<PAGE>


================================================================================


                UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-Q

(Mark One)

/X/     QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
        EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2000

                                        OR

/ /     TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
        EXCHANGE ACT OF 1934

For the transition period from        to

                        Commission file number 000-21873

                        BIOSITE DIAGNOSTICS INCORPORATED
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)


                 Delaware                               33-0288606
       [State or other jurisdiction        [I.R.S. Employer Identification No.]
    of incorporation or organization]

           11030 Roselle Street
          San Diego, California                            92121
 [Address of principal executive offices]               [Zip Code]

       Registrant's telephone number, including area code: (858) 455-4808

       Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No ___




    The number of shares of the Registrant's Common Stock, $0.01 par value,
                   outstanding at July 31, 2000 was 13,873,323

===============================================================================


<PAGE>

                        BIOSITE DIAGNOSTICS INCORPORATED
                                    FORM 10-Q

                                      INDEX

<TABLE>
<CAPTION>
                                                                                                    PAGE
<S>                                                                                                 <C>

PART I. FINANCIAL INFORMATION.........................................................................1

ITEM 1.  FINANCIAL STATEMENTS.........................................................................1
   CONDENSED BALANCE SHEETS...........................................................................1
   CONDENSED STATEMENTS OF OPERATIONS (UNAUDITED).....................................................2
   CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED).....................................................3
   NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)................................................4

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.........6

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK...................................11

PART II.  OTHER INFORMATION..........................................................................21

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.........................................21

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K............................................................21

SIGNATURES...........................................................................................22
</TABLE>

Biosite-Registered Trademark-, Triage-Registered Trademark-,
ExpressTest-Registered Trademark- and Immediate Response
Diagnostics-Registered Trademark- are registered trademarks of
the Company. Omniclonal-TM- and the Company's logo are trademarks
or service marks of the Company.

<PAGE>


PART I.  FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS

                        BIOSITE DIAGNOSTICS INCORPORATED

                            CONDENSED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                                JUNE 30,         DECEMBER 31,
                                                                                  2000               1999
                                                                             ---------------    ---------------
                                                                               (Unaudited)          (Note)
<S>                                                                          <C>                <C>
ASSETS
Current assets:
  Cash and cash equivalents                                                   $    8,065,537     $    4,594,217
  Marketable securities, available-for-sale                                       27,881,133         27,677,307
  Accounts receivable, net                                                         7,575,055          6,192,161
  Inventories, net                                                                 7,480,644          6,058,856
  Other current assets                                                             2,682,552          2,649,607
                                                                             ---------------    ---------------
        Total current assets                                                      53,684,921         47,172,148
Property, equipment and leasehold improvements,  net                              10,385,881          9,936,429
Patents and license rights, net                                                    7,702,416          7,555,771
Other assets                                                                       3,308,195          3,483,632
                                                                             ---------------    ---------------
                                                                              $   75,081,413     $   68,147,980
                                                                             ===============    ===============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
  Accounts payable                                                            $    1,681,849     $    1,831,282
  Accrued salaries and other                                                       4,110,520          3,423,541
  Current portion of long-term obligations                                         2,092,234          1,939,372
                                                                             ---------------    ---------------
        Total current liabilities                                                  7,884,603          7,194,195
Long-term obligations                                                              4,318,635          4,068,814

Commitments and contingencies

Stockholders' equity:
  Preferred stock, $.01 par value, 5,000,000 shares authorized, none
     issued and outstanding at June 30, 2000 and December 31, 1999                         -                  -
  Common stock, $.01 par value, 25,000,000 shares authorized; 13,854,788
     and 13,141,302 shares issued and outstanding at June 30, 2000 and
     December 31, 1999, respectively                                                 138,548            131,413
  Additional paid-in capital                                                      58,721,851         55,398,048
  Unrealized net gain (loss) on marketable securities, net of related
     tax effect                                                                     (195,580)          (131,416)
  Deferred compensation                                                              (46,005)           (93,086)
  Retained earnings                                                                4,259,361          1,580,012
                                                                             ---------------     --------------
        Total stockholders' equity                                                62,878,175         56,884,971
                                                                             ---------------     --------------
                                                                               $  75,081,413      $  68,147,980
                                                                             ===============     ==============
</TABLE>

Note:    The balance sheet at December 31, 1999 has been derived from the
         audited financial statements at that date but does not include all of
         the information and footnotes required by generally accepted accounting
         principles for complete financial statements.

See accompanying notes.


                                        -1-
<PAGE>


                BIOSITE DIAGNOSTICS INCORPORATED

         CONDENSED STATEMENTS OF OPERATIONS (UNAUDITED)

<TABLE>
<CAPTION>
                                                     THREE MONTHS ENDED                  SIX MONTHS ENDED
                                                          JUNE 30,                           JUNE 30,
                                                     2000              1999             2000              1999
                                                ------------------------------------------------------------------
<S>                                             <C>               <C>              <C>               <C>
Revenues:
   Product sales                                $  13,133,740     $  10,593,579    $  25,331,802     $  20,041,300
   Corporate partners revenue                         309,957           310,000        1,024,797           310,000
                                                -------------     -------------    -------------     -------------
         Total revenues                            13,443,697        10,903,579       26,356,599        20,351,300

Operating Expenses:
   Cost of product sales                            3,552,813         3,262,624        7,389,966         7,004,541
   Selling, general and administrative              4,852,429         4,292,491        9,237,184         9,237,550
   Research and development                         3,327,507         3,596,798        6,492,739         6,642,033
                                                -------------     -------------    -------------     -------------
         Total operating expenses                  11,732,749        11,151,913       23,119,889        22,884,124
                                                -------------     -------------    -------------     -------------

Operating income (loss)                             1,710,948          (248,334)       3,236,710        (2,532,824)

Interest and other income                             519,654           441,742        1,019,639           940,290
                                                -------------     -------------    -------------     -------------

Income (loss) before benefit (provision)
   for income taxes                                 2,230,602           193,408        4,256,349        (1,592,534)
Benefit (provision) for income taxes                 (875,000)          (96,000)      (1,577,000)          633,000
                                                -------------     -------------    -------------     -------------

Net income (loss)                               $   1,355,602     $      97,408    $   2,679,349     $    (959,534)
                                                =============     =============    =============     =============

Net income (loss) per share
  - Basic                                       $        0.10     $        0.01    $        0.20     $       (0.07)
                                                =============     =============    =============     =============
  - Diluted                                     $        0.09     $        0.01    $        0.18     $       (0.07)
                                                =============     =============    =============     =============

Shares used in calculating per share amounts
  - Basic                                          13,681,000        13,015,000       13,459,000        12,994,000
                                                =============     =============    =============     =============
  - Diluted                                        15,019,000        13,624,000       14,932,000        12,994,000
                                                =============     =============    =============     =============
</TABLE>

  See accompanying notes.


                                                -2-
<PAGE>



                        BIOSITE DIAGNOSTICS INCORPORATED

                 CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)

<TABLE>
<CAPTION>
                                                                             SIX MONTHS ENDED JUNE 30,
                                                                         ---------------------------------
                                                                              2000               1999
                                                                         ---------------   ---------------
<S>                                                                      <C>                <C>
OPERATING ACTIVITIES
Net cash provided by operating activities                                $   2,021,435      $     166,651

INVESTING ACTIVITIES
Proceeds from sales and maturities of marketable securities                  5,876,851         14,607,103
Purchase of marketable securities                                           (6,187,618)       (11,286,339)
Purchase of property, equipment and leasehold improvements                  (1,516,089)        (1,545,827)
Patents, license rights, deposits and other assets                            (379,207)        (2,305,397)
                                                                         -------------      -------------
Net cash used in investing activities                                       (2,206,063)          (530,460)

FINANCING ACTIVITIES
Proceeds from issuance of financing obligations                              1,410,354          1,342,520
Principal payments under financing obligations                              (1,007,671)          (875,628)
Repurchase and retirement of common stock                                           --           (350,641)
Proceeds from issuance of common stock, net                                  3,253,265            737,669
                                                                         -------------      -------------
Net cash provided by financing activities                                    3,655,948            853,920
                                                                         -------------      -------------

Increase in cash and cash equivalents                                        3,471,320            490,111

Cash and cash equivalents at beginning of period                             4,594,217            762,337
                                                                         -------------      -------------
Cash and cash equivalents at end of period                               $   8,065,537      $   1,252,448
                                                                         =============      =============

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
  Interest paid                                                          $     248,486      $     220,095
                                                                         =============      =============
  Income taxes  paid                                                     $     903,100      $          --
                                                                         =============      =============
</TABLE>

      See accompanying notes.


                                                  -3-
<PAGE>


                        BIOSITE DIAGNOSTICS INCORPORATED

               NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)


1.  BASIS OF PRESENTATION

    The accompanying unaudited condensed financial statements have been
prepared in accordance with both generally accepted accounting principles for
interim financial information, and the instructions to Form 10-Q and Article
10 of Regulation S-X. Accordingly, they do not include all of the information
and footnotes required by generally accepted accounting principles for
complete financial statements. The accompanying financial statements reflect
all adjustments (consisting of normal recurring accruals) which are, in the
opinion of management, considered necessary for a fair presentation of the
results for the interim periods presented. Interim results are not
necessarily indicative of results for a full year. We have experienced
significant quarterly fluctuations in our operating results and we expect
that these fluctuations in sales, expenses and operating results may continue.

    The financial statements and related disclosures have been prepared with
the presumption that users of the interim financial information have read or
have access to the audited financial statements for the preceding fiscal
year. Accordingly, these financial statements should be read in conjunction
with the audited financial statements and the related notes thereto contained
in our Annual Report on Form 10-K for the year ended December 31, 1999.

2.  EARNINGS PER SHARE

    Earnings per Share, EPS, is computed in accordance with Statement of
Financial Accounting Standards No. 128, Earnings per Share, FAS 128. FAS 128
requires dual presentation of basic and diluted earnings per share. Basic EPS
includes no dilution and is computed by dividing net income (loss) by the
weighted average number of common shares outstanding for the period. Diluted
EPS reflects the potential dilution of securities that could share in our
earnings, such as common stock equivalents which may be issuable upon
exercise of outstanding common stock options. Common stock equivalents are
not considered in loss years as the effect is antidilutive.

    Shares used in calculating basic and diluted earnings per share were as
follows:

<TABLE>
<CAPTION>
                                                                    THREE MONTHS ENDED           SIX MONTHS ENDED
                                                                         JUNE 30,                    JUNE 30,
                                                                --------------------------- ---------------------------
                                                                    2000          1999          2000          1999
                                                                ------------- ------------- ------------- -------------
<S>                                                             <C>           <C>           <C>           <C>
Weighted average common shares outstanding                         13,681        13,015         13,459        12,994
Net effect of dilutive common share equivalents using the
   treasury stock method                                            1,338           609          1,473             -
                                                                ------------- ------------- ------------- -------------
Shares used in calculating per share amounts - Diluted             15,019        13,624         14,932        12,994
                                                                ============= ============= ============= =============
</TABLE>



                                        -4-
<PAGE>


                           BIOSITE DIAGNOSTICS INCORPORATED

                  NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)


3.  BALANCE SHEET INFORMATION

     Net inventories consist of the following:

<TABLE>
<CAPTION>
                                              JUNE 30,        DECEMBER 31,
                                               2000               1999
                                           ------------       ------------
        <S>                                <C>                <C>
        Raw materials                      $  2,050,114       $  2,088,530
        Work-in-process                       3,553,401          3,058,179
        Finished goods                        1,877,129            912,147
                                           ------------       ------------
                                           $  7,480,644       $  6,058,856
                                           ============       ============
</TABLE>

4.  COMPREHENSIVE INCOME

    Financial Accounting Standards Board's Statement No. 130, Comprehensive
Income, FAS 130, establishes rules for the reporting and display of
comprehensive income and its components. FAS 130 requires that the change in
net unrealized gains or losses on marketable securities be included in
comprehensive income. As adjusted, our comprehensive income is as follows:

<TABLE>
<CAPTION>
                                                        THREE MONTHS ENDED                   SIX MONTHS ENDED
                                                             JUNE 30,                            JUNE 30,
                                                ----------------------------------- -----------------------------------
                                                      2000             1999               2000              1999
                                                ----------------- ---------------- ------------------- ----------------
<S>                                             <C>               <C>              <C>                 <C>
Net income (loss)                                  $ 1,355,602        $ 97,408        $  2,679,349       $   (959,534)
Change in unrealized net gain (loss) on
   marketable securities, net of tax                   (23,291)        (66,683)            (64,164)           (94,110)
                                                ----------------- ---------------- ------------------- ----------------
Comprehensive income (loss)                        $ 1,332,311        $ 30,725        $  2,615,185       $ (1,053,644)
                                                ================= ================ =================== ================
</TABLE>


                                       -5-
<PAGE>


PART I.  FINANCIAL INFORMATION.

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.

    The matters discussed in this Management's Discussion and Analysis of
Financial Condition and Results of Operations contain forward-looking
statements that involve risks and uncertainties, including the timely
development, introduction and acceptance of new products, manufacturing
efficiency issues, dependence on others, the impact of competitive products,
third party reimbursement issues, changing market conditions and the other
risks detailed under "Factors that May Affect Results" and throughout our
Annual Report on Form 10-K for the year ended December 31, 1999. Actual
results may differ materially from those projected. These forward-looking
statements represent our judgment as of the date of the filing of this Form
10-Q and our Form 10-K, respectively. We disclaim any intent or obligation to
update these forward-looking statements.

OVERVIEW

    We were established in 1988. We develop, manufacture and market rapid,
accurate and cost-effective diagnostic products that improve the quality of
patient care and simplify the practice of laboratory medicine. Our two
product platforms are designed to provide rapid results through either
qualitative visual readings or quantitative meter readings. In 1992, we
launched our first qualitative platform product, the Triage-Registered
Trademark- Panel for Drugs of Abuse. In 1998, we began selling two
additional qualitative platform products, the Triage C. DIFFICILE Panel
and the Triage Parasite Panel. Also, in 1998, we launched our first
quantitative platform product, the Triage Cardiac System. We followed these
product launches with the introduction of our second quantitative platform
product, the Triage BNP System, in certain international countries in
December 1999.

    We market our products worldwide primarily through distributors supported
by our direct sales force. Our principal markets are hospitals, which use our
products in laboratories, emergency departments and other point-of-care
locations. In addition to focusing our attention on commercial activities
associated with our products, we continue to invest in the research and
development of additional rapid tests designed to aid in the diagnosis of
several critical diseases or conditions in four core areas: cardiovascular,
cerebrovascular, infectious diseases and oncology.

    In March 1999, we introduced Biosite Discovery, a collaborative research
and diagnostics development program focused on identifying new protein
markers for acute diseases. In addition to our internal diagnostic marker
discovery programs, we use our expertise in antibody development to establish
collaborative programs with pharmaceutical and biotechnology partners. We
utilize our proprietary Omniclonal-TM- phage display technology to develop
high-affinity antibodies for our customers' use in characterizing and
validating protein targets. The Omniclonal technology combines antibody phage
display capabilities and a highly efficient antibody expression and
purification process to accelerate our partners' research programs. In return
for our services, we have obtained and seek to continue to obtain diagnostic
rights to the proteins under study. Initially, we are focusing on disease
target markers in our four core areas: cardiovascular, cerebrovascular,
infectious disease and oncology. If the diagnostic utility of a marker is
established, it will then be assessed for commercialization potential, with
high value markers being added to our product development pipeline. We have
executed collaborative agreements under the Biosite Discovery program with
several partners in the areas of cardiovascular, cerebrovascular, infectious
disease and oncology.

    Our product sales to date have primarily been attributed to sales of the
Triage Drugs of Abuse Panel product line. The Triage Drugs of Abuse Panel
products are marketed pursuant to exclusive distribution agreements in the
U.S. hospital market segment by Fisher Healthcare, or Fisher, which accounted
for 83% of product sales in 1999 and 84% in the first half of 2000, and
internationally by country-specific and regional distributors. Since its
launch in fiscal 1992, the Triage Drugs of Abuse Panel product line has
experienced continued annual revenue growth. We believe, however, that
domestic sales of the Triage Drugs of Abuse Panel products may decline as the
available U.S. market becomes saturated and competitive pressures become more
and more prominent in a maturing market.

    During the second half of 1999 and the first half of 2000 we returned to
operating profitability after incurring operating losses during the prior
seven quarters. We may not be able to maintain operating profitability on a
quarterly or annual basis in the future and our operating results may not be
consistent with predictions made by securities analysts.



                                      -6-
<PAGE>


    We anticipate that our results of operations may fluctuate for the
foreseeable future due to several factors, including:

    -   whether and when new products are successfully developed and introduced
        by us
    -   market acceptance of current or new products - manufacturing
        inefficiencies
    -   progress of research and development projects including clinical trials
        and regulatory delays
    -   seasonal customer demand, the timing or cancellation of significant
        orders, product recalls and shipment problems
    -   changes in reimbursement policies
    -   competitive pressures on average selling prices
    -   changes in the mix of products sold.

    Operating results would also be adversely affected by a downturn in the
market for our current and future products. We continue to increase our
operating expenses, primarily for personnel, capital equipment and activities
supporting newly introduced products and product development. Our operating
results would be adversely affected if our net sales or gross profit did not
correspondingly increase or if our product development efforts were
unsuccessful or subject to delays. Our limited operating history makes
accurate prediction of future operating results difficult or impossible. We
may not sustain revenue growth or maintain profitability on a quarterly or
annual basis.

RECENT DEVELOPMENTS

BIOSITE DISCOVERY - MEDAREX

In June 2000, we launched an alliance with Medarex Inc. aimed at accelerating
drug research via Trans-Phage Technology-SM-. This high throughput method to
create fully human antibodies combines the immunological power of Medarex's
HuMAb-Mouse-TM- with the speed of Biosite's Omniclonal-TM- phage display
technology. Through this alliance, Biosite and Medarex will offer
pharmaceutical and biotechnology companies access to large volumes of
high-affinity, fully-human antibodies to validate genomic targets and
identify promising drug candidates. We believe that the Trans-Phage
Technology will enable scientists to make large volumes of fully-human
antibodies to disease targets in a fraction of the time typically associated
with traditional technologies. Under the terms of the agreement, Biosite will
receive research funding of $3 million annually over eight years from
Medarex, along with research fees and, if any products are generated through
the collaboration, milestone payments and royalties. We may also receive
diagnostic rights to targets identified through the collaboration.

NEW PRODUCTS - TRIAGE BNP TEST

    In December 1999, we began initial shipments of our second quantitative
platform product, the Triage BNP System, to certain international customers.
The Triage BNP System is a rapid, quantitative diagnostic test that may aid
in the diagnosis of congestive heart failure, or CHF, and therefore
potentially enable earlier therapeutic intervention. Additionally, we filed a
pre-market approval application, or PMA, with the FDA, seeking approval to
market the Triage BNP Test in the United States. At the present time, in the
United States, there is no blood test available to aid in diagnosing CHF. On
March 24, 2000, the FDA Clinical Chemistry and Clinical Toxicology Device
Panel, or Advisory Panel, voted 6-3 to recommend non-approval of our PMA for
the Triage BNP Test. In voting, the Advisory Panel indicated the need for
additional data. Despite this outcome, we continue to believe in the
potential utility, safety and effectiveness of the Triage BNP Test. In order
to remedy the deficiencies of the current PMA submission, we are gathering
data from additional female CHF patients to ensure that our CHF patient
population adequately mirrors the known sex distribution for the disease.
Also, to better demonstrate the sensitivity and specificity of our test in
different age groups, we are accumulating data from a control group of
healthy individuals that is representative of the age distribution among the
diseased population. We anticipate submitting an amendment to our PMA by
October 2000. We will continue to market the Triage BNP System
internationally.



                                      -7-
<PAGE>


RESULTS OF OPERATIONS

    PRODUCT SALES. Product sales for the three and six months ended June 30,
2000 were $13.1 million and $25.3 million, respectively, representing
increases of 24% and 26% respectively, compared to the same periods of 1999.
The increase in net product sales was primarily attributable to the growth in
net sales of our Triage Cardiac System. Net sales of our quantitative
platform products, consisting of the Triage Cardiac System and Triage BNP
System, were approximately $3.8 million and $6.9 million, respectively, for
three and six months ended June 30, 2000, as compared to $1.5 million and
$2.6 million, respectively, for the same periods of 1999. The Triage Cardiac
System's net sales growth, on both a quarterly and year-to-date basis, was
primarily due to growth in our customer base and greater average product
utilization by our customers. Additionally, the second quarter's net sales
included approximately $574,000 associated with the stocking of the Triage
Cardiac Panel by Fisher, our U.S. distributor. Fisher began shipping the
product to its customers from its regional locations in April. Prior to that,
we were drop-shipping the product directly to their customers. Net sales of
our qualitative platform products, consisting of the Triage Drugs of Abuse
Panel and Triage Microbiology Panels, were approximately $9.4 million and
$18.4 million, respectively, for three and six months ended June 30, 2000, as
compared to $9.1 million and $17.4 million, respectively, for the same
periods of 1999. The growth in our qualitative platform products for the
second quarter of 2000 as compared to the same period of 1999 was primarily
related to sales growth of $279,000, or 47%, for our Microbiology Panel
products. The Microbiology Panel products also increased $455,000 or 42% for
six months ended June 30, 2000 as compared to the same period of 1999. Net
sales of the Triage Drugs of Abuse Panel for the second quarter of 2000 were
consistent with net sales of the product for same period of 1999. Net sales
of the Triage Drugs of Abuse Panel for the six months ended June 30, 2000
increased $580,000, or 4%, as compared to the same period in 1999. We believe
that the domestic sales of the Triage Drugs of Abuse Panel products may
decline as the available U.S. market becomes saturated and competitive
pressures become more prominent in a maturing market.

    CORPORATE PARTNERS REVENUES. Corporate partners revenues consist of
revenues associated with our research and development and licensing
arrangements, including license fees, milestone revenues, royalties, research
funding and antibody fees. Corporate partners revenues for the three months
ended June 30, 2000 were $310,000, which is consistent with revenues for the
same period in 1999. Corporate partner revenues for the six months ended June
30, 2000 were $1.0 million, representing an increase of 231% as compared to
the same period of 1999. Corporate partnersrevenues recognized during the
three and six months ended June 30, 2000 related primarily to the licensing
of technology and performance of activities under collaborative research and
development agreements. On June 1, 2000, the Company entered into an alliance
with Medarex Inc. Under the terms of the agreement, Biosite will receive
research funding of $3 million annually over eight years from Medarex, along
with research fees and, if any products are generated through the
collaboration, milestone payments and royalties. We may also receive
diagnostic rights to targets identified through the collaboration. Corporate
partners revenues recognized during the second quarter of 1999 related to
activities associated with a research and development feasibility study being
performed by the Company. There were no corporate partners revenues
recognized during the first quarter of 1999. Costs associated with corporate
partners revenues are included in research and development expenses.

    COST OF SALES AND GROSS PROFIT FROM PRODUCT SALES. Gross profit for the
three and six months ended June 30, 2000 was $9.6 million and $17.9 million,
respectively, representing increases of 31% and 38%, respectively, over the
same periods of 1999. The overall gross margin increased to 73% for the
second quarter and to 71% for the first half of 2000 from 69% and 65% for the
same periods, respectively, in 1999. Gross margins increased primarily as a
result of greater efficiencies achieved in the manufacturing of the Triage
Cardiac Panel. Our newer products, which continued to experience lower gross
margins than the Triage Drugs of Abuse Panel, were produced with greater
efficiency during the second quarter and first half of 2000 than the same
periods of 1999. During the first quarter of 1999, we experienced significant
inefficiencies related to the production of the Triage Cardiac Panel, which
adversely affected gross profits related to that product during that period.
Our newer products are expected to continue to realize lower gross margins
than the Triage Drugs of Abuse Panel during the early stages of their
commercialization as incremental manufacturing costs are spread over smaller
sales volumes, efficiency issues are addressed, and meter quality issues are
resolved with our supplier. We also expect that the overall gross margin may
decrease as a result of competitive pricing pressures related to the maturing
Triage Drugs of Abuse product line and the changing mix of net sales of
products with different gross margins.

    SELLING, GENERAL AND ADMINISTRATIVE EXPENSES (SG&A EXPENSES). Our SG&A
expenses for the three and six months ended June 30, 2000 were $4.9 million
and $9.2 million, respectively. The SG&A expenses increased 13% for the three
months ended June 30, 2000 as compared to the same period of 1999, while SG&A
expenses for the first half of 2000 are consistent with the first half of
1999. The increase in SG&A expenses during the second quarter of 2000, as


                                     -8-
<PAGE>


compared to the same period of 1999, was primarily due to the establishment
of our professional education group and implementation of programs intended
to build the medical community's awareness and understanding of the benefits
our products provide towards improving point-of-care diagnosis and disease
management. Our SG&A expenses for the six months ended June 30, 2000 are
consistent with the same period in 1999. Our SG&A expenses are expected to
increase in the second half of 2000 as we expand sales and marketing programs
relating to the Triage Cardiac and Triage BNP Systems, as well as other
business development activities.

    RESEARCH AND DEVELOPMENT EXPENSES. Research and development expenses for
the three months and six months ended June 30, 2000 were $3.3 million and
$6.5 million, respectively, representing decreases of 8% and 2%,
respectively, from the same periods of 1999. The decrease in expenses in the
three and six months ended June 30, 2000 is primarily related to a decrease
in new product scale-up activities. During the second quarter of 2000, our
research and development resources were focused primarily on clinical
studies, the development of potential improvements to our existing and new
products, and research activities associated with the Biosite Discovery
Program. Expenses related to the performance of our obligations associated
with earning our corporate partners revenue was incurred by our research and
development group, primarily the Biosite Discovery Program. We expect that
our research and development expenses will increase in the second half of
2000, as compared to 1999 levels. The increased expenditures are expected to
primarily relate to clinical studies, product development efforts and the
Biosite Discovery program. The costs associated with the clinical trials are
expected to be significant, especially those related to the Triage BNP Test,
which are subject to more complex regulatory approval requirements than our
previous products. We have incurred significant expenses in the second
quarter and expect to incur significant expenses in the third quarter of 2000
related to gathering the additional data needed for our amendment to our PMA
for the Triage BNP test. The timing of the other increased expenditures and
their magnitude is primarily dependent on the progress and success of the
research and development and the timing of potential product launches.

    INTEREST AND OTHER INCOME. Interest income increased $78,000 and $80,000,
respectively, for the three months and six months ended June 30, 2000 from
the same periods in 1999. The increase resulted primarily from the higher
average balance of cash and marketable securities during the second quarter
and first half of 2000 as compared to the same periods in 1999.

    BENEFIT (PROVISION) FOR INCOME TAXES. As a result of the pre-tax income
and the estimated tax credits to be generated in 2000, we recorded a
provision for income taxes of $1.6 million for the first half of 2000. For
the same period in 1999, we recorded a benefit for income taxes of $633,000.
We will continue to assess the likelihood of realization of our tax credits
and other net deferred tax assets. If future events occur which do not make
the realization of such assets more likely than not, a valuation allowance
will be established against all or a portion of the net deferred tax assets.


LIQUIDITY AND CAPITAL RESOURCES

    We have financed our operations through cash provided by operating
activities, private and public placements of equity securities, debt and
capital lease financing, cash received under collaborative agreements and
interest income. At June 30, 2000, the Company had cash, cash equivalents and
marketable securities of approximately $35.9 million compared to $32.3
million at December 31, 1999.

    The increase in cash, cash equivalents and marketable securities during
the first half of 2000 is largely attributable to cash generated from
operating activities of $2.0 million, the receipt of $1.4 million in proceeds
from equipment financing, and the receipt of $3.3 million in proceeds from
the issuance of common stock under our employee stock plans. Significant uses
of cash for the first half of 2000 included the purchase of leasehold
improvement and capital equipment of approximately $1.5 million and principal
payments under equipment financing obligations of $1.0 million.

    The decrease in cash, cash equivalents and marketable securities during
the six months ended June 30, 1999 is largely attributable to the net payment
of $1,050,000 made to Dade Behring as part of the settlement of litigation
between Dade Behring and Biosite in March 1999. Other significant uses of
cash during the six months ended 1999 included deposits and purchases of
equipment and leasehold improvements totaling approximately $2.8 million.
Significant sources of cash during the first half of 1999 included the
receipt of $3.3 million from the sale of marketable securities that were not
reinvested in other marketable securities and the receipt of $1.3 million in
proceeds from equipment financing.

    Our primary short-term needs for capital, which are subject to change,
are for the support of our commercialization efforts related to new products,
expansion of our manufacturing capacity and efficiency for new


                                      -9-
<PAGE>


products, potential licensing of technologies patented by others, potential
procurement and enforcement of patents and the continued advancement of
research and development efforts. We executed agreements to license
technologies patented by others that call for cash payments and future
royalties based on product sales utilizing the licensed technologies. We may
enter into additional licensing agreements that may include up-front and
annual cash payments and future royalties based on product sales utilizing
the licensed technologies. We utilized and may continue to utilize credit
arrangements with financial institutions to finance the purchase of capital
equipment. Additionally, we may utilize cash generated from operating
activities, if any, to meet our capital requirements.

    We are evaluating various alternatives in addressing our future
facilities expansion needs. The alternatives being evaluated include
negotiations with various parties for the leasing of additional facility
space, which would be adequate for our foreseeable future needs. Leasing of
additional facility space would be expected to result in an increase in rent
upon occupancy.

    We believe that our available cash, cash from operations and funds from
existing credit arrangements will be sufficient to satisfy our funding needs
for at least the next 24 months. Thereafter, if cash generated from
operations is insufficient to satisfy our working capital and capital
expenditure requirements, we may be required to sell additional equity or
debt securities or obtain additional credit facilities. Additional capital,
if needed, may not be available on satisfactory terms, if at all.
Furthermore, any additional equity financing may be dilutive to stockholders,
and debt financing, if available, may include restrictive covenants. Our
future liquidity and capital funding requirements will depend on numerous
factors, including:

    -   the extent to which our new products and products under development are
        successfully developed, gain market acceptance and become and remain
        competitive
    -   the costs and timing of further expansion of sales, marketing and
        manufacturing activities, and facilities expansion needs
    -   the timing and results of clinical studies and regulatory actions
        regarding our potential products
    -   changes in third-party reimbursement policies, and
    -   the costs and timing associated with business development activities,
        including potential licensing of technologies patented by others.

    Our failure to raise capital on acceptable terms, when needed, could have
a material adverse effect on our business.




                                     -10-
<PAGE>


ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

    We are exposed to changes in interest rates, primarily from our
variable-rate long-term debt arrangements and, to a lesser extent, our
investments in available-for-sale marketable securities. Under our current
policies, we do not use interest rate derivatives instruments to manage this
exposure to interest rate changes. We do have the option to convert our
variable-rate long-term debt arrangements to fixed-rate debt arrangements for
a nominal transaction fee. At June 30, 2000, we had variable-rate debt
totaling approximately $1.3 million. A hypothetical 1% adverse move in
interest rates along the entire interest rate yield curve would not
materially effect the fair market value of our financial instruments that are
exposed to changes in interest rates.

    Additionally, our purchases of Triage Meters from LRE Technology Partner
GmbH ("LRE") are denominated in German Deutsche Marks (DM) and sales of some
products to some international customers are denominated in the local
currency of customers. We have on occasion purchased forward exchange
contracts to manage this exposure to exchange rate changes. As of June 30,
2000, we had no outstanding forward exchange contracts. Total receivables and
payables denominated in foreign currencies at June 30, 2000 were not material.






                                     -11-
<PAGE>


FACTORS THAT MAY AFFECT RESULTS

    This report includes forward-looking statements about our business and
results of operations which are subject to risks and uncertainties that could
cause our actual results to vary materially from those indicated from such
forward-looking statements. Factors that could cause or contribute to such
differences include those discussed below, as well as those discussed
elsewhere in the Form 10-Q and in our Annual Report on Form 10-K for the year
ended December 31, 1999. The factors discussed below should be read in
conjunction with the risk factors discussed in our Annual Report on Form
10-K, which are incorporated by reference.

WE HAVE ONLY A LIMITED HISTORY OF PROFITABILITY  AND WE MAY NOT MAINTAIN
PROFITABILITY.  IN ADDITION OUR QUARTERLY RESULTS WILL FLUCTUATE.

    We achieved operating profitability in the third and fourth quarters of
1999 and each quarter of 2000. However, we incurred an operating loss during
the prior seven quarters. We may not be able to maintain operating
profitability on a quarterly or annual basis in the future. We believe that
our future operating results will be subject to quarterly fluctuations due to
a variety of factors, including:

    -   whether and when new products are successfully developed and introduced
        by us
    -   market acceptance of current or new products
    -   changes in the mix of products sold
    -   manufacturing delays or inefficiencies
    -   competitive pressures on average selling prices
    -   the timing of significant orders
    -   research and development efforts
    -   seasonal customer demand
    -   changes in reimbursement policies
    -   regulatory uncertainties or delays
    -   product recalls
    -   shipment problems, and
    -   costs and timing associated with business development activities,
        including potential licensing of technologies.

    Operating results would also be adversely affected by a downturn in the
market for our products. Because we continue to increase our operating
expenses to support our expanded sales and marketing activities,
manufacturing operations and new product development, our operating results
would be adversely affected if our sales and gross profits did not
correspondingly increase or if our product development efforts are
unsuccessful or subject to delays. Our limited operating history makes
accurate prediction of future operating results difficult or impossible. We
may not sustain revenue growth or sustain profitability on a quarterly or
annual basis and our growth or operating results may not be consistent with
predictions made by securities analysts.

WE ARE DEPENDENT ON THE DEVELOPMENT AND INTRODUCTION OF NEW PRODUCTS FOR
REVENUE GROWTH AND PROFITABILITY.

    Except for our commercialized products, all of our products are still
under development and may not be successfully developed or commercialized on
a timely basis, or at all. If we are unable, for technological or other
reasons, to complete the development, introduction or scale-up of
manufacturing for any new product or if any new product is not approved for
marketing or does not achieve a significant level of market acceptance, we
will be harmed.

    We believe that our revenue growth and profitability will substantially
depend upon our ability to complete development of and successfully introduce
these new products as well continue to achieve a growing level of market
acceptance of new products such as the Triage Cardiac System and the Triage
BNP System. In addition, the successful development of some of these new
products will depend on the development of new technologies. We will be
required to undertake time-consuming and costly development activities and
seek regulatory approval for these new products. We may experience
difficulties that could delay or prevent the successful development,
introduction and marketing of these new products. Regulatory clearance or
approval of any new products may not be granted by the U.S. Food and Drug
Administration or foreign regulatory authorities on a timely basis, or at
all, and the new products may not be successfully commercialized.


                                     -12-
<PAGE>


    In December 1999, we filed a PMA with the FDA seeking approval to market
the Triage BNP Test in the United States. At the present time, in the United
States, there is no blood test available to aid in diagnosing CHF. On March
24, 2000, the FDA Clinical Chemistry and Clinical Toxicology Device Panel, or
Advisory Panel, recommended non-approval of our PMA for the Triage BNP Test.
In voting, the Advisory Panel indicated the need for additional data. While
we anticipate submitting an amendment to our PMA application by October 2000
if we develop the additional data requested by the FDA, we may not be able to
submit an amendment or, even if submitted, an amendment may not satisfy the
FDA. We have limited resources to devote to the development of our potential
products and thus the delay in the development of the Triage BNP Test may
delay the development of other products.

    If we fail to establish and maintain:

    -   reliable, cost-efficient, high volume manufacturing capacity
    -   a cost-effective sales force and administrative infrastructure, or
    -   an effective product distribution system for our products

we may not be able to successfully commercialize new products.

WE ARE DEPENDENT IN THE NEAR TERM ON SALES OF THE TRIAGE DRUGS OF ABUSE
PANEL. A SIGNIFICANT REDUCTION IN SALES OF THE TRIAGE DRUGS OF ABUSE PANEL
WOULD HARM US.

    Sales of the Triage Drugs of Abuse Panel products accounted for
approximately 83% of our sales in 1999 and 67% of our sales in the first half
of 2000. We expect our revenue and profitability to substantially depend on
the sale of the Triage Drugs of Abuse Panel products for the foreseeable
future. A significant reduction in demand for the Triage Drugs of Abuse Panel
products would have a material adverse effect on us. We believe that domestic
net sales of the Triage Drugs of Abuse Panel products may decline as the
available U.S. market becomes saturated. Competitive pressures could also
erode our profit margins for the Triage Drugs of Abuse Panel products. Our
continued growth will depend on our ability to

    -   successfully commercialize our newer products
    -   develop and commercialize other products, and
    -   gain additional acceptance of the Triage Drugs of Abuse Panel products
        in new market segments, such as international markets.

    Sales of our newer products represented less than 22% of net sales during
1999 and less than 33% during the first half of 2000.

    We may not be able to successfully commercialize new products, including
our four newer products that we have launched in the last two years, and we
may not be able to maintain or expand our share of the drug-testing market.
Technological change or the development of new or improved diagnostic
technologies could result in our products becoming obsolete or noncompetitive.

WE ARE DEPENDENT ON KEY DISTRIBUTORS AND HAVE LIMITED DIRECT SALES
EXPERIENCE. IF OUR DISTRIBUTORS TERMINATE THEIR RELATIONSHIP WITH US OR FAIL
TO ADEQUATELY PERFORM, OUR PRODUCT SALES WILL SUFFER.

    We rely upon a key distributor alliance with Fisher to distribute our
products in the United States and may rely upon distributors to distribute
products under development. The Triage Drugs of Abuse Panel products are
currently marketed pursuant to exclusive distribution agreements in the U.S.
hospital market segment by Fisher (which accounted for 83% of net sales in
1999 and 84% of net sales in the first half of 2000) and internationally by
country-specific and regional distributors. The loss or termination of one or
more of these distributors would have a material adverse effect on our sales.

    If any of our distribution or marketing agreements are terminated and we
are unable to enter into alternative agreements or if we elect to distribute
new products directly, we would have to invest in additional sales and
marketing resources, including additional field sales personnel, which would
significantly increase future selling, general and administrative expenses.
We have limited experience in direct sales, marketing and distribution of our
products. Our direct sales, marketing and distribution efforts may not be
successful. Further, we may not be able to enter into new distribution or
marketing agreements on satisfactory terms, or at all. A failure to enter
into acceptable distribution agreements or our failure to successfully market
our products would have a material and adverse effect on us.


                                     -13-
<PAGE>


COMPETITION AND TECHNOLOGICAL CHANGE MAY MAKE OUR PRODUCTS LESS ATTRACTIVE OR
OBSOLETE.

    The market in which we compete is intensely competitive. Our competitors
include:

    -   companies marketing laboratory-based tests and analyzers, and
    -   clinical reference laboratories.

    Currently, the majority of diagnostic tests used by physicians and other
health care providers are performed by independent clinical reference
laboratories and hospital laboratories. We expect that these laboratories
will compete vigorously to maintain their dominance of the testing market. In
order to achieve market acceptance for our products, we will be required to
demonstrate that our products provide cost-effective and time saving
alternatives to tests performed by clinical reference laboratories or
traditional hospital laboratory procedures. This will require physicians to
change their established means of having such tests performed and changed
their clinical practices. Our products may not be able to compete with the
testing services provided by traditional laboratory services.

    In addition, companies with a significant presence in the diagnostic
market, such as:

    -   Abbott Laboratories
    -   Dade Behring
    -   Roche Boehringer Mannheim Corporation
    -   Bayer Diagnostics, and
    -   Ortho Clinical Diagnostics, a division of Johnson & Johnson,


have developed or are developing diagnostic products that do or will compete
with our products. These competitors have substantially greater financial,
technical, research and other resources and larger, more established
marketing, sales, distribution and service organizations than us. Moreover,
these competitors offer broader product lines and have greater name
recognition than us, and offer discounts as a competitive tactic. In
addition, several smaller companies are currently making or developing
products that compete with or will compete with our products. Our competitors
may succeed in developing or marketing technologies or products that are more
effective or commercially attractive than our products, or that would render
our technologies and products obsolete. Moreover, we may not have the
financial resources, technical expertise or marketing, distribution or
support capabilities to compete successfully in the future. In addition,
competitors, many of which have made substantial investments in competing
technologies, may be more effective than us or may prevent, limit or
interfere with our ability to make, use or sell our products either in the
United States or in international markets.


OUR LIMITED MANUFACTURING EXPERIENCE AND OUR POTENTIAL INABILITY TO SCALE-UP
MANUFACTURING MAY ADVERSELY AFFECT OUR ABILITY TO PRODUCE PRODUCTS.

    We must manufacture our products in compliance with regulatory
requirements, in sufficient quantities and on a timely basis, while
maintaining product quality and acceptable manufacturing costs. Significant
additional work will be required for the scaling-up of each new product prior
to commercialization, and this work may not be completed successfully.

    In addition, although we expect some of our newer products and products
under development to share production attributes with our existing products,
production of these products may require the development of new manufacturing
technologies and expertise. These products may not be able to be manufactured
by us or any other party at a cost or in quantities to make these products
commercially viable. If we are unable to develop or contract for
manufacturing capabilities on acceptable terms for our products under
development, our ability to conduct pre-clinical and clinical testing will be
adversely affected, resulting in the delay of submission of products for
regulatory clearance or approval and initiation of new development programs,
which would have a material adverse effect on us.

    Manufacturing and quality control problems have arisen and may arise as
we attempt to scale-up our manufacturing and such scale-up may not be
achieved in a timely manner or at a commercially reasonable cost, or at all.

    Our manufacturing facilities and those of our contract manufacturers are,
or will be, subject to periodic regulatory inspections by the FDA and other
federal and state regulatory agencies and these facilities are subject to
Quality


                                     -14-
<PAGE>


System Regulations requirements of the FDA. We or our contractors may not
satisfy such regulatory requirements, and any failure to do so would have a
material adverse effect on us.

WE ARE DEPENDENT ON SOLE-SOURCE SUPPLIERS FOR OUR PRODUCTS. A SUPPLY
INTERRUPTION WOULD HARM US.

    Key components and raw materials used in the manufacture of our products
are provided by single-source vendors. Any supply interruption in a
sole-sourced component or raw material would have a material adverse effect
on our ability to manufacture these products until a new source of supply is
qualified and, as a result, would have a material adverse effect on us. In
addition, an uncorrected impurity or supplier's variation in a raw material,
either unknown to us or incompatible with our manufacturing processes of our
products, could have a material adverse effect on our ability to manufacture
products. We have under development products which, if developed, may require
us to enter into additional supplier arrangements. We may not be able to
enter into additional supplier arrangements on commercially reasonable terms,
or at all. Failure to obtain a supplier for the manufacture of our future
products, if any, would have a material adverse effect on us.

    We rely upon LRE for production of the fluorescent meter used in
connection with our Triage Meter System platform products, including the
Triage Cardiac System and Triage BNP System and others currently under
development. Our dependence upon LRE for the manufacture of the meter may
adversely affect

    -    our profit margins
    -    our ability to develop and manufacture products on a timely and
         competitive basis, or
    -    the timing of market introductions and subsequent sales of products
         incorporating the LRE meter.


HEALTH CARE REFORM AND RESTRICTIONS ON REIMBURSEMENT MAY ADVERSELY AFFECT OUR
RESULTS.

    In the United States, health care providers that purchase the Triage
Drugs of Abuse Panel and other diagnostic products generally rely on
third-party payors to reimburse all or part of the cost of the procedure.
Third-party payors can affect the pricing or the relative attractiveness of
our products by regulating the maximum amount of reimbursement provided by
such payors for testing services. In addition, the tests performed by public
health departments, corporate wellness programs and other large volume users
in the drug screening market are generally not subject to reimbursement.
Further, some health care providers are moving towards a managed care system
in which providers contract to provide comprehensive health care for a fixed
cost per patient. We are unable to predict what changes will be made in the
reimbursement methods utilized by third-party payors. We could be adversely
affected by changes in reimbursement policies of governmental or private
health care payors, particularly to the extent any such changes affect
reimbursement for procedures in which our products are used.

    Third-party payors are increasingly scrutinizing and challenging the
prices charged for medical products and services. Decreases in reimbursement
amounts for tests performed using our products may decrease amounts
physicians and other practitioners are able to charge patients, which in turn
may adversely affect our ability to sell our products on a profitable basis.
Failure by physicians and other users to obtain reimbursement from
third-party payors, or changes in government and private third-party payors'
policies toward reimbursement of tests utilizing our products could have a
material adverse effect on us. Given the efforts to control and reduce health
care costs in the United States in recent years, there can be no assurance
that currently available levels of reimbursement will continue to be
available in the future for our existing products or products under
development.

    In addition, market acceptance of our products in international markets
is dependent, in part, upon the availability of reimbursement within
prevailing health care payment systems. Reimbursement and health care payment
systems in international markets vary significantly by country, and include
both government sponsored health care and private insurance.

    We believe that the overall escalating cost of medical products and
services has led to and will continue to lead to increased pressures on the
health care industry, both foreign and domestic, to reduce the cost of
products and services, including products offered by us. Third-party
reimbursement and coverage may not be available or adequate in either U.S. or
foreign markets, current reimbursement amounts may be decreased in the future
and future legislation, regulation or reimbursement policies of third-party
payors may adversely affect the demand for our products or our ability to
sell our products on a profitable basis.


                                     -15-
<PAGE>


OUR PATENT AND PROPRIETARY TECHNOLOGY MAY NOT PROVIDE US WITH ANY BENEFIT AND
THE PATENTS OF OTHERS MAY PREVENT US FROM COMMERCIALIZING OUR PRODUCTS.

    Our ability to compete effectively will depend in part on our ability to
develop and maintain proprietary aspects of our technology, and to operate
without infringing the proprietary rights of others or to obtain licenses to
such proprietary rights. Our patent applications may not result in the
issuance of any patents. Additionally, our patent applications may not have
priority over others' applications, or, if issued, our patents may not offer
protection against competitors with similar technology. Any patents issued to
us may be challenged, invalidated or circumvented in the future and the
rights created thereunder may not provide a competitive advantage.

    Our products may incorporate technologies that are the subject of patents
issued to, and patent applications filed by, others. We have obtained
licenses for some technologies and may negotiate to obtain other licenses for
technologies patented by others. However, we may not be able to obtain
licenses for technology patented by others on commercially reasonable terms,
or at all. We may not be able to develop alternative approaches if we are
unable to obtain licenses and our current and future licenses may not be
adequate for the operation of our business. The failure to obtain necessary
licenses or to identify and implement alternative approaches would prevent us
from commercializing some of our products under development and would have a
material adverse effect on us.

    Litigation may be necessary to enforce any patents issued to us, to
protect trade secrets or know-how owned by us or to determine the
enforceability, scope and validity of the proprietary rights of others. We
settled a number of patent infringement claims prior to 1999.

THE LEGAL PROCEEDINGS TO OBTAIN PATENTS AND LITIGATION OF THIRD-PARTY CLAIMS
OF INTELLECTUAL PROPERTY INFRINGEMENT COULD REQUIRE US TO SPEND SUBSTANTIAL
AMOUNTS OF MONEY AND COULD IMPAIR OUR OPERATIONS.

    We may become subject to additional patent infringement claims and
litigation or interference proceedings conducted in the U.S. Patent and
Trademark Office, or USPTO, to determine the priority of inventions. We also
have received correspondence from other parties calling to our attention the
existence of patents that they believe cover technology which is or may be
incorporated in our products and products under development. Some of this
correspondence has included offers to negotiate the licensing of the patented
technologies. There can be no assurance that these matters will not result in
litigation to determine the enforceability, scope, and validity of the
patents. Litigation, if initiated, could seek to recover damages as a result
of any sales of the products and to enjoin further sales of such products.

    Litigation that could be brought forth by other parties may result in
material expenses to us and significant diversion of effort by our technical
and management personnel, regardless of the outcome. The outcome of
litigation is inherently uncertain and there can be no assurance that a court
would not find the third-party claims valid and that we had no successful
defense to such claims. An adverse outcome in litigation or the failure to
obtain a necessary license could subject us to significant liability and
could prevent us from selling our products, which would have a material
adverse effect on us.

    We also rely upon trade secrets, technical know-how and continuing
invention to develop and maintain our competitive position. Others may
independently develop substantially equivalent proprietary information and
techniques or otherwise gain access to our trade secrets or disclose such
technology, and we may not be able to protect our trade secrets or our rights
to our trade secrets.

    Others may have filed and in the future are likely to file patent
applications that are similar or identical to ours. To determine the priority
of inventions, we may have to participate in interference proceedings
declared by the USPTO that could result in substantial cost to us. Patent
applications of others may have priority over patent applications filed by us.

    Our commercial success depends in part on us neither infringing patents
or proprietary rights of third parties nor breaching any licenses that may
relate to our technologies and products. We are aware of several third-party
patents that may relate to our technology. We may infringe these patents, or
other patents or proprietary rights of third parties. In addition, we have
received and may in the future receive notices claiming infringement from
third parties as well as invitations to take licenses under third-party
patents. Any legal action against us or our collaborative partners claiming
damages and seeking to enjoin commercial activities relating to our products
and processes affected by third-party rights, in addition to subjecting us to
potential liability for damages, may require us or our collaborative partner
to obtain a license in order to continue to manufacture or market the
affected products and processes. We or our collaborative partners may not
prevail in any such action and any license (including licenses proposed by
third


                                     -16-
<PAGE>


parties) required under any such patent may not be made available on
commercially acceptable terms, or at all. There are a significant number of
U.S. and foreign patents and patent applications in our areas of interest,
and we believe that there may be significant litigation in the industry
regarding patent and other intellectual property rights. Litigation
concerning patent and other intellectual property rights could consume a
substantial portion of our managerial and financial resources, which would
have a material adverse effect on us.


WE MAY NEED ADDITIONAL CAPITAL. IF ADDITIONAL CAPITAL IS NOT AVAILABLE, WE
MAY HAVE TO CURTAIL OR CEASE OPERATIONS.

    If cash generated from operations is insufficient to satisfy our working
capital and capital expenditure requirements, we may be required to sell
additional equity or debt securities or obtain additional credit facilities.
Additional capital, if needed, may not be available on satisfactory terms, or
at all.

    Furthermore, any additional equity financing may be dilutive to
stockholders, and debt financing, if available, may include restrictive
covenants. Our future liquidity and capital funding requirements will depend
on numerous factors, including:

    -   the extent to which our new products and products under development are
        successfully developed, gain market acceptance and become and remain
        competitive
    -   the costs and timing of further expansion of sales, marketing and
        manufacturing activities, facilities expansion needs
    -   the timing and results of clinical studies and regulatory actions
        regarding our potential products
    -   changes in third-party reimbursement policies, and
    -   the costs and timing associated with business development activities,
        including potential licensing of technologies patented by others.

    The failure by us to raise capital on acceptable terms when needed would
cause us to have to scale back our operations, reduce our work force and
license to others products we would otherwise seek to develop or
commercialize ourselves. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Liquidity and Capital
Resources."

THE REGULATORY APPROVAL PROCESS IS EXPENSIVE, TIME CONSUMING AND UNCERTAIN
WHICH MAY PREVENT US FROM OBTAINING REQUIRED APPROVALS OR HAVE APPROVALS
RESCINDED FOR THE COMMERCIALIZATION OF OUR PRODUCTS.

    The testing, manufacture and sale of our products are subject to
regulation by numerous governmental authorities, principally the FDA and
corresponding state and foreign regulatory agencies. Pursuant to the Federal
Food, Drug, and Cosmetic Act, and the regulations promulgated thereunder, the
FDA regulates the preclinical and clinical testing, manufacture, labeling,
distribution and promotion of medical devices. We will not be able to
commence marketing or commercial sales in the United States of new products
under development until we receive clearance or approval from the FDA, which
can be a lengthy, expensive and uncertain process. Noncompliance with
applicable requirements can result in, among other things, fines,
injunctions, civil penalties, recall or seizure of products, total or partial
suspension of production, failure of the government to grant pre-market
clearance or pre-market approval for devices, withdrawal of marketing
clearances or approvals and criminal prosecution. The FDA also has the
authority to request recall, repair, replace or refund of the cost of any
device manufactured or distributed by us.

    In the United States, medical devices are classified into one of three
classes, i.e. Class I, II or III, on the basis of the controls deemed
necessary by the FDA to reasonably ensure their safety and effectiveness.
Class I devices are subject to general controls, e.g., labeling, pre-market
notification and adherence to the Quality System Regulation, QSR, and Class
II devices are subject to general and special controls, e.g., performance
standards, postmarket surveillance, patient registries and FDA guidelines.
Generally, Class III devices are those which must receive pre-market approval
by the FDA to ensure their safety and effectiveness, e.g., life-sustaining,
life-supporting and implantable devices or new devices which have been found
not to be substantially equivalent to legally marketed devices.

    Before a new device can be introduced in the market, the manufacturer
must generally obtain FDA clearance through clearance of a 510(k)
notification or approval of a pre-market approval, PMA, application. A PMA
application must be filed if a proposed device is a new device not
substantially equivalent to a legally marketed Class I or Class II device, or
if it is a pre-amendment Class III device for which the FDA has called for
PMAs. A PMA application must be supported by valid scientific evidence to
demonstrate the safety and effectiveness of the device,


                                     -17-
<PAGE>


typically including the results of clinical investigations, bench tests,
laboratory and animal studies. The PMA application must also contain a
complete description of the device and its components and a detailed
description of the methods, facilities and controls used to manufacture the
device. In addition, the submission must include the proposed labeling,
advertising literature and any training materials. The PMA approval process
can be expensive, uncertain and lengthy, and a number of devices for which
FDA approval has been sought by other companies have never been approved for
marketing.

    Upon receipt of a PMA application, the FDA makes a threshold
determination as to whether the application is sufficiently complete to
permit a substantive review. If the FDA determines that the PMA application
is complete, the FDA will accept the application for filing. Once the
submission is accepted, the FDA begins an in-depth review of the PMA. The FDA
review of a PMA application generally takes one to three years from the date
the application is accepted, but may take significantly longer. The review
time is often significantly extended by FDA requests for additional
information or clarification of information already provided in the
submission. During the review period, it is likely that an advisory
committee, typically a panel of clinicians, will be convened to review and
evaluate the application and provide recommendations to the FDA as to whether
the device should be approved. The FDA is not bound by the recommendation of
the advisory panel. Toward the end of the PMA review process, the FDA
generally will conduct an inspection of the manufacturer's facilities to
ensure that the facilities are in compliance with applicable QSR
requirements. If FDA evaluations of both the PMA application and the
manufacturing facilities are favorable, the FDA may issue either an approval
letter or an approvable letter, which usually contains a number of conditions
that must be met in order to secure final approval of the PMA. When and if
those conditions have been fulfilled to the satisfaction of the FDA, the
agency will issue a PMA approval letter, authorizing commercial marketing of
the device for certain indications. If the FDA's evaluation of the PMA
application or manufacturing facilities is not favorable, the FDA will deny
approval of the PMA application or issue a non-approvable letter. The FDA may
determine that additional clinical investigations must be performed, in which
case the PMA may be delayed for one or more years while additional clinical
investigations are conducted and submitted in an amendment to the PMA.
Modifications to a device that is the subject of an approved PMA, its
labeling or manufacturing process may require approval by the FDA of PMA
supplements or new PMAs. Supplements to an approved PMA often require the
submission of the same type of information required for an initial PMA,
except that the supplement is generally limited to that information needed to
support the proposed change from the product covered by the original PMA.

    A 510(k) clearance will be granted if the submitted information
establishes that the proposed device is "substantially equivalent" to a
legally marketed Class I or Class II medical device or to a pre-amendment
Class III medical device for which the FDA has not called for PMAs. The FDA
recently has been requiring more rigorous demonstration of substantial
equivalence than in the past, including in some cases requiring submission of
clinical data. It generally takes from three to 12 months from submission to
obtain 510(k) pre-market clearance but may take longer. The FDA may determine
that a proposed device is not substantially equivalent to a legally marketed
device or that additional information is needed before a substantial
equivalence determination can be made. A "not substantially equivalent"
determination, or a request for additional information, could prevent or
delay the market introduction of new products that fall into this category.
For any devices that are cleared through the 510(k) process, modifications or
enhancements that could significantly affect safety or effectiveness, or
constitute a major change in the intended use of the device, will require new
510(k) submissions.

    We have made modifications to the Triage Drugs of Abuse Panel since
receipt of initial 510(k) clearance. With respect to several of these
modifications, we filed new 510(k) notices describing the modifications, and
have received FDA clearance of those 510(k) notices. We made other
modifications to the Triage Drugs of Abuse Panel which we believe do not
require the submission of new 510(k) notices. There can be no assurance,
however, that the FDA would agree with any of our determinations not to
submit a new 510(k) notice for any of these modifications, or would not
require us to submit a new 510(k) notice for any of these modifications made
to the Triage Drugs of Abuse Panel. If the FDA requires the Company to submit
a new 510(k) notice for any device modification, we may be prohibited from
marketing the modified the Triage Drugs of Abuse Panel until the 510(k)
notice is cleared by the FDA.

    We are uncertain of the regulatory path to market that the FDA will
ultimately apply to our products currently in development. Although the
Triage Drugs of Abuse Panel, Triage C. difficile Panel, Triage Parasite Panel
and Triage Cardiac Panel received 510(k) clearance, a PMA is required for
Triage BNP Test and may be required for the other products now in
development. There can be no assurance that the FDA will not determine that
we must adhere to the more costly, lengthy and uncertain PMA approval process
for any of our products in development.

    In December 1999, we filed a PMA with the FDA, seeking approval to market
the Triage BNP Test in the United States. At the present time, in the United
States, there is no blood test available to aid in diagnosing CHF. On March


                                     -18-
<PAGE>


24, 2000, the FDA Clinical Chemistry and Clinical Toxicology Device Panel
(Advisory Panel) voted 6-3 to recommend non-approval of our PMA for the
Triage BNP Test. In voting, the Advisory Panel indicated the need for
additional data. Despite this outcome, we continue to believe in the
potential utility, safety and effectiveness of the Triage BNP Test. In order
to remedy the deficiencies of the current PMA submission, we intend to gather
data from additional female CHF patients to ensure that our CHF patient
population adequately mirrors the known sex distribution for the disease.
Also, to better demonstrate the sensitivity and specificity of our test in
different age groups, we will accumulate data from a control group of healthy
individuals that is representative of the age distribution among the diseased
population. We anticipate submitting an amendment to our PMA application by
October 2000. In April 2000, the FDA conducted an audit of our manufacturing
facility. No citations or observations resulted from this audit.

    We may not be able to obtain necessary regulatory approvals or clearances
for our products on a timely basis, if at all. Delays in receipt of or
failure to receive such approvals or clearances, the loss of previously
received approvals or clearances, limitations on intended use imposed as a
condition of such approvals or clearances, or failure to comply with existing
or future regulatory requirements would have a material adverse effect on our
business, financial condition and results of operations.

    Before the manufacturer of a device can submit the device for FDA
approval or clearance, it generally must conduct a clinical investigation of
the device. Although clinical investigations of most devices are subject to
the investigational device exemption, IDE, requirements, clinical
investigations of in vitro diagnostic, IVD, tests, such as all of the
Company's products and products under development, are exempt from the IDE
requirements, including the need to obtain the FDA's prior approval, provided
the testing is noninvasive, does not require an invasive sampling procedure
that presents a significant risk, does not intentionally introduce energy
into the subject, and is not used as a diagnostic procedure without
confirmation by another medically established test or procedure. In addition,
the IVD must be labeled for research use only, RUO, or investigational use
only, IUO, and distribution controls must be established to assure that IVDs
distributed for research or clinical investigation are used only for those
purposes.

    We intend to conduct clinical investigations of our products under
development, which will entail distributing them in the United States on an
IUO basis. There can be no assurance that the FDA would agree that our IUO
distribution of our IVD products under development will meet the requirements
for IDE exemption. Furthermore, failure by us or the recipients of our
products under development to maintain compliance with the IDE exemption
requirements could result in enforcement action by the FDA, including, among
other things, the loss of the IDE exemption or the imposition of other
restrictions on our distribution of our products under development, which
would adversely affect our ability to conduct the clinical investigations
necessary to support marketing clearance or approval.

    Any devices manufactured or distributed by us pursuant to FDA clearance
or approvals are subject to pervasive and continuing regulation by FDA and
certain state agencies. Manufacturers of medical devices for marketing in the
United States are required to adhere to QSR, which includes testing, control,
documentation, and other quality assurance requirements. Manufacturers must
also comply with Medical Device Reporting, MDR, requirements that a
manufacturer report to the FDA any incident in which its product may have
caused or contributed to a death or serious injury, or in which its product
malfunctioned and, if the malfunction were to recur, it would be likely to
cause or contribute to a death or serious injury. Labeling and promotional
activities are subject to scrutiny by the FDA and, in certain circumstances,
by the Federal Trade Commission. Current FDA enforcement policy prohibits the
marketing of approved medical devices for unapproved uses.

    We are subject to routine inspection by the FDA and certain state
agencies for compliance with QSR requirements, MDR requirements and other
applicable regulations. The recently finalized QSR requirements include the
addition of design controls that will likely increase the cost of compliance.
Changes in existing requirements or adoption of new requirements could have a
material adverse effect on our business, financial condition and results of
operation. There can be no assurance that we will not incur significant costs
to comply with laws and regulations in the future or that laws and
regulations will not have a material adverse effect upon our business,
financial condition and results of operations.

    We are also subject to numerous federal, state and local laws relating to
such matters as safe working conditions, manufacturing practices,
environmental protection, fire hazard control and disposal of hazardous or
potentially hazardous substances. There can be no assurance that we will not
incur significant costs to comply with laws and regulations in the future or
that such laws or regulations will not have a material adverse effect upon
our business, financial condition and results of operations.


                                     -19-
<PAGE>


    The use of our products is also affected by the Clinical Laboratory
Improvement Amendments of 1988, CLIA, and related federal and state
regulations which provide for regulation of laboratory testing. The scope of
these regulations includes quality control, proficiency testing, personnel
standards and federal inspections. CLIA categorizes tests as "waived,"
"moderately complex" or "highly complex," on the basis of specific criteria.
There can be no assurance that any future amendment of CLIA or the
promulgation of additional regulations impacting laboratory testing will not
have a material adverse effect on our ability to market our products or on
our business, financial condition or results of operations.

WE ARE DEPENDENT ON OTHERS FOR THE DEVELOPMENT OF PRODUCTS. THE FAILURE OF
OUR COLLABORATIONS TO SUCCESSFULLY DEVELOP PRODUCTS WOULD HARM OUR BUSINESS.

    Our strategy for the research, development, commercialization and
distribution of some of our products entails entering into various
arrangements with third parties. We are or will be dependent upon the success
of these parties in performing their responsibilities. These parties may not
perform their obligations as expected and no revenue may be derived from
these arrangements.

    We entered into agreements with partners for the development and
marketing of products. The agreements are subject to rights of termination
and may be terminated. Our collaborators may not abide by their contractual
obligations and may discontinue or sell their current lines of business. The
research for which we receive or provide funding may not lead to the
development of products. We intend to enter into additional development and
marketing agreements. We may not be able to enter into agreements on
acceptable terms, or at all.

    We are continuing to enhance, with LRE, a hand-held point-of-care
fluorescent meter for use in Triage Meter System products. The meter can be
programmed to run a specific test through the use of changeable proprietary
software that is also under further improvements by LRE. LRE may not improve
the hardware or software on schedule, or at all, and new software that
permits the meter to be used for another Triage Meter System product may not
be further improved.

WE MAY NOT BE ABLE TO MANAGE OUR GROWTH.

    We anticipate increased growth in the number of our employees, the scope
of our operating and financial systems and the geographic area of our
operations as new products are developed and commercialized. This growth will
result in an increase in responsibilities for both existing and new
management personnel. Our ability to manage growth effectively will require
us to continue to implement and improve our operational, financial and
management information systems and to train, motivate and manage our
employees. We may not be able to manage our expansion, and a failure to do so
could have a material adverse effect on us.

IF WE LOSE OUR KEY PERSONNEL OR ARE UNABLE TO ATTRACT AND RETAIN ADDITIONAL
PERSONNEL, WE MAY NOT BE ABLE TO PURSUE COLLABORATIONS OR DEVELOP OUR OWN
PRODUCTS.

    Our future success depends in part on the continued service of our key
technical, sales, marketing and executive personnel, and our ability to
identify, hire and retain qualified personnel. Competition for such personnel
is intense and we may not be able to retain existing personnel or identify or
hire additional personnel.

WE MAY HAVE SIGNIFICANT PRODUCT LIABILITY EXPOSURE.

    The testing, manufacturing and marketing of medical diagnostic devices
entails an inherent risk of product liability claims. Potential product
liability claims may exceed the amount of our insurance coverage or may be
excluded from coverage under the terms of the policy. Our existing insurance
may not be renewed at a cost and level of coverage comparable to that
presently in effect, or at all. In the event that we are held liable for a
claim against which we are not indemnified or for damages exceeding the
limits of our insurance coverage, that claim could exceed our total assets.


                                     -20-
<PAGE>


PART II.  OTHER INFORMATION.


ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

     On May 31, 2000, the Company held its Annual Meeting of Stockholders.
The following actions were taken at the annual meeting. As of April 7, 2000,
the record date, 13,575,570 shares were entitled to vote at the Annual
Meeting. Of these 13,575,570 shares, 1,119,988 were not voted.

1.   The following Class III Directors were elected:

     a.  Kim D. Blickenstaff. 11,920,511 shares voted in favor of the nominee,
         535,071 shares withheld their vote;

     b.  Gunars E. Valkirs. 11,600,192 shares voted in favor of the nominee,
         855,390 shares withheld their vote;

     c.  The following directors continue in office for their existing terms:

         Lonnie M. Smith
         Timothy J. Wollaeger
         Howard E. Greene, Jr.
         Anthony DeMaria

2.   A proposal to amend and restate the 1996 Stock Incentive Plan of Biosite
     Diagnostics Incorporated, among other things, increase the number of shares
     of Common Stock authorized for issuance thereunder by 1,000,000 shares.
     5,757,575 shares were voted in favor of the proposal, 2,566,010 shares were
     voted against the proposal, 53,670 shares abstained and 4,078,327 shares
     were not voted (includes broker non-votes);

3.   The selection of Ernst & Young LLP as the Company's independent auditor was
     ratified. 12,425,753 shares were voted in favor of the proposal, 16,838
     shares were voted against the proposal, 12,991 shares abstained and 0
     shares were not voted (includes broker non-votes);



ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

         (a)   Exhibits

               27.1      Financial Data Schedule

         (b)   Reports on Form 8-K.

               None


                                     -21-
<PAGE>


SIGNATURES

    Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.



         Dated:  August 11, 2000        BIOSITE DIAGNOSTICS INCORPORATED


                                        By:   /s/ CHRISTOPHER J. TWOMEY
                                             --------------------------------
                                             Christopher J. Twomey
                                             Vice President, Finance and
                                             Chief Financial Officer
                                             (Principal Financial and
                                             Accounting Officer)









                                     -22-
<PAGE>


                                  Exhibit Index

<TABLE>
<CAPTION>
Exhibit
Number                     Description
------                     -----------
<S>                        <C>
27.1                       Financial Data Schedule

</TABLE>









                                     -23-