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Applera Corporation Teleconference July 23, 2003 Management Remarks for Fourth Quarter Fiscal 2003 Earnings Call

Rockville, MD - July 23, 2003

Applera Corporation Teleconference July 23, 2003 Management Remarks for Fourth Quarter Fiscal 2003 Earnings Call

Peter Dworkin
Good morning everyone. Thanks for joining Applera management to discuss the fourth quarter and year-end fiscal 2003 financial results that we issued early 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.

As in previous earnings calls, 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 11:45 am Eastern Time and the Celera Genomics portion at approximately 12:00 pm Eastern Time. But, we will move from one business to the next without interruption. Present today are Tony White, Chief Executive Officer 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 SEC.

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
Thank you, Peter. Good morning, everyone.
Fiscal 2003 was a challenging year, given the state of the global economy and the war in the Middle East. Our businesses performed well under trying circumstances. We advanced our research and product development programs and introduced many new products. Our commitment to R&D remains high, with total spending in fiscal 2003 of more than $400 million across our three businesses.

During the fourth quarter, Applied Biosystems generated solid earnings growth, as well as strong cash flow from operations, on modest revenue growth. The fourth quarter results for Applied Biosystems reflect benefits from the cost reduction program we announced last December and implemented during the last two quarters. We are committed to managing this business to achieve revenue growth and healthy levels of profitability while continuing to invest in innovative technology.

Celera Genomics became a more focused and disciplined organization in fiscal 2003. Executing the business and scientific plan communicated in December 2002, Celera is advancing drug candidates through pre-clinical development while using cash at a reduced rate. Celera is using its expertise in proteomics, bioinformatics and genomics as well as a close collaboration with Celera Diagnostics to identify novel drug targets and to develop targeted therapeutics. We are building out our internal development capabilities and strategically managing our capital to ensure the resources needed to support clinical testing in the future. One use of that capital has been to fund Celera Diagnostics, and we remain optimistic that this strategic investment in the young field of molecular diagnostics will become a source of cash and strategic value for Celera Genomics.

Celera Diagnostics met or exceeded its fiscal 2003 financial goals and its objectives for new product introductions and discovery. In addition, Celera Diagnostics is making significant discoveries in its disease association studies that have the promise of driving both new diagnostic products as well as influencing target discovery and future clinical trials. In the coming months, we will begin to release findings from these studies.

The Applera businesses are engaged in a vital enterprise. We have a strong balance sheet, outstanding technology, a high-caliber work force, and a clear mission. We are confident that our strategy of disciplined risk-taking will enable us to seize opportunities where we see them and to realize significant benefits from biological advances - for patients, physicians, stockholders, and customers alike.

Now Mike Hunkapiller will review the quarter at Applied Biosystems.

Mike Hunkapiller
Thank you, Tony.
During the fourth quarter, revenues of $433 million were 4 percent above the prior year quarter. The effect of foreign currency increased net revenues during the quarter by approximately $12 million, or 3 percent, compared to the prior year quarter. Fourth quarter instrument revenues increased 8 percent, consumables sales declined 2 percent, and revenues from 'Other Sources' increased 6 percent compared to the prior year quarter. This 'Other Sources' category includes service contracts, royalties, licenses, and contract research.

As discussed in this morning's press release, the funding environment for life science research improved modestly during the fourth quarter. Our customers who receive grants from the National Institutes of Health have begun to receive funds from the fiscal 2003 budget. However, both government funding for life science research in Europe and Japan and pharmaceutical investments in life science R&D remain constrained. Similarly, we have not experienced a rebound in orders from our biotechnology customers.

While the business environment remains challenging, each of our three main product categories generated revenue growth during the fourth quarter.

DNA sequencing instrument revenue growth was strong. Significant sales of the Applied Biosystems 3730 DNA Analyzer product line led to an 11 percent year-over-year increase in DNA sequencing sales despite a decline in sequencing consumable revenues. While we are pleased with these results, they do emphasize the significant effect that the timing of large genome center orders can have on any one-quarter's financial results. During fiscal 2004, we anticipate continued demand for our genetic analyzers by all customer types. However, because we anticipate more modest demand from the large genome centers, our expectation is that DNA sequencing revenues will decline modestly in fiscal 2004 compared to fiscal 2003.

Within our SDS and Other Applied Genomics product category, revenue from our TaqManŪ chemistry-based consumable products, which are used for both gene expression analysis and genotyping, was again strong. This strength was partially offset by the absence of revenue from the distribution of Celera Diagnostics products.

During the past three months, we launched three new gene expression analysis products: the Applied Biosystems 7900HT Micro Fluidic Card and the Mouse Assays-on-Demand? and Rat Assays-on-Demand products. Within the next month, we plan to launch the new Applied Biosystems Portal, which includes the myScienceK virtual research community. This free online resource will offer access to search tools and graphical viewers to help scientists plan their experiments, including selection of genomic reagents such as our Assays-on-Demand products. The myScience site will also offer fee-based access to the entire Celera Discovery SystemSM (CDS) online platform for an in-depth interpretatio n and analysis of experimental results.

In addition, we expect to launch commercially our new resequencing primers, the SNPlex? system assay kits for ultra, high-throughput genotyping, and the Applied Biosystems Expression Array System, which I will discuss in greater detail in a moment, before calendar year-end. We expect the introduction of these and other new technologies to expand the end-user markets in gene expression analysis and genotyping and related functional biology applications. As a result, we anticipate revenue growth for the SDS and Other Applied Genomics product category in fiscal 2004.

During the fourth quarter, year-over-year revenue growth for Mass Spectrometry moderated to 5 percent as customers delayed orders in advance of the Annual American Society of Mass Spectrometry conference in early June. At the conference, Applied Biosystems introduced both the 4000 Q TRAPŪ LC/MS/MS System and the 4700 Proteomics Discovery System, which directly links experimentally identified proteins to relevant biological information and annotative tools of the CDS online platform. For fiscal 2004, we expect this product category to generate revenue growth as a result of both our new product offerings and market growth.

From a geographic perspective, revenues in the United States, which accounted for approximately 51 percent of total fourth quarter revenues, increased 8 percent from the prior year quarter. Revenues in Europe, which accounted for approximately 28 percent of total revenues, increased 5 percent over the prior year quarter. And finally, revenues in Asia Pacific, which accounted for 18 percent of total revenues, declined 7 percent from the prior year quarter, as weakness in Japan offset revenue growth in the rest of Asia. The effects of foreign currency increased revenues by approximately 9 percent in Europe and approximately 2 percent in Asia Pacific during the fourth quarter of fiscal 2003 compared to the prior year quarter.

Yesterday we announced the first system for whole human genome analysis available on a single microarray: the Applied Biosystems Expression Array System. The Applied Biosystems Expression Array System will be integrated with SDS-based products for gene expression analysis and the CDS online platform. Together, these products are expected to provide an integrated solution for researchers interested in studying changes in human gene expression levels.

The Applied Biosystems Expression Array System is based on highly sensitive, chemiluminescent technology for gene expression detection and incorporates DNA probes that are each approximately 60 base pairs long. The combination of chemiluminescence and long oligonucleotides is expected to provide higher sensitivity compared with other commercially available microarray products that incorporate shorter oligonucleotide lengths or use fluorescence detection methods. The long oligonucleotides enable tighter binding to the target, which leads to the detecti on of more genes with greater selectivity and specificity. As a result, customers should be able to detect more genes using less biological sample, which should be a significant advantage for researchers working with small, difficult-to-obtain or expensive samples, such as samples often required for cancer research. The array system is expected to ship to customer test sites this fall and be available for commercial release before the end of calendar year 2003. Next, Dennis Winger will cover the financial performance and financial outlook for Applied Biosystems.

Dennis Winger
Thank you, Mike. Financial results for Applied Biosystems are detailed in the press release, so I am going to focus on providing some additional color on a few aspects of the fourth quarter and fiscal 2003 results and the financial outlook.

Earnings per diluted share in the fourth quarter of fiscal 2003 were $0.46. Included in this amount were the following per share items: a benefit of $0.13 primarily for the reduction of valuation allowances on deferred tax assets resulting from the expected utilization of foreign tax credits and a reduction of the income tax liability due to the settlement of overseas tax audits; a gain of $0.08 from the successful completion of a previously disclosed patent infringement lawsuit; and a benefit of $0.02 for a reduction in expected severance costs that were recorded during the second quarter of fiscal 2003. Earnings per diluted share in the fourth quarter of fiscal 2002 were $0.18. Included in this amount was a charge of $0.02 per share for the write-down of investments.

Despite the ongoing challenges of the current business environment, we are very pleased with our strong cash flow performance. During the fourth quarter of fiscal 2003, cash flow from operations, which included $ approximately $26 million from a damage award received following successful litigation, was $106.0 million, and capital expenditures were $32.6 million.

For the full fiscal year, cash flow from operations, which included the damage award received following successful litigation, was $279.4 million, and capital expenditures were $131.9 million. Capital spending was unusually high in fiscal 2003 primarily due to construction at our new expansion campus in Pleasanton, California, as well as facilities expansion in Bedford, Massachusetts. During fiscal 2003, strong cash flow generation allowed us to use $19.8 million to repurchase approximately 1.1 million shares of Applied Biosystems stock and still increase our cash and cash equivalents by $160.3 million to $601.7 million at the end of the June fiscal year.

As of the end of the fourth quarter, accounts receivable was $404.9 million, representing 75 days sales outstanding, versus $365.1 million, or 73 days, as of the end of the third quarter of fiscal 2003. Inventory was $140.8 million, representing 3.3 months of inventory on hand, versus $144.8 million, or 3.4 months, as of the end of the third quarter.

Tony and Mike have discussed our views on the near-term commercial and government life science funding outlook, and Mike has outlined some of the factors that we expect to influence the fiscal 2004 revenue growth rates for Applied Biosystems' individual product categories.

Reflecting these factors, the Group forecasts single digit annual revenue growth for fiscal 2004, weighted toward the second half of the fiscal year due, in part, to the timing of new product introductions, the timing of 3730xl instrument sales to the large genome centers in fiscal 2003 and anticipated 3730xl instrument sales in fiscal 2004, and the timing of the release of U.S. and Japanese life science budgets.

Because fiscal 2003 included higher than normal technology license fees that positively impacted gross margins, the Group estimates that the fiscal 2004 gross margin will be slightly below that of fiscal 2003. The Group expects selling, general and administrative expense to rise somewhat more slowly than revenue during fiscal 2004. The Group expects the total dollars spent on R&D to increase slightly in fiscal 2004, with spending weighted toward the first half of the year primarily due to new product introductions and costs associated with the development of and enhancements to the new Applied Biosystems Portal. These Portal-related costs are expected to impact SG&A spending during the first half of fiscal 2004 as well.

The Group expects the effective tax rate for fiscal 2004 to be approximately 28 percent. Future tax legislation 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.

While the Group anticipates that the fiscal 2004 earnings per diluted share growth rate, before unusual items in fiscal 2003, will slightly exceed the estimated revenue growth rate, the Group anticipates that first and second quarter earnings per share will be at, or slightly above or below, prior year quarter results. This anticipated earnings pattern is primarily due to a number of factors including: higher than normal technology license fees during the first and second quarters of fiscal 2003; R&D expenses that are forecast to be weighted toward the first half of fiscal 2004; and the timing of new product introductions in fiscal 2004.

Capital spending in fiscal 2004 is anticipated to be approximately $90 million. 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.
I am very pleased with the progress we made last year at Celera Diagnostics. During fiscal 2003, we achieved our key financial and discovery goals, and introduced several important new products. Our disease association studies are yielding promising results that could give rise to new diagnostic and therapeutic products and other future value.

Our diagnostics alliance partner, Abbott Laboratories, recently introduced new analyte specific reagents for measuring viral load and for genotyping the hepatitis C virus, which are manufactured by Celera Diagnostics. The opportunity for these products is significant; Abbott estimates annual demand for these products is over $300 million globally. This is an established and competitive market, and while our competitors won't give up market share easily, we believe our new HCV products are competitive and should contribute to our future sales growth. During the recent quarter, we also received our third FDA clearance for the ViroSeqTM HIV-1 Genotyping System, this time on the ABI PRISMŪ 3700 DNA Analyzer platform, which is currently in use at the largest clinical reference laboratories in the U.S. The ViroSeq system is now cleared for three different analytical platforms with various throughputs, which facilitates the ViroSeq system's use in clinical testing in laboratories with a variety of testing volume requirements.

End-user sales of products manufactured by Celera Diagnostics more than doubled for fiscal 2003, exceeding our primary financial goal for last year. We finished fiscal 2003 with $23.4 million in end-user sales of our products, compared to $11.6 million during fiscal 2002, exceeding our original outlook for fiscal 2003 of between $18 and $22 million. End-user sales for the fiscal fourth quarter were $8.7 million, a 50 percent increase compared to the third quarter and 140 percent over the prior year. This increase was primarily the result of continued growth in demand for cystic fibrosis ASRs, and to a lesser extent, a pick-up in sales of the ViroSeqTM HIV-1 Genotyping System.

Our pre-tax loss for the recent quarter was $15.4 million, compared to $14.5 million in the same period last year. Pre-tax losses for fiscal 2003 increased to $51.2 million from $44.7 million in the year-ago period. For the year, higher R&D expenses associated with our discovery programs and product development were partially offset by increases in revenue and gross margin. Net cash use for Celera Diagnostics was $16.1 million in the fourth quarter of fiscal 2003 compared to $15.2 million in the prior year period. Net cash use for the fiscal 2003 was $59.4 million, compared to $45.9 million in fiscal 2002. We expect losses and cash use to decrease going forward, as revenue increases should exceed growth in expenses.

Just over a year ago, we announced that we had started our first disease association study. Today, our genotyping and gene expression platforms are operating at high capacity and we have nine studies in various disease areas and phases. In support of these studies, we have gained access to over 30,000 patient samples, and we have completed over 40 million genotypes. Most importantly, we are beginning to make and replicate discoveries. In four of the studies currently underway, we have discovered new associations between disease and single nucleotide polymorphisms, or SNPs, in multiple genes. Celera Diagnostics and Celera Genomics are aggressively evaluating the diagnostic and therapeutic value of the novel markers and potential targets we have found, and we are discussing the findings with our collaborators and preparing patent submissions and product plans. We are looking forward to sharing more details about our discoveries and our product plans in the coming mon ths.

We believe our approach to conducting these studies is more rigorous than other groups working in this area in terms of both their scale and scope. We typically power our studies with over 1000 well-characterized case and control samples. We can economically complete whole genome scans, interrogating for functional SNPs in most known genes. Depending on how the study is designed, our capacity for analysis can exceed one million genotypes per day. We also believe our focus on functional SNPs - including more than 40,000 novel SNPs identified through the Applera Genomics Initiative - is likely to identify associations that impact the amount, stability and/or function of proteins - and thus have the greatest biological and medical value. Once we identify potential markers, we continue to perform studies with additional sample sets from other sources, with the goal of replicating our findings. We believe that by using a large number of samples from different sources for b oth discovery and replication, focusing on functional SNPs and interrogating wide sections of the genome, our studies should be robust enough to provide new and valuable insight into the genetic component of many diseases.

In closing, I will comment briefly on Celera Diagnostics' goals for fiscal 2004. We intend to maintain our focus on the same strategic issues that drove us during 2003: we would like to see end-user sales of products manufactured by Celera Diagnostics double again in fiscal 2004, while advancing our disease association studies to gain both diagnostic and therapeutic value from their findings. Achievement of our sales objective depends in part on growth in sales of new products introduced during fiscal 2003, such as hepatitis C ASRs and the IVD version of the ViroSeq system, as well as preparation for the implementation of the IVD Directive in Europe in December of 2003. The anticipated increase in revenues should begin to reduce both our net losses and our use of cash. We expect to reduce our fiscal 2004 net losses by approximately 20 percent compared to fiscal 2003, and to reduce our net cash use to a range of $46 to $52 million, compared to $59.4 million for fiscal 2003. We are assessing options for expanding manufacturing capacity, which may impact total cash requirements for fiscal 2004.

We are optimistic that the strong momentum we have established at Celera Diagnostics can be maintained during 2004. 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 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.
Celera Genomics is beginning fiscal 2004 with a clear set of priorities that are consistent with the business and scientific plan we established seven months ago. Our primary goals include meaningful progress in our therapeutic target identification and small molecule programs, the appropriately timed expansion of our development organization, and the creation of new partnerships that both create value and support our efforts to build a portfolio of clinical compounds. We intend to accomplish these goals while maintaining the positive combination of financial and scientific discipline we have established over the last year.

To prepare for the coming year, we have better aligned our organization behind our target identification, proteomics and small molecule programs, and built out our development organization from 12 to 24 professionals. These new hires are already making important contributions. We have initiated pharmacokinetic (PK) studies for two of our leading programs, including the Factor VIIa anticoagulant small molecule program, and the histone deacetylase program for cancer and other indications. In addition, Celera Genomics has recently solved the crystal structure of both Factor VIIa and tryptase in the presence of small molecule inhibitors. These structures are aiding our efforts to design potent and selective inhibitors against these therapeutic targets.

Our target finding efforts are also moving ahead. Celera Genomics is looking at findings from the Celera Diagnostics disease association studies in real time as our scientists in both businesses evaluate the therapeutic utility of markers discovered at Celera Diagnostics. We are optimistic that the initial discoveries from these studies will provide real value to our therapeutic programs, initially in target identification, and then later in clinical trial design, where these findings may be used to stratify patient populations with the goal of increasing efficacy and minimizing adverse reactions.

Proteomics is continuing to process both lung and colon cancer samples. Over 40 lung cancer tumors and matched normal lung samples have been processed, and we are beginning to identify and quantify cell surface proteins. The colon cancer program is moving ahead in parallel. We have also undertaken expression and functional validation studies of cell surface proteins identified in our earlier pancreatic cancer study. We believe all three programs will make significant progress in the coming year.

Our highest priority going forward is to create shareholder value based on a growing clinical portfolio. Celera Genomics believes that at least one of its compounds, most likely one of its partnered compounds, could enter clinical trials during fiscal 2004. Celera's partners will make clinical development decisions with respect to partnered compounds. To sustain our longer-term prospects, Celera Genomics plans to complete the target identification and validation phases of its three ongoing proteomic oncology programs, to initiate at least one new proteomic discovery program, and to potentially establish a collaboration to create value from our proteomics program.

We are also focused on identifying other opportunities to develop new strategic relationships that take advantage of our strengths in genomics, proteomics and bioinformatics. Other possible relationships may include partnering of other therapeutic discovery efforts that we elect not to pursue independently or in collaboration with Celera Diagnostics.

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

Dennis Winger
Thank you, Kathy.

I will briefly discuss some of the background behind the results for the recently completed quarter and fiscal year, and comment on our fiscal 2004 outlook.

Celera Genomics ended fiscal 2003 with $802.4 million in cash and short-term investments, a decrease of $87 million compared to the end of fiscal 2002. Funding for Celera Diagnostics accounted for approximately 40 percent of Celera Genomics' fiscal 2003 cash use. The fiscal 2003 result was a significant improvement compared to fiscal 2002, when Celera Genomics' balance of cash and short-term investments decreased by approximately $107 million. The improvement was primarily due to higher operating profit from the Online/Information Business, as well as reduced spending on the Applera Genomics Initiative and discontinued programs during fiscal 2003 compared to fiscal 2002. The result for fiscal 2003 also included the conversion of approximately $17 million of short-term investments to long-term investments.

For the fourth quarter of fiscal 2003, Celera Genomics reported a net loss of $19.4 million, or 27 cents per share, compared to $28.8 million, or 42 cents per share, in the same period last year. Last year's result included $8.8 million in charges related to restructuring and a write-down of investments. Revenues decreased to $21.5 million compared to $28.1 million in the prior year. This decrease was primarily the result of our decision last year not to pursue additional sequencing service business.

For fiscal 2003, Celera Genomics reported a loss of $81.9 million, or $1.15 per share, compared to $211.8 million, or $3.21 per share in the previous year. These results included charges as described in the press release, including a fiscal 2002 charge of $99.0 million for in-process R&D related to the Axys Pharmaceuticals acquisition and $25.9 million of charges related to the Paracel business.

The Online/Information Business contributed favorably to Celera Genomics' financial performance for the year. Fiscal 2003 operating income for the business increased to $29.7 million, compared to $15.0 million in the prior year. This was primarily the result of lower operating expenses within the business.

In fiscal 2004, we expect Celera Genomics' revenue to decrease to a range of $55 to $60 million, compared to $88.3 million in fiscal 2003. The primary driver behind this decrease is the anticipated expiration of customer agreements within the Online/Information Business that will occur throughout the year. Existing agreements are generally expected to expire between now and fiscal 2006. Thereafter, that business is expected to evolve into Applied Biosystems' Knowledge Business. We also do not anticipate any significant service revenues at Celera. Fiscal 2003 results included over $5 million in revenue associated with the wind-down of service agreements.

We believe R&D expenses will be comparable to fiscal 2003 expenses of $121 million. Increases in therapeutic discovery and development programs should be offset by decreased R&D spending in support of the Online/Information business. Pre-tax losses related to the Celera Diagnostics joint venture are expected to be in the range of $38 to $44 million range.

During fiscal 2004, we anticipate that Celera Genomics' cash and short-term investments will decrease by a range of $90 to $100 million, as its cash burn increases modestly compared to $87 million for fiscal 2003. This expectation includes Celera Genomics' portion of the funding for the Celera Diagnostics joint venture which is expected to be in the range of $25 to $30 million. The impact of higher therapeutic spending and lower Online/Information Business revenues and operating profit should be partially offset by lower losses and cash demands related to the Celera Diagnostics joint venture and the reclassification of approximately $16 million of long-term treasury securities to short-term investments.

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 releases.

Certain statements in these management remarks, including the Outlook sections, are forward-looking. These may be identified by the use of forward-looking words or phrases such as "believe," "expect," "should," and "planned," 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 earthquakes, which could interrupt Applied Biosystems' or Celera Diagnostics' operations; (7) potent ial disruptions to Applied Biosystems' business due to the outbreak of severe acute respiratory syndrome (SARS); (8) 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; (9) the Applied Biosystems Knowledge Business' dependence on the operation of computer hardware, software, and Internet applications and related technology; (10) Celera Diagnostics' reliance on existing and future collaborations, including its strategic alliance with Abbott Laboratories, which may not be successful; (11) Celera Diagnostics' unproven ability to discover, develop, or commercialize proprietary diagnostic products; (12) 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 require d regulatory clearances or approvals; (13) the uncertainty that Celera Diagnostics' products will be 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; (14) 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; (15) legal, ethical, and social issues which could affect demand for Celera Diagnostics' products; (16) Celera Diagnostics' limited commercial manufacturing experience and capabilities and its reliance on a single principal manufacturing facility; (17) Celera Diagnostics' reliance on a single supplier or a limited number of suppliers for key components of certain of its products; (18) potential product liability or other claims against Celera Diagnostics as a result of the testing or use of its products; (19) intense competition in the industry in which Celera Diagnostics operates; 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 press release is as of the date of the release, and Applera does not undertake any duty to update this information, including any forward-looking state ments, un less 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 products will n ot 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 orother 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 CeleraGenomics 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 principal 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 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 press release is as of the date of the release, and Applera does not undertake any duty to update this information, including any forward-looking statements, unless required by law.

Copyright 2003. Applera Corporation. All Rights Reserved. Applera, AB (DesignCelera, Celera Diagnostics, Celera Discovery System, Celera Genomics, and SNPlex are trademarks and Applied Biosystems, API PRISM and ViroSeq are registered trademarks of Applera Corporation or its subsidiaries in the United States and/or certain other countries. Q TRAP is a registered trademark of Applied Biosystems/MDS SCIEX, which is a joint venture between Applera Corporation and MDS Inc. TaqMan is a registered trademark of Roche Molecular Systems, Inc.


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