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Applera Corporation Teleconference - January 28, 2004
Management Remarks for Second Quarter Fiscal 2004 Earnings Call

- January 28, 2004

Peter Dworkin
Good morning. Thanks for joining Applera management to discuss the second 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; Cathy Burzik, Executive Vice President, 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 Relations section of the Applera web site and on the separate Investor Relations sites within the Applied Biosystems and Celera Genomics web sites.

Tony White will make a few introductory remarks before we hear from Mike, Kathy, and Dennis.

Tony White
Good morning everyone.

I will make a few comments about Applied Biosystems before turning the call over to Mike Hunkapiller, and later I’ll say a few words about Celera Diagnostics and Celera Genomics before Kathy Ordoñez reviews those businesses.

Applied Biosystems' performance in our second fiscal quarter was on track with the outlook we shared with the financial community when we reported first quarter results in October, despite some deterioration during the quarter in the business environment. We are now broadly reiterating the outlook for the full fiscal year that we first gave at the beginning of the fiscal year in July. That is, we continue to expect improved performance in the second half of the fiscal year and particularly in the fourth fiscal quarter.

In the second quarter we experienced solid growth in our Sequence Detection Systems (SDS) and Mass Spectrometry businesses. We expect these product lines to continue to perform well given the growing markets they serve in basic research and pharmaceutical development. Growth in these product categories should also be aided by new products we have introduced recently and others that are slated for release during the third and fourth quarter.

We are pleased that the Congress has now passed, and the President has signed, 2004 spending bills for the National Institutes of Health and other U.S. government agencies like the National Science Foundation that fund life science research by our customers. Hopefully, the funds will be disbursed in a timely fashion in order not to negatively affect our third quarter performance. Pressures restraining government spending for life science research in other geographic areas important to Applied Biosystems – particularly in Japan and in some of the larger country markets in Europe -- continue to be a concern. Mike will elaborate on the public sector and commercial sector funding situation in a few minutes.

As I mentioned at the Applied Biosystems and Celera Diagnostics Investor Day last month, we are now conducting an in-depth review of the entire Applied Biosystems product portfolio to make sure we are maximizing opportunities for growth, profitability, and shareholder value creation. We have engaged a leading strategy consulting firm to work closely with the management team over the next several months. We expect to complete this project within the current fiscal year.

Now, Mike will recap Applied Biosystems’ performance during the second quarter.

Mike Hunkapiller
Thank you, Tony.

During the second quarter, net revenues increased 3 percent compared to the prior year quarter; however, excluding the net effect of foreign currency, revenues were only slightly above the prior year quarter.

Once again, the fastest growing product category in the quarter was SDS and Other Applied Genomics. During the second quarter, sales of these products increased approximately 22 percent over the prior year quarter, with sales of both instruments and consumables contributing to this growth. Revenue growth in this category was driven, in part, by the increasing adoption of the Applied Biosystems Assays-on-Demand™ and Assays-by-DesignSM products for gene expression and genotyping experiments in both basic research and drug discovery and development.

During the second quarter, we received positive feedback from customers testing the Applied Biosystems Expression Array System, the SNPlex™ Genotyping System assay kits for ultra high throughput genotyping, and the VariantSEQr™ Resequencing System. We expect to begin unrestricted sales of the Applied Biosystems Expression Array System in Japan during the current quarter, and in the rest of the world during the fourth fiscal quarter. During early January, we began full commercial sales of the SNPlex Genotyping System. Finally, we expect to begin full commercial sales of the VariantSEQr™ Resequencing System, used for discovery of genetic variations and their association with disease or biological changes, during the current quarter, concurrent with the release of the next version of the Applied Biosystems Portal.

Last week, Ambion announced our agreement to co-market Ambion’s siRNA products and Applied Biosystems' real-time PCR reagents for performing and monitoring the gene knockdown effects of RNA interference (RNAi). This collaboration marks the continuing expansion of new applications based on our SDS technology.

Within Mass Spectrometry, strong sales of our proteomics systems, including the QSTAR XL LC/MS/MS System and the 4700 Proteomics Discovery System with TOF/TOF™ Optics, contributed to a 12 percent increase in sales in the second quarter versus the prior year quarter. Sales of our systems utilized primarily for small molecule applications increased only slightly compared to the prior year quarter, as a result of continued manufacturing constraints for the 4000 Q TRAP™ LC/MS/MS system. Demand for the 4000 Q TRAP™ System increased during the quarter, and we finished the quarter with a substantial backlog of orders for the system. At this point, we anticipate we will be able to fully meet demand for the system by the end of the current quarter.

As discussed in this morning’s press release, we believe revenue growth was negatively impacted in the second quarter by the delay in the passage of the fiscal 2004 National Institutes of Health (NIH) budget. With the delayed passage of the budget, NIH grant recipients receive their annual funding in monthly allotments based on their prior year funding level. While one of our large-scale genome customers was able to secure alternative short-term funding during the second quarter, we believe the monthly, as opposed to annual, grant disbursements at the prior year level limited some customers’ capital equipment purchases during the quarter.

Despite the constraints of U.S. government funding, the performance of the DNA Sequencing product category was relatively stable during the second quarter. While sales of both sequencing instruments and consumables increased slightly relative to the prior year quarter, total revenue for the category declined 3 percent. This decline was due primarily to the absence of the $6.7 million technology license fee recorded in the prior year quarter.

In Europe, difficult economic conditions in certain countries, most notably Germany and France, continued to negatively impact government funding for life science research. We believe this constrained level of government funding negatively impacted our second quarter sales.

From a geographic perspective, revenues in the United States, which accounted for approximately 47 percent of total second quarter revenues, increased 5 percent from the prior year quarter, with the largest factor being an increase in sales of the 3730xl systems to large-scale genome centers. Revenues in Europe, which accounted for approximately 30 percent of total revenues, decreased 4 percent from the prior year quarter. During the prior year quarter, Applied Biosystems European revenues included an order from a large-scale genome center for a substantial number of 3730xl instrument systems, which was not repeated this year. And finally, revenues in Asia Pacific, which accounted for approximately 20 percent of total revenues, increased 9 percent from the prior year quarter. The net effect of foreign currency increased revenues by approximately 6 percent in Europe and approximately 3 percent in Asia Pacific during the second quarter of fiscal 2004.

As I discussed during our December 4th Investor Day, we are in a transition period where individual scientists working on smaller biology projects are just beginning to take advantage of the enormous storehouse of information that result from big biology projects. Typically, during such transition periods, the needs of life science tools customers change dramatically. At Applied Biosystems, our focus on Integrated Science is a response to the changing needs of our customers, who increasingly are pursuing Systems Biology or Integrated Science. During transition periods, it is also critical to step back and reassess both our existing business and our vision for the future. It is because of this that we have begun the in depth business review which Tony discussed. Our hope is that this review will provide us with a fresh perspective on options for future growth.

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

Dennis Winger
Thank you, Mike.

Second 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 $0.25 for the second quarter of fiscal 2004 as compared to $0.14 in the prior year quarter. Included in these amounts were gains totaling $0.02 during the second quarter of fiscal 2004 from the sale of investments and a reduction in previously recorded severance costs; and charges totaling $0.11 for asset write-offs, severance costs, and office closures recorded during the second quarter of fiscal 2003. The net effect of foreign currency increased earnings per share by $0.01 during the second quarter of fiscal 2004.

During the second quarter of fiscal 2004, cash flow from operations was $87.8 million, and capital expenditures were $12.8 million. During the second quarter, strong cash flow generation allowed us to use $47.7 million to repurchase approximately 2.2 million shares of Applied Biosystems stock. On a fiscal year-to-date basis, we have used $84.0 million to repurchase approximately 3.9 million shares of Applied Biosystems stock. At the end of the quarter, cash and cash equivalents were $639.6 million, and Applied Biosystems had no debt.

As of the end of the second quarter, accounts receivable was $356.5 million, representing 67 days sales outstanding, versus $345.7 million, or 75 days outstanding, as of the end of the first quarter of fiscal 2004. Inventory was $150.7 million, representing 3.5 months of inventory on hand, versus $142.2 million, or 3.9 months, as of the end of the first quarter of fiscal 2004.

Looking forward to the remainder of fiscal 2004, the Group believes demand from commercial customers should improve. However, as both Tony and Mike have discussed, the Group believes a number of issues relating to government funding for life science research exist that have the potential to negatively impact fiscal 2004 second-half financial results. While the Group does not expect the funding situation in Europe to change significantly in the near-term, the Group is increasingly cautious about the situation in Japan. The Group now expects the transition of universities to Independent Administrative Agencies will lead to lower than previously expected sales in Japan during the remainder of fiscal 2004. In the U.S., Congress recently approved, and the President signed, the spending bill that included the fiscal 2004 NIH budget. However, previous experience suggests that the lag time between approval and the Group's U.S. academic customers' receipt of their annual grant funds can delay customer purchases.

Despite these funding constraints, the Group forecasts single digit annual revenue growth for fiscal 2004, consistent with the Group's prior guidance. For the second half of fiscal 2004, the Group expects revenue growth to be driven by new product sales. The Group expects fiscal 2004 annual earnings per share growth at a rate equal to or slightly above annual revenue growth.

The Group presently estimates that the fiscal 2004 annual gross margin will be approximately equal to that of fiscal 2003. The Group expects annual selling, general and administrative expense to increase as a percent of total revenues during fiscal 2004 due to a number of factors, including expenses associated with Applera's legal actions with F. Hoffmann-La Roche Ltd. and the expected commencement in March 2004 of a patent infringement trial involving MJ Research, Inc. Additional factors include: costs associated with the development of, and enhancements to, the new Applied Biosystems Portal; and increased insurance and pension costs. The Group expects total annual research, development, and engineering expenditures for fiscal 2004 to be approximately equal to those in fiscal 2003.

For the fiscal third quarter, the Group anticipates earnings per share will be slightly above prior year quarter results. This forecast includes the expected legal expenses related to the trial discussed above.

Capital spending in fiscal 2004 is anticipated to be within the range of $70-80 million.

These comments reflect management's current outlook. Applera 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, followed by Kathy Ordoñez.

Tony White

Thanks Peter.

Over the past few months, Celera Genomics and Celera Diagnostics have both made clear progress in their discovery programs. Celera Diagnostics has now proven its rigorous discovery and replication processes for identifying markers of disease. Celera Diagnostics' scientists and academic collaborators have recently presented selected discoveries from studies of major diseases, and we expect additional scientific presentations in the coming months. The organization is moving toward incorporation of the markers into prototype diagnostic products, while Celera Genomics is evaluating the therapeutic utility of selected markers. At Celera Genomics, we believe we have similar proof of principle for our proteomics methodologies. Our scientists have identified differentially expressed proteins in the pancreatic and lung cancer programs. Validation of diagnostic markers and therapeutic targets is spurring discussions with potential partners related to therapeutic antibodies, pharmacogenomics, and other opportunities for products and value creation.

We are pleased with the short-term progress in the science and business of both Celera Diagnostics and Celera Genomics. However, it is the longer-term opportunity to change how new drugs are developed and used, and the potential advantage created by Applera's complementary expertise in both diagnostics and therapeutics that is most exciting. Our vision is dominated by "Targeted Medicine," a concept that employs new genetic and proteomic technologies to identify and validate new drug targets and therapeutics. It also integrates diagnostics to select and de-select target populations for therapy, and possibly other diagnostics to monitor patient response, efficacy, and safety.

Two months ago, the FDA issued draft guidelines for the use of pharmacogenomic data in clinical trials that are intended to support adoption of pharmacogenomic approaches to new medicine. These guidelines recognize the potential of pharmacogenomics to lead to targeted therapies, as well as the reality that biotech and pharma are still learning how to best capture and utilize such data. They are consistent with our approach to Targeted Medicine and the assumptions under which we are building both Celera Genomics and Celera Diagnostics to be at the forefront of the next generation of medicine.

Now I will turn it over to Kathy.

Kathy Ordoñez

Thank you Tony and good morning everyone.

Celera Diagnostics is growing toward profitability by working with our alliance partner Abbott to increase sales of our existing infectious disease and genetic testing products, and by planning for the future introduction of new molecular diagnostic products incorporating results of our genetic association studies and other research. Since our last quarterly call, we have continued to grow sales and advance discovery programs. We reduced our quarterly net loss, while our scientists and collaborators have communicated selected results from additional disease association studies.

For the recent quarter, end user sales of products manufactured by Celera Diagnostics increased to $10.4 million, more than double the $5.0 million in end user sales we reported in the same quarter last year. Recently, Abbott brought a number of new products into the alliance from the German diagnostic company Artus, including products for SARS and a variety of infectious diseases that are CE marked and offered in Europe and other ex-US markets. Since we share profits, sales from these products should help Celera Diagnostics move toward profitability.

Celera Diagnostics' pre-tax loss for the second quarter of fiscal 2004 decreased to $9.3 million. This compares favorably to the year ago quarter loss of $9.9 million and to the loss of $12.0 million for the first quarter of fiscal 2004. The primary drivers behind these results included higher end user sales of products manufactured by Celera Diagnostics. In addition, R&D expenses were $2.0 million lower than in the second quarter of fiscal 2003, due primarily to the wind-down of the Applera Genomics Initiative. Net cash used increased to $14.0 million during the quarter, compared to $11.5 million in the second quarter of the prior fiscal year. Results for the first six months are also summarized in today's press release.

Our discovery programs are the basis for our long-term success and for new products. Recent scientific presentations demonstrate our progress and are representative of the quality of the methods we have established to discover new markers of disease. In early November, we presented an analysis of markers for breast cancer prognosis at the International Association for Breast Cancer Research. Our scientists focused on gene expression markers associated with risk for distant metastasis and combined original research with a re-analysis of findings published by others. Their results suggest a constellation of markers monitoring expression of ten or fewer genes is likely to be highly predictive of risk for metastasis in breast cancer. Such a constellation could be used in conjunction with other current criteria such as tumor size and grade, age, estrogen receptor status, and lymph node involvement to make treatment decisions. If analysis of additional tumor collections confirms these findings, we would begin development of a prototype product. The collaboration with Merck we announced in October provides us with access to certain gene expression data and intellectual property that should accelerate our efforts to develop a prognostic test for metastasis in breast cancer.

At the American Society of Human Genetics, we showed that a pair of haplotypes in the insulin degrading enzyme gene may protect against the increased risk of Alzheimer's Disease conferred by the ApoE4 mutation. At a hepatitis conference in Kyoto in December, we also discussed an ex vivo study of interferon responsiveness that compared patterns of mRNA from sustained responders vs. non-responders and suggests it may be possible to identify those patients that are unlikely to benefit from interferon treatment.

The presentations to date have included only a subset of our replicated findings. We are working with our academic collaborators to schedule communications of discovery results from additional multicenter studies. For example, we are planning additional presentations related to risk of myocardial infarction or heart attack, and another regarding interferon response in hepatitis C patients in the spring.

While our discovery efforts in these and other diseases are continuing, we are increasing our focus on product and market development. We intend to provide additional visibility regarding new product opportunities in the future. Meanwhile, we are on track to meet the goals for fiscal 2004 that are outlined in the press release.

These comments reflect management's current outlook. Applera 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.

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

Thank you, Peter.

We believe Celera Genomics has three primary sources of competitive advantage. First, we are able to identify targets and study disease using a variety of large scale proteomics and genomics platforms, with our research findings integrated through proprietary bioinformatics. Second, we have small molecule research and development capabilities, and lastly, we have access to discoveries from Celera Diagnostics, which provide both pharmacogenomic insight and potential therapeutic targets. We are leveraging these advantages and focusing on four activities during fiscal 2004: identifying therapeutic targets, creating new partnerships, advancing small molecule and protein therapeutic programs, and balancing expansion of our organization as necessary to support the prior three activities.

As you know, we have several routes to the identification of new targets, including proteomics and genomics, as well as bioinformatic analysis, literature mining and in-licensing. While we are making progress on many fronts, we will focus today on proteomics, our primary source of targets for therapeutic antibodies. We have three oncology studies underway, including pancreatic cancer, lung cancer, and colon cancer. In pancreatic cancer, we have progressed from over 100 differentially expressed proteins to approximately 25 that are in evaluation as potential therapeutic targets. We eliminated some proteins through an assessment of biological rationale and through searches of literature and IP. We prioritized or eliminated others following thorough validation studies. There are several among the 25 that we find particularly interesting as potential targets for therapeutic antibodies or small molecules.

Within the lung cancer program, we have now identified almost 100 differentially expressed proteins. We have compared this list of proteins to those identified in the pancreatic cancer study and have identified some differentially expressed proteins that are common to both cancers. We are also continuing to process colon cancer samples. Based on the encouraging progress we have made in these three studies, we have initiated partnering discussions related to antibodies and we have elected to start another study in breast cancer.

A large portion of our small molecule resources are focused on three proprietary programs--Factor VIIa inhibitors for anticoagulation, tryptase inhibitors, and histone deacetylase inhibitors for cancer and other indications. There are a number of additional programs in lead optimization that we have chosen not to identify externally for competitive reasons and because the programs are early stage. We are satisfied with the progress in the more advanced programs, but will generally reserve future updates for a time when we are nearing trials in humans.

Finally, let us remind you of our milestones for fiscal 2004. Within proteomics, we plan to advance the differential protein identification and evaluation activities in all three ongoing oncology programs and to initiate a new discovery program in breast cancer. We are also focusing on partnering, where our first priority is to establish a strategic collaboration to advance our validated antibody targets toward development. In addition, we are seeking other opportunities to develop new strategic relationships consistent with our Targeted Medicine strategy that take advantage of our strengths in genomics, proteomics, and pharmacogenomics. Other possible relationships may include partnering of other therapeutic discovery efforts that we elect not to pursue independently. One of our partnered compounds could enter clinical trials during fiscal 2004; however, partners will make clinical development decisions with respect to partnered compounds. We remain committed to achieving these goals.

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

Dennis Winger

Thank you, Kathy.

The balance sheet at Celera Genomics remains strong, with $770 million in cash and short-term investments on December 31, a decrease of approximately $20 million from the prior quarter.

For the second quarter of fiscal 2004, Celera Genomics reported a net loss of $13.6 million, or 19 cents per share, compared to $16.1 million, or 23 cents per share, in the same quarter last year. R&D expenses decreased by $7.7 million compared to last year's quarter, primarily due to the wind-down of the Applera Genomics Initiative in the prior year quarter, lower R&D expenses associated with the Online/Information business, and the elimination of non-strategic activities as a result of the June 2002 restructuring and the revised business plan. Expiration of Online/Information Business customer agreements is the primary factor behind the decrease in revenues. These expirations were expected, and are consistent with Celera's strategic decision to focus on therapeutic discovery and development. Recently expired agreements were contributing about $5 million in quarterly sales.

For the first six months of fiscal 2004, Celera Genomics reported a net loss of $29.8 million, or 41 cents per share, compared to $35.8 million, or 50 cents per share, in the same period last year. Reduced R&D expenses more than offset the impact of lower revenues and interest income. Our R&D expenses for this period were $47.0 million, reflecting the wind-down of the Applera Genomics Initiative and cost reductions in the Online/Information Business.

R&D expenses in the second quarter of fiscal 2004 were $3.4 million higher than the first fiscal quarter of 2004, and we expect therapeutic discovery spending to increase over the balance of the year. We have expanded our R&D capabilities consistent with our internal needs and headcount plans. Fortunately, this expansion has not cost us as much as we expected. As a result, we now anticipate R&D expenses for fiscal 2004 will be in the range of $96 to $106 million. Lower R&D expenses should also have a favorable impact on our use of cash, so we now anticipate that Celera Genomics' cash and short-term investments will decrease by approximately $80 to $90 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.

Other elements of our outlook remain unchanged. 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.

These comments reflect management's current outlook. Applera 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 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) Applied Biosystems’ sales are dependent on customers’ capital spending policies and government-sponsored research; (3) Applied Biosystems’ significant overseas operations, with attendant exposure to fluctuations in the value of foreign currencies; (4) risks associated with Applied Biosystems’ growth strategy, including difficulties in integrating acquired operations or technologies; (5) the risk of earthquakes, which could interrupt Applied Biosystems’ or Celera Diagnostics’ operations; (6) 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; (7) Applied Biosystems’ dependence on the operation of computer hardware, software, and Internet applications and related technology for its businesses, particularly those focused on the development and marketing of information-based products and services; (8) Celera Diagnostics’ reliance on existing and future collaborations, including its strategic alliance with Abbott Laboratories, which may not be successful; (9) Celera Diagnostics' unproven ability to discover, develop, or commercialize proprietary diagnostic products; (10) 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; (11) 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; (12) 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; (13) legal, ethical, and social issues which could affect demand for Celera Diagnostics’ products; (14) Celera Diagnostics’ limited commercial manufacturing experience and capabilities and its reliance on a single principal manufacturing facility; (15) Applied Biosystems’ and Celera Diagnostics’ reliance on a single supplier or a limited number of suppliers for key components of some of their products; (16) potential product liability or other claims against Celera Diagnostics as a result of the testing or use of its products; (17) intense competition in the industry in which Celera Diagnostics operates; and (18) 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 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 2004. Applera Corporation. All Rights Reserved. AB (Design), Applera, Celera, Celera Diagnostics, Celera Discovery System, Celera Genomics, myScience, SNPlex, TOF/TOF, and VariantSEQr 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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