          corporate partners, including conflicts as to the strategy for
          realizing value arising from evolving opportunities.

     -    Delay, difficulty or inability on acceptable terms to resolve
          conflicts with partners, including resolution with Ortho of Chiron's
          ability to market hepatitis and retrovirus immunodiagnostic tests for
          use on its ACS:Centaur-TM- immunoassay system and resolution of the
          terms under which Chiron is continuing to co-promote Aredia-TM- for
          Novartis.

     -    Delays or difficulties in developing and acquiring technology and
          technical and managerial personnel to manufacture and/or deliver the
          Company's products in commercial quantities at reasonable costs and in
          compliance with applicable quality assurance and environmental
          regulations and governmental permitting requirements.

     -    Possible changes in laws, regulations and guidelines of regulatory
          agencies, which may affect the development, manufacturing and sale of
          certain of the Company's products including, for example, off-label
          sales of pharmaceuticals and research use only sales of diagnostic
          tests and systems.

     -    The ability and willingness of customers to substitute competitive
          products for the Company's products once other products for similar
          indications are approved for marketing.

     -    Difficulties in obtaining key raw materials and supplies of acceptable
          quality used in the manufacture of the Company's products.

     -    Increased costs of development, regulatory approval, manufacture,
          sales, and marketing associated with the introduction of novel
          products and fluctuation of such costs between periods.

     -    Difficulties in launching or marketing the Company's products, many of
          which are novel products based on biotechnology, and unpredictability
          of customer acceptance of such products.

     -    Further decline in the Betaseron-Registered Trademark- customer base
          in the U.S.; the extent to which patients, once enrolled, remain
          compliant with the prescribed treatment regimen and continue to
          regularly receive Betaseron-Registered Trademark-; the impact of
          competing products, including other beta interferon products; pricing,
          promotional and marketing decisions by the Company's partner,
          Schering.

     -    Changes in the product mix of the Chiron-Ortho joint business, whereby
          the proportion of higher margin HCV tests sold relative to other lower
          margin products decreases; continued margin erosion of HCV tests.

     -    Continued increases in research and development spending in order to
          develop new products and increase market share.

     -    Continued or increased pressure to reduce selling prices of the
          Company's products.

     -    Underutilization of the Company's existing or new manufacturing
          facilities or of any facility expansions, resulting in production
          inefficiencies and higher costs; start-up costs and inefficiencies and
          delays and increased depreciation costs in connection with the start
          of production in new plants and expansions.

     -    The cost of acquiring in-process technology, either by license,
          collaboration or purchase of another entity.


                                       22
<PAGE>


     -    Changes in the Company's plans involving the utilization of its long-
          lived assets in response to changes in the projected level of demand
          for the Company's products, product pricing, success of clinical
          trials, timing of regulatory approval, introduction of competing
          products, available information regarding contract manufacturing
          alternatives and excess manufacturing capacity which currently exists.

     -    Increased financing costs resulting from the expanded use of debt for
          operating and acquisition-related activities.

     -    Amount and rate of growth in Chiron's selling, general and
          administrative expenses; and the impact of unusual or infrequent
          charges resulting from Chiron's ongoing evaluation of its business
          strategies and organizational structures, including the continued
          costs of integration of acquired businesses.

     -    The acquisition of fixed assets and other assets, including
          inventories and receivables; and the making or incurring of any
          expenditures and expenses, including, among others, depreciation and
          research and development expenses; any revaluation of assets,
          including, among others, the Company's investments in the equity
          securities of other companies with whom it collaborates, or related
          expenses, and the amount of, and any changes to, tax rates.

     -    The ability or inability of Chiron to obtain, or hedge against,
          foreign currency, foreign exchange rates and fluctuations in those
          rates.

     -    The costs and other effects of legal and administrative cases and
          proceedings (whether civil, such as product-related or environmental,
          or criminal); settlements and investigations; developments or
          assertions by or against Chiron relating to intellectual property
          rights and licenses.

     -    Seasonal fluctuations in product sales and resulting gross margin
          amounts.


                                       23
<PAGE>

ITEM 1.   LEGAL PROCEEDINGS.

     The Company is party to certain lawsuits, which are described in Part I,
Item 3, "Legal Proceedings," on page 10 of the Company's Annual Report on Form
10-K for the year ended December 29, 1996. No material developments in the area
of legal proceedings have occurred since such Form 10-K was filed except as
described in each of the Company's Quarterly Reports for the periods ended March
30, 1997 and June 29, 1997 and except as follows:

     CONNAUGHT.  On June 7, 1997, Connaught Laboratories, Limited 
("Connaught") filed an emergency proceeding with the Tribunale di Siena, 
Italy, against Chiron S.p.A. seeking to enjoin production, manufacture, and 
sale of TriAcelluvax-TM-(formerly Acelluvax DTP-TM-) which Connaught alleges 
infringes its European Patent 0 527 753 (the "'753 patent").  The '753 patent 
claims allegedly relate to the pertactin protein of BORDETELLA PERTUSSIS.  In 
June, the Siena Court heard oral argument on Connaught's application. On June 
17, 1997, Chiron S.p.A. filed an action challenging the validity of the '753 
patent in the Tribunale di Milano, Italy, against Connaught.  On September 
30, 1997, Connaught renewed its application for injunctive relief before the 
Tribunale di Milano, Italy.  This application is currently under submission.

     Connaught also is the owner of EP 0 322 115 (the "'115 patent") 
allegedly relating to pertussis toxin mutants.  On July 17, 1997, Connaught 
filed suit in the Landgericht Dusseldorf, Germany, against Chiron Behring 
GmbH, Chiron S.p.A., and Behringwerke AG asserting imminent infringement of 
the '115 patent. Connaught seeks to prevent introduction of TriAcelluvax-TM- 
in Germany.  Also, Connaught seeks damages and an order enjoining Chiron 
S.p.A. from manufacturing and selling TriAcelluvax-TM- in Italy. Trial of 
this matter is expected to take place in July 1998.

     EVANS.  Evans Medical Limited (a division of Medeva plc) ("Evans") owns 
European Patent 0 162 639 (the "'639 patent") which Evans claims relates to 
the p69 antigen of BORDETELLA PERTUSSIS.  Chiron S.p.A. had opposed the '639 
patent before the European Patent Office ("EPO") and, along with other 
parties, has appealed the EPO Opposition Division decision which maintained 
the patent in amended form.  Chiron is involved in litigation with Evans, 
Medeva plc and its exclusive licensee, SmithKline Beecham Biologicals in 
several jurisdications concerning the '639 patent and various of its national 
counterparts.  Those jurisdications include the UK, Italy, The Netherlands, 
and the U.S.

     Trial has begun in the High Court of Justice in the UK on Chiron's petition
to declare the UK portion of the '639 patent invalid and an Evans counterclaim
for infringement of that patent by Chiron's TriAcelluvax-TM- vaccine as used in
certain clinical trials.  SmithKline Beecham Biologicals is also a party to that
trial.  A decision of the High Court is expected by the end of 1997.

     In the Italian case, technical briefing has been completed in Milan and a
technical expert's report is expected in June 1998.

     In the Dutch case, the District Court of The Hague issued a decision on May
14, declaring, INTER ALIA, itself to have jurisdiction to hear Chiron's claim
for a declaratory judgment of non-infringement on a pan-European basis.  Evans
has appealed this decision.  A hearing is scheduled on December 11, 1997, at the
Court of Appeals in The Hague.


                                      24
<PAGE>

     The action pending in the United States District Court for the Eastern
District of Texas was transferred to United States District Court for the
District of Delaware in April 1997, by stipulation of the parties.  Chiron has
answered and filed a counterclaim alleging the invalidity of two U.S. patents in
suit owned by Evans and which allegedly relate to the p69 protein of BORDETELLA
PERTUSSIS.  Chiron seeks judgment declaring that its products do not infringe
any claims of these patents.  Chiron further seeks a judgment declaring that the
Evans' patents are invalid and unenforceable.

     In the first quarter of 1997, Medeva brought suit against Chiron in The
Netherlands seeking a pan-European injunction under EP 0 471 726 (the "'726
patent"), a patent allegedly relating to p69 and filamentous hemagglutinin
("FHA").  The District Court of The Hague issued a decision on July 22 wherein
it refused Evans' request for a pan-European injunction.  Evans has appealed
that decision.

ITEM 6.   EXHIBITS AND REPORTS ON FORM 8-K.

     (a)  EXHIBITS.

               Exhibit
               Number                        Exhibit
               ------                        -------
               2.01      Agreement and Plan of Merger, made as of February 6,
                         1987, incorporated by reference to Exhibit 2.01 of the
                         Registrant's Form 10-Q report for the period ended
                         September 30, 1994.

               3.01      Restated Certificate of Incorporation of the
                         Registrant, as filed with the Office of the Secretary
                         of State of Delaware on August 17, 1987, incorporated
                         by reference to Exhibit 3.01 of the Registrant's Form
                         10-K report for fiscal year 1996.

               3.02      Certificate of Amendment of Restated Certificate of
                         Incorporation of the Registrant, as filed with the
                         Office of the Secretary of State of Delaware on
                         December 12, 1991, incorporated by reference to Exhibit
                         3.02 of the Registrant's Form 10-K report for fiscal
                         year 1996.

               3.03      Bylaws of the Registrant, as amended, incorporated by
                         reference to Exhibit 3.03 of the Registrant's Form 10-K
                         report for fiscal year 1994.

               3.04      Certificate of Amendment of Restated
                         Certificate of Incorporation of the
                         Registrant, as filed with the Office of
                         the Secretary of State of Delaware on
                         May 22, 1996, incorporated by reference
                         to Exhibit 3.04 of the Registrant's Form
                         10-Q report for the period ended
                         June 30, 1996.

               4.01      Indenture, dated as of May 21, 1987, between Cetus
                         Corporation and Bankers Trust Company, Trustee,
                         incorporated by reference to Exhibit 4.01 of the
                         Registrant's Form 10-Q report for the period ended
                         September 30, 1994.

               4.02      First Supplemental Indenture, dated as of December 12,
                         1991, by and among Registrant, Cetus Corporation, and
                         Bankers Trust Company, incorporated by reference to
                         Exhibit 4.02 of the Registrant's Form 10-K report for
                         fiscal year 1992.

               4.03      Second Supplemental Indenture, dated as of March 25,
                         1996, by and among the Registrant, Cetus Oncology
                         Corporation (formerly Cetus Corporation), and Bankers
                         Trust Company, incorporated by reference to Exhibit
                         4.03 of the Registrant's Form 10-Q report for the
                         period ended June 30, 1996.

               4.04      Indenture, dated as of November 15, 1993, between
                         Registrant and The First National Bank of Boston, as
                         Trustee, incorporated by reference to Exhibit 4.03 of
                         the Registrant's Form 10-K report for fiscal year 1993.


                                       25
<PAGE>

               4.05      $1,000,000 County of Lorain, Ohio Variable Rate
                         Industrial Revenue Bonds dated as of July 1, 1984, due
                         July 1, 2014, incorporated by reference to Exhibit 4.06
                         of the Registrant's Form 10-Q report for the period
                         ended April 2, 1995. The Registrant agrees to furnish
                         to the Commission upon request a copy of such agreement
                         which it has elected not to file under the provisions
                         of Regulation 601(b)(4)(iii).

               4.06      $1,000,000 Walpole Industrial Development Authority
                         6.75 percent Industrial Revenue Bonds dated as of July
                         1, 1979, due July 1, 2004, incorporated by reference to
                         Exhibit 4.07 of the Registrant's Form 10-Q report for
                         the period ended April 2, 1995. The Registrant agrees
                         to furnish to the Commission upon request a copy of
                         such agreement which it has elected not to file under
                         the provisions of Regulation 601(b)(4)(iii).

              10.01      Lease between Registrant and BGR Associates, a
                         California limited partnership, dated May 26, 1989,
                         incorporated by reference to Exhibit 10.01 of the
                         Registrant's Form 10-Q report for the period ended
                         September 30, 1994.

              10.02      First Amendment to Lease between Registrant and BGR
                         Associates, a California limited partnership,
                         incorporated by reference to Exhibit 10.02 of the
                         Registrant's Form 10-K report for fiscal year 1995.

              10.03      Second Amendment to Lease, dated as of May 9, 1996,
                         between BGR Associates, a California limited
                         partnership, as lessor and Registrant, as lessee [BGR I
                         Property Building NQ Lease], incorporated by reference
                         to Exhibit 10.03 of the Registrant's Form 10-K report
                         for fiscal year 1996.

              10.04      Third Amendment to Triple Net Lease, dated as of
                         January 31, 1997, between BGR Associates, a California
                         limited partnership, as lessor and Registrant, as
                         lessee [BGR I Property Building NQ Lease], incorporated
                         by reference to Exhibit 10.04 of the Registrant's Form
                         10-K report for fiscal year 1996.

              10.05      Lease between Registrant and BGR Associates II, a
                         California limited partnership, dated May 26, 1989,
                         incorporated by reference to Exhibit 10.02 of the
                         Registrant's Form 10-Q report for the period ended
                         September 30, 1994.

              10.06      First Amendment to Lease between Registrant and BGR
                         Associates II, a California limited partnership, dated
                         as of March 15, 1995, incorporated by reference to
                         Exhibit 10.04 of the Registrant's Form 10-K report for
                         fiscal year 1995.

              10.07      Second Amendment to Lease, dated as of May 9, 1996,
                         between BGR Associates II, a California limited
                         partnership, as lessor and Registrant, as lessee,
                         incorporated by reference to Exhibit 10.07 of the
                         Registrant's Form 10-K report for fiscal year 1996.


                                       26
<PAGE>


              10.08      Third Amendment to Triple Net Lease, dated as of
                         January 31, 1997, between BGR Associates II, a
                         California limited partnership, as lessor and
                         Registrant, as lessee [BGR II Property Lease],
                         incorporated by reference to Exhibit 10.08 of the
                         Registrant's Form 10-K report for fiscal year 1996.

              10.09      Lease made and entered into December 17, 1984 between
                         BGR Associates, a California limited partnership, and
                         Cetus Corporation and Amendment to Lease dated December
                         17, 1984 entered into effective February 1, 1986,
                         incorporated by reference to Exhibit 10.69 of the
                         Registrant's Form 10-Q report for the period ended
                         April 2, 1995.

              10.10      Second Amendment to Lease dated as of March 15, 1995,
                         between BGR Associates, a California limited
                         partnership, and Registrant, incorporated by reference
                         to Exhibit 10.73 of the Registrant's Form 10-K report
                         for fiscal year 1995.

              10.11      Third Amendment to Lease, dated as of May 9, 1996,
                         between BGR Associates, a California limited
                         partnership, as lessor and Registrant, as lessee [BGR I
                         Property Building R Lease], incorporated by reference
                         to Exhibit 10.11 of the Registrant's Form 10-K report
                         for fiscal year 1996.

              10.12      Fourth Amendment to Triple Net Lease, dated as of
                         January 31, 1997, between BGR Associates, a California
                         limited partnership, as lessor and Registrant, as
                         lessee [BGR I Property Building R Lease], incorporated
                         by reference to Exhibit 10.12 of the Registrant's Form
                         10-K report for fiscal year 1996.

              10.13      Triple Net Lease dated as of January 20, 1989, between
                         Cetus Corporation and BGR Associates III, a California
                         limited partnership, and Marin County Exchange
                         Corporation, incorporated by reference to Exhibit 10.34
                         of the Registrant's Form 10-Q report for the period
                         ended September 30, 1994.

              10.14      First Amendment to Triple Net Lease, dated as of
                         September 10, 1996, between BGR Associates III, a
                         California limited partnership, as lessor and
                         Registrant, as lessee, incorporated by reference to
                         Exhibit 10.14 of the Registrant's Form 10-K report for
                         fiscal year 1996.

              10.15      Second Amendment to Triple Net Lease, dated as of
                         January 31, 1997, between BGR Associates III, a
                         California limited partnership, as lessor and
                         Registrant, as lessee [BGR III Lease], incorporated by
                         reference to Exhibit 10.15 of the Registrant's Form 10-
                         K report for fiscal year 1996.

              10.16      Assignment of Lessor Claims, dated as of January 31,
                         1997, between BGR Associates III, a California limited
                         partnership, as assignor and Registrant, as assignee,
                         incorporated by reference to Exhibit 10.16 of the
                         Registrant's Form 10-K report for fiscal year 1996.

              10.17      Agreement and Plan of Merger dated as of April 23, 1995
                         between Viagene, Inc., a Delaware corporation, and
                         Chiron Corporation, incorporated by reference to
                         Exhibit 10.67 of the Registrant's current


                                       27
<PAGE>


                         report on Form 8-K dated April 24, 1995.

              10.18      Stockholders' Agreement dated as of April 23, 1995
                         among certain stockholders of Viagene, Inc., a Delaware
                         corporation, and Chiron Corporation, incorporated by
                         reference to Exhibit 10.68 of the Registrant's current
                         report on Form 8-K dated April 24, 1995.

              10.19      Stock and Asset Purchase Agreement dated as of March 6,
                         1995, by and among Johnson & Johnson, a New Jersey
                         corporation, Site Microsurgical Systems, Inc., a
                         Pennsylvania corporation, and Chiron Corporation and
                         Amendment No. 1 to Stock and Asset Purchase Agreement,
                         entered into March 31, 1995 by and among Johnson &
                         Johnson, Site Microsurgical Systems, Inc. and Chiron
                         Corporation, incorporated by reference to Exhibit 10.05
                         of the Registrant's Form 10-Q report for the period
                         ended April 2, 1995.

              10.20      Amended and Restated Revolving Credit Agreement dated
                         as of March 20, 1997, between Chiron Corporation and
                         Swiss Bank Corporation, New York and Cayman Island
                         Branches, incorporated by reference to Exhibit 10.20 of
                         the Registrant's Form 10-Q report for the period ended
                         June 30, 1997.

              10.21      Agreement between the Registrant and Ortho Diagnostic
                         Systems, Inc., a New Jersey corporation, dated August
                         17, 1989, and Amendment to Collaboration Agreement
                         between Ortho Diagnostic Systems, Inc. and Registrant,
                         dated December 22, 1989 (with certain confidential
                         information deleted), incorporated by reference to
                         Exhibit 10.14 of the Registrant's Form 10-Q report for
                         the period ended September 30, 1994.

              10.22      License and Supply Agreement between Ortho Diagnostic
                         Systems, Inc., a New Jersey corporation, the Registrant
                         and Abbott Laboratories, an Illinois corporation, dated
                         August 17, 1989 (with certain confidential information
                         deleted), incorporated by reference to Exhibit 10.15 of
                         the Registrant's Form 10-Q report for the quarter ended
                         June 30, 1994.

              10.23      Chiron 1991 Stock Option Plan, as amended, incorporated
                         by reference to Annex 2 of the Registrant's Proxy
                         Statement dated April 11, 1997.*

              10.24      Forms of Option Agreements, Chiron 1991 Stock Option
                         Plan, as amended, incorporated by reference to Exhibit
                         10.17 of the Registrant's Form 10-K report for fiscal
                         year 1993.*

              10.25      Form of Automatic Share Right Agreement, Chiron 1991
                         Stock Option Plan, as amended, incorporated by
                         reference to Exhibit 10.19 of Registrant's Form 10-Q
                         report for the period ended September 29, 1996.*

              10.26      Forms of Option Agreements, Cetus Corporation Amended
                         and Restated Common Stock Option Plan, incorporated by
                         reference to Exhibit 10.27 of Registrant's Form 10-Q
                         report for the period ended March 30, 1997.*


                                       28
<PAGE>


              10.27      Forms of Supplemental Letter concerning the assumption
                         of Cetus Corporation options by the Registrant,
                         incorporated by reference to Exhibit 10.27 of
                         Registrant's Form 10-K report for fiscal year 1996.*

              10.28      Indemnification Agreement between the Registrant and 
                         Dr. William J. Rutter, dated as of February 12, 1987 
                         (which form of agreement is used for each member of 
                         Registrant's Board of Directors), incorporated by 
                         reference to Exhibit 10.21 of the Registrant's Form 
                         10-Q report for the period ended September 30, 1994.

              10.29      Stock Purchase Agreement by and between the Registrant
                         and Johnson & Johnson Development Corporation, a
                         corporation organized and existing under the laws of
                         the State of New Jersey, dated as of October 3, 1986,
                         incorporated by reference to Exhibit 10.22 of the
                         Registrant's Form 10-Q report for the period ended
                         September 30, 1994.

              10.30      Revolving Credit Agreement, dated as of July 12, 1996,
                         between Registrant and Bank of America National Trust
                         and Savings Association, incorporated by reference to
                         Exhibit 10.24 of the Registrant's Form 10-Q report for
                         the period ended June 30, 1996.

              10.31      First Amendment to Revolving Credit Agreement, dated as
                         of July 11, 1997, between Registrant and Bank of
                         America National Trust and Savings Association,
                         incorporated by reference to Exhibit 10.31 of the
                         Registrant's Form 10-Q report for the period ended
                         June 30, 1997.

              10.32      Second Amendment to Revolving Credit Agreement, 
                         dated as of August 18, 1997, between Registrant and 
                         Bank of America National Trust and Savings 
                         Association.

              10.33      Third Amendment to Revolving Credit Agreement, 
                         dated as of October 10, 1997, between Registrant and 
                         Bank of America National Trust and Savings 
                         Association.

              10.34      Form of Debenture Purchase Agreement between the 
                         Registrant and Ciba-Geigy, Limited, a Swiss 
                         corporation, dated June 22, 1990, incorporated by 
                         reference to Exhibit 10.25 of the Registrant's Form 
                         10-K report for fiscal year 1994.

              10.35      Chiron Corporation 1.90 percent Convertible 
                         Subordinated Note due 2000, Series B, incorporated 
                         by reference to Exhibit 10.25 of the Registrant's 
                         Form 10-K report for fiscal year 1993.

              10.36      Investment Agreement dated as of November 20, 1994
                         among Ciba-Geigy Limited, Ciba-Geigy Corporation, Ciba
                         Biotech Partnership, Inc. and Chiron Corporation,
                         incorporated by reference to Exhibit 10.54 of the
                         Registrant's current report on Form 8-K dated
                         November 20, 1994.

              10.37      Governance Agreement dated as of November 20, 1994
                         among Ciba-Geigy Limited, Ciba-Geigy Corporation and
                         Chiron Corporation, incorporated by reference to
                         Exhibit 10.55 of the Registrant's current report on
                         Form 8-K dated November 20, 1994.

              10.38      Subscription Agreement dated as of November 20, 1994
                         among Ciba-Geigy Limited, Ciba-Geigy Corporation, Ciba
                         Biotech Partnership, Inc. and Chiron Corporation,
                         incorporated by reference to Exhibit 10.56 of the
                         Registrant's current report on Form 8-K dated
                         November 20, 1994.

              10.39      Cooperation and Collaboration Agreement dated as of
                         November 20, 1994, between Ciba-Geigy Limited and
                         Chiron Corporation,


                                       29
<PAGE>


                         incorporated by reference to Exhibit 10.57 of the
                         Registrant's current report on Form 8-K dated
                         November 20, 1994.

              10.40      Registration Rights Agreement dated as of November 20,
                         1994 between Ciba Biotech Partnership, Inc. and Chiron
                         Corporation, incorporated by reference to Exhibit 10.58
                         of the Registrant's current report on Form 8-K dated
                         November 20, 1994.

              10.41      Market Price Option Agreement dated as of November 20,
                         1994 among Ciba-Geigy Limited, Ciba-Geigy Corporation,
                         Ciba Biotech Partnership, Inc. and Chiron Corporation,
                         incorporated by reference to Exhibit 10.59 of the
                         Registrant's current report on Form 8-K dated
                         November 20, 1994.

              10.42      Amendment dated as of January 3, 1995 among Ciba-Geigy
                         Limited, Ciba-Geigy Corporation, Ciba Biotech
                         Partnership, Inc. and Chiron Corporation, incorporated
                         by reference to Exhibit 10.60 of the Registrant's
                         current report on Form 8-K dated January 4, 1995.

              10.43      Supplemental Agreement dated as of January 3, 1995
                         among Ciba-Geigy Limited, Ciba-Geigy Corporation, Ciba
                         Biotech Partnership, Inc. and Chiron Corporation,
                         incorporated by reference to Exhibit 10.61 of the
                         Registrant's current report on Form 8-K dated
                         January 4, 1995.

              10.44      Amendment with Respect to Employee Stock Option
                         Arrangements dated as of January 3, 1995 among Ciba-
                         Geigy Limited, Ciba-Geigy Corporation, Ciba Biotech
                         Partnership, Inc. and Chiron Corporation, incorporated
                         by reference to Exhibit 10.62 of the Registrant's
                         current report on Form 8-K dated January 4, 1995.*

              10.45      Agreement, dated November 27, 1996, between Ciba-Geigy
                         Limited and the Registrant, incorporated by reference
                         to Exhibit 10.92 of the Registrant's Form 8-K report
                         filed with the Commission on December 17, 1996.

              10.46      Amendment dated March 26, 1997, to Agreement dated
                         November 27, 1996, between Novartis Pharma AG and the
                         Registrant, incorporated by reference to Exhibit 10.44
                         of the Registrant's Form 10-Q report for the period
                         ended March 30, 1997.

              10.47      Letter Agreement, dated May 6, 1996, as to consent 
                         to assignment of contracts to Novartis Limited, 
                         among the Registrant, Ciba-Geigy Limited, Ciba-Geigy 
                         Corporation and Ciba Biotech Partnership, Inc., 
                         incorporated by reference to Exhibit 10.43 of the 
                         Registrant's Form 10-K report for fiscal year 1996.

              10.48      Letter Agreement, dated December 19, 1996, regarding
                         compensation paid by the Registrant for director
                         services performed by employees of Ciba-Geigy Limited,
                         incorporated by reference to Exhibit 10.44 of the
                         Registrant's Form 10-K report for fiscal year 1996.*

              10.49      Supplemental Benefits Agreement, dated July 21, 1989,
                         between the


                                       30
<PAGE>


                         Registrant and Dr. William J. Rutter, incorporated 
                         by reference to Exhibit 10.27 of the Registrant's 
                         Form 10-Q report for the period ended September 30, 
                         1994.*

              10.50      Lease commencing March 1, 1987, between EuroCetus B.V.
                         and the Municipal Land Company of the City of Amsterdam
                         (Translation), incorporated by reference to Exhibit
                         10.40 of the Registrant's Form 10-K report for fiscal
                         year 1995.

              10.51      Form of Option Agreement (with Purchase Agreements
                         attached thereto) between Cetus Corporation and each
                         former limited partner of Cetus Healthcare Limited
                         Partnership, a California limited partnership,
                         incorporated by reference to Exhibit 10.31 of the
                         Registrant's Form 10-Q report for the period ended
                         September 30, 1994.

              10.52      Form of Option Agreement (with forms of Purchase 
                         Agreements attached thereto), dated December 30, 
                         1986, between Cetus Corporation and each former 
                         limited partner of Cetus Healthcare Limited 
                         Partnership II, a California limited partnership, 
                         incorporated by reference to Exhibit 10.32 of the 
                         Registrant's Form 10-Q report for the period ended 
                         September 30, 1994.

              10.53      License Agreement between the Registrant and the Board
                         of Trustees of the Leland Stanford Junior University,
                         dated December 15, 1981, incorporated by reference to
                         Exhibit 10.07 of the Registrant's Form 10-Q report for
                         the period ended September 30, 1994.

              10.54      Stock Purchase and Warrant Agreement dated May 9, 1989,
                         between Cetus Corporation and Hoffmann-La Roche Inc.,
                         incorporated by reference to Exhibit 10.36 of the
                         Registrant's Form 10-Q report for the period ended
                         September 30, 1994.

              10.55      Letter Agreement, dated as of December 12, 1991,
                         relating to Stock Purchase and Warrant Agreement
                         between Registrant and Hoffmann-La Roche Inc.,
                         incorporated by reference to Exhibit 10.51 of
                         Registrant's Form 10-K report for fiscal year 1996.

              10.56      Letter Agreement dated September 26, 1990 between 
                         the Registrant and William G. Green, incorporated by 
                         reference to Exhibit 10.41 of the Registrant's Form 
                         10-K report for fiscal year 1992.*

              10.57      Letter Agreement dated December 18, 1991 between
                         Registrant and Jack Schuler, incorporated by reference
                         to Exhibit 10.42 of the Registrant's Form 10-K report
                         for fiscal year 1992.*

              10.58      Lease between Sclavo S.p.A. and Biocine Sclavo S.p.A.,
                         dated January 7, 1992, incorporated by reference to
                         Exhibit 10.49 of the Registrant's Form 10-Q report for
                         the period ended April 2, 1995.

              10.59      Agreement made as of November 11, 1993 by and between
                         Kodak Clinical Diagnostics Limited, a company
                         registered in England, and Ciba Corning Diagnostics
                         Corp., a Delaware corporation, and Letter


                                       31
<PAGE>


                         dated October 7, 1994 from Kodak Clinical Diagnostics
                         Limited to Ciba Corning Diagnostics Corp., incorporated
                         by reference to Exhibit 10.50 of Amendment No. 1 to the
                         Registrant's Form 10-Q report for the period ended
                         April 2, 1995. [Certain information has been omitted
                         from the Agreement pursuant to a request by Registrant
                         for confidential treatment pursuant to Rule 24b-2.]

              10.60      Regulatory Filing, Development and Supply Agreement
                         between the Registrant, Cetus Oncology Corporation, a
                         wholly-owned subsidiary of the Registrant, and Schering
                         AG, a German company, dated as of May 10, 1993 (with
                         certain confidential information deleted), incorporated
                         by reference to Exhibit 10.50 of the Registrant's
                         current report on Form 8-K dated February 9, 1994.

              10.61      Letter Agreement dated December 30, 1993 by and between
                         Registrant and Schering AG, a German company (with
                         certain confidential information deleted), incorporated
                         by reference to Exhibit 10.51 of the Registrant's Form
                         10-K report for fiscal year 1993.

              10.62      Description of Executive Officer Variable Compensation
                         Program, incorporated by reference to Exhibit 10.58 of
                         the Registrant's Form 10-K report for fiscal year
                         1996.*

              10.63      Chiron Corporation 1995 Executive Officer Variable Cash
                         Compensation Plan, incorporated by reference to Annex 2
                         of the Registrant's Proxy Statement dated April 18,
                         1995.*

              10.64      Amended and Restated License Agreement effective April
                         1, 1996, between Ciba Corning Diagnostics Corp., a
                         Delaware corporation, and Bioanalysis Limited, a
                         corporation organized under the laws of the United
                         Kingdom of Great Britain and Northern Ireland,
                         incorporated by reference to Exhibit 10.56 of the
                         Registrant's Form 10-Q report for the period ended
                         September 29, 1996. [Certain confidential information
                         has been omitted from the Agreement and filed
                         separately with the Securities and Exchange Commission
                         pursuant to a request by Registrant for confidential
                         treatment pursuant to Rule 24b-2.]

              10.65      Guaranty, dated as of September 29, 1994, made by
                         Registrant, in favor of Bankers Trust Company, as
                         trustee, incorporated by reference to Exhibit 10.52 of
                         the Registrant's Form 10-Q report for the period ended
                         September 30, 1994.

              10.66      Guaranty, dated as of September 29, 1994, made by Cetus
                         Corporation, in favor of The First National Bank of
                         Boston, as trustee, incorporated by reference to
                         Exhibit 10.53 of the Registrant's Form 10-Q report for
                         the period ended September 30, 1994.

              10.67      Letter Agreements dated September 11, 1992, July 15,
                         1994 and September 14, 1994 between the Registrant and
                         Lewis T. Williams, incorporated by reference to Exhibit
                         10.54 of the Registrant's Form 10-Q report for the
                         period ended September 30, 1994.*


                                       32
<PAGE>

              10.68      Letters dated May 6, 1996 and May 25, 1996 to Magnus
                         Lundberg, incorporated by reference to Exhibit 10.61 of
                         the Registrant's Form 10-Q report for the period ended
                         September 29, 1996.*

              10.69      Letter dated January 8, 1997 to Magnus Lundberg,
                         incorporated by reference to Exhibit 10.65 of the
                         Registrant's Form 10-K report for fiscal year 1996.*

              10.70      Research Agreement, dated as of July 15, 1985, between
                         Ciba-Geigy Limited, a Swiss corporation, and Ciba
                         Corning Diagnostics Corp., a Delaware corporation,
                         incorporated by reference to Exhibit 10.64 of the
                         Registrant's Form 10-Q report for the period ended
                         April 2, 1995.

              10.71      Licensing Agreement, effective December 18, 1986, by
                         and between Miles Laboratories, Inc., a Delaware
                         corporation, and Ciba Corning Diagnostics Corp., a
                         Delaware corporation, and Letter dated December 18,
                         1992 from Ciba Corning Diagnostics Corp. to Miles
                         Laboratories, Inc., incorporated by reference to
                         Exhibit 10.65 of Amendment No. 1 to the Registrant's
                         Form 10-Q report for the period ended April 2, 1995.
                         [Certain information has been omitted from the
                         Agreement pursuant to a request by Registrant for
                         confidential treatment pursuant to Rule 24b-2.]

              10.72      Magnetocluster Binding Assay Technology Agreement,
                         dated as of January 21, 1983, by and between
                         Bioclinical Group, Inc., a Delaware corporation, and
                         Corning Glass Works, a New York corporation,
                         incorporated by reference to Exhibit 10.66 of Amendment
                         No. 1 to the Registrant's Form 10-Q report for the
                         period ended April 2, 1995. [Certain information has
                         been omitted from the Agreement pursuant to a request
                         by Registrant for confidential treatment pursuant to
                         Rule 24b-2.]

              10.73      Turn-back License Agreement, dated as of May 30, 1986,
                         by and between Ciba Corning Diagnostics Corp., a
                         Delaware corporation, and Advanced Magnetics, Inc., a
                         Delaware corporation, incorporated by reference to
                         Exhibit 10.67 of the Registrant's Form 10-Q report for
                         the period ended April 2, 1995. [Certain information
                         has been omitted from the Agreement pursuant to a
                         request by Registrant for confidential treatment
                         pursuant to Rule 24b-2.]

              10.74      Settlement Agreement, dated August 30, 1989, between
                         Ciba Corning Diagnostics Corp. and Advanced Magnetics,
                         Inc., incorporated by reference to Exhibit 10.68 of the
                         Registrant's Form 10-Q report for the period ended
                         April 2, 1995.  [Certain information has been omitted
                         from the Agreement pursuant to a request by Registrant
                         for confidential treatment pursuant to Rule 24b-2.]

              10.75      Agreement, effective as of December 21, 1988, by and
                         between Hoffmann-La Roche Inc., a New Jersey
                         corporation, and Cetus Corporation, incorporated by
                         reference to Exhibit 10.70 of the Registrant's Form 10-
                         Q report for the period ended April 2, 1995. [Certain
                         information has been omitted from the Agreement
                         pursuant to


                                       33
<PAGE>


                         a request by Registrant for confidential treatment
                         pursuant to Rule 24b-2.]

              10.76      Agreement, effective as of December 21, 1988, by and
                         among F. Hoffmann-La Roche Ltd., a Swiss corporation,
                         Cetus Corporation, and EuroCetus International, B.V., a
                         Netherlands Antilles corporation, incorporated by
                         reference to Exhibit 10.71 of the Registrant's Form 10-
                         Q report for the period ended April 2, 1995. [Certain
                         information has been omitted from the Agreement
                         pursuant to a request by Registrant for confidential
                         treatment pursuant to Rule 24b-2.]

              10.77      Agreement, by and between Cetus Oncology Corporation,
                         EuroCetus International, N.V., and F. Hoffmann-La Roche
                         Ltd., incorporated by reference to Exhibit 10.72 of the
                         Registrant's Form 10-Q report for the period ended
                         April 2, 1995. [Certain information has been omitted
                         from the Agreement pursuant to a request by Registrant
                         for confidential treatment pursuant to Rule 24b-2.]

              10.78      Agreement commencing January 1, 1991, between EuroCetus
                         B.V. and the Municipal Development Corporation
                         (Translation), incorporated by reference to Exhibit
                         10.41 of the Registrant's Form 10-K report for fiscal
                         year 1994.

              10.79      Settlement Agreement on Purified IL-2, made as of April
                         14, 1995, by and between Cetus Oncology Corporation,
                         dba Chiron Therapeutics, a Delaware corporation, and
                         Takeda Chemical Industries, Ltd., a Japanese
                         corporation, incorporated by reference to Exhibit 10.74
                         of the Registrant's Form 10-Q report for the period
                         ended July 2, 1995.  [Certain information has been
                         omitted from the Agreement pursuant to a request by
                         Registrant for confidential treatment pursuant to
                         Rule 24b-2.]

              10.80      License Agreement made and entered into December 1,
                         1987, by and between Sloan Kettering Institute for
                         Cancer Research, a not-for-profit New York corporation,
                         and Cetus Corporation, incorporated by reference to
                         Exhibit 10.75 of the Registrant's Form 10-Q report for
                         the period ended July 2, 1995.  [Certain information
                         has been omitted from the Agreement pursuant to a
                         request by Registrant for confidential treatment
                         pursuant to Rule 24b-2.]

              10.81      Chiron Funding L.L.C. Limited Liability Company
                         Agreement, entered into and effective as of December
                         28, 1995, among the Registrant, Chiron Biocine Company
                         and Biocine S.p.A. and Ciba-Geigy Corporation,
                         incorporated by reference to Exhibit 10.80 of the
                         Registrant's Form 10-K report for fiscal year 1995.
                         [Certain information has been omitted from the
                         Agreement and filed separately with the Securities and
                         Exchange Commission pursuant to a request by Registrant
                         for confidential treatment pursuant to Rule 24b-2.  The
                         omitted confidential information has been identified by
                         the following statement: "Confidential Treatment
                         Requested".]

              10.82      Agreement between Ciba-Geigy Limited and the Registrant
                         made


                                       34
<PAGE>

                         November 15, 1995, incorporated by reference to Exhibit
                         10.81 of the Registrant's Form 10-K report for fiscal
                         year 1995.  [Certain information has been omitted from
                         the Agreement and filed separately with the Securities
                         and Exchange Commission pursuant to a request by
                         Registrant for confidential treatment pursuant to Rule
                         24b-2.  The omitted confidential information has been
                         identified by the following statement: "Confidential
                         Treatment Requested".]

              10.83      Reimbursement Agreement dated as of March 24, 1995,
                         between Ciba-Geigy Limited, a Swiss corporation, and
                         the Registrant, incorporated by reference to Exhibit
                         10.76 of the Registrant's Form 10-Q report for the
                         period ended July 2, 1995.

              10.84      Promissory Note, as amended and restated, dated January
                         1, 1995 by Ciba Corning Diagnostics Corp., incorporated
                         by reference to Exhibit 10.83 of the Registrant's Form
                         10-K report for fiscal year 1995.

              10.85      Commercial lease between Domilyon Corporation and
                         Domilens Laboratories and Amendment No. 1 to Commercial
                         Lease dated May 9, 1994, incorporated by reference to
                         Exhibit 10.84 of the Registrant's Form 10-K report for
                         fiscal year 1995.

              10.86      Agreement between the Registrant and Cephalon, Inc.
                         dated as of January 7, 1994, and Letter Agreements
                         between the Registrant and Cephalon dated January 13,
                         1995 and May 23, 1995, incorporated by reference to
                         Exhibit 10.85 of the Registrant's Form 10-K report for
                         fiscal year 1995.  [Certain information has been
                         omitted from the Agreements and filed separately with
                         the Securities and Exchange Commission pursuant to a
                         request by Registrant for confidential treatment
                         pursuant to Rule 24b-2.  The omitted confidential
                         information has been identified by the following
                         statement: "Confidential Treatment Requested".]

              10.87      Reimbursement Agreement, dated as of June 28, 1996,
                         between Ciba-Geigy Limited, a Swiss corporation, and
                         the Registrant, incorporated by reference to Exhibit
                         10.94 of the Registrant's Form 10-Q report for the
                         period ended June 30, 1996.

              10.88      Reimbursement Agreement, dated as of May 20, 1996,
                         between Ciba-Geigy Limited, a Swiss corporation, and
                         the Registrant, incorporated by reference to Exhibit
                         10.95 of the Registrant's Form 10-Q report for the
                         period ended June 30, 1996.

              10.89      Letter Agreement between the Registrant and Dr. Richard
                         W. Barker, dated May 1, 1996, incorporated by reference
                         to Exhibit 10.88 of the Registrant's Form 10-Q report
                         for the period ended June 30, 1996.*

              10.90      Revolving Credit Agreement, dated as of March 23, 1996,
                         between the Registrant and Morgan Guaranty Trust
                         Company of New York, incorporated by reference to
                         Exhibit 10.89 of the Registrant's Form 10-Q report for
                         the period ended June 30, 1996.


                                       35
<PAGE>

              10.91      Amendment No. 1 to Revolving Credit Agreement, dated as
                         of March 18, 1997, between the Registrant and Morgan
                         Guaranty Trust Company of New York, incorporated by
                         reference to Exhibit 10.89 of the Registrant's
                         Form 10-Q report for the period ended June 30, 1997.

              10.92      Purchase and Assignment Agreement between Behringwerke
                         Aktiengesellschaft, on the one side, and 31.CORSA
                         Verwaltungsgesellschaft mbH and the Registrant, on the
                         other side, dated February 17, 1996, Closing Agreement,
                         by and among Behringwerke Aktiengesellschaft, on the
                         one side, and the Registrant and 31.CORSA
                         Verwaltungsgesellschaft mbH, on the other side, dated
                         June 29, 1996 and Letter Agreement dated June 29, 1996
                         between the Registrant, 31.CORSA
                         Verwaltungsgesellschaft mbH and Behringwerke
                         Aktiengesellschaft, incorporated by reference to
                         Exhibit 10.86 of the Registrant's Form 10-Q report for
                         the period ended September 29, 1996.  [Certain
                         confidential information has been omitted from the
                         Agreements and filed separately with the Securities and
                         Exchange Commission pursuant to a request by Registrant
                         for confidential treatment pursuant to Rule 24b-2.]

              10.93      Royalty Projects Agreement by and between Ciba Corning
                         Diagnostics Corp., a Delaware corporation, and Ciba-
                         Geigy Limited, a Swiss corporation, incorporated by
                         reference to Exhibit 10.87 of the Registrant's Form 10-
                         Q report for the period ended September 29, 1996.
                         [Certain confidential information has been omitted from
                         the Agreement and filed separately with the Securities
                         and Exchange Commission pursuant to a request by
                         Registrant for confidential treatment pursuant to
                         Rule 24b-2.]

              10.94      Purchase Agreement between BNP Leasing Corporation and
                         the Registrant, dated June 28, 1996, incorporated by
                         reference to Exhibit 10.90 of the Registrant's Form 10-
                         Q report for the period ended June 30, 1996.

              10.95      Lease Agreement between BNP Leasing Corporation and the
                         Registrant, dated June 28, 1996, incorporated by
                         reference to Exhibit 10.91 of the Registrant's Form 10-
                         Q report for the period ended June 30, 1996.

              10.96      Ground Lease between BNP Leasing Corporation and the
                         Registrant, dated June 28, 1996, incorporated by
                         reference to Exhibit 10.92 of the Registrant's
                         Form 10-Q report for the period ended June 30, 1996.

              10.97      Reimbursement Agreement, dated as of July 12, 1996,
                         between Ciba-Geigy Limited, a Swiss corporation, and
                         the Registrant, incorporated by reference to Exhibit
                         10.93 of the Registrant's Form 10-Q report for the
                         period ended June 30, 1996.

              10.98      Form of Performance Unit Agreement, Chiron 1991 Stock
                         Option Plan, as amended, incorporated by reference to
                         Exhibit 10.94 of the Registrant's Form 10-K report for
                         fiscal year 1996.*

              11         Statement of Computation of Earnings (Loss) per Share.


                                       36
<PAGE>


              27         Financial Data Schedule.

          ------------------------
          * Management contract, compensatory plan or arrangement.

     (b)  REPORTS ON FORM 8-K.

               Chiron filed a current report on Form 8-K dated October 22, 1997,
          reporting under Item 5 that on October 21, 1997, Chiron Corporation
          issued a press release announcing that Bausch & Lomb Incorporated, a
          New York corporation, had signed an agreement under which Bausch &
          Lomb has agreed to purchase Chiron's opthalmic products unit, Chiron
          Vision Corporation, for $300 million in cash.


                                       37
<PAGE>


                               CHIRON CORPORATION

                               SEPTEMBER 28, 1997




                                    SIGNATURE


     Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.




                                   CHIRON CORPORATION



DATE:   November 10, 1997          BY:  /s/ Edward E. Penhoet
        ----------------------          ---------------------------------------
                                        Edward E. Penhoet, Ph.D.
                                        President and Chief Executive Officer,
                                        and Chief Financial Officer (Principal
                                        Accounting Officer)


                                       38