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Applera Corporation Teleconference January 23, 2003 Management Remarks for Second Quarter Fiscal 2003 Earnings Call

- January 23, 2003

Peter Dworkin

Good morning. I am Peter Dworkin, Vice President, Investor Relations, for Applera Corporation.

Thank you for joining Applera management to discuss the second quarter FY 2003 financial results that were issued this morning for Applera Corporation, including its Applied Biosystems Group and Celera Genomics Group, as well as Celera Diagnostics, the 50/50 joint venture between Applied Biosystems and Celera Genomics.

This morning we will discuss each of our businesses separately, starting with Applied Biosystems, then Celera Diagnostics, and concluding with Celera Genomics. We estimate that the Celera Diagnostics portion of the call will begin at about 10:45 a.m. and the Celera Genomics portion at 11 a.m., but we will move from one business to the next without interruption.

Present today are Tony White, CEO of Applera; Dennis Winger, Chief Financial Officer of Applera; Mike Hunkapiller, President of Applied Biosystems; and Kathy Ordoņez, President of Celera Genomics and Celera Diagnostics. Other business managers are present to assist in answering your questions.

During this call we will be making forward-looking statements about Applera's businesses. These statements are subject to the risks and uncertainties relating to our businesses and corporate structure that are referred to in the releases issued this morning and in Applera's filings with the Securities & Exchange Commission. Please note that during this call, the text of these prepared remarks will be posted on the Investor Relations section of the Applera web site and on the separate Investor Relations sites within the Applied Biosystems and Celera Genomics web sites.

Our first speaker this morning will be Tony White.

Tony White

Good morning.

We are pleased with the performance of our three businesses during the last quarter. Applied Biosystems increased its revenue and net income, before restructuring and other charges, in what is clearly a difficult business environment for suppliers of life science research instruments, consumables, and services. The turnaround in the sequencing business after five quarters of revenue declines is particularly noteworthy and gratifying. This means that the three largest product lines of Applied Biosystems are all growing again.

Although our market and technology positions are sound, we made the difficult decision to reduce headcount. This was necessary in order to reduce our cost structure in light of market uncertainties. The move was also undertaken to free up funds for certain new R&D programs and marketing initiatives like our forthcoming web portal, which we believe can help transform how researchers study biology. By resizing the Applied Biosystems cost structure after several years of rapid growth in our work force, we believe we are in a better position to achieve our financial targets, fund new initiatives, and manage through today's economic conditions.

During the last quarter, Celera Genomics completed its refocusing around therapeutic discovery and product development. After thoroughly reviewing its assets and opportunities, the new Celera Genomics management team developed a rigorous business and scientific plan that was reviewed by the Applera Board of Directors in November and presented to the financial community in December. The plan builds on Celera's strengths and capabilities-bioinformatics, target finding, medicinal chemistry, expertise in protease inhibition, and close collaboration with Celera Diagnostics. The new Celera management team has quickly built a culture that values cooperation and clear analysis. Celera has a solid foundation based on excellent technology and sound planning upon which to grow.

Celera Diagnostics has continued to demonstrate steady progress. CDx has continued to expand its discovery programs and its relationships with customers and collaborators, while growing sales. We were pleased to receive FDA clearance for the CDx ViroSeq HIV Genotyping System in December. Based on original development at Applied Biosystems, this product for the analysis of drug resistance in the HIV virus is the first product of Applera Corporation cleared by the FDA. The ViroSeq system, by guiding the choice of anti-viral drugs to treat HIV, is also an example of how diagnostics can improve the selection of the right drug for a particular patient.

I am pleased that a very close working relationship has been forged between Celera Genomics and Celera Diagnostics. There are many synergies in R&D between the search for diagnostic markers and therapeutic targets, in the validation of these markers and targets, in patient selection and stratification, and in product commercialization and use by physicians and patients. Last month we shared our vision for how these therapeutic and diagnostic businesses intend to collaborate in these ways for mutual advantage and, more broadly, to advance the concept of targeted medicine. While the concept of targeted medicine is not new, and while the development of targeted medicine will take years, we believe Celera Genomics and Celera Diagnostics have the scientific and financial resources and, importantly, the will and the organizational structure, to lead the way toward this new vision of medicine.

Next, Mike Hunkapiller will review the quarter at Applied Biosystems.

Mike Hunkapiller

Thank you, Tony.

During the second quarter, revenues increased 8 percent from the prior year quarter, or 7 percent excluding currency, to $445 million. Excluding sales to Celera Genomics, fiscal 2003 second quarter revenues increased 10 percent compared to the prior year quarter. This growth was driven primarily by a 13 percent rise in instrument sales and a 22 percent increase in revenues from other sources. This "Other Sources" category includes service contracts, royalties, licenses, and contract research. Consumable sales declined 4 percent year-over-year largely due to lower sales of sequencing reagents that more than offset the growth in other consumable product revenues.

As I mentioned on our last earnings conference call in October, our goal for this fiscal year has been to get the total sequencing product line to grow again, or at least to stem what had been an ongoing decline. Thus, we are pleased that AB achieved 12 percent year-over-year revenue growth in our sequencing product line during the second quarter. This growth was driven by the success of our sequencing instruments, and most specifically the Applied Biosystems 3730 DNA Analyzer product line. To remind you, the 3730xl system is our second-generation high-throughput, production-level DNA sequencer with 96-capillaries, which offers improved throughput, sensitivity, and uniformity compared to the 3700 model that was used to produce the first draft sequences of the human genome. The 3730 system is our 48 capillary model and is designed for core labs in the academic and commercial sectors, as well as the standardized testing markets.

We've had good acceptance of the 3730 product line by both the large genome centers and smaller academic and commercial labs. As we noted in today's press release, we anticipate significant additional demand for the 3730 product line from customers doing whole genome sequencing, resequencing, and SNP genotyping. However, it is difficult to predict the timing and magnitude of future sales of these more expensive systems, particularly at the large genome centers, until pending life science funding decisions are made by the governments in the United States and Japan.

In contrast to the strength of sequencing instrument revenues, sales of sequencing consumables again declined on a year-over-year basis. As we have discussed in prior conference calls, we believe this decline has occurred because overall sequencing capacity has not increased quickly enough to overcome the effects of reagent dilution. Ultimately, we anticipate that the lower operating costs and the greater capacity of the 3730 product line will lead to more sequencing and related applications using DNA electrophoresis technology. However, the outlook for AB's revenues from sequencing reagents remains difficult to forecast accurately as these revenues depend on several factors, including the total volume of sequencing activity; the mix of instruments in use; the nature of our customers' research projects; and the utilization of consumables per unit of sequencing. For the remainder of this fiscal year, we continue to anticipate that revenue from sequencing consumables will trend down on a year-to-year basis , but at a more moderate level.

As has been the case in recent quarters, mass spectrometry was our fastest growing product line during the second quarter. Sales of mass spectrometry products increased 20 percent during the quarter as compared to the prior year quarter. As anticipated, the year-over-year revenue growth rate for mass spectrometry moderated from recent quarters as we moved past the first full year of substantial API 4000® LC/MS/MS instrument sales. The Q TRAP® system, AB's linear ion trap, was a strong contributor to growth, as were both the 4700 Proteomics Analyzer with TOF/TOFTM Optics and the QSTARŪ XL LC/MS/MS systems that serve the high-end discovery proteomics market.

Our Sequence Detection Systems (SDS) and Other Applied Genomics product category also experienced more moderate year-over-year revenue growth relative to recent quarters, with sales increasing 9 percent during the second quarter. Conservative year-end pharmaceutical R&D spending appears to have led to weakness in sales of the Applied Biosystems 7900HT Sequence Detection System that offset strength in sales of the low-to-mid throughput ABI PRISMŪ 7000 system. In contrast, revenues of consumable products within this category were robust. Our TaqManŪ chemistry-based products which include custom oligos, the Assays-by-DesignSM service, and Assays-on-DemandTM for SNP genotyping and for gene expression analysis all contributed to year-over-year revenue growth. Presently, our website offers approximately 122,000 Assays-on-DemandTM SNP Genotyping Products and over 17,000 Assays-on-DemandTM Gene Expression Products.

Recently, we announced the SNPlexTM system, a reagent and software product based on Applied Biosystems' proprietary oligonucleotide ligation reagent and electrophoretic detection technology. The SNPlex system uses multiplexing to rapidly analyze large numbers of target genetic sequences in a single biological sample and is designed to allow researchers to conduct ultra high throughput genotyping at an expected cost as low as one cent or less per genotype using the Applied Biosystems 3730xl and 3730 DNA Analyzers. Ultimately, we believe that the SNPlex system will help drive the number of genotyping experiments performed and drive both consumable and instrument revenue growth for AB.

In terms of revenue by geographical region, revenues in the United States, which accounted for approximately 47 percent of total second quarter revenues, increased 8 percent from the prior year quarter. Revenues in Europe, which accounted for approximately 32 percent of total revenues, increased 18 percent over the prior year quarter. Revenues in Japan and the Far East, which accounted for 19 percent of total revenues, declined 5 percent from the prior year quarter. And finally, revenues in the rest of the world, which accounted for 2 percent of total sales, grew by 5 percent over the prior year quarter.

The delay in the passage of the fiscal 2003 NIH budget, as well as government funding issues in Japan and Europe, have a significant negative impact on our government and academic customers. At the same time, our commercial customers in the pharmaceutical and biotechnology industries remain cautious about their R&D spending levels. Thus, we remain in a period where the challenges facing life science tools companies are intense and the ability to deliver truly value-added innovative technologies to our customers is critical. For Applied Biosystems, these capabilities have proven to be our core competencies and we look to this period as an opportunity to strengthen our position within the life science tools marketplace.

Next, Dennis Winger will cover the financial performance and outlook for Applied Biosystems.

Dennis Winger

Thank you, Mike.

Financial results for Applied Biosystems are spelled out in the press release, so I am going to focus on providing some additional color on a few aspects of the second quarter results and the financial outlook.

Operating income in the quarter was $33.9 million. Included in this amount were special items totaling $33.8 million, consisting of a $9.5 million non-cash pre-tax charge for asset write-offs and a $24.3 million pre-tax charge for severance costs and office closures. Earnings for the Group were 14 cents per diluted share, versus 23 cents in the second quarter of fiscal 2002. The special charges reduced earnings per diluted share in the quarter by 11 cents.

During the second quarter of fiscal 2003, cash flow from operations was $99.0 million, and capital expenditures were $34.1 million. As of the end of the second quarter, accounts receivable was $370.0 million, representing 63 days sales outstanding, versus $363.9 million, or 75 days, as of the end of the first quarter of fiscal 2003. Inventory was $154.6 million, representing 3.5 months of inventory on hand, versus $150.0 million, or 3.9 months, as of the end of the first quarter.

Turning to our financial outlook for Applied Biosystems, let me begin by stating that forecasting remains challenging in this environment. Spending patterns remain unpredictable in the pharmaceutical and biotechnology sectors. Congress has yet to approve the FY03 NIH budget. As Mike noted, there is also uncertainty about life science funding in Japan and parts of Europe, as well as difficulties in predicting trends in the consumption of sequencing reagents by AB's customers. Reflecting these risks and uncertainties, at this time the Group expects that revenue percentage growth in fiscal 2003 will be in the high single digits. The Group continues to expect that growth in fiscal 2003 will be heavily influenced by the adoption of new products. The Group expects the effective tax rate for fiscal 2003 to be approximately 27 percent, one percentage point lower than the previously forecasted rate of 28 percent due to the effect of the second quarter special charges. Future tax legislati on may repeal or replace the existing U.S. export tax regime, as well as significantly change other international tax provisions of the Internal Revenue Code. Such changes may result in a change in the effective tax rate for the Group.

The Group believes that operations are on track to meet our previous guidance for diluted earnings per share from continuing operations for fiscal 2003, which, after reflecting the special charges of 11 cents in the second quarter, should be in the range of 74 cents to 84 cents. Because of the delay in the approval of the fiscal 2003 NIH budget and funding issues in Japan and Europe, the Group expects that some sales that would otherwise have occurred during the third fiscal quarter, and approximately 3 to 4 cents of diluted earnings per share, will now be shifted to the fourth fiscal quarter. As a result, the Group expects fiscal third quarter diluted earnings per share to be somewhat below the level of the prior year quarter and fiscal fourth quarter diluted earnings per share to be somewhat higher than the comparable quarter last year. Capital spending in fiscal 2003 is anticipated to be approximately $150 million, including approximately $75 million for the facilities expansion in Pleasanton, CA. These comments reflect management's current outlook. The Company does not have any current intention to update this outlook and plans to revisit the outlook for its businesses only once each quarter when financial results are announced.

Thank you, we'll now take your questions about Applied Biosystems.

Peter Dworkin

We will now turn to Celera Diagnostics, a 50/50 joint venture between Applied Biosystems and Celera Genomics. The next speaker will be Kathy Ordoņez.

Kathy Ordoņez (CDx)

Thank you, Peter.

Celera Diagnostics ended calendar 2002 with a number of key accomplishments including continued sales growth, FDA clearance of our ViroSeq HIV genotyping kit and progress both with new product launches and our discovery programs to identify new genetic markers associated with disease.

For the quarter, end-user sales of Celera Diagnostics' products increased to $5.0 million, driven mainly by adoption of our new version three cystic fibrosis analyte specific reagents by several large reference labs. We have also advanced new ASRs for hepatitis viral load testing into external evaluations, and are following close behind with ASRs to genotype the hepatitis virus. We continue to expect fiscal 2003 end-user sales, including those from the alliance with Abbott Laboratories, to be in the range of $18 to $22 million, and we continue to expect the pre-tax losses for Celera Diagnostics to be approximately $50 to $60 million for fiscal 2003. Net cash use by Celera Diagnostics was $11.5 million during the second quarter, and is still expected to be in the range of $55 to 65 million for all of fiscal 2003.

In December, we received clearance from the U.S. Food and Drug Administration to market our ViroSeqTM HIV-1 Genotyping System as an in vitro diagnostic product intended to identify mutations in the HIV virus associated with drug resistance. The output from this system is useful for physicians seeking the best course of treatment for HIV infected individuals. We are now developing applications for the ViroSeq system for the Applied Biosystems 3100 and 3700 sequencing instruments currently in use in most of the large American labs for genotyping the HIV virus. We believe that ViroSeq affords an opportunity to provide better-standardized HIV genotype testing for these laboratories.

During December, the California State Food and Drug Branch of the Department of Health Services inspected our new Alameda manufacturing facility. We have been notified that the facility can be used to manufacture in vitro diagnostic products.

We have also continued to establish collaborations to provide access to clinical samples for our ongoing disease association studies. Recently, we announced relationships with the University of California, San Francisco in breast cancer and with Genomics Collaborative in rheumatoid arthritis.

Currently, we have six disease association studies ongoing in our research program. These include Alzheimer's Disease, two cardiovascular indications, rheumatoid arthritis, a host response study and breast cancer. We expect to have completed four of these initial association studies, including replication, by June of 2003.

During this quarter, we plan to commercially launch our Hepatitis C (HCV) viral load ASRs, and complete initial external evaluations of our HCV genotyping ASRs. By fiscal year end, we expect to have extended the use of our ViroSeq HIV genotyping system to additional Applied Biosystems' sequencing platforms. We intend to have processed samples for six disease association studies, and to have commercialized ASRs for up to two new tests resulting from these studies by the end of calendar 2003.

Last week, Abbott Laboratories advised its customers that it will discontinue manufacture of its LCx assays for chlamydia and gonorrhea around mid-year. You may recall that Celera Diagnostics' agreement with Abbott called for profits generated from the sale of these reagents to be shared with Celera Diagnostics beginning July 1, 2003. Recently, Celera Diagnostics and Abbott amended the alliance agreement between the two companies to provide ongoing compensation to Celera Diagnostics for profits it had expected from the sale of these LCx assays. This should remain in effect through the earlier of December 2006 or when sales of next generation testing products for chlamydia and gonorrhea generate anticipated replacement profits.

Now we will take your questions regarding Celera Diagnostics.

Peter Dworkin

In the third and final portion of our call today Kathy Ordoņez will cover Celera Genomics.

For those of you who may have just joined us this morning, please note that during this call we will be making forward-looking statements about the Company's businesses. These statements are subject to the risks and uncertainties relating to our businesses and corporate structure that are referred to in the releases issued this morning and in Applera's filings with the Securities & Exchange Commission.

Kathy Ordoņez (CRA)

Thank you.

In December, we provided an in depth review of our preclinical programs, and raised the curtain on our new, focused business and scientific plan for Celera Genomics. For those of you who want to know all the details, the audio webcast and presentation materials from this event are still available on the Celera Genomics website. Today, I will provide you with an update on recent activities, and recap some of the key takeaways from our December presentation.

Celera Genomics' business and scientific plan calls for us to advance selected compounds into clinical trials on our own account, rather than partnering at a preclinical phase, so we can generate more value. We have selected inflammation, coagulation and oncology as the therapeutic areas of focus, and we are aggressively pursuing existing small molecule programs and target identification for these disease classes. We have pared down our preclinical portfolio and redoubled our resources on the most promising programs, such as oral tryptase inhibitors for asthma and Factor VIIa inhibitors for anticoagulation. Over the next three years, we plan to shift a significant portion of our R&D spending toward preclinical and clinical development activities, and to place less emphasis on target identification.

Celera is now moving ahead with execution of our plan. We have clear milestones by which we are measuring our progress. Our highest priorities include the expansion of our pre-clinical and clinical development organization and advancement of our pipeline and previously established target finding programs. Let me talk first about the organization. Our senior management team is complete, with the recent hiring of Dr. Jim Yee as Head of Development. Jim brings over 20 years of development experience to Celera, having led teams responsible for numerous NDAs, as well as the selection and evaluation of compounds for clinical drug development. Dr. Yee, together with Dr. Robert Booth, our Chief Scientific Officer, are currently searching for additional candidates experienced in formulation, toxicology and clinical program management. We expect to add more than 25 development scientists in the coming calendar year.

Let me move on to the pipeline, where the tryptase/asthma program is the highest priority. We have pilot-scale quantities of our lead compound, which has shown good potency, selectivity and bioavailability, and we plan to initiate additional toxicology and safety evaluations this quarter. We are also identifying backup compounds to increase our likelihood of success.

For target finding and validation, Celera Genomics is applying comparative genetics, proteomics, genotyping and gene expression platforms integrated through bioinformatics. We have recently focused our proteomics effort exclusively towards the identification of differentially expressed cell surface proteins. We believe this class of proteins includes the most promising targets for near term drug candidates via antibodies. We do not intend to build the organization necessary for the development and manufacture of therapeutic antibodies, but instead plan to partner for these capabilities. Our team has identified differentially expressed proteins on the surface of pancreatic cancer cells, and these proteins are undergoing further validation to confirm their viability as targets. The proteomics effort is currently focused on lung cancer and should move on to colon cancer in the coming months.

I believe calendar 2003 is going to be a year of significant progress in discovery and development programs for Celera Genomics. We are on track to see at least one of our compounds-most likely one of the partnered compounds-enter clinical trials before the end of the calendar year. We also plan to initiate at least one new preclinical development program. We intend to complete our proteomics studies in pancreatic and lung cancer, and to define our commercial path forward for therapeutic antibodies. Possible collaborations, and potential findings from Celera Genomics' proteomics studies, as well as the disease association studies at Celera Diagnostics, may generate additional long-term value creation opportunities for both Celera Genomics and Celera Diagnostics.

Now, Dennis Winger will make a few comments on financial results for Celera Genomics.

Dennis Winger

Thank you, Kathy.

You will note that the cash and short-term investments balance decreased by $41 million during the quarter, and $49 million since the beginning of the fiscal year. These decreases include the conversion of $17 million of short-term investments to long-term investments. Excluding this conversion, the year to date change in Celera Genomics' cash balance was $32 million.

For the quarter, Celera Genomics reported a net loss of $16.1 million, or $0.23 per share, compared to $117.9 million, or $1.82 per share, in the same period last year. Results for the prior year quarter included a $99.0 million non-cash charge for acquired in-process R&D related to the November 2001 acquisition of Axys Pharmaceuticals. In the recent quarter, the Online/Information Business again provided more operating cash flow compared to the prior year period, covering a significant portion of Celera's investment in drug discovery and development.

We continue to expect, excluding the $17 million conversion I just mentioned, the change in cash balance to be in the range of $75 to 85 million for fiscal year 2003. This expectation includes Celera Genomics' portion of the funding for the Celera Diagnostics joint venture. In this fiscal year, Celera Genomics expects $85 to 95 million in revenues, largely from the established CDS subscriptions.

Celera's new business and scientific plan calls for a greater portion of its R&D investment to go toward preclinical and clinical development. Note that we have not increased our fiscal 2003 forecast for R&D expenses from the previous range of $130 to $140 million. We are reducing spending in earlier stage R&D activities to offset anticipated increases in development expenses. Year to date, R&D expenses are higher versus the same period last year, primarily due to therapeutic programs acquired with Axys Pharmaceuticals. This acquisition closed in November 2001, so its impact on R&D expenses began half way through the second fiscal quarter last year. The full year R&D expense outlook includes approximately $10 million for Celera's share of expenses associated with the Applera Genomics Initiative, most of which have already been booked in the first half of fiscal 2003.

These comments reflect management's current outlook. The Company does not have any current intention to update this outlook and plans to revisit the outlook for its businesses only once each quarter when financial results are announced.

We will now take your questions regarding Celera Genomics.

Peter Dworkin

Thank you for participating in this call today. Management's remarks should now be posted on our websites. The audio replay will be available later today using the phone numbers listed in today's press release.

Certain statements made during management's prepared remarks for this conference call are forward-looking. These may be identified by the use of forward-looking words or phrases such as "believe," "expect," "intend," "anticipate," "should," "planned," and "potential," among others. These forward-looking statements are based on Applera Corporation's current expectations. The Private Securities Litigation Reform Act of 1995 provides a "safe harbor" for such forward-looking statements. In order to comply with the terms of the safe harbor, Applera Corporation notes that a variety of factors could cause actual results and experience to differ materially from the anticipated results or other expectations expressed in such forward-looking statements.

The risks and uncertainties that may affect the operations, performance, development, and results of Applied Biosystems include but are not limited to: (1) rapidly changing technology could adversely affect demand for Applied Biosystems' products, and its business is dependent on development of new products; (2) uncertainty of successful integration of the Celera Discovery System into the Applied Biosystems Knowledge Business and market acceptance and adoption of Knowledge Business product offerings; (3) Applied Biosystems' sales are dependent on customers capital spending policies and government-sponsored research; (4) Applied Biosystems' significant overseas operations, with attendant exposure to fluctuations in the value of foreign currencies; (5) risks associated with Applied Biosystems' growth strategy, including difficulties in integrating acquired operations or technologies; (6) the risk of electricity shortages and earthquakes, which could interrupt Applied Biosystems' or Celera Diagnostics' operations; (7) uncertainty of the availability to Applied Biosystems or Celera Diagnostics of intellectual property protection, limitations on the ability of Celera Diagnostics to protect trade secrets, and the risk to Applied Biosystems and Celera Diagnostics of infringement claims; (8) the Applied Biosystems Knowledge Business' dependence on the operation of computer hardware, software, and Internet applications and related technology; (9) Celera Diagnostics' reliance on existing and future collaborations, including its strategic alliance with Abbott Laboratories, which may not be successful; (10) Celera Diagnostics' unproven ability to discover, develop, or commercialize proprietary diagnostic products; (11) the risk that clinical trials of products that Celera Diagnostics does discover and develop will not proceed as anticipated or may not be successful, or that such products will not receive required regulatory clearances or approvals; (12) the uncertainty that Celera Diagnostics' products will b e accepted and adopted by the market, including the risks that these products will not be competitive with products offered by other companies, or that users will not be entitled to receive adequate reimbursement for these products from third party payors such as private insurance companies and government insurance plans; (13) Celera Diagnostics' reliance on access to biological materials and related clinical and other information, which may be in limited supply or access to which may be limited; (14) legal, ethical, and social issues which could affect demand for Celera Diagnostics' products; (15) Celera Diagnostics' limited commercial manufacturing experience and capabilities and its reliance on a single manufacturing facility; (16) Celera Diagnostics' reliance on a single supplier or a limited number of suppliers for key components of certain of its products; (17) potential product liability or other claims against Celera Diagnostics as a result of the testing or use of its products; (18) inten se competition in the industry in which Celera Diagnostics operates; and (19) other factors that might be described from time to time in Applera Corporation's filings with the Securities and Exchange Commission. All information in this conference call is as of the date of the call, and Applera does not undertake any duty to update this information, including any forward-looking statements, unless required by law.

The risks and uncertainties that may affect the operations, performance, development, and results of Celera Genomics' businesses include but are not limited to: (1) Celera Genomics expects operating losses for the foreseeable future; (2) Celera Genomics' reliance on Applied Biosystems' emerging Knowledge Business for incremental revenues to Celera Genomics from the Celera Discovery System and Celera Genomics' related information assets; (3) Celera Genomics' and Celera Diagnostics' unproven ability to discover, develop, or commercialize proprietary therapeutic or diagnostic products; (4) the risk that clinical trials of products that Celera Genomics or Celera Diagnostics do discover and develop will not proceed as anticipated or may not be successful, or that such products will not receive required regulatory clearances or approvals; (5) the uncertainty that Celera Genomics' or Celera Diagnostics' products will be accepted and adopted by the market, including the risk that that these produ cts w ill not be competitive with products offered by other companies, or that users will not be entitled to receive adequate reimbursement for these products from third party payors such as private insurance companies and government insurance plans; (6) reliance on existing and future collaborations, including, in the case of Celera Diagnostics, its strategic alliance with Abbott Laboratories, which may not be successful; (7) Celera Genomics' and Celera Diagnostics' reliance on access to biological materials and related clinical and other information, which may be in limited supply or access to which may be limited; (8) intense competition in the industries in which Celera Genomics and Celera Diagnostics operate; (9) potential product liability or other claims against Celera Genomics or Celera Diagnostics as a result of the testing or use of their products; (10) Celera Genomics' reliance on scientific and management personnel having the training and technical backgrounds necessary for Celera Genomics' business; (11) potential liabilities of Celera Genomics related to use of hazardous materials; (12) uncertainty of the availability to Celera Genomics and Celera Diagnostics of intellectual property protection, limitations on their ability to protect trade secrets, and the risk to them of infringement claims; (13) Celera Genomics' dependence on the operation of computer hardware, software, and Internet applications and related technology; (14) legal, ethical, and social issues which could affect demand for Celera Genomics' or Celera Diagnostics' products; (15) risks associated with future acquisitions by Celera Genomics, including that they may be unsuccessful; (16) uncertainty of the outcome of existing stockholder litigation; (17) Celera Diagnostics' limited commercial manufacturing experience and capabilities and its reliance on a single manufacturing facility; (18) Celera Diagnostics' reliance on a single supplier or a limited number of suppliers for key components of certain of its products; (19) the risk of electricity shortages and earthquakes, which could interrupt Celera Diagnostics' and/or Celera Genomics' operations; and (20) other factors that might be described from time to time in Applera Corporation's filings with the Securities and Exchange Commission. All information in this conference call is as of the date of the call, and Applera does not undertake any duty to update this information, including any forward-looking statements, unless required by law.


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