<PAGE>   1
                                                                      EXHIBIT 13
                 PORTIONS OF 1996 ANNUAL REPORT TO STOCKHOLDERS

CONSOLIDATED FINANCIAL INFORMATION

SELECTED CONSOLIDATED FINANCIAL DATA

<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------------
                                         Period from Inception                   Years Ended December 31,
                                          (March 11, 1992)       ----------------------------------------------------------
(in thousands, except per share data)    to December 31, 1992     1993            1994             1995            1996
---------------------------------------------------------------------------------------------------------------------------
<S>                                             <C>              <C>             <C>             <C>              <C>    
CONSOLIDATED STATEMENT OF OPERATIONS DATA:
Sales                                           $17,719          $22,771         $24,188         $26,966          $33,725
Cost of sales                                     9,691           14,195          13,183          13,185           15,388
                                               ----------------------------------------------------------------------------
Gross profit                                      8,028            8,576          11,005          13,781           18,337
                                               ----------------------------------------------------------------------------
Operating expenses:
   Selling, general and administrative            7,742           10,292          10,343          10,608           12,700
   Research and development                         290              462             736           1,338            2,144
                                               ----------------------------------------------------------------------------
     Total operating expenses                     8,032           10,754          11,079          11,946           14,844
                                               ----------------------------------------------------------------------------
Income (loss) from operations                        (4)          (2,178)            (74)          1,835            3,493
Interest expense, net                                61              170             326             527              532
                                               ----------------------------------------------------------------------------
Income (loss) before income taxes                   (65)          (2,348)           (400)          1,308            2,961
Provision (benefit) for income taxes                401             (195)             62             291              960
                                               ----------------------------------------------------------------------------
     Net income (loss)                          $  (466)         $(2,153)        $  (462)        $ 1,017          $ 2,001
                                               ============================================================================
Net income (loss) per share                     $  (.14)         $  (.65)        $  (.14)        $  .30           $  .50
                                               ============================================================================
Shares used in per share computations (1)         3,242            3,318           3,328           3,422            3,995
===========================================================================================================================
</TABLE>


<TABLE>
<CAPTION>
December 31,          (in thousands)             1992             1993            1994             1995             1996
---------------------------------------------------------------------------------------------------------------------------
<S>                                             <C>              <C>             <C>             <C>              <C>    
CONSOLIDATED BALANCE SHEET DATA:
Cash, cash equivalents and short-term
   investments                                  $ 1,238          $ 1,839         $   935         $ 1,203          $14,704
Working capital                                  13,000           12,946          13,017          15,424           30,231
Total assets                                     23,980           24,046          23,495          31,197           46,262
Long-term debt and other obligations,
   net of current portion                           850            2,834           3,266           8,601            1,233
Redeemable preferred stock                       18,025           18,175          18,319          18,343               --
Stockholders' equity (deficit)                      (24)          (2,291)         (2,053)           (544)          38,900
===========================================================================================================================
</TABLE>

(1)    See Note 1 of notes to consolidated financial statements for an
       explanation of the method used to determine the number of shares used to
       compute per share amounts.


                                      -13-
<PAGE>   2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

OVERVIEW

CN Biosciences was formed in 1992 with the purchase of the Company's
subsidiaries, including the Calbiochem biochemical and immunochemical operations
headquartered in San Diego, California, and the Novabiochem peptide operations
headquartered in Laufelfingen, Switzerland, from Biodor Holding AG, Ixora
Holding AG and Biodor US Holding Corporation. During 1993, the Company hired its
current Chief Executive Officer and reorganized its worldwide operations to
better focus its business and corporate strategy on core products. In 1993, the
Company recorded a one-time charge of approximately $2.0 million principally
related to its European operations to reserve for costs of facilities no longer
required, impaired inventory and costs of terminating employees. From 1993 to
1995, the Company invested in excess of $3.2 million for capital expenditures,
principally for infrastructure upgrades to its facilities, automated fulfillment
systems and computer information systems. The Company also hired additional
scientific personnel, particularly employees holding Ph.D.s, to enable it to
expand its internal development and manufacturing capabilities. These
initiatives contributed to improved operating results, and in 1994 the Company
commenced its niche research market strategy with the introduction of the Signal
Transduction specialty catalog.

In August 1995, the Company expanded its immunochemical and molecular biology
capabilities with the purchase of the Oncogene Research Products business from
Oncogene Science, Inc., a biopharmaceutical company ("OSI"), for $6.2 million
cash, which was funded by bank debt. Assets acquired included primarily
inventory and property and equipment. Approximately 30 employees, including four
holding Ph.D.s, all of whom were previously employed by OSI in the Oncogene
Research Products business, joined the Company upon the consummation of the
acquisition. The acquisition and successful integration of this business
enhanced the depth and breadth of the Company's scientific resources, while
providing a complementary base of products and customers. The Company believes
that, due to the highly fragmented nature of the life sciences research products
industry, significant opportunities for consolidation exist. Based on its
experience with the acquisition of the Oncogene Research Products business, the
Company believes it can capitalize on these opportunities, although no
assurances can be given that the Company will be able to identify and
successfully consummate additional acquisitions.

The Company uses general and specialty catalogs to market a broad range of
brand-name research products to life sciences researchers worldwide at
pharmaceutical and biotechnology companies, academic institutions and government
laboratories. The Company invests significantly in producing each of its
catalogs, and associated costs are capitalized and amortized over the estimated
useful life of the catalog, generally 12 to 24 months. The Company believes that
researchers tend to purchase the Company's products as a result of exposure to
multiple catalogs, as well as the Company's numerous other periodic publications
and advertisements.

Since 1993, the Company has increasingly focused its strategy on its higher
margin core business of providing standard laboratory quantity sizes of products
(generally ranging from 100 nanograms to 100 grams), and has reduced the focus
on its bulk business. Bulk quantities (generally up to ten kilograms) are
generally offered at discounts to catalog prices, and bulk sales are
characterized as relatively high dollar sales made to a limited number of
customers. Thus, the absence or presence of bulk sales has had and could have a
material impact on results of operations in any individual period.

The Company maintains significant levels of inventory relative to its net sales
in order to meet short delivery times required by researchers. In addition,
products manufactured internally are made in economic batch sizes which often
represent quantities sufficient to supply more than one year of sales. The
Company's products generally have a relatively long shelf life, often in excess
of five years, and quality and storage conditions are continually monitored to
ensure that quality products are delivered to customers. The Company regularly
evaluates the level and composition of inventory through the analysis of recent
sales history and forecasted product demand to ensure that inventory reserve
levels are adequate to properly reflect their net realizable value. Fluctuations
in inventory reserve levels, other than those related to reserves recorded in
1993 for impaired inventory described above, have not been material to the
Company's financial position or results of operations.



                                      -14-
<PAGE>   3
MANAGEMENT'S DISCUSSION CONTINUED

The Company's reporting currency is the U.S. dollar. Historically, a majority of
the Company's sales have been denominated in U.S. dollars, with the balance
denominated in foreign currencies. These foreign currency sales have been
effected principally by the Company's international subsidiaries. In accordance
with U.S. accounting requirements, sales denominated in foreign currencies are
translated into the local functional currency and then into U.S. dollars, at an
average exchange rate in effect during the period. In addition, the Company
incurs manufacturing costs in Swiss Francs in connection with its Swiss
operations and also incurs operating expenses in local currencies at each of its
other international locations. Thus, changes from reporting period to reporting
period in the exchange rates between various foreign currencies and the U.S.
dollar have had, and will in the future continue to have, an impact on revenues
and expenses reported by the Company, and such effect may be material in any
individual reporting period.

To the extent that the Company incurs operating expenses in local currencies at
its foreign subsidiaries, the Company has a natural hedge against a portion of
the possible fluctuation in foreign currency exchange rates of billings in such
currencies. Although the Company does not engage in significant amounts of
foreign currency hedging transactions, the Company has, from time to time,
entered into forward contracts to hedge certain of its foreign currency
exposures, principally related to fixed expense commitments of its Japanese
subsidiary.

In October 1996, the Company completed the initial public offering of 1,840,000
shares of Common Stock at an initial public offering price of $12.50 per share.
Upon the consummation of the initial public offering, (i) the outstanding shares
of the Company's Series A Convertible Preferred Stock were converted into an
aggregate of 788,814 shares of Class A Common Stock, which shares were
subsequently converted into an equal number of shares of Common Stock, and (ii)
the outstanding shares of the Company's Series B Preferred Stock were exchanged
for an aggregate of 1,435,424 shares of Common Stock.


RESULTS OF OPERATIONS

The following table sets forth, for the periods indicated, items from the
Company's Consolidated Statements of Operations expressed as a percentage of
sales.

<TABLE>
<CAPTION>
                                                                                   Percentage of Sales
                                                                        ---------------------------------------------------
         Years Ended December 31,                                        1994             1995              1996
---------------------------------------------------------------------------------------------------------------------------
<S>                                                                       <C>              <C>               <C>  
         Sales:
           Core                                                           68.3%            76.5%             81.9%
           Bulk                                                           31.7             23.5              18.1
                                                                       ----------------------------------------------------
         Total sales                                                     100.0            100.0             100.0
         Cost of sales                                                    54.5             48.9              45.6
                                                                       ----------------------------------------------------
         Gross profit                                                     45.5             51.1              54.4
           Selling, general and administrative                            42.8             39.3              37.7
           Research and development                                        3.0              5.0               6.4
                                                                       ----------------------------------------------------
         Income (loss) from operations                                    (0.3)             6.8              10.3
         Interest expense, net                                             1.4              2.0               1.6
                                                                       ----------------------------------------------------
         Income (loss) before income taxes                                (1.7)             4.8               8.7
         Provision (benefit) for income taxes                              0.2              1.0               2.8
                                                                       ----------------------------------------------------
             Net income (loss)                                            (1.9)%            3.8%              5.9%
===========================================================================================================================
</TABLE>



                                      -15-
<PAGE>   4
MANAGEMENT'S DISCUSSION CONTINUED

YEARS ENDED DECEMBER 31, 1996 AND 1995

SALES. Sales increased 25.1% to $33.7 million for 1996 from $27.0 million for
1995. This increase resulted primarily from a 34.0% increase in core product
sales, offset by a decrease in bulk sales of 3.8%. Significant factors which
management believes contributed to the increase in sales of core products during
1996 included the additional sales from a full year of the Oncogene Research
Products business which was acquired in August 1995, issuance of updated
Calbiochem and Novabiochem general catalogs, issuance of an updated Signal
Transduction specialty catalog and introduction of new specialty catalogs
addressing apoptosis and combinatorial chemistry. Excluding the sales of
Oncogene Research Products, sales of core products during 1996 increased by
14.8% as compared to sales in 1995. Gains in 1996 sales were achieved despite a
general strengthening of the U.S. dollar which had the effect of modestly
decreasing the dollar value of sales denominated in foreign currencies recorded
in 1996. The decrease in bulk sales related primarily to the Company's decision
to discontinue sales of a product which had been provided in bulk form to the
veterinary industry in order to avoid subjecting the Company to increased costs
associated with a variety of regulatory requirements.

GROSS PROFIT. The Company's gross profit percentage increased to 54.4% for 1996
from 51.1% for 1995. This increase was primarily the result of increased sales
of the higher gross margin Oncogene Research Products brand products, improved
margins on the Company's Calbiochem and Novabiochem brand products and a
decrease in lower margin bulk sales. Management believes that additional factors
which contributed to improvements in gross margins of Calbiochem and Novabiochem
brand products include improved operating efficiencies from increased volume and
minor price increases.

SELLING, GENERAL AND ADMINISTRATIVE. Selling, general and administrative
expenditures increased 19.7% to $12.7 million for 1996 from $10.6 million for
1995, and decreased to 37.7% of sales for 1996 from 39.3% for 1995. The dollar
increase in expenses was primarily the result of incremental operational costs
relating to the Oncogene Research Products business, increased administrative
salaries and increased selling costs related to expanded advertising programs
and additional specialty catalogs launched during 1996. The decrease in expenses
as a percentage of sales was attributable to improved operating efficiencies and
increased sales. The Company anticipates a modest growth in administrative
expenses resulting from the Company's reporting obligations and investor
relations activities as a new public company.

RESEARCH AND DEVELOPMENT. Research and development expenditures increased 60.2%
to $2.1 million for 1996 from $1.3 million for 1995. This increase resulted from
additional development activity related to Oncogene Research Products brand
products, research and development costs in connection with products included in
the Company's new Apoptosis specialty catalog launched during the period, and
increased research in the areas of glycobiology and neurosciences. The Company
anticipates maintaining at least the current levels of spending for research and
development in 1997.

INTEREST EXPENSE, NET. Interest expense, net increased to $532,000 for 1996 from
$527,000 for 1995 as a result of interest expense on bank debt related to the
acquisition of the Oncogene Research Products business in 1995, offset partially
by interest income on proceeds from the Company's initial public offering of
common stock completed in October 1996.

INCOME TAXES. Income tax expense increased to $960,000 for 1996 from $291,000
for 1995. This increase was primarily the result of increased profitability and
increased tax rates due to the utilization of certain operating loss
carryforwards generated in prior years.

NET INCOME. As a result of the above factors, net income increased 96.8% to $2.0
million for 1996 from $1.0 million for 1995.


                                      -16-
<PAGE>   5
CN BIOSCIENCES, INC.

YEARS ENDED DECEMBER 31, 1995 AND 1994

SALES. Sales increased 11.5% to $27.0 million for 1995 from $24.2 million for
1994. This increase resulted primarily from a 24.9% increase in core product
sales, including sales of Oncogene Research Products brand products, offset by a
decrease in bulk sales of 17.5%. Sales of core products during 1995, excluding
Oncogene Research Products brand products, increased by 13.5%, primarily as a
result of the continuing success of the Company's niche research market strategy
and growth in sales of amino acids, peptides, linkers and resins featured in the
Company's Novabiochem general catalog. The decrease in bulk sales was related
primarily to the Company's decision to discontinue sales of a product which had
been provided in bulk form to the veterinary industry in order to avoid
subjecting the Company to increased costs associated with a variety of
regulatory requirements. Gains in sales included the results of a general
weakening of the U.S. dollar which had the effect of increasing the dollar value
of sales denominated in foreign currencies recorded in 1995.

GROSS PROFIT. The Company's gross profit percentage increased to 51.1% for 1995
from 45.5% for 1994. This increase was primarily the result of sales of the
higher gross margin Oncogene Research Products brand products for a portion of
the year and increased gross margins in the Company's core and bulk operations
as a result of continued improvement in operating efficiencies subsequent to the
Company's restructuring in 1993. In particular, the Company experienced
improvement in margins of certain products featured in the Company's Novabiochem
general catalog, many of which were manufactured by the Company's Swiss
subsidiary, which was substantially restructured in 1993.

SELLING, GENERAL AND ADMINISTRATIVE. Selling, general and administrative
expenditures increased 2.6% to $10.6 million for 1995 from $10.3 million for
1994, and decreased to 39.3% of sales for 1995 from 42.8% for 1994. The dollar
increase in selling, general and administrative was the result of adding the
Oncogene Research Products business' operations for a portion of the year,
offset by reductions in operating costs of the Company's Swiss subsidiary in
1995 compared to 1994. The decrease as a percentage of sales reflects the
continued results of the Company's 1993 restructuring and incremental sales
which did not result in comparable growth in expenses.

RESEARCH AND DEVELOPMENT. Research and development expenditures increased 81.8%
to $1.3 million for 1995 from $736,000 for 1994. This increase resulted from
increased research and development related to Oncogene Research Products brand
products for a portion of the year, and research and development costs of
products developed for inclusion in the Apoptosis specialty catalog being
prepared for launch in 1996. This increase included salaries of additional
scientific personnel, as well as increased costs of materials and expenses.

INTEREST EXPENSE, NET. Interest expense, net increased to $527,000 for 1995 from
$326,000 for 1994 primarily as a result of additional borrowings in connection
with the acquisition of the Oncogene Research Products business.

INCOME TAXES. Income tax expense increased to $291,000 for 1995 from $62,000 for
1994 as a result of increased profitability in 1995.

NET INCOME (LOSS). As a result of the above factors, net income increased to
$1.0 million for 1995 from a net loss of $462,000 for 1994.


                                      -17-

<PAGE>   6
CN BIOSCIENCES, INC.

QUARTERLY RESULTS

The following tables present the Company's unaudited quarterly consolidated
results of operations, in dollars and as a percentage of sales, for the eight
quarters ended December 31, 1996. This information has been prepared by the
Company on a basis consistent with the Company's audited consolidated financial
statements and, in the opinion of management, includes all adjustments,
consisting only of normal recurring accruals, necessary for a fair presentation
of the results for such periods.

<TABLE>
<CAPTION>
                                       March 31,  June 30,   Sept. 30, Dec. 31,   March 31,  June 30,  Sept. 30,  Dec. 31,
Quarters Ended        (in thousands)     1995       1995       1995      1995       1996       1996      1996       1996
---------------------------------------------------------------------------------------------------------------------------
<S>                                     <C>        <C>        <C>       <C>        <C>        <C>       <C>        <C>   
Sales:
   Core                                 $4,813     $4,827     $5,293    $5,693     $6,597     $6,949    $7,122     $6,961
   Bulk                                  1,923      1,512      1,572     1,333      1,621      1,398     1,713      1,364
                                        -----------------------------------------------------------------------------------
Total sales                              6,736      6,339      6,865     7,026      8,218      8,347     8,835      8,325
Cost of sales                            3,508      3,183      3,224     3,270      3,794      3,808     4,065      3,721
                                        -----------------------------------------------------------------------------------
Gross profit                             3,228      3,156      3,641     3,756      4,424      4,539     4,770      4,604
   Selling, general
     and administrative                  2,264      2,539      2,785     3,020      3,015      3,170     3,245      3,270
   Research and development                218        270        401       449        541        524       590        489
                                        -----------------------------------------------------------------------------------
Income from operations                     746        347        455       287        868        845       935        845
Interest expense (income), net              74         85        157       211        206        188       219        (81)
                                        -----------------------------------------------------------------------------------
Income before income taxes                 672        262        298        76        662        657       716        926
Provision for income taxes                 150         58         66        17        198        264       250        248
                                        -----------------------------------------------------------------------------------
     Net income                        $   522    $   204    $   232   $    59    $   464    $   393   $   466    $   678
---------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
                                       March 31,  June 30,   Sept. 30, Dec. 31,   March 31,  June 30,  Sept. 30,  Dec. 31,
Quarters Ended                           1995       1995       1995      1995       1996       1996      1996       1996
---------------------------------------------------------------------------------------------------------------------------
<S>                                       <C>        <C>        <C>        <C>       <C>        <C>        <C>       <C>  
Sales:
   Core                                   71.5%      76.1%      77.1%      81.0%     80.3%      83.3%      80.6%     83.6%
   Bulk                                   28.5       23.9       22.9       19.0      19.7       16.7       19.4      16.4
                                         ----------------------------------------------------------------------------------
Total sales                              100.0%     100.0%     100.0%     100.0%    100.0%     100.0%     100.0%    100.0%
Cost of sales                             52.1       50.3       47.0       46.5      46.2       45.6       46.0      44.7
                                         ----------------------------------------------------------------------------------
Gross profit                              47.9       49.7       53.0       53.5      53.8       54.4       54.0      55.3
   Selling, general
     and administrative                   33.6       40.1       40.6       43.0      36.7       38.0       36.7      39.3
   Research and development                3.2        4.2        5.8        6.4       6.6        6.3        6.7       5.9
                                         ----------------------------------------------------------------------------------
Income from operations                    11.1        5.4        6.6        4.1      10.5       10.1       10.6      10.1
Interest expense (income), net             1.1        1.3        2.3        3.0       2.5        2.2        2.5      (1.0)
                                         ----------------------------------------------------------------------------------
Income before income taxes                10.0        4.1        4.3        1.1       8.0        7.9        8.1      11.1
Provision for income taxes                 2.2        0.9        0.9        0.3       2.4        3.2        2.8       3.0
                                         ----------------------------------------------------------------------------------
     Net income                            7.8%       3.2%       3.4%       0.8%      5.6%       4.7%       5.3%      8.1%
---------------------------------------------------------------------------------------------------------------------------
</TABLE>

The Company's quarterly operating results may vary significantly from quarter to
quarter as a result of a number of factors including new product offerings, new
editions of existing catalogs, introduction of additional specialty catalogs and
bulk sales. The Company's bulk sales business fluctuates more and is less
predictable than its core business, and the uncertain timing and volatility of
bulk sales has in the past and may continue in the future to materially affect
the Company's business, financial condition and results of operations. Other
factors which may affect quarterly operating results include the timing of the
U.S. Government approval of the NIH budget, lower European and academic sales
during the summer months and various holiday breaks and fluctuations in weather.
The Company's current and planned expense levels are based in part upon its
expectations as to future revenues. Consequently, if revenues in a particular
quarter do not meet expectations, the Company may not be able to adequately
adjust operating expenses to compensate for the shortfall. Operating results may
therefore vary significantly from quarter to quarter and will not necessarily be
indicative of results in subsequent periods.


                                      -18-
<PAGE>   7
MANAGEMENT'S DISCUSSION CONTINUED

LIQUIDITY AND CAPITAL RESOURCES

The Company generated $2.0 million of cash from operating activities in each of
1996 and 1995 and used $29,000 of cash in 1994. Cash provided from operating
activities in 1996 resulted from positive operating results, adjusted for
non-cash charges including depreciation and amortization, offset primarily by
catalog costs capitalized in other assets and increases in inventory and
accounts receivable. Cash provided by operating activities in 1995 resulted from
positive operating results, which were principally offset by catalog costs
capitalized in other assets. Cash used in operating activities in 1994 was less
than the net loss primarily due to the liquidation of inventories offset by
increases in accounts receivable due to increased sales.

Net cash used in investing activities was $4.5 million in 1996, $6.8 million in
1995 and $1.2 million in 1994. During 1995, the Company acquired the Oncogene
Research Products business in a purchase transaction requiring an investment of
approximately $6.2 million. In 1996, investing activities consisted primarily of
purchases and sales of short-term investments, and in 1994 investing activities
consisted primarily of capital expenditures for property and equipment.

Net cash provided by financing activities was $11.9 million in 1996, $5.1
million in 1995 and $232,000 in 1994. In 1996, net cash provided by financing
activities consisted of cash received from the issuance of shares of Common
Stock in the Company's initial public offering, offset by payments to fully
retire bank term debt. During 1995, the Company incurred $6.0 million of
indebtedness, consisting primarily of borrowings from financial institutions, in
connection with the purchase of the Oncogene Research Products business. In
1994, net cash provided by financing activities consisted primarily of
borrowings from financial institutions offset by repayments.

The Company is a holding company, the principal assets of which are the capital
stock of its subsidiaries, and has no independent means of generating operating
revenues. As a holding company, the Company depends on dividends and other
permitted payments from its subsidiaries, including its international
subsidiaries, to meet its cash needs. The Company maintains cash balances at its
various subsidiaries adequate to support local operations. The amount of
foreign-sourced earnings to be repatriated to the United States is determined
based upon foreign entity capitalization, local cash needs, local and U.S. tax
implications and requirements for cash in the U.S. operations.

At December 31, 1996, the Company had cash, cash equivalents and short-term
investments of $14.7 million and working capital of $30.2 million. The Company's
U.S. subsidiary's bank credit agreement (the "Credit Facility") provides for
unsecured borrowings up to a maximum of $5.0 million. At December 31, 1996, $5.0
million was available under the Credit Facility, which expires in June 1998.

The Company believes that its existing capital resources will be sufficient to
fund its operations for at least the next two years. If, however, the Company
were to undertake a significant acquisition or if working capital or other
capital requirements are greater than currently anticipated, the Company could
be required to seek additional funds through increased credit facilities or
sales of equity, debt or convertible securities. There can be no assurance that
additional financing will be available or that, if available, the financing will
be on terms favorable to the Company and its stockholders.


FORWARD-LOOKING STATEMENTS

This Annual Report contains forward-looking statements which express the beliefs
and expectations of management. Such statements are based on current
expectations and involve a number of known and unknown risks and uncertainties
that could cause the Company's future results, performance or achievements to
differ significantly from the results, performance or achievements expressed or
implied by such forward-looking statements. Important factors that could cause
or contribute to such differences are and will be discussed in the Company's
Annual Report on Form 10-K and the Company's periodic and other filings made
with the Securities and Exchange Commission.


                                      -19-
<PAGE>   8
                          CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
December 31,                                                                           1995                      1996
---------------------------------------------------------------------------------------------------------------------------
<S>                                                                                <C>                        <C>        
Assets
Current assets:
   Cash and cash equivalents                                                       $ 1,203,000                $10,591,000
   Short-term investments                                                                   --                  4,113,000
   Accounts receivable, trade, net of allowance for doubtful
     accounts of $472,000 in 1995 and $341,000 in 1996                               4,099,000                  4,487,000
   Inventories                                                                      14,443,000                 14,733,000
   Other current assets                                                                476,000                  2,436,000
                                                                                 ------------------------------------------
Total current assets                                                                20,221,000                 36,360,000
Property and equipment, net                                                          4,030,000                  3,688,000
Intangible assets, net                                                               6,067,000                  4,836,000
Other assets                                                                           879,000                  1,378,000
                                                                                 ------------------------------------------
Total assets                                                                       $31,197,000                $46,262,000
                                                                                 ------------------------------------------ 
Liabilities and stockholders' equity (deficit)
Current liabilities:
   Accounts payable, trade                                                         $ 1,491,000               $  2,303,000
   Accrued expenses                                                                  1,556,000                  1,906,000
   Other current liabilities                                                           583,000                  1,920,000
   Current portion of long-term debt                                                 1,167,000                         --
                                                                                 ------------------------------------------
Total current liabilities                                                            4,797,000                  6,129,000
Long-term debt, net of current portion                                               7,000,000                         --
Other liabilities                                                                    1,601,000                  1,233,000
Commitments
Redeemable preferred stock                                                          18,343,000                         --
Stockholders' equity (deficit):
   Preferred stock, $.01 par value; 5,000,000 shares authorized,
     none issued and outstanding                                                            --                         --
   Common stock, $.01 par value; 30,000,000 shares authorized, 1,058,065
     shares in 1995 and 5,152,587 shares in 1996 issued and outstanding                 11,000                     52,000
   Additional paid-in capital                                                          255,000                 38,736,000
   Accumulated deficit                                                              (2,064,000)                   (63,000)
   Foreign currency translation adjustment                                           1,254,000                    271,000
   Note receivable from common stockholder                                                  --                    (96,000)
                                                                                  -----------------------------------------
Total stockholders' equity (deficit)                                                  (544,000)                38,900,000
                                                                                  -----------------------------------------
Total liabilities and stockholders' equity                                         $31,197,000                $46,262,000
---------------------------------------------------------------------------------------------------------------------------
</TABLE>


See accompanying notes.



                                      -20-


<PAGE>   9
                     CONSOLIDATED STATEMENTS OF OPERATIONS


<TABLE>
<CAPTION>
Years Ended December 31,                                         1994                    1995                    1996
---------------------------------------------------------------------------------------------------------------------------
<S>                                                           <C>                     <C>                     <C>        
Sales                                                         $24,188,000             $26,966,000             $33,725,000
Cost of sales                                                  13,183,000              13,185,000              15,388,000
                                                             --------------------------------------------------------------
Gross profit                                                   11,005,000              13,781,000              18,337,000
Operating expenses:
   Selling, general and administrative                         10,343,000              10,608,000              12,700,000
   Research and development                                       736,000               1,338,000               2,144,000
                                                             --------------------------------------------------------------
       Total operating expenses                                11,079,000              11,946,000              14,844,000
Income (loss) from operations                                     (74,000)              1,835,000               3,493,000
Interest expense, net                                             326,000                 527,000                 532,000
                                                             --------------------------------------------------------------
Income (loss) before income taxes                                (400,000)              1,308,000               2,961,000
Provision for income taxes                                         62,000                 291,000                 960,000
                                                             --------------------------------------------------------------
       Net income (loss)                                     $   (462,000)            $ 1,017,000             $ 2,001,000
                                                             --------------------------------------------------------------
Net income (loss) per share                                  $       (.14)            $       .30             $       .50
                                                             --------------------------------------------------------------
Shares used in per share computations                           3,328,000               3,422,000               3,995,000
---------------------------------------------------------------------------------------------------------------------------
</TABLE>


See accompanying notes.

           Consolidated Statements of Stockholder's Equity (Deficit)

<TABLE>
<CAPTION>
                                                                                                    Note
                                                                                       Foreign   receivable
                                                         Additional                   currency      from
                                       Common stock        paid-in     Accumulated   translation   common
                                    Shares     Amount      capital       deficit     adjustment  stockholder     Total
---------------------------------------------------------------------------------------------------------------------------
<S>                                <C>         <C>      <C>            <C>            <C>         <C>         <C>         
Balance at December 31, 1993       1,044,309   $11,000  $    430,000   $(2,619,000)   $(101,000)  $(12,000)   $(2,291,000)
   Forgiveness of stockholder
     note receivable                      --        --            --            --           --      6,000          6,000
   Exercise of stock options          16,561        --         7,000            --           --         --          7,000
   Net loss                               --        --            --      (462,000)          --         --       (462,000)
   Translation adjustment                 --        --            --            --      687,000         --        687,000
                                  -----------------------------------------------------------------------------------------
Balance at December 31, 1994       1,060,870    11,000       437,000    (3,081,000)     586,000     (6,000)    (2,053,000)
   Forgiveness of stockholder
     note receivable                      --        --            --            --           --      6,000          6,000
   Repurchase of stock               (59,726)       --      (206,000)           --           --         --       (206,000)
   Exercise of stock options          56,922        --        24,000            --           --         --         24,000
   Net income                             --        --            --     1,017,000           --         --      1,017,000
   Translation adjustment                 --        --            --            --      668,000         --        668,000
                                  -----------------------------------------------------------------------------------------
Balance at December 31, 1995       1,058,066    11,000       255,000    (2,064,000)   1,254,000         --       (544,000)
   Exercise of stock options,
     including tax benefit             1,893     1,000         5,000            --           --         --          6,000
   Issuance of note receivable
     for common stock                 28,390        --        96,000            --           --    (96,000)            --
   Sale of common stock net of
     issuance costs of $2,923,000  1,840,000    18,000    20,059,000            --           --         --     20,077,000
   Conversion of preferred stock   2,224,238    22,000    18,321,000            --           --         --     18,343,000
   Net income                             --        --            --     2,001,000           --         --      2,001,000
   Translation adjustment                 --        --            --            --     (983,000)        --       (983,000)
                                  -----------------------------------------------------------------------------------------
Balance at December 31, 1996       5,152,587   $52,000   $38,736,000   $   (63,000)   $ 271,000   $(96,000)   $38,900,000
---------------------------------------------------------------------------------------------------------------------------
</TABLE>


See accompanying notes.


                                      -21-
<PAGE>   10
                     Consolidated Statements of Cash Flows


<TABLE>
<CAPTION>
Years Ended December 31,                                         1994                    1995                     1996
---------------------------------------------------------------------------------------------------------------------------
<S>                                                          <C>                      <C>                    <C>         
OPERATING ACTIVITIES
Net income (loss)                                             $  (462,000)            $ 1,017,000             $ 2,001,000
Adjustments to reconcile net income (loss) to net cash
   provided by (used in) operations:
   Depreciation and amortization                                1,448,000               1,856,000               1,877,000
   Additions to inventory reserve                                 192,000                 317,000                 310,000
   Additions (reductions) to allowance for doubtful accounts      217,000                (129,000)                 10,000
   Loss on disposal of property and equipment                       2,000                  10,000                   5,000
   Forgiveness of note receivable from stockholder                150,000                 150,000                      --
   Changes in assets and liabilities:
     Accounts receivable, trade                                  (327,000)               (409,000)               (599,000)
     Inventories                                                  709,000                (370,000)             (1,325,000)
     Other current assets                                         (12,000)                329,000                (842,000)
     Deferred income taxes                                         42,000                  26,000                (242,000)
     Other assets                                                (475,000)             (1,153,000)             (1,102,000)
     Accounts payable, trade                                     (784,000)                148,000                 910,000
     Accrued expenses                                            (436,000)                781,000                 365,000
     Other current liabilities                                   (655,000)               (590,000)              1,300,000
     Other liabilities                                            362,000                   9,000                (643,000)
                                                              -------------------------------------------------------------
Net cash provided by (used in) operating activities               (29,000)              1,992,000               2,025,000
INVESTING ACTIVITIES
Purchases of property and equipment                            (1,436,000)               (805,000)               (369,000)
Proceeds from sale of property and equipment                       51,000                  22,000                   5,000
Purchase of business                                                   --              (6,213,000)                     --
Purchase of short-term investments                                     --                      --              (4,829,000)
Sale of short-term investments                                         --                      --                 716,000
Other                                                             154,000                 150,000                      --
                                                              -------------------------------------------------------------
Net cash used in investing activities                          (1,231,000)             (6,846,000)             (4,477,000)
                                                              -------------------------------------------------------------
FINANCING ACTIVITIES
Proceeds from lines of credit                                     258,000                 809,000               1,025,000
Payments on lines of credit                                       (33,000)             (1,404,000)             (1,025,000)
Proceeds from long-term debt                                    2,500,000               8,500,000                      --
Payments on long-term debt                                     (2,500,000)             (2,500,000)             (8,167,000)
Proceeds from sale of common stock                                  7,000                  24,000              20,083,000
Payments for repurchase of stock                                       --                (326,000)                     --
                                                              -------------------------------------------------------------
Net cash provided by financing activities                         232,000               5,103,000              11,916,000
                                                              -------------------------------------------------------------
Effect of exchange rate changes on cash                           124,000                  19,000                 (76,000)
                                                              -------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents             (904,000)                268,000               9,388,000
Balance at beginning of year                                    1,839,000                 935,000               1,203,000
                                                              -------------------------------------------------------------
Balance at end of year                                        $   935,000             $ 1,203,000            $ 10,591,000
                                                              -------------------------------------------------------------
Supplemental cash flow information:
   Interest paid during the year                              $   316,000             $   548,000            $    747,000
                                                              -------------------------------------------------------------
   Income taxes paid during the year                          $    86,000             $   313,000            $     67,000
---------------------------------------------------------------------------------------------------------------------------
</TABLE>


See accompanying notes.



                                      -22-
<PAGE>   11
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS   DECEMBER 31, 1996

1. Organization and Summary of Significant Accounting Policies

ORGANIZATION
CN Biosciences, Inc. is engaged in the development, production, marketing and
distribution of a broad array of products used worldwide in disease-related life
sciences research at pharmaceutical and biotechnology companies, academic
institutions and government laboratories. The Company's products include
biochemical and biological reagents, antibodies, assays and research kits which
it sells principally through its general and specialty catalogs under its well
established brand names, including Calbiochem, Novabiochem and Oncogene Research
Products. With over 7,800 products, the Company offers scientists the
convenience of obtaining from a single source both innovative and fundamental
research products, many of which are instrumental to research in areas such as
cancer, cardiovascular disease, Alzheimer's and AIDS.

BASIS OF PRESENTATION
The consolidated financial statements include the accounts of the Company and
its wholly-owned subsidiaries. All significant intercompany balances and
transactions have been eliminated in consolidation.

USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts reported in the financial statements and accompanying notes.
Actual results could differ from those estimates.

CASH EQUIVALENTS
For purposes of financial statement preparation, the Company considers all
demand deposits with banks or other financial institutions and investments with
initial maturities of three months or less at the date of purchase as cash
equivalents.

CONCENTRATION OF CREDIT RISK AND REVENUE RECOGNITION
The Company deposits its cash in financial institutions. At times, such deposits
may be in excess of insured limits. To date, the Company has not experienced any
losses on its cash investments.

The Company records revenue upon shipment. Accounts receivable are derived from
sales which are generally for small amounts and denominated in various
currencies. The Company grants credit to its customers based on an evaluation of
the customer's financial condition and collateral is generally not required.
Management believes the allowance for doubtful accounts is sufficient to provide
for any future losses. Credit losses have traditionally been minimal and within
management's expectations.

SHORT-TERM INVESTMENTS
The Company has classified its investments as available-for-sale and accordingly
carries them at fair value. Unrealized holding gains or losses, if any, net of
tax, on these securities are carried as a separate component of stockholders'
equity. The amortized cost of debt securities in this category is adjusted for
amortization of premiums and accretion of discounts to maturity. Such
amortization is included in interest income. Realized gains and losses and
declines in value judged to be other than temporary on available-for-sale
securities are also included in interest income. The cost of securities sold is
based on the specific identification method.

INVENTORIES
Inventories are maintained to support customer deliveries worldwide, often on a
next-day or second-day basis, of many sizes and quantities of each brand of
catalog item. Based upon economic production runs for certain products, the
Company from time to time manufactures quantities of product in excess of a
one-year supply. Inventories are valued at the lower of cost (first-in,
first-out basis) or market, with costs including material, labor and
manufacturing overhead.



                                      -23-
<PAGE>   12
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS   (Continued)

PROPERTY AND EQUIPMENT
Property and equipment is stated at cost. Depreciation is provided under the
straight-line method over 3 to 5 years for equipment and office fixtures and
over the shorter of the remaining lease life or 15 years for leasehold
improvements.

IMPAIRMENT OF LONG-LIVED ASSETS
In March 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 121 "Accounting for Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed Of" ("SFAS 121") regarding the
impairment of long-lived assets, identifiable intangibles and goodwill related
to those assets. SFAS 121 is effective for financial statements for fiscal years
beginning after December 15, 1995. The Company adopted this standard effective
January 1, 1996 and such adoption did not have a material effect on the
Company's financial position or results of operations.

DEFERRED CHARGES
In accordance with Statement of Position No. 93-7, the Company expenses the
production costs of advertising the first time the advertising takes place,
except for direct-response advertising, the costs of which are capitalized and
amortized into advertising expense over the expected period of future benefits
which varies from one to two years.

Direct-response advertising consists of costs relating to the preparation,
printing and distribution of the Company's product catalogs. The capitalized
costs of direct-response advertising are included in other assets.

STOCK OPTIONS
The Company has elected to follow Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees" ("APB 25") and related
Interpretations in accounting for its employee stock options. Under APB 25,
because the exercise price of the Company's employee stock options equals the
market price of the underlying stock on the date of grant, no compensation
expense is recognized.

FOREIGN CURRENCY TRANSLATION
The financial statements of foreign subsidiaries are translated to U.S. dollars.
All assets and liabilities are translated at year end exchange rates, and
stockholders' equity is translated at historical exchange rates. The resulting
translation adjustment is recorded as a separate component of stockholders'
equity. Sales and expense transactions are translated at average exchange rates.
Foreign currency transaction gains and losses were not material during any of
the three years in the period ended December 31, 1996.

NET INCOME (LOSS) PER SHARE
For periods subsequent to the completion of the Company's initial public
offering of common stock ("IPO") in October 1996, net income (loss) per share is
computed using the weighted average number of shares of common stock and common
stock equivalents outstanding during the periods presented. Common share
equivalents result from outstanding options and warrants to purchase common
stock. For loss periods, common share equivalents were not included in computing
net loss per share since the effect would have been antidilutive. For periods
prior to the IPO, net income (loss) per share is computed pursuant to the
requirements of the Securities and Exchange Commission which require that common
stock issued during the twelve months immediately preceding the IPO, plus the
number of equivalent shares of common stock granted or issued during the same
period, be included in the calculation of shares used in computing net income
(loss) per share as if these shares were outstanding for all periods presented
(using the treasury stock method and the assumed initial public offering price).
In addition, the calculation of the shares used in computing net income (loss)
per share also gives effect to the conversion and exchange of the shares of
preferred stock upon completion of the IPO using the if-converted method from
the original date of issuance.



                                      -24-
<PAGE>   13
CN BIOSCIENCES, INC.

2. ACQUISITION

On August 1, 1995, the Company acquired certain assets and assumed certain
liabilities of the Oncogene Research Products Business ("ORP") of Oncogene
Science, Inc., a biopharmaceutical company, in exchange for $5,932,000 in cash
plus acquisition costs of $281,000. The acquisition has been accounted for as a
purchase and, accordingly, the purchase price has been allocated to the assets
acquired and liabilities assumed based on the estimated fair values at the date
of acquisition. This allocation resulted in $4,335,000 of costs in excess of net
assets acquired which is being amortized over 15 years. ORP's results of
operations have been included in the consolidated results of the Company from
August 1, 1995.

The ORP purchase price allocation is summarized as follows:


<TABLE>
<S>                                                                                                   <C>       
--------------------------------------------------------------------------------------------------------------------
         Inventories                                                                                  $1,507,000
         Property and equipment                                                                          350,000
         Other current assets                                                                            121,000
         Costs in excess of net assets acquired                                                        4,335,000
                                                                                                    ----------------
         Total assets                                                                                  6,313,000
         Liabilities assumed                                                                            (100,000)
                                                                                                    ----------------  
         Net assets acquired                                                                          $6,213,000
--------------------------------------------------------------------------------------------------------------------
</TABLE>


The following unaudited pro forma information presents the combined results of
operations of the Company and ORP for the years ended December 31, 1994 and 1995
as though the acquisition had occurred January 1, 1994. The unaudited pro forma
information is included for comparative purposes only and is not necessarily
indicative of the results of operations that would have occurred had the
acquisition been made on the date indicated or of future results of the combined
companies.

<TABLE>
<CAPTION>
         Years Ended December 31,                                               1994                    1995
---------------------------------------------------------------------------------------------------------------------------
<S>                                                                          <C>                     <C>        
         Net sales                                                           $28,908,000             $29,937,000
         Net income (loss)                                                      (332,000)                979,000
         Net income (loss) per share                                         $      (.10)            $       .29
---------------------------------------------------------------------------------------------------------------------------
</TABLE>



3. FINANCIAL STATEMENT DETAILS

Short-term investments of the Company are classified as available-for-sale and
are stated at amortized cost which approximates market value. There were no
significant unrealized or realized gains or losses related to such securities as
of December 31, 1996. The Company's available-for-sale securities and cash
equivalents consist entirely of state and municipal debt securities and mature
at various dates through 1998.

INVENTORIES
<TABLE>
<CAPTION>
         December 31,                                                           1995                     1996
------------------------------------------------------------------------------------------------------------------
<S>                                                                          <C>                     <C>        
         Finished products                                                   $13,987,000             $13,777,000
         Semi-finished products, raw materials and supplies                    3,958,000               4,131,000
         Work-in-progress                                                        415,000                 525,000
                                                                            --------------------------------------
                                                                              18,360,000              18,433,000
         Reserves for excess materials                                        (3,917,000)             (3,700,000)
                                                                            --------------------------------------
                                                                             $14,443,000             $14,733,000
------------------------------------------------------------------------------------------------------------------
</TABLE>




                                      -25-
<PAGE>   14
CN BIOSCIENCES, INC.

<TABLE>
<S>                                                                            <C>                    <C>       
OTHER CURRENT ASSETS
         December 31,                                                             1995                   1996
---------------------------------------------------------------------------------------------------------------------------
         Deferred income taxes                                                 $  82,000              $1,211,000
         Other                                                                   394,000               1,225,000
                                                                              ---------------------------------------------
                                                                                $476,000              $2,436,000
---------------------------------------------------------------------------------------------------------------------------
PROPERTY AND EQUIPMENT
         December 31,                                                            1995                    1996
---------------------------------------------------------------------------------------------------------------------------
         Equipment and office fixtures                                        $6,365,000              $6,581,000
         Leasehold improvements                                                1,131,000               1,165,000
                                                                             ----------------------------------------------
                                                                               7,496,000               7,746,000
         Accumulated depreciation                                             (3,466,000)             (4,058,000)
                                                                             ----------------------------------------------
                                                                              $4,030,000              $3,688,000
---------------------------------------------------------------------------------------------------------------------------
INTANGIBLE ASSETS
         December 31,                                                            1995                    1996
---------------------------------------------------------------------------------------------------------------------------
         Goodwill                                                             $6,561,000              $5,707,000
         Accumulated amortization                                               (494,000)               (871,000)
                                                                             ----------------------------------------------
                                                                              $6,067,000              $4,836,000
---------------------------------------------------------------------------------------------------------------------------
</TABLE>

Goodwill represents the excess of the purchase price over the fair market value
of assets acquired, and is being amortized over 15 to 25 years. In 1995 and
1996, the Company reduced the value of goodwill by $150,000 and $854,000
respectively, based on the recognition of certain deferred tax assets which had
previously been considered unrealizable. Amortization of goodwill for the years
ended December 31, 1994, 1995 and 1996 was $100,000, $215,000, and $377,000,
respectively.

OTHER ASSETS
<TABLE>
<CAPTION>
         December 31,                                                             1995                   1996
---------------------------------------------------------------------------------------------------------------------------
<S>                                                                             <C>                   <C>       
         Capitalized direct-response advertising                                $171,000              $  842,000
         Other                                                                   708,000                 536,000
                                                                               --------------------------------------------
                                                                                $879,000              $1,378,000
---------------------------------------------------------------------------------------------------------------------------
</TABLE>

Amortization of capitalized direct-response advertising for the years ended
December 31, 1994, 1995 and 1996 was $400,000, $714,000 and $551,000,
respectively.


4. BANK DEBT

The Company's U.S. subsidiary's credit agreement with a commercial bank provides
for unsecured borrowings under a revolving line of credit up to a maximum of
$5,000,000 which expires in June 1998. The facility provides that the Company
can elect that borrowings bear interest at the bank's prime rate or LIBOR plus
2.35% (8.25% at December 31, 1996). There were no borrowings outstanding under
this facility at December 31, 1996.

Interest expense charged against operations for the years ended December 31,
1994, 1995 and 1996 was $349,000, $574,000 and $717,000, respectively.


                                      -26-
<PAGE>   15
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS   (Continued)

5. REDEEMABLE PREFERRED STOCK AND STOCKHOLDERS' EQUITY

REDEEMABLE PREFERRED STOCK
Upon consummation of the Company's IPO, the holder of the 4,001 outstanding
shares of Series A preferred stock converted such shares into 788,814 shares of
Class A common stock which was subsequently converted into 788,814 shares of
common stock, and the holders of the 179,428 outstanding shares of Series B
preferred stock exchanged such shares of Series B preferred stock for 1,435,424
shares of common stock.

CLASS A COMMON STOCK
In January 1995, the Company authorized 500,000 shares, $.01 par value, of
nonvoting Class A common stock and in July 1996, increased the number of such
authorized shares to 800,000. Each share of Class A common stock is convertible
into one fully paid and nonassessable share of voting common stock at any time
at the election of the holder subject to certain terms and conditions. In
December 1996, the holder of the 788,814 outstanding shares of Class A common
stock converted such shares into 788,814 shares of common stock. At December 31,
1996, 11,186 shares of Class A common stock were available to be issued.

STOCK OPTION PLANS
The Company has elected to follow APB 25 and related Interpretations in
accounting for its employee stock options because, as discussed below, the
alternative fair value accounting provided for under FASB Statement No. 123,
"Accounting for Stock-Based Compensation" ("Statement 123") requires use of
option valuation models that were not developed for use in valuing employee
stock options. Under APB 25, because the exercise price of the Company's
employee stock options equals the market price of the underlying stock on the
date of grant, no compensation expense is recognized.

The Company's Amended and Restated 1992 Stock Option Plan has authorized the
grant of options to employees, directors and consultants of the Company for up
to 835,000 shares of the Company's common stock. Options granted have 5 to 10
year terms and vest and become fully exercisable 4 to 5 years from the date of
grant.

A summary of the Company's stock option activity and related information is as
follows:

<TABLE>
<CAPTION>
         Years Ended December 31,                     1994                    1995                    1996
---------------------------------------------------------------------------------------------------------------------------
                                                         Weighted                Weighted                Weighted
                                                          Average                 Average                 Average
                                                         Exercise                Exercise                Exercise
                                                Options    Price        Options    Price       Options     Price
---------------------------------------------------------------------------------------------------------------------------
<S>                                             <C>        <C>          <C>        <C>          <C>     <C>     
         Outstanding-- beginning of year        382,984    $.42         379,672    $.42         395,334 $    .45
           Granted                               23,659     .42         101,732     .54         244,600    16.50
           Exercised                            (16,561)    .42         (56,922)    .42          (1,893)     .42
           Forfeited                            (10,410)    .42         (29,148)    .42          (2,716)    3.05
                                              -----------------------------------------------------------------------------
         Outstanding-- end of year              379,672    $.42         395,334    $.45         635,325  $  6.62
                                              -----------------------------------------------------------------------------
         Exercisable-- end of year               94,137    $.42         125,153    $.42         214,211 $    .43
---------------------------------------------------------------------------------------------------------------------------
</TABLE>

Exercise prices for options outstanding as of December 31, 1996 ranged from $.42
to $16.50. The weighted-average remaining contractual life of those options is
approximately 5 years.

At December 31, 1996, options for 117,675 shares were available for future
grant. At December 31, 1996, 756,028 shares of common stock were reserved for
future issuance related to stock options and warrants.

Pro forma information regarding net income and net income per share is required
by Statement 123, and has been determined as if the Company had accounted for
its employee stock options under the fair value method of that statement. The
fair value of these options was estimated at the date of grant using the
Black-Scholes option pricing model with the following weighted average
assumptions for 1995 and 1996, respectively: risk-free interest rates of 5.8% to
6.8% and 5.4% to 6.0%; dividend yields of 0%; volatility factors of the expected
market price of the Company's common stock of 0 and .3853; and a
weighted-average life of the option of 4.5 years.



                                      -27-
<PAGE>   16
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS   (Continued)


The Black-Scholes option valuation model was developed for use in estimating the
fair value of traded options which have no vesting restrictions and are fully
transferable. In addition, option valuation models require the input of highly
subjective assumptions including the expected stock price volatility. Because
the Company's employee stock options have characteristics significantly
different from those of traded options, and because changes in the subjective
assumptions can materially affect the fair value estimate, in management's
opinion, the existing models do not necessarily provide a reliable single
measure of the fair value of its employee stock options.

For purposes of pro forma disclosures, the estimated fair value of the options
is amortized to expense over the vesting period of such options. The effects of
applying Statement 123 for pro forma disclosure purposes are not likely to be
representative of the effects on pro forma net income in future years because
they do not take into consideration pro forma compensation expense related to
grants made prior to 1995. The Company's pro forma information follows:

<TABLE>
<CAPTION>
                                                                         1995                    1996
--------------------------------------------------------------------------------------------------------
<S>                                                                   <C>                     <C>       
 Pro forma net income                                                 $1,014,000              $1,915,000
                                                                      ----------------------------------
 Pro forma net income per share                                       $      .30              $      .48
                                                                      ----------------------------------
 Weighted-average fair value of options granted during the year       $      .15              $     8.74
--------------------------------------------------------------------------------------------------------
</TABLE>

WARRANTS
During 1995, the Company issued a warrant to purchase 3,028 shares of the
Company's common stock at $1.06 per share. The value of the warrant on the date
of issuance was not considered significant. The warrant is currently exercisable
and expires in July 2000.


6. TRANSACTIONS WITH EMPLOYEE/STOCKHOLDERS

In 1993, the Company entered into an employment agreement with the Chairman and
Chief Executive Officer of the Company. As part of this agreement, the Company
granted an option to purchase 110,249 shares of common stock at $.42 per share.
The options vest over four years and expire in January 1998. In addition, the
Company issued 44,100 shares of common stock at $.42 per share and 4,377 shares
of Series B preferred stock at $100 per share in exchange for $4,000 in cash and
a note for $452,000. The note bears interest at 8% per annum, payable annually.
Amounts forgiven in 1993, 1994 and 1995 related to this note, charged to current
operations, were $152,000, $150,000 and $150,000, respectively.

Effective June 9, 1995, an officer/stockholder of the Company resigned and, in
connection therewith in October 1995, the Company entered into an agreement to
reacquire 59,726 shares of common stock at a price of $3.4515 per share and
1,199 shares of Series B preferred stock at a price of $100 per share, resulting
in a total cost of $326,000. The cost of the reacquired shares was applied
against preferred stock ($120,000) and paid-in-capital ($206,000).

In January 1996, the Company sold 28,390 shares of common stock to an officer of
the Company in exchange for a note receivable of $96,000 bearing interest at
5.65%.



                                      -28-
<PAGE>   17
CN BIOSCIENCES, INC.

7. INCOME TAXES

The significant components of the provision (benefit) for income taxes are as
follows:

<TABLE>
<CAPTION>
         Years Ended December 31,                         1994                    1995                    1996
         --------------------------------------------------------------------------------------------------------
         <S>                                             <C>                    <C>                      <C>     
         Current:
           Federal                                       $17,000                $ 52,000                 $714,000
           State                                           2,000                  17,000                   52,000
                                                         --------------------------------------------------------
                                                          19,000                  69,000                  766,000
         Deferred:
           Federal                                        43,000                 139,000                 (277,000)
           State                                              --                  36,000                 (110,000)
                                                         --------------------------------------------------------
                                                          43,000                 175,000                 (387,000)
                                                         --------------------------------------------------------
         Total Federal and State                          62,000                 244,000                  379,000
         Foreign                                              --                  47,000                  581,000
                                                         --------------------------------------------------------
                                                         $62,000                $291,000                 $960,000
         --------------------------------------------------------------------------------------------------------
</TABLE>


Temporary differences and carryforwards which give rise to a significant portion
of the net deferred tax asset included in the accompanying consolidated balance
sheets at December 31, 1995 and 1996 are shown below. As of December 31, 1995
and 1996, a valuation allowance of $3,296,000 and $2,389,000, respectively, had
been recognized as an offset to the deferred tax assets related to the
jurisdictions in which realization of such assets is uncertain.

<TABLE>
<CAPTION>
         Years Ended December 31,                                                1995                    1996
         -------------------------------------------------------------------------------------------------------
         <S>                                                                <C>                      <C>        
         Deferred tax assets:
           Inventory reserves                                                $   548,000             $   472,000
           Accounts receivable reserves                                           65,000                  62,000
           Net operating losses                                                2,397,000               2,336,000
           Deferred rent                                                         102,000                 148,000
           Other                                                                 283,000                 801,000
                                                                             -----------------------------------
                                                                               3,395,000               3,819,000
           Valuation allowances                                               (3,296,000)             (2,389,000)
                                                                             -----------------------------------
                                                                                  99,000               1,430,000
         Deferred tax liabilities:
           Depreciation                                                          (15,000)               (157,000)
           Other                                                                       --                (92,000)
                                                                             -----------------------------------
                                                                                 (15,000)               (249,000)
                                                                             -----------------------------------
         Net deferred tax assets                                                 $84,000              $1,181,000
         -------------------------------------------------------------------------------------------------------
</TABLE>



                                      -29-
<PAGE>   18
CN BIOSCIENCES, INC.

Income tax expense differs from the amount obtained by applying the statutory
federal income tax rate to earnings before tax as follows:

<TABLE>
<CAPTION>
         Years Ended December 31,                                  1994                1995              1996
         --------------------------------------------------------------------------------------------------------
         <S>                                                     <C>                 <C>               <C>       
         Provision at federal statutory rate                     $(136,000)          $445,000          $1,007,000
         State income taxes, net of federal benefit                  1,000             56,000              91,000
         Nondeductible expenses, including amortization
           of costs in excess of net assets acquired                63,000             71,000              42,000
         Change in valuation allowance, net of write-offs
           and adjustments                                         134,000           (298,000)           (113,000)
         Other, net                                                     --             17,000             (67,000)
                                                                  -----------------------------------------------
         Total income tax expense                                 $ 62,000           $291,000            $960,000
         --------------------------------------------------------------------------------------------------------
</TABLE>

At December 31, 1996, the Company had state net operating loss carryforwards of
approximately $211,000 which begin to expire in 1998 unless previously utilized.
The Company also had approximately $1,641,000 and $258,000 of foreign net
operating losses in Germany and the United Kingdom, respectively, which are
available indefinitely. Additionally, the Company has approximately $6,492,000
and $5,727,000 of net operating losses for Swiss Federal and Cantonal purposes,
respectively, which will begin to expire in 2000 and 1997, respectively, unless
previously utilized.


8. COMMITMENTS AND CONTINGENCIES

The Company leases certain facilities and equipment under various operating
leases. Lease expense on the facilities and equipment for the years ended
December 31, 1994, 1995 and 1996 was $1,157,000, $1,126,000 and $1,640,000,
respectively.

The Company is party to a fifteen year lease agreement for premises which were
first occupied during 1993. The Company has two options to extend the term of
the lease for five years each.

In addition, the Company leases certain equipment under capital leases. Cost and
accumulated amortization of equipment under capital leases at December 31, 1995
were approximately $1,514,000 and $587,000, respectively, and at December 31,
1996 were $1,491,000 and $359,000, respectively. Amortization of assets held
under capital leases is included with depreciation expenses.

Future annual minimum payments under the operating and capital leases as of
December 31, 1996 are as follows:

<TABLE>
<CAPTION>
                                                       Operating                 Capital
                                                        Leases                   Leases
         -------------------------------------------------------------------------------
         <S>                                         <C>                        <C>     
         1997                                        $ 1,486,000                $425,000
         1998                                          1,350,000                 232,000
         1999                                          1,144,000                 181,000
         2000                                          1,125,000                  80,000
         2001                                          1,112,000                  24,000
         Thereafter                                    6,465,000                      --
                                                     -----------------------------------
                                                     $12,682,000                 942,000
         Less amounts representing interest          -----------                (137,000)
                                                                                --------
         Present value of future minimum lease payments                          805,000
         Less current portion (included in other current liabilities)           (369,000)
                                                                                --------
         Capital lease obligation, net of current portion
           (included in other liabilities)                                      $436,000
         -------------------------------------------------------------------------------
</TABLE>


                                      -30-
<PAGE>   19
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS   (Continued)


9. CUSTOMER AND GEOGRAPHIC INFORMATION

The Company operates in one business segment, the development, production,
marketing and distribution of a broad array of products used in disease-related
life sciences research at pharmaceutical and biotechnology companies, academic
institutions and government laboratories. No single customer accounted for more
than 10% of total revenue during any of the three years in the period ended
December 31, 1996. United States export sales, principally to Europe and Asia,
aggregated $2,524,000, $4,429,000 and $6,812,000, for the years ended December
31, 1994, 1995 and 1996, respectively.

Information with respect to the Company's operations by significant geographic
area is set forth below. Transfers between geographic areas have been shown at
the agreed upon transfer price, computed by applying discount percentages to
local currency list prices. All transactions denominated in foreign currency
have been translated at the average exchange rate during the period.

<TABLE>
<S>                                                   <C>          <C>          <C>         <C>          <C>    
                                                                                                      Consolidated
         Year Ended December 31, 1994 (in thousands) United States  Europe      Other      Eliminations   Total
---------------------------------------------------------------------------------------------------------------------------
         Sales to unaffiliated customers              $12,554      $ 9,329      $2,305      $    --      $24,188
         Transfers between geographic areas             2,996        3,581         701       (7,278)          --
                                                     ----------------------------------------------------------------------
         Total revenue                                $15,550      $12,910      $3,006      $(7,278)     $24,188
                                                     ----------------------------------------------------------------------
         Income (loss) before income taxes            $  (251)     $  (126)     $   67      $   (90)     $  (400)
                                                     ----------------------------------------------------------------------
         Identifiable assets                          $15,624      $ 8,315      $  395      $  (839)     $23,495
---------------------------------------------------------------------------------------------------------------------------

                                                                                                      Consolidated
         Year Ended December 31, 1995 (in thousands) United States  Europe      Other      Eliminations  Total
---------------------------------------------------------------------------------------------------------------------------
         Sales to unaffiliated customers              $13,202      $11,353      $2,411      $    --      $26,966
         Transfers between geographic areas             3,735        4,435         339       (8,509)          --
                                                     ----------------------------------------------------------------------
         Total revenue                                $16,937      $15,788      $2,750      $(8,509)     $26,966
                                                     ----------------------------------------------------------------------
         Income before income taxes                   $   211      $ 1,058      $   36      $     3      $ 1,308
                                                     ----------------------------------------------------------------------
         Identifiable assets                          $22,557      $ 8,978      $  482      $  (820)     $31,197
---------------------------------------------------------------------------------------------------------------------------

                                                                                                      Consolidated
         Year Ended December 31, 1996 (in thousands) United States  Europe      Other      Eliminations   Total
---------------------------------------------------------------------------------------------------------------------------
         Sales to unaffiliated customers              $17,298      $12,946      $3,481    $      --      $33,725
         Transfers between geographic areas             5,139        4,999         450      (10,588)          --
                                                     ----------------------------------------------------------------------
         Total revenue                                $22,437      $17,945      $3,931     $(10,588)     $33,725
                                                     ----------------------------------------------------------------------
         Income before income taxes                   $ 1,373      $ 1,555      $   33     $     --      $ 2,961
                                                     ----------------------------------------------------------------------
         Identifiable assets                          $37,914      $ 8,926      $  453     $ (1,031)     $46,262
---------------------------------------------------------------------------------------------------------------------------
</TABLE>


10. EMPLOYEE BENEFIT PLAN

The Company sponsors a Defined Contribution Plan which covers substantially all
domestic employees who meet certain age requirements. Employees may contribute
up to 15% of their compensation per year (subject to a maximum limit imposed by
federal tax law). The Company may make matching contributions equal to a maximum
of 30% of each participant's contribution per year. The contributions charged to
operations for the years ended December 31, 1994, 1995 and 1996 were $31,000,
$67,000 and $87,000, respectively.



                                      -31-
<PAGE>   20
                         REPORT OF INDEPENDENT AUDITORS


Board of Directors and Stockholders

CN Biosciences, Inc.



We have audited the accompanying consolidated balance sheets of CN Biosciences,
Inc. as of December 31, 1995 and 1996 and the related consolidated statements of
operations, stockholders' equity (deficit) and cash flows for each of the three
years in the period ended December 31, 1996. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.

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

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of CN
Biosciences, Inc. at December 31, 1995 and 1996 and the consolidated results of
its operations and its cash flows for each of the three years in the period
ended December 31, 1996, in conformity with generally accepted accounting
principles.


                                        ERNST & YOUNG LLP


San Diego, California
February 21, 1997



                                      -32-
<PAGE>   21
STOCK LISTING

CN Biosciences, Inc. common stock trades on the Nasdaq National Market tier of
The Nasdaq Stock Market under the symbol CNBI.

PRICE RANGE OF COMMON STOCK

As of March 3, 1997 there were approximately 22 holders of record of the
Company's common stock and 5,154,953 shares of common stock outstanding. No cash
dividends have been paid on the common stock since the Company's inception, and
the Company does not anticipate paying any cash dividends in the foreseeable
future. The Company is a guarantor of its U.S. subsidiary's bank credit
agreement, which restricts the payment of cash dividends by the Company.

The following table presents the high and low sales prices as quoted by NASDAQ:

1996                    High            Low
----------------       ------         -------
10/2/96-12/31/96       $18.50         $12.75

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