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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549





Form 10-Q







|x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ---------------------------------------------------------------------------------------

FOR THE QUARTERLY PERIOD ENDED September 26, 2009



| ̈ | 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: 001-34116





Celera Corporation

(Exact name of registrant as specified in its charter)







|                                               |  |                                     
|---------------------------------------------- |  | ------------------------------------
|Delaware                                       |  | 26-2028576                          
|(State or other jurisdiction of incorporation) |  | (I.R.S. Employer Identification No.)

1401 Harbor Bay Parkway

Alameda, CA 94502

(Address of principal executive
offices, with zip code)

(510) 749-4200

(Registrants telephone number, including area code)





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 the filing requirements for the past 90 days.    Yes  x    No   ̈

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive
Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such
files).    Yes   ̈    No   ̈

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of large accelerated
filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act. (Check one):



|                        |  |                                                  |  |                           |  |  
|----------------------- |  | ------------------------------------------------ |  | ------------------------- |  | -
|Large accelerated filer |  |  ̈                                                |  | Accelerated filer         |  |  ̈
|                        |  |                                                  | 
|Non-accelerated filer   |  | x  (Do not check if a smaller reporting company) |  | Smaller reporting company |  |  ̈

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the
Exchange Act).    Yes   ̈    No  x

Number of shares of common stock outstanding as of November 1, 2009: 81,943,596.









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TABLE OF CONTENTS



|                               |  |                                                                                                                                |  |   
|------------------------------ |  | ------------------------------------------------------------------------------------------------------------------------------ |  | --
|                               |  | Page                                                                                                                          
|PART I  Financial Information |  |                                                                                                                               
|                               |  |                                                                                                                               
|Item 1.                        |  | Financial Statements (unaudited)                                                                                               |  |   
|                               |  | Condensed Consolidated Statements of Operations for the Three and Nine Months Ended September 26, 2009 and September
 27, 2008 |  | 4 
|                               |  | Condensed Consolidated Statements of Financial Position at September 26, 2009 and December 27, 2008                            |  | 5 
|                               |  | Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 26, 2009 and September 27,
 2008           |  | 6 
|                               |  | Notes to Unaudited Condensed Consolidated Financial Statements                                                                 |  | 7 
|Item 2.                        |  | Managements Discussion and Analysis of Financial Condition and Results of
Operations                                          |  | 24
|Item 3.                        |  | Quantitative and Qualitative Disclosures about Market Risk                                                                     |  | 38
|Item 4T.                       |  | Controls and Procedures                                                                                                        |  | 39
|                               | 
|PART II  Other Information    |  |                                                                                                                               
|                               |  |                                                                                                                               
|Item 1.                        |  | Legal Proceedings                                                                                                              |  | 40
|Item 1A.                       |  | Risk Factors                                                                                                                   |  | 40
|Item 2.                        |  | Unregistered Sales of Equity Securities and Use of Proceeds                                                                    |  | 68
|Item 6.                        |  | Exhibits                                                                                                                       |  | 69
|                               | 
|SIGNATURES                     |  | 70                                                                                                                            



2



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CAUTIONARY STATEMENT FOR PURPOSES OF THE SAFE HARBOR PROVISIONS OF THE PRIVATE
SECURITIES LITIGATION REFORM ACT OF 1995

This Quarterly Report on Form 10-Q contains certain forward-looking statements, including,
without limitation, statements concerning the conditions in our industry, our operations, our economic performance and financial condition, including, in particular, statements relating to our business and growth strategy and development efforts.
The Private Securities Litigation Reform Act of 1995 provides a safe harbor for certain forward-looking statements so long as such information is identified as forward-looking and is accompanied by meaningful cautionary statements
identifying important factors that could cause actual results to differ materially from those projected in the information. When used in this Quarterly Report on Form 10-Q, the words may, might, should,
estimate, project, plan, anticipate, expect, intend, outlook, believe and other similar expressions are intended to identify forward-looking statements
and information. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of their dates. These forward-looking statements are based on estimates and assumptions by our management that, although we
believe to be reasonable, are inherently uncertain and subject to a number of risks and uncertainties. These risks and uncertainties include, without limitation, those identified in Part II, Item 1A Risk Factors in this Quarterly
Report. Reference is also made to such risks and uncertainties detailed from time to time in our other filings with the Securities and Exchange Commission (SEC). We undertake no obligation to publicly update or revise any forward-looking statement
as a result of new information, future events or otherwise, except as otherwise required by law.



3



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PART I  Financial Information



|ITEM 1. | FINANCIAL STATEMENTS
|------- | --------------------

Celera Corporation

Condensed Consolidated Statements of Operations

(Unaudited)



|                                                       |  |                    |        |   |                   |   |        |                   |  |   |                   |   |  |   |         |  
|------------------------------------------------------ |  | ------------------ | ------ | - | ----------------- | - | ------ | ----------------- |  | - | ----------------- | - |  | - | ------- | -
|                                                       |  | Three Months Ended |        |   | Nine Months Ended |  
|(Dollar amounts in thousands except per share amounts) |  | September 26,2009  |        |   | September 27,2008 |   |        | September 26,2009 |  |   | September 27,2008 |  
|Net Revenues                                           |  |                    |        |   |                   |   |        |                   |  |   |                   |   |  |   |         |  
|Products                                               |  | $                  | 8,224  |   |                   | $ | 10,363 |                   |  | $ | 25,658            |   |  | $ | 28,464  |  
|Services                                               |  |                    | 24,353 |   |                   |   | 30,463 |                   |  |   | 78,456            |   |  |   | 79,182  |  
|Royalties, licenses and milestones                     |  |                    | 7,448  |   |                   |   | 4,983  |                   |  |   | 22,965            |   |  |   | 20,345  |  
|                                                       |  |                    |        |   |                   |   |        |                   |  |   |                   |   |  |   |         |  
|Total Net Revenues                                     |  |                    | 40,025 |   |                   |   | 45,809 |                   |  |   | 127,079           |   |  |   | 127,991 |  
|                                                       |  |                    |        |   |                   |   |        |                   |  |   |                   |   |  |   |         |  
|Cost of Sales                                          |  |                    |        |   |                   |   |        |                   |  |   |                   |   |  |   |         |  
|Products                                               |  |                    | 4,325  |   |                   |   | 5,489  |                   |  |   | 13,566            |   |  |   | 13,750  |  
|Services                                               |  |                    | 8,347  |   |                   |   | 9,072  |                   |  |   | 26,516            |   |  |   | 26,131  |  
|                                                       |  |                    |        |   |                   |   |        |                   |  |   |                   |   |  |   |         |  
|Total Cost of Sales                                    |  |                    | 12,672 |   |                   |   | 14,561 |                   |  |   | 40,082            |   |  |   | 39,881  |  
|                                                       |  |                    |        |   |                   |   |        |                   |  |   |                   |   |  |   |         |  
|Gross Margin                                           |  |                    | 27,353 |   |                   |   | 31,248 |                   |  |   | 86,997            |   |  |   | 88,110  |  
|Selling, general and administrative                    |  |                    | 22,652 |   |                   |   | 25,228 |                   |  |   | 89,007            |   |  |   | 71,712  |  
|Research and development                               |  |                    | 6,198  |   |                   |   | 7,961  |                   |  |   | 21,353            |   |  |   | 27,532  |  
|Amortization of purchased intangible assets            |  |                    | 2,568  |   |                   |   | 2,549  |                   |  |   | 7,666             |   |  |   | 7,559   |  
|Employee-related charges, asset impairments and other  |  |                    | 3,775  |   |                   |   | 1,760  |                   |  |   | 4,373             |   |  |   | 8,309   |  
|Litigation-related charge and legal settlement         |  |                    | 978    |   |                   |   |       |                   |  |   | 978               |   |  |   | (1,100  | )
|Impairment of intangible assets                        |  |                    |       |   |                   |   |       |                   |  |   | 15,655            |   |  |   |        |  
|                                                       |  |                    |        |   |                   |   |        |                   |  |   |                   |   |  |   |         |  
|Operating Loss                                         |  |                    | 8,818  |   |                   |   | 6,250  |                   |  |   | 52,035            |   |  |   | 25,902  |  
|Loss on investments                                    |  |                    |       |   |                   |   | 3,217  |                   |  |   |                  |   |  |   | 6,297   |  
|Interest income, net                                   |  |                    | (1,380 | ) |                   |   | (2,490 | )                 |  |   | (5,191            | ) |  |   | (8,623  | )
|Other income, net                                      |  |                    |       |   |                   |   |       |                   |  |   |                  |   |  |   | (136    | )
|                                                       |  |                    |        |   |                   |   |        |                   |  |   |                   |   |  |   |         |  
|Loss Before Income Taxes                               |  |                    | 7,438  |   |                   |   | 6,977  |                   |  |   | 46,844            |   |  |   | 23,440  |  
|(Benefit) provision for income taxes                   |  |                    | (62    | ) |                   |   | 28     |                   |  |   | (6,332            | ) |  |   | 95,056  |  
|                                                       |  |                    |        |   |                   |   |        |                   |  |   |                   |   |  |   |         |  
|Net Loss                                               |  | $                  | 7,376  |   |                   | $ | 7,005  |                   |  | $ | 40,512            |   |  | $ | 118,496 |  
|                                                       |  |                    |        |   |                   |   |        |                   |  |   |                   |   |  |   |         |  
|                                                       |  |                    |        |  
|Net Loss per Share                                     |  |                    |        |   |                   |   |        |                   |  |   |                   |   |  |   |         |  
|Basic and diluted                                      |  | $                  | 0.09   |   |                   | $ | 0.09   |                   |  | $ | 0.50              |   |  | $ | 1.48    |  
|                                                       |  |                    |        |   |                   |   |        |                   |  |   |                   |   |  |   |         |  
|                                                       |  |                    |        |  
|Weighted Average Shares Outstanding (in thousands)     |  |                    |        |   |                   |   |        |                   |  |   |                   |   |  |   |         |  
|Basic and diluted                                      |  |                    | 81,860 |   |                   |   | 80,184 |                   |  |   | 81,805            |   |  |   | 79,941  |  
|                                                       |  |                    |        |   |                   |   |        |                   |  |   |                   |   |  |   |         |  

See accompanying notes to unaudited condensed consolidated financial statements.



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Celera Corporation

Condensed Consolidated Statements of Financial Position

(Unaudited)



|                                                                                                                                   |  |                      |            |   |                     |   |           |  
|---------------------------------------------------------------------------------------------------------------------------------- |  | -------------------- | ---------- | - | ------------------- | - | --------- | -
|(Dollar amounts in thousands)                                                                                                      |  | At September 26,2009 |            |   | At December 27,2008 |  
|Assets                                                                                                                             |  |                      |            |   |                     |   |           |  
|Current assets                                                                                                                     |  |                      |            |   |                     |   |           |  
|Cash and cash equivalents                                                                                                          |  | $                    | 73,682     |   |                     | $ | 72,018    |  
|Short-term investments                                                                                                             |  |                      | 247,261    |   |                     |   | 244,457   |  
|Accounts receivable (net of allowances for doubtful accounts of $24,150 and $16,752, respectively)                                 |  |                      | 31,263     |   |                     |   | 47,652    |  
|Inventories, net                                                                                                                   |  |                      | 6,061      |   |                     |   | 7,514     |  
|Prepaid expenses and other current assets                                                                                          |  |                      | 14,463     |   |                     |   | 19,699    |  
|                                                                                                                                   |  |                      |            |   |                     |   |           |  
|Total current assets                                                                                                               |  |                      | 372,730    |   |                     |   | 391,340   |  
|Property, plant and equipment, net                                                                                                 |  |                      | 14,690     |   |                     |   | 16,668    |  
|Goodwill                                                                                                                           |  |                      | 116,350    |   |                     |   | 116,350   |  
|Intangible assets, net                                                                                                             |  |                      | 104,173    |   |                     |   | 117,182   |  
|Other long-term assets                                                                                                             |  |                      | 28,007     |   |                     |   | 26,349    |  
|                                                                                                                                   |  |                      |            |   |                     |   |           |  
|Total Assets                                                                                                                       |  | $                    | 635,950    |   |                     | $ | 667,889   |  
|                                                                                                                                   |  |                      |            |   |                     |   |           |  
|                                                                                                                                   |  |                     
|Liabilities and Stockholders Equity                                                                                               |  |                      |            |   |                     |   |           |  
|Current liabilities                                                                                                                |  |                      |            |   |                     |   |           |  
|Loans payable                                                                                                                      |  | $                    |           |   |                     | $ | 62        |  
|Accounts payable                                                                                                                   |  |                      | 8,532      |   |                     |   | 8,629     |  
|Accrued salaries and wages                                                                                                         |  |                      | 7,927      |   |                     |   | 8,997     |  
|Accrued taxes on income                                                                                                            |  |                      | 107        |   |                     |   | 190       |  
|Other accrued expenses                                                                                                             |  |                      | 14,534     |   |                     |   | 9,765     |  
|Deferred revenue                                                                                                                   |  |                      | 1,034      |   |                     |   | 1,811     |  
|                                                                                                                                   |  |                      |            |   |                     |   |           |  
|Total current liabilities                                                                                                          |  |                      | 32,134     |   |                     |   | 29,454    |  
|Other long-term liabilities                                                                                                        |  |                      | 15,263     |   |                     |   | 25,221    |  
|                                                                                                                                   |  |                      |            |   |                     |   |           |  
|Total Liabilities                                                                                                                  |  |                      | 47,397     |   |                     |   | 54,675    |  
|                                                                                                                                   |  |                      |            |   |                     |   |           |  
|                                                                                                                                   |  |                     
|Commitments and contingencies (refer to Note 14)                                                                                   |  |                      |            |   |                     |   |           |  
|                                                                                                                                   |  |                     
|Stockholders Equity                                                                                                               |  |                      |            |   |                     |   |           |  
|Common stock: par value $0.01 per share; 300,000,000 shares authorized; 81,942,119 and 81,241,461 shares outstanding,
respectively |  |                      | 822        |   |                     |   | 814       |  
|Preferred stock: par value $0.01 per share; 10,000,000 shares authorized; zero shares issued and outstanding                       |  |                      |           |   |                     |   |          |  
|Additional paid-in capital                                                                                                         |  |                      | 1,587,827  |   |                     |   | 1,581,080 |  
|Accumulated other comprehensive income (loss)                                                                                      |  |                      | 3,846      |   |                     |   | (5,760    | )
|Treasury stock, at cost: 221,208 and 133,600 shares, respectively                                                                  |  |                      | (1,953     | ) |                     |   | (1,443    | )
|Accumulated net loss                                                                                                               |  |                      | (1,001,989 | ) |                     |   | (961,477  | )
|                                                                                                                                   |  |                      |            |   |                     |   |           |  
|Total Stockholders Equity                                                                                                         |  |                      | 588,553    |   |                     |   | 613,214   |  
|                                                                                                                                   |  |                      |            |   |                     |   |           |  
|Total Liabilities and Stockholders Equity                                                                                         |  | $                    | 635,950    |   |                     | $ | 667,889   |  
|                                                                                                                                   |  |                      |            |   |                     |   |           |  

See accompanying notes to unaudited condensed consolidated financial statements.



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Celera Corporation

Condensed Consolidated Statements of Cash Flows

(Unaudited)



|                                                                                                       |  |                   |          |   |                   |   |          |  
|------------------------------------------------------------------------------------------------------ |  | ----------------- | -------- | - | ----------------- | - | -------- | -
|                                                                                                       |  | Nine Months Ended |         
|(Dollar amounts in thousands)                                                                          |  | September 26,2009 |          |   | September 27,2008 |  
|Operating Activities                                                                                   |  |                   |          |   |                   |   |          |  
|Net loss                                                                                               |  | $                 | (40,512  | ) |                   | $ | (118,496 | )
|Adjustments to reconcile net loss from operations to net cash provided (used) by operating activities: |  |                   |          |   |                   |   |          |  
|Depreciation and amortization                                                                          |  |                   | 12,146   |   |                   |   | 11,893   |  
|Impairment of intangible assets                                                                        |  |                   | 15,655   |   |                   |   |         |  
|Non-cash interest income                                                                               |  |                   | (681     | ) |                   |   |         |  
|Allowance for doubtful accounts                                                                        |  |                   | 27,744   |   |                   |   | 10,889   |  
|Employee-related charges, asset impairments and other                                                  |  |                   | 2,252    |   |                   |   | 10,458   |  
|Share-based compensation                                                                               |  |                   | 2,569    |   |                   |   | 5,466    |  
|Deferred income taxes                                                                                  |  |                   | (6,062   | ) |                   |   | 131,755  |  
|Loss on disposal of assets                                                                             |  |                   | 198      |   |                   |   | 269      |  
|Amortization of premium on purchase of investments                                                     |  |                   | 1,252    |   |                   |   | 24       |  
|Nonreimbursable utilization of tax benefits by Applied Biosystems (now Life Technologies)              |  |                   |         |   |                   |   | (42,170  | )
|Changes in operating assets and liabilities:                                                           |  |                   |          |   |                   |   |          |  
|Accounts receivable                                                                                    |  |                   | (11,355  | ) |                   |   | (25,349  | )
|Inventories                                                                                            |  |                   | 2,148    |   |                   |   | 2,947    |  
|Prepaid expenses and other assets                                                                      |  |                   | (401     | ) |                   |   | 6,640    |  
|Accounts payable and other liabilities                                                                 |  |                   | (1,475   | ) |                   |   | (12,638  | )
|                                                                                                       |  |                   |          |   |                   |   |          |  
|Net Cash Provided (Used) by Operating Activities                                                       |  |                   | 3,478    |   |                   |   | (18,312  | )
|                                                                                                       |  |                   |          |   |                   |   |          |  
|Investing Activities                                                                                   |  |                   |          |   |                   |   |          |  
|Purchase of intangible assets                                                                          |  |                   | (10,650  | ) |                   |   | (2,000   | )
|Additions to property, plant and equipment, net                                                        |  |                   | (2,994   | ) |                   |   | (4,306   | )
|Proceeds from maturities of available-for-sale investments                                             |  |                   | 113,365  |   |                   |   | 113,675  |  
|Proceeds from sales of available-for-sale investments                                                  |  |                   | 30,094   |   |                   |   | 92,010   |  
|Purchases of available-for-sale investments                                                            |  |                   | (138,780 | ) |                   |   | (187,806 | )
|Investment in alliance activity, net                                                                   |  |                   |         |   |                   |   | (666     | )
|                                                                                                       |  |                   |          |   |                   |   |          |  
|Net Cash (Used) Provided by Investing Activities                                                       |  |                   | (8,965   | ) |                   |   | 10,907   |  
|                                                                                                       |  |                   |          |   |                   |   |          |  
|Financing Activities                                                                                   |  |                   |          |   |                   |   |          |  
|Principal payments on loans payable and debt                                                           |  |                   | (62      | ) |                   |   | (92      | )
|Funding from Applied Biosystems (now Life Technologies) as a result of the split-off                   |  |                   | 31       |   |                   |   | 1,118    |  
|Proceeds from the issuance of stock, net of taxes withheld and paid                                    |  |                   | 7,182    |   |                   |   | 5,899    |  
|                                                                                                       |  |                   |          |   |                   |   |          |  
|Net Cash Provided by Financing Activities                                                              |  |                   | 7,151    |   |                   |   | 6,925    |  
|                                                                                                       |  |                   |          |   |                   |   |          |  
|Net Change in Cash and Cash Equivalents                                                                |  |                   | 1,664    |   |                   |   | (480     | )
|Cash and Cash Equivalents at Beginning of Period                                                       |  |                   | 72,018   |   |                   |   | 51,080   |  
|                                                                                                       |  |                   |          |   |                   |   |          |  
|Cash and Cash Equivalents at End of Period                                                             |  | $                 | 73,682   |   |                   | $ | 50,600   |  
|                                                                                                       |  |                   |          |   |                   |   |          |  

See accompanying notes to unaudited condensed consolidated financial statements.



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Celera Corporation

Notes to Unaudited Condensed Consolidated Financial Statements

1. The Company and Nature of Operations

Organization

Celera Corporation is a healthcare business focusing on the integration of genetic testing into routine clinical care through a
combination of products and services incorporating proprietary discoveries.

When used in these notes, references to the Company
and Celera refer to the Celera Group for all periods prior to the completion of the split-off from Applied Biosystems, Inc. (Applied Biosystems), formerly known as Applera Corporation (Applera), which is discussed below under
Relationship with Applied Biosystems (now Life Technologies), and to Celera Corporation and its subsidiaries for all periods following the completion of the split-off, in each case, unless the context otherwise requires.

Celera operates through three reporting segments: a clinical laboratory testing service business (Lab Services); a products business (Products); and a
segment that includes other activities under corporate management (Corporate). The Lab Services business, conducted through Berkeley HeartLab, Inc. (BHL), offers a broad portfolio of clinical laboratory tests and disease management services designed
to help improve cardiovascular disease treatment regimens for patients. The Products business develops, manufactures and oversees the commercialization of molecular diagnostic products. Most of this business is conducted through the Companys
distribution and royalty agreements with Abbott Molecular (Abbott), a subsidiary of Abbott Laboratories. The Corporate segment includes revenues from royalties, licenses, collaborations and milestones related to the licensing of certain intellectual
property and from Celeras former small molecule and proteomic programs.

Relationship with Applied Biosystems (now
Life Technologies)

Prior to July 1, 2008, Celera operated as a reporting segment of Applied Biosystems, formerly known as
Applera, and not as a          stand-alone company. Applied Biosystems established the following two classes of common stock, referred to as tracking stocks, which were intended to reflect separately the
relative performance of Applied Biosystems two businesses:



| |  |  | Applied Biosystems Group common stock that was intended to reflect the relative performance of the Applied Biosystems Group; and
| | - |  | --------------------------------------------------------------------------------------------------------------------------------



| |  |  | Celera Group common stock that was intended to reflect the relative performance of the Celera Group.
| | - |  | ----------------------------------------------------------------------------------------------------

At the time of the split-off, which was completed on July 1, 2008, each outstanding share of Celera Group common stock was redeemed in exchange for one
share of Celera Corporation common stock. In addition, each option to purchase shares of Celera Group common stock and each other security evidencing the right to receive shares of Celera Group common stock issued under employee stock incentive
plans and outstanding on the split-off date were converted into a similar option to purchase shares of Celera Corporation common stock, at the same exercise price, or a similar security evidencing the right to receive shares of Celera Corporation
common stock.

In November 2008, Applied Biosystems merged with Invitrogen Corporation to form a new company, Life Technologies Corporation
(Life Technologies).



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Celera Corporation

Notes to Unaudited Condensed Consolidated Financial Statements (Continued)



Basis of Presentation

Prior to the split-off, Celera was a reporting segment of Applied Biosystems (now Life Technologies) and its financial information was included in Applied Biosystems (now Life Technologies) consolidating financial information.
The consolidated financial statements of Celera prior to July 1, 2008 include the assets and liabilities of Applied Biosystems (now Life Technologies) that were specifically attributed to Celera.

Following the split-off, on July 1, 2008, Celera became a stand-alone company with its own consolidated financial statements. As a result, the
comparability of certain items has been affected.

The accompanying unaudited condensed consolidated financial statements include the
financial statements of Celera Corporation and its wholly owned subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation. Subsequent events have been evaluated through the date of issuance of the
Companys unaudited condensed consolidated financial statements, November 9, 2009.

Certain information and footnote disclosures
normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to such rules. The accompanying unaudited interim financial
statements should be read in conjunction with the audited consolidated financial statements and notes thereto for the six month transition period ended December 27, 2008 included in the Companys Transition Report on Form 10-KT filed
with the SEC on March 25, 2009.

In the opinion of management, the accompanying unaudited condensed consolidated financial statements
contain all adjustments (consisting of normal recurring adjustments) considered necessary for the fair statement of the results for the interim periods.

Use of Estimates

The preparation of financial statements in conformity with
accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues and expenses for the reporting period. Significant items subject to such estimates and assumptions include: test service revenues, the carrying amount of property, plant and
equipment, intangible assets and goodwill; and valuation allowances for accounts receivable, inventories and deferred income tax assets. Actual results could differ from those estimates.

2. Accounting Policies

There have been no changes to the Companys accounting
policies for the nine months ended September 26, 2009. Refer to Note 1 to the consolidated financial statements contained in the Companys Transition Report on Form 10-KT for the six months ended December 27, 2008.

Recently Issued Accounting Pronouncements

In June 2009, the Financial Accounting Standards Board (FASB) issued The FASB Accounting Standards Codification (Codification). The Codification is now the single official source of authoritative,
nongovernmental U.S. generally accepted accounting principles (GAAP). The Codification did not change GAAP but reorganized the literature. The provisions of the Codification are effective for the Companys third quarter of 2009. The
adoption of the Codification did not have an impact on the Companys consolidated results of operations and financial position.



8



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##### Table of Contents

Celera Corporation

Notes to Unaudited Condensed Consolidated Financial Statements (Continued)



In October 2009, the FASB issued two updates to the Codification relating to revenue recognition. The first update eliminates the requirement that all
undelivered elements in an arrangement with multiple deliverables have objective and reliable evidence of fair value before revenue can be recognized for items that have been delivered. The update also no longer allows use of the residual method
when allocating consideration to deliverables. Instead, arrangement consideration is to be allocated to deliverables using the relative selling price method, applying a selling price hierarchy. Vendor specific objective evidence (VSOE) of
selling price should be used if it exists. Otherwise, third party evidence (TPE) of selling price should be used. If neither VSOE nor TPE is available, the companys best estimate of selling price should be used. The second update
eliminates tangible products from the scope of software revenue recognition guidance when the tangible products contain software components and non-software components that function together to deliver the tangible products essential
functionality. Both updates require expanded qualitative and quantitative disclosures and are effective for fiscal years beginning on or after June 15, 2010, with prospective application for new or materially modified arrangements or
retrospective application permitted. Early adoption is permitted. The same transition method and period of adoption must be used for both updates. The Company is in the process of analyzing the impact of these updates.

In May 2009, the FASB issued a statement which establishes general standards of accounting for, and disclosure of, events that occur after the balance sheet
date but before financial statements are issued or are available to be issued. In particular, this statement sets forth: the period after the balance sheet date during which management of a reporting entity should evaluate events or
transactions that may occur for potential recognition or disclosure in the financial statements; the circumstances under which an entity should recognize events or transactions occurring after the balance sheet date in its financial statements; and
the disclosures that an entity should make about events or transactions that occurred after the balance sheet date. The statement, which was effective for the Companys second quarter of 2009, did not have an impact on the Companys
consolidated results of operations and financial position.

In April 2009, the FASB issued a staff position that requires disclosures about
the fair value of financial instruments in interim financial statements as well as in annual financial statements. The staff position does not require disclosures for earlier periods presented for comparative purposes at initial adoption. In periods
after initial adoption, the staff position requires comparative disclosures only for periods ending subsequent to initial adoption. The provisions of the staff position were effective for the Companys second quarter of 2009. The disclosures
required by this staff position are included in Note 6 to the Companys condensed consolidated financial statements.

In April 2009, the
FASB issued a staff position that provides additional guidance for estimating fair value when the volume and level of activity for the asset or liability have significantly decreased. The staff position also includes guidance on identifying
circumstances that indicate a transaction is not orderly. The staff position, which was effective for the Companys second quarter of 2009, did not have an impact on the Companys consolidated results of operations and financial position.

In April 2009, the FASB issued a staff position that amends the other-than-temporary impairment guidance in GAAP for debt securities to make
the guidance more operational and to improve the presentation and disclosure of other-than-temporary impairments on debt and equity securities in financial statements. The staff position, which was effective for the Companys second quarter of
2009, did not have an impact on the Companys consolidated results of operations and financial position.



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Celera Corporation

Notes to Unaudited Condensed Consolidated Financial Statements (Continued)



In April 2008, the FASB issued a staff position that amends the factors that should be considered in developing renewal or extension assumptions used to
determine the useful life of a recognized intangible asset. The staff position applies to intangible assets that are acquired individually or with a group of other assets and to both intangible assets acquired in business combinations and asset
acquisitions. The staff position, which was effective for the Companys first quarter of 2009, did not have an impact on the Companys consolidated results of operations and financial position.

In February 2008, the FASB issued a staff position that delays the effective date of a statement related to fair value measurement for all non-financial
assets and non-financial liabilities, except those that are recognized or disclosed at fair value in the financial statements on a recurring basis (at least annually). The staff position partially defers the effective date of the statement to fiscal
years beginning after November 15, 2008, and interim periods within those fiscal years for items within the scope of the staff position. The staff position, which was effective for the Companys first quarter of 2009, did not have an
impact on the Companys consolidated results of operations and financial position.

In December 2007, the FASB issued a statement related
to business combinations, which establishes the principles and requirements for how an acquirer recognizes and measures the identifiable assets acquired, the liabilities assumed, the goodwill acquired and any noncontrolling interest in the acquiree.
The statement also establishes the disclosure requirements for a business combination. The provisions of the statement were effective for the Companys first quarter of 2009. The adoption of the statement did not have an impact on the
Companys consolidated results of operations and financial position.

3. Allowance for Doubtful Accounts

For the three and nine months ended September 26, 2009, the Company recorded an allowance for doubtful accounts of $2.6 million and $27.7 million,
respectively, compared to $3.8 million and $10.9 million for the three and nine months ended September 27, 2008, respectively. Allowance for doubtful accounts is recorded in selling, general and administrative expense in the Condensed
Consolidated Statements of Operations. The increase in allowance for doubtful accounts for the nine months ended September 26, 2009 was primarily due to the provision for the Lab Services accounts receivable over 360 days old, tests that
have been denied for reimbursement and an assessment of the collectability of aged accounts receivable based on past collection experience. These balances were primarily due from patients.

4. Employee-Related Charges, Asset Impairments and Other

Restructurings

On July 21, 2009, Celera committed to a restructuring program
with estimated costs of $3.2 million. The restructuring program includes the elimination of approximately 90 full-time positions. Severance costs of $2.6 million and property-related costs of $0.6 million were recorded in employee-related charges,
asset impairments and other in the Condensed Consolidated Statements of Operations for the three and nine months ended September 26, 2009. Costs of $2.1 million, $0.5 million and $0.6 million were recorded in the Companys Lab Services,
Products and Corporate segments, respectively. The property-related charge primarily represents the estimated cost of excess lease space less estimated future sublease income on a number of facilities. The remaining cash expenditures of $0.4 million
for the excess lease space charge are expected to be paid through April 2012.



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Celera Corporation

Notes to Unaudited Condensed Consolidated Financial Statements (Continued)



On February 17, 2009, Celera committed to a plan to close its Rockville, Maryland facility, which resulted in a workforce reduction of approximately 15
positions. This facility historically housed the majority of Celeras proteomic research. The change reflected the substantial completion of the research phase of the proteomics projects in Rockville. The Company has transferred its diagnostic
lung cancer program to its Alameda, California facility and completed the closure of its Rockville facility at the end of October 2009.

The
Company expects to record a total net charge of $1.0 million in its Corporate segment relating to the closure of its Rockville facility. Severance costs of $0.7 million were recorded in employee-related charges, asset impairments and other in the
Condensed Consolidated Statements of Operations for the nine months ended September 26, 2009. No severance costs related to the closure were recorded for the three months ended September 26, 2009. Property-related costs of $0.3 million,
offset by a gain on the sale of equipment of $0.3 million, were recorded in employee-related charges, asset impairments and other in the Condensed Consolidated Statements of Operations for the three and nine months ended September 26, 2009.
Remaining property-related costs of $0.3 million are expected to be incurred during the fourth quarter of 2009. The property-related costs represent the estimated cost of excess lease space less estimated future sublease income for the facility. The
remaining cash expenditures of $0.6 million for the excess lease space charge are expected to be paid through April 2010.

For the nine months
ended September 27, 2008, Celera recorded pre-tax charges of $1.3 million in employee-related charges, asset impairments and other in the Condensed Consolidated Statements of Operations for severance costs for approximately 30 employees. Costs
of $0.8 million and $0.5 million, respectively, were recorded in the Companys Products and Corporate segments. This charge resulted from the realigning of the Companys R&D resources and other activities in line with its then current
business activities. All of the affected employees were notified by June 30, 2008, and terminated by the end of September 2008.

Also for
the nine months ended September 27, 2008, Celera recorded excess lease charges of $0.9 million in employee-related charges, asset impairments and other in the Condensed Consolidated Statements of Operations, to reflect a reduction in the
Companys proteomic-based activities. The charge, recorded in the Companys Corporate segment, represented the estimated cost of excess lease space less estimated future sublease income on a facility. The remaining cash expenditures of
$0.2 million for the excess lease space charge are expected to be paid through April 2010.

Other

A charge of $0.5 million related to tax obligations associated with the split-off from Applied Biosystems (now Life Technologies) was recorded in
employee-related charges, asset impairments and other in the Condensed Consolidated Statements of Operations for the three and nine months ended September 26, 2009.

A charge of $1.6 million related to the realization of pension costs as a result of the split-off from Applied Biosystems (now Life Technologies) was recorded in employee-related charges, asset
impairments and other in the Condensed Consolidated Statements of Operations for the three and nine months ended September 27, 2008.

A
charge of $3.7 million for professional fees related to the split-off from Applied Biosystems (now Life Technologies) was recorded in employee-related charges, asset impairments and other in the Condensed Consolidated Statements of Operations for
the nine months ended September 27, 2008.



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Celera Corporation

Notes to Unaudited Condensed Consolidated Financial Statements (Continued)



5. Net Loss per Share

Basic and diluted net
loss per share has been computed for the three and nine months ended September 26, 2009 and for the three months ended September 27, 2008 using the weighted average number of common shares outstanding for each period.

Net loss per share has been calculated for the nine months ended September 27, 2008 to reflect the capital structure of Celera subsequent to the
split-off date. Basic and diluted net loss per share has been computed by dividing the net loss for the nine months ended September 27, 2008 by the weighted average number of shares of Applera Corporation  Celera Group Common Stock
outstanding for the six months ended June 30, 2008 and Celera Corporation common stock outstanding for the three months ended September 27, 2008.

Restricted stock unit awards and stock options to acquire 6.0 million and 7.1 million shares of common stock at September 26, 2009 and at September 27, 2008, respectively, have been
excluded from the computations of diluted net loss per share because their effect would have been anti-dilutive.

6. Investments

All short-term investments are classified as available-for-sale and are carried at fair value with unrealized gains and losses reported as
a component of stockholders equity in the Condensed Consolidated Statements of Financial Position. The fair value of short-term investments and unrealized gains and losses at September 26, 2009 and December 27, 2008 were as follows:



|                                      |  |                       |       |                 |   |                  |  |   |           |   |  |   |      
|------------------------------------- |  | --------------------- | ----- | --------------- | - | ---------------- |  | - | --------- | - |  | - | -----
|                                      |  | At September 26, 2009
|(Dollar amounts in millions)          |  | AmortizedCost         |       | UnrealizedGains |   | UnrealizedLosses |  |   | FairValue
|U.S. Treasury securities              |  | $                     | 36.2  |                 | $ | 0.3              |  | $ |          |   |  | $ | 36.5 
|U.S. government agency securities(a)  |  |                       | 57.1  |                 |   | 0.7              |  |   |          |   |  |   | 57.8 
|Non-U.S. government agency securities |  |                       | 30.6  |                 |   | 0.1              |  |   |          |   |  |   | 30.7 
|Corporate bonds                       |  |                       | 105.7 |                 |   | 0.9              |  |   | (0.4      | ) |  |   | 106.2
|Asset-backed securities               |  |                       | 15.8  |                 |   | 0.3              |  |   |          |   |  |   | 16.1 
|                                      |  |                       |       |                 |   |                  |  |   |           |   |  |   |      
|Total short-term investments          |  | $                     | 245.4 |                 | $ | 2.3              |  | $ | (0.4      | ) |  | $ | 247.3
|                                      |  |                       |       |                 |   |                  |  |   |           |   |  |   |      



|(a) | U.S. government agency securities include corporate bonds that are guaranteed by the Federal Deposit Insurance Corporation (FDIC).
|--- | ----------------------------------------------------------------------------------------------------------------------------------



|                                      |  |                      |       |                 |   |                  |  |   |           |   |  |   |      
|------------------------------------- |  | -------------------- | ----- | --------------- | - | ---------------- |  | - | --------- | - |  | - | -----
|                                      |  | At December 27, 2008
|(Dollar amounts in millions)          |  | AmortizedCost        |       | UnrealizedGains |   | UnrealizedLosses |  |   | FairValue
|U.S. Treasury securities              |  | $                    | 16.6  |                 | $ | 0.2              |  | $ |          |   |  | $ | 16.8 
|U.S. government agency securities     |  |                      | 50.7  |                 |   | 0.8              |  |   |          |   |  |   | 51.5 
|Non-U.S. government agency securities |  |                      | 0.6   |                 |   |                 |  |   |          |   |  |   | 0.6  
|Corporate bonds                       |  |                      | 140.3 |                 |   | 0.2              |  |   | (6.1      | ) |  |   | 134.4
|Asset-backed securities               |  |                      | 36.3  |                 |   |                 |  |   | (1.6      | ) |  |   | 34.7 
|Certificates of deposit               |  |                      | 6.5   |                 |   |                 |  |   |          |   |  |   | 6.5  
|                                      |  |                      |       |                 |   |                  |  |   |           |   |  |   |      
|Total short-term investments          |  | $                    | 251.0 |                 | $ | 1.2              |  | $ | (7.7      | ) |  | $ | 244.5
|                                      |  |                      |       |                 |   |                  |  |   |           |   |  |   |      



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##### Table of Contents

Celera Corporation

Notes to Unaudited Condensed Consolidated Financial Statements (Continued)



The realized gains and losses associated with short-term investments for the three and nine months ended September 26, 2009 and September 27, 2008
were as follows:



|                               |  |                    |      |   |                   |   |      |                   |  |   |                   |   |  |   |      |  
|------------------------------ |  | ------------------ | ---- | - | ----------------- | - | ---- | ----------------- |  | - | ----------------- | - |  | - | ---- | -
|                               |  | Three Months Ended |      |   | Nine Months Ended |  
|(Dollar amounts in millions)   |  | September 26,2009  |      |   | September 27,2008 |   |      | September 26,2009 |  |   | September 27,2008 |  
|Realized gains on investments  |  | $                  | 0.2  |   |                   | $ |     |                   |  | $ | 0.3               |   |  | $ | 0.6  |  
|Realized losses on investments |  |                    | (0.1 | ) |                   |   | (3.2 | )                 |  |   | (0.2              | ) |  |   | (3.7 | )
|                               |  |                    |      |   |                   |   |      |                   |  |   |                   |   |  |   |      |  

The following tables show the fair value and the gross unrealized losses for investments that were in
an unrealized loss position at September 26, 2009 and December 27, 2008 aggregated by category and by the length of time that the individual securities have been in a continuous loss position.



|                             |  |                       |      |                |                      |      |           |       |                |      |  |           |      |                |  |   |       |  |   |      |  
|---------------------------- |  | --------------------- | ---- | -------------- | -------------------- | ---- | --------- | ----- | -------------- | ---- |  | --------- | ---- | -------------- |  | - | ----- |  | - | ---- | -
|                             |  | At September 26, 2009 |     
|                             |  | Less Than 12 Months   |      |                | 12 Months or Greater |      |           | Total |               
|(Dollar amounts in millions) |  | FairValue             |      | UnrealizedLoss |                      |      | FairValue |       | UnrealizedLoss |      |  | FairValue |      | UnrealizedLoss | 
|Corporate bonds              |  | $                     |     |                | $                    |     |           |       | $              | 42.1 |  | $         | (0.4 | )              |  | $ | 42.1  |  | $ | (0.4 | )
|                             |  |                       |      |                |                      |      |           |       |                |      |  |           |      |                |  |   |       |  |   |      |  
|                             | 
|                             |  | At December 27, 2008  |     
|                             |  | Less Than 12 Months   |      |                | 12 Months or Greater |      |           | Total |               
|(Dollar amounts in millions) |  | FairValue             |      | UnrealizedLoss |                      |      | FairValue |       | UnrealizedLoss |      |  | FairValue |      | UnrealizedLoss | 
|Corporate bonds              |  | $                     | 41.5 |                | $                    | (1.9 | )         |       | $              | 72.5 |  | $         | (4.2 | )              |  | $ | 114.0 |  | $ | (6.1 | )
|Asset-backed securities      |  |                       | 25.8 |                |                      | (1.2 | )         |       |                | 4.6  |  |           | (0.4 | )              |  |   | 30.4  |  |   | (1.6 | )
|                             |  |                       |      |                |                      |      |           |       |                |      |  |           |      |                |  |   |       |  |   |      |  
|Total                        |  | $                     | 67.3 |                | $                    | (3.1 | )         |       | $              | 77.1 |  | $         | (4.6 | )              |  | $ | 144.4 |  | $ | (7.7 | )
|                             |  |                       |      |                |                      |      |           |       |                |      |  |           |      |                |  |   |       |  |   |      |  

The Company periodically reviews its investments for other-than-temporary declines in fair value and
writes down investments to their fair value when an other-than-temporary decline has occurred. When investments are evaluated for other-than-temporary impairment, factors considered include the length of time and extent to which fair value has been
below cost basis, the financial condition of the issuer, the Companys intent to sell the investment, and whether it is more-likely-than-not that the Company will be required to sell the investment before recovery of its amortized cost basis.

The Company evaluated its short-term investment portfolio and concluded that there had been no decline in market value at September 26,
2009 that was considered to be other-than-temporary, except for one investment that was sold subsequent to September 26, 2009 for a loss of $0.1 million. The unrealized loss related to this investment was considered to be other-than-temporary
and was recorded in interest income, net in the Condensed Consolidated Statements of Operations for the three and nine months ended September 26, 2009.

Total unrealized losses of $0.4 million in the investment portfolio at September 26, 2009 were due to market movements and fluctuations in interest rates and have been recorded in accumulated other
comprehensive income (loss) in the Condensed Consolidated Statements of Financial Position. Management does not believe the unrealized losses represent an other-than-temporary impairment based on its evaluation of available evidence as of
September 26, 2009. At that date, the Company had no intention to sell these investments and believes it is more-likely-than-not that it will not be required to sell these investments before recovery of their amortized cost basis.



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##### Table of Contents

Celera Corporation

Notes to Unaudited Condensed Consolidated Financial Statements (Continued)



The following table summarizes the contractual maturities of available-for-sale securities at September 26, 2009:



|                             |  |                     |      
|---------------------------- |  | ------------------- | -----
|(Dollar amounts in millions) |  | AtSeptember 26,2009
|Less than one year           |  | $                   | 112.1
|Due in one-to-two years      |  |                     | 60.6 
|Due in two-to-five years     |  |                     | 74.6 
|                             |  |                     |      
|Total                        |  | $                   | 247.3
|                             |  |                     |      

Securities classified as trading totaling $7.1 million at September 26, 2009 and
$6.2 million at December 27, 2008, have been recorded at fair value with realized and unrealized gains and losses included in net loss in the Condensed Consolidated Statements of Operations. These securities, representing the deferred
compensation and excess savings plan assets, are recorded in prepaid expenses and other current assets in the Condensed Consolidated Statements of Financial Position. Included in net loss are unrealized net holding gains of $0.4 million and $0.8
million for the three and nine months ended September 26, 2009, respectively. As a result of the split-off from Applied Biosystems (now Life Technologies), the Company is unable to determine the realized and unrealized gains and losses arising
in the three and nine months ended September 27, 2008.

Minority equity investments classified as available-for-sale totaling $2.0
million at September 26, 2009 and $0.9 million at December 27, 2008, are included in other long-term assets in the Condensed Consolidated Statements of Financial Position. These investments are carried at fair value with unrealized gains
and losses reported as a component of stockholders equity in the Condensed Consolidated Statements of Financial Position. Net unrealized holding gains of $0.6 million and $1.1 million for the three and nine months ended September 26,
2009, respectively, and $0.2 million and $0.8 million, net of $1.6 million reclassified to realized loss, for the three and nine months ended September 27, 2008, respectively, are included in comprehensive loss.

7. Fair Value of Financial Instruments

Fair value is defined as an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement
that should be determined based on assumptions that market participants would use in pricing an asset or a liability. As a basis for considering such assumptions, the FASB established a three-tier value hierarchy, which prioritizes the inputs used
in the valuation methodologies in measuring fair value:



|         |  |                                                                                                                                                                                                                                                                                                                  
|-------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Level 1: |  | observable inputs that reflect unadjusted quoted prices for identical assets or liabilities in active markets; markets;                                                                                                                                                                                          
|         | 
|Level 2: |  | observable inputs that reflect unadjusted quoted prices for similar assets or liabilities in active markets, or unadjusted quoted prices for identical or similar assets or
liabilities in markets that are not active, or inputs other than quoted prices that are observable for the assets or liabilities; and
|         | 
|Level 3: |  | unobservable inputs which are supported by little or no market activity.                                                                                                                                                                                                                                         

Active markets are those in which transactions occur with sufficient frequency and volume to provide
pricing information on an ongoing basis. Inactive markets are those in which there are few transactions for the asset, prices are not current, or price quotations vary substantially either over time or among market makers, or in which little
information is released publicly. With regard to the Companys financial assets subject to fair value measurements, the Company believes that all of the assets it holds are actively traded because there is sufficient frequency and volume to
obtain pricing information on an ongoing basis.



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##### Table of Contents

Celera Corporation

Notes to Unaudited Condensed Consolidated Financial Statements (Continued)



The following table sets forth the Companys financial assets that were accounted for at fair value at September 26, 2009:



|                                                     |  |       |       |                                        |   |         |  |         |       |  |   |  
|---------------------------------------------------- |  | ----- | ----- | -------------------------------------- | - | ------- |  | ------- | ----- |  | - | -
|                                                     |  |       |       | Fair Value at September 26, 2009 Using
|(Dollar amounts in millions)                         |  | Total |       | Level 1                                |   | Level 2 |  | Level 3
|U.S. Treasury securities                             |  | $     | 36.5  |                                        | $ | 36.5    |  | $       |      |  | $ | 
|U.S. government agency securities(a)                 |  |       | 57.8  |                                        |   |        |  |         | 57.8  |  |   | 
|Non-U.S. government securities                       |  |       | 30.7  |                                        |   |        |  |         | 30.7  |  |   | 
|Corporate bonds                                      |  |       | 106.2 |                                        |   |        |  |         | 106.2 |  |   | 
|Asset-backed securities                              |  |       | 16.1  |                                        |   |        |  |         | 16.1  |  |   | 
|                                                     |  |       |       |                                        |   |         |  |         |       |  |   |  
|Short-term investments                               |  |       | 247.3 |                                        |   | 36.5    |  |         | 210.8 |  |   | 
|Cash equivalents                                     |  |       | 66.1  |                                        |   | 66.1    |  |         |      |  |   | 
|Publicly traded common stock                         |  |       | 2.0   |                                        |   | 2.0     |  |         |      |  |   | 
|Deferred compensation and excess savings plan assets |  |       | 7.1   |                                        |   | 7.1     |  |         |      |  |   | 
|                                                     |  |       |       |                                        |   |         |  |         |       |  |   |  
|Total assets measured at fair value                  |  | $     | 322.5 |                                        | $ | 111.7   |  | $       | 210.8 |  | $ | 
|                                                     |  |       |       |                                        |   |         |  |         |       |  |   |  



|(a) | U.S. government agency securities include corporate bonds that are guaranteed by the Federal Deposit Insurance Corporation (FDIC).
|--- | ----------------------------------------------------------------------------------------------------------------------------------

Cash equivalents typically consist of money market funds and instruments with remaining maturities of three months or less at the date of purchase. Publicly
traded common stock represents minority equity investments which are included in other long-term assets in the Condensed Consolidated Statements of Financial Position. Deferred compensation and excess savings plan assets, totaling $7.1 million at
September 26, 2009, have been classified as trading and have been recorded at fair value with realized and unrealized gains and losses included in net loss. These assets are included in prepaid expenses and other current assets in the Condensed
Consolidated Statements of Financial Position. The related deferred compensation liability is recorded at fair value in other long-term liabilities in the Condensed Consolidated Statements of Financial Position. Changes in fair value are recorded in
net loss where they offset the gains and losses recorded for the related assets.

8. Inventories

Inventories, net at September 26, 2009 and December 27, 2008 included the following components:



|                             |  |                     |     |                    |   |    
|---------------------------- |  | ------------------- | --- | ------------------ | - | ---
|(Dollar amounts in millions) |  | AtSeptember 26,2009 |     | AtDecember 27,2008
|Raw materials and supplies   |  | $                   | 1.7 |                    | $ | 3.9
|Work-in-process              |  |                     | 1.8 |                    |   | 1.1
|Finished products            |  |                     | 2.6 |                    |   | 2.5
|                             |  |                     |     |                    |   |    
|Inventories, net             |  | $                   | 6.1 |                    | $ | 7.5
|                             |  |                     |     |                    |   |    



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##### Table of Contents

Celera Corporation

Notes to Unaudited Condensed Consolidated Financial Statements (Continued)



9. Goodwill

The gross carrying amount of
goodwill in each of the Companys reporting units at September 26, 2009 was as follows:



|                             |  |                     |      
|---------------------------- |  | ------------------- | -----
|(Dollar amounts in millions) |  | AtSeptember 26,2009
|Reportable Segment           |  |                     |      
|Lab Services                 |  | $                   | 103.0
|Products                     |  |                     | 11.0 
|Corporate                    |  |                     | 2.3  
|                             |  |                     |      
|Total                        |  | $                   | 116.3
|                             |  |                     |      

There has been no change to the goodwill balance since December 27, 2008.

The Company performs a goodwill impairment analysis using the two-step method on an annual basis and whenever events or changes in circumstances indicate
that the carrying value may not be recoverable. The Company completed its annual impairment analysis during the fourth quarter of 2008 and determined that no goodwill impairment existed as of the date of that analysis. During the second quarter of
2009, the Company reduced its 2009 forecasted financial results due to a combination of factors, including broad economic pressures and the effects of changing business conditions. The Company considered this reduction in its forecast to be an
impairment indicator requiring an interim goodwill impairment test to be performed as of June 27, 2009 for each of its reporting units, which the Company has determined to be consistent with its operating segments.

The first step of a goodwill impairment test determines the fair value of each reporting unit based on a combination of the income approach and the market
approach. Under the income approach, the fair value of each reporting unit is estimated based on the present value of expected future cash flows. The income approach is dependent upon a number of factors including estimates of forecasted revenue and
operating costs, appropriate discount rates and other variables. Under the market approach, the Company estimates the value of the reporting units by comparison to similar businesses whose securities are actively traded in the public market. This
requires management to make judgments about the selection of comparable companies and/or comparable recent company and asset transactions and transaction premiums. Changes in economic and operating conditions that occur after the annual impairment
analysis or an interim impairment analysis, and that impact these assumptions, may result in a future goodwill impairment charge. The fair values obtained by these valuation methods were weighted and combined into a single estimate of fair value.
Significant judgments inherent in this analysis included assumptions regarding appropriate revenue growth rates, discount rates and royalty rates.

Based on the results of step one of the impairment tests, the Company determined that the fair value of each reporting unit at June 27, 2009 exceeded its carrying value, and therefore, the second step of the impairment test was not
required to be performed and no goodwill impairment was recognized.

The Company has not performed an additional goodwill impairment test at
September 26, 2009. The Company will continue to test goodwill for impairment on an annual basis and in each reporting period in which indicators, or potential indicators, of impairment are present.



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Celera Corporation

Notes to Unaudited Condensed Consolidated Financial Statements (Continued)



10. Intangible and Other Long-Lived Assets

Changes in the gross carrying amount and accumulated amortization of intangible assets at September 26, 2009 were as follows:



|                                  |  |                       |                     |                          |           |           |                    |                    |      |  |   |      
|--------------------------------- |  | --------------------- | ------------------- | ------------------------ | --------- | --------- | ------------------ | ------------------ | ---- |  | - | -----
|                                  |  | Gross Carrying Amount
|(Dollar amounts in millions)      |  | AtSeptember 26,2009   |                     | ImpairmentCharges        |           | Additions |                    | AtDecember 27,2008
|Amortized intangible assets:      |  |                       |                     |                          |           |           |                    |                    |      |  |   |      
|Customer relationships            |  | $                     | 85.2                |                          | $         |          |                    | $                  |     |  | $ | 85.2 
|Acquired technology               |  |                       | 17.6                |                          |           |          |                    |                    |     |  |   | 17.6 
|Patents and licenses              |  |                       | 13.4                |                          |           |          |                    |                    | 10.7 |  |   | 2.7  
|Other                             |  |                       | 0.9                 |                          |           |          |                    |                    |     |  |   | 0.9  
|                                  |  |                       |                     |                          |           |           |                    |                    |      |  |   |      
|Total amortized intangible assets |  |                       | 117.1               |                          |           |          |                    |                    | 10.7 |  |   | 106.4
|Unamortized intangible assets:    |  |                       |                     |                          |           |           |                    |                    |      |  |   |      
|Trade names                       |  |                       | 7.8                 |                          |           | 15.7      |                    |                    |     |  |   | 23.5 
|                                  |  |                       |                     |                          |           |           |                    |                    |      |  |   |      
|Total                             |  | $                     | 124.9               |                          | $         | 15.7      |                    | $                  | 10.7 |  | $ | 129.9
|                                  |  |                       |                     |                          |           |           |                    |                    |      |  |   |      
|                                  |  |                      
|                                  |  | WeightedAverage Life  |                     | Accumulated Amortization
|(Dollar amounts in millions)      |  |                       | AtSeptember 26,2009 |                          | Additions |           | AtDecember 27,2008
|Amortized intangible assets:      |  |                       |                     |                          |           |           |                    |                    |      |  |   |      
|Customer relationships            |  |                       | 13                  |                          | $         | 15.2      |                    | $                  | 5.9  |  | $ | 9.3  
|Acquired technology               |  |                       | 8                   |                          |           | 4.3       |                    |                    | 1.6  |  |   | 2.7  
|Patents and licenses              |  |                       | 8                   |                          |           | 0.9       |                    |                    | 0.4  |  |   | 0.5  
|Other                             |  |                       | 5                   |                          |           | 0.4       |                    |                    | 0.2  |  |   | 0.2  
|                                  |  |                       |                     |                          |           |           |                    |                    |      |  |   |      
|Total amortized intangible assets |  |                       |                     |                          |           | 20.8      |                    |                    | 8.1  |  |   | 12.7 
|Unamortized intangible assets:    |  |                       |                     |                          |           |           |                    |                    |      |  |   |      
|Trade names                       |  |                       |                     |                          |           |          |                    |                    |     |  |   |     
|                                  |  |                       |                     |                          |           |           |                    |                    |      |  |   |      
|Total                             |  |                       |                     |                          | $         | 20.8      |                    | $                  | 8.1  |  | $ | 12.7 
|                                  |  |                       |                     |                          |           |           |                    |                    |      |  |   |      

In connection with the acquisitions of BHL and Atria Genetics, Inc. (Atria) in October 2007, trade
names were acquired that were determined to be indefinitely lived. The Company conducts an impairment analysis for indefinite lived intangible assets during the fourth quarter of each year, or more frequently if events or changes in circumstances
indicate that an asset may be impaired.

As a result of the impairment indicators described in Note 9, the Company evaluated its trade names
for impairment at June 27, 2009 using the relief from royalty method. It was determined that the carrying values of the trade names exceeded their fair values and the Company recorded impairment charges for the second quarter of 2009 in its
Corporate segment of $14.9 million for the BHL trade name and of $0.8 million for the Atria trade name. A total charge of $15.7 million was recorded in impairment of intangible assets in the Condensed Consolidated Statements of Operations for the
nine months ended September 26, 2009. Significant judgments inherent in this analysis included assumptions regarding appropriate revenue growth rates, discount rates and royalty rates. Recording the impairment charge in the Corporate segment is
consistent with the financial information provided to the Companys chief operating decision maker.

The Company reviews long-lived
assets, including its intangible assets subject to amortization, for impairment whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. Recoverability of long-lived assets



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Celera Corporation

Notes to Unaudited Condensed Consolidated Financial Statements (Continued)



is measured by a comparison of the carrying amount of the asset group to the future undiscounted net cash flows expected to be generated by those assets. If such assets are considered to be
impaired, an impairment charge is recognized for the amount by which the carrying amounts of the assets exceed the fair value of the assets. As a result of the impairment indicators described above, the Company tested its long-lived assets for
impairment at June 27, 2009 and determined that there was no impairment.

The Company has not performed an additional impairment test of
its long-lived assets or its indefinite lived intangible assets at September 26, 2009. The Company will continue to test these assets for impairment in each reporting period in which indicators, or potential indicators, of impairment are
present.

In April 2009, the Company entered into patent license agreements with deCODE genetics, Inc. (deCODE) and Perlegen Sciences, Inc.
(Perlegen) under which deCODE and Perlegen granted the Company licenses to certain genetic markers. The Company paid total fees for the licenses of $10.3 million which have been capitalized to patents and licenses in the Condensed Consolidated
Statement of Financial Position at September 26, 2009.

Aggregate intangible asset amortization expense was $8.1 million for the nine
months ended September 26, 2009, of which $7.7 million related to acquisition-related intangible assets and is recorded in amortization of purchased intangible assets in the Condensed Consolidated Statements of Operations. The amortization of
patents and licenses is recorded in cost of sales in the Condensed Consolidated Statements of Operations.

11. Other Balance Sheet Accounts

The following table summarizes the major components of selected accounts in the Condensed Consolidated Statements of Financial Position:



|                             |  |                     |      |                    |   |     
|---------------------------- |  | ------------------- | ---- | ------------------ | - | ----
|(Dollar amounts in millions) |  | AtSeptember 26,2009 |      | AtDecember 27,2008
|Other long-term assets:      |  |                     |      |                    |   |     
|Receivable from Abbott(a)    |  | $                   | 25.5 |                    | $ | 24.8
|Other                        |  |                     | 2.5  |                    |   | 1.5 
|                             |  |                     |      |                    |   |     
|Other long-term assets       |  | $                   | 28.0 |                    | $ | 26.3
|                             |  |                     |      |                    |   |     
|Other long-term liabilities: |  |                     |      |                    |   |     
|Deferred compensation        |  | $                   | 7.1  |                    | $ | 6.2 
|Deferred tax liability       |  |                     | 5.8  |                    |   | 15.7
|Other                        |  |                     | 2.4  |                    |   | 3.3 
|                             |  |                     |      |                    |   |     
|Other long-term liabilities  |  | $                   | 15.3 |                    | $ | 25.2
|                             |  |                     |      |                    |   |     



|(a) | Following the termination of the Abbott strategic alliance effective October 1, 2008, the Companys total net investment in the alliance at December 27,
2008 was converted to a long-term receivable of $24.8 million from Abbott. The receivable from Abbott at September 27, 2009 includes $0.7 million accretion of discount.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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Celera Corporation

Notes to Unaudited Condensed Consolidated Financial Statements (Continued)



12. Share-Based Compensation

The Company
estimates the fair value of stock-based payment awards on the date of grant using the Black-Scholes pricing model, which is affected by the Companys stock price as well as other assumptions. Forfeitures are estimated such that the Company only
recognizes expense for those shares expected to vest, and adjustments are made if actual forfeitures differ from those estimates.

For the
three and nine months ended September 26, 2009, 882,000 and 1,240,000 options, respectively, were granted to employees under the Celera Corporation 2008 Stock Incentive Plan. The fair value of the options granted was estimated using the
following average assumptions:



|                                               |  |                                    |      |   |                                   |   |      |  
|---------------------------------------------- |  | ---------------------------------- | ---- | - | --------------------------------- | - | ---- | -
|                                               |  | Three MonthsEndedSeptember 26,2009 |      |   | Nine MonthsEndedSeptember 26,2009 |  
|Expected option term in years                  |  |                                    | 5.0  |   |                                   |   | 5.0  |  
|Volatility                                     |  |                                    | 51.3 | % |                                   |   | 50.6 | %
|Risk-free interest rate                        |  |                                    | 2.7  | % |                                   |   | 2.5  | %
|Expected dividends                             |  |                                    | 0.0  | % |                                   |   | 0.0  | %
|Weighted average fair value per option granted |  | $                                  | 2.93 |   |                                   | $ | 3.17 |  

Share-based compensation expense for the three months ended September 26, 2009 and
September 27, 2008 was $1.0 million and $1.4 million, respectively. Share-based compensation expense for the nine months ended September 26, 2009 and September 27, 2008 was $2.6 million and $5.5 million, respectively.

13. Income Taxes

Benefit
for income taxes of $0.1 million and $6.3 million was recorded for the three and nine months ended September 26, 2009, respectively. The benefit for the nine months ended September 26, 2009 was primarily the result of a reduction in a
deferred tax liability associated with the trade names that were impaired during the second quarter of 2009, partially offset by an increase in the valuation allowance for state deferred tax assets. Provision for income taxes of less than $0.1
million and $95.1 million was recorded for the three and nine months ended September 27, 2008, respectively. The provision for the nine months ended September 27, 2008 was primarily due to a valuation allowance recorded against deferred
tax assets.

The Company maintains a full valuation allowance on its federal and state net deferred tax assets since the Company believes it
is more likely than not it may not generate sufficient income, of the appropriate character, and in the particular jurisdictions, to realize the benefits.

14. Commitments and Contingencies

Indemnifications

In the normal course of business, Celera enters into some agreements under which it indemnifies third parties for intellectual
property infringement claims or claims arising from breaches of representations or warranties. In addition, from time to time, Celera provides indemnity protection to third parties for claims relating to past performance arising from undisclosed
liabilities, product liabilities, environmental obligations, representations and warranties, and other claims. In these agreements, the scope and amount of remedy, or the period in which claims can be made, may be limited. It is not possible to
determine the maximum potential amount of future payments, if any, due under these indemnities due to the conditional nature of the obligations and the unique facts and circumstances involved in each agreement. Historically, payments made related to
these indemnifications have not been material to the Companys consolidated financial statements.



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Celera Corporation

Notes to Unaudited Condensed Consolidated Financial Statements (Continued)



Legal Proceedings

Applied Biosystems (now Life Technologies) and some of its officers are defendants in a lawsuit brought on behalf of purchasers of Celera stock in its follow-on public offering of Celera stock completed on March 6, 2000. In the
offering, Applied Biosystems (now Life Technologies) sold an aggregate of approximately 4.4 million shares of Celera stock at a public offering price of $225 per share. The lawsuit, which was commenced with the filing of several complaints in
April and May 2000, is pending in the U.S. District Court for the District of Connecticut, and an amended consolidated complaint was filed on August 21, 2001. The consolidated complaint generally alleges that the prospectus used in connection
with the offering was inaccurate or misleading because it failed to adequately disclose the alleged opposition of the Human Genome Project and two of its supporters, the governments of the U.S. and the U.K., to providing patent protection to
Celeras genomic-based products. Although neither Celera nor Applied Biosystems (now Life Technologies) ever sought, or intended to seek, a patent on the basic human genome sequence data, the complaint also alleges that Applied Biosystems (now
Life Technologies) did not adequately disclose the risk that it would not be able to patent this data. The consolidated complaint seeks unspecified monetary damages, rescission, costs and expenses, and other relief as the court deems proper. On
March 31, 2005, the court certified the case as a class action. In November 2008, the U.S. District Court for the District of Connecticut issued an order to the parties to show cause why the case should not be dismissed. A hearing on this
matter was held in April 2009 at which the Court directed the parties to explore a potential settlement of the matter. The parties are exploring a settlement in accordance with the Courts direction, but no agreement has yet been reached.

Under the terms of the separation agreement between Celera and Applied Biosystems (now Life Technologies), Celera agreed to indemnify Applied
Biosystems (now Life Technologies) for liabilities resulting from the class action suit described above, as well as other actions pending on the split-off date or that may arise in the future, to the extent such actions are ultimately determined to
relate to or arise out of the Celera business, assets or liabilities, in each case, to the extent not covered by Applied Biosystems (now Life Technologies) insurance. There is no limit on the maximum amount of monetary damages for which
the Company may be required to indemnify Applied Biosystems (now Life Technologies) for such suits. If plaintiffs in these suits are ultimately successful on the merits, the resulting liabilities for which Celera is responsible could have a material
adverse impact on Celeras business and financial condition.

An arbitration proceeding is currently pending between Applied Biosystems
(now Life Technologies) and the Cornell Research Foundation (CRF) as a result of CRFs allegations of breach of an exclusive license agreement by Applied Biosystems (now Life Technologies). CRF has alleged, among other things, that past
royalties are owed on certain Celera products, and that Applied Biosystems (now Life Technologies) granted an unauthorized sublicense to a third party. Celera may be required to indemnify Applied Biosystems (now Life Technologies) for damages and
costs if the alleged violations are proven by CRF under the exclusive license agreement and then determined to be Celeras liabilities under the separation agreement. There can be no assurance on the outcome of this matter.

On May 15, 2008, Celera received a letter from the National Institutes of Health, or NIH, following up on previous correspondence and discussions and
requesting that Celera enter into a license agreement with the NIH for its U.S. Patent No. 5,252,477 in connection with Celeras ViroSeq HIV-1 Genotyping System, and that Celera pay royalties in respect of all of its past sales of this
product



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Celera Corporation

Notes to Unaudited Condensed Consolidated Financial Statements (Continued)



(which NIH alleged to be approximately $1.9 million), and in respect of future sales of this product. Although Celera has had discussions with the NIH on this matter, Celera continues to
believe that the NIHs patent is not applicable to its ViroSeq HIV-1 Genotyping System and that the NIH is not entitled to any royalties from the sale of this product.

The Company recorded a charge of $1.0 million in litigation-related charge and legal settlement in the Condensed Consolidated Statements of Operations for the three and nine months ended
September 26, 2009 related to the expected outcome of certain legal proceedings described above. The recorded charge represents managements best estimate at this time.

The Company recorded a $1.1 million gain in litigation-related charge and legal settlement in the Condensed Consolidated Statements of Operations for the nine months ended September 27, 2008 related
to the settlement of a litigation matter associated with its former Online/Information Business, an information products and services business.

Tax Matters Agreement

The tax matters agreement with Applied Biosystems (now Life
Technologies) governs Applied Biosystems (now Life Technologies) and Celeras respective rights, responsibilities and obligations after the split-off with respect to taxes, including ordinary course of business taxes and taxes, if
any, incurred as a result of any failure of the split-off, together with certain related transactions, to qualify as a tax-free exchange for U.S. federal income tax purposes within the meaning of Sections 355 and 368(a)(1)(D) of the Internal
Revenue Code (including as a result of Section 355(e) of the Internal Revenue Code). Under the tax matters agreement, it is expected that Applied Biosystems (now Life Technologies) generally will be responsible for the payment of all income and
non-income taxes attributable to Celeras operations pre-split-off and Celera generally will be responsible for the payment of all income and non-income taxes attributable to its operations post-split-off. In addition, Applied Biosystems (now
Life Technologies) will pay Celera for certain available tax benefits resulting from U.S. federal and state tax credits and losses attributable to Celeras business that arose prior to the split-off from Applied Biosystems (now Life
Technologies), to the extent these credits are not first utilized by Applied Biosystems (now Life Technologies).

Notwithstanding the
foregoing, it is expected that, under the tax matters agreement, Celera also generally will be responsible for any taxes imposed on Applied Biosystems (now Life Technologies) that arise from the failure of the split-off, together with certain
related transactions, to qualify as a tax-free exchange for U.S. federal income tax purposes within the meaning of Sections 355 and 368(a)(1)(D) of the Internal Revenue Code, if such failure to qualify is attributable to actions, events or
transactions relating to Celeras stock, assets or business, or a breach of the relevant representations or covenants made by Celera in the tax matters agreement. In addition, Celera generally will be responsible for a percentage of any taxes
that arise from the failure of the split-off, together with certain related transactions, to qualify as a tax-free exchange for U.S. federal income tax purposes within the meaning of Sections 355 and 368(a)(1)(D) of the Internal Revenue Code,
if such failure is for any reason for which neither Celera nor Applied Biosystems (now Life Technologies) is responsible. Under the tax matters agreement, Celera will also be required to indemnify Applied Biosystems (now Life Technologies) for a
portion of Applied Biosystems (now Life Technologies) tax cost resulting from Applied Biosystems (now Life Technologies) and Celera entering into an intellectual property supply agreement and other intellectual property license
agreements in connection with the split-off. The tax matters agreement also imposes restrictions on Celeras and Applied Biosystems (now Life Technologies) ability to engage in certain actions following Celeras separation from
Applied Biosystems (now Life Technologies) and sets forth the respective obligations among Celera and Applied Biosystems (now Life Technologies) with respect to the filing of tax returns, the administration of tax contests, assistance and
cooperation and other matters.



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Celera Corporation

Notes to Unaudited Condensed Consolidated Financial Statements (Continued)



Under the terms of the tax matters agreement, certain tax assets were transferred to Celera. To preserve the allocation of one of the tax assets transferred
to the Company, Applied Biosystems (now Life Technologies) was required to make a specific tax election on its federal tax return for the period ended June 27, 2008. The Company put Applied Biosystems (now Life Technologies) on notice that the
election must be made. Applied Biosystems (now Life Technologies) refused to make the election on its federal tax return filed on March 16, 2009 and, pursuant to applicable tax regulations, that decision is irrevocable. This action resulted in
the elimination of approximately $8.7 million of Celeras non-current deferred tax assets at December 27, 2008. Because of the full valuation allowance against these tax assets, there was no effect on the Companys net deferred tax
assets at December 27, 2008.

The Company believes that Applied Biosystems (now Life Technologies) failure to make the
election constitutes a material breach of the tax matters agreement. The Company intends to pursue its rights and remedies with respect to this matter.

15. Comprehensive Loss

The components of comprehensive loss for the three and nine months
ended September 26, 2009 and September 27, 2008, net of any related tax effects, are as follows:



|                                                 |  |                    |     |                   |                   |      |                   |  |                   |      |  |   |       |  
|------------------------------------------------ |  | ------------------ | --- | ----------------- | ----------------- | ---- | ----------------- |  | ----------------- | ---- |  | - | ----- | -
|                                                 |  | Three Months Ended |     |                   | Nine Months Ended |     
|(Dollar amounts in millions)                     |  | September 26,2009  |     | September 27,2008 |                   |      | September 26,2009 |  | September 27,2008 |     
|Net loss                                         |  | $                  | 7.4 |                   | $                 | 7.0  |                   |  | $                 | 40.5 |  | $ | 118.5 |  
|Other comprehensive income (loss):               |  |                    |     |                   |                   |      |                   |  |                   |      |  |   |       |  
|Unrealized gain on minority equity investments   |  |                    | 0.6 |                   |                   | 0.2  |                   |  |                   | 1.1  |  |   | 2.4   |  
|Unrealized gain (loss) on short-term investments |  |                    | 1.7 |                   |                   | (5.5 | )                 |  |                   | 8.5  |  |   | (6.5  | )
|Termination of pension plan                      |  |                    |    |                   |                   | 1.6  |                   |  |                   |     |  |   | 1.6   |  
|                                                 |  |                    |     |                   |                   |      |                   |  |                   |      |  |   |       |  
|Comprehensive loss                               |  | $                  | 5.1 |                   | $                 | 10.7 |                   |  | $                 | 30.9 |  | $ | 121.0 |  
|                                                 |  |                    |     |                   |                   |      |                   |  |                   |      |  |   |       |  

16. Segment Information

Business Segments

Celera operates primarily in the U.S. through three reporting segments, a clinical laboratory testing service business (Lab Services), a products business (Products), and a segment that includes other activities under corporate management
(Corporate). The Lab Services business, conducted through BHL, offers a broad portfolio of clinical laboratory tests and disease management services designed to help healthcare providers improve cardiovascular disease treatment regimens for their
patients. The Products business develops, manufactures and oversees the commercialization of molecular diagnostic products. The Corporate segment includes revenues for royalties, licenses, collaborations and milestones related to the licensing of
certain intellectual property and from Celeras former small molecule and proteomic programs. The Corporate segment also includes corporate and shared general and administrative functions, and centrally managed research and business development
activities. Also included in the Corporate segment is the amortization and impairment of purchased intangible assets.

Costs and expenses for
the Lab Services segment and the Products segment reflect direct costs attributable to those segments and an allocation of certain shared services related to information technology, human resources, facilities and other services. These costs have
been allocated primarily based on head count. All other centralized corporate and shared administrative costs are reflected in the Corporate segment. Prior to the termination of the Abbott strategic alliance agreement on October 1, 2008,
certain administrative costs were allocated to the Products segment to the extent agreed to under the alliance agreement.



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Celera Corporation

Notes to Unaudited Condensed Consolidated Financial Statements (Continued)



The above items included in the respective reporting segments are consistent with the financial information provided to the Companys chief operating
decision maker.

The following table provides information concerning the segments for the three and nine months ended September 26, 2009
and September 27, 2008:



|                                      |  |              |       |   |          |   |      |           |  |   |       |   |  |   |       |  
|------------------------------------- |  | ------------ | ----- | - | -------- | - | ---- | --------- |  | - | ----- | - |  | - | ----- | -
|(Dollar amounts in millions)          |  | Lab Services |       |   | Products |   |      | Corporate |  |   | Total |  
|Three months ended September 26, 2009 |  |              |       |   |          |   |      |           |  |   |       |   |  |   |       |  
|Net revenues                          |  | $            | 24.2  |   |          | $ | 10.0 |           |  | $ | 5.8   |   |  | $ | 40.0  |  
|                                      |  |              |       |   |          |   |      |           |  |   |       |   |  |   |       |  
|Operating (loss) income               |  |              | (1.5  | ) |          |   | 0.4  |           |  |   | (7.7  | ) |  |   | (8.8  | )
|Interest income, net                  |  |              |      |   |          |   |     |           |  |   | 1.4   |   |  |   | 1.4   |  
|                                      |  |              |       |   |          |   |      |           |  |   |       |   |  |   |       |  
|(Loss) income before income taxes     |  | $            | (1.5  | ) |          | $ | 0.4  |           |  | $ | (6.3  | ) |  | $ | (7.4  | )
|                                      |  |              |       |   |          |   |      |           |  |   |       |   |  |   |       |  
|Total assets                          |  | $            | 203.5 |   |          | $ | 83.9 |           |  | $ | 348.6 |   |  | $ | 636.0 |  
|Depreciation and amortization         |  |              | 0.6   |   |          |   | 0.2  |           |  |   | 3.2   |   |  |   | 4.0   |  
|                                      |  |              |       |  
|Three months ended September 27, 2008 |  |              |       |   |          |   |      |           |  |   |       |   |  |   |       |  
|Net revenues                          |  | $            | 30.1  |   |          | $ | 10.5 |           |  | $ | 5.2   |   |  | $ | 45.8  |  
|                                      |  |              |       |   |          |   |      |           |  |   |       |   |  |   |       |  
|Operating income (loss)               |  |              | 2.8   |   |          |   | 0.2  |           |  |   | (9.3  | ) |  |   | (6.3  | )
|Loss on investments, net              |  |              |      |   |          |   |     |           |  |   | (3.2  | ) |  |   | (3.2  | )
|Interest income, net                  |  |              |      |   |          |   |     |           |  |   | 2.5   |   |  |   | 2.5   |  
|                                      |  |              |       |   |          |   |      |           |  |   |       |   |  |   |       |  
|Income (loss) before income taxes     |  | $            | 2.8   |   |          | $ | 0.2  |           |  | $ | (10.0 | ) |  | $ | (7.0  | )
|                                      |  |              |       |   |          |   |      |           |  |   |       |   |  |   |       |  
|Total assets                          |  | $            | 244.3 |   |          | $ | 79.8 |           |  | $ | 345.4 |   |  | $ | 669.5 |  
|Depreciation and amortization         |  |              | 0.7   |   |          |   | 0.3  |           |  |   | 3.1   |   |  |   | 4.1   |  
|                                      |  |              |       |  
|Nine months ended September 26, 2009  |  |              |       |   |          |   |      |           |  |   |       |   |  |   |       |  
|Net revenues                          |  | $            | 77.9  |   |          | $ | 30.1 |           |  | $ | 19.1  |   |  | $ | 127.1 |  
|                                      |  |              |       |   |          |   |      |           |  |   |       |   |  |   |       |  
|Operating (loss) income               |  |              | (17.5 | ) |          |   | 2.2  |           |  |   | (36.7 | ) |  |   | (52.0 | )
|Interest income, net                  |  |              |      |   |          |   |     |           |  |   | 5.2   |   |  |   | 5.2   |  
|                                      |  |              |       |   |          |   |      |           |  |   |       |   |  |   |       |  
|(Loss) income before income taxes     |  | $            | (17.5 | ) |          | $ | 2.2  |           |  | $ | (31.5 | ) |  | $ | (46.8 | )
|                                      |  |              |       |   |          |   |      |           |  |   |       |   |  |   |       |  
|Depreciation and amortization         |  | $            | 1.9   |   |          | $ | 0.6  |           |  | $ | 9.7   |   |  | $ | 12.2  |  
|                                      |  |              |       |  
|Nine months ended September 27, 2008  |  |              |       |   |          |   |      |           |  |   |       |   |  |   |       |  
|Net revenues                          |  | $            | 78.2  |   |          | $ | 28.9 |           |  | $ | 20.9  |   |  | $ | 128.0 |  
|                                      |  |              |       |   |          |   |      |           |  |   |       |   |  |   |       |  
|Operating income (loss)               |  |              | 3.8   |   |          |   | (3.9 | )         |  |   | (25.8 | ) |  |   | (25.9 | )
|Loss on investments, net              |  |              |      |   |          |   |     |           |  |   | (6.3  | ) |  |   | (6.3  | )
|Interest income, net                  |  |              |      |   |          |   |     |           |  |   | 8.6   |   |  |   | 8.6   |  
|Other income, net                     |  |              |      |   |          |   |     |           |  |   | 0.1   |   |  |   | 0.1   |  
|                                      |  |              |       |   |          |   |      |           |  |   |       |   |  |   |       |  
|Income (loss) before income taxes     |  | $            | 3.8   |   |          | $ | (3.9 | )         |  | $ | (23.4 | ) |  | $ | (23.5 | )
|                                      |  |              |       |   |          |   |      |           |  |   |       |   |  |   |       |  
|Depreciation and amortization         |  | $            | 2.2   |   |          | $ | 0.9  |           |  | $ | 8.8   |   |  | $ | 11.9  |  

Prior periods have been revised to reflect sales made at cost to the Lab Services segment from the
Products segment.



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##### Table of Contents

|ITEM 2. | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|------- | -------------------------------------------------------------------------------------

The purpose of the following managements discussion and analysis is to provide an overview of the business of Celera to help facilitate an
understanding of significant factors influencing our historical operating results, financial condition, and liquidity and also to convey our expectations of the potential impact of known trends, events, or uncertainties that may impact our future
results.

The following should be read in conjunction with our audited consolidated financial statements and related notes included in our
Transition Report on Form 10-KT filed with the U.S. Securities and Exchange Commission (SEC) on March 25, 2009. Historical results and percentage relationships are not necessarily indicative of operating results for future periods.

Business Overview

We are a healthcare business focusing on the integration of genetic testing into routine clinical care through a combination of products and services incorporating proprietary discoveries. We are organized into three reporting segments: a
clinical laboratory testing service business (Lab Services); a products business (Products); and a segment that includes other activities under corporate management (Corporate). Our Lab Services business, conducted through Berkeley
HeartLab, Inc. (BHL), offers a broad portfolio of clinical laboratory tests and disease management services designed to help healthcare providers improve cardiovascular disease treatment regimens for patients. Our Products business develops,
manufactures, and oversees the commercialization of molecular diagnostic products. Most of this business is conducted through distribution and royalty agreements with Abbott Molecular, a subsidiary of Abbott Laboratories. Our Corporate segment
includes revenues from royalties, licenses, funded collaborations and milestones related to the licensing of certain intellectual property and from our former small molecule and proteomic programs.

Relationship with Applied Biosystems (now Life Technologies)

Prior to July 1, 2008, we operated as a reporting unit of Applied Biosystems, formerly known as Applera, and not as a stand-alone company. Applied Biosystems established the following two classes of
common stock, sometimes referred to as tracking stocks, which were intended to reflect separately the relative performance of Applied Biosystems two businesses:



| |  |  | Applied Biosystems Group common stock that was intended to reflect the relative performance of the Applied Biosystems Group; and
| | - |  | --------------------------------------------------------------------------------------------------------------------------------



| |  |  | Celera Group common stock that was intended to reflect the relative performance of the Celera Group.
| | - |  | ----------------------------------------------------------------------------------------------------

On July 1, 2008, Applied Biosystems separated the Celera Group reporting unit from Applied Biosystems remaining businesses by means of a
redemption of each outstanding share of Celera Group common stock in exchange for one share of common stock of Celera Corporation. Upon the separation, we held all of the businesses, assets and liabilities attributed to the Celera Group and became
an independent, publicly-traded company. Our common stock began trading on The NASDAQ Stock Market on July 1, 2008 under the symbol CRA.

In November 2008, Applied Biosystems merged with Invitrogen Corporation to form a new company, Life Technologies Corporation (Life Technologies).



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Prior to the split-off, we received substantial administrative services and management from Applied
Biosystems (now Life Technologies), and engaged in some related-party transactions with Applied Biosystems (now Life Technologies). We also benefited from free access to all of Applied Biosystems (now Life Technologies) technology and
know-how, and license agreements that Applied Biosystems (now Life Technologies) had entered into with third parties related to intellectual property.

Although we are now an independent public company, we continue to have contractual and commercial relationships with Applied Biosystems (now Life Technologies). We entered into a separation agreement and several related agreements with
Applied Biosystems (now Life Technologies) in connection with the split-off. These agreements govern our relationship with Applied Biosystems (now Life Technologies) after the split-off and provide for the allocation of employee benefit, tax and
certain other liabilities and obligations attributable to periods before the split-off. These agreements also include arrangements with respect to intellectual property, interim services and a number of ongoing commercial relationships.

Basis of Presentation

Prior to the split-off, we were a reportable segment of Applied Biosystems (now Life Technologies) and our financial information was included in Applied Biosystems (now Life Technologies) consolidating financial information. Our
consolidated financial statements prior to July 1, 2008 include the assets and liabilities of Applied Biosystems (now Life Technologies) that were specifically attributed to us.

Following the split-off, on July 1, 2008, we became a stand-alone company with our own consolidated financial statements. As a result, comparability of certain items has been affected.

The discussion and analysis of our financial condition and results of operations is based on our condensed consolidated financial statements and related
disclosures, which have been prepared in conformity with accounting principles generally accepted in the United States of America, or GAAP. Certain information and footnote disclosures normally included in financial statements prepared in accordance
with GAAP have been condensed or omitted pursuant to such rules. All significant intracompany transactions and balances have been eliminated in consolidation.

The discussion and analysis of our financial condition and results of operations should be read in conjunction with the audited consolidated financial statements and notes thereto for the six month
transition period ended December 27, 2008 included in our Transition Report on Form 10-KT filed with the SEC on March 25, 2009.

Business Developments

In October 2009, BHL entered into collaborative agreements
with Geisinger Medical Center and Proven Diagnostics, a clinical laboratory service recently launched by Geisinger Health System. Proven Diagnostics will provide select diagnostic tools from BHLs menu of proprietary cardiovascular tests and
services.

In October 2009, BHL launched a laboratory developed test that identifies a variant in the LPA gene.

In October 2009, we entered into non-exclusive intellectual property license agreements with three laboratory partners to enable them to develop, offer and
market a KIF6 test. The Institute for Medical Diagnostics in Berlin, Bonn Medical Laboratories in Bonn, and Synlab Laboratory Services in Heidelburg are each expected to start offering and marketing a KIF6 test in early 2010.



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In September 2009, we entered into a research collaboration with Medco to evaluate whether testing for
KIF6 increases patient adherence with statin therapy. As part of this collaboration, a prospective, randomized, open-label, multi-center study (AKROBATS, or Additional KIF6 Risk Offers Better Adherence to Statins) will be conducted
over 18 months to address the primary question of whether patient adherence with newly prescribed statin therapy is higher in those patients tested for KIF6 status than in those who are not offered the test.

In July 2009, we implemented cost-saving measures, which included a restructuring program to reduce headcount by approximately 90 full-time positions
nationally, or 14% of the workforce. This included a major redeployment of resources at BHL as we realigned our disease management program to a model focused on web and telephone support, which we expect to be more efficient.

In July 2009, BHL expanded its menu of tests as it launched a service for vitamin D testing. Testing for vitamin D is one of the fastest growing tests
ordered by physicians as deficiency of this molecule has been linked with cardiovascular disease, cancer, infectious diseases, and autoimmune disorders.

In June 2009, we entered into an exclusive license agreement with Bayer Schering Pharma AG, providing Bayer Schering Pharma with access to five cancer-related targets for therapeutic development and
in-vivo diagnostic imaging.

In April 2009, BHL entered into an agreement with Blue Cross and Blue Shield of Alabama to become a Preferred
Medical Laboratory (PML). The agreement establishes coverage across Blue Cross and Blue Shields plans in Alabama for individuals who are already at elevated risk for cardiovascular disease.

In April 2009, we entered into separate patent license agreements with deCODE genetics, Inc. and Perlegen Sciences, Inc. providing us access to certain
genetic markers in cardiovascular and metabolic diseases.

In January 2009, Life Technologies granted licenses to two life science companies
under its patents relating to real-time technology in the human in vitro diagnostics field. Under our agreement with Applied Biosystems (now Life Technologies), revenues from these third-party licenses are shared between us and Applied Biosystems
(now Life Technologies). Accordingly, we expect to record a total of $8.3 million in license fees over the five quarters ending April 3, 2010.

Testing for Impairment

Goodwill

We perform a goodwill impairment analysis using the two-step method on an annual basis and whenever events or changes in circumstances indicate that the
carrying value may not be recoverable. We completed our annual impairment analysis during the fourth quarter of 2008 and determined that no goodwill impairment existed as of the date of that analysis. During the second quarter of 2009, we reduced
our 2009 forecasted financial results due to a combination of factors, including broad economic pressures and the effects of changing business conditions. We considered this reduction in our forecast to be an impairment indicator requiring an
interim goodwill impairment test to be performed as of June 27, 2009 for each of our reporting units, which we have determined to be consistent with our operating segments.

The first step of a goodwill impairment test determines the fair value of each reporting unit based on a combination of the income approach and the market approach. Under the income approach, the fair
value of each reporting unit is estimated based on the present value of expected future cash flows. The income approach is dependent upon a number of factors including estimates of forecasted



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revenue and operating costs, appropriate discount rates and other variables. Under the market approach, we estimate the value of the reporting units by comparison to similar businesses whose
securities are actively traded in the public market. This requires management to make judgments about the selection of comparable companies and/or comparable recent company and asset transactions and transaction premiums. Changes in economic and
operating conditions that occur after the annual impairment analysis or an interim impairment analysis, and that impact these assumptions, may result in a future goodwill impairment charge. The fair values obtained by these valuation methods were
weighted and combined into a single estimate of fair value. Significant judgments inherent in this analysis included assumptions regarding appropriate revenue growth rates, discount rates and royalty rates.

Based on the results of step one of the impairment tests, we determined that the fair value of each reporting unit at June 27, 2009 exceeded its
carrying value, and therefore, the second step of the impairment test was not required to be performed and no goodwill impairment was recognized.

We have not performed an additional goodwill impairment test at September 26, 2009. We will continue to test goodwill for impairment on an annual basis and in each reporting period in which indicators, or potential indicators, of
impairment are present.

Intangible and Other Long-Lived Assets

In connection with the acquisitions of BHL and Atria Genetics, Inc. (Atria) in October 2007, trade names were acquired that were determined to be
indefinitely lived. An impairment analysis for indefinite lived intangible assets is conducted during the fourth quarter of each year, or more frequently if events or changes in circumstances indicate that an asset may be impaired.

As a result of the impairment indicators described above, we evaluated trade names for impairment at June 27, 2009 using the relief from royalty
method. It was determined that the carrying values of the trade names exceeded their fair values and we recorded pre-tax non-cash impairment charges for the second quarter of 2009 in our Corporate segment of $14.9 million for the BHL trade name and
of $0.8 million for the Atria trade name. A total charge of $15.7 million was recorded in impairment of intangible assets in our Condensed Consolidated Statements of Operations for the nine months ended September 26, 2009. Significant judgments
inherent in our analysis included assumptions regarding appropriate revenue growth rates, discount rates and royalty rates.

We review
long-lived assets, including our intangible assets subject to amortization, for impairment whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. Recoverability of long-lived assets is
measured by a comparison of the carrying amount of the asset group to the future undiscounted net cash flows expected to be generated by those assets. If such assets are considered to be impaired, an impairment charge is recognized for the amount by
which the carrying amounts of the assets exceed the fair value of the assets. As a result of the impairment indicators described above, we tested our long-lived assets for impairment at June 27, 2009 and determined that there was no impairment.

We have not performed an additional impairment test of our long-lived assets or our indefinite lived intangible assets at September 26,
2009. We will continue to test these assets for impairment in each reporting period in which indicators, or potential indicators, of impairment are present.



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Results of Operations

Three Months Ended September 26, 2009 Compared to Three Months Ended September 27, 2008

The following discussion and analysis relates to our results of operations for the three months ended September 26, 2009 and September 27, 2008. The selected financial information contained in
the table below should be read in conjunction with our unaudited condensed consolidated financial statements and accompanying notes.



|                                                      |  |                    |      |   |                   |   |      |   |  |      |   
|----------------------------------------------------- |  | ------------------ | ---- | - | ----------------- | - | ---- | - |  | ---- | --
|                                                      |  | Three Months Ended |      |   | % Change          |  
|(Dollar amounts in millions)                          |  | September 26,2009  |      |   | September 27,2008 |   |     
|Net revenues                                          |  | $                  | 40.0 |   |                   | $ | 45.8 |   |  | (13  | )%
|Cost of sales                                         |  |                    | 12.7 |   |                   |   | 14.6 |   |  | (13  | )%
|                                                      |  |                    |      |   |                   |   |      |   |  |      |   
|Gross margin                                          |  |                    | 27.3 |   |                   |   | 31.2 |   |  | (13  | )%
|                                                      |  |                    |      |   |                   |   |      |   |  |      |   
|Selling, general and administrative                   |  |                    | 22.6 |   |                   |   | 25.2 |   |  | (10  | )%
|Research and development                              |  |                    | 6.2  |   |                   |   | 7.9  |   |  | (22  | )%
|Amortization of purchased intangible assets           |  |                    | 2.6  |   |                   |   | 2.6  |   |  |     |   
|Employee-related charges, asset impairments and other |  |                    | 3.7  |   |                   |   | 1.8  |   |  | 106  | % 
|Litigation-related charge                             |  |                    | 1.0  |   |                   |   |     |   |  |     |   
|                                                      |  |                    |      |   |                   |   |      |   |  |      |   
|Operating loss                                        |  |                    | 8.8  |   |                   |   | 6.3  |   |  | 40   | % 
|                                                      |  |                    |      |   |                   |   |      |   |  |      |   
|Loss on investments                                   |  |                    |     |   |                   |   | 3.2  |   |  | (100 | )%
|Interest income, net                                  |  |                    | (1.4 | ) |                   |   | (2.5 | ) |  | (44  | )%
|                                                      |  |                    |      |   |                   |   |      |   |  |      |   
|Loss before income taxes                              |  |                    | 7.4  |   |                   |   | 7.0  |   |  | 6    | % 
|Benefit (provision) for income taxes                  |  |                    |     |   |                   |   |     |   |  |     |   
|                                                      |  |                    |      |   |                   |   |      |   |  |      |   
|Net loss                                              |  | $                  | 7.4  |   |                   | $ | 7.0  |   |  | 6    | % 
|                                                      |  |                    |      |   |                   |   |      |   |  |      |   
|Effective income tax rate                             |  |                    | 0.0  | % |                   |   | 0.0  | % |  |      |   

|                                                                              |  |  |  |  |  | 
|----------------------------------------------------------------------------- |  |  |  |  |  | 
|                                                                             
|The following table summarizes the components of our net revenues by segment:

|                             |  |                    |      |                   |   |      |  |     |   
|---------------------------- |  | ------------------ | ---- | ----------------- | - | ---- |  | --- | --
|                             |  |                   
|                             |  | Three Months Ended |      | % Change          |  
|(Dollar amounts in millions) |  | September 26,2009  |      | September 27,2008 |  
|Lab Services                 |  | $                  | 24.2 |                   | $ | 30.1 |  | (20 | )%
|Products                     |  |                    | 10.0 |                   |   | 10.5 |  | (5  | )%
|Corporate                    |  |                    | 5.8  |                   |   | 5.2  |  | 12  | % 
|                             |  |                    |      |                   |   |      |  |     |   
|Net revenues                 |  | $                  | 40.0 |                   | $ | 45.8 |  | (13 | )%
|                             |  |                    |      |                   |   |      |  |     |   

|                                                                       |  |  |  |  |  | 
|---------------------------------------------------------------------- |  |  |  |  |  | 
|                                                                      
|The following table summarizes our operating income (loss) by segment:

|                             |  |                    |      |   |                   |   |      |   |  |      |   
|---------------------------- |  | ------------------ | ---- | - | ----------------- | - | ---- | - |  | ---- | --
|                             |  |                   
|                             |  | Three Months Ended |      |   | % Change          |  
|(Dollar amounts in millions) |  | September 26,2009  |      |   | September 27,2008 |   |     
|Lab Services                 |  | $                  | (1.5 | ) |                   | $ | 2.8  |   |  | (154 | )%
|Products                     |  |                    | 0.4  |   |                   |   | 0.2  |   |  | 100  | % 
|Corporate                    |  |                    | (7.7 | ) |                   |   | (9.3 | ) |  | (17  | )%
|                             |  |                    |      |   |                   |   |      |   |  |      |   
|Operating loss               |  | $                  | (8.8 | ) |                   | $ | (6.3 | ) |  | 40   | % 
|                             |  |                    |      |   |                   |   |      |   |  |      |   



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Revenues

Revenues from our Lab Services segment for the three months ended September 26, 2009 decreased $5.9 million compared to the three months ended September 27, 2008. The decrease was primarily due
to lower reimbursement rates, reflecting the continued impact of denied tests and historical collection activities. Sample volume declined marginally compared to the three months ended September 27, 2008 due to some lost accounts as a result of
changes in the delivery of disease management services, and efforts to collect receivables from patients, in addition to adverse economic conditions.

Revenues from our Products segment for the three months ended September 26, 2009 decreased by $0.5 million compared to the three months ended September 27, 2008. For the three months ended
September 26, 2009, revenues were primarily from sales of Celera-manufactured products and from royalties from sales of RealTimeTMassays used on the m2000TMsystem from Abbott. For the three months ended September 27, 2008, revenues were recorded based on our alliance
agreement with Abbott and included equalization revenues of $5.3 million. The decline in revenues was largely attributable to variations in sales volume, with the prior year quarter including a large order of Celera-manufactured products.

Prior to the termination of our alliance agreement with Abbott, effective October 1, 2008, the revenues of our Products segment included
product sales to Abbott at cost and equalization revenue received under the alliance agreement. Equalization revenue resulted from an equal sharing of alliance profits and losses between the alliance partners and varied each period depending on the
relative income and expense contribution of each partner. Effective October 1, 2008, the alliance agreement was replaced by a distribution agreement and a royalty agreement. Under the terms of our distribution agreement, Abbott is the exclusive
distributor for a specified group of our diagnostic products. Sales under the distribution agreement are made to Abbott at a price that is based on Abbotts end-user sales price to third parties. Under the terms of our royalty agreement with
Abbott, we receive royalties on sales by Abbott of m2000 reagents, instruments, service and related consumables. Abbott receives royalties on the sale of certain of our genetic tests.

Research and development and administrative costs incurred by us under the terms of the Abbott alliance agreement were presented on a gross basis in our
Consolidated Statements of Operations. All revenues, costs and expenses of the alliance, prior to its termination, were shared equally by both parties. The timing and nature of equalization payments led to fluctuations in both reported revenues and
gross margins from period to period due to changes in end-user sales of alliance products and differences in relative operating expenses between the alliance partners.

Corporate revenues, which primarily consists of royalties, licenses and milestones, increased $0.6 million for the three months ended September 26, 2009 compared to the three months ended
September 27, 2008. The increase in revenue was primarily due to the inclusion of revenue from Cepheid, one of our licensees, in the third quarter of 2009, partially offset by lower revenues from other licensees. We did not recognize royalty
revenue from Cepheid for the three months ended September 27, 2008 as we changed from an accrual basis to a cash basis for this license during the quarter. This change was due to external limitations in the ability to estimate the quarterly
royalty revenue prior to receipt of payment.

Corporate revenues for the three months ended September 26, 2009 included licensing revenue
of $1.5 million from Life Technologies related to human in-vitro diagnostics (HIVD) licenses entered into by Life Technologies during the first quarter of 2009. In January 2009, Life Technologies granted licenses to two life science companies under
its patents relating to real-time technology in the HIVD field. Under our agreement with Applied Biosystems (now Life Technologies), revenues from these third-party licenses are shared between us and Applied Biosystems (now Life Technologies). The
prior year quarter included licensing revenues of $2.0 million from Beckman Coulter, Inc.; the last payment under this license was received in the three months ended December 27, 2008.



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Gross Margin

Gross margin for the three months ended September 26, 2009 decreased $3.9 million compared to the three months ended September 27, 2008 primarily due to a decrease in revenue from our Lab
Services segment, partially offset by a decrease in material cost in our Products segment. Gross margin as a percentage of net revenues was 68% for both three month periods.

Operating Expenses

SG&A expenses decreased $2.6 million for the three months ended September 26, 2009 compared to the prior year quarter, primarily due to a $1.6 million reduction in costs in our Lab Services segment, primarily as a result of lower
employee and employee-related costs, and a $1.2 million decrease in the allowance for doubtful accounts for our Lab Services segment.

Research and development expenses decreased by $1.7 million for the three months ended September 26, 2009 compared to the prior year quarter primarily due to the completion of certain discovery research projects, including reduced
proteomic-based target discovery and validation related activities, and associated lower employee-related costs in our Corporate and Products segments and the termination of the strategic alliance with Abbott, effective October 1, 2008.

The amortization of purchased intangible assets for the three months ended September 26, 2009 and September 27, 2008 related to our
acquisitions of BHL and Atria in October 2007.

A charge of $3.7 million was recorded in employee-related charges, asset impairments and other
expenses for the three months ended September 26, 2009. The charge included $3.2 million related to the restructuring program that we announced in July 2009 and $0.5 million related to tax obligations associated with the split-off from Applied
Biosystems (now Life Technologies) in July 2008. The restructuring charge included severance-related costs of $2.6 million, $1.5 million of which was related to our Lab Services segment, $0.5 million to our Products segment and $0.6 million to our
Corporate segment. In addition, property-related costs of $0.6 million were recorded in our Lab Services segment. This compares to employee-related charges, asset impairments and other expenses of $1.8 million for the three months ended
September 27, 2008, which included a $1.6 million charge in our Corporate segment related to the realization of pension costs as a result of the split-off from Applied Biosystems (now Life Technologies). Certain unrealized pension costs had
previously been recorded in accumulated other comprehensive income, however the pension plan was terminated following the split-off from Applied Biosystems (now Life Technologies) and the unrealized pension costs of $1.6 million were charged to the
Condensed Consolidated Statement of Operations. Our Lab Services segment also included severance costs of $0.3 million, partially offset by the reversal of a previous charge in our Corporate segment of $0.1 million for certain severance-related
benefits associated with the restructuring of our proteomics-based activities.

We recorded a charge of $1.0 million in our Products segment
for the three months ended September 26, 2009 related to the expected outcome of certain legal proceedings. The recorded charge represents managements best estimate at this time.

Operating Income (Loss)

Our Lab Services segment had an operating loss of $1.5 million for the three months ended September 26, 2009 compared to operating income of $2.8 million for the prior year quarter. This change was primarily due to a decrease in gross
margin of $5.3 million, largely attributable to a decrease in revenue, and an increase in employee-related charges, asset impairments and other expenses, partially offset by a decrease in SG&A expenses. These changes are further described above.



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Our Products segment had operating income of $0.4 million for the three months ended September 26,
2009, an increase of $0.2 million compared to the prior year quarter. This change was primarily due to an increase in gross margin, largely attributable to a decrease in material cost, and a decrease in R&D expenses, partially offset by a
litigation-related charge and an increase in employee-related charges, asset impairments and other expenses. These changes are further described above.

Our Corporate segment had an operating loss of $7.7 million for the three months ended September 26, 2009, a decrease of $1.6 million compared to the prior year quarter. This change was primarily due
to an increase in license revenue of $0.6 million and a decrease in R&D and employee-related charges, asset impairment and other expenses. These changes are further described above.

Loss on Investments

For
the three months ended September 27, 2008 we recorded a $3.2 million loss on investments for an other-than-temporary impairment of our investments in senior debt securities issued by Lehman Brothers Holdings, Inc. and Washington Mutual
Bank NV. The impairment charge resulted from a number of factors, including the magnitude and duration of the decline in market value, the regulatory and economic environment, and changes in credit ratings of the issuers.

Interest Income, Net

Interest income, net for the three months ended September 26, 2009 decreased $1.1 million compared to the prior year quarter primarily due to lower interest rates. Interest income, net for the three months ended September 26, 2009
included $0.2 million of accretion of discount related to the long-term receivable from Abbott.

Benefit (Provision) for
Income Taxes

We recorded a tax benefit of less than $0.1 million for the three months ended September 26, 2009 and a tax charge of
less than $0.1 million for the three months ended September 27, 2008. Subsequent to the split-off from Applied Biosystems (now Life Technologies), we have established a full valuation allowance on our federal and state net deferred tax assets
since we believe it is more likely than not we may not generate sufficient income, of the appropriate character, and in the particular jurisdictions, to realize the benefits.



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Nine Months Ended September 26, 2009 Compared to Nine Months Ended
September 27, 2008

The following discussion and analysis relates to our results of operations for the nine months ended
September 26, 2009 and September 27, 2008. The selected financial information contained in the table below should be read in conjunction with our unaudited condensed consolidated financial statements and accompanying notes.



|                                                      |  |                   |       |   |                   |   |        |    |  |      |   
|----------------------------------------------------- |  | ----------------- | ----- | - | ----------------- | - | ------ | -- |  | ---- | --
|                                                      |  | Nine Months Ended |       |   | % Change          |  
|(Dollar amounts in millions)                          |  | September 26,2009 |       |   | September 27,2008 |   |       
|Net revenues                                          |  | $                 | 127.1 |   |                   | $ | 128.0  |    |  | (1   | )%
|Cost of sales                                         |  |                   | 40.1  |   |                   |   | 39.9   |    |  | 1    | % 
|                                                      |  |                   |       |   |                   |   |        |    |  |      |   
|Gross margin                                          |  |                   | 87.0  |   |                   |   | 88.1   |    |  | (1   | )%
|                                                      |  |                   |       |   |                   |   |        |    |  |      |   
|Selling, general and administrative                   |  |                   | 89.0  |   |                   |   | 71.7   |    |  | 24   | % 
|Research and development                              |  |                   | 21.3  |   |                   |   | 27.5   |    |  | (23  | )%
|Amortization of purchased intangible assets           |  |                   | 7.7   |   |                   |   | 7.6    |    |  | 1    | % 
|Employee-related charges, asset impairments and other |  |                   | 4.3   |   |                   |   | 8.3    |    |  | (48  | )%
|Litigation-related charge and legal settlement        |  |                   | 1.0   |   |                   |   | (1.1   | )  |  | (191 | )%
|Impairment of intangible assets                       |  |                   | 15.7  |   |                   |   |       |    |  |     |   
|                                                      |  |                   |       |   |                   |   |        |    |  |      |   
|Operating loss                                        |  |                   | 52.0  |   |                   |   | 25.9   |    |  | 101  | % 
|                                                      |  |                   |       |   |                   |   |        |    |  |      |   
|Loss on investments                                   |  |                   |      |   |                   |   | (6.3   | )  |  | (100 | )%
|Interest income, net                                  |  |                   | 5.2   |   |                   |   | 8.6    |    |  | (40  | )%
|Other income, net                                     |  |                   |      |   |                   |   | 0.1    |    |  | (100 | )%
|                                                      |  |                   |       |   |                   |   |        |    |  |      |   
|Loss before income taxes                              |  |                   | 46.8  |   |                   |   | 23.5   |    |  | 99   | % 
|Benefit (provision) for income taxes                  |  |                   | 6.3   |   |                   |   | (95.0  | )  |  | (107 | )%
|                                                      |  |                   |       |   |                   |   |        |    |  |      |   
|Net loss                                              |  | $                 | 40.5  |   |                   | $ | 118.5  |    |  | (66  | )%
|                                                      |  |                   |       |   |                   |   |        |    |  |      |   
|Effective income tax rate                             |  |                   | 13.5  | % |                   |   | (404.3 | )% |  |      |   

The following table summarizes the components of our net revenues by segment:



|                             |  |                   |       |                   |   |       |  |    |   
|---------------------------- |  | ----------------- | ----- | ----------------- | - | ----- |  | -- | --
|                             |  | Nine Months Ended |       | % Change          |  
|(Dollar amounts in millions) |  | September 26,2009 |       | September 27,2008 |  
|Lab Services                 |  | $                 | 77.9  |                   | $ | 78.2  |  | 0  | % 
|Products                     |  |                   | 30.1  |                   |   | 28.9  |  | 4  | % 
|Corporate                    |  |                   | 19.1  |                   |   | 20.9  |  | (9 | )%
|                             |  |                   |       |                   |   |       |  |    |   
|Net revenues                 |  | $                 | 127.1 |                   | $ | 128.0 |  | (1 | )%
|                             |  |                   |       |                   |   |       |  |    |   

The following table summarizes our operating income (loss) by segment:



|                             |  |                   |       |   |                   |   |       |   |  |      |   
|---------------------------- |  | ----------------- | ----- | - | ----------------- | - | ----- | - |  | ---- | --
|                             |  | Nine Months Ended |       |   | % Change          |  
|(Dollar amounts in millions) |  | September 26,2009 |       |   | September 27,2008 |   |      
|Lab Services                 |  | $                 | (17.5 | ) |                   | $ | 3.8   |   |  | (561 | )%
|Products                     |  |                   | 2.2   |   |                   |   | (3.9  | ) |  | (156 | )%
|Corporate                    |  |                   | (36.7 | ) |                   |   | (25.8 | ) |  | 42   | % 
|                             |  |                   |       |   |                   |   |       |   |  |      |   
|Operating loss               |  | $                 | (52.0 | ) |                   | $ | (25.9 | ) |  | 101  | % 
|                             |  |                   |       |   |                   |   |       |   |  |      |   



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Revenues

Revenues from our Lab Services segment for the nine months ended September 26, 2009 decreased $0.3 million compared to the nine months ended September 27, 2008. The decrease was primarily due to
lower reimbursement rates, reflecting the continued impact of denied tests and historical collection activities, partially offset by an overall increase in the volume of samples in the period and the launch of the blood-based KIF6 test in
July 2008.

Revenues from our Products segment for the nine months ended September 26, 2009 increased $1.2 million
compared to the nine months ended September 27, 2008. For the nine months ended September 26, 2009, revenues were primarily from sales of Celera-manufactured products and from royalties from sales of RealTimeTMassays used on the m2000TMsystem from Abbott. For the nine months ended September 27,
2008, revenues were recorded based on our alliance agreement with Abbott and included equalization revenues of $13.3 million.

Corporate
revenues, which primarily consists of royalties, licenses and milestones, decreased $1.8 million for the nine months ended September 26, 2009 compared to the nine months ended September 27, 2008. The reduction in revenue was due primarily
to a decrease in royalty revenue received from a licensee.

Corporate revenues for the nine months ended September 26, 2009 included
licensing revenue of $5.3 million from Life Technologies related to human in vitro diagnostics licenses entered into by Life Technologies during the first quarter of 2009. In January 2009, Life Technologies granted licenses to two life science
companies under its patents relating to real-time technology in the human in vitro diagnostics field. Under our agreement with Applied Biosystems (now Life Technologies), revenues from these third-party licenses are shared between us and Applied
Biosystems (now Life Technologies). We expect to record a total of $8.3 million in license fees over the five quarters ending April 3, 2010 for these licenses. Revenues for the nine months ended September 26, 2009 also included $1.0
million from Pharmacyclics, Inc. related to the execution of an amendment to our 2006 licensing agreement. The nine months ended September 27, 2008 included licensing revenues of $6.0 million from Beckman Coulter, Inc.; the last payment under
this license was received in the three months ended December 27, 2008.

Gross Margin

Gross margin for the nine months ended September 26, 2009 decreased $1.1 million compared to the nine months ended September 27, 2008 primarily due
to a decrease in revenue from our Corporate segment and increased costs in our Lab Services segment, partially offset by increased revenue and lower costs in our Products segment. As a result, gross margin as a percentage of net revenues decreased
to 68% for the nine months ended September 26, 2009 compared to 69% for the nine months ended September 27, 2008.

Operating Expenses

SG&A expenses increased by $17.3 million for the nine months ended September 26, 2009 compared to
the prior year period, primarily due to a $16.8 million increase in allowance for doubtful accounts expense for our Lab Services segment. This increase in the allowance for doubtful accounts was primarily due to a provision for accounts receivable
over 360 days outstanding and tests that have been denied for reimbursement. These balances were primarily due from patients. We also incurred increased SG&A costs of $1.7 million in our Lab Services segment associated primarily with the
expansion of our accounts receivable collection activities and increased sales efforts and $0.6 million in our Corporate segment associated primarily with increased employee-related costs; partially offset by lower costs in our Products segments
primarily related to reduced employee-related costs.



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Research and development expenses decreased by $6.2 million for the nine months ended September 26,
2009 compared to the prior year period primarily due to the completion of certain discovery research projects, including reduced proteomic-based target discovery and validation related activities, and associated lower employee-related costs in our
Corporate and Products segments, and the termination of the strategic alliance with Abbott.

The amortization of purchased intangible assets
for the nine months ended September 26, 2009 and September 27, 2008 related to our acquisitions of BHL and Atria in October 2007.

A
charge of $4.3 million was recorded in employee-related charges, asset impairments and other expenses for the nine months ended September 26, 2009 primarily related to the restructuring announced in July 2009. Costs associated with the
restructuring program included severance-related costs of $2.6 million, $1.5 million of which related to our Lab Services segment, $0.5 million for our Products segment and $0.6 million for our Corporate segment. In addition, property-related costs
of $0.6 million were recorded in our Lab Services segment. Our Corporate segment also included severance and related costs of $0.7 million associated with the closure of our Rockville, Maryland facility and $0.5 million related to tax costs
associated with the split-off from Applied Biosystems (now Life Technologies) in July 2008. These costs were partially offset by the reversal of a previous charge of $0.1 million for certain severance-related benefits associated with employees
terminated in our February 2008 restructuring action.

Employee-related charges, asset impairment and other expenses were $8.3 million for the
nine months ended September 27, 2008. Our Lab Services segment included severance costs of $0.3 million, partially offset by the reversal of a previous charge in our Corporate segment of $0.1 million for certain severance-related benefits
associated with the restructuring of our proteomics-based activities. Our Products segment included restructuring charges of $0.9 million related to a reduction in our proteomic-based activities and $0.4 million related to a patent infringement suit
with Innogenetics N.V. Our Corporate segment included $3.7 million for professional fees related to the split-off from Applied Biosystems (now Life Technologies) and $1.6 million related to the realization of pension costs as a result of the
split-off from Applied Biosystems (now Life Technologies). Our Corporate segment also included an asset impairment charge of $0.3 million and $1.3 million for severance costs resulting from the realigning of our R&D resources.

We recorded a charge of $1.0 million in our Products segment for the nine months ended September 26, 2009 related to the expected outcome of certain
legal proceedings. The recorded charge represents managements best estimate at this time.

Our Corporate segment included a gain of $1.1
million for the nine months ended September 27, 2008 related to the settlement of a litigation matter associated with our former Online/Information business, an information products and service business.

We recorded a $15.7 million non-cash charge for the nine months ended September 26, 2009 in our Corporate segment for the impairment of intangible
assets relating to the trade names of BHL and Atria.

Operating Income (Loss)

Our Lab Services segment had an operating loss of $17.5 million for the nine months ended September 26, 2009 compared to operating income of $3.8
million for the nine months ended September 27, 2008. This change was primarily due to an increase in allowance for doubtful accounts expense, increased employee-related charges, asset impairments and other expenses and a decrease in gross
margin, caused by a decrease in revenue and an increase in cost of sales. These changes are further described above.



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Our Products segment had operating income of $2.2 million for the nine months ended September 26, 2009
compared to an operating loss of $3.9 million for the nine months ended September 27, 2008. This change was due to an increase in gross margin, primarily as a result of increased revenues, and a decrease in SG&A and R&D expenses,
partially offset by a litigation related charge of $1.0 million recorded in the nine months ended September 26, 2009. These changes are further described above.

The operating loss for our Corporate segment was $36.7 million for the nine months ended September 26, 2009 compared to $25.8 million for the nine months ended September 27, 2008. This change
was primarily due to a $15.7 million non-cash impairment charge recorded for the nine months ended September 26, 2009 related to our indefinite-lived intangible assets, a gain of $1.1 million for the nine months ended September 27, 2008
related to the settlement of a litigation matter associated with our former Online/Information business, and a decrease in revenues of $1.8 million, partially offset by a decrease in R&D and employee-related charges, asset impairments and other
expenses. These changes are further described above.

Loss on Investments

We recorded a loss on investments of $6.3 million for the nine months ended September 27, 2008, consisting of $3.1 million for an other-than-temporary
impairment of a minority equity investment and $3.2 million for an other-than-temporary impairment of our investments in senior debt securities issued by Lehman Brothers Holdings, Inc. and Washington Mutual Bank NV.

Interest Income, Net

Interest income, net for the nine months ended September 26, 2009 decreased $3.4 million compared to the prior year period primarily due to lower interest rates combined with lower average balances of cash and cash equivalents and
short-term investments. Interest income, net for the nine months ended September 26, 2009 included $0.7 million of accretion of discount related to the long-term receivable from Abbott.

Benefit (Provision) for Income Taxes

We recorded a tax benefit of $6.3 million for the nine months ended September 26, 2009. This benefit was primarily the result of a reduction in a deferred tax liability associated with the intangible
asset impairment charge referred to above, partially offset by an increase in our valuation allowance for state deferred tax assets. A tax charge of $95.0 million was recorded for the nine months ended September 27, 2008 primarily due to a
valuation allowance recorded against deferred tax assets. Subsequent to the split-off from Applied Biosystems (now Life Technologies), we have established a full valuation allowance on our federal and state net deferred tax assets since we believe
it is more likely than not we may not generate sufficient income, of the appropriate character, and in the particular jurisdictions, to realize the benefits.

Discussion of Financial Resources and Liquidity

We had cash, cash equivalents and
short-term investments of $321.0 million at September 26, 2009 and $316.5 million at December 27, 2008. We believe that existing funds are adequate to satisfy our normal operating cash flow needs and planned capital expenditures for at
least the next twelve months.

We do not have a revolving credit agreement in place, although we may establish such a facility in the future.



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The following table summarizes the components of our financial resources at September 26, 2009 and
December 27, 2008:



|                                                           |  |                     |       |                    |   |      
|---------------------------------------------------------- |  | ------------------- | ----- | ------------------ | - | -----
|(Dollar amounts in millions)                               |  | AtSeptember 26,2009 |       | AtDecember 27,2008
|Cash and cash equivalents                                  |  | $                   | 73.7  |                    | $ | 72.0 
|Short-term investments                                     |  |                     | 247.3 |                    |   | 244.5
|                                                           |  |                     |       |                    |   |      
|Total cash and cash equivalents and short-term investments |  | $                   | 321.0 |                    | $ | 316.5
|                                                           |  |                     |       |                    |   |      
|Total debt                                                 |  | $                   |      |                    | $ | 0.1  

We maintain a portfolio of investments in marketable debt securities, which are recorded at fair
value. To minimize our exposure to credit risk, we invest in corporate and government securities with strong credit ratings and have established guidelines relative to credit, diversification and maturity with the primary objective of maintaining
safety of principal. We do not invest in derivative financial instruments or auction rate securities. Recent global market and economic conditions have led to tighter credit conditions and recession in most major economies. Further
deterioration in the credit markets may have an adverse effect on the fair value of our investment portfolio.

A prolonged economic downturn
or a continuing scarcity of credit could adversely affect the financial condition and levels of business activity of our customers. This may in turn have a corresponding negative impact on our future operating results as our customers may delay
payment or suffer business failures that may cause us to record additional allowances for doubtful accounts in the future.

The overall
increase of cash, cash equivalents and short-term investments for the nine months ended September 26, 2009 was primarily due to $7.2 million of proceeds received from the exercise of stock options, a net increase of $7.5 million in the value of
securities within our short-term investment portfolio, and $3.5 million of cash provided by operating activities, partially offset by the purchase of intangible assets of $10.7 million and additions to property, plant and equipment of $3.0 million.

Net cash flows for the nine months ended September 26, 2009 were as follows:



|                                                 |  |                   |      |   |                   |   |       |  
|------------------------------------------------ |  | ----------------- | ---- | - | ----------------- | - | ----- | -
|                                                 |  | Nine Months Ended |     
|(Dollar amounts in millions)                     |  | September 26,2009 |      |   | September 27,2008 |  
|Net cash provided (used) by operating activities |  | $                 | 3.5  |   |                   | $ | (18.3 | )
|Net cash (used) provided by investing activities |  |                   | (9.0 | ) |                   |   | 10.9  |  
|Net cash provided by financing activities        |  |                   | 7.2  |   |                   |   | 6.9   |  
|                                                 |  |                   |      |   |                   |   |       |  
|Net change in cash and cash equivalents          |  | $                 | 1.7  |   |                   | $ | (0.5  | )
|                                                 |  |                   |      |   |                   |   |       |  

Operating activities

For the nine months ended September 26, 2009, net cash provided by operating activities of $3.5 million consisted of income-related cash flow of $14.6
million, offset by changes in operating assets and liabilities of $11.1 million. Income-related cash flow represents the net loss for the period adjusted for non-cash charges related to depreciation and amortization, impairment of intangible assets,
non-cash interest income, allowance for doubtful accounts, employee-related charges, asset impairments and other, share-based compensation, deferred income taxes, loss (gain) on disposal of assets, amortization of premium on purchase of investments
and non-reimbursable utilization of tax benefits by Applied Biosystems (now Life Technologies).



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The changes in operating assets and liabilities for the nine months ended September 26, 2009 were due
to an increase of $11.4 million in accounts receivable primarily attributable to our Lab Services segment, a decrease of $1.5 million in accounts payable and other liabilities due primarily to the timing of payments, an increase in prepaid expenses
and other assets of $0.4 million, partially offset by a decrease in net inventories of $2.1 million, primarily in our Products segment.

For
the nine months ended September 27, 2008, net cash used by operating activities of $18.3 million consisted of changes in operating assets and liabilities of $28.4 million, partially offset by income-related cash flow of $10.1 million. The
changes in operating assets and liabilities were due to an increase of $25.3 million in accounts receivable primarily due to slower collections at our Lab Services segment; a decrease of $12.6 million in accounts payable and other liabilities
primarily due to the settlement of a patent infringement suit, payments relating to the split-off from Applied Biosystems (now Life Technologies) and the timing of other payments; partially offset by a decrease of $6.6 million in prepaid expenses;
and a decrease in net inventories of $2.9 million, primarily in our Products segment.

Investing activities

The net cash used by investing activities of $9.0 million for the nine months ended September 26, 2009 was primarily caused by the purchase of
intangible assets of $10.7 million, including $10.3 million for the acquisition of patent licenses from deCODE genetics, Inc. and Perlegen Sciences, Inc., and additions to property, plant and equipment of $3.0 million, net of disposal proceeds of
$0.4 million. Additions to property, plant and equipment included $1.3 million for leasehold improvements, $1.8 million for the purchase of machinery and equipment and $0.3 million for the purchase of software licenses. This was partially offset by
proceeds from the maturity and sale of available-for-sale investments exceeding the purchases of available-for-sale investments by $4.7 million.

For the nine months ended September 27, 2008, the net cash provided by investing activities of $10.9 million was due primarily to proceeds from the maturity and sale of available-for-sale investments exceeding the purchase of
available-for-sale investments by $17.9 million. This was partially offset by the purchase of intangible assets of $2.0 million, investment of $0.7 million in the alliance with Abbott and additions to property, plant and equipment, net of $4.3
million, which included $2.1 million for leasehold improvements and $2.2 million for the purchase of machinery and equipment.

Financing activities

The net cash provided by financing activities of $7.2 million and $6.9 million for the nine months ended
September 26, 2009 and September 27, 2008, respectively, related primarily to proceeds from the issuance of stock upon the exercise of stock options.

Trends and Uncertainties That May Impact Future Results of Operations

Recent global
market and economic conditions have been unprecedented and challenging, with tight credit conditions and recession in most major economies. Concern about the stability of the markets generally and the strength of counterparties specifically has led
many lenders and institutional investors to reduce, and in some cases, cease to provide, credit or funding to businesses and consumers. These factors have led to a decrease in spending by businesses and consumers alike, and a corresponding decrease
in global infrastructure spending. Continued turbulence in the U.S. and international markets and economies and prolonged declines in business and consumer spending may continue to affect our liquidity and financial condition, and the liquidity and
financial condition of our customers.



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Off-Balance Sheet Arrangements

An off-balance sheet arrangement includes any contractual obligation, agreement or transaction arrangement involving an unconsolidated entity under which we
would have: (1) retained a contingent interest in transferred assets; (2) an obligation under derivative instruments classified as equity; (3) any obligation arising out of a material variable interest in an unconsolidated entity that
provides financing, liquidity, market risk or credit risk support to us, or that engages in leasing, hedging or research and development services with us; or (4) made guarantees.

At September 26, 2009 and December 27, 2008, we had no off-balance sheet arrangements or obligations.

Critical Accounting Estimates

There have been no material changes to our critical
accounting policies and estimates from the disclosures made in Managements Discussion and Analysis of Financial Conditions and Results of Operations included in our Transition Report on Form 10-KT for the six months ended December 27,
2008 filed with the SEC on March 25, 2009.

Recent Accounting Pronouncements

Refer to Note 2 to our unaudited condensed consolidated financial statements for a description of the effect of recently adopted accounting
pronouncements.



|ITEM 3. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
|------- | ----------------------------------------------------------

Our principal exposures to financial market risk are changes in interest rates and changes in equity prices. Changes in interest rates will affect the interest earned on our cash, cash equivalents, and
short-term investments, as well as the value of those investments. Our primary objectives for these investments are to ensure the preservation of capital, meet liquidity requirements, and optimize returns.

We manage our interest rate risk by maintaining an investment portfolio generally consisting of debt instruments of high credit quality and relatively short
maturities. As of September 26, 2009, our cash, cash equivalents and short-term investments were invested in a diversified, liquid portfolio of corporate bonds, treasury and agency securities, as well as asset-backed securities and money market
instruments.

To provide an assessment of the interest rate risk associated with our investment portfolio, we considered the volatility of
interest rates experienced in prior years as well as the duration of the holdings in our portfolio. We determined that it is reasonably possible that an adverse change of 100 basis points (1.0%) could be experienced in the near term. A
hypothetical 1.0% increase in interest rates would result in a decrease in the fair value of our portfolio of $2.4 million. This loss would only be realized if these investments were sold prior to maturity. The decline reflects only the direct
impact of the change in interest rates. Other market fluctuations, such as changes in credit risk, could result in additional declines in the value of our investment portfolio.

We do not hedge our equity positions in other companies or our short-term investments. Our exposure on these instruments is limited to changes in quoted market prices. For marketable equity securities, a
reasonably possible decline in market prices of approximately 10% in the near term would result in a decrease in their fair value of $0.2 million.



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We have minimal exposure to foreign currency risk as our operations are primarily in the U.S. and overseas
sales are typically billed in U.S. dollars.

Impact of Inflation and Changing Prices

Inflation and changing prices are monitored and we attempt to minimize the impact of inflation by improving productivity and efficiency through review of
both manufacturing capacity and operating expense levels. When operating costs increase, we attempt to recover such costs by increasing, over time, the selling price of our products and services. We believe the effects of inflation have been
appropriately managed and therefore have not had a material impact on our historic consolidated operations and resulting financial position.



|ITEM 4T. | CONTROLS AND PROCEDURES
|-------- | -----------------------

Disclosure
Controls and Procedures

We are responsible for maintaining disclosure controls and procedures, as defined by the SEC in Rules 13a-15(e)
and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the Exchange Act). Disclosure controls and procedures are controls and other procedures designed to ensure that the information required to be disclosed by us in the reports that
we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SECs rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures
designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as
appropriate to allow timely decisions regarding required disclosure. Our management evaluated the effectiveness of our disclosure controls and procedures as of the end of the three months ended September 26, 2009, the period covered by this
report. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that as of the end of such period, our disclosure controls and procedures were effective, at the reasonable assurance level.

There has been no change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred
during the three months ended September 26, 2009, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.



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PART II  Other Information



|ITEM 1. | Legal Proceedings
|------- | -----------------

We have from time to
time been involved in various lawsuits, arbitrations, investigations, and other legal actions. These legal actions have involved, for example, commercial, intellectual property, securities, and employment matters. We believe that we have meritorious
defenses against the claims currently asserted against us and intend to defend them vigorously. However, the outcome of legal actions is inherently uncertain, and we cannot be sure that we will prevail in our defense of claims currently asserted
against us.

On May 15, 2008, we received a letter from the National Institutes of Health, or NIH, following up on previous
correspondence and discussions and requesting that we enter into a license agreement with the NIH for its U.S. Patent No. 5,252,477 in connection with our ViroSeq HIV-1 Genotyping System, and that we pay royalties in respect of all of our past
sales of this product (which NIH alleged to be approximately $1.9 million), and in respect of future sales of this product. Although we have had discussions with the NIH on this matter, we continue to believe that the NIHs patent is not
applicable to our ViroSeq HIV-1 Genotyping System and that the NIH is not entitled to any royalties from the sale of this product.

In
addition to legal actions to which we are a party, we may be required under our separation agreement with Applied Biosystems (now Life Technologies) to indemnify Applied Biosystems (now Life Technologies) for damages, costs and other liabilities
incurred by Applied Biosystems (now Life Technologies) relating to existing and future lawsuits, arbitrations, investigations, and other legal actions to which Applied Biosystems (now Life Technologies) is or may become a party, to the extent
related to our business. For more information, see Note 14 to our unaudited Condensed Consolidated Financial Statements and the sections entitled Risk Factors  Applied Biosystems (now Life Technologies) is subject to a class action
lawsuit relating to its offering of shares of Celera Group tracking stock in 2000 that may result in liabilities for which we have agreed to indemnify Applied Biosystems (now Life Technologies), and Risk Factors  Our separation
agreement with Applied Biosystems (now Life Technologies) requires us to indemnify Applied Biosystems (now Life Technologies) for specified liabilities, including liabilities relating to the Celera business, specified litigation and one-half of any
liabilities resulting from the split-off.



|ITEM 1A. | Risk Factors
|-------- | ------------

The following information
sets forth facts that could cause our actual results to differ materially from those contained in forward-looking statements we have made in this Quarterly Report and those we may make from time to time. The risk factors set forth below include all
changes to, and supersede, the risk factors previously disclosed in Part I, Item 1A of our Transition Report on Form 10-KT for the year ended December 27, 2008.

Our net revenues will be negatively affected if third-party payors decide that our products or services are not approved for reimbursement or if healthcare providers do not accept our diagnostic
products as clinically useful.

Our revenues are highly dependent on our clinical laboratory tests and diagnostic products being approved
for reimbursement by Medicare and other government healthcare programs, as well as private insurance companies and managed care organizations, commonly referred to, collectively, as third-party payors. We have experienced denials of
reimbursement from certain payers in



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some territories. Third party payors may deny clinical laboratory tests and diagnostic products for reimbursement if they determine that these tests and products are not medically necessary or
otherwise not approved for reimbursement under standards independently established by these third-party payors, which may take into consideration factors such as the investigational nature of a particular test or product, or whether less expensive
alternatives are available. Each third-party payor makes its own decision as to whether a given diagnostic test is medically necessary and worthy of payment. If Medicare or any other third-party payor determines that any one or more of our clinical
laboratory tests are not medically necessary or are not otherwise suitable for reimbursement, healthcare providers may be reluctant to prescribe these tests. Similarly, if the use of our diagnostic products is not approved for reimbursement,
purchasers of any one or more of these products could decrease or eliminate their orders of these products. Any change by one or more third-party payor with regard to their existing reimbursement practices could impact the tests and products we
offer, the revenue received on each of the tests and products we sell and harm our operating results and financial condition.

In
addition, the growth and success of our sales of diagnostic products depends on market acceptance of our products as clinically useful and cost-effective by healthcare providers and clinical laboratories. We expect that most of our diagnostic
products will use genotyping and gene expression information to predict predisposition to diseases, disease progression or severity, or responsiveness to treatment. Market acceptance depends on the widespread acceptance and use by healthcare
providers of genetic testing for these purposes. The use of genotyping and gene expression information by healthcare providers for these purposes is relatively new. Healthcare providers may not want to use our products designed for these purposes.
Also, Medicare and other third-party payors are continually looking at the clinical utility of genetic testing and making determinations as to whether to continue reimbursement for certain genetic tests. These events could impact the tests and
products we offer, the revenue received on each of the tests and products we sell and harm our operating results and financial condition.

Third-party payors and healthcare providers may look to treatment guidelines such as the National Cholesterol Education Programs current clinical guidelines for cholesterol testing and management that are contained in the Third Report
of the Expert Panel on Detection, Evaluation, and Treatment of High Blood Cholesterol in Adults (ATP III), anticipated to be updated in 2010, in making their determinations as to the clinical utility of our diagnostic tests. Some of our
advanced diagnostic tests are not included in the current guidelines and may not be incorporated in the future, and other existing tests may be removed, any of which could harm our operating results and financial condition.

Efforts by third-party payors, including Medicare, to reduce utilization and reimbursement rates could decrease our net revenues and profitability.

Third-party payors have increased their efforts to control the cost, utilization and delivery of healthcare services. From time to time,
Congress has considered and implemented changes in the Medicare fee schedules in conjunction with budgetary legislation. A five-year moratorium on changes to the Medicare clinical laboratory fee schedule ended on December 31, 2008. The Medicare
clinical laboratory rates were increased approximately 4.5% as of January 1, 2009. In the current economic environment, there is no certainty that these rates will remain at these levels for clinical laboratory testing. Reductions in the
reimbursement rates of other third-party payors have occurred and may occur in the future. In the past, these reimbursement rate changes have resulted in reduced prices, added costs and decreased test utilization for the clinical laboratory industry
and future rate reductions could have a similar impact on the industry. If the payment amount we receive for our clinical laboratory testing services is reduced, it could harm our operating results and financial condition. Also, if clinical
laboratories that purchase our diagnostic products receive reduced payment for their testing services, the reduced payments may cause them to seek lower pricing for our diagnostic products, which could, in turn, harm our operating results and
financial condition.



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From time to time, the federal government has considered whether competitive bidding can be used to provide
clinical testing services for Medicare beneficiaries at attractive rates while maintaining quality and access to care. In 2008, Congress enacted legislation that eliminated a proposed competitive bidding demonstration project for clinical testing
services. State governments also have considered from time to time whether to apply competitive bidding to clinical testing services. The industry remains concerned about the potential use of competitive bidding for clinical testing services and
believes that the quality of services and access to those services could be adversely impacted by implementation of competitive bidding. If competitive bidding were implemented on a regional or national basis for clinical testing, it could harm our
operating results and financial condition.

We expect efforts to reduce reimbursements, to impose more stringent cost controls and to reduce
utilization of clinical test services will continue. These efforts, including changes in law or regulations, may harm our operating results and financial condition.

Payment practices by third-party payors where we are out-of-network can harm our operating results and financial condition.

A large portion of BHLs clinical laboratory non-Medicare fee-for-service testing business is currently reimbursed by non-governmental third-party payors on an out-of-network, non-participating
basis. This means that BHL does not have contracted reimbursement rates with these companies. Blue Cross/Blue Shield and its related entities are the most significant payors of our services with whom we are out-of-network. During the third
quarter of 2009, Blue Cross/Blue Shield resumed sending payment for our services to their beneficiaries instead of us in all states where we conduct business, except for Alabama where we have secured an in-network contract. As a result of this
practice, we, in-turn, must then seek to collect both the non-contractual payors receivables and the patients receivables from these beneficiaries. This increases the length of time it takes for us to collect a receivable and
reduces the probability of collecting the full amount due. Though we have implemented programs aimed at improving our collections, there can be no assurance that these will be successful. We are in dialogue with various Blue Cross/Blue
Shield entities to secure in-network contracts and/or receive payment directly from Blue Cross/Blue Shield. There can be no assurance that these contracting discussions and negotiations will be successful or completed in an expeditious
manner. The amounts we are required to spend to collect monies owed to us from patients are significant and harm our operating results and financial condition.

We may need to accept lower prices for some of our testing services in exchange for participating in provider networks.

In order to contain medical expenses, third-party payors may require BHL to become an in-network, participating provider of clinical
laboratory testing services. BHLs past practice was to be an out-of-network provider. BHL has entered into contracts with, among others, Blue Cross and Blue Shield of Alabama, United Healthcare® (through its PacifiCare® subsidiary) and Aetna®
(through Aetna Health of California, Inc.) as an in-network, participating provider and we are working toward bringing additional BHL business under contract in the future. In-network, participating reimbursement rates are usually substantially
lower than those reimbursement rates currently being received by BHL for its testing services and there is no assurance that all of BHLs tests will be allowed by any particular third-party payors coverage determination polices.
Therefore, joining these networks could reduce BHLs net income and harm our operating results and financial condition.



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Our business is affected by macroeconomic conditions, and recent adverse changes in U.S. and global
economic conditions have had and may continue to have an adverse effect on our business.

Various macroeconomic factors have affected, and
may continue to affect, our business and the results of our operations. Recent negative global market and economic conditions have continued, with tight credit conditions and recession in most major economies continuing into the second half of 2009.
Slower economic activity, inflation, rising unemployment and the related loss of employee-sponsored health insurance, decreased consumer confidence and other factors related to adverse market and economic conditions have and may continue to increase
our business costs, cause supplier difficulties, lower our revenues and/or affect the ability of our customers to purchase and pay for our products and services. This, in turn, may harm our operating costs and financial condition and cause us to
record higher allowances for doubtful accounts in the future.

Interest rate changes, illiquid credit market conditions, continuing government
support for major financial institutions and other factors related to adverse market and economic conditions could also affect the value of our investments and/or adversely affect our ability to obtain external financing. For example, in the six
months ended December 27, 2008, we recognized a $3.2 million loss on investments for an other-than-temporary impairment of our investments in senior debt securities issued by Lehman Brothers Holdings, Inc. and Washington Mutual Bank N.V.

Medicare contracting reforms could change Medicares reimbursement policies or rates for our laboratory testing services.

Because a large percentage of our revenue is derived from the Medicare fee-for-service program, the Medicare coverage and reimbursement
rules are significant to our operations.

The Medicare Modernization Act of 2003 mandated the creation of Medicare Administrative Contractors,
or MACs, to replace the organizations that administered the Medicare fee-for-service programs. The fee-for-service program is the traditional Medicare program where beneficiaries choose the physician or other healthcare provider they
wish to see and Medicare and/or the beneficiary pays a fee for each service used. In November 2007, CMS awarded the MAC Jurisdiction 1 (California, Hawaii, Nevada, American Samoa, Guam and the Northern Mariana Islands) to Palmetto GBA. As a
Medicare-participating laboratory based in California, we submit our Medicare fee-for-service bills to Palmetto GBA and are subject to Palmetto GBAs local coverage and reimbursement policies.

The full transition to Palmetto GBA occurred effective September 2, 2008. The MAC stated methodology for consolidation and transition of Local Coverage
Determinations, or LCDs, was based on the principal of least restrictive. A new LCD related to some of our diagnostic services was introduced as a result of the consolidation process and later retired. New LCDs may result in reductions
to, delays in or denials for reimbursement for the services we offer. Additionally, the transition from a fiscal intermediary to a MAC is in an early stage and may result in delays in or denials for reimbursement that could harm our operating
results and financial condition.

The clinical laboratory fee schedule sets the maximum amount payable under Medicare for each specific
laboratory Current Procedural Terminology (CPT) code. We bill the Medicare fee-for-service program directly and must accept no more than the scheduled amount as payment in full for covered tests performed on behalf of Medicare fee-for-service
beneficiaries. Under current law, those services reimbursed under the clinical laboratory fee schedule generally do not result in coinsurance amounts payable by Medicare beneficiaries. Payment under the clinical laboratory fee schedule has been
limited from year-to-year by Congressional action such as imposition of national limitation amounts and freezes on the otherwise applicable annual consumer price index, or



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CPI, updates. The CPI update of the clinical laboratory fee schedule had been frozen since 2004 by the Medicare Prescription Drug Improvement and Modernization Act of 2003. However, on
December 31, 2008, CMS published Transmittal 1660, CR 6070, that states that the annual CPI update to payments made using the clinical laboratory fee schedule for calendar year 2009 is 4.5%. In the current economic environment, there is no
certainty that these rates will remain at these reimbursement levels for clinical laboratory tests.

The payment amount under Medicares
clinical laboratory fee schedule is important not only for our reimbursement from Medicare, but also because the laboratory fee schedule often establishes the payment amounts set by other third-party payors. Accordingly, a reduction in Medicare
reimbursement rates for clinical laboratory services could result in a corresponding reduction in the reimbursement rates we receive from such third-party payors. Any reductions in reimbursement levels for our laboratory services would decrease our
revenues and harm our operating results and financial condition.

Our business could be adversely impacted if healthcare reform focuses on
reducing healthcare costs and/or does not recognize the value and importance of diagnostic testing.

Government oversight of and attention
to the healthcare industry in the United States is significant and may increase. Recently, there has been extensive public discussion of healthcare reform. While it is not possible to predict whether changes in U.S. government regulation of
healthcare will occur, or the nature or impact of any such changes, our business could be adversely impacted if healthcare reform focuses on reducing healthcare costs and/or does not recognize the value and importance of diagnostic testing. For
example, healthcare reform could lead to Medicare savings by way of a reduction in the laboratory fee schedule reimbursement amounts, future inflation increases to the laboratory fee schedule reimbursement amounts being reduced or eliminated, or the
implementation of more restrictive medical policies for laboratory testing. Additionally, there have been recent proposals to require that Medicare beneficiaries pay co-payments for laboratory services. Currently, no such co-payments are required
and this would be a substantial change requiring us to alter our billing system and allocate additional resources to our collection efforts, which may not be successful. Finally, a number of proposed healthcare reform bills have included provisions
to tax clinical laboratories and manufacturers of diagnostic products. Any of these events and/or changes in laws could harm our operating results and financial condition.

The competition in the biotechnology and healthcare industries is intense and evolving.

There is intense competition among healthcare, diagnostic, and biotechnology companies attempting to develop new diagnostic products. We are aware of competitors who are engaged in research and development projects that address the same
diseases that we are targeting. Our products business competes with companies in the U.S. and abroad that are engaged in the development and commercialization of products and services that provide genetic information. These companies may develop
products or services that are competitive with, and could be more effective and/or cost-effective than, the diagnostic products offered by us or our collaborators or licensees, such as analyte specific reagents (ASRs), diagnostic test kits, or
diagnostic testing services that perform the same or similar purposes as our or our collaborators or licensees diagnostic products. Key competitors for our leading products include Luminex Corporation and Third Wave
Technologies, Inc. (now Hologic, Inc.) for our cystic fibrosis products, Siemens for our ViroSeq HIV-1 Genotyping System, F. Hoffmann-La Roche, Ltd. and Siemens for the m2000 system and assays, and Life Technologies for
our HLA products. Also, clinical laboratories may offer testing services that are competitive with the diagnostic products sold by us or our collaborators or licensees. For example, a clinical laboratory can use either reagents purchased from
manufacturers other than us, or their own internally developed reagents, to provide diagnostic testing services. In this manner, clinical



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laboratories could offer testing services for a particular disease as an alternative to purchasing diagnostic products sold by us or our collaborators or licensees for use in their testing of the
same disease. The testing services offered by clinical laboratories may be easier and more cost-effective to develop and market than test kits developed by us or our collaborators or licensees because the testing services are not subject to the same
clinical validation requirements that are applicable to the FDA cleared or approved diagnostic test kits. For example, clinical reference laboratories such as Laboratory Corporation of America Holdings, or LabCorp, and Quest Diagnostics
Incorporated, or Quest, offer laboratory-developed tests that compete with our ViroSeq HIV-1 Genotyping System.

In addition, BHLs
clinical laboratory testing services, and its associated disease monitoring, management, and educational services compete primarily with existing diagnostic, detection and monitoring technologies and disease management service companies. In
particular, many clinical reference laboratories, including LabCorp, Sonic Healthcare Limited, Mayo Medical Laboratories, Quest, and other regional laboratory companies, offer clinical testing services using a traditional lipid panel test, which is
simpler to perform and less expensive than BHLs more extensive and proprietary lipid fractionation and related cardiovascular bio-marker tests, and which is widely accepted as an adequate test for assessing and managing risk of cardiovascular
disease. Also, other companies, including Atherotech, Inc., Agilent Technologies, Inc., LipoScience, Inc. and Boston Heart Lab Corporation currently provide alternative methods for lipoprotein subclass analysis using different technologies
than BHLs testing services. In addition, companies, including Healthways, Inc. and LifeMasters Supported SelfCare, Inc., and internal efforts by some healthcare payors, such as United Healthcare, compete with BHLs disease
monitoring and management and lifestyle modification offerings. Many of BHLs actual or potential competitors have longer operating histories, better name recognition and greater financial, technical, sales, marketing, and distribution
capabilities than BHL has. These competitors also may have more experience in research and development, billing and collections, regulatory matters and manufacturing. Many of these companies, particularly those selling the traditional lipid panel
test, offer tests or services that have been approved for third-party reimbursement. BHLs current or potential competitors may use, or develop in the future, technologies that are superior to, or more effective than, BHLs, which could
make BHLs tests noncompetitive or obsolete.

Failure to collect receivables, or to timely or accurately bill for our services could
have a material adverse effect on our business.

We have experienced an increased aging of our accounts receivables and our allowance for
doubtful accounts. A significant amount of this increase is due to some non-contracted payors sending payment for our services to their beneficiaries instead of to us, as described above. For the nine months ended September 26, 2009, our
allowance for doubtful accounts was $27.7 million primarily due to the provision of BHLs accounts receivable over 360 days old and tests that have been denied for reimbursement. These balances were primarily due from patients. Any failure to
improve our collections, or a further deterioration in our receivables, will harm our operating results and financial condition.

Billing for
clinical testing services is complex and is subject to extensive and non-uniform rules and administrative requirements. Depending on the billing arrangement and applicable law, we bill various third-parties, such as patients, insurance companies,
Medicare, physicians and hospitals. A significant portion of our accounts receivable is owed to us by individual patients. In general, it is difficult to collect amounts owed to us by individuals and it is becoming increasingly more difficult to do
so in the current economic environment. Changes in laws and regulations could increase the complexity and cost of our billing process. Additionally, auditing for compliance with applicable laws and regulations as well as internal compliance policies
and procedures adds further cost and complexity to the billing process. Further, our billing processes and systems require significant and continuing technology and human resource investments.



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Missing or incorrect information on requisitions adds complexity to and slows the billing process, creates
backlogs of unbilled requisitions, and generally increases the aging of accounts receivable and our allowance for doubtful accounts. We believe that a portion of our allowance for doubtful accounts is attributable to the lack of, or inaccurate,
billing information. Failure to timely or correctly bill may lead to our not being reimbursed for our services or an increase in the aging of our accounts receivable, which could harm our operating results and financial condition. Failure to comply
with applicable laws and regulations relating to billing federal healthcare programs and private third-party payors could lead to various penalties, including: exclusion from participation in the Medicare program; asset forfeitures; civil and
criminal fines and penalties; and the loss of various licenses, certificates and authorizations necessary to operate our business, any of which could harm our operating results and financial condition.

Our competitive position depends on maintaining our intellectual property protection.

Our ability to compete depends, in part, on our ability to protect our proprietary discoveries and technologies through obtaining and enforcing intellectual property rights, including patent rights,
copyrights, trade secrets, and trademarks, and operating without infringing the intellectual property rights of others. Our ability to obtain patent protection for the inventions we make, including those relating to novel methods of diagnosing
and/or treating diseases, is uncertain. The patentability of these and other types of biotechnology inventions involves complex factual, scientific, and legal questions. As a result, it is difficult to predict whether patents will issue or the
breadth of claims that will be allowed in biotechnology patents. This may be particularly true with regard to the patenting of gene sequences, gene functions, genetic variations and methods of diagnosis of disease based on genetic variations. These
types of gene patents have recently come under attack in a lawsuit filed by public interest groups. Future changes in policies or laws, or interpretations of these policies or laws, relevant to the patenting of biotechnology inventions could harm
our patent position in the U.S. or other countries. Opposition to the protection of these inventions in the U.S. or other countries could result in stricter standards for obtaining or enforcing biotechnology patent rights.

In some instances, patent applications in the U.S. are maintained in secrecy until a patent issues. In most instances, the content of U.S. and international
patent applications is made available to the public approximately eighteen months after the initial filing from which priority is claimed. As a result, we may not be aware that others have filed patent applications for inventions covered by our
patent applications and may incorrectly believe that our inventors were the first to make the invention. Accordingly, our patent applications may be preempted or we may have to participate in interference proceedings before the U.S. Patent and
Trademark Office. These proceedings determine the priority of invention and the right to a patent for the claimed invention in the U.S. In addition, disputes may arise in the future with regard to the ownership of rights to any invention developed
with collaborators, which could result in delays in, or prevent, the development of related products.

We also rely on trade secret protection
for our confidential and proprietary information and procedures, including procedures related to sequencing genes and to searching and identifying important regions of genetic information. We protect our trade secrets through recognized practices,
including access control, confidentiality and non-use agreements with employees, consultants, collaborators and customers, and other security measures. These confidentiality and non-use agreements may be breached, however, and we may not have
adequate remedies for a breach. In addition, our trade secrets may otherwise become known or be independently developed by competitors. Accordingly, it is uncertain whether our reliance on trade secret protection will be adequate to safeguard our
confidential and proprietary information and procedures.



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Following the split-off from Applied Biosystems (now Life Technologies), Applied Biosystems (now Life
Technologies) may compete with us in our diagnostics business directly or enable others to compete with us by providing them access to its intellectual property, reagents, and technologies.

Applied Biosystems (now Life Technologies) reagent and clinical laboratory testing service business in human diagnostics was historically
operated exclusively through Celera. As a result, Applied Biosystems (now Life Technologies) has not competed with us in this business, nor was it permitted to enable others to compete with us in the business by providing them access to its
intellectual property, reagents, and technologies. Since the split-off, Applied Biosystems (now Life Technologies) may directly compete with us or enable others to compete with us in human diagnostics, except that for a period of three years
following the split-off date, Applied Biosystems (now Life Technologies), subject to specified exceptions, is restricted in its ability to supply any reseller with capillary electrophoresis sequencers for commercialization of human diagnostic tests
outside of Asia, Africa, the Middle East and South America, nor is it able to itself commercialize these tests anywhere in the world for the same three year period. In addition, Applied Biosystems (now Life Technologies) is restricted from supplying
any third-party reseller with real-time instruments for use in the human in vitro diagnostics, or HIVD, field, unless the third party has obtained a license to Applied Biosystems (now Life Technologies) real-time intellectual property in the
field, although the third party cannot commercialize human diagnostic tests for specified conditions on these instruments for three years following the split-off date. Competition from Applied Biosystems (now Life Technologies) in all other areas of
our business may limit our success in expanding our product offerings into new areas and disease indications.

The restrictions on Applied
Biosystems (now Life Technologies) described above do not apply to the commercialization of an existing competing product (as specifically defined in the operating agreement between us and Applied Biosystems (now Life Technologies)) acquired as part
of an acquisition of a third party by Applied Biosystems (now Life Technologies), nor do they prohibit an acquiror of Applied Biosystems (now Life Technologies) from continuing to commercialize an existing competing product following an acquisition.
Accordingly, Life Technologies is not prohibited from continuing to commercialize existing competing products commercialized by Invitrogen prior to the Applied Biosystems/Invitrogen merger. We understand that Life Technologies has high resolution
HLA typing products that might be characterized as existing competing products. In addition, Life Technologies may have existing competing products, that we are not aware of, that may not be subject to the restrictions described above.

Applied Biosystems (now Life Technologies) is subject to a class action lawsuit relating to its offering of shares of Celera Group tracking stock in
2000 that may result in liabilities for which we have agreed to indemnify Applied Biosystems (now Life Technologies).

Applied Biosystems
(now Life Technologies) and some of its officers are defendants in a lawsuit brought on behalf of purchasers of Celera Group tracking stock in its follow-on public offering of Celera Group tracking stock completed on March 6, 2000. In the
offering, Applied Biosystems (now Life Technologies) sold an aggregate of approximately 4.4 million shares of Celera Group tracking stock at a public offering price of $225 per share. The lawsuit was commenced with the filing of several
complaints in 2000, which have been consolidated into a single case which has been certified by the court as a class action. The consolidated complaint generally alleges that the prospectus used in connection with the offering was inaccurate or
misleading because it failed to adequately disclose the alleged opposition of the Human Genome Project and two of its supporters, the governments of the U.S. and the U.K., to providing patent protection to our genomic-based products. The complaint
also alleges that Applied Biosystems (now Life Technologies) did not adequately disclose the risk that it would not be able to patent this data.



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Under the terms of the separation agreement we entered into with Applied Biosystems (now Life Technologies),
we agreed to indemnify Applied Biosystems (now Life Technologies) for liabilities resulting from the class action suit described above, as well as other actions pending on the split-off date or that may arise in the future, to the extent such
actions are ultimately determined to relate to or arise out of the Celera business, assets or liabilities, in each case, to the extent not covered by Applied Biosystems (now Life Technologies) insurance. There is no limit on the maximum
amount of monetary damages for which we may be required to indemnify Applied Biosystems (now Life Technologies) for such suits. If plaintiffs in these suits are ultimately successful on the merits, the resulting liabilities for which Celera is
responsible could have a material adverse impact on Celeras business and financial condition.

The allocation of intellectual
property rights between Applied Biosystems (now Life Technologies) and us in connection with the split-off may harm our business.

Prior
to the split-off from Applied Biosystems (now Life Technologies), we had access to all intellectual property owned or licensed by Applied Biosystems (now Life Technologies) for use in the human diagnostics field. Under the separation agreement with
Applied Biosystems (now Life Technologies), intellectual property developed by Celera or used primarily in our business was transferred to us on or prior to the split-off date. However, some intellectual property currently used in substantially all
of our diagnostic products is also used by Applied Biosystems (now Life Technologies) and has been retained by Applied Biosystems (now Life Technologies). All intellectual property that has been retained by Applied Biosystems (now Life Technologies)
and that is used in our diagnostic products is being made available to us through a master purchase agreement we entered into with Applied Biosystems (now Life Technologies) on the split-off date. The early termination or failure to comply with the
terms of the master purchase agreement or an increase in the prices for these goods and services after its expiration could harm our business. Also, we may need to obtain additional licenses from third parties for rights that were not transferred to
us from Applied Biosystems (now Life Technologies). Our inability to obtain these licenses or to obtain these licenses on commercially acceptable terms could affect our ability to develop and sell some of our diagnostic products. Any change to our
product development or production activities could harm our operating results and financial condition.

We may be subject to restrictions
to preserve the tax-free treatment of the split-off and may not be able to engage in desirable acquisitions and other strategic transactions following the split-off.

Under the tax matters agreement and separation agreement that we have entered into with Applied Biosystems (now Life Technologies), to preserve the tax-free treatment of the split-off to Applied
Biosystems (now Life Technologies), we may be subject to restrictions for the two-year period following the split-off on our ability to:



| |  |  | issue equity securities to satisfy financing needs;
| | - |  | ---------------------------------------------------



| |  |  | acquire businesses or assets with equity securities; or
| | - |  | -------------------------------------------------------



| |  |  | engage in mergers or asset transfers that could jeopardize the tax-free status of the split-off.
| | - |  | ------------------------------------------------------------------------------------------------

However, if Applied Biosystems (now Life Technologies) were determined to be subject to tax on the distribution of the Celera Corporation common stock, we
would no longer be subject to these restrictions. These restrictions may limit our ability to engage in new business or other transactions that may maximize the value of our business and may also discourage, delay or prevent a merger, change of
control, disposition of our subsidiaries or divisions or other strategic transactions involving our issuance of equity.



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The negotiation of the split-off agreements between us and Applied Biosystems (now Life Technologies)
were effected through discussions among Applied Biosystems (now Life Technologies) employees, some of whom, following the split-off, became our employees but some of whom did not and may have remained as employees of Applied Biosystems (now Life
Technologies), and without involvement in, or review of, the agreements by independent outside advisors to us or an independent Board of Directors of Celera.

Celera Corporation was formed to effect the split-off and has only operated as an independent company with an independent Board of Directors and independent advisors since July 1, 2008. The split-off
agreements between us and Applied Biosystems (now Life Technologies) were negotiated through discussions among Applied Biosystems (now Life Technologies) employees, some of whom, following the split-off, became our employees but some of whom did not
and may have remained as employees of Applied Biosystems (now Life Technologies), and without review by independent advisors to, or an independent Board of Directors of, our Company. Accordingly, the agreements may not reflect terms that would be as
favorable to us as would have been negotiated by us if we had been an independent company or had been allowed access to independent advisors.

Following the split-off, we may experience increased costs resulting from our operation as an independent entity and our diminished bargaining power in negotiating with third parties to obtain optimal pricing for goods, technology and
services.

Prior to the split-off from Applied Biosystems (now Life Technologies), we were supported by Applied Biosystems (now Life
Technologies) centralized functions, including finance, legal, and human resources. Following the split-off, we may incur additional costs relating to our procurement and implementation of these services to the extent necessary to operate as
an independent entity. In addition, as a business unit of Applied Biosystems (now Life Technologies), we were able to take advantage of Applied Biosystems (now Life Technologies) bargaining power in negotiating with third parties to
obtain raw materials and supplies, capital goods, technology and services, including insurance and employee benefit services. Following the split-off, as a smaller, stand-alone company, we may be unable to obtain these goods, technology and services
at prices and on terms as favorable as those available to us as a business unit of Applied Biosystems (now Life Technologies). Increased costs resulting from our operation as an independent entity and our diminished bargaining power could harm our
business, financial condition and results of operations.

We may be required to record additional impairment of our long-lived assets,
including goodwill and other intangible assets, and these impairment charges would adversely affect our operating results.

As of
September 26, 2009, we had $116.3 million of goodwill on our balance sheet. This amount primarily represents the remaining excess of the total purchase price of our acquisitions over the fair value of the net assets acquired. At
September 26, 2009, we also had $118.9 million in long-lived assets, which includes $104.2 million of intangible assets, net on our balance sheet. As a result of a combination of factors, including broad economic pressures, and the
effects of changing business conditions, an interim impairment review for goodwill and long-lived assets was triggered during the three months ended June 27, 2009, resulting in a charge of $15.7 million. Our stock price, which has recently
declined, is a significant factor in assessing our fair value for purposes of the goodwill impairment assessment. If our market capitalization remains below our carrying value for a sustained period, our next annual impairment review in the fourth
quarter of 2009 may determine that our long-lived assets are further impaired. Valuation of our



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long-lived assets requires us to make assumptions about future sales prices and sales volumes for our products. These and other assumptions are used to forecast future cash flows. If actual
market conditions differ or our forecasts change, we may be required to assess long-lived assets and could record an additional impairment charge. If we are required to record an additional impairment charge relating to goodwill or long-lived
assets, such charges could harm our business, financial condition and results of operations.

We may be unable to make the changes
necessary to operate as an independent entity, which could prevent us from operating profitably.

Celera had been a business unit of
Applied Biosystems (now Life Technologies) since we commenced operations in the year ended June 30, 1996. However, following the split-off, Applied Biosystems (now Life Technologies) has no obligation to provide financial, operational or
organizational assistance to us other than pursuant to a transition services agreement for a limited period of time. We may not be able to implement successfully the changes necessary to operate independently. Celera has historically recorded net
losses due, in part, to our investment in new technology and diagnostic product discovery and development, and therapeutic target discovery and drug development, as well as other investments required for the expansion of our business operations as
an early-stage business. We cannot assure you that we will be profitable as a stand-alone company.

We may become involved in expensive
intellectual property legal proceedings.

There has been substantial litigation and other legal proceedings regarding patents and other
intellectual property rights relevant to diagnostic and biotechnology products and services. The intellectual property rights of biotechnology companies, including those held by us, are generally uncertain and involve complex factual, scientific,
and legal questions. Our success in diagnostic product development, clinical laboratory testing, and therapeutic target discovery may depend, in part, on our ability to operate without infringing the intellectual property rights of others and our
ability to prevent others from infringing our intellectual property rights. Also, contractual disputes related to existing license rights to patents owned by others may affect our ability to develop, manufacture, and sell our products and clinical
laboratory testing services.

We may initiate proceedings at the U.S. Patent and Trademark Office to determine our patent rights with respect
to others. Also, we may initiate patent litigation to enforce our patent rights or invalidate patents held by others. These legal actions may similarly be initiated against us by others alleging that we are infringing their rights. The cost to us of
any patent litigation or proceedings, even if we are successful, could be substantial, and these legal actions may absorb significant management time. Even if we are successful on the merits in any such proceeding, the cost of these proceedings
could harm our operating results and financial condition.

If infringement claims against us are resolved unfavorably to us, we may be
enjoined from manufacturing or selling our products or services without a license from a third party, and we may not be able to obtain a license on commercially acceptable terms, or at all. Also, we could become subject to significant liabilities to
others if these claims are resolved unfavorably to us. Similarly, our business could be harmed and we could be subject to liabilities because of lawsuits brought by others against Abbott Laboratories, who serves as the exclusive distributor for most
of our diagnostic products, and from whom we obtain royalties for sales of certain of their molecular diagnostic products.



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We have a dispute with Applied Biosystems (now Life Technologies) concerning the tax matters agreement
entered into in connection with our separation from Applied Biosystems.

We believe that Applied Biosystems (now Life Technologies) has
materially breached the tax matters agreement entered into in connection with the split-off by eliminating a tax asset transferred to us. Other disputes may arise in connection with the parties obligations under the split-off agreements. Any
legal proceedings on these matters may be expensive, take significant time and divert managements attention from other business concerns.

We rely on independent healthcare providers, laboratories, and others to collect and process patient specimens.

We have a
limited internal network of BHL employees and contractors who are able to collect blood specimens for us. We rely on healthcare providers and other clinical laboratories to collect and send to our laboratory for testing most of our clinical
laboratory specimens. Although we believe we pay our service providers fair market value consideration for specimen collection and processing services and in compliance with anti-kickback and anti-referral laws, legal restrictions prohibit us from
paying additional consideration, such as a referral fee, for these services. Because these services are time-consuming and may not be a business priority for the companies and individuals we rely on to provide them, the fair market value
consideration may not be sufficient incentive for them to continue providing these services. If we are unable to obtain or maintain needed collection and processing services, we would be unable to obtain patient samples for testing, which would harm
our operating results and financial condition.

Some of our diagnostic research and product development programs require access to human
tissue and/or blood samples, other biological materials, and related information, which may be in limited supply.

We may not be able to
obtain or maintain access to human tissue, blood and other biological materials and information on acceptable terms, or may not be able to obtain needed consents from individuals providing tissue, blood, or other samples. In addition, government
regulation in the U.S. and foreign countries could result in restricted access to, or use of, human tissue or blood samples or other biological materials. For example, the European Union Directive on Data Protection may restrict our access to human
samples and related clinical data from countries of the European Union if we are not able to meet the required standard of privacy protection. If we lose access to sufficient numbers or sources of tissue or blood samples or other required biological
materials, or if tighter restrictions are imposed on the use of related clinical or other information or information generated from tissue or blood samples or other biological materials, these research and development programs and our operating
results and financial condition could be harmed. Also, the supply by Applied Biosystems (now Life Technologies) of some goods and services used in our business is governed by the terms of the master purchase agreement we entered into at the
split-off date, and Applied Biosystems (now Life Technologies) no longer provides us with exclusive access to these goods and services. These differences may harm our operating results and financial condition.

If the split-off is determined to be taxable for U.S. federal income tax purposes, we and our stockholders could incur significant income tax
liabilities, and we could be required to indemnify Applied Biosystems (now Life Technologies) for taxes.

On June 18, 2008, Applied
Biosystems (now Life Technologies) received a tax opinion from Skadden, Arps, Slate, Meagher & Flom LLP to the effect that the split-off, together with certain related transactions necessary to effectuate the split-off, (i) should
qualify under Sections 355 and 368(a)(1)(D) of the Internal Revenue Code as an exchange that is tax-free to the Celera Group tracking stock holders, although in light of the then pending Invitrogen/Applied Biosystems merger there is a significant
risk that the Internal



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Revenue Service (IRS) and a court could conclude to the contrary, and (ii) will be tax-free to Celera. The opinion relies on certain facts, assumptions, representations and undertakings,
including those relating to the pre or post split-off activities of Applied Biosystems (now Life Technologies) and Celera. Actions taken by Applied Biosystems (now Life Technologies) or us that are inconsistent with such facts, assumptions,
representations or undertakings could result in the split-off being treated by the IRS as a taxable transaction. The IRS is not bound by the opinion and could determine that the split-off should be treated as a taxable transaction if it determines
that any of these facts, assumptions, representations or undertakings is not correct or has been violated by either Celera or Applied Biosystems (now Life Technologies) as a result of pre or post split-off activity, or if it disagrees with the
conclusions in the opinion.

If the split-off fails to qualify for tax-free treatment, Applied Biosystems (now Life Technologies) would be
subject to tax as if it had sold the Celera Corporation common stock in a taxable sale at fair market value, and our initial public stockholders, the former holders of Celera Group tracking stock whose stock was redeemed in exchange for shares of
our common stock in the split-off, should recognize either (A) gain or loss equal to the difference between the fair market value of the shares of Celera Corporation common stock received and the holders tax basis in the Celera Group
tracking stock redeemed in exchange for the shares of Celera Corporation common stock or (B) in certain circumstances, a distribution equal to the fair market value of the shares of Celera Corporation common stock received, which should be
taxed (i) as a dividend to the extent of such holders pro rata share of Applied Biosystems (now Life Technologies) current and accumulated earnings and profits, then (ii) as a non-taxable return of capital to the extent
of such holders tax basis in the Celera Group tracking stock redeemed, and finally (iii) as capital gain with respect to the remaining value. Under the tax matters agreement between Applied Biosystems (now Life Technologies) and us, we
would generally be required to indemnify Applied Biosystems (now Life Technologies) against any tax resulting from the exchange if the tax resulted from:



| |  |  | an issuance of our equity securities, a redemption of our equity securities, or our involvement in other acquisitions of our equity securities,
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | other actions or failures to act by us, or
| | - |  | ------------------------------------------



| |  |  | any of our representations or undertakings being incorrect and violated.
| | - |  | ------------------------------------------------------------------------

Our indemnification obligations to Applied Biosystems (now Life Technologies) and its subsidiaries, officers and directors are not limited by any maximum
amount. If we are required to indemnify Applied Biosystems (now Life Technologies) or any other person under the circumstances set forth in the tax matters agreement, we may be subject to substantial liabilities.

Our accounting and other management systems and resources may not be adequate to meet the financial reporting and other requirements to which we are
subject following the split-off. If we are unable to achieve and maintain effective internal controls, our operating results and financial condition could be harmed.

Prior to the split-off from Applied Biosystems (now Life Technologies), we were not directly subject to reporting and other requirements of the Securities Exchange Act of 1934 (the Exchange Act). As a
result of the split-off, we are directly subject to reporting and other obligations under the Exchange Act, including the requirements of Section 404 of the Sarbanes-Oxley Act of 2002 (Sarbanes-Oxley). Commencing with our audit for the year
ending December 26, 2009, Sarbanes-Oxley will require our auditors to opine on the effectiveness of our internal controls over financial reporting. Our reporting and other obligations will place significant demands on our management and
administrative and operational resources, including accounting resources.



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To comply with these requirements, we may need to upgrade our systems, including information technology,
implement additional financial and management controls, reporting systems and procedures and hire additional legal, accounting and finance staff and consultants. If we are unable to upgrade our systems and procedures in a timely and effective
fashion, our auditors may be unable to conclude that our internal controls over financial reporting are effective, and we could lose investor confidence in the accuracy and completeness of our financial reports. Any failure to achieve and maintain
effective internal controls could harm our operating results and financial condition.

We conduct our clinical laboratory testing business
in a heavily regulated industry and changes in regulations or violations of regulations could, directly or indirectly, harm our operating results and financial condition.

The clinical laboratory testing industry is highly regulated and there can be no assurance that the regulatory environment in which we operate will not change significantly and adversely in the future. In
particular, there is risk of healthcare reform or other legislative activity in the near future, which may result in changes in the regulatory or payor environment that may adversely affect our business. Areas of the regulatory environment that may
affect our ability to conduct business include, without limitation:



| |  |  | federal and state laws applicable to billing and claims payment;
| | - |  | ----------------------------------------------------------------



| |  |  | federal and state laboratory anti-mark-up laws;
| | - |  | -----------------------------------------------



| |  |  | federal and state anti-kickback laws;
| | - |  | -------------------------------------



| |  |  | federal and state false claims laws;
| | - |  | ------------------------------------



| |  |  | federal and state self-referral and financial inducement laws, including the federal physician anti-self-referral law, or the Stark Law;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------



| |  |  | coverage and reimbursement levels by Medicare and other governmental payors and private insurers;
| | - |  | -------------------------------------------------------------------------------------------------



| |  |  | federal and state laws governing laboratory licensing and testing, including CLIA;
| | - |  | ----------------------------------------------------------------------------------



| |  |  | federal and state laws governing the development, use and distribution of diagnostic medical tests known as laboratory developed tests or
LDTs;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the Health Insurance Portability and Accountability Act of 1996, or HIPAA, along with the revisions to HIPAA as a result of the HITECH Act, and
analogous state laws;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | federal, state and foreign regulation of privacy, security, electronic transactions and identity theft;
| | - |  | -------------------------------------------------------------------------------------------------------



| |  |  | federal, state and local laws governing the handling and disposal of medical and hazardous waste;
| | - |  | -------------------------------------------------------------------------------------------------



| |  |  | Occupational Safety and Health Administration rules and regulations; and
| | - |  | ------------------------------------------------------------------------



| |  |  | changes to other federal, state and local laws, including tax laws.
| | - |  | -------------------------------------------------------------------

These laws and regulations are extremely complex and in many instances, there are no significant regulatory or judicial interpretations of these laws and regulations. Any determination that we have
violated these laws or regulations, or the public announcement that we are being investigated for possible violations of these laws or regulations, could harm our operating results and financial condition. In addition, a significant change in any of
these laws or regulations may require us to change our business model in order to maintain compliance with these laws or regulations, which could harm our operating results and financial condition.



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Our clinical laboratory testing services are subject to federal and state anti-kickback and anti-referral
laws and regulations.

Federal and state anti-kickback laws prohibit payment, or offers of payment, in exchange for referrals of products
and services for which reimbursement may be made by Medicare or other federal and state healthcare programs. Some state laws contain similar prohibitions that apply without regard to the payor of reimbursement for the services. Federal and state
anti-referral laws, including the Stark Law, prohibit physicians from referring their Medicare or other federally funded healthcare program patients or specimens to healthcare providers with which the physicians or their immediate family members
have a financial relationship involving some types of health services. The financial relationships covered by these prohibitions include clinical laboratory services such as those provided by BHL. Some state laws also contain similar prohibitions
that apply without regard to the payor of reimbursement for the services.

Based on our analysis of publicly-disclosed government settlements
and public announcements by various government officials, we believe the federal officials responsible for administering and enforcing the healthcare laws and regulations have made a priority of eliminating healthcare fraud. While we seek to conduct
our business in compliance with all applicable laws and regulations, many of the laws and regulations applicable to our business, particularly those relating to billing and reimbursement of tests and those relating to relationships with physicians,
hospitals and patients, contain language that has not been interpreted by courts. We must rely on our interpretation of these laws and regulations based on the advice of our counsel, and regulatory or law enforcement authorities may not agree with
our interpretation of these laws and regulations and may seek to enforce legal remedies or penalties against us for violations. From time to time we may need to change our operations, particularly pricing or billing practices, in response to
changing interpretations of these laws and regulations or regulatory or judicial determinations with respect to these laws and regulations. These occurrences, regardless of their outcome, could damage our reputation and harm important business
relationships that we have with healthcare providers, laboratories, and others. Furthermore, if a regulatory or judicial authority finds that we have not complied with applicable laws and regulations, we would be required to refund amounts that were
billed and collected in violation of such laws and regulations. In addition, we may voluntarily refund amounts that were alleged to have been billed and collected in violation of applicable laws and regulations. In either case, we could suffer civil
and criminal damages, fines and penalties, exclusion from participation in governmental healthcare programs and the loss of licenses, certificates and authorizations necessary to operate our business, as well as incur liabilities from third-party
claims, all of which could harm our operating results and financial condition. Moreover, regardless of the outcome, if we or physicians or other third parties with whom we do business are investigated by a regulatory or law enforcement authority we
could incur substantial costs, including legal fees, and our management may be required to divert a substantial amount of time to an investigation.

Our clinical laboratory testing service business is subject to HIPAA and other laws and regulations pertaining to privacy, security and identity theft.

The Health Insurance Portability and Accountability Act of 1996, or HIPAA, and its related privacy and security regulations establish federal standards governing the use and disclosure of certain
individually identifiable health information, which is referred to as protected health information, or PHI. We are also subject to state privacy and security laws that in some cases impose more stringent requirements than HIPAA and its related
regulations. In addition, we must comply with the laws of other countries that regulate the transfer of healthcare data relating to citizens of those countries. HIPAA, as well as state and foreign privacy and security regulations, provide for
significant fines and other penalties for the wrongful use or disclosure of PHI, including potential civil and criminal fines and penalties. Although HIPAA and the related regulations do not expressly provide for a private right of action, we also
could incur damages under state and foreign laws to individuals claiming that we wrongfully used or disclosed their confidential health information or other private personal information.

In February 2009, President Obama signed into law economic stimulus legislation known as the American Recovery and Reinvestment Act of 2009 (ARRA). Title XIII of the ARRA, also known as the
Health Information Technology for Economic and Clinical Health (HITECH) Act, contains extensive revisions to HIPAA. The changes to HIPAA include new restrictions on the use of PHI without an individuals written authorization, a new requirement
to account for routine disclosures of PHI held in an electronic health record, a requirement to notify individuals of breaches to their PHI, new rights of a state attorney general to enforce HIPAA violations, extension of certain HIPAA privacy and
security law provisions and penalties to business associates of covered entities, and significantly increased penalties for violations of the law. Since several of the provisions contemplate future adoption of implementing regulations, we cannot at
this time determine the extent to which these changes will impact our business, or how much it will cost us to comply.



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In addition, the Federal Trade Commission has instituted new requirements, called the Red Flags
Rule, to protect consumers against identity theft and to impose obligations on certain institutions to curb identity theft. The Red Flags Rule applies to any entity that regularly defers payments for goods or services or arranges for the
extension of credit, and for which there is reasonably foreseeable risk of identity theft. Entities subject to the Red Flags Rule must implement an identity theft prevention program, which must include written policies and procedures to identify and
detect red flags of identity theft. The program must also indicate what actions will be taken when red flags are identified, and must be re-evaluated periodically to reflect new risks from identity theft. Although enforcement of the Red
Flags Rule is not expected until mid-2010, our billing and collection practices could make us subject to the Red Flags Rule. To the extent we are subject to the Red Flags Rule, we do not know how much it will cost us to comply. If applicable, any
failure to comply may subject us to financial penalties once enforcement of the Red Flags Rule commences.

Certain of our specialized
diagnostic tests take advantage of the laboratory developed test exception from FDA review and any changes to the FDAs policies with respect to this exception could adversely affect our operating results and financial condition.

A number of esoteric tests that are developed and validated internally at BHL are first offered as laboratory developed tests or
LDTs. The FDA maintains that it has authority to regulate the development and use of LDTs as diagnostic medical devices under the Federal Food, Drug and Cosmetic Act but to date has decided not to exercise its authority with respect to
most LDTs performed by high complexity CLIA-certified laboratories as a matter of enforcement discretion. A portion of BHLs diagnostic tests are LDTs for which it has not obtained FDA premarket clearance or approval. The FDA regularly
considers the application of additional regulatory controls over the sale of ASRs and the development and use of LDTs by laboratories such as ours. Further, the FDA has recently been petitioned to exercise regulatory authority over certain LDTs and
to initiate enforcement action against companies that make effectiveness claims about LDTs that are without sufficient analytical and clinical support. Based on recent comments, the FDA is expected to look at the sale and use of LDTs with heightened
scrutiny or modify its regulatory approach with respect to LDTs. If FDA regulation of LDTs increases or if regulation of the various medical devices used in laboratory-developed testing ensues, it would lead to an increased regulatory burden, which
may prevent or hinder us from marketing current products or services and developing new products or services, and could harm our operating results and financial condition.

There is a high demand for, and short supply of, key personnel needed for our clinical laboratory testing services.

Our existing clinical laboratory services operations require individuals who are licensed as Clinical Laboratory Scientists in the State of California. We believe that to continue operating and to expand
our clinical laboratory testing services, we must continue to attract and retain these licensed Clinical Laboratory Scientists. There is a shortage of licensed Clinical Laboratory Scientists in the State of California, and we compete for these
personnel with hospitals, other clinical laboratories, and other healthcare providers. Licensed Clinical Laboratory Scientists may prefer to work for these other organizations either because of the compensation offered, the reputations of the
organizations, or other personal considerations. If we are unable to attract and retain a sufficient number of licensed Clinical Laboratory Scientists, the current operations of our clinical laboratory testing business could be harmed and the future
growth of these services could be delayed or prevented.

We rely on single suppliers or a limited number of suppliers of instruments, key
components of our products and a test kit used in our clinical laboratory testing services.

Several key components of our diagnostic
products and a test kit used in our clinical laboratory testing services come from, or are manufactured for us by, a single supplier or a limited number of suppliers, including Applied Biosystems (now Life Technologies). Key components of our
diagnostic products include enzymes, fluorescent dyes, phosphoramidites, and oligonucleotides. We acquire some of these and other key components on a purchase-order basis, meaning that the supplier is not required to supply us with specified
quantities over any set period of time or set aside part of its inventory for our forecasted requirements. We have not arranged for alternative supply sources for some of these components should suppliers become unable to meet our demand or become
unwilling to do so on terms that are acceptable to us. It may be difficult, if not impossible, to find alternative suppliers, especially to replace enzymes, fluorescent dyes, phosphoramidites, and oligonucleotides. In addition, we rely on single
source suppliers,



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particularly Applied Biosystems (now Life Technologies), to provide instruments, associated software, and consumables for use in our products business. We obtain Lp-PLA2 test kits, known as
PLAC® test kits, used in our clinical laboratory testing services from a single supplier  diaDexus, Inc.,
or diaDexus. To our knowledge, diaDexus is the only supplier of PLAC® test kits used in clinical laboratory
testing in the United States, and, therefore, it is possible that no alternative supply source would be available should diaDexus become unable to provide a sufficient number of these kits to meet our demand or become unwilling to do so on
acceptable terms. There can be no assurance that diaDexus will be able to meet our demand for these kits in the future or sell these test kits to us on acceptable terms. If we are unable to obtain Lp-PLA2 tests kits from diaDexus, our Lp-PLA2 test
revenue will be impacted.

If any of the components of our products or any of the kits used for our laboratory testing services are no longer
available in the marketplace, or are not available on commercially acceptable terms, we may be forced to further develop our products or testing services to use alternative components or test kits or discontinue the products or testing services.
Changes in our products or services or the use of new components may require us to seek new regulatory clearances, approvals or licenses and may be costly.

Our success will depend on our ability to retain our key employees and recruit key management personnel.

One of our primary assets is our highly skilled personnel. These personnel could leave us and thereby deprive us of the skill and knowledge essential for performance of our existing and new business. The
overall level of benefits and compensation offered to employees of Celera following the split-off may be less than that offered to these employees as part of Applied Biosystems (now Life Technologies). In addition, some of our employees may have
additional or different responsibilities following the split-off as a result of the fact we are an independent public company. If any of our key personnel leaves for one of these or any other reason, it could harm our operating results and financial
condition.

Furthermore, because we have previously relied on Applied Biosystems (now Life Technologies) corporate personnel in the operation
of our business, we must train existing personnel or hire new management personnel to perform functions previously performed by these employees. We cannot assure you that we will be able to effectively train or hire employees in a timely manner or
that this transition will not result in an interruption of our services. Any interruption could harm our ability to continue to develop and manage our business.

Ethical, legal, and social issues may decrease demand for our diagnostic products and clinical laboratory testing business.

Genetic testing has raised issues regarding confidentiality and the appropriate uses of the resulting information. For example, concerns have been expressed regarding the use of genetic test results by
insurance carriers or employers to discriminate on the basis of this information, resulting in barriers to the acceptance of genetic tests by consumers. These concerns could lead to governmental authorities calling for limits on, or regulation of
the use of, genetic testing or prohibiting testing for genetic predisposition to some diseases, particularly those that have no known cure. Were any of these scenarios to occur, it could reduce the potential markets for our business and, therefore,
harm our operating results and financial condition.

Our scientific discoveries may not be replicated in some studies by other
investigators, which may negatively impact the acceptance of our diagnostic products and testing services.

Our scientific discoveries of
an association between certain genetic variants and risk for disease or drug response may not be replicated in studies by other investigators. As an example, a recent publication stated that the KIF6 gene variant did not associate with
coronary artery disease, or CAD, or myocardial infarction in subjects with CAD in the Ottawa Heart Study. Non-replication might be due to a variety of reasons including: studies that are statistically under-powered to find such an association;
limitations common to case-control studies, such as the absence of fatal myocardial infarctions in cases; analysis of a different clinical endpoint than was done in our studies; and the absence of clinical information on underlying drug use in the
patients studied. Reports on non-replication, whatever the cause, may negatively affect the acceptance of our diagnostic products and testing services by the medical community and customers, and could harm our operating results and financial
condition.

The FDA has issued draft guidance on IVDMIAs, which may prevent others from using our diagnostic products.

The FDA has issued draft guidance on a new class of laboratory developed tests called In-Vitro Diagnostic Multivariate Index Assays, or IVDMIAs.
This draft guidance, which was issued in 2006 and 2007, represents the FDAs first public discussion of its



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position on IVDMIAs, which generally are tests developed by a single clinical laboratory for use only in that laboratory, and which combine the values of multiple variables using an
interpretation function to yield a single patient-specific result for use in the diagnosis, prevention, or treatment of diseases or other conditions. If this draft guidance becomes final and is enforced, a laboratory-developed test that meets the
definition of an IVDMIA could not be used for diagnostic purposes before the laboratory receives FDA clearance or approval for use of that test. The requirements for FDA clearance or approval are evolving, but could include the requirement that the
laboratory seek clearance pursuant to Section 510(k) of the Federal Food, Drug and Cosmetic Act, or FFDCA. The Section 510(k) clearance process generally requires the filing of notice with the FDA with clinical data demonstrating that the
product and its intended purpose are substantially equivalent to a diagnostic device that is already cleared or approved for marketing by the FDA. If a 510(k) premarketing clearance is not obtained, the laboratory could be required to
file a FDA pre-market approval or PMA application under the FFDCA, which must demonstrate that a diagnostic device is safe and effective, and must be supported by more extensive information than required for a 510(k) notification. However,
because the IVDMIA guidance document sets forth a new classification, and that guidance remains in draft form, we cannot be certain how, or if, this new classification will affect our business, or if the clearance process will be modified from that
described above.

We do not believe that the tests currently offered by us are IVDMIAs, as set forth in the draft guidance document, and,
therefore, these tests would not be directly affected if the final rules apply the same criteria as the draft guidance. However, clinical laboratories that license some of our intellectual property have developed and may be developing tests using
our intellectual property that may be considered IVDMIAs by the FDA. The requirement of FDA clearance or approval for any of these tests could delay or prevent them from being used or discourage their further development, which in turn, could delay
or prevent altogether payments to us from the use of these laboratory-developed tests. Also, it is possible that some of our current or future diagnostic products could be indirectly affected because other companies might want to use our diagnostic
products as part of an IVDMIA, although we are not aware of any customers that currently use our diagnostic products in this manner. The requirement of FDA clearance or approval for any of these tests could discourage their development, or delay or
prevent them from being used if developed, which in turn, could affect the demand for our products being used as a part of these tests. In addition, some of our future tests used in our clinical laboratory testing services could meet the definition
of an IVDMIA and therefore require FDA clearance or approval.

Our clinical laboratory testing service business could be adversely impacted
by CMS adoption of the new coding set for diagnoses.

CMS has adopted a new coding set for diagnosis, commonly known as ICD-10,
which significantly expands the coding set for diagnoses. The new coding set is currently required to be implemented by October 1, 2013. We may be required to incur significant expense in implementing the new coding set, and if we do not
adequately implement it, our business could be adversely impacted. In addition, if as a result of the new coding set physicians fail to provide appropriate codes for desired tests, we may not be reimbursed for such tests.

We need to maintain federal and state operating licenses and similar clearances to conduct our clinical laboratory testing.

BHLs clinical laboratory, located in Alameda, California, is regulated by the Clinical Laboratory Improvement Amendments of 1988, or CLIA. CLIA is a
federal law that regulates clinical laboratory testing performed on specimens derived from humans for the purpose of providing information for the diagnosis, prevention, or treatment of disease. CLIA is intended to ensure the quality and



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reliability of clinical laboratory testing in the United States. BHLs CLIA certification requires its clinical laboratory to be inspected every other year in addition to being subject to
random CLIA inspections. BHLs clinical laboratory is also subject to license requirements imposed by the State of California. California laws establish quality standards for day-to-day operation of the clinical laboratory, including the
training and skills required of personnel and quality control. BHLs California and New York state licenses require periodic inspections by the state laboratory licensing authorities. If a CLIA or state inspector finds deficiencies, that
finding could lead to the revocation or suspension of, or limitations being placed upon, BHLs CLIA accreditation or California, New York, or other state licenses. Any revocation, suspension, or limitation of any licenses could prevent BHL from
performing all or some of its clinical laboratory testing services and could harm our operating results and financial condition.

We no
longer have early access to Applied Biosystems (now Life Technologies) instrumentation, reagents, and technologies for use in our diagnostic products and services.

Prior to the split-off from Applied Biosystems (now Life Technologies), we had access to Applied Biosystems (now Life Technologies) instrumentation, reagents and technologies before they were
made available to unaffiliated third parties. This early access provided a competitive advantage to us in developing our products business. After the split-off, our business relationship with Applied Biosystems (now Life Technologies) is similar to
that of any other customer. This change in access to new technologies could harm our competitive position.

We do not manufacture the
instruments used for our diagnostics products and thus are reliant on third parties for their supply. Applied Biosystems (now Life Technologies) is the manufacturer of the instruments used to perform certain of our tests including our HIV-1
Genotyping System and HLA products. The instruments supplied by Applied Biosystems (now Life Technologies) are Research Use Only instruments. The FDA now requires that diagnostic products such as these be submitted as systems that include an IVD
instrument. We have been in discussions with Applied Biosystems (now Life Technologies) and other parties for access to a next generation capillary electrophoresis sequencing instrument that may be developed under requirements needed to achieve FDA
clearance or approval for our HLA sequencing products as well as new and next-generation sequencing products for U.S. commercialization. We have not reached agreement on this matter and may not in the future. Failure to reach agreement with Applied
Biosystems (now Life Technologies) on access to a suitably developed instrument and the required documentation to support an FDA submission for such products, or another instrument manufacturer with a suitable instrument or that is willing to work
with us, could lead to our inability to sell such products that run on capillary electrophoresis sequencing instruments in the U.S.

The
historical financial information of Celera prior to our split-off from Applied Biosystems (now Life Technologies) may not be representative of our results as an independent entity, and, therefore, may not be reliable as an indicator of our
historical or future results as an independent entity.

The Condensed Consolidated Statement of Operations for the nine months ended
September 27, 2008 included in this Quarterly Report on Form 10-Q includes the results for the six month period ended June 30, 2008 that were prepared on a combined basis and included in Applied Biosystems (now Life
Technologies) consolidating financial information. This historical financial information may not reflect what our results of operations, financial position and cash flows would have been had we been an independent entity during the period.
This is because, in part, the financial information reflects allocations for services provided to Celera by Applied Biosystems (now Life Technologies). These allocations may not reflect the costs we incur for similar or incremental services as an
independent entity.



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We could encounter difficulties if we were to expand our diagnostic product manufacturing and clinical
laboratory testing services.

If there were a substantial increase in the demand for our products or services, we would have to increase
the capacity of our facilities or establish alternate manufacturing or service arrangements with other companies. We may not be able to effectively manage large increases in capacity. In addition to the difficulties that are inherent in the
expansion, development, or acquisition of new facilities, our operations are government regulated and any facility expansion or acquisition would require regulatory approvals, clearances or licenses and/or would need to meet standards specified in
applicable laws and regulations. Facilities used for clinical laboratory testing services are subject, on an ongoing basis, to federal and state regulation under CLIA and California, New York, and other state laws and regulations, which is described
above in these risk factors. Also, our diagnostic product manufacturing facilities are subject, on an ongoing basis, to the FDAs Quality System Regulation, international quality standards and other regulatory requirements, including
requirements for good manufacturing practices, and the State of California Department of Health Services Food and Drug Branch requirements. We may encounter difficulties expanding our diagnostic product manufacturing operations or our laboratory
testing services in accordance with these regulations and standards, which could result in a delay or termination of product manufacturing or laboratory testing services.

Our business may be harmed by any disruption to our computer hardware, software, and Internet applications.

Our business requires manipulating and analyzing large amounts of data, communicating the results of the analysis to our internal research personnel and our collaborators via the Internet and tracking and
communicating the results, via the Internet and other modalities, of the tests performed by our clinical laboratory testing business. Also, we rely on a global enterprise software system to operate and manage our business. Our business, therefore,
depends on the continuous, effective, reliable, and secure operation of our computer hardware, software, networks, Internet servers, and related infrastructure. To the extent that our hardware or software malfunctions or there is an interruption in
Internet service in a way that affects access to our data by our accounting and billing departments, internal research personnel or collaborators, or access to our laboratory testing results by referring professionals or patients, our operating
results and financial condition could be harmed.

Our computer and communications hardware is protected through physical and software
safeguards. However, it remains vulnerable to fire, storm, flood, power loss, earthquakes, telecommunications failures, physical or software break-ins, software viruses, and similar events. If we fail to maintain the necessary computer capacity and
data to support our accounting and billing departments and our collaborators and licensees discovery, research, and development activities, including our associated computational needs, we could experience a loss of or delay in revenues.
In addition, any sustained disruption in Internet access provided by other companies could harm our operating results and financial condition.

We have changed our marketing strategy for our clinical laboratory testing services, and our new strategy could harm our revenues.

In the past, we focused on actively marketing our clinical laboratory testing services to accounts that referred large volumes of specimens for our services. We believe that the continued growth of our clinical laboratory services requires
a change to our sales strategy, moving away from a focus on large-volume accounts and instead implementing an approach that includes developing local market territories and selling non-blood based genetic testing services to accounts on a more
disbursed basis. We are currently implementing this new strategy and are reorganizing our existing sales, marketing and clinical operations for our laboratory testing services based on market demand and the use of telephone and internet technology.
These organizational changes may harm the business we currently receive from our existing accounts, may not be successful in generating business from new accounts and may cost more to effect than we anticipate.



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Our rights under the split-off agreements we have entered into with Applied Biosystems (now Life
Technologies) may be less favorable to us than if we had remained a business segment of Applied Biosystems (now Life Technologies) and the terms of our master purchase agreement we have entered into with Applied Biosystems (now Life Technologies)
may be less favorable to us than if it had been negotiated with an unaffiliated third party.

The terms of the split-off agreements we
have entered into with Applied Biosystems (now Life Technologies) may be less favorable to us than if we remained part of Applied Biosystems (now Life Technologies). For example, some of the intellectual property rights are being made available to
us on a non-exclusive basis through the master purchase agreement, which also covers materials currently provided to us by Applied Biosystems (now Life Technologies) used in our products and services and research and development, as well as future
Applied Biosystems (now Life Technologies) materials. The master purchase agreement provides for current pricing for all materials and components for the first year after the split-off, with price increases during each subsequent year of the
agreement subject to a combination of the Producer Price Index and Employment Cost Index. This could result in us paying more for these products than if we remained part of Applied Biosystems (now Life Technologies). In addition, Applied Biosystems
(now Life Technologies) has licensed to us specified intellectual property rights which we and Applied Biosystems (now Life Technologies) will seek to license to various third parties in the human in vitro diagnostics field. Revenues from
these third-party licenses will be shared equally between us and Applied Biosystems (now Life Technologies). This could result in us receiving less from these licenses than if we remained part of Applied Biosystems (now Life Technologies).

In addition, we negotiated our split-off agreements, including our master purchase agreement, with Applied Biosystems (now Life
Technologies). Had these agreements been negotiated with unaffiliated third parties, their terms might have been more favorable to us.

Our
separation agreement with Applied Biosystems (now Life Technologies) requires us to indemnify Applied Biosystems (now Life Technologies) for specified liabilities, including liabilities relating to the Celera business, specified litigation and
one-half of any liabilities resulting from the split-off.

Under the terms of our separation agreement with Applied Biosystems (now Life
Technologies), we have agreed from and after the split-off date to indemnify Applied Biosystems (now Life Technologies) for indemnifiable losses relating to or resulting from, among other things:



| |  |  | the failure to satisfy or otherwise discharge liabilities of Celera;
| | - |  | --------------------------------------------------------------------



| |  |  | our assets and liabilities;
| | - |  | ---------------------------



| |  |  | our failure to observe our obligations under the separation agreement or our other split-off agreements with Applied Biosystems (now Life Technologies)
from and after the split-off date;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the class action lawsuit relating to Applied Biosystems (now Life Technologies) offering of shares of Celera Group tracking stock in 2000,
as well as other actions pending on the split-off date or that may arise in the future, to the extent such actions are ultimately determined to relate to or arise out of the Celera business, assets or liabilities;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | one-half of liabilities resulting from the split-off, the separation agreement and/or the registration statement filed in connection therewith; and
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------



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| |  |  | liabilities resulting from the oversight and/or management of the businesses and affairs of Applied Biosystems (now Life Technologies) or one or both
of Celera or Applied Biosystems (now Life Technologies) prior to the split-off, but only to the extent that such liabilities arise out of or relate to the businesses, assets or liabilities of Celera prior to the split-off or Celera benefited from
such oversight and/or management prior to the split-off,
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

in each case to the extent not covered by Applied Biosystems
(now Life Technologies) insurance. There is no limit on the maximum amount of monetary damages for which we may be required to indemnify Applied Biosystems (now Life Technologies) under the separation agreement. As a result, successful
indemnification claims could harm our financial condition and results of operations.

Our clinical laboratory testing services depend
primarily on a single courier for the delivery of our clinical specimens.

Substantially all patient specimens are sent by healthcare
providers and other clinical laboratories to our clinical testing laboratory by an established international overnight shipping service. We use overnight shipping because patient specimens are biological materials that can spoil if not tested on a
timely basis after collection from a patient. Therefore, any interruption in shipping, even one that is short in duration, could interfere with our services and harm our business. Our primary couriers shipping network relies on various modes
of transportation, including trucks and airplanes. The transportation of specimens could therefore be delayed or prevented by natural or man-made disasters or other events that interfere with these modes of transportation, including earthquakes,
floods, power outages, inclement weather, and terrorism. If there is a delay in the delivery of patient samples that are in-transit, we would have no way to prevent these samples from spoiling. Although there are other companies that provide similar
overnight courier services, many of the circumstances that could interfere with our primary couriers services likely would interfere with the services of other similar couriers. Additionally, we currently have a favorable pricing arrangement
with our primary courier. This pricing arrangement is not guaranteed and may be subject to unanticipated price changes. If we need to switch to a different courier because of circumstances that are unique to our primary courier or due to a change in
our primary couriers pricing, it could take us several days or longer to establish an agreement with a new courier, the shipping rates might not be as favorable to us, and our testing services would likely be interrupted. The inability to
receive the specimens and perform our tests, even if only for a short period of time, or the loss of specimens due to shipping delays, could interrupt our business and harm our reputation.

Commercialization of our diagnostic products is dependent on our agreement with Abbott Molecular, Inc.

We lack our own sales organization to sell our diagnostic products to unaffiliated clinical testing laboratories. Accordingly, we are reliant on the efforts
of our distributor, Abbott Molecular, Inc., for the sales, promotion, and distribution of most molecular diagnostic products manufactured by us. Our revenues under the agreement are dependent on Abbotts sales price to end-users which may
change over reporting periods. Our ViroSeq HIV-1 Genotyping System, cystic fibrosis, and HLA products are mature products that represent a majority of our product revenues. Current market conditions are leading to pricing declines for these
products that may not be offset by increased growth in the overall market or our ability to increase our market share for these products, resulting in declining revenue for these products. In addition, a majority of the sales of our diagnostics
products and Abbotts m2000 products are made outside the United States and subject to foreign exchange effects. Changes in foreign exchange rates will have an effect on the revenue of Celera through both product sales and the royalties
we receive on m2000 product sales. Although this is a long-term arrangement, the agreement contains provisions that could result in early termination for reasons that include the following: material breach of the agreement by either company
that is not cured following 60 days written notice; and upon specified insolvency events.



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The amount and timing of resources to be devoted to sales activities by Abbott Molecular are generally not within our control. Failure by Abbott to devote sufficient resources to the distribution
of our products or the termination of the distribution agreement could harm our operating results and financial condition.

Our successful
development of diagnostic products may depend on entering into other collaborations, alliances, and partnership arrangements with other companies.

Our strategy for the discovery, development, clinical testing, manufacturing and/or commercialization of most of our diagnostic product candidates includes entering into collaborations and similar arrangements with other companies, in
addition to our agreements with Abbott. Depending on the nature of the product candidate, our potential collaborators may include pharmaceutical companies, clinical reference laboratories, diagnostic imaging equipment suppliers, or other companies.
We have identified some potential new collaborators, but have not yet entered into any collaboration arrangements with them. Although we have expended, and continue to expend, time and money on internal research and development programs, we may be
unsuccessful in creating diagnostic product candidates that would enable us to form additional collaborations and alliances and, if applicable, receive milestone and/or royalty payments from collaborators. Other companies may not be interested in
entering into these relationships with us, or may not be interested in doing so on terms that we consider acceptable.

Our development and
commercialization of diagnostic products could be harmed if collaborators or licensees fail to perform under their agreements with us or if they terminate those agreements.

Each of our existing collaboration, license, and similar agreements with other companies for the development and commercialization of products, including our distribution agreement and royalty agreement
with Abbott, may be canceled under some circumstances. These agreements generally may be terminated under circumstances including a material breach or default of the agreement, a change in control, or the insolvency or bankruptcy of either party. In
addition, the amount and timing of resources to be devoted to research, development, clinical trials, and commercialization activities by our collaborators and licensees are generally not within our control. We expect that collaboration, license,
and similar agreements entered into in the future, if any, will have similar terms and limitations. Furthermore, even if these agreements contain commitments regarding these activities, our collaborators or licensees may not perform their
obligations as expected. If collaborators or licensees terminate their agreements or otherwise fail to conduct their collaborative or licensed activities in a timely manner, or at all, the development or commercialization of diagnostic products may
be delayed or prevented. If we assume responsibility for continuing diagnostic programs on our own after termination of a collaboration, license, or similar agreement, we may be required to devote additional resources to product development and
commercialization or we may need to cancel some development programs. Any reallocation of additional resources to product development and/or commercialization or cancellation of development programs may harm our operating results and financial
condition.

Our licensing and royalty revenues depend on our licensees and partners maintenance of their agreements with us and
their sales of their products.

We derive revenues from our licensees and partners product sales under a number of agreements.
Such agreements include our royalty agreement with Abbott, our small molecule sale agreements and our intellectual property license agreements. In addition, we derive licensing revenues from intellectual property licensed from Applied Biosystems
(now Life Technologies) to third parties in the human diagnostics field. Even if these licensees and partners perform their obligations as required by these agreements, their ability to develop, manufacture and commercialize products successfully is
uncertain. Since the royalties payable to us under these agreements



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generally depend on our licensees and partners sales of their products, which are not within our control, their failure in commercializing their products or maintaining or increasing
the sales volumes of their products may harm our operating results and financial condition. In addition, certain of these intellectual property license agreements permit our licensees to pay us an upfront license fee over a period of time during
which they have the right to terminate the agreements. In the event that a licensee terminates its license agreement before the upfront license fee is paid in full, we will not be paid any remaining license fee.

Our diagnostic product candidates may never result in a commercialized product.

Most of our diagnostic product candidates are in various stages of research and development and the ability to commercialize those product candidates, including through collaborators or licensees, is
uncertain. Development of existing product candidates will require significant additional research and development efforts by us or our collaborators or licensees before they can be marketed. For potential diagnostic products, these efforts include
extensive clinical testing to confirm the products are safe and effective and may require lengthy regulatory review and clearance or approval by the FDA and comparable agencies in other countries. Furthermore, even if these products are found to be
safe and effective and receive necessary regulatory clearances or approvals, they may never be developed into commercial products due to considerations such as inability to obtain needed licenses to intellectual property owned by others, market and
competitive conditions, and manufacturing difficulties or cost considerations. Our inability to produce commercialized products could harm our operating results and financial condition.

Development and commercialization of diagnostic product candidates depends on the satisfaction of regulatory requirements.

In the U.S., either we or our collaborators or licensees must show through pre-clinical studies and clinical trials that each of our or our collaborators or licensees diagnostic product
candidates is safe and effective for each indication before obtaining regulatory clearance or approval from the FDA for the commercial sale of that product as an in vitro diagnostic product with clinical claims. Outside of the U.S., the
regulatory requirements for commercialization vary from country to country. This regulatory review and approval process can take many years and require substantial expense and may not be successful. If we or our collaborators or licensees fail to
adequately show the safety and effectiveness of a diagnostic product candidate because, for example, the results from pre-clinical studies are different from the results that are obtained in clinical trials, regulatory clearance or approval could be
delayed or denied. Without regulatory clearance or approval, we or our collaborators or licensees may be unable to complete the development or commercialization of the product for which clearance or approval was sought. The inability of us or our
collaborators or licensees to commercialize products could harm our operating results and financial condition.

The FDA has issued an
interpretation of the regulations governing the sale of ASRs which could prevent or delay our or our collaborators or licensees sales of these products and make development of new ASR products more difficult, all of which could harm our
operating results and financial condition. We believe that all of our current ASR products, other than our HLA ASR products, meet the regulatory definition of an ASR, as set forth in the FDA guidance document. Our products sold as ASRs include HLA
products, Fragile X products, and deep vein thrombosis products. We similarly believe that all of the ASR products manufactured and sold by Abbott for which Abbott pays us royalties meet the regulatory definition of an ASR, as set forth in the FDA
guidance document. If the FDA does not agree with our interpretations of our ASR products, we may need to establish an appropriate action plan for any affected product, such as reconfiguring the product to bring it into compliance with the ASR
definition or seeking clearance pursuant to Section 510(k) of the FFDCA.



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In June 2008, the FDA issued a letter that stated that the FDA might employ enforcement
discretion to the sale of ASR products that did not meet the regulatory definition of an ASR, if a manufacturer met with the FDA and developed an approved plan to bring the products into compliance by reconfiguring the product or seeking the
appropriate registration. We applied for and received assurance of such enforcement discretion for the sale of our HLA ASR products from the FDA, while working with the FDA under a pre-IDE for registering the HLA products. In
late July 2009, the FDA notified us that it could no longer consider extending such enforcement discretion. Based on additional correspondence, the FDA has reinstated such enforcement discretion on a conditional basis pending
additional meetings with the FDA. We are actively assessing potential regulatory solutions; however, none may be available, requiring us to discontinue marketing the HLA ASRs. This discontinuation could be permanent and we would no longer
receive any revenues from these products and our business could be harmed.

Commercialization of our products depends on satisfaction of
ongoing regulatory requirements.

The manufacture of our and our collaborators and licensees diagnostic products is subject to
the FDAs Quality System Regulation. Manufacturing problems with respect to any product, including non-compliance with this regulation, could result in withdrawal of regulatory clearance or approval for that product, and could also force us or
our collaborators or licensees to suspend manufacturing of, reformulate, conduct additional testing for, and/or change the labeling for, that product. This could delay or prevent us from generating revenues from the sale of any affected diagnostic
product.

Clinical trials of diagnostic product candidates may not be successful.

Potential clinical trials of product candidates may not begin on time, may not be completed on schedule, or at all, or may not be sufficient for
registration of the products or result in products that can receive necessary clearances or approvals. Numerous unforeseen events during, or as a result of, clinical testing could delay or prevent commercialization of our or our collaborators
or licensees diagnostic product candidates. Diagnostic product candidates that appear to be promising at early stages of development or early clinical trials may later be found to be unsafe, ineffective, or to have limited medical value. If we
are unable to successfully complete clinical trials for diagnostic product candidates, our operating results and financial condition would be harmed.

We could be harmed by disruptions to our critical manufacturing, clinical laboratory, or other facilities.

We have
headquarters, research and development, manufacturing, administrative, and clinical laboratory facilities in Alameda, Burlingame and South San Francisco, California and do not have alternative facilities or manufacturing or testing backup plans. Our
California facilities are located near major earthquake faults. Although following the split-off we have purchased insurance policies covering damages to our operations and facilities resulting from some natural disasters, including flooding,
windstorm and lightning, the ultimate impact of disruptions caused by earthquakes, other natural disasters or weather-related events, or other causes, such as acts of terrorism, on us, our significant suppliers, and the general infrastructure is
unknown, and our operating results could be harmed if a major earthquake or other disaster occurs. In particular, all of our laboratory testing services are performed at our clinical laboratory facility in Alameda and we do not have access to any
backup facility should there be an interruption in operations due to earthquakes or other disasters. It would be expensive and time consuming to repair or replace our laboratory facility or the equipment located at that facility. Furthermore, if
operations at our Alameda facility are interrupted, it may be difficult and time-consuming for



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us to hire another company to perform laboratory testing services, because we would need to find a laboratory that has the required state and federal licenses and would perform our testing
services on terms and conditions that are acceptable to us. An earthquake or other disaster could likewise harm our manufacturing capabilities. However, the impact of a manufacturing disruption would depend, in part, on factors such as customer
demand and inventory levels of our products. Also, the repair or replacement of our facility or equipment may require new regulatory approvals, clearances or licenses, which would further delay operations. A prolonged or sustained interruption in
our facility or equipment could harm our operating results and financial condition.

We may pursue acquisitions, investments, or other
strategic relationships or alliances, which may consume significant resources, may be unsuccessful, may require us to obtain financing on a stand-alone basis, and could dilute the holders of our common stock.

Acquisitions, investments and other strategic relationships and alliances, if pursued, may involve significant cash expenditures, debt incurrence,
additional operating losses, and expenses that could have a material adverse effect on our financial condition and operating results. Acquisitions involve numerous other risks, including:



| |  |  | diversion of management time and attention from daily operations;
| | - |  | -----------------------------------------------------------------



| |  |  | difficulties integrating acquired businesses, technologies and personnel into our business;
| | - |  | -------------------------------------------------------------------------------------------



| |  |  | inability to obtain required regulatory approvals and/or required financing on favorable terms;
| | - |  | -----------------------------------------------------------------------------------------------



| |  |  | entry into new markets in which we have little previous experience;
| | - |  | -------------------------------------------------------------------



| |  |  | potential loss of key employees, key contractual relationships, or key customers of acquired companies or of us; and
| | - |  | --------------------------------------------------------------------------------------------------------------------



| |  |  | assumption of the liabilities and exposure to unforeseen liabilities of acquired companies.
| | - |  | -------------------------------------------------------------------------------------------

If these types of transactions are pursued, it may be difficult for us to complete these transactions quickly and to integrate these acquired operations
efficiently into our current business operations. Any acquisitions, investments or other strategic relationships and alliances by us may ultimately harm our business and financial condition. In addition, future acquisitions may not be as successful
as originally anticipated and may result in impairment charges. We have incurred these charges in recent years in relation to acquisitions. For example, since the year ended June 30, 2002 we have incurred charges for impairment of goodwill,
intangibles and other assets and other charges of $30.4 million related to our acquisition of Paracel, Inc. During the years ended June 30, 2007 and 2006, we incurred charges totaling $28.8 million for severance and benefit costs
and asset impairments relating to our acquisition of Axys Pharmaceuticals, Inc., and our subsequent decision to partner or sell our small molecule drug discovery and development programs, and the integration of Celera Diagnostics into us.
Additionally, during the second quarter of 2009, we incurred charges of $15.7 million for the impairment of trade names related to our acquisition of BHL and Atria Genetics, Inc.

In the event we need to obtain financing to complete an acquisition, investment or other strategic relationship or alliance, we will have to do so on a stand-alone basis without reliance on Applied
Biosystems (now Life Technologies) overall balance sheet. The cost to us of stand-alone financing may be materially higher than the cost of financing that we might have obtained as part of Applied Biosystems (now Life Technologies), and
we may not be able to secure adequate debt or equity financing on desirable terms. Also, under the tax matters agreement and separation agreement that we have entered into with Applied Biosystems (now Life Technologies), to preserve the tax-free
treatment of the split-off to Applied Biosystems (now Life Technologies), for the two-year



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period following the split-off we may be subject to restrictions on our ability to issue equity securities to satisfy financing needs, acquire businesses or assets with equity securities or
engage in mergers or asset transfers that could jeopardize the tax-free status of the split-off. These restrictions may limit our ability to engage in these transactions (though if Applied Biosystems (now Life Technologies) were determined to be
subject to tax on the distribution of our common stock, we would no longer be subject to these restrictions).

In addition, subject to these
potential restrictions, acquisitions and other transactions may involve the issuance of a substantial amount of our common stock without the approval of our stockholders. Any issuances of this nature could be dilutive to our stockholders.

The market price and trading volume of our common stock may be volatile and may face negative pressure.

Before the split-off, there was no trading market for the shares of our common stock. Our common stock issued in the split-off traded publicly for the first
time following the split-off. Until, and possibly even after, orderly trading markets develop for our common stock, there may be significant fluctuations in price. Investors interest may not lead to a liquid trading market and the market price
of our common stock may be volatile. This may result in short- or long-term negative pressure on the trading price of shares of our common stock.

The market price of our common stock may be volatile due to the risks and uncertainties described in this Risk Factors section, as well as other factors that may affect the market price, such as:



| |  |  | conditions and publicity regarding the genomics, biotechnology, pharmaceutical, diagnostics, or life sciences industries generally;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------



| |  |  | price and volume fluctuations in the stock market at large which do not relate to our operating performance; and
| | - |  | ----------------------------------------------------------------------------------------------------------------



| |  |  | comments by securities analysts or government officials, including those with regard to the viability or profitability of the biotechnology sector
generally or with regard to intellectual property rights of life science companies, or our ability to meet market expectations.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The stock market has from time to time experienced extreme price and volume fluctuations that are unrelated to the operating performance of particular companies or the industries in which they compete.

In addition, our ability to achieve previously announced financial targets is subject to a number of risks, uncertainties, and other factors affecting our
business and the genomics, biotechnology, pharmaceutical, diagnostics, and life sciences industries generally, many of which are beyond our control. These factors may cause actual results to differ materially. We describe a number of these factors
throughout this document, including in this Risk Factors section. We cannot assure you that we will meet these targets. If we are not able to meet these targets, it could harm the market price of our common stock.

Future sales of our stock could adversely affect our stocks market price and our ability to raise capital in the future.

Sales of substantial amounts of our common stock could harm the market price of our stock. This also could harm our ability to raise capital in the future.
The shares issued in the split-off are freely tradable without restriction under the Securities Act of 1933 (the Securities Act) by persons other than affiliates, as defined under the Securities Act. Any sales of substantial amounts of
our common stock in the public market, or the perception that those sales might occur, could harm the market price of our common stock.



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We will not solicit the approval of our stockholders for the issuance of authorized but unissued shares of
our common stock unless this approval is deemed advisable by our Board of Directors or is required by applicable law, regulation or stock exchange listing requirements. The issuance of those shares could dilute the value of our outstanding shares of
common stock.

We do not expect to pay dividends on our common stock.

We currently do not expect to pay any dividends on our common stock for the foreseeable future. Holders of our common stock will have to rely on a rise in the market price of our common stock, if any, to
earn a return on their investment in our common stock, which rise is uncertain and unpredictable. As a result, you should not rely on an investment in our common stock as a source of dividend income.

Anti-takeover provisions could deter takeover attempts of Celera Corporation and limit appreciation of the market price for shares of our common stock.

Our amended and restated certificate of incorporation, amended and restated by-laws, and Delaware law contain provisions that may have
the impact of delaying or precluding an acquisition of our company without the approval of our Board of Directors. These provisions may limit the price that investors might be otherwise willing to pay in the future for shares of our common stock.
These provisions include providing for a staggered Board of Directors, advance notice procedures for stockholder proposals and director nominations, as well as a provision in our amended and restated certificate of incorporation that does not afford
stockholders the right to call a special meeting of stockholders. In addition, there are provisions of Delaware law that may also have the effect of precluding an acquisition of us without the approval of our Board of Directors.

Our collaborations with outside experts may be subject to restriction and change.

We collaborate with scientific and clinical experts at academic and other institutions that provide assistance and guidance to our research and development efforts. These advisors and collaborators are
not our employees and may have other commitments that limit their availability to us. Although they generally agree not to collaborate with our competitors, if a conflict of interest arises between their work for us and their work for another
company or institution, we may lose the services of these experts. In addition, our advisors and collaborators sign confidentiality agreements that generally prohibit their use or disclosure of our confidential information other than in connection
with our collaboration and, where applicable, require disclosure and assignment to us of their ideas, developments, discoveries and inventions arising under our collaboration. These confidentiality agreements generally have a term that lasts for so
long as the collaboration is in effect, plus a specified period afterward and are generally terminable by either party upon a breach of the agreement by the other party and, in some cases, upon written notice. These agreements generally permit us to
seek injunctive or other relief to prevent unpermitted use or disclosure of our confidential information. However, it is possible that valuable proprietary knowledge may become publicly known or otherwise available to other parties, including our
competitors, through these experts.

We may be exposed to product liability or other legal claims relating to our products and services.

Clinicians, patients, third-party payors, and others may at times seek damages from us based on testing or analysis errors caused by a
technicians misreading of results, mishandling of the patient samples, or similar claims. Product liability or other claims, or product recalls, regardless of the ultimate outcome, could harm our reputation and require us to spend significant
time and money in litigation and to pay significant damages. These damages, if not covered by adequate insurance, could harm our operating results and financial condition.



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Our operations are subject to potential exposure to environmental liabilities.

Our research and development activities, manufacturing activities, and clinical laboratory testing activities involve the controlled use of potentially
hazardous materials, including biological materials, chemicals, and various radioactive compounds. Also, some of our diagnostic products are hazardous materials or include hazardous materials. We cannot completely eliminate the risk of accidental or
other contamination or injury from these materials, and we could be held liable for resulting damages, which could be substantial. We do not maintain environmental liability insurance and any potential environmental damages for which we become
liable may not be covered under our existing insurance policies. Under some laws and regulations, a party can be subject to strict liability for damages caused by some hazardous materials, which means that a party can be liable without
regard to fault or negligence. We could be held similarly responsible for the actions of our other collaborators or licensees. In addition, we are subject to federal, state, local, and foreign laws, regulations, and permits governing the use,
storage, handling, and disposal of hazardous materials and specified waste products, as well as the shipment and labeling of materials and products containing hazardous materials. If we are found to be liable for our use of hazardous materials, or
fail to comply with any of these laws, regulations, or permits, or if we are held indirectly responsible for the conduct of our collaborators or licensees found to be non-compliant, we could be subject to substantial fines or penalties, payment of
remediation costs, loss of permits, and/or other adverse governmental action. Any of these events could harm our operating results and financial condition.



|ITEM 2. | Unregistered Sales of Equity Securities and Use of Proceeds
|------- | -----------------------------------------------------------

Issuer Purchases of Equity Securities

This table provides information about our
purchases of Celera Corporation common stock during the three months ended September 26, 2009:



|                                     |  |                                    |  |                            |      |                                                                           |   |                                                                         |  
|------------------------------------ |  | ---------------------------------- |  | -------------------------- | ---- | ------------------------------------------------------------------------- | - | ----------------------------------------------------------------------- | -
|Period                               |  | Total Numberof SharesPurchased (1) |  | AveragePrice Paidper Share |      | Total Numberof SharesPurchasedas Part ofPubliclyAnnouncedPlans orPrograms |   | MaximumNumber ofShares thatMay Yet bePurchasedUnder thePlans orPrograms
|June 28, 2009 - July 25, 2009        |  |                                   |  |                            |     |                                                                           |  |                                                                         | 
|July 26, 2009 - August 22, 2009      |  | 67,568                             |  | $                          | 6.19 |                                                                           |  |                                                                         | 
|August 23, 2009 - September 26, 2009 |  |                                   |  |                            |     |                                                                           |  |                                                                         | 
|                                     |  |                                    |  |                            |      |                                                                           |   |                                                                         |  
|Total                                |  | 67,568                             |  | $                          | 6.19 |                                                                           |  |                                                                         | 
|                                     |  |                                    |  |                            |      |                                                                           |   |                                                                         |  



|(1) | During the three months ended September 26, 2009, we repurchased 67,568 shares of our common stock, at an average price of $6.19, to satisfy tax obligations upon
the vesting of restricted stock under the 2008 Stock Incentive Plan. We may make similar repurchases in the future to satisfy employee tax obligations upon the vesting of restricted stock.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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|ITEM 6. | Exhibits
|------- | --------



|           |  |                                                                                                                                                                    
|---------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------
|EXHIBITNO. |  | DOCUMENT                                                                                                                                                           
|           | 
|3.1        |  | Form of Amended and Restated Certificate of Incorporation of the Registrant (incorporated by reference to Exhibit 3.1 of our report on Form 8-K dated July 8, 2008)
|           | 
|3.2        |  | Third Amended and Restated Bylaws of Celera Corporation (incorporated by reference to Exhibit 3.1 of our report on Form 8-K dated August 18, 2009)                 
|           | 
|10.29+     |  | Celera Corporation 2008 Stock Incentive Plan (as amended on August 13, 2009)                                                                                       
|           | 
|10.30+     |  | Form of Non-Qualified Stock Option Award Agreement pursuant to the Celera Corporation 2008 Stock Incentive Plan                                                    
|           | 
|10.31+     |  | Form of Restricted Stock Unit Award Agreement pursuant to the Celera Corporation 2008 Stock Incentive Plan                                                         
|           | 
|31.1+      |  | Certification of Chief Executive Officer pursuant to Exchange Act Rule 13a-14(a)                                                                                   
|           | 
|31.2+      |  | Certification of Chief Financial Officer pursuant to Exchange Act Rule 13a-14(a)                                                                                   
|           | 
|32.1+      |  | Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002                  
|           | 
|32.2+      |  | Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002                  



|+ | Indicates filed herewith.
|- | -------------------------



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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.



CELERA CORPORATION/s/    KATHY
ORDOÑEZName:

Kathy OrdoñezTitle:

Chief Executive OfficerDate: November 9, 2009/s/    UGO
DEBLASIName:

Ugo DeBlasiTitle:

Chief Financial OfficerDate: November 9, 2009




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