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Applera Corporation Teleconference October 22, 2003 Management Remarks for First Quarter Fiscal 2004 Earnings Call

ROCKVILLE, MD - October 22, 2003

Peter Dworkin
Good morning. Thanks for joining Applera management to discuss the first quarter fiscal 2004 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 Ordoñez, 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 and Media section of the Applera web site and on the separate Investor sites within the Applied Biosystems and Celera Genomics web sites.

Our first speaker will be Tony White.

Tony White
Thank you, Peter.

Good morning everyone. Thanks for your interest in the Applera businesses.

I will make a few comments about Applied Biosystems and later in this call I'll say a few words about Celera Diagnostics and Celera Genomics before we review those businesses.

Revenues at Applied Biosystems in the first fiscal quarter were disappointing. Mike will speak to the factors affecting first quarter performance in a few minutes. Now I'd like to give you a somewhat broader perspective on the AB business.

I'd like to make just two points. First, while business conditions remain challenging, we see modest improvements in the research funding situation with our U.S. government-funded customers and in the pharmaceutical sector. Second, we believe the aggressive investments Applied Biosystems has made in new product development position us favorably as the situation with these customer segments seems to be getting better.

Let me take just a few minutes to give you a sense of the breadth of new products that will be released later this fiscal year:

  • For DNA sequencing, we have resequencing assays that should make it easier and cheaper for customers to find rare mutations in genes that may affect protein expression and biological function.
  • Our new SNPlex™ assay should dramatically reduce the cost of running ultra-high-throughput disease gene association studies. And because SNPlex runs on our DNA sequencing platform, we anticipate the assay will be one of the factors creating demand for the 3730 product line and, later, other AB DNA sequencing instruments.
  • AB's new Expression Array System, like the other products I've mentioned, addresses unmet research needs with both our academic and pharma customers. This system for whole genome gene expression should complement very nicely AB's market-leading position with its Sequence Detection Systems for real-time PCR.

Beyond these upcoming new products, several products that we have recently launched should gain momentum over the next few quarters. These include:

  • The 8500 Affinity Chip Analyzer, which Mike will be describing in a minute, for the affinity screening market, which is primarily a pharma market.
  • The 4000 Q TRAP™ mass spectrometer, for proteomics and small molecule discovery and development.
  • Validated assays to study gene expression in the mouse and rat -- assays which complement our human Assays-on-Demand™ product offering based on TaqMan® chemistry.
  • Speaking of human Assays-on-Demand, AB has been building out this product offering and now offers more than 20,000 gene human gene expression assays and approximately 150,000 SNP assays.

From a longer-term perspective, one of the most noteworthy developments is how AB is beginning to redefine the concept of a whole-product solution to enable customers to practice more of what we call integrated science. Examples include software in the Expression Array System and in the 4700 Proteomics Discovery System that integrate with the Celera Discovery System, permitting customers to link, in real-time, experimental results with enormous amounts of biological information.

So we believe Applied Biosystems is, as I said, well positioned as our management team senses that market conditions in at least the U.S. seem to be improving somewhat.

Now Mike will discuss first quarter results and make a few remarks.

Mike Hunkapiller
Thank you, Tony.

I would like to start today by welcoming Cathy Burzik to our executive management team. Cathy joined us in September from Ortho-Clinical Diagnostics, a Johnson & Johnson company. In her new position as Executive Vice President, Cathy is responsible for global commercial activities, including the product management organizations, sales and service, marketing, business development and strategic planning. Cathy has an outstanding record in growing complex, technology-intensive businesses and brings first-rate leadership and communication skills to my team. She has already begun to have a positive impact on the organization.

Turning to first quarter results, net revenues declined 3 percent compared to the prior year quarter. The effect of foreign currency increased net revenues during the quarter by approximately 2 percent compared to the prior year quarter. Fiscal 2003 first quarter revenue included $5.4 million for a license relating to certain mass spectrometry technology and $3.9 million of sales of Celera Diagnostics products that are now distributed by Abbott Laboratories rather than Applied Biosystems.

The fastest growing product category in the first quarter was SDS and Other Applied Genomics, which increased approximately 13 percent over the prior year quarter despite the absence of the $3.9 million of sales of Celera Diagnostics products I just mentioned. The Applied Biosystems Assays-on-Demand™ and Assays-by-Design™ products led the revenue growth in this category. During the upcoming months, we plan to preview and launch three new products within this product category: our new resequencing primers, the SNPlex™ Genotyping System assay kits for ultra high-throughput genotyping, and the Applied Biosystems Expression Array System.

As discussed in this morning's press release, we believe revenue growth for DNA Sequencing, our highest revenue product category, was negatively impacted in the first quarter by a delay in funding to the large genome centers. However, we expect the new funding cycle to begin on November 1st, our orders from the large genome centers are strong, and our understanding is that the funding allocated by the NHGRI to large scale sequencing research for fiscal 2004 will be modestly higher than in the prior year.

Within Mass Spectrometry, our manufacturing capabilities could not fulfill stronger than expected demand for our recently introduced 4000 Q TRAP® LC/MS/MS System. At this point, we do not believe we can fully resolve the 4000 Q TRAP manufacturing issues before the third quarter.

We recently launched the Applied Biosystems 8500 Affinity Chip Analyzer that we developed in collaboration with HTS Biosystems. The 8500 system, falling within our "Other Product Lines" revenue category, marks our second product entry into the $1 billion-plus affinity screening market, which is growing at approximately 20 percent per annum. This system highlights our commitment to both having an increased presence in this market as well as delivering breakthrough technologies to advance drug discovery research. The system's initial applications are antibody affinity determination, matched antibody pair identification and peptide epitope mapping. The 8500 system complements the Applied Biosystems 8200 Cellular Detection System, which is used in primary antibody screening applications and other cell- and bead-based functional assays.

From a geographic perspective, revenues in the United States, which accounted for approximately 50 percent of total first quarter revenues, declined 11 percent from the prior year quarter, with the largest factor being a decrease in sales of the 3730xl instruments to large genome centers. Revenues in Europe, which accounted for approximately 27 percent of total revenues, increased 8 percent over the prior year quarter. And finally, revenues in Asia Pacific, which accounted for approximately 20 percent of total revenues, increased 4 percent from the prior year quarter. The effects of foreign currency increased revenues by approximately 5 percent in Europe and approximately 2 percent in Asia Pacific during the first quarter of fiscal 2004 compared to the prior year quarter.

Today, in order to better understand the complex interaction of biological systems, life scientists are developing revolutionary approaches to discovery that unite technology, informatics and traditional laboratory research. The recently released National Institutes of Health (NIH) Roadmap for where biomedical science may go led to the formation of an Interdisciplinary Research Implementation Group to promote this change. Within the life science enabling tools industry, we believe Applied Biosystems, in partnership with our customers, is uniquely positioned to provide the innovative products, services, and knowledge resources to make this new integrated science possible. While the first quarter was challenging, our pipeline of recently launched and upcoming product releases is one of the strongest in our recent history, and I am cautiously optimistic about the business outlook for Applied Biosystems.

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

Dennis Winger
Thank you, Mike.

First quarter fiscal 2004 financial results and the fiscal 2004 financial outlook for Applied Biosystems are detailed in the press release, so I am going to focus on providing additional color on a few of these details.

Earnings from continuing operations per diluted share were $0.16 for the first quarter of both fiscal 2004 and fiscal 2003.

During the first quarter of fiscal 2004, cash flow from operations was $47.6 million, and capital expenditures were $17.2 million. During the first quarter, strong cash flow generation allowed us to use $36.3 million to repurchase approximately 1.7 million shares of Applied Biosystems stock. At the end of the quarter, cash and cash equivalents were $590.8 million, and Applied Biosystems has no debt.

As of the end of the first quarter, accounts receivable was $345.7 million, representing 75 days sales outstanding, versus $404.9 million, or again, 75 days outstanding, as of the end of the fourth quarter of fiscal 2003. Inventory was $142.2 million, representing 3.9 months of inventory on hand, versus $140.8 million, or 3.3 months, as of the end of the fourth quarter.

Tony and Mike have discussed many of the factors expected to influence Applied Biosystems results over the remainder of fiscal 2004. As Tony mentioned, forecasting in this environment remains difficult, and while the government-funding situation in both the U.S. and Japan has not changed significantly since our fiscal 2003 year-end earnings conference call in July, we now are more cautious about the situation in Europe due to economic conditions in parts of that region.

At this time, the Group reiterates its previous forecast for single digit annual revenue growth in 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. Assuming that the previously discussed funding issues are resolved for the large genome centers, the Group expects fiscal 2004 first half revenues to approximately equal those of the prior year period.

While the Group anticipates that the fiscal 2004 earnings per share growth rate, before unusual items in fiscal 2003, will exceed the estimated revenue growth rate, the Group anticipates that second quarter earnings per share will be at, or slightly above or below, prior year quarter results. When compared to fiscal 2003, the weighting of earnings growth to the second half of fiscal 2004 is primarily due to a number of factors including higher than normal technology license fees during the first and second quarters of fiscal 2003 and the timing of new product introductions in fiscal 2004.

I would also like to point out that for reporting purposes, the December quarter will contain one additional week this year as a result of the timing of quarter-ends. Because many of our customers make capital equipment purchasing decisions on a quarterly basis as opposed to a weekly basis, we anticipate that the additional week will impact quarterly expenses without having a significant effect on revenues.

The comments in the Outlook sections of this press release, including the Celera Diagnostics Joint Venture Outlook below, 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. Tony White will make some introductory remarks about Celera Diagnostics and Celera Genomics. Kathy Ordoñez will then discuss Celera Diagnostics and, later, Celera Genomics.

Tony White
Thanks Peter.

Celera Genomics is continuing to execute the strategic plan that has transformed it into a biopharmaceutical business. Its scientists are applying their expertise in proteomics, bioinformatics and genomics and using the close collaboration with Celera Diagnostics to identify novel drug targets and to develop targeted therapeutics.

Our vision for Celera Diagnostics and Celera Genomics is to create truly differentiated businesses; to use our unique capabilities to change how new drugs are developed and used in practice, and to exploit the potential advantage created by Applera's complementary expertise in both diagnostics and therapeutics. Kathy will outline the progress in our discovery programs, but first I want to remind you that it is the promise of what we call "targeted medicine" which is driving both these businesses. This concept involves linking diagnostics to select and de-select target populations for therapy, and possibly using additional diagnostics to monitor patient response, efficacy and safety, while employing new genetic and proteomic technologies to identify and validate new drug targets and therapeutics.

We believe Celera Diagnostics' disease association studies should be the foundation for new diagnostics and targeted therapies. Just a few weeks ago, Celera Diagnostics announced the first findings from its disease association studies. We are confident in the validity of the novel markers we identify because we employ rigorous discovery and replication processes. Celera Diagnostics routinely performs association studies with thousands of case and control samples from multiple geographically diverse sample sets. This provides sufficient statistical power to gain new insights into how genetic differences among humans correlate with disease. It is our practice to replicate potential discoveries using at least one additional sample set before reporting a discovery.

Both businesses are benefiting from their close working relationship and the ongoing exchange between their scientific teams. Celera Genomics is now evaluating the therapeutic potential of markers from CDx, and Celera Diagnostics could develop protein diagnostics based on Celera Genomics' proteomic discoveries. We are looking forward to additional scientific breakthroughs and collaborations in this fiscal year. Now I will turn it over to Kathy.

Kathy Ordoñez (CDx)
Thank you, Tony, and good morning everyone.

Celera Diagnostics is off to a strong start in fiscal 2004. We have continued to grow end user sales for our existing products and we have reduced our quarterly net losses. In addition, we established a strategic collaboration with Merck, advanced our discovery programs and began to communicate findings from our disease association studies.

Earlier this week, we announced a collaboration with Merck that will focus initially on breast cancer. The collaboration provides Celera Diagnostics with access to certain gene expression data and Merck intellectual property that should accelerate our efforts to develop a prognostic test for metastasis in breast cancer. Merck's subsidiary, Rosetta Inpharmatics, along with its collaborators, has previously published a description of a gene expression signature strongly predictive of rapid development of distant metastases. Our goal is to combine our own study findings with Merck's data to identify a collection of gene expression markers that can be configured into a test for routine clinical practice. Such a test could improve a physician's ability to predict a breast cancer patient's risk of metastasis.

Several weeks ago, one of our collaborating researchers, Dr. John Kane from the University of California, San Francisco, presented a subset of the first discoveries to emerge from one of our disease association studies. We reported the identification of several novel markers associated with increased risk for myocardial infarction, or heart attack, and we confirmed other markers previously associated with coronary heart disease. These findings not only expand our understanding of factors contributing to heart attack risk, they demonstrate the power of our discovery platform and validate our scientific methods. We are confident in the validity of these results because we used thousands of samples in discovery and replication. We are following up with additional statistical analysis of this study data and other as yet unpublished data, while we are evaluating the diagnostic and therapeutic potential of our discoveries. In addition, we are conducting studies in three other forms of cardiovascular disease.

These cardiovascular results are just the beginning; we are very pleased with the progress in our other ongoing disease association studies. In five of our studies, including myocardial infarction, we have established associations between disease and either single nucleotide polymorphisms or gene expression patterns. As we indicated in the press release, we plan to present findings from our breast cancer and Alzheimer's disease studies in early November. At a minimum, our discoveries provide us with new understanding of disease, and some of the studies should lead to new diagnostic and therapeutic products and other future value.

While the discovery programs are the basis for our long-term success, our established business is also performing strongly. Celera Diagnostics' net loss decreased to $12.0 million in the first quarter of fiscal 2004, compared to $13.3 million in the prior year period, and net cash use decreased to $14.7 million compared to $16.0 million in the same quarter last year. We are on track to meet the financial goals for fiscal 2004 that are outlined in the press release. These goals are unchanged from our July announcement.

Now we will take your questions regarding Celera Diagnostics.

Peter Dworkin
In the third and final portion of our call today, Kathy Ordoñez 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 Ordoñez (CRA)
Thank you.

Our expertise in genomics, proteomics, and bioinfomatics, together with access to discoveries from Celera Diagnostics, represents a powerful combination and a source of competitive advantage for Celera Genomics. To build a clinical pipeline, we need to leverage these capabilities and demonstrate meaningful progress in four areas during fiscal 2004: therapeutic target identification, small molecule programs, appropriate expansion of our development organization, and the creation of new partnerships. Today I will update you on each of these areas.

Celera Genomics is seeking to identify new therapeutic targets for both small molecule compounds and therapeutic antibodies. We have several routes to the identification of new targets, including proteomics, genomic discoveries from the Celera Diagnostics' disease association studies and bioinformatic analysis, as well as traditional sources such as literature mining and in-licensing. Proteomics should be the primary source of targets for therapeutic antibodies. We previously announced that we had selected over 40 differentially expressed proteins in our pancreatic cancer program for validation as potential therapeutic targets. Recently, we have made progress in validating proteins within this program. Experiments involving some of these proteins have shown that several antibodies have inhibitory effects on tumor cell invasion, cell proliferation and apoptosis. Within the lung cancer program, over 60 tumors and matched normal tissue samples have been processed, and differentially expressed proteins are being identified. The program in colon cancer is moving ahead in parallel.

Celera Genomics has begun to evaluate the therapeutic utility of novel markers discovered in two of the disease association studies at Celera Diagnostics. We believe CDx's discoveries may enhance small molecule target identification efforts, and contribute to clinical trial design in the future. New insights into genetic factors in disease may be useful in stratification of patient populations with the goal of increasing efficacy and minimizing adverse reactions.

Most of our small molecule resources are focused on three proprietary programs--Factor VIIa inhibitors for anticoagulation, tryptase inhibitors for asthma and allergic rhinitis, and histone deacetylase inhibitors for cancer and other indications.

Last quarter we discussed pharmacokinetic studies for Factor VIIa and HDAC. Several Factor VIIa compounds have successfully cleared PK screening and are now progressing through preclinical evaluation. We are satisfied with the progress in all three programs, but will generally reserve updates for a time when we are nearing trials in humans.

Our development organization is now scaled to support the early phases of clinical trials, and it is actively participating in studies to aid our clinical decision making process. We have planned for additional expansion of our development organization, but we intend to time future hiring to advances in our small molecule programs.

Finally, I will recap our milestones for fiscal 2004 and discuss our partnering goals. 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. Within proteomics, we plan to complete the target identification and validation phases of our three ongoing oncology programs, to initiate at least one new discovery program, and to establish a strategic collaboration to advance validated antibody targets toward development. We are seeking 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 and novel approaches to the implementation of our "targeted medicine" strategy. We are confident in our ability to meet these goals.

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

Dennis Winger
Thank you, Kathy.

Celera Genomics ended the quarter with $790.3 million in cash and short-term investments, a decrease of approximately $12 million from the prior quarter. The small decrease in the recent quarter was due in part to the conversion of approximately $16 million of long-term investments to short-term investments.

For the first quarter of fiscal 2004, Celera Genomics reported a net loss of $16.3 million, or 23 cents per share, compared to $19.6 million, or 28 cents per share, in the same period last year. Lower R&D expenses and other factors, including the reduced loss from the Celera Diagnostics joint venture, more than offset the $6 million decrease in revenues from the prior year. Expiration of Online/Information Business customer agreements is the primary factor behind the revenue decrease. The R&D expense for the recent quarter was approximately a third lower than the first quarter of 2003, which included expenses related to the Applera Genomics Initiative and programs eliminated in Celera's June 2003 restructuring and higher Online/Information expenses.

We believe R&D expenses will be comparable to last year's level of $121 million. Therapeutic discovery spending should increase over the balance of the year. We anticipate that Celera Genomics' cash and short-term investments will decrease by approximately $90 to $100 million during fiscal 2004. 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. Higher therapeutic spending and lower Online/Information Business revenues and operating profit should be partially offset by reduced cash demands related to the Celera Diagnostics joint venture and the $16 million asset conversion I previously mentioned. Pre-tax losses reported by Celera Genomics and related to the Celera Diagnostics joint venture are expected to be in the range of $38 to $44 million.

For the fiscal year, we expect 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. Agreements are generally expected to expire between now and fiscal 2006. In conjunction with the transformation of Celera into a biopharmaceutical company, we decided not to purse additional service business, consequently we do not anticipate any significant service revenues at Celera during fiscal 2004. Last year's results included over $5 million in revenue associated with the wind-down of service agreements.

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 this press release, 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," "anticipate," 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) 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 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; (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 principal 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) intense 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 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.

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 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 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. AB (Design), API 4000, Applera, Assays-by-Design, Assays-on-Demand, Celera, Celera Diagnostics, Celera Discovery System, Celera Genomics, and SNPlex are trademarks and Applied Biosystems is a registered trademark of Applera Corporation or its subsidiaries in the U. S. 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.


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