<PAGE>   1
                                  UNITED STATES
                             SECURITIES AND EXCHANGE
                         COMMISSION WASHINGTON, DC 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 June 30, 1999

                                       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 0-20815

                                     AVIRON
             (Exact name of registrant as specified in its charter)

                  DELAWARE                               77-0309686
      (State or other jurisdiction of                 (I.R.S. Employer
       incorporation or organization)                 Identification No.)

           297 North Bernardo Avenue, Mountain View, California 94043
           (Address of principal executive offices including zip code)

                                 (650) 919-6500
              (Registrant's telephone number, including area code)


--------------------------------------------------------------------------------
      (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.

<TABLE>
<CAPTION>
    Common Stock $.001 par value              15,820,855 shares
    ----------------------------              -----------------
<S>                                            <C>
               (Class)                  (Outstanding at August 9, 1999)
</TABLE>


<PAGE>   2

                                     AVIRON

                                TABLE OF CONTENTS



<TABLE>
<CAPTION>
                                                                                          PAGE
                                                                                         NUMBER
                                                                                         ------
<S>          <C>                                                                        <C>
PART I.       FINANCIAL INFORMATION

ITEM 1.       FINANCIAL STATEMENTS AND NOTES (UNAUDITED)

              Condensed Balance Sheets as of June 30, 1999
              and December 31, 1998                                                        3

              Condensed Statements of Operations for the three-
              and six-month periods ended June 30, 1999 and 1998                           4

              Condensed Statements of Cash Flows for the six-
              month periods ended June 30, 1999 and 1998                                   5

              Notes to Condensed Financial Statements                                      6

ITEM 2.       MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
              AND RESULTS OF OPERATIONS                                                    9

ITEM 3.       QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                  18

PART II.      OTHER INFORMATION                                                           19

ITEM 1.       LEGAL PROCEEDINGS                                                           19

ITEM 2.       CHANGES IN SECURITIES                                                       19

ITEM 3.       DEFAULTS UPON SENIOR SECURITIES                                             19

ITEM 4.       SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS                         19

ITEM 5.       OTHER INFORMATION                                                           20

ITEM 6.       EXHIBITS AND REPORTS ON FORM 8-K                                            20

              SIGNATURES                                                                  21

              EXHIBIT INDEX                                                               22
</TABLE>





                                       2
<PAGE>   3

PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS



                                     AVIRON
                            CONDENSED BALANCE SHEETS
                        (IN THOUSANDS, EXCEPT SHARE DATA)



<TABLE>
<CAPTION>
                                                                              JUNE 30,        DECEMBER 31,
                                                                               1999               1998
                                                                            ---------         ------------
                                                                           (UNAUDITED)          (NOTE 1)
<S>                                                                         <C>                <C>
                                     ASSETS
Current Assets:
  Cash and cash equivalents .......................................         $  16,196          $  28,164
  Short-term investments ..........................................            46,356             60,692
  Accounts receivable .............................................             2,810                 75
  Inventory .......................................................               956                 --
  Prepaid expenses and other current assets .......................             1,012              1,228
                                                                            ---------          ---------
    Total current assets ..........................................            67,330             90,159
Long-term investments .............................................             8,514              6,002
Property and equipment, net .......................................            23,443             18,521
Deposits and other assets .........................................             7,010              6,303
                                                                            ---------          ---------

TOTAL ASSETS ......................................................         $ 106,297          $ 120,985
                                                                            =========          =========

                      LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities:
  Accounts payable ................................................         $   3,929          $   2,792
  Accrued compensation ............................................               694                804
  Accrued clinical trial costs ....................................               253                757
  Accrued interest ................................................             1,438              1,445
  Accrued expenses and other liabilities ..........................             5,391              4,584
  Current portion of capital lease obligations ....................               291                408
                                                                            ---------          ---------
    Total current liabilities .....................................            11,996             10,790
Deferred rent .....................................................             1,716              1,116
Capital lease obligations, noncurrent .............................                38                113
Convertible debt ..................................................           100,000            100,000
                                                                            ---------          ---------
Total liabilities .................................................           113,750            112,019
                                                                            ---------          ---------

Commitments and contingencies

Stockholders' Equity (Deficit):
  Preferred stock, $0.001 par value; 5.0 million shares authorized,
    issuable in series; none outstanding at June 30, 1999 and
    December 31, 1998 .............................................                --                 --
  Common stock, $0.001 par value; 30.0 million shares authorized,
    15.8 million and 15.7 million shares issued and outstanding at
    June 30, 1999 and December 31, 1998, respectively .............                16                 16
  Additional paid-in capital ......................................           130,890            130,524
  Notes receivable from stockholders ..............................               (83)               (83)
  Deferred compensation ...........................................              (161)              (237)
  Accumulated deficit .............................................          (138,115)          (121,254)
                                                                            ---------          ---------
Total stockholders' equity (deficit)...............................            (7,453)             8,966
                                                                            ---------          ---------

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY ........................         $ 106,297          $ 120,985
                                                                            =========          =========
</TABLE>



                             See accompanying notes.




                                       3
<PAGE>   4

                                     AVIRON
                       CONDENSED STATEMENTS OF OPERATIONS
                                   (UNAUDITED)
                      (IN THOUSANDS, EXCEPT PER SHARE DATA)


<TABLE>
<CAPTION>
                                                          THREE MONTHS ENDED             SIX MONTHS ENDED
                                                               JUNE 30,                      JUNE 30,
                                                      ------------------------        ------------------------
                                                        1999            1998            1999            1998
                                                      --------        --------        --------        --------
<S>                                                   <C>             <C>             <C>             <C>
REVENUES:
    Contract revenues and grants ............         $  2,944        $    134        $ 18,475        $    387
                                                      --------        --------        --------        --------

OPERATING EXPENSES:

  Research and development ..................           14,362          10,874          28,367          20,657
  General, administrative and marketing......            3,151           2,591           5,833           4,652
                                                      --------        --------        --------        --------

TOTAL OPERATING EXPENSES ....................           17,513          13,465          34,200          25,309
                                                      --------        --------        --------        --------

LOSS FROM OPERATIONS ........................          (14,569)        (13,331)        (15,725)        (24,922)
                                                      --------        --------        --------        --------

OTHER INCOME/(EXPENSE):
  Interest income ...........................            1,062           1,847           2,273           2,800
  Interest expense ..........................           (1,613)         (1,618)         (3,187)         (1,661)
                                                      --------        --------        --------        --------

TOTAL OTHER INCOME (EXPENSE), NET ...........             (551)            229            (914)          1,139
                                                      --------        --------        --------        --------

NET LOSS ....................................         $(15,120)       $(13,102)       $(16,639)       $(23,783)
                                                      ========        ========        ========        ========

Basic and diluted net loss per share ........         $  (0.96)       $  (0.84)       $  (1.06)       $  (1.51)
                                                      ========        ========        ========        ========

Shares used in computing basic and
diluted net loss per share ..................           15,749          15,571          15,726          15,787
</TABLE>


                             See accompanying notes.





                                       4
<PAGE>   5

                                     AVIRON
                       CONDENSED STATEMENTS OF CASH FLOWS
                                   (UNAUDITED)
                                 (IN THOUSANDS)



<TABLE>
<CAPTION>
                                                                                     SIX MONTHS ENDED
                                                                                         JUNE 30,
                                                                                 -------------------------
                                                                                   1999            1998
                                                                                 --------        --------
<S>                                                                              <C>             <C>
CASH FLOWS FROM OPERATING ACTIVITIES:

Net loss .................................................................       $(16,639)       $(23,783)
Adjustment to reconcile net loss to net cash used in operating activities:
       Depreciation and amortization .....................................          2,193           1,075
       Amortization of debt issuance costs ...............................            288             139
       Amortization of deferred compensation .............................             76             223

Changes in assets and liabilities:
       Accounts receivable ...............................................         (2,735)             --
       Inventory .........................................................           (956)             --
       Prepaid expenses and other current assets .........................            216            (114)
       Deposits and other assets .........................................           (995)            138
       Accounts payable ..................................................          1,137          (1,302)
       Accrued expenses and other liabilities ............................            186            (560)
       Deferred rent .....................................................            600             259
                                                                                 --------        --------

Net cash used in operating activities ....................................        (16,629)        (23,925)
                                                                                 --------        --------

CASH FLOWS FROM INVESTING ACTIVITIES:
       Purchases of investments ..........................................        (28,536)        (34,399)
       Maturities of investments .........................................         40,138          25,725
       Expenditures for property and equipment ...........................         (7,115)         (9,435)
                                                                                 --------        --------

Net cash provided by (used in) investing activities ......................          4,487         (18,109)
                                                                                 --------        --------

CASH FLOWS FROM FINANCING ACTIVITIES:
       Principal payments on capital lease obligation ....................           (192)           (261)
       Proceeds from convertible debt offering, net ......................             --          96,000
       Repurchase of Common Stock ........................................             --         (13,337)
       Proceeds from issuance of Common stock, net: ......................            366             682
                                                                                 --------        --------

Net cash provided by financing activities ................................            174          83,084
                                                                                 --------        --------

Net increase (decrease) in cash and cash equivalents .....................        (11,968)         41,050

Cash and cash equivalents at beginning of period .........................         28,164          15,239
                                                                                 --------        --------

CASH AND CASH EQUIVALENTS AT END OF PERIOD ...............................       $ 16,196        $ 56,289
                                                                                 ========        ========
</TABLE>


                             See accompanying notes.


                                       5
<PAGE>   6

                                     AVIRON
                     NOTES TO CONDENSED FINANCIAL STATEMENTS
                                  JUNE 30, 1999
                                   (UNAUDITED)



1. Summary of Significant Accounting Policies

         Basis of Presentation

         The accompanying unaudited condensed financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X.

         The financial information as of June 30, 1999 and for the three-month
and six-month periods ended June 30, 1999 and 1998 are unaudited, but includes
all adjustments (consisting only of normal recurring adjustments) which Aviron
(the Company) considers necessary for a fair presentation of the financial
position at such date and the operating results and cash flows for those
periods. The balance sheet data at December 31, 1998 is derived from the audited
financial statements at that date, but does not include all of the information
and footnotes required by generally accepted accounting principles for complete
financial statements. The accompanying condensed financial statements should be
read in conjunction with the financial statements and notes thereto included in
the Company's Annual Report on Form 10-K for the year ended December 31, 1998.
The results of the Company's operations for any interim period are not
necessarily indicative of the results of the Company's operations for a full
fiscal year.

         Accounts Receivable

         Accounts receivable is comprised principally of amounts receivable from
partners in connection with reimbursement of certain expenses associated with
the development and commercialization of FLUMIST(TM), the Company's live
cold-adapted virus vaccine.

         Inventory

         Inventory is comprised principally of sprayer components that will be
used in the manufacture of commercial batches of FLUMIST(TM) for sale. Inventory
is valued at the lower of cost (FIFO) or market value.

         Comprehensive Income (Loss)

         Comprehensive income (loss) is not presented separately as it
approximates the net loss presented in the statement of operations for the
three-month and six-month periods ended June 30, 1999 and 1998.


2. Net Loss Per Share

         The Company calculates net loss per share in accordance with Statement
of Financial Accounting Standards No. 128 "Earnings Per Share" (SFAS 128). SFAS
128 requires the presentation of basic earnings (loss) per share and diluted
earnings per share, if more dilutive, for all periods presented. Basic net loss
per share is computed using the weighted average number of common shares
outstanding during the period. Diluted net loss per share has not been presented
separately as, given the Company's net loss position, the result would be
anti-dilutive.


3. New Accounting Pronouncements

         In June 1998, the Financial Accounting Standards Board issued Statement
No. 133, "Accounting for Derivative Instruments and Hedging Activities" (SFAS
133), which is required to be adopted for the year ending December 31, 2001.
Management does not anticipate that the adoption of SFAS 133 will have a
significant effect on the results of operations or the financial position of the
Company.



                                       6
<PAGE>   7
         As of January 1, 1999, the Company adopted Statement of Position 98-1,
"Accounting for the Costs of Computer Software Developed or Obtained for
Internal Use" (SOP 98-1). SOP 98-1 requires companies to capitalize certain
qualifying computer software costs, which are incurred during the application
development stage, and amortize them over the software's estimated useful life.
The adoption of SOP 98-1 did not have a significant effect on the results of
operations or the financial position of the Company.


4. Collaboration Agreement

         On January 12, 1999, the Company announced a worldwide collaboration
for the marketing of FLUMIST(TM) with Wyeth Lederle Vaccines, a business unit of
Wyeth-Ayerst Laboratories, the pharmaceutical division of American Home Products
Corporation (Wyeth). On March 15, 1999, the Federal Trade Commission granted
early termination of the waiting period under the Hart-Scott-Rodino Antitrust
Improvement Act of 1996 regarding this collaboration.

         Under the agreement, Aviron is granting Wyeth exclusive worldwide
rights to market FLUMIST(TM). Wyeth and Aviron will co-promote FLUMIST(TM) in
the United States, while Wyeth will have the exclusive right to market the
product outside the United States. In each case, Wyeth will hold the marketing
rights for up to eleven years. The collaboration excludes Korea, Australia, New
Zealand and certain South Pacific countries. The companies will collaborate on
the regulatory, clinical, and marketing programs for the product.

         As consideration under the agreement, the Company received a cash
payment of $15 million for the initial license that was recognized as revenue
during the quarter ended March 31, 1999. During the quarter ended June 30, 1999,
the Company recorded $2.8 million of revenue in expense reimbursement from Wyeth
for a portion of its clinical development and commercialization costs incurred
during the period from March 15 through June 30, 1999.

         In addition, the Company will receive $15.5 million upon acceptance for
filing with the U.S. Food and Drug Administration (FDA), and $20 million upon
FDA marketing approval for FLUMIST(TM). Compensation for achieving additional
development and regulatory milestones is included in the agreement terms. The
granting of certain rights under the license would trigger additional payments
in excess of $140 million to the Company. Consideration for the license also
includes a commitment to provide up to $40 million in future financing to the
Company from Wyeth, a portion of which is contingent upon regulatory approval of
the product, with the remaining amount to come from participation in the
Company's future securities offerings. The potential value for the license fees,
milestones and financing support that the Company could receive under the
collaboration exceeds $400 million. In addition to the payments mentioned above,
the Company anticipates that it will earn product revenues from Wyeth, in the
form of product transfer payments and royalties, which increase at higher sales
levels. The Company will incur expenses to supply and co-promote the product.


5. Credit Facility

         On June 23, 1999 the Company entered into a $10 million general line of
credit. This credit facility is secured by various assets of the Company and
requires the maintenance of a minimum balance in the amount of $20 million of
cash and investments. As of June 30, 1999, no amounts have been drawn against
the credit line. Once drawn, the loan will be repaid over 48 months.

6. Subsequent Event

         On July 2, 1999 the Company and Medeva Pharma Limited (Medeva Pharma),
a subsidiary of Medeva PLC, extended their collaboration covering the
manufacture of key components of FLUMIST(TM) through December 2005. The Company
paid Medeva Pharma $1 million upon execution of the agreement and will pay an
additional $1 million on December 31, 1999.

         Under the terms of the new agreement, the Company will make specified
payments to Medeva for reaching certain technological, regulatory, and
employment milestones, supplying the vaccine components of FluMist(TM), and
providing the use of facilities. The Company is required to make minimum
payments to Medeva Pharma



                                       7
<PAGE>   8
 totaling 25 million British Pounds Sterling over the term of the agreement.
These minimum payments include all of the milestone, supply, and facility use
payments described above.

     In addition, the Company will make payments to Medeva Pharma totaling $20
million over the term of the agreement based on net sales of FLUMIST(TM).




                                       8
<PAGE>   9


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

         The following Management's Discussion and Analysis of Financial
Condition and Results of Operations contains, in addition to historical
information, forward-looking statements which involve risks and uncertainties.
The Company's actual results could differ materially from those anticipated in
these forward-looking statements as a result of certain factors, including those
set forth in the Company's Annual Report on Form 10-K in the section entitled
"Business Risks."

OVERVIEW

         Since its inception in April 1992, Aviron has devoted substantially all
of its resources to its research and development programs. To date, Aviron has
not generated any revenues from the sale of products and does not expect to
generate any such revenues until 2000 at the earliest. Aviron has incurred
cumulative net losses of approximately $138.1 million as of June 30, 1999 and it
expects to incur substantial operating losses over at least the next few years.
Aviron has financed its operations through proceeds from private placements of
preferred stock, two public offerings and a private placement of Common Stock, a
private placement of convertible subordinated notes, revenue from its
collaborative agreements, equipment lease financings and investment income
earned on cash, cash equivalent balances and marketable securities.

         On June 30, 1998 Aviron submitted its first Product License
Application/Establishment License Application (PLA/ELA) to the U.S. Food and
Drug Administration (FDA) for its live cold-adapted influenza vaccine,
FLUMIST(TM), a trivalent vaccine. On August 31, 1998 the Company announced that
it had received notice from the FDA that its submission was not accepted for
filing due to lack of data on manufacturing validation and stability.
On December 10, 1998, the Company reported on a meeting with the U.S. Food and
Drug Administration Center for Biologics Evaluation and Research (CBER)
regarding plans for submission of the Company's license applications for
FLUMIST(TM). Requirements for completion of the submission include data on
manufacturing and assay validation, stability, and clinical equivalence. If the
current manufacturing validation exercises are successful, the Company plans to
resubmit its application for U.S. licensure for FLUMIST(TM) to prevent influenza
and its complications in children and adults in the fall of 1999. The
resubmission will be in the form of a Biological License Application (BLA) in
accordance with current FDA requirements.

         The Company expects its research and development expenditures to
increase substantially over the next several years as the Company expands its
research and development efforts, preclinical testing and clinical trials with
respect to certain of its programs, and manufacturing activities principally in
regard to FLUMIST(TM). In addition, general, administrative and marketing
expenses are expected to continue to increase as the Company expands its
operations and prepares for the potential commercial launch of FLUMIST(TM).

         The Company announced in late 1998 positive preliminary results of a
Phase 2 clinical trial for a live intranasal vaccine for Parainfluenza Virus
Type 3 (PIV-3) to protect against croup. The Company intends to continue
preparation for further clinical trials for PIV-3. The Company also is
developing a subunit vaccine for Epstein-Barr Virus (EBV) to protect against
infectious mononucleosis in collaboration with SmithKline Beecham Biologicals,
S.A. (SmithKline Beecham). A Phase 1 clinical trial of this vaccine is being
completed. In addition, the Company expects to begin a clinical trial by early
2000 for a vaccine candidate for Cytomegalovirus (CMV) with the National
Institute of Allergy and Infectious Diseases (NIAID) of the National Institute
of Health (NIH). Aviron is also using its proprietary Rational Vaccine Design
technologies to develop vaccine candidates for diseases caused by Herpes Simplex
Virus Type 2 (HSV-2) and Respiratory Syncytial Virus (RSV).

Influenza Clinical Trials

         The Company has conducted and continues to conduct clinical trials to
evaluate safety and efficacy of FLUMIST(TM). To date, the Company has tested
FLUMIST(TM) in over 11,000 children and adults in completed clinical trials. The
Company's clinical trials relate to the safety, efficacy, and effectiveness of
the trivalent formulation of its intranasal spray delivery method. The Company
enrolled a total of 647 patients in Phase 1 / Phase 2 clinical trials; 92
patients in a challenge efficacy study in healthy adults, in collaboration with
the NIH; 1,602 children in Year 1 of the Phase 3 pediatric protective efficacy
trial, 1,358 of whom returned for Year 2 and 948 of whom returned for Year 3 of
the trial; and 10,379 adults and children in six additional studies and in a
healthy working adult effectiveness trial. The Company has received limited data
on the efficacy of FluMist(TM) against culture-confirmed influenza from clinical
trials in healthy adults. There can be no assurance that data from such trials,
in addition to prior trials, will be sufficient to support the FDA approval in



                                       9
<PAGE>   10

healthy children or adults. The Company's clinical trials are being designed to
support the planned BLA submission in the fall of 1999 seeking approval of
FLUMIST(TM) in several target populations. The estimated timing of submission of
this BLA and potential commercialization of FLUMIST(TM) are forward-looking
statements subject to risks and uncertainties, and there can be no assurance
that such filing or such approval will not be delayed materially or that
commercialization will occur as a result of certain factors, including those set
forth in "Uncertainties Related to Clinical Trials," "-- Uncertainties Related
to Early Stage of Development; Technological Uncertainty" in the "Business
Risks" section of the Company's 1998 Annual Report on Form 10-K.

Phase 3 Clinical Trials in Children

         The Company has completed a two-year pivotal Phase 3 clinical trial to
evaluate one-and two-dose regimens in children. The Company's clinical trial
data suggest that a repeat or booster dose may be required in young children
without previous exposure to influenza or influenza vaccines. Two doses of the
inactivated injectable influenza vaccine are recommended annually for young
children receiving influenza prophylaxis for the first time. The Company
enrolled 1,602 children at 10 clinical sites in the pivotal Phase 3 clinical
trial, of which 1,314 were vaccinated with a second dose 46 to 74 days after
initial vaccination. The primary endpoint of the first stage of the study was
defined as protection of children from culture-confirmed influenza during
naturally occurring epidemics of influenza.

         In May 1998, data from the first year of this trial of FLUMIST(TM) were
published in The New England Journal of Medicine. In the randomized,
placebo-controlled study, results show that only 14 of the 1,070 children
vaccinated with FLUMIST(TM) experienced culture-confirmed influenza, while 95 of
the 532 placebo recipients experienced culture-confirmed influenza. Of the
children who received FLUMIST(TM), only one child developed influenza-associated
otitis media (ear infection), while 20 of the placebo recipients developed
influenza-associated ear infections. Throughout the entire cough, cold and flu
season, 1,070 children vaccinated with FLUMIST(TM) experienced 30 percent fewer
ear infections with fever than children who received placebo and a 35 percent
reduction in related antibiotic use.

         The children who participated in the first year of this study were
invited back to participate for a second year of the trial during the 1997-98
flu season, and they were vaccinated with either a single dose of FLUMIST(TM) or
a placebo spray. In September 1998, the results of Year 2 of the Phase 3
efficacy trial of FLUMIST(TM) in children, conducted in collaboration with
NIAID, were presented at the Interscience Conference on Antimicrobial Agents and
Chemotherapy (ICAAC). The study showed that FLUMIST(TM) provided 87 percent
protection against culture-confirmed influenza overall, 86 percent protection
against A/Sydney, an unexpected variant which was the predominant strain of
influenza circulating during the 1997-98 flu season, and 100 percent protection
against the influenza strains included in the 1997-98 vaccine. Among the 1,358
participants, there were five cases of influenza due to influenza strains
included in the vaccine and 66 cases caused by A/Sydney. Two percent of children
vaccinated with FLUMIST(TM) (15 out of 917) experienced culture-confirmed
influenza, all of which was attributable to the A/Sydney strain, while 13
percent of the placebo recipients (56 out of 441) experienced culture-confirmed
influenza. The difference between these two influenza attack rates is used to
calculate the overall protection rate of 87 percent.

         The incidence of pneumonia and other lower respiratory diseases was
also reduced in those children vaccinated with FLUMIST(TM), compared to placebo
in Year 2 of the study. Eight children in the placebo group developed
influenza-related wheezing, bronchitis or pneumonia, all of which were due to
the A/Sydney strain. No children who received FLUMIST(TM) experienced such lower
respiratory complications. Among the 15 of the 917 children in the FLUMIST(TM)
group who did contract influenza, the illness appeared to be milder than in the
control group, based on frequency of complications and duration of fever.

         The Company began a large scale clinical trial in August 1998 to assess
the impact of community-wide influenza immunization. The three-year trial,
taking place in Temple, Texas, is expected to enroll up to 15,000 children and
is funded by a $3 million grant from the NIAID awarded to the Baylor College of
Medicine. The trial will evaluate the impact of vaccinating pre-school and
school-age children with FluMist(TM) on the incidence of doctor visits for
flu-related illness.



                                       10
<PAGE>   11

Clinical Trials in Healthy Adults

         FLUMIST(TM) has been tested in a double-blind, placebo-controlled
challenge efficacy study at two Vaccine Treatment Evaluation Units (VTEUs)
involving 92 healthy young adults. Subjects were randomized to receive either
FLUMIST(TM), the inactivated injectable vaccine or placebo. There were no
serious adverse events attributable to FLUMIST(TM) seen in any subjects, and
there were no statistically significant differences in the occurrence of any
potential reactions assessed in the study between either vaccine or placebo.
Following vaccination and subsequent intranasal administration of the wild-type
challenge virus, the incidence of laboratory-documented influenza, a
prospectively defined primary endpoint of the trial, was 7 percent in subjects
vaccinated with FLUMIST(TM), 13 percent in subjects vaccinated with the
inactivated injectable influenza vaccine and 45 percent in subjects who received
placebo. The reduction in laboratory-documented influenza compared to placebo
was statistically significant for FLUMIST(TM) and the inactivated vaccine. These
data have not been peer reviewed. No assurance can be given that the conclusions
drawn from this analysis will not change as a result of further study by the
Company or during the peer review process.

         The Company conducted a Phase 3 trial in 4,561 healthy working adults
to assess the impact of immunization on the frequency of influenza-like illness,
utilization of health care services, and absenteeism from work. Results of this
study were published in the July 14, 1999 issue of the Journal of the American
Medical Association. The double-blind, placebo-controlled study was conducted at
13 clinical sites nationwide during the 1997-98 flu season. The participants,
aged 18 to 65, each received one dose of vaccine. FLUMIST(TM) recipients had
reduced illness by multiple definitions including days of febrile illness (22.9
percent less), days of severe febrile illness (27.3 percent less) and days of
febrile upper respiratory tract illness (24.8 percent less).

         Reductions in illness-associated absenteeism and health resource use
were observed across several illness definitions. For example, those receiving
FluMist(TM) missed 28.4 percent fewer work days due to febrile upper respiratory
illness and had a 40.9 percent reduction in health care provider visits. In
addition, FluMist(TM) recipients experienced a 45.2 percent reduction in days of
prescription antibiotic use and 28.0 percent fewer days of OTC medication due to
febrile upper respiratory illness. Data from this study are expected to be part
of the Company's BLA submission to the FDA.

Clinical Trials in High-Risk Adults

         The Company has completed a clinical trial for safety in 200 elderly
high-risk adults for the use of FLUMIST(TM) for co-administration with the
inactivated injectable influenza vaccine. As this trial was not designed to
generate efficacy data on use of FLUMIST(TM) in high-risk adults, there can be
no assurance that data from this trial, combined with data from the Company's
other clinical trials and prior trials, will be sufficient to support FDA
approval for use of FLUMIST(TM) in high-risk adults even if the FDA were
satisfied with the safety data submitted. Early in the fourth quarter of 1998,
the Cooperative Studies program of the Department of Veterans Affairs Office of
Research and Development began a one-year trial to evaluate the potential
additional benefit of co-administration of FLUMIST(TM) with the flu shot,
compared to the flu shot alone, in high-risk patients with chronic obstructive
pulmonary disease. This study involved over 2,000 volunteers at 20
participating VA Medical Centers in the United States. Results from this trial
are not yet available for analysis.

Clinical Trials for Manufacturing Consistency and Process

         In February 1998, the Company reported positive results from a
manufacturing consistency lot trial of bulk vaccine manufactured, blended, and
filled into sprayers at Medeva Pharma Limited (Medeva Pharma), formerly Evans
Medical Limited, a subsidiary of Medeva PLC. The Company conducted a randomized,
double-blind, placebo-controlled trial in 500 children, designed to evaluate the
safety and immunogenicity of three new manufacturing lots of FLUMIST(TM). The
children were vaccinated between April and September 1997. Analysis of patient
diary cards and antibody responses following two doses of FLUMIST(TM) showed
consistent safety and immunogenicity for the different lots according to the
pre-defined endpoints.


                                       11
<PAGE>   12

         On June 9, 1999, the Company announced completion of a bridging study
on FLUMIST(TM) designed to compare FluMist(TM) blended and filled at Aviron's
facility at Packaging Coordinators, Inc. (PCI) in Philadelphia, Pennsylvania, to
vaccine manufactured with the process used in earlier clinical trials, blended
and filled by Medeva Pharma.

         The study's primary endpoint was to show that FluMist(TM) blended and
filled at Aviron's PCI facility had similar immunogenicity for all three 1997-98
influenza strains to the vaccine blended and filled at Medeva Pharma. The
secondary endpoint was to show that the two lots of vaccine had similar safety
and tolerability profiles.

         The 225-person trial was conducted in Australia from December 1998
through March 1999. Participants were children aged 12 to 42 months, randomized
to receive vaccine blended and filled at one of the two manufacturing sites. The
study was conducted in collaboration with CSL Limited, Aviron's Australian
marketing partner for FLUMIST(TM).

         The Company's preliminary analysis indicates that the results appear to
meet all of the Company's objectives. Aviron will include data from this
clinical study in its licensing application for the vaccine.

Partnering Agreements

         The Company has entered into several development and marketing
agreements with respect to its products.

         In January 1999, the Company announced a worldwide collaboration for
the marketing of FLUMIST(TM) with Wyeth Lederle Vaccines, a business unit of
Wyeth-Ayerst Laboratories, the pharmaceutical division of American Home Products
Corporation (Wyeth), under which Wyeth and the Company will co-promote
FLUMIST(TM) in the United States, while Wyeth will have the exclusive right to
market the product outside the United States, except for Korea, Australia, New
Zealand and certain countries in the South Pacific region. Wyeth and the Company
will collaborate on the regulatory, clinical and marketing programs for
FLUMIST(TM). In June 1998, the Company announced the signing of an agreement
with CSL Limited to develop, sell and distribute FLUMIST(TM) in Australia, New
Zealand and certain countries in the South Pacific region. Under the agreement,
CSL Limited and Aviron will jointly carry out additional trials in Australia for
FLUMIST(TM). Expenses associated with these agreements are expected to increase
as the Company continues preclinical testing and clinical trials and prepares
for the potential commercial launch of FLUMIST(TM). No assurance can be given,
however, that the Company will receive any future payments from CSL Limited or
Wyeth.

         In October 1995, the Company signed an agreement with SmithKline
Beecham defining a collaboration on the Company's EBV vaccine technology. Under
the terms of this agreement, the Company granted SmithKline Beecham an exclusive
license to produce, use and sell non-live EBV vaccines incorporating the
Company's technology for prophylactic and therapeutic uses on a worldwide basis,
except in Korea. The Company retained U.S. co-marketing rights to a monovalent
EBV vaccine formulation which will be supplied by SmithKline Beecham. The
Company is entitled to royalties from SmithKline Beecham based on net sales of
the non-live EBV vaccine. No assurance can be given, however, that the Company
will receive any future payments from SmithKline Beecham or that SmithKline
Beecham will not terminate this agreement.

         In May 1995, the Company entered into a Development and License
Agreement with Sang-A Pharm. Co., Ltd. (Sang-A). The Company granted to Sang-A
certain exclusive clinical development and marketing rights in Korea for
specified products developed by the Company, including vaccines for influenza
(cold-adapted and recombinant), PIV, EBV, CMV, HSV-2 and RSV on meeting certain
conditions. However, the Company is under no obligation to develop any product.
Sang-A also will make payments to the Company upon Sang-A's meeting certain
regulatory milestones for each product in Korea and will pay a royalty to the
Company on net sales of such products in South and North Korea. No assurance can
be given, however, that the Company will receive any future payments from Sang-A
or that Sang-A will not terminate its agreement with the Company. In January
1997, Sang-A declared bankruptcy. The Company is unable to predict what, if any,
long-term effect the bankruptcy will have on Sang-A and on the Company's
agreement with Sang-A.



                                       12
<PAGE>   13

Manufacturing Facilities

         In April 1997, the Company entered into an agreement with Medeva Pharma
for the commercial manufacture of FLUMIST(TM) through December 2001. In July
1999, the agreement with Medeva Pharma was revised and extended through December
2005.

         In October 1997, the Company entered into an agreement with PCI for the
blending, filling, labeling and packaging of FLUMIST(TM) in the United States
until October 2004. In 1998, Aviron and PCI opened a 34,000-square-foot
manufacturing suite in Philadelphia, Pennsylvania at PCI's site, in which PCI
blended, filled and packaged doses of FLUMIST(TM) for use in 1998 - 99 clinical
trials. If regulatory approval is received, the PCI facility is expected to be
used to blend, fill, label, package and store FLUMIST(TM).

         The agreements with Medeva Pharma and PCI have required the Company to
fund the construction of facilities, improvements, and equipment and will
continue to require the Company to incur expenses for the duration of the
agreements for facility space, utilities and insurance.

         In February 1999, the Company announced that it has leased a 69,000
square-foot building in Santa Clara, California. The facility will provide
additional laboratory, pilot plant, manufacturing and office space to
accommodate growth. This additional space will require the commitment of
significant additional funds during 1999, 2000, and 2001 for renovation,
equipment and furnishings.

         In the event of a better than expected market acceptance, the Company
may be capacity constrained in its supply of FLUMIST(TM). In order to secure
future production capacity, the Company may extend and expand its existing
arrangements, collaborate with other third parties, or expand its own
manufacturing facilities. Using an alternative supplier or expanding its
proprietary facility would require a substantial amount of funds and additional
clinical trials and testing. There can be no assurance that an alternative
source of supply will be established on a timely basis, or that the Company will
have or be able to obtain funds sufficient for building or equipping such
additional facilities.

         The Company is currently evaluating the costs and benefits of
developing internal manufacturing capabilities or contracting for expanded or
alternative sources of supply from third-party manufacturers for products other
than FLUMIST(TM).

Research Grants

         In July 1998, the Company received notice from the NIAID of a Small
Business Innovation Research (SBIR) grant to support development of its live
attenuated vaccine for the prevention of disease caused by CMV. The $750,000
grant is the second that Aviron has received for research on CMV. In September
1998, the total grant amount was increased by an additional $200,000 to
$950,000. A portion of the award has been used to produce recombinant CMV
vaccine candidates for human testing. The remainder of the award will be used to
determine the safety and immunogenicity of these vaccine candidates in a Phase 1
clinical trial in collaboration with the NIAID Vaccine Treatment and Evaluation
Unit network. No assurance can be given, however, that the Company will receive
any future grants to support its research or that such research will result in
commercially viable products.

Business Risks

         The Company's business is subject to significant risks, including but
not limited to the risks inherent in its research and development efforts,
including preclinical testing and clinical trials; uncertainties associated both
with obtaining and enforcing its patents and with the patent rights of others;
the lengthy, expensive and uncertain process of seeking regulatory approvals;
uncertainties regarding government reforms and product pricing and reimbursement
levels; technological change and competition; manufacturing uncertainties and
dependence on third parties. Even if the Company's product candidates appear
promising at an early stage of development, they may not reach the market for
numerous reasons. Such reasons include the possibilities that the products will
be found unsafe or ineffective during clinical trials, will fail to receive
necessary regulatory approvals, will be difficult to



                                       13
<PAGE>   14

manufacture on a commercial scale, will be uneconomical to market or will be
precluded from commercialization by proprietary rights of third parties.

RESULTS OF OPERATIONS

THREE MONTHS ENDED JUNE 30, 1999 AND 1998

Revenues

         The Company earned $2.9 million in revenue for the three months ended
June 30, 1999, compared to $134,000 for the three months ended June 30, 1998.
The 1999 revenues were comprised principally of $2.8 million in expense
reimbursement from Wyeth under the FLUMIST(TM) collaboration agreement, combined
with other revenues from other contracts. The 1998 revenue came from both a
grant payment from the NIH for research on the Company's CMV vaccine and from
contract services rendered to other biotechnology companies.

Operating Expenses

         Research and development expenses increased to $14.4 million in the
three months ended June 30, 1999 from $10.9 million for the three months ended
June 30, 1998. The increase was due primarily to an increase in development
activities, depreciation, documentation, validation, and other expenses
associated with the commercial scale-up of the manufacturing facilities
associated with FLUMIST(TM). The Company expects these expenses to continue to
increase during the remainder of 1999 as development and manufacturing
activities expand in preparation for potential commercialization of FLUMIST(TM).
These expenses are expected to increase in the future in continued support of
these activities.

         General, administrative and marketing expenses increased to $3.2
million in the three months ended June 30, 1999 from $2.6 million for the three
months ended June 30, 1998. This increase was due to additional staffing, legal
and other infrastructure costs necessary to support the development of
FLUMIST(TM) and other products. These expenses are also expected to increase in
the future in continued support of these activities.

Net Interest Income (Expense)

         Net interest income decreased to a net expense of $551,000 in the three
months ended June 30, 1999, as compared to net interest income of $229,000 for
the three months ended June 30, 1998. The decrease in net interest is primarily
due to the reduced balances of cash, cash equivalents, and investment balances
as funds have been used to meet net operating expenses and capital requirements.

SIX MONTHS ENDED JUNE 30, 1999 AND 1998

Revenues

         The Company earned $18.5 million in revenues for the six months ended
June 30, 1999, compared to $387,000 for the six months ended June 30, 1998. The
1999 revenues are comprised primarily of amounts earned from Wyeth under the
FLUMIST(TM) collaboration agreement, which included a non-refundable initial
payment in the amount of $15.0 million and $2.8 million in expense
reimbursements, combined with other revenues from other contracts and research
grants. The 1998 revenues were from a grant payment from the NIH for research on
the Company's CMV vaccine and from payments received for services rendered to
other biotechnology companies.

Operating Expenses

         Research and development expenses increased to $28.4 million in the six
months ended June 30, 1999, from $20.7 million for the six months ended June 30,
1998. The increase was due primarily to an increase in development activities,
depreciation, documentation, validation, and other expenses associated with the
commercial scale-up of the manufacturing facilities associated with FLUMIST(TM).
The Company expects these expenses to increase in 1999 as development and
manufacturing activities expand in preparation for potential commercialization
of FLUMIST(TM). These expenses are expected to increase in the future in
continued support of these activities.



                                       14
<PAGE>   15

         General, administrative and marketing expenses increased to $5.8
million in the six months ended June 30, 1999, from $4.7 million for the six
months ended June 30, 1998. This increase was due to additional staffing, legal
and other infrastructure costs necessary to support the development of
FLUMIST(TM) and other products. These expenses are expected to increase in the
future in continued support of these activities.

Net Interest Income (Expense)

         Net interest decreased to a net expense of $914,000 for the six months
ended June 30, 1999, as compared to net interest income of $1.1 million for the
six months ended June 30, 1998. The decrease in net interest is due to a
combination of increased interest expense associated with the issuance of the
Company's convertible debt on March 30, 1998 and decreased interest income
associated with a reduction in the average balances of cash, cash equivalents,
and investment balances as funds have been used to meet net operating expenses
and capital requirements.

LIQUIDITY AND CAPITAL RESOURCES

         The Company had cash, cash equivalents and marketable securities at
June 30, 1999 of approximately $71.1 million. In order to preserve principal and
maintain liquidity, the Company's funds are invested in United States Treasury
and agency obligations, highly rated corporate obligations and other liquid
investments.

         The Company has financed its operations since inception primarily
through private placements of Preferred Stock from 1992 to 1995, an initial
public offering of Common Stock in November 1996, a private sale of Common Stock
in March 1997, a second public offering of Common Stock in August 1997, and a
private placement of convertible subordinated notes in March 1998. Through June
30, 1999, the Company had raised approximately $236.3 million from such
activities net of offering expenses. In June 1999, the Company entered into a
$10 million general line of credit. (See Note 5 to the financial statements.)
Cash used in operations was $16.6 million and $23.9 million for the first six
months of 1999 and 1998, respectively. The decrease in cash used in operating
activities was primarily due to the receipt of the $15.0 million payment from
Wyeth, which was partially offset by increases in operating expenses. The
Company expects expenditures for research and development, clinical trials and
general, administrative and marketing expenses to continue to increase in 1999
as the Company develops its products, expands its clinical trials and prepares
for the potential commercial launch of FLUMIST(TM). Cash expended for capital
additions and to repay lease financing arrangements amounted to approximately
$7.1 million and $9.4 million for the six months ended June 30 of 1999 and 1998,
respectively. Capital expenditures decreased in 1999 primarily due to a decrease
in the level of expenditures for facilities and equipment at PCI. Capital
expenditures are expected to increase during the second half of 1999 and beyond,
primarily in connection with the Santa Clara facility.

         The Company anticipates that its existing cash, cash equivalents and
short-term investments, revenues and other advances available under existing
collaborations, and borrowings under its existing credit facilities will enable
it to maintain its current and planned operations into 2000. The Company's
future cash requirements beyond 1999 will depend on numerous factors, including
the time and costs involved in obtaining regulatory approvals; the ability to
successfully launch FLUMIST(TM) in the United States; continued scientific
progress in the research and development of the Company's technology and vaccine
programs; the size and complexity of these programs; the ability of the Company
to establish and maintain collaborative arrangements; the timing of receipt of
milestone payments and loans, if any, under such collaborative agreements;
progress with preclinical testing and clinical trials; the cost involved in
preparing, filing, prosecuting, maintaining and enforcing patent claims; the
cost of constructing or expanding any or all of its manufacturing facilities,
and product commercialization activities.

         In addition, there can be no assurance that, should the Company require
outside funding through additional debt or equity financings, such funds will be
available on favorable terms, if at all. If adequate funds are not available,
the Company may be required to delay, reduce the scope of, or eliminate one or
more of its research or development programs or to obtain funds through
collaborative agreements with others that may require the Company to relinquish
rights to certain of its technologies, product candidates or products that the
Company would otherwise seek to develop or commercialize itself, which could
materially adversely affect the Company's business, financial condition and
results of operations.



                                       15
<PAGE>   16

IMPACT OF "YEAR 2000"

         Many older computer software programs refer to years in terms of their
final two digits only. Such programs may interpret the year 2000 to mean the
year 1900 instead, the so-called "Year 2000" problem (Y2K). If not corrected,
those programs could cause date-related failures.

         The Company has completed its assessment of Y2K related problems. Four
potential areas of exposure --(a) internal information systems, (b) facility
support systems, (c) scientific equipment, and (d) the readiness of significant
third parties with whom the Company has material business relationships -- have
been evaluated. The results of the assessment and the status of remedial action
and testing are as indicated below.

(a) Internal Information Systems

         The Company uses a number of computers and computer programs across its
entire operations. An inventory has been performed of computer equipment and
computer programs, to determine if Y2K problems exist which may affect the
Company's internal information processes.

-   The Company has completed the process of upgrading its older financial and
    accounting programs to Y2K compliant systems. These systems will be tested
    during the third quarter of 1999 to verify Y2K compliance.

-   During 1998, the Company also completed the installation of internal systems
    for the accumulation and statistical evaluation of clinical trial data.
    These systems will be tested during the third quarter of 1999 to verify Y2K
    compliance.

-   To date, no other significant internal information systems have been
    identified as non-Y2K compliant.

-   Procedures have been enacted to verify the Y2K compliance of new systems.

(b) Scientific Equipment

         All major pieces of scientific equipment have been inventoried. As part
of its assessment, the Company made inquiries of its internal staff and
third-party vendors, including its suppliers of scientific equipment, to
determine if Y2K problems exist which may affect the Company's research and
development operations.

-   Only one piece of laboratory equipment was found to require remediation in
    the form of an inexpensive software upgrade.

-   To date, no other significant pieces of scientific equipment have been
    identified as non-Y2K compliant.

-   Procedures have been enacted to verify the Y2K compliance of new scientific
    equipment.


(c) Facility Support Systems

         The Company has made inquiries of its internal staff and third-party
vendors of utilities, communication and other facility support systems at the
Mountain View and Santa Clara facilities, to determine if Y2K problems exist
which may affect communications, administrative or support functions.

-   Remediation is necessary for certain of the communication and process
    systems and for certain of the building control, assess and alarm systems.
    Hardware replacements and software upgrades are expected to be completed by
    the end of the third quarter of 1999 at a cost of less than $20,000. These
    systems will be tested to verify Y2K compliance.

Third Parties with Major Business Relationships

         The Company currently has no products available for commercial sale,
and does not anticipate FDA clearance for its lead product, FLUMIST(TM), until
mid-2000 at the earliest. In preparation for the potential commercial launch of
FLUMIST(TM), the Company has contacted its third party manufacturers and its
marketing and distribution partners to determine their level of Y2K readiness.
All of these parties have advised us that they have a Y2K plan in place and that
remediation steps, if any, will be completed prior to December 1999. It is not
possible for the Company to undertake an independent verification and testing of
the readiness of these parties for all potential Y2K issues. The failure of any
of these parties to successfully identify and remedy the impact of Y2K upon
their businesses could



                                       16
<PAGE>   17

have a material adverse effect on the Company's business, including delaying or
adversely affecting the potential commercial launch of FLUMIST(TM).

         The Company's remediation steps are expected to be completed during the
third quarter of 1999.

         External and internal costs specifically associated with modifying
internal use software for Y2K compliance are expensed as incurred. To this
point, these costs have not been material, and the Company does not expect such
costs to be material in the future. There can be no assurance, however, that the
Company's assessment of Y2K's potential impact will not change as we complete
our assessment, or that Y2K will not ultimately cause a material disruption in
the business of the Company.




                                       17
<PAGE>   18


ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

         The Company is exposed to market risk, including changes to interest
rates and foreign currency exchange rates. The Company's exposure to such market
risk has not changed substantially since December 31, 1998 and reference is made
to the more detailed disclosures of market risk included in the Company's Annual
Report on Form 10K for such period.

         Interest Rates -- The Company's investments and interest income are
sensitive to changes in the general level of interest rates, primarily U.S.
interest rates. In this regard, changes in U.S. interest rates primarily affect
the market value of the Company's cash equivalents and investments. To mitigate
market risk, the Company places its cash in investments that meet high credit
standards, as specified in the Company's investment policy guidelines, and
staggers the maturity of the investments to meet expected cash demands. The
policy also limits the amount of credit exposure to any one issue, issuer, or
type of investment and does not permit derivative financial instruments in its
investment portfolio. As a result, the Company does not expect any material loss
with respect to its investment portfolio.

         Foreign Currency Exchange Rates -- The Company pays for the costs of
manufacturing and development activities, equipment, and facilities
modifications at Medeva Pharma, which is located in the United Kingdom (U.K.) in
British Pounds Sterling. As a result, the Company's financial results could be
affected by factors such as changes in foreign currency exchange rates or weak
economic conditions in the U.K. The Company is exposed to changes in exchange
rates in the United Kingdom. When the U.S. dollar strengthens against the
British Pounds Sterling, the U.S. dollar value of British Pounds Sterling-based
expenses decreases; when the U.S. dollar weakens, the U.S. dollar value of
British Pounds Sterling-based expenses increases. Accordingly, changes in
exchange rates, and in particular a weakening of the U.S. dollar, may adversely
affect the Company's financial position as expressed in U.S. dollars.







                                       18
<PAGE>   19

                                     AVIRON



PART II. OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS.

                  On June 30, 1999 the European Patent Office held oral
         proceedings in an Opposition filed by American Cyanamid against
         Aviron's granted European Patent No. 0490972 relating to methods and
         compositions of recombinant negative-strand RNA viruses. At the oral
         proceedings, the Opposition Division of the European Patent Office
         informed the Company of its intent to issue a written opinion which
         upholds claims limited to influenza and denies claims directed to
         non-segmented negative-strand RNA viruses. This decision will not
         affect Aviron's FLUMIST(TM) cold-adapted influenza product. Aviron
         intends to appeal the decision insofar as it relates to the denied
         claims; the appeal will request the Technical Board of Appeals to
         reverse the decision with respect to the denial of the claims directed
         to non-segmented RNA viruses. There can be no assurance that Aviron
         will be successful in obtaining claims directed to non-segmented RNA
         viruses as a result of the appeal. If Aviron does not succeed in the
         appeal of the claims directed to non-segmented RNA viruses it could
         negatively impact Aviron's ability to exclude others from
         commercializing an RSV vaccine based on genetically engineered
         candidates in Europe.

                  On July 8, 1999 a lawsuit entitled Joany Chou v. The
         University of Chicago, ARCH Development Corp., Bernard Roizman and
         Aviron Company, was filed in the U.S. District Court for the Northern
         District of Illinois, Eastern Division by an individual formerly
         associated with the University of Chicago. The complaint appears to
         assert claims of inventorship, unjust enrichment, fraud, conversion,
         breach of fiduciary duty, breach of contract and breach of implied
         contract. All of the claims appear to relate to patents and patent
         applications for HSV, and none appear to relate to Aviron's FLUMIST(TM)
         cold-adapted influenza product or technology, or any other pipeline
         products in research or development. Dr. Roizman is a founder and
         director of Aviron and a member of its Scientific Advisory Board.
         Aviron believes the allegations of the lawsuit are unfounded and
         intends to vigorously defend itself in the matter. There can be no
         assurance that the Company will prevail in the defense of this lawsuit.


ITEM 2. CHANGES IN SECURITIES.

        None

ITEM 3. DEFAULTS UPON SENIOR SECURITIES.

        None

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

                  The Company's Annual Meeting of Stockholders (Annual Meeting)
         was held on June 3, 1999. At the Annual Meeting, the stockholders of
         the registrant (i) elected the two people listed below to serve as
         directors to hold office until the 2002 Annual Meeting of Stockholders
         and until their successors are elected; (ii) approved an amendment to
         the Company's 1996 Equity Incentive Plan; and (iii) ratified the
         selection of Ernst & Young LLP as the Registrant's Independent
         Accountants for the fiscal year ending December 31, 1999.

                  The Company had 15,768,680 shares of Common Stock outstanding
         as of April 15, 1999, the record date for the Annual Meeting. At the
         Annual Meeting, holders of a total of 10,778,993 shares of Common Stock
         were present in person or represented by Proxy. The following sets
         forth information regarding the results of the voting at the Annual
         Meeting.




                                       19
<PAGE>   20


PROPOSAL 1 -- ELECTION OF DIRECTORS

Director

  PAUL H. KLINGENSTEIN

<TABLE>
<S>                                                         <C>
         Votes in Favor .......................              10,728,367
         Votes Against ........................                  50,626
</TABLE>


Director

JANE E. SHAW, Ph.D.

<TABLE>
<S>                                                         <C>
         Votes in Favor .......................              10,727,667
         Votes Against ........................                  51,326
</TABLE>

PROPOSAL 2 -- AMENDMENT TO THE COMPANY'S 1996 EQUITY INCENTIVE PLAN

<TABLE>
<S>                                                         <C>
         Votes in Favor .......................               8,345,026
         Votes Against ........................               2,385,911
         Abstentions ..........................                  48,056
</TABLE>

PROPOSAL 3 -- RATIFICATION OF SELECTION OF INDEPENDENT ACCOUNTANTS

<TABLE>
<S>                                                         <C>
         Votes in Favor .......................              10,734,910
         Votes Against ........................                  12,750
         Abstentions ..........................                  31,333
</TABLE>


ITEM 5. OTHER INFORMATION.

        None

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

        (a) EXHIBITS


<TABLE>
<CAPTION>
            ITEM               DESCRIPTION
            ----               -----------
<S>                          <C>
            10.25             Real Property Lease by and between the Registrant
                              and Spieker Properties, L.P. dated February 5,
                              1999

            10.26++           First Amendment to the Influenza Vaccine
                              Collaboration and License and Distribution
                              Agreement by and between the Registrant and CSL
                              Limited, A.C.N. dated June 7, 1999

            10.27             Loan and Security Agreement by and between the
                              Registrant and Transamerica Business Credit
                              Corporation dated June 23, 1999

            27.1              Financial Data Schedules.
</TABLE>

            ----------

            ++    Confidential treatment has been requested for portions of
                  this exhibit.

         (b) REPORTS ON FORM 8-K

         None




                                       20
<PAGE>   21

                                     AVIRON

                                   SIGNATURES



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



                                           AVIRON


Date: August 13, 1999                      By: /s/ J. Leighton Read, M.D.
     ---------------------                     -------------------------------
                                               J. Leighton Read, M.D.
                                               Chairman and
                                               Chief Executive Officer

Date: August 13, 1999                      By: /s/ Fred Kurland
     ---------------------                     -------------------------------
                                               Fred Kurland
                                               Senior Vice President and
                                               Chief Financial Officer





                                       21
<PAGE>   22


                                  EXHIBIT INDEX


<TABLE>
<CAPTION>
NO. OF EXHIBIT                DESCRIPTION
--------------                -----------
<S>                     <C>
   10.25                Real Property Lease by and between the Registrant and
                        Spieker Properties, L.P. dated February 5, 1999

   10.26++              First Amendment to the Influenza Vaccine Collaboration
                        and License and Distribution Agreement by and between
                        the Registrant and CSL Limited, A.C.N. dated June 7,
                        1999

   10.27                Loan and Security Agreement by and between the
                        Registrant and Transamerica Business Credit Corporation
                        dated June 23, 1999

   27.1                 Financial Data Schedules.
</TABLE>


----------

++ Confidential treatment has been requested for portions of this exhibit.






                                       22