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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 JUNE 26, 2010



| ̈ | 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         |  | x
|                        |  |                                                  | 
|Non-accelerated filer   |  |  ̈  (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 July 29, 2010: 81,987,689.









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TABLE OF CONTENTS



|                               |  |                                                                                                                    |  |   
|------------------------------ |  | ------------------------------------------------------------------------------------------------------------------ |  | --
|                               |  | Page                                                                                                              
|PART I  Financial Information |  |                                                                                                                   
|Item 1.                        |  | Financial Statements (Unaudited)                                                                                   |  | 4 
|                               |  |                                                                                                                   
|                               |  | Condensed Consolidated Statements of Operations for the Three and Six Months Ended June 26, 2010 and June 27,
2009 |  | 4 
|                               |  |                                                                                                                   
|                               |  | Condensed Consolidated Statements of Financial Position at June 26, 2010 and December 26,
2009                     |  | 5 
|                               |  |                                                                                                                   
|                               |  | Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 26, 2010 and June 27,
2009           |  | 6 
|                               |  |                                                                                                                   
|                               |  | Notes to Unaudited Condensed Consolidated Financial Statements                                                     |  | 7 
|                               |  |                                                                                                                   
|Item 2.                        |  | Managements Discussion and Analysis of Financial Condition and Results of Operations                              |  | 20
|                               |  |                                                                                                                   
|Item 3.                        |  | Quantitative and Qualitative Disclosures about Market Risk                                                         |  | 29
|                               |  |                                                                                                                   
|Item 4.                        |  | Controls and Procedures                                                                                            |  | 29
|                               | 
|PART II  Other Information    |  |                                                                                                                   
|                               |  |                                                                                                                   
|Item 1.                        |  | Legal Proceedings                                                                                                  |  | 31
|                               |  |                                                                                                                   
|Item 1A.                       |  | Risk Factors                                                                                                       |  | 33
|                               |  |                                                                                                                   
|Item 6.                        |  | Exhibits                                                                                                           |  | 59
|                               | 
|SIGNATURES                     |  | 60                                                                                                                



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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. 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.



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PART I  Financial Information



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

Celera Corporation

Condensed Consolidated Statements of Operations

(Unaudited)



|                                                       |  |                    |        |   |                  |   |         |              |  |   |              |   |  |   |         |  
|------------------------------------------------------ |  | ------------------ | ------ | - | ---------------- | - | ------- | ------------ |  | - | ------------ | - |  | - | ------- | -
|                                                       |  | Three Months Ended |        |   | Six Months Ended |  
|(Dollar amounts in thousands except per share amounts) |  | June 26,2010       |        |   | June 27,2009     |   |         | June 26,2010 |  |   | June 27,2009 |  
|Net Revenues                                           |  |                    |        |   |                  |   |         |              |  |   |              |   |  |   |         |  
|Products                                               |  | $                  | 8,955  |   |                  | $ | 8,277   |              |  | $ | 17,129       |   |  | $ | 17,434  |  
|Services                                               |  |                    | 19,908 |   |                  |   | 25,437  |              |  |   | 37,489       |   |  |   | 54,103  |  
|Royalties, licenses and milestones                     |  |                    | 3,704  |   |                  |   | 7,604   |              |  |   | 9,375        |   |  |   | 15,517  |  
|                                                       |  |                    |        |   |                  |   |         |              |  |   |              |   |  |   |         |  
|Total Net Revenues                                     |  |                    | 32,567 |   |                  |   | 41,318  |              |  |   | 63,993       |   |  |   | 87,054  |  
|                                                       |  |                    |        |   |                  |   |         |              |  |   |              |   |  |   |         |  
|Cost of Sales                                          |  |                    |        |   |                  |   |         |              |  |   |              |   |  |   |         |  
|Products                                               |  |                    | 4,364  |   |                  |   | 4,427   |              |  |   | 8,941        |   |  |   | 9,241   |  
|Services                                               |  |                    | 7,401  |   |                  |   | 8,976   |              |  |   | 14,697       |   |  |   | 18,169  |  
|                                                       |  |                    |        |   |                  |   |         |              |  |   |              |   |  |   |         |  
|Total Cost of Sales                                    |  |                    | 11,765 |   |                  |   | 13,403  |              |  |   | 23,638       |   |  |   | 27,410  |  
|                                                       |  |                    |        |   |                  |   |         |              |  |   |              |   |  |   |         |  
|Gross Margin                                           |  |                    | 20,802 |   |                  |   | 27,915  |              |  |   | 40,355       |   |  |   | 59,644  |  
|Selling, general and administrative                    |  |                    | 21,895 |   |                  |   | 41,109  |              |  |   | 45,615       |   |  |   | 66,355  |  
|Research and development                               |  |                    | 6,428  |   |                  |   | 7,425   |              |  |   | 12,988       |   |  |   | 15,155  |  
|Amortization of purchased intangible assets            |  |                    | 2,567  |   |                  |   | 2,549   |              |  |   | 5,134        |   |  |   | 5,098   |  
|Employee-related charges, asset impairments and other  |  |                    |       |   |                  |   | (126    | )            |  |   | 220          |   |  |   | 598     |  
|Legal and insurance settlements                        |  |                    | (2,780 | ) |                  |   |        |              |  |   | (2,780       | ) |  |   |        |  
|Impairment of intangible assets                        |  |                    |       |   |                  |   | 15,655  |              |  |   |             |   |  |   | 15,655  |  
|                                                       |  |                    |        |   |                  |   |         |              |  |   |              |   |  |   |         |  
|Operating Loss                                         |  |                    | (7,308 | ) |                  |   | (38,697 | )            |  |   | (20,822      | ) |  |   | (43,217 | )
|Interest income, net                                   |  |                    | 1,173  |   |                  |   | 1,699   |              |  |   | 2,396        |   |  |   | 3,811   |  
|                                                       |  |                    |        |   |                  |   |         |              |  |   |              |   |  |   |         |  
|Loss Before Income Taxes                               |  |                    | (6,135 | ) |                  |   | (36,998 | )            |  |   | (18,426      | ) |  |   | (39,406 | )
|(Provision) benefit for income taxes                   |  |                    | (11    | ) |                  |   | 5,279   |              |  |   | (172         | ) |  |   | 6,270   |  
|                                                       |  |                    |        |   |                  |   |         |              |  |   |              |   |  |   |         |  
|Net Loss                                               |  | $                  | (6,146 | ) |                  | $ | (31,719 | )            |  | $ | (18,598      | ) |  | $ | (33,136 | )
|                                                       |  |                    |        |   |                  |   |         |              |  |   |              |   |  |   |         |  
|Net Loss per Share                                     |  |                    |        |   |                  |   |         |              |  |   |              |   |  |   |         |  
|Basic and diluted                                      |  | $                  | (0.07  | ) |                  | $ | (0.39   | )            |  | $ | (0.23        | ) |  | $ | (0.41   | )
|                                                       |  |                    |        |   |                  |   |         |              |  |   |              |   |  |   |         |  
|Weighted Average Shares Outstanding (in thousands)     |  |                    |        |   |                  |   |         |              |  |   |              |   |  |   |         |  
|Basic and diluted                                      |  |                    | 81,988 |   |                  |   | 81,818  |              |  |   | 81,981       |   |  |   | 81,777  |  
|                                                       |  |                    |        |   |                  |   |         |              |  |   |              |   |  |   |         |  

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 June 
26,2010 |            |   | At December 26,2009 |  
|Assets                                                                                                                                                                                                                |  |                  |            |   |                     |   |           |  
|Current assets                                                                                                                                                                                                        |  |                  |            |   |                     |   |           |  
|Cash and cash equivalents                                                                                                                                                                                             |  | $                | 50,441     |   |                     | $ | 56,233    |  
|Short-term investments                                                                                                                                                                                                |  |                  | 272,443    |   |                     |   | 270,236   |  
|Accounts receivable (net of allowances for doubtful accounts of $7,677 and $18,632, respectively)                                                                                                                     |  |                  | 20,576     |   |                     |   | 27,530    |  
|Inventories, net                                                                                                                                                                                                      |  |                  | 8,023      |   |                     |   | 6,702     |  
|Income taxes receivable                                                                                                                                                                                               |  |                  | 4,842      |   |                     |   | 4,810     |  
|Prepaid expenses and other current assets                                                                                                                                                                             |  |                  | 9,924      |   |                     |   | 11,562    |  
|                                                                                                                                                                                                                      |  |                  |            |   |                     |   |           |  
|Total current assets                                                                                                                                                                                                  |  |                  | 366,249    |   |                     |   | 377,073   |  
|Property, plant and equipment, net                                                                                                                                                                                    |  |                  | 13,494     |   |                     |   | 13,878    |  
|Goodwill                                                                                                                                                                                                              |  |                  | 116,350    |   |                     |   | 116,350   |  
|Intangible assets, net                                                                                                                                                                                                |  |                  | 96,304     |   |                     |   | 101,486   |  
|Other long-term assets                                                                                                                                                                                                |  |                  | 33,196     |   |                     |   | 29,414    |  
|                                                                                                                                                                                                                      |  |                  |            |   |                     |   |           |  
|Total Assets                                                                                                                                                                                                          |  | $                | 625,593    |   |                     | $ | 638,201   |  
|                                                                                                                                                                                                                      |  |                  |            |   |                     |   |           |  
|Liabilities and Stockholders Equity                                                                                                                                                                                  |  |                  |            |   |                     |   |           |  
|Current liabilities                                                                                                                                                                                                   |  |                  |            |   |                     |   |           |  
|Accounts payable                                                                                                                                                                                                      |  | $                | 9,306      |   |                     | $ | 9,797     |  
|Accrued salaries and wages                                                                                                                                                                                            |  |                  | 7,534      |   |                     |   | 8,861     |  
|Other accrued expenses                                                                                                                                                                                                |  |                  | 11,671     |   |                     |   | 10,619    |  
|Deferred revenue                                                                                                                                                                                                      |  |                  | 1,557      |   |                     |   | 1,142     |  
|                                                                                                                                                                                                                      |  |                  |            |   |                     |   |           |  
|Total current liabilities                                                                                                                                                                                             |  |                  | 30,068     |   |                     |   | 30,419    |  
|Other long-term liabilities                                                                                                                                                                                           |  |                  | 13,945     |   |                     |   | 13,599    |  
|                                                                                                                                                                                                                      |  |                  |            |   |                     |   |           |  
|Total Liabilities                                                                                                                                                                                                     |  |                  | 44,013     |   |                     |   | 44,018    |  
|                                                                                                                                                                                                                      |  |                  |            |   |                     |   |           |  
|Commitments and contingencies (refer to Note 13)                                                                                                                                                                      |  |                  |            |   |                     |   |           |  
|                                                                                                                                                                                                                      |  |                 
|Stockholders Equity                                                                                                                                                                                                  |  |                  |            |   |                     |   |           |  
|Common stock: par value $0.01 per share; 300,000,000 shares authorized; 82,240,673 and 82,169,792 shares issued and 81,987,689
and 81,947,481 shares outstanding at June 26, 2010 and December 26, 2009, respectively |  |                  | 822        |   |                     |   | 822       |  
|Preferred stock: par value $0.01 per share; 10,000,000 shares authorized; zero shares issued and outstanding                                                                                                          |  |                  |           |   |                     |   |          |  
|Additional paid-in capital                                                                                                                                                                                            |  |                  | 1,591,546  |   |                     |   | 1,589,014 |  
|Accumulated other comprehensive income                                                                                                                                                                                |  |                  | 4,213      |   |                     |   | 530       |  
|Treasury stock, at cost: 252,984 and 222,311 shares atJune 26, 2010 and December 26, 2009,
respectively                                                                                                               |  |                  | (2,176     | ) |                     |   | (1,956    | )
|Accumulated net loss                                                                                                                                                                                                  |  |                  | (1,012,825 | ) |                     |   | (994,227  | )
|                                                                                                                                                                                                                      |  |                  |            |   |                     |   |           |  
|Total Stockholders Equity                                                                                                                                                                                            |  |                  | 581,580    |   |                     |   | 594,183   |  
|                                                                                                                                                                                                                      |  |                  |            |   |                     |   |           |  
|Total Liabilities and Stockholders Equity                                                                                                                                                                            |  | $                | 625,593    |   |                     | $ | 638,201   |  
|                                                                                                                                                                                                                      |  |                  |            |   |                     |   |           |  

See accompanying notes to unaudited condensed consolidated financial statements.



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Celera Corporation

Condensed Consolidated Statements of Cash Flows

(Unaudited)



|                                                                                                       |  |                  |          |   |              |   |         |  
|------------------------------------------------------------------------------------------------------ |  | ---------------- | -------- | - | ------------ | - | ------- | -
|                                                                                                       |  | Six Months Ended |         
|(Dollar amounts in thousands)                                                                          |  | June 26,2010     |          |   | June 27,2009 |  
|Operating Activities                                                                                   |  |                  |          |   |              |   |         |  
|Net loss                                                                                               |  | $                | (18,598  | ) |              | $ | (33,136 | )
|Adjustments to reconcile net loss from operations to net cash (used) provided by operating activities: |  |                  |          |   |              |   |         |  
|Depreciation and amortization                                                                          |  |                  | 7,996    |   |              |   | 8,127   |  
|Impairment of intangible assets                                                                        |  |                  |         |   |              |   | 15,655  |  
|Allowance for doubtful accounts                                                                        |  |                  | 3,191    |   |              |   | 25,162  |  
|Employee-related charges, asset impairments and other                                                  |  |                  | 220      |   |              |   | 598     |  
|Share-based compensation                                                                               |  |                  | 2,534    |   |              |   | 1,521   |  
|Deferred income taxes                                                                                  |  |                  | 190      |   |              |   | (6,062  | )
|Non-cash interest income                                                                               |  |                  | (468     | ) |              |   | (452    | )
|Loss on disposal of assets                                                                             |  |                  | 60       |   |              |   | 174     |  
|Amortization of premium on purchase of investments                                                     |  |                  | 1,362    |   |              |   | 752     |  
|Changes in operating assets and liabilities:                                                           |  |                  |          |   |              |   |         |  
|Accounts receivable                                                                                    |  |                  | 3,763    |   |              |   | (8,404  | )
|Inventories                                                                                            |  |                  | (1,321   | ) |              |   | 622     |  
|Prepaid expenses and other assets                                                                      |  |                  | 1,762    |   |              |   | 764     |  
|Accounts payable and other liabilities                                                                 |  |                  | (4,492   | ) |              |   | (1,928  | )
|                                                                                                       |  |                  |          |   |              |   |         |  
|Net Cash (Used) Provided by Operating Activities                                                       |  |                  | (3,801   | ) |              |   | 3,393   |  
|                                                                                                       |  |                  |          |   |              |   |         |  
|Investing Activities                                                                                   |  |                  |          |   |              |   |         |  
|Purchase of intangible assets                                                                          |  |                  | (325     | ) |              |   | (10,300 | )
|Purchase of property, plant and equipment, net                                                         |  |                  | (2,259   | ) |              |   | (2,585  | )
|Proceeds from maturities of available-for-sale investments                                             |  |                  | 87,686   |   |              |   | 64,505  |  
|Proceeds from sales of available-for-sale investments                                                  |  |                  | 22,027   |   |              |   | 17,294  |  
|Purchases of available-for-sale investments                                                            |  |                  | (108,898 | ) |              |   | (90,044 | )
|                                                                                                       |  |                  |          |   |              |   |         |  
|Net Cash Used by Investing Activities                                                                  |  |                  | (1,769   | ) |              |   | (21,130 | )
|                                                                                                       |  |                  |          |   |              |   |         |  
|Financing Activities                                                                                   |  |                  |          |   |              |   |         |  
|Principal payments on loans payable and debt                                                           |  |                  |         |   |              |   | (62     | )
|Funding from Life Technologies as a result of the split-off                                            |  |                  |         |   |              |   | 31      |  
|Proceeds from the exercise of stock options                                                            |  |                  |         |   |              |   | 7,547   |  
|Taxes withheld and paid on the vesting of restricted stock                                             |  |                  | (222     | ) |              |   | (365    | )
|                                                                                                       |  |                  |          |   |              |   |         |  
|Net Cash (Used) Provided by Financing Activities                                                       |  |                  | (222     | ) |              |   | 7,151   |  
|                                                                                                       |  |                  |          |   |              |   |         |  
|Net Change in Cash and Cash Equivalents                                                                |  |                  | (5,792   | ) |              |   | (10,586 | )
|Cash and Cash Equivalents at Beginning of Period                                                       |  |                  | 56,233   |   |              |   | 72,018  |  
|                                                                                                       |  |                  |          |   |              |   |         |  
|Cash and Cash Equivalents at End of Period                                                             |  | $                | 50,441   |   |              | $ | 61,432  |  
|                                                                                                       |  |                  |          |   |              |   |         |  

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. Celeras common stock began trading on The NASDAQ Stock
Market on July 1, 2008, following its split-off from Applied Biosystems, Inc. (now Life Technologies Corporation).

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 physicians improve cardiovascular disease treatment regimens for their 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.

Basis of Presentation

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.

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 condensed
consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto for the year ended December 26, 2009 included in the Companys Annual Report on Form 10-K filed with the
Securities and Exchange Commission (SEC) on March 10, 2010.

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: Lab Services revenues;
share-based compensation; 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.



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Celera Corporation

Notes to Unaudited Condensed Consolidated Financial Statements (Continued)



2. Accounting Policies

There have been no changes to the Companys accounting policies during the six months ended June 26, 2010, except as noted below. Refer to Note
2 to the consolidated financial statements contained in the Companys Annual Report on Form 10-K for the year ended December 26, 2009.

Recently Issues Accounting Pronouncements

In April 2010, the Financial Accounting Standards Board (FASB) issued an amendment to the accounting standards related to the milestone method of revenue
recognition. The standard clarifies the guidance on defining a milestone and determining when it may be appropriate to apply the milestone method of revenue recognition for research or development transactions. The guidance was effective for the
Companys second quarter of 2010. The adoption did not have an effect on the Companys condensed consolidated financial statements.

In February 2010, the FASB issued guidance which removes the requirement for an SEC filer to disclose a date through which subsequent events have
been evaluated. The guidance was effective for the Companys first quarter of 2010. The adoption did not have a material effect on the Companys condensed consolidated financial statements.

In January 2010, the FASB issued guidance to amend the disclosure requirements related to recurring and nonrecurring fair value measurements. The
guidance requires new disclosures on the transfers of assets and liabilities between Level 1 (quoted prices in active markets for identical assets or liabilities) and Level 2 (significant other observable inputs) of the fair value measurement
hierarchy, including the reasons and the timing of the transfers. Additionally, the guidance requires a roll-forward of activities on purchases, sales, issuance, and settlements of the assets and liabilities measured using significant unobservable
inputs (Level 3 fair value measurements). The guidance was effective for the Companys first quarter of 2010. The adoption did not have a material effect on the Companys condensed consolidated financial statements.

3. Employee-Related Charges, Asset Impairments and Other

Restructurings

For the three months
ended June 26, 2010, Celera did not record any charges for employee-related charges, asset impairments and other.

For the six months
ended June 26, 2010, Celera recorded a net charge of $0.2 million in employee-related charges, asset impairments and other in the Condensed Consolidated Statements of Operations. This included a charge of $0.4 million for additional lease
expenses related to a facility previously used by Paracel, Inc. (Paracel), a business Celera acquired in 2000 and closed in 2005. The charge was recorded in Celeras Corporate segment. This charge was a revision to an accrual previously
established in 2005. Through June 26, 2010, Celera made cash payments of $6.4 million related to the excess lease space charge. The remaining cash expenditures related to this charge of $0.7 million are expected to be paid through June
2011.

Also for the six months ended June 26, 2010, Celera recorded the reversal of a previously established accrual of $0.2 million in
employee-related charges, asset impairments and other in the Condensed Consolidated Statements of Operations. The reversal related to severance and related costs associated with the Companys 2009 restructuring programs, which are further
described below.



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Celera Corporation

Notes to Unaudited Condensed Consolidated Financial Statements (Continued)



During the third quarter of 2009, Celera committed to a restructuring program which resulted in a
workforce reduction of approximately 90 positions. Total costs of $3.2 million were recorded in connection with the program. Severance and related 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 Consolidated Statements of Operations for the year ended December 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. Remaining cash expenditures of $0.1 million for the excess
lease space charge are expected to be paid through April 2012. Remaining cash expenditures of $0.3 million for severance and related costs are expected to be paid through September 2010.

During the first quarter of 2009, Celera committed to a plan to close its Rockville, Maryland facility. For the six months ended June 27, 2009, the
Company recorded a net charge of $0.6 million in its Corporate segment for severance and related costs associated with this closure. This included the reversal of a previous charge of $0.1 million, recorded in the three months ended June 27,
2009, for certain severance-related benefits, associated with employees terminated in our February 2008 restructuring action. All cash expenditures for severance and related costs were paid as of June 26, 2010.

4. Legal and Insurance Settlements

Legal Settlement

In January 2010, BHL
filed a lawsuit against Health Diagnostic Laboratory, Inc. (HDL), Blue Wave Healthcare Consultants, Inc. (Blue Wave) and seven former employees of BHL, which included claims related to the misappropriation of trade secrets and tortious interference
with BHLs client relationships. On April 22, 2010, the Company announced that BHL had settled the litigation. During the three months ended June 26, 2010, the Company received a payment of $2.3 million related to the settlement.
Remaining cash payments of $4.7 million are expected to be made through 2011. The settlement agreement also provides for HDL to pay BHL an additional amount in 2011 based on samples HDL receives during 2010 from an agreed upon set of healthcare
providers. Refer to Note 13 for further information.

Insurance Settlement

In April 2010, the Company received a cash settlement of $0.5 million related to an insurance claim filed in 2009.

5. Net Loss per Share

Basic and diluted
net loss per share has been computed for the three and six months ended June 26, 2010 and June 27, 2009 using the weighted average number of common shares outstanding for each period.

Restricted stock unit awards and stock options to acquire 6.3 million and 5.3 million shares of common stock at June 26, 2010 and at
June 27, 2009, respectively, have been excluded from the computations of diluted net loss per share because their effect would have been anti-dilutive.



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##### Table of Contents

Celera Corporation

Notes to Unaudited Condensed Consolidated Financial Statements (Continued)



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. Included in short-term investments at June 26, 2010 was an unsettled short-term investment purchase of $4.2 million, which has subsequently been settled.
The fair value of short-term investments and unrealized gains and losses at June 26, 2010 and December 26, 2009 were as follows:



|                                      |  |                  |       |                 |   |                  |  |   |           |   |  |   |      
|------------------------------------- |  | ---------------- | ----- | --------------- | - | ---------------- |  | - | --------- | - |  | - | -----
|                                      |  | At June 26, 2010
|(Dollar amounts in millions)          |  | AmortizedCost    |       | UnrealizedGains |   | UnrealizedLosses |  |   | FairValue
|U.S. Treasury securities              |  | $                | 55.9  |                 | $ | 0.8              |  | $ |          |   |  | $ | 56.7 
|U.S. government agency securities(a)  |  |                  | 79.6  |                 |   | 0.4              |  |   |          |   |  |   | 80.0 
|Non-U.S. government agency securities |  |                  | 33.5  |                 |   | 0.2              |  |   |          |   |  |   | 33.7 
|Corporate bonds                       |  |                  | 86.8  |                 |   | 0.7              |  |   | (0.2      | ) |  |   | 87.3 
|Asset-backed securities               |  |                  | 14.6  |                 |   | 0.1              |  |   |          |   |  |   | 14.7 
|                                      |  |                  |       |                 |   |                  |  |   |           |   |  |   |      
|Total short-term investments          |  | $                | 270.4 |                 | $ | 2.2              |  | $ | (0.2      | ) |  | $ | 272.4
|                                      |  |                  |       |                 |   |                  |  |   |           |   |  |   |      



|                                      |  |                      |       |                 |   |                  |  |   |           |   |  |   |      
|------------------------------------- |  | -------------------- | ----- | --------------- | - | ---------------- |  | - | --------- | - |  | - | -----
|                                      |  | At December 26, 2009
|(Dollar amounts in millions)          |  | AmortizedCost        |       | UnrealizedGains |   | UnrealizedLosses |  |   | FairValue
|U.S. Treasury securities              |  | $                    | 43.4  |                 | $ | 0.3              |  | $ |          |   |  | $ | 43.7 
|U.S. government agency securities(a)  |  |                      | 67.9  |                 |   | 0.6              |  |   | (0.1      | ) |  |   | 68.4 
|Non-U.S. government agency securities |  |                      | 33.0  |                 |   | 0.1              |  |   |          |   |  |   | 33.1 
|Corporate bonds                       |  |                      | 110.1 |                 |   | 0.9              |  |   | (0.2      | ) |  |   | 110.8
|Asset-backed securities               |  |                      | 14.0  |                 |   | 0.2              |  |   |          |   |  |   | 14.2 
|                                      |  |                      |       |                 |   |                  |  |   |           |   |  |   |      
|Total short-term investments          |  | $                    | 268.4 |                 | $ | 2.1              |  | $ | (0.3      | ) |  | $ | 270.2
|                                      |  |                      |       |                 |   |                  |  |   |           |   |  |   |      



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

Realized gains and losses associated with short-term investments for the three and six months ended June 26, 2010 and June 27, 2009 were as
follows:



|                               |  |                    |      |   |                  |   |      |              |  |   |              |   |  |   |      |  
|------------------------------ |  | ------------------ | ---- | - | ---------------- | - | ---- | ------------ |  | - | ------------ | - |  | - | ---- | -
|                               |  | Three Months Ended |      |   | Six Months Ended |  
|(Dollar amounts in millions)   |  | June 26,2010       |      |   | June 27,2009     |   |      | June 26,2010 |  |   | June 27,2009 |  
|Realized gains on investments  |  | $                  | 0.1  |   |                  | $ | 0.1  |              |  | $ | 0.1          |   |  | $ | 0.1  |  
|Realized losses on investments |  |                    | (0.1 | ) |                  |   | (0.1 | )            |  |   | (0.1         | ) |  |   | (0.1 | )

The following tables show the fair value
and the gross unrealized losses for investments that were in an unrealized loss position at June 26, 2010 and December 26, 2009 aggregated by asset class and by the length of time that the individual securities have been in a continuous
loss position.



|                             |  |                     |      |                |                      |      |            |       |                |     |  |            |      |                |  |   |      |  |   |      |  
|---------------------------- |  | ------------------- | ---- | -------------- | -------------------- | ---- | ---------- | ----- | -------------- | --- |  | ---------- | ---- | -------------- |  | - | ---- |  | - | ---- | -
|                             |  | At June 26, 2010    |     
|                             |  | Less Than 12 Months |      |                | 12 Months or Greater |      |            | Total |               
|(Dollar amounts in millions) |  | Fair Value          |      | UnrealizedLoss |                      |      | Fair Value |       | UnrealizedLoss |     |  | Fair Value |      | UnrealizedLoss | 
|Corporate bonds              |  | $                   | 34.0 |                | $                    | (0.1 | )          |       | $              | 6.4 |  | $          | (0.1 | )              |  | $ | 40.4 |  | $ | (0.2 | )
|                             |  |                     |      |                |                      |      |            |       |                |     |  |            |      |                |  |   |      |  |   |      |  



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Celera Corporation

Notes to Unaudited Condensed Consolidated Financial Statements (Continued)



|                                  |  |                      |      |                |                      |      |            |       |                |      |  |            |      |                |  |   |      |  |   |      |  
|--------------------------------- |  | -------------------- | ---- | -------------- | -------------------- | ---- | ---------- | ----- | -------------- | ---- |  | ---------- | ---- | -------------- |  | - | ---- |  | - | ---- | -
|                                  |  | At December 26, 2009 |     
|                                  |  | Less Than 12 Months  |      |                | 12 Months or Greater |      |            | Total |               
|(Dollar amounts in millions)      |  | Fair Value           |      | UnrealizedLoss |                      |      | Fair Value |       | UnrealizedLoss |      |  | Fair Value |      | UnrealizedLoss | 
|U.S. government agency securities |  | $                    | 24.9 |                | $                    | (0.1 | )          |       | $              |     |  | $          |     |                |  | $ | 24.9 |  | $ | (0.1 | )
|Corporate bonds                   |  |                      | 6.2  |                |                      |     |            |       |                | 28.4 |  |            | (0.2 | )              |  |   | 34.6 |  |   | (0.2 | )
|                                  |  |                      |      |                |                      |      |            |       |                |      |  |            |      |                |  |   |      |  |   |      |  
|Total                             |  | $                    | 31.1 |                | $                    | (0.1 | )          |       | $              | 28.4 |  | $          | (0.2 | )              |  | $ | 59.5 |  | $ | (0.3 | )
|                                  |  |                      |      |                |                      |      |            |       |                |      |  |            |      |                |  |   |      |  |   |      |  

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 June 26, 2010 that was
considered to be other-than-temporary.

Total unrealized losses of $0.2 million in the investment portfolio at June 26, 2010 were due to
market movements and fluctuations in interest rates and have been recorded in accumulated other comprehensive income 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 June 26, 2010. 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.

The following table summarizes the contractual maturities of
available-for-sale securities at June 26, 2010:



|                             |  |                |      
|---------------------------- |  | -------------- | -----
|(Dollar amounts in millions) |  | AtJune 26,2010
|Less than one year           |  | $              | 106.1
|Due in one-to-two years      |  |                | 87.3 
|Due in two-to-five years     |  |                | 79.0 
|                             |  |                |      
|Total                        |  | $              | 272.4
|                             |  |                |      

Securities classified as trading totaling $7.6 million at
June 26, 2010 and $7.4 million at December 26, 2009, 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 deferred compensation and the Companys excess savings plan assets, are recorded in prepaid expenses and other current assets in the Condensed Consolidated Statements of Financial Position. The related deferred compensation and
excess savings plan liabilities are recorded at fair value in other long-term liabilities in the Condensed Consolidated Statements of Financial Position. Included in net loss are unrealized net holding losses of $0.1 million and less than $0.1
million for the three and six months ended June 26, 2010, respectively, and unrealized net holding gains of $0.4 million for the three and six months ended June 27, 2009. These gains and losses are offset by changes in fair value of the
related liability.

Minority equity investments classified as available-for-sale totaling $6.7 million at June 26, 2010 and $3.3 million
at December 26, 2009, 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. Included in comprehensive loss are net unrealized holding gains of $0.5 million and $3.4 million for the three and six months ended June 26, 2010,
respectively, and $0.2 million and $0.5 million for the three and six months ended June 27, 2009, respectively.



11



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Celera Corporation

Notes to Unaudited Condensed Consolidated Financial Statements (Continued)



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. We use
the market approach to value our securities, utilizing market inputs such as reported trades, benchmark yields, issuer spreads, and broker/dealer quotes.

The following tables set forth the Companys financial assets that were accounted for at fair value at June 26, 2010 and December 26,
2009:



|                                                     |  |       |       |                                       |   |         |  |         |       |  |   |  
|---------------------------------------------------- |  | ----- | ----- | ------------------------------------- | - | ------- |  | ------- | ----- |  | - | -
|                                                     |  |       |       | Fair Value at June 26, 2010 Using    
|(Dollar amounts in millions)                         |  | Total |       | Level 1                               |   | Level 2 |  | Level 3
|U.S. Treasury securities                             |  | $     | 56.7  |                                       | $ | 56.7    |  | $       |      |  | $ | 
|U.S. government agency securities(a)                 |  |       | 80.0  |                                       |   |        |  |         | 80.0  |  |   | 
|Non-U.S. government agency securities                |  |       | 33.7  |                                       |   |        |  |         | 33.7  |  |   | 
|Corporate bonds                                      |  |       | 87.3  |                                       |   |        |  |         | 87.3  |  |   | 
|Asset-backed securities                              |  |       | 14.7  |                                       |   |        |  |         | 14.7  |  |   | 
|                                                     |  |       |       |                                       |   |         |  |         |       |  |   |  
|Short-term investments                               |  |       | 272.4 |                                       |   | 56.7    |  |         | 215.7 |  |   | 
|Cash equivalents                                     |  |       | 39.0  |                                       |   | 39.0    |  |         |      |  |   | 
|Publicly traded common stock                         |  |       | 6.7   |                                       |   | 6.7     |  |         |      |  |   | 
|Deferred compensation and excess savings plan assets |  |       | 7.6   |                                       |   | 7.6     |  |         |      |  |   | 
|                                                     |  |       |       |                                       |   |         |  |         |       |  |   |  
|Total assets measured at fair value                  |  | $     | 325.7 |                                       | $ | 110.0   |  | $       | 215.7 |  | $ | 
|                                                     |  |       |       |                                       |   |         |  |         |       |  |   |  
|                                                     |  |      
|                                                     |  |       |       | Fair Value at December 26, 2009 Using
|(Dollar amounts in millions)                         |  | Total |       | Level 1                               |   | Level 2 |  | Level 3
|U.S. Treasury securities                             |  | $     | 43.7  |                                       | $ | 43.7    |  | $       |      |  | $ | 
|U.S. government agency securities(a)                 |  |       | 68.4  |                                       |   |        |  |         | 68.4  |  |   | 
|Non-U.S. government agency securities                |  |       | 33.1  |                                       |   |        |  |         | 33.1  |  |   | 
|Corporate bonds                                      |  |       | 110.8 |                                       |   |        |  |         | 110.8 |  |   | 
|Asset-backed securities                              |  |       | 14.2  |                                       |   |        |  |         | 14.2  |  |   | 
|                                                     |  |       |       |                                       |   |         |  |         |       |  |   |  
|Short-term investments                               |  |       | 270.2 |                                       |   | 43.7    |  |         | 226.5 |  |   | 
|Cash equivalents                                     |  |       | 48.8  |                                       |   | 44.0    |  |         | 4.8   |  |   | 
|Publicly traded common stock                         |  |       | 3.3   |                                       |   | 3.3     |  |         |      |  |   | 
|Deferred compensation and excess savings plan assets |  |       | 7.4   |                                       |   | 7.4     |  |         |      |  |   | 
|                                                     |  |       |       |                                       |   |         |  |         |       |  |   |  
|Total assets measured at fair value                  |  | $     | 329.7 |                                       | $ | 98.4    |  | $       | 231.3 |  | $ | 
|                                                     |  |       |       |                                       |   |         |  |         |       |  |   |  



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



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Celera Corporation

Notes to Unaudited Condensed Consolidated Financial Statements (Continued)



Cash equivalents 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 $7.6 million at June 26, 2010, have been classified as trading and have been recorded at fair value with realized gains and losses included in net loss.

8. Inventories

Net inventories included
the following components at June 26, 2010 and December 26, 2009:



|                             |  |                |     |                    |   |    
|---------------------------- |  | -------------- | --- | ------------------ | - | ---
|(Dollar amounts in millions) |  | AtJune 26,2010 |     | AtDecember 26,2009
|Raw materials and supplies   |  | $              | 2.2 |                    | $ | 1.9
|Work-in-process              |  |                | 1.7 |                    |   | 1.3
|Finished products            |  |                | 4.1 |                    |   | 3.5
|                             |  |                |     |                    |   |    
|Inventories, net             |  | $              | 8.0 |                    | $ | 6.7
|                             |  |                |     |                    |   |    

9. Goodwill and Intangible Assets

The gross carrying amount of goodwill in each of the Companys reporting units at June 26, 2010 was as follows:



|                             |  |                |      
|---------------------------- |  | -------------- | -----
|(Dollar amounts in millions) |  | AtJune 26,2010
|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 26, 2009.

Changes in the gross carrying amount and accumulated amortization of intangible assets other than goodwill at
June 26, 2010 were as follows:



|                                  |  |                       |       |           |   |                    |  |   |      
|--------------------------------- |  | --------------------- | ----- | --------- | - | ------------------ |  | - | -----
|                                  |  | Gross Carrying Amount
|(Dollar amounts in millions)      |  | AtJune 26,2010        |       | Additions |   | AtDecember 26,2009
|Amortized intangible assets:      |  |                       |       |           |   |                    |  |   |      
|Customer relationships            |  | $                     | 85.2  |           | $ |                   |  | $ | 85.2 
|Acquired technology               |  |                       | 17.6  |           |   |                   |  |   | 17.6 
|Patents and licenses              |  |                       | 13.7  |           |   | 0.3                |  |   | 13.4 
|Other                             |  |                       | 0.9   |           |   |                   |  |   | 0.9  
|                                  |  |                       |       |           |   |                    |  |   |      
|Total amortized intangible assets |  |                       | 117.4 |           |   | 0.3                |  |   | 117.1
|Unamortized intangible assets:    |  |                       |       |           |   |                    |  |   |      
|Trade names                       |  |                       | 7.8   |           |   |                   |  |   | 7.8  
|                                  |  |                       |       |           |   |                    |  |   |      
|Total                             |  | $                     | 125.2 |           | $ | 0.3                |  | $ | 124.9
|                                  |  |                       |       |           |   |                    |  |   |      



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Celera Corporation

Notes to Unaudited Condensed Consolidated Financial Statements (Continued)



|                             |  |                     |  |                          |      |           |   |                    |  |   |     
|---------------------------- |  | ------------------- |  | ------------------------ | ---- | --------- | - | ------------------ |  | - | ----
|                             |  |                     |  | Accumulated Amortization
|(Dollar amounts in millions) |  | WeightedAverageLife |  | AtJune 26,2010           |      | Additions |   | AtDecember 26,2009
|Amortized intangible assets: |  |                     |  |                          |      |           |   |                    |  |   |     
|Customer relationships       |  | 13                  |  | $                        | 21.2 |           | $ | 4.0                |  | $ | 17.2
|Acquired technology          |  | 8                   |  |                          | 5.8  |           |   | 1.0                |  |   | 4.8 
|Patents and licenses         |  | 15                  |  |                          | 1.4  |           |   | 0.4                |  |   | 1.0 
|Other                        |  | 5                   |  |                          | 0.5  |           |   | 0.1                |  |   | 0.4 
|                             |  |                     |  |                          |      |           |   |                    |  |   |     
|Total                        |  |                     |  | $                        | 28.9 |           | $ | 5.5                |  | $ | 23.4
|                             |  |                     |  |                          |      |           |   |                    |  |   |     

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 its annual impairment analysis for indefinite lived intangible assets during the fourth quarter of each year, or more frequently
if a significant change in circumstances occurs indicating that an asset may be impaired.

Aggregate intangible asset amortization expense was
$5.5 million for the six months ended June 26, 2010, of which $5.1 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.

10. 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) |  | AtJune 26,2010 |      | AtDecember 26,2009
|Other long-term assets:      |  |                |      |                    |   |     
|Receivable from
Abbott(a)    |  | $              | 26.2 |                    | $ | 25.7
|Minority equity investments  |  |                | 6.7  |                    |   | 3.3 
|Other                        |  |                | 0.3  |                    |   | 0.4 
|                             |  |                |      |                    |   |     
|Other long-term assets       |  | $              | 33.2 |                    | $ | 29.4
|                             |  |                |      |                    |   |     
|Other long-term liabilities: |  |                |      |                    |   |     
|Deferred compensation        |  | $              | 7.6  |                    | $ | 7.4 
|Deferred tax liability       |  |                | 3.9  |                    |   | 3.8 
|Other                        |  |                | 2.4  |                    |   | 2.4 
|                             |  |                |      |                    |   |     
|Other long-term liabilities  |  | $              | 13.9 |                    | $ | 13.6
|                             |  |                |      |                    |   |     



|(a) | Following the termination of the Abbott strategic alliance effective October 1, 2008, the Companys total net investment in the alliance was converted to a
long-term receivable from Abbott with a then present value of $24.8 million. The receivable from Abbott at June 26, 2010 includes $1.4 million accretion of discount.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

11. 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.



14



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Celera Corporation

Notes to Unaudited Condensed Consolidated Financial Statements (Continued)



For the three and six months ended June 26, 2010, 11,000 and 595,000 restricted stock units and
185,000 and 1,124,000 options were granted, respectively, 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 MonthsEndedJune 26, 2010 |      |   | Six MonthsEndedJune 26, 2010 |  
|Expected option term in years                  |  |                                | 5    |   |                              |   | 5    |  
|Volatility                                     |  |                                | 51   | % |                              |   | 51   | %
|Risk-free interest rate                        |  |                                | 2.1  | % |                              |   | 2.3  | %
|Expected dividends                             |  |                                | 0.0  | % |                              |   | 0.0  | %
|Weighted average fair value per option granted |  | $                              | 3.19 |   |                              | $ | 3.10 |  

Share-based compensation expense for
the three months ended June 26, 2010 and June 27, 2009 was $1.3 million and $0.5 million, respectively. Share-based compensation expense for the six months ended June 26, 2010 and June 27, 2009 was $2.5 million and
$1.5 million, respectively.

12. Income Taxes

Provision for income taxes of less than $0.1 million was recorded for the three months ended June 26, 2010.

Provision for income taxes of $0.2 million was recorded for the six months ended June 26, 2010 primarily due to an increase in the deferred tax
liability associated with the acquisition of Atria in 2007. Benefit for income taxes of $5.3 million and $6.3 million was recorded for the three and six months ended June 27, 2009, respectively. The benefit was primarily the result of a
reduction in a deferred tax liability associated with the trade names that were impaired for the three months ended June 27, 2009, partially offset by an increase in the valuation allowance for state 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.

13.
Commitments and Contingencies

Indemnifications

In the normal course of business, Celera enters into 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.

Legal Proceedings

On
July 2, 2010 and July 9, 2010, two stockholder derivative actions captioned Kahn v. Ordoñezand Greenberg v. Ordoñez, respectively, were filed in the United States District Court for the Northern District of
California alleging that certain of Celeras directors and certain of its current and former officers breached their fiduciary duties, wasted corporate assets, grossly mismanaged the company and abused their control, and were unjustly
enriched. Celera is only a nominal defendant in the derivative actions and no damages are sought from Celera in them.



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Celera Corporation

Notes to Unaudited Condensed Consolidated Financial Statements (Continued)



On June 14, 2010, a purported class action captioned Washtenaw County Employees Retirement
System v. Celera Corporationwas filed in the United States District Court for the Northern District of California alleging that from April 24, 2008 through July 22, 2009, Celera and certain of its directors and current and former
officers made false and misleading statements regarding the Companys business and financial results. The action seeks unspecified damages on behalf of an alleged class of purchasers of the Companys stock during this period, as well
as an award to plaintiff of their costs and attorneys fees. Celera believes that the allegations are without merit and intends to vigorously defend the action.

On January 14, 2010, BHL filed a lawsuit in the United States District Court for the Eastern District of Virginia against HDL, Blue Wave and seven
former employees of BHL. In the litigation, BHL sought injunctive relief and damages for contractual, tort and statutory claims against the defendants, including claims for misappropriation of trade secrets and tortious interference with BHLs
client relationships. On April 22, 2010, the Company announced that BHL had settled the litigation. The settlement agreement provides for the payment by HDL to BHL of an aggregate amount of approximately $7.0 million to be made in a series of
payments in 2010 and 2011, with approximately $3.8 million to be paid in 2010 and the balance in 2011. The settlement agreement also provides for HDL to pay BHL an additional amount in 2011 based on samples HDL receives during 2010 from an agreed
upon set of healthcare providers.

The settlement agreement contains prohibitions, effective until an agreed upon date during the first
quarter of 2011, on HDL, Blue Wave and the individuals named in the litigation from performing lab testing services for healthcare providers that were BHL customers during the latter half of 2009. These restrictions do not apply to the agreed upon
set of healthcare providers referenced in the paragraph above, each of whom used HDLs lab testing services in the first two months of 2010, regardless of whether these providers were formerly served by BHL. HDL, Blue Wave and the individuals
named in the litigation are also prohibited from soliciting or hiring BHL employees for a defined period, subject to certain agreed upon exceptions.

On March 16, 2010, the parties to a class action lawsuit brought on behalf of purchasers of PE Corporation Celera Genomics Group tracking stock in a
follow-on public offering conducted in February 2000 entered into a Stipulation and Agreement of Settlement (Settlement Agreement). The Settlement Agreement provides for a settlement in the aggregate amount of $11.0 million, which amount will
be funded entirely by Life Technologies Corporations (as successor to PE Corporation) insurance carrier. On July 15, 2010, a fairness hearing was held and the settlement was approved by the U.S. District Court for the District of
Connecticut. Under the terms of our separation agreement with Life Technologies, we agreed to indemnify Life Technologies for liabilities resulting from the class action lawsuit described above to the extent not covered by Life Technologies
insurance.

At December 26, 2009, Cornell Research Foundation (CRF) and Life Technologies were parties to an arbitration proceeding as a
result of CRFs allegations of breach of an exclusive license agreement by Life Technologies. CRF alleged, among other things, that past royalties were owed on certain Celera products, and that Life Technologies granted an unauthorized
sublicense to a third party. The parties to the arbitration, and Celera, entered into a definitive settlement agreement regarding this matter in February 2010. As part of this settlement, Celera agreed to pay CRF an undisclosed amount, which
was fully reserved for at December 26, 2009. In addition, Celera entered into a new patent sublicense agreement with Life Technologies.



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Celera Corporation

Notes to Unaudited Condensed Consolidated Financial Statements (Continued)



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 (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.

Tax
Matters Agreement

The tax matters agreement with Life Technologies governs 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 Life Technologies generally will be responsible for the payment of all income and non-income taxes attributable to Celeras operations pre-split-off, with the exception of BHL, 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, 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 Life Technologies, to the extent these credits are not first utilized by 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
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 Life Technologies is responsible. Under the tax matters agreement Celera will also be
required to indemnify Life Technologies for a portion of Life Technologies tax cost resulting from 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 Life Technologies ability to engage in certain actions following Celeras separation from Life Technologies and sets forth the
respective obligations among Celera and Life Technologies with respect to the filing of tax returns, the administration of tax contests, assistance and cooperation and other matters.

The Company believes that Life Technologies has materially breached the tax matters agreement in connection with the filing of its consolidated federal
tax return for the period ended June 27, 2008.

Other Matters

Lab Services revenue in the second quarter does not include approximately $1.9 million for additional testing performed on samples previously received and
processed by BHL. The Company is reviewing the orders for this additional testing to determine whether they support payor requirements for amounts billed to, and reimbursement received from, federal health care programs and others. As part
of this review, the Company will also review similar orders in earlier periods, which totaled approximately $0.1 million in the first quarter of 2010, approximately $0.6 million in 2009 and approximately $1.4 million in 2008. This review has
recently commenced and the Company is unable at this time to determine what effect, if any, the outcome of this matter will have on its results of operations.



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Celera Corporation

Notes to Unaudited Condensed Consolidated Financial Statements (Continued)



14. Comprehensive Loss

The components of comprehensive loss for the three and six months ended June 26, 2010 and June 27, 2009, net of any related tax effects, are as
follows:



|                                               |  |                    |     |                  |   |              |  |              |      |  |   |     
|---------------------------------------------- |  | ------------------ | --- | ---------------- | - | ------------ |  | ------------ | ---- |  | - | ----
|                                               |  | Three Months Ended |     | Six Months Ended
|(Dollar amounts in millions)                   |  | June 26,2010       |     | June 27,2009     |   | June 26,2010 |  | June 27,2009
|Net loss                                       |  | $                  | 6.1 |                  | $ | 31.7         |  | $            | 18.6 |  | $ | 33.1
|Other comprehensive income:                    |  |                    |     |                  |   |              |  |              |      |  |   |     
|Unrealized gain on minority equity investments |  |                    | 0.5 |                  |   | 0.2          |  |              | 3.4  |  |   | 0.5 
|Unrealized gain on short-term investments      |  |                    | 0.2 |                  |   | 5.5          |  |              | 0.2  |  |   | 6.8 
|                                               |  |                    |     |                  |   |              |  |              |      |  |   |     
|Comprehensive loss                             |  | $                  | 5.4 |                  | $ | 26.0         |  | $            | 15.0 |  | $ | 25.8
|                                               |  |                    |     |                  |   |              |  |              |      |  |   |     

15. 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 physicians 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 from 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 benefit and provision for income taxes and the amortization and impairment of purchased intangible assets.

Costs and
expenses for the Lab Services and Products segments 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.

Assets, including purchased intangible assets, are allocated to their respective segments, except for cash, cash equivalents and short-term investments
which are allocated to the Corporate segment. All amortization of purchased intangible assets, $2.5 million and $2.6 million for the three months ended June 26, 2010 and June 27, 2009, respectively, and $5.1 million for both the six months
ended June 26, 2010 and June 27, 2009, is allocated to the Corporate segment.

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



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Celera Corporation

Notes to Unaudited Condensed Consolidated Financial Statements (Continued)



The following tables provides information concerning the segments for the three and six months ended
June 26, 2010 and June 27, 2009:



|                                  |  |              |       |   |          |   |           |  |   |                            |   |  |       |      |   |  |   |       |  
|--------------------------------- |  | ------------ | ----- | - | -------- | - | --------- |  | - | -------------------------- | - |  | ----- | ---- | - |  | - | ----- | -
|                                  |  |              |       |   |          |   |           |  |   | Elimination ofIntersegment |   |  |       |     
|(Dollar amounts in millions)      |  | Lab Services |       |   | Products |   | Corporate |  |   | Sales                      |   |  | Total |     
|Three months ended June 26, 2010  |  |              |       |   |          |   |           |  |   |                            |   |  |       |      |   |  |   |       |  
|Revenues from external customers  |  | $            | 19.6  |   |          | $ | 10.9      |  | $ | 2.1                        |   |  | $     |     |   |  | $ | 32.6  |  
|Intersegment revenues             |  |              |      |   |          |   | 0.7       |  |   |                           |   |  |       | (0.7 | ) |  |   |      |  
|                                  |  |              |       |   |          |   |           |  |   |                            |   |  |       |      |   |  |   |       |  
|Total net revenues                |  |              | 19.6  |   |          |   | 11.6      |  |   | 2.1                        |   |  |       | (0.7 | ) |  |   | 32.6  |  
|                                  |  |              |       |   |          |   |           |  |   |                            |   |  |       |      |   |  |   |       |  
|Operating (loss) income           |  |              | (0.3  | ) |          |   | 2.7       |  |   | (9.7                       | ) |  |       |     |   |  |   | (7.3  | )
|Interest income, net              |  |              |      |   |          |   |          |  |   | 1.2                        |   |  |       |     |   |  |   | 1.2   |  
|                                  |  |              |       |   |          |   |           |  |   |                            |   |  |       |      |   |  |   |       |  
|(Loss) income before income taxes |  | $            | (0.3  | ) |          | $ | 2.7       |  | $ | (8.5                       | ) |  | $     |     |   |  | $ | (6.1  | )
|                                  |  |              |       |   |          |   |           |  |   |                            |   |  |       |      |   |  |   |       |  
|Total assets                      |  | $            | 189.1 |   |          | $ | 82.9      |  | $ | 353.6                      |   |  | $     |     |   |  | $ | 625.6 |  
|Depreciation and amortization     |  |              | 0.6   |   |          |   | 0.3       |  |   | 3.1                        |   |  |       |     |   |  |   | 4.0   |  
|                                  |  |              |       |   |         
|Three months ended June 27, 2009  |  |              |       |   |          |   |           |  |   |                            |   |  |       |      |   |  |   |       |  
|Revenues from external customers  |  | $            | 25.2  |   |          | $ | 9.7       |  | $ | 6.5                        |   |  | $     |     |   |  | $ | 41.4  |  
|Intersegment revenues             |  |              |      |   |          |   |          |  |   |                           |   |  |       |     |   |  |   |      |  
|                                  |  |              |       |   |          |   |           |  |   |                            |   |  |       |      |   |  |   |       |  
|Total net revenues                |  |              | 25.2  |   |          |   | 9.7       |  |   | 6.5                        |   |  |       |     |   |  |   | 41.4  |  
|                                  |  |              |       |   |          |   |           |  |   |                            |   |  |       |      |   |  |   |       |  
|Operating (loss) income           |  |              | (17.5 | ) |          |   | 0.8       |  |   | (22.0                      | ) |  |       |     |   |  |   | (38.7 | )
|Interest income, net              |  |              |      |   |          |   |          |  |   | 1.7                        |   |  |       |     |   |  |   | 1.7   |  
|                                  |  |              |       |   |          |   |           |  |   |                            |   |  |       |      |   |  |   |       |  
|(Loss) income before income taxes |  | $            | (17.5 | ) |          | $ | 0.8       |  | $ | (20.3                      | ) |  | $     |     |   |  | $ | (37.0 | )
|                                  |  |              |       |   |          |   |           |  |   |                            |   |  |       |      |   |  |   |       |  
|Total assets                      |  | $            | 207.6 |   |          | $ | 84.7      |  | $ | 345.4                      |   |  | $     |     |   |  | $ | 637.7 |  
|Depreciation and amortization     |  |              | 0.7   |   |          |   | 0.1       |  |   | 3.3                        |   |  |       |     |   |  |   | 4.1   |  
|                                  |  |              |       |   |         
|                                  |  |              |       |   |          |   |           |  |   | Elimination ofIntersegment |   |  |       |     
|(Dollar amounts in millions)      |  | Lab Services |       |   | Products |   | Corporate |  |   | Sales                      |   |  | Total |     
|Six months ended June 26, 2010    |  |              |       |   |          |   |           |  |   |                            |   |  |       |      |   |  |   |       |  
|Revenues from external customers  |  | $            | 37.1  |   |          | $ | 20.8      |  | $ | 6.1                        |   |  | $     |     |   |  | $ | 64.0  |  
|Intersegment revenues             |  |              |      |   |          |   | 1.2       |  |   |                           |   |  |       | (1.2 | ) |  |   |      |  
|                                  |  |              |       |   |          |   |           |  |   |                            |   |  |       |      |   |  |   |       |  
|Total net revenues                |  |              | 37.1  |   |          |   | 22.0      |  |   | 6.1                        |   |  |       | (1.2 | ) |  |   | 64.0  |  
|                                  |  |              |       |   |          |   |           |  |   |                            |   |  |       |      |   |  |   |       |  
|Operating (loss) income           |  |              | (4.9  | ) |          |   | 4.2       |  |   | (20.1                      | ) |  |       |     |   |  |   | (20.8 | )
|Interest income, net              |  |              |      |   |          |   |          |  |   | 2.4                        |   |  |       |     |   |  |   | 2.4   |  
|                                  |  |              |       |   |          |   |           |  |   |                            |   |  |       |      |   |  |   |       |  
|(Loss) income before income taxes |  | $            | (4.9  | ) |          | $ | 4.2       |  | $ | (17.7                      | ) |  | $     |     |   |  | $ | (18.4 | )
|                                  |  |              |       |   |          |   |           |  |   |                            |   |  |       |      |   |  |   |       |  
|Depreciation and amortization     |  | $            | 1.2   |   |          | $ | 0.4       |  | $ | 6.4                        |   |  | $     |     |   |  | $ | 8.0   |  
|                                  |  |              |       |   |         
|Six months ended June 27, 2009    |  |              |       |   |          |   |           |  |   |                            |   |  |       |      |   |  |   |       |  
|Revenues from external customers  |  | $            | 53.7  |   |          | $ | 20.1      |  | $ | 13.3                       |   |  | $     |     |   |  | $ | 87.1  |  
|Intersegment revenues             |  |              |      |   |          |   |          |  |   |                           |   |  |       |     |   |  |   |      |  
|                                  |  |              |       |   |          |   |           |  |   |                            |   |  |       |      |   |  |   |       |  
|Total net revenues                |  |              | 53.7  |   |          |   | 20.1      |  |   | 13.3                       |   |  |       |     |   |  |   | 87.1  |  
|                                  |  |              |       |   |          |   |           |  |   |                            |   |  |       |      |   |  |   |       |  
|Operating (loss) income           |  |              | (16.0 | ) |          |   | 1.8       |  |   | (29.0                      | ) |  |       |     |   |  |   | (43.2 | )
|Interest income, net              |  |              |      |   |          |   |          |  |   | 3.8                        |   |  |       |     |   |  |   | 3.8   |  
|                                  |  |              |       |   |          |   |           |  |   |                            |   |  |       |      |   |  |   |       |  
|(Loss) income before income taxes |  | $            | (16.0 | ) |          | $ | 1.8       |  | $ | (25.2                      | ) |  | $     |     |   |  | $ | (39.4 | )
|                                  |  |              |       |   |          |   |           |  |   |                            |   |  |       |      |   |  |   |       |  
|Depreciation and amortization     |  | $            | 1.3   |   |          | $ | 0.4       |  | $ | 6.5                        |   |  | $     |     |   |  | $ | 8.2   |  



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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
Annual Report on Form 10-K filed with the U.S. Securities and Exchange Commission (SEC) on March 10, 2010. 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. Our common stock began trading on The NASDAQ Stock Market on July 1, 2008,
following our split-off from Applied Biosystems, Inc. (now Life Technologies Corporation).

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 physicians improve cardiovascular disease treatment regimens for their 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 (Abbott), a subsidiary of Abbott Laboratories. Our Corporate
segment includes revenues from royalties, licenses, collaborations and milestones related to the licensing of certain intellectual property and from our former small molecule and proteomic programs.

Basis of Presentation

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.

Business Developments

In July 2010, BHL launched a laboratory developed test for Cytochrome 2C19 (CYP2C19) that identifies carriers of genetic variants that
may impact the effectiveness of the anti-platelet drug, Plavix® (or clopidogrel). Effectiveness of Plavix
depends on its activation by the CYP2C19 gene in the cytochrome P450 system, which converts the drug to its active form. Depending on the presence of certain 2C19genetic variants, a person may be more or less effective at converting
Plavix into its active (or usable) form. The Food and Drug Administration recently placed a warning on the Plavix label to inform clinicians that they should consider an alternative treatment depending on a persons 2C19
genotype. BHLs new test identifies 8 variants known to be associated with Plavix metabolism.



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##### Table of Contents

In June 2010, we extended our research collaboration with Ipsen Pharmaceuticals to use next-generation
sequencing technology to identify genetic biomarkers for pharmacogenomic tests for growth failure patients. This followed the completion of the first phase of this project that was started in November, 2007.

In June 2010, we signed a Declaration of Conformity and applied the CE mark to a real-time PCR (polymerase chain reaction) test for detection of a
variant in the KIF6 gene, allowing the test to be marketed in the European Union and other geographic areas that recognize the CE Mark.

In March 2010, BHL launched a laboratory developed test that detects genetic variants in the chromosome 9p21 region that identifies people at elevated
risk for early myocardial infarction (MI), or heart attack. Published studies involving approximately 35,000 participants have shown that carriers of the risk form of the 9p21 genetic variants have up to 2-fold increased risk for having an early MI.

Results of Operations

Three Months Ended June 26, 2010 Compared to Three Months Ended June 27, 2009

The following discussion and analysis relates to our results of operations for the three months ended June 26, 2010 and June 27, 2009. 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 |      |   |             
|(Dollar amounts in millions)                          |  | June 26,2010       |      |   | June 27,2009 |   |       | % Change
|Net revenues                                          |  | $                  | 32.6 |   |              | $ | 41.4  |          |  | (21%) 
|Cost of sales                                         |  |                    | 11.9 |   |              |   | 13.4  |          |  | (11%) 
|                                                      |  |                    |      |   |              |   |       |          |  |       
|Gross margin                                          |  |                    | 20.7 |   |              |   | 28.0  |          |  | (26%) 
|Selling, general and administrative                   |  |                    | 21.9 |   |              |   | 41.1  |          |  | (47%) 
|Research and development                              |  |                    | 6.4  |   |              |   | 7.4   |          |  | (14%) 
|Amortization of purchased intangible assets           |  |                    | 2.5  |   |              |   | 2.6   |          |  | (4%)  
|Employee-related charges, asset impairments and other |  |                    |     |   |              |   | (0.1  | )        |  | (100%)
|Legal and insurance settlements                       |  |                    | (2.8 | ) |              |   |      |          |  |      
|Impairment of intangible assets                       |  |                    |     |   |              |   | 15.7  |          |  | (100%)
|                                                      |  |                    |      |   |              |   |       |          |  |       
|Operating loss                                        |  |                    | (7.3 | ) |              |   | (38.7 | )        |  | (81%) 
|Interest income, net                                  |  |                    | 1.2  |   |              |   | 1.7   |          |  | (29%) 
|                                                      |  |                    |      |   |              |   |       |          |  |       
|Loss before income taxes                              |  |                    | (6.1 | ) |              |   | (37.0 | )        |  | (84%) 
|Benefit for income taxes                              |  |                    |     |   |              |   | 5.3   |          |  | (100%)
|                                                      |  |                    |      |   |              |   |       |          |  |       
|Net loss                                              |  | $                  | (6.1 | ) |              | $ | (31.7 | )        |  | (81%) 
|                                                      |  |                    |      |   |              |   |       |          |  |       

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



|                             |  |                    |      |              |   |          |  |      
|---------------------------- |  | ------------------ | ---- | ------------ | - | -------- |  | -----
|                             |  | Three Months Ended |      |             
|(Dollar amounts in millions) |  | June 26,2010       |      | June 27,2009 |   | % Change
|Lab Services                 |  | $                  | 19.6 |              | $ | 25.2     |  | (22%)
|Products                     |  |                    | 10.9 |              |   | 9.7      |  | 12%  
|Corporate                    |  |                    | 2.1  |              |   | 6.5      |  | (68%)
|                             |  |                    |      |              |   |          |  |      
|Net revenues                 |  | $                  | 32.6 |              | $ | 41.4     |  | (21%)
|                             |  |                    |      |              |   |          |  |      



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



|                             |  |                    |      |   |              |   |       |   |  |      
|---------------------------- |  | ------------------ | ---- | - | ------------ | - | ----- | - |  | -----
|                             |  | Three Months Ended |      |   | % Change    
|(Dollar amounts in millions) |  | June 26,2010       |      |   | June 27,2009 |   |      
|Lab Services                 |  | $                  | (0.3 | ) |              | $ | (17.5 | ) |  | (98%)
|Products                     |  |                    | 2.7  |   |              |   | 0.8   |   |  | 238% 
|Corporate                    |  |                    | (9.7 | ) |              |   | (22.0 | ) |  | (56%)
|                             |  |                    |      |   |              |   |       |   |  |      
|Operating loss               |  | $                  | (7.3 | ) |              | $ | (38.7 | ) |  | (81%)
|                             |  |                    |      |   |              |   |       |   |  |      

Revenues

Revenues for our Lab Services segment for the three months ended June 26, 2010 decreased $5.6 million compared to the three months ended
June 27, 2009. The decrease was due to lower sample volume, which declined approximately 23% year over year. Sample volumes were adversely impacted by competitive pressures, including the loss of business from accounts serviced by former BHL
sales representatives identified in the now-settled litigation with Health Diagnostic Laboratory, Inc. (HDL) and others (refer to Part II, Item 1, Legal Proceedings), and changes to BHLs business that were implemented in the second half
of 2009. Lab Services revenue for the three months ended June 26, 2010 does not include approximately $1.9 million for additional testing performed on samples previously received and processed by BHL. Refer to Note 13 to our unaudited condensed
consolidated financial statements.

Revenues for our Products segment for the three months ended June 26, 2010
increased by $1.2 million compared to the three months ended June 27, 2009 primarily as a result of higher sales of Celera manufactured products distributed by Abbott and increased royalties from sales of
RealTimeTMassays used on the
m2000TMsystem.

Corporate revenues, which primarily consist of royalties, licenses and milestones, decreased by $4.4 million for the three months ended June 26,
2010 compared to the three months ended June 27, 2009. The decrease was due primarily to lower licensing revenue, including the completion of payments from three licensees, as expected, partially offset by higher royalty revenue received from a
licensee.

Gross Margin

Gross margin for the three months ended June 26, 2010 decreased by $7.3 million compared to the three months ended June 27, 2009 primarily as a
result of the decrease in net revenues. Gross margin as a percentage of net revenue decreased to 63% for the three months ended June 26, 2010 from 68% for the three months ended June 27, 2009, primarily as a result of a reduction in
license revenue in our Corporate segment and lower sample volume in our Lab Services segment, partially offset by changes in product mix and increased royalties in our Products segment.

Operating Expenses

SG&A expenses
decreased by $19.2 million for the three months ended June 26, 2010 compared to the prior year quarter, primarily due to an $18.7 million decrease in allowance for doubtful accounts expense in our Lab Services segment, savings from our 2009
restructuring programs, primarily in our Lab Services segment, and reductions in billing and collection costs in our Lab Services segment, partially offset by costs associated with the expansion of our sales infrastructure in our Lab Services
segment and increased legal costs in our Corporate segment. The allowance for doubtful accounts expense for the three months ended June 27, 2009 was primarily due to a provision for accounts receivable over 360 days outstanding and tests that
had been denied for reimbursement.

Research and development expenses decreased by $1.0 million for the three months ended June 26, 2010
compared to the prior year quarter primarily as a result of the completion of certain discovery research and development projects and lower associated employee-related costs in our Corporate segment.

The amortization of purchased intangible assets for the three months ended June 26, 2010 and June 27, 2009 related to our acquisitions of BHL
and Atria Genetics, Inc. (Atria) in 2007.



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A benefit of $0.1 million was recorded in employee-related charges, asset impairments and other for the
three months ended June 27, 2009 as a result of the reversal of certain severance-related benefits, associated with employees terminated in the February 2008 restructuring program. The benefit was included in our Corporate segment.

We received a cash payment of $2.3 million during the three months ended June 26, 2010 related to the settlement with HDL, which we recorded in our
Lab Services segment. Remaining cash payments of $4.7 million are expected to be made through 2011. The settlement agreement also provides for HDL to pay BHL an additional amount in 2011 based on samples HDL receives during 2010 from an agreed upon
set of healthcare providers. We also received a $0.5 million cash insurance settlement during the three months ended June 26, 2010, which was recorded in our Corporate segment.

A $15.7 million non-cash charge for the impairment of intangible assets relating to the trade names of BHL and Atria was recorded in our Corporate
segment for the three months ended June 27, 2009.

Operating Income (Loss)

Our Lab Services segment had an operating loss of $0.3 million for the three months ended June 26, 2010 compared to $17.5 million for the three
months ended June 27, 2009. This was primarily due to decreased allowance for doubtful accounts and SG&A expenses and the HDL legal settlement, partially offset by a decrease in gross margin, primarily caused by a decrease in revenue. These
changes are further described above.

Our Products segment had operating income of $2.7 million for the three months ended June 26, 2010
compared to $0.8 million for the three months ended June 27, 2009. This change was primarily due to an increase in gross margin, as described above.

Our Corporate segment had an operating loss of $9.7 million for the three months ended June 26, 2010 compared to $22.0 million for the three months
ended June 27, 2009. This change was primarily due to a $15.7 million non-cash impairment charge recorded for the three months ended June 27, 2009 related to our indefinite lived intangible assets. Our Corporate segments operating
loss for the three months ended June 26, 2010 was further impacted by decreased revenue, partially offset by lower research and development expenses and the insurance settlement, as described above.

Interest Income, Net

Interest income,
net for the three months ended June 26, 2010 decreased compared with the prior year quarter primarily due to lower interest rates. Interest income, net for the three months ended June 26, 2010 and the three months ended June 27, 2009
included $0.2 million related to a long-term receivable from Abbott.

Benefit for Income Taxes

We recorded a tax benefit of $5.3 million for the three months ended June 27, 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.



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##### Table of Contents

Six Months Ended June 26, 2010 Compared to Six Months Ended June 27, 2009

The following discussion and analysis relates to our results of operations for the six months ended June 26, 2010 and June 27, 2009. The
selected financial information contained in the table below should be read in conjunction with our unaudited condensed consolidated financial statements and accompanying notes.



|                                                      |  |                  |       |   |              |   |       |   |  |       
|----------------------------------------------------- |  | ---------------- | ----- | - | ------------ | - | ----- | - |  | ------
|                                                      |  | Six Months Ended |       |   | % Change    
|(Dollar amounts in millions)                          |  | June 26,2010     |       |   | June 27,2009 |   |      
|Net revenues                                          |  | $                | 64.0  |   |              | $ | 87.1  |   |  | (27%) 
|Cost of sales                                         |  |                  | 23.7  |   |              |   | 27.4  |   |  | (14%) 
|                                                      |  |                  |       |   |              |   |       |   |  |       
|Gross margin                                          |  |                  | 40.3  |   |              |   | 59.7  |   |  | (32%) 
|Selling, general and administrative                   |  |                  | 45.6  |   |              |   | 66.4  |   |  | (31%) 
|Research and development                              |  |                  | 13.0  |   |              |   | 15.1  |   |  | (14%) 
|Amortization of purchased intangible assets           |  |                  | 5.1   |   |              |   | 5.1   |   |  |      
|Employee-related charges, asset impairments and other |  |                  | 0.2   |   |              |   | 0.6   |   |  | (67%) 
|Legal and insurance settlements                       |  |                  | (2.8  | ) |              |   |      |   |  |      
|Impairment of intangible assets                       |  |                  |      |   |              |   | 15.7  |   |  | (100%)
|                                                      |  |                  |       |   |              |   |       |   |  |       
|Operating loss                                        |  |                  | (20.8 | ) |              |   | (43.2 | ) |  | (52%) 
|Interest income, net                                  |  |                  | 2.4   |   |              |   | 3.8   |   |  | (37%) 
|                                                      |  |                  |       |   |              |   |       |   |  |       
|Loss before income taxes                              |  |                  | (18.4 | ) |              |   | (39.4 | ) |  | (53%) 
|(Provision) benefit for income taxes                  |  |                  | (0.2  | ) |              |   | 6.3   |   |  | (103%)
|                                                      |  |                  |       |   |              |   |       |   |  |       
|Net loss                                              |  | $                | (18.6 | ) |              | $ | (33.1 | ) |  | (44%) 
|                                                      |  |                  |       |   |              |   |       |   |  |       

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



|                             |  |                  |      |              |   |      |  |      
|---------------------------- |  | ---------------- | ---- | ------------ | - | ---- |  | -----
|                             |  | Six Months Ended |      | % Change    
|(Dollar amounts in millions) |  | June 26,2010     |      | June 27,2009 |  
|Lab Services                 |  | $                | 37.1 |              | $ | 53.7 |  | (31%)
|Products                     |  |                  | 20.8 |              |   | 20.1 |  | 3%   
|Corporate                    |  |                  | 6.1  |              |   | 13.3 |  | (54%)
|                             |  |                  |      |              |   |      |  |      
|Net revenues                 |  | $                | 64.0 |              | $ | 87.1 |  | (27%)
|                             |  |                  |      |              |   |      |  |      

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



|                             |  |                  |       |   |              |   |       |   |  |      
|---------------------------- |  | ---------------- | ----- | - | ------------ | - | ----- | - |  | -----
|                             |  | Six Months Ended |       |   | % Change    
|(Dollar amounts in millions) |  | June 26,2010     |       |   | June 27,2009 |   |      
|Lab Services                 |  | $                | (4.9  | ) |              | $ | (16.0 | ) |  | (69%)
|Products                     |  |                  | 4.2   |   |              |   | 1.8   |   |  | 133% 
|Corporate                    |  |                  | (20.1 | ) |              |   | (29.0 | ) |  | (31%)
|                             |  |                  |       |   |              |   |       |   |  |      
|Operating loss               |  | $                | (20.8 | ) |              | $ | (43.2 | ) |  | (52%)
|                             |  |                  |       |   |              |   |       |   |  |      

Revenues

Revenues for our Lab Services segment for the six months ended June 26, 2010 decreased $16.6 million compared to the six months ended June 27,
2009. The decrease was primarily due to lower sample volume, which declined approximately 24% year over year, and lower reimbursement rates. Sample volumes were adversely impacted by competitive pressures, including the loss of business from
accounts serviced by former BHL sales representatives identified in the now-settled litigation with HDL and changes to BHLs business that were implemented in the second half of 2009. Lab Services revenue for the six months ended June 26, 2010
does not include approximately $1.9 million for additional testing performed on samples previously received and processed by BHL. Refer to Note 13 to our unaudited condensed consolidated financial statements.



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##### Table of Contents

Revenues for our Products segment for the six months ended June 26, 2010 increased
$0.7 million compared to the six months ended June 27, 2009 primarily as a result of increased royalties from sales of
RealTimeTMassays used on the
m2000TMsystem, partially offset by lower sales of
Celera manufactured products distributed by Abbott.

Corporate revenues, which primarily consist of royalties, licenses and milestones,
decreased $7.2 million for the six months ended June 26, 2010 compared to the six months ended June 27, 2009. The decrease was due primarily to lower licensing revenue, including the completion of payments from three licensees, as
expected, partially offset by higher royalty revenue received from a licensee.

Gross Margin

Gross margin for the six months ended June 26, 2010 decreased $19.4 million compared to the six months ended June 27, 2009
primarily as a result of the decrease in net revenues. Gross margin as a percentage of net revenue decreased to 63% for the six months ended June 26, 2010 from 69% for the six months ended June 27, 2009, primarily as a result of lower
sample volume and reimbursement rates for our Lab Services segment, a reduction in license revenue in our Corporate segment, partially offset by changes in product mix and increased royalties in our Products segment.

Operating Expenses

SG&A expenses
decreased by $20.8 million for the six months ended June 26, 2010 compared to the prior year period, primarily due to a $22.0 million decrease in allowance for doubtful accounts expense for our Lab Services segment, savings from our 2009
restructuring programs, primarily in our Lab Services segment, and reductions in billing and collection costs in our Lab Services segment, partially offset by costs associated with the expansion of our sales infrastructure in our Lab Services
segment and increased legal costs in our Corporate segment. The allowance for doubtful accounts expense for the six months ended June 27, 2009 was primarily due to a provision for accounts receivable over 360 days outstanding and tests that had
been denied for reimbursement.

Research and development expenses decreased by $2.1 million for the six months ended June 26, 2010
compared to the prior year period primarily as a result of the completion of certain discovery research and development projects and lower associated employee-related costs in our Corporate and Products segments.

The amortization of purchased intangible assets for the six months ended June 26, 2010 and June 27, 2009 related to our acquisitions of BHL and
Atria in 2007.

For the six months ended June 26, 2010, we recorded a net charge of $0.2 million in employee-related charges, asset
impairments and other. This included a charge of $0.4 million for additional lease expenses related to a facility previously used by Paracel, Inc., a business we acquired in 2000 and closed in 2005. The charge was recorded in our Corporate segment.
Also for the six months ended June 26, 2010, we recorded the reversal of a previously established accrual of $0.2 million in employee-related charges, asset impairments and other. The reversal, which was primarily recorded in our Lab Services
segment, related to severance and related costs associated with our 2009 restructuring activities.

A charge of $0.6 million was recorded in
employee-related charges, asset impairment and other in our Corporate segment for the six months ended June 27, 2009. This charge included severance and related costs associated with the closure of our Rockville, Maryland facility 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 program.



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We received a cash payment of $2.3 million during the six months ended June 26, 2010 related to the
settlement with HDL, which we recorded in our Lab Services segment. Remaining cash payments of $4.7 million are expected to be made through 2011. The settlement agreement also provides for HDL to pay BHL an additional amount in 2011 based on samples
HDL receives during 2010 from an agreed upon set of healthcare providers. We also received a $0.5 million cash insurance settlement during the six months ended June 26, 2010, which was recorded in our Corporate segment.

A $15.7 million non-cash charge for the impairment of intangible assets relating to the trade names of BHL and Atria was recorded in our Corporate
segment for the six months ended June 27, 2009.

Operating Income (Loss)

Our Lab Services segment had an operating loss of $4.9 million for the six months ended June 26, 2010 compared to $16.0 million for the six months
ended June 27, 2009. This change was primarily due to decreased allowance for doubtful accounts and SG&A expenses and the HDL legal settlement, partially offset by a decrease in gross margin, primarily caused by a decrease in revenue. These
changes are further described above.

Our Products segment had operating income of $4.2 million for the six months ended June 26, 2010
compared to $1.8 million for the six months ended June 27, 2009. This change was primarily due to an increase in gross margin, as described above.

Our Corporate segment had an operating loss of $20.1 million for the six months ended June 26, 2010 compared to $29.0 million for the six months
ended June 27, 2009. This change was primarily due to a $15.7 million non-cash impairment charge recorded for the six months ended June 27, 2009 related to our indefinite lived intangible assets. Our Corporate segments operating loss
was further impacted by decreased revenue and increased SG&A expenses, partially offset by lower research and development expenses and the insurance settlement, as described above.

Interest Income, Net

Interest income,
net for the six months ended June 26, 2010 decreased $1.4 million compared with the prior year period primarily due to lower interest rates. Interest income, net for the six months ended June 26, 2010 and the six months ended June 27,
2009 included $0.5 million related to a long-term receivable from Abbott.

(Provision) Benefit for Income Taxes

We recorded a tax provision of $0.2 million for the six months ended June 26, 2010, primarily due to an increase in the deferred tax liability
associated with the acquisition of Atria in 2007.

We recorded a tax benefit of $6.3 million for the six months ended June 27, 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.

Discussion of Financial Resources and Liquidity

We had cash, cash equivalents and short-term investments of $322.8 million at June 26, 2010 and $326.4 million at December 26, 2009. The cash
balance at June 26, 2010 included $4.2 million for an unsettled short-term investment purchase, which has subsequently been settled. 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.



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##### Table of Contents

The following table summarizes the components of our financial resources at June 26, 2010 and
December 26, 2009:



|                                                           |  |                 |       |                     |   |      
|---------------------------------------------------------- |  | --------------- | ----- | ------------------- | - | -----
|(Dollar amounts in millions)                               |  | AtJune 
26,2010 |       | AtDecember 
26,2009
|Cash and cash equivalents                                  |  | $               | 50.4  |                     | $ | 56.2 
|Short-term investments                                     |  |                 | 272.4 |                     |   | 270.2
|                                                           |  |                 |       |                     |   |      
|Total cash and cash equivalents and short-term investments |  | $               | 322.8 |                     | $ | 326.4
|                                                           |  |                 |       |                     |   |      

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. While global market and economic conditions have improved recently, credit conditions continue to be
restrained. 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 decrease of cash, cash equivalents and short-term investments of $3.6 million for the six months ended June 26, 2010 was primarily due
to cash used by operations of $5.2 million, additions to property, plant and equipment of $2.3 million and the purchase of intangible assets of $0.3 million, partially offset by the purchase of short-term investments of $4.2 million that was not
settled at June 26, 2010.

Net cash flows for the six months ended June 26, 2010 and June 27, 2009 were as follows:



|                                                 |  |                  |      |   |              |   |       |  
|------------------------------------------------ |  | ---------------- | ---- | - | ------------ | - | ----- | -
|                                                 |  | Six Months Ended |     
|(Dollar amounts in millions)                     |  | June 26,2010     |      |   | June 27,2009 |  
|Net cash (used) provided by operating activities |  | $                | (3.8 | ) |              | $ | 3.4   |  
|Net cash used by investing activities            |  |                  | (1.8 | ) |              |   | (21.1 | )
|Net cash (used) provided by financing activities |  |                  | (0.2 | ) |              |   | 7.2   |  
|                                                 |  |                  |      |   |              |   |       |  
|Net change in cash and cash equivalents          |  | $                | (5.8 | ) |              | $ | (10.5 | )
|                                                 |  |                  |      |   |              |   |       |  

Operating activities

For the six months ended June 26, 2010, net cash used by operating activities of $3.8 million consisted of income-related cash outflow of $3.5
million and changes in operating assets and liabilities of $0.3 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,
allowance for doubtful accounts, employee-related charges, asset impairments and other, share-based compensation, deferred income taxes, non-cash interest income, loss on disposal of assets and amortization of premium on purchase of investments.

The changes in operating assets and liabilities for the six months ended June 26, 2010 were due to a decrease of $4.5 million in
accounts payable and other liabilities caused primarily by the timing of payments and an increase in inventories of $1.3 million, partially offset by a decrease of $3.8 million in accounts receivable due primarily to collections in all of our
segments and a decrease of $1.8 million in prepaid expenses and other assets caused primarily by a decrease in prepaid insurance and a reduction of non-trade receivables.



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##### Table of Contents

For the six months ended June 27, 2009, net cash provided by operating activities of $3.4 million
consisted of income-related cash inflow of $12.3 million, offset by changes in operating assets and liabilities of $8.9 million.

The changes
in operating assets and liabilities for the six months ended June 27, 2009 were due to an increase of $8.4 million in accounts receivable primarily attributable to our Lab Services segment; and a decrease of $1.9 million in accounts payable and
other liabilities caused primarily by the timing of payments; partially offset by a decrease in prepaid expenses and other assets of $0.8 million and a decrease in net inventories of $0.6 million.

Investing activities

For the six months
ended June 26, 2010, net cash used by investing activities of $1.8 million was primarily due to additions to property, plant and equipment, net of $2.3 million, which included $1.8 million for the purchase of machinery and equipment, $0.4
million for leasehold improvements and $0.1 million for the purchase of software licenses, and the purchase of product related software licenses of $0.3 million, partially offset by the proceeds from the maturity and sale of available-for-sale
investments exceeding purchases of available-for-sale investments by $0.8 million.

The net cash used by investing activities of $21.1 million
for the six months ended June 27, 2009 was primarily caused by purchases of available-for-sale investments exceeding the proceeds from the maturity and sale of available-for-sale investments by $8.2 million, the purchase of technology licenses
for $10.3 million and additions to property, plant and equipment of $2.6 million, which included $1.1 million for leasehold improvements, $1.3 million for the purchase of machinery and equipment and $0.2 million for the purchase of software
licenses.

Financing activities

The net cash used by financing activities of $0.2 million for the six months ended June 26, 2010 related to payments made to satisfy tax obligations
on the vesting of restricted stock. For the six months ended June 27, 2009, the net cash provided by financing activities of $7.2 million related primarily to proceeds from the exercise of stock options, partially offset by taxes withheld and
paid on the vesting of restricted stock.

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 June 26, 2010 and June 27, 2009, 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 Annual Report on Form 10-K for
the year ended December 26, 2009 filed with the SEC on March 10, 2010.

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.



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##### Table of Contents

|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 June 26, 2010, 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 $2.7 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 $0.7 million.

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 4. | CONTROLS AND PROCEDURES
|------- | -----------------------

Disclosure
Controls and Procedures

We are responsible for maintaining disclosure controls and procedures, as defined by the Securities and Exchange
Commission in its 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



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communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure. In designing and
evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and in reaching a
reasonable level of assurance, management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

As of June 26, 2010, the end of the period covered by this report, we carried out an evaluation, under the supervision and with the participation of
our management, including our Chief Executive Officer and our Chief Financial Officer, of the effectiveness of our disclosure controls and procedures. 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 six months ended June 26, 2010, 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. In cases where we are the plaintiff, we believe we have valid claims and intend to pursue our rights. 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 or in our pursuit of claims made by us.

In addition to legal actions to which we are a party, we may be required under our separation agreement with Life Technologies to indemnify Life
Technologies for damages, costs and other liabilities incurred by Life Technologies relating to existing and future lawsuits, arbitrations, investigations, and other legal actions to which Life Technologies is or may become a party, to the extent
related to our business. For more information, see Note 13 to our unaudited condensed consolidated financial statements and the section entitled Risk Factors  Our separation agreement with Life Technologies requires us to indemnify 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.

Health Diagnostic Laboratory, Inc.

On
January 14, 2010, BHL filed a lawsuit in the United States District Court for the Eastern District of Virginia against Health Diagnostic Laboratory, Inc. (HDL), Blue Wave Healthcare Consultants, Inc. (Blue Wave) and seven former employees of
BHL. In the litigation, BHL sought injunctive relief and damages for contractual, tort and statutory claims against the defendants, including claims for misappropriation of trade secrets and tortious interference with BHLs client
relationships. On April 22, 2010, we announced that BHL had settled the litigation. The settlement agreement provides for the payment by HDL to BHL of an aggregate amount of approximately $7.0 million to be made in a series of payments in 2010
and 2011, with approximately $3.8 million to be paid in 2010 and the balance in 2011. The settlement agreement also provides for HDL to pay BHL an additional amount in 2011 based on samples HDL receives during 2010 from an agreed upon set of
healthcare providers.

The settlement agreement contains prohibitions, effective until an agreed upon date during the first quarter of 2011,
on HDL, Blue Wave and the individuals named in the litigation from performing lab testing services for healthcare providers that were BHL customers during the latter half of 2009. These restrictions do not apply to the agreed upon set of healthcare
providers referenced in the paragraph above, each of whom used HDLs lab testing services in the first two months of 2010, regardless of whether these providers were formerly served by BHL. HDL, Blue Wave and the individuals named in the
litigation are also prohibited from soliciting or hiring BHL employees for a defined period, subject to certain agreed upon exceptions.

Securities Litigation

On March 16,
2010, the parties to a class action lawsuit brought on behalf of purchasers of PE Corporation Celera Genomics Group tracking stock in a follow-on public offering conducted in February 2000 entered into a Stipulation and Agreement of Settlement (the
Settlement Agreement). The Settlement Agreement provides for a settlement in the aggregate amount of $11.0 million, which amount will be funded entirely by Life Technologies Corporations (as successor to PE Corporation)
insurance carrier. On July 15, 2010, a fairness hearing was held and the settlement was approved by the U.S. District Court for the District of Connecticut. Under the terms of our separation agreement with Life Technologies, we agreed to
indemnify Life Technologies for liabilities resulting from the class action lawsuit described above to the extent not covered by Life Technologies insurance.



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On June 14, 2010, a purported class action captioned Washtenaw County Employees Retirement
System v. Celera Corporation was filed in the United States District Court for the Northern District of California alleging that from April 24, 2008 through July 22, 2009, Celera and certain of its directors and current and former
officers made false and misleading statements regarding the Companys business and financial results. The action seeks unspecified damages on behalf of an alleged class of purchasers of the Companys stock during this period, as well
as an award to plaintiff of their costs and attorneys fees. Celera believes that the allegations are without merit and intends to vigorously defend the action.

On July 2, 2010 and July 9, 2010, two stockholder derivative actions captioned Kahn v. Ordoñez and Greenberg v.
Ordoñez, respectively, were filed in the United States District Court for the Northern District of California alleging that certain of Celeras directors and certain of its current and former officers breached their fiduciary duties,
wasted corporate assets, grossly mismanaged the company and abused their control, and were unjustly enriched. Celera is only a nominal defendant in the derivative actions and no damages are sought from Celera in them.

Cornell Research Foundation

At
December 26, 2009, Cornell Research Foundation (CRF) and Life Technologies were parties to an arbitration proceeding as a result of CRFs allegations of breach of an exclusive license agreement by Life Technologies. CRF alleged, among
other things, that past royalties were owed on certain Celera products, and that Life Technologies granted an unauthorized sublicense to a third party. The parties to the arbitration, and Celera, entered into a definitive settlement agreement
regarding this matter in February 2010. As part of this settlement, Celera agreed to pay CRF an undisclosed amount, which was fully reserved for at December 26, 2009. In addition, Celera entered into a new patent sublicense agreement with
Life Technologies.

National Institutes of Health

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®TMHIV-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
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|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 Annual Report on Form 10-K for the year ended December 26, 2009 and in Part II, Item 1A of our subsequent Quarterly Report on Form 10-Q.

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 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 payors 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 2011,
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.



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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 and decreased by approximately 1.9% as of January 1, 2010. 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 further 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.

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 and other
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. Blue Cross/Blue Shield sends 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
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In addition, physicians with whom we do business have on occasion been contacted by non-governmental
third-party payors where we are out of network to direct their patients to in-network providers. If these physicians switch their referral patterns to in-network providers, our operating results and financial condition may be harmed.

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® Health Management, LLC 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 policies. In addition, even if a contract is secured, third-party payors may unilaterally decrease reimbursement rates and enact negative
coverage determination policies for BHLs tests. Therefore, joining these networks could reduce BHLs net income and harm our operating results and financial condition.

Our business is affected by macroeconomic conditions, and 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. Negative global market and economic conditions, with tight credit conditions and recession in most major economies, continued through 2009 and into 2010. Slower economic activity, 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 results and financial condition and cause us to record higher allowances for doubtful accounts in the future.

Interest rate changes, illiquid credit market conditions 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.



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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, the Centers for Medicare and Medicaid Services (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.

The clinical laboratory fee schedule sets the maximum
amount payable under Medicare for each specific laboratory test, identified by its 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. 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, such as the rate reduction of approximately 1.9% as of
January 1, 2010, could result in a corresponding reduction in the reimbursement rates we receive from such third-party payors. Any further 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 by healthcare reform that 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. In March 2010, the President signed into law The Patient Protection and Affordable Care Act, as amended by the Health Care and Education Affordability Reconciliation Act
(collectively, the PPACA). The PPACA is one of the most significant health reform measures signed into law in decades. It substantially changes the way health care is financed by both governmental and private insurers, and includes payment reform,
cost control and anti-fraud and abuse provisions. The PPACA includes, among other things, measures that directly impact Medicare payment for clinical laboratory tests, including changes to the annual adjustment factor for the Medicare clinical
laboratory fee schedule and excise taxes on medical devices. Although the PPACA retains the existing 0.5 percent reduction to the inflation update for the clinical laboratory fee schedule for 2010, it establishes a 1.75 annual percentage point
reduction in the inflation update for 2011 through 2015. This adjustment could cause the annual adjustment to the fee schedule to be below zero and harm our revenues. The PPACA also includes an additional productivity adjustment to the fee
schedules annual inflation update that begins in 2011 and continues beyond 2015. This productivity adjustment will vary from year to year. Additionally, the PPACA contains a requirement that a clinical laboratorys referral sources be
enrolled in the Medicare Provider Enrollment, Chain and Ownership System (PECOS). CMS indicated on June 30, 2010 that it would not, for the time being, implement changes to automatically reject claims made by providers that did not have
their PECOS applications approved by July 6, 2010. Implementation is expected in the future however, and our business may be harmed if our referring physicians have not satisfied the enrollment procedures.



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In addition, the PPACA establishes a deductible excise tax on entities that manufacture or import certain
medical devices offered for sale in the United States, beginning in 2013. Further, the PPACA establishes a new Patient-Centered Outcomes Research Institute to oversee, identify priorities in and conduct comparative clinical research. The PPACA also
appropriates funding for comparative effectiveness research, an initiative that has received considerable Federal funding under the American Recovery and Reinvestment Act of 2009. It is unclear how this research information will be used to develop
new or modify current coverage and reimbursement policies. Our business could be adversely impacted if such research does not recognize the value and importance of diagnostic testing. We cannot predict the full impact of the PPACA on our business or
whether changes in the PPACA or other healthcare laws, regulations or policies may be introduced or adopted. Our operating results and financial condition may be harmed by these or future reform measures.

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 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 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
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is widely accepted as an adequate test for assessing and managing risk of cardiovascular disease. Also, other companies, including Atherotech, Inc., LipoScience, Inc., Boston Heart Lab
Corporation and Health Diagnostic Laboratory, Inc. 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.

We do not have contracts with healthcare providers that require them to send samples to BHL. These providers use the lab provider of their choice and may
use multiple labs for their testing services. Any loss of business to our competitors in the lab testing service industry, especially with respect to those healthcare providers that refer a high volume of samples to our lab, harms our operating
results and financial condition.

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

For the six months ended June 26, 2010, our allowance for doubtful accounts charge was $3.2 million.
Any failure to collect receivables, or a 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.

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 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.



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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 been invalidated 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.

Following the split-off from Life Technologies, 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, instruments and technologies.

Life Technologies reagent and
clinical laboratory testing service business in human diagnostics was historically operated exclusively through Celera. As a result, 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, 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 July 1, 2008 split-off date, Life Technologies, subject to specified exceptions, is restricted in its ability to supply any reseller with capillary electrophoresis sequencers for commercialization of human
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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, 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 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 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 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 Life Technologies) acquired as part of an acquisition of a third party by Life Technologies, nor do they prohibit an acquiror
of 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.

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

Prior to the split-off from Life
Technologies, we had access to all intellectual property owned or licensed by Life Technologies for use in the human diagnostics field. Under the separation agreement with 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 Life Technologies and has been retained by Life
Technologies. All intellectual property that has been retained by Life Technologies and that is used in our diagnostic products is being made available to us through a master purchase agreement with Life Technologies. 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 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.

The negotiation of the
split-off agreements between us and Life Technologies were effected through discussions among 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
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 Life Technologies were negotiated through discussions among 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 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.



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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 June 26, 2010, 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 June 26, 2010, we also had
$96.3 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 2009, resulting in a charge of $15.7 million. Our stock price 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, we may determine that our long-lived assets are further impaired. Valuation of our 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 operate profitably as a stand-alone company.

Celera had been a business unit of Life Technologies since we commenced operations until the date of the split-off, July 1, 2008. 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. 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.



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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.

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

We believe that
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 independent healthcare
providers and other clinical laboratories to collect and send to our laboratory for testing most of our clinical laboratory specimens and the information required for proper billing. 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 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 Life Technologies no longer provides us with exclusive access to
these goods and services. These differences may harm our operating results and financial condition.



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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 Life Technologies for taxes.

On
June 18, 2008, 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 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 Life Technologies and Celera. Actions taken by 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 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, 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 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 Life Technologies and us, we would generally be required to indemnify 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 Life Technologies and its subsidiaries, officers and directors are not limited by any maximum amount. If we are
required to indemnify Life Technologies or any other person under the circumstances set forth in the tax matters agreement, we may be subject to substantial liabilities.

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. 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;
| | - |  | ----------------------------------------------------------------



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| |  |  | 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 HIPPA 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;
| | - |  | --------------------------------------------------------------------



| |  |  | changes to laws, regulations and rules as a result of the PPACA; and
| | - |  | --------------------------------------------------------------------



| |  |  | changes to other federal, state and local laws, regulations and rules, 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.

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.



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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. These changes are significant and have
required, and will continue to require, investment and management attention. In addition, since several of the provisions contemplate future adoption of implementing regulations, we cannot at this time determine the full extent to which these
changes will impact our business, or how much it will cost us to comply in total.



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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 later in 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 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 and has announced its intent to modify its regulatory approach with respect to LDTs. The FDA has recently sent letters to a number of
companies that offer direct-to-consumer LDTs for genetic markers asking these companies to explain why they do not need FDA clearance for their products. 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.



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A portion of our workforce has unionized, and our operations may be adversely affected by increased labor
costs, work stoppages or strikes.

On February 16, 2010, our clinical laboratory scientists (21 employees) elected to be represented
by the Office & Professional Employees International Union, Local 29. We are in the process of negotiating with the union for the terms of a collective bargaining agreement. The outcome of the negotiations may not be favorable to us. We may
reach agreements in collective bargaining that increase our operating expenses and harm our operating results as a result of higher wages or benefits expenses. In addition, negotiations could divert management attention and disrupt operations, which
may adversely affect our operating results. If we are unable to negotiate a satisfactory collective bargaining agreement, we could be involved in a labor dispute or strike that could lead to a shutdown in BHLs clinical laboratory and harm our
operating results and financial condition.

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 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, particularly 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.



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The activities of the parties identified in our recently settled litigation with Health Diagnostic
Laboratory have adversely affected and may continue to adversely affect BHLs business.

We recently settled our litigation with
Health Diagnostic Laboratory, Inc., Blue Wave Healthcare Consultants, Inc. and certain former employees of BHL. Among other things, the settlement agreement contains prohibitions, effective until an agreed upon date during the first quarter of
2011, on HDL and the individuals named in the litigation from performing lab testing services for healthcare providers that were BHL customers during the latter half of 2009. These restrictions do not apply to an agreed upon set of healthcare
providers, each of whom used HDLs lab testing services in the first two months of 2010, regardless of whether these providers were formerly served by BHL. HDL, Blue Wave and the individuals named in the litigation are also prohibited from
soliciting or hiring BHL employees for a defined period, subject to certain agreed upon exceptions. Though settled, the activities of the parties identified in the litigation have adversely affected and may continue to adversely affect BHLs
business due to lost business from accounts serviced by the former sales representatives identified in the litigation. Additionally, BHLs business may be adversely impacted when the restrictions contained in the settlement agreement expire.

Our success will depend on our ability to retain our key employees.

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 may be less than that of our competitors. If any of our key personnel leaves, it could harm our operating results and
financial condition. This is particularly true with respect to key employees leaving our employment and joining a competitor.

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 examples, a recent publication stated that the KIF6 gene variant did not associate with coronary artery disease, or CAD, or with nonfatal myocardial infarction in
subjects with CAD in the Ottawa Heart Study, and a presentation at the annual meeting of the American Heart Association in 2009 claimed that KIF6 carriers were not associated with increased risk for major vascular events (MVE) or response to
simvastatin in a preliminary analysis of the Heart Protection Study (HPS). 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 phenotype (such as coronary stenosis in CAD, or non-coronary vascular events in MVE) than was done in our studies; and the



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absence of clinical information on underlying drug use in the patients studied, and statin use in the placebo arm of the HPS. Reports on non-association or 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.

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 physicians fail to provide appropriate codes for desired tests as a result of the new coding set, 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 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 Life Technologies instrumentation,
reagents, and technologies for use in our diagnostic products and services.

Prior to the split-off from Life Technologies, we had access
to 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 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. Life
Technologies is the manufacturer of the instruments used to perform certain of our tests including our ViroSeq®
HIV-1 Genotyping System and HLA products. The instruments supplied by 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 Life Technologies and other parties for access to a next generation capillary electrophoresis sequencing instrument that may



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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 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 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
historical financial information for the years ended June 30, 2008 and 2007 included in our Annual Report on Form 10-K for the year ended December 26, 2009 filed with the SEC on March 10, 2010, 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 Life Technologies. These
allocations may not reflect the costs we incur for similar or incremental services as an independent entity.

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.



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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 sales and marketing strategy for our clinical laboratory testing services, and our new strategy could harm our revenues.

We
believe that growing our clinical laboratory services requires changes to our sales strategy, including our approach to developing local market territories, selling non-blood based genetic testing services to accounts on a more disbursed basis and
using telephone and internet technology to deliver our services. These 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 implement than
we anticipate.

Our rights under the split-off agreements we have with Life Technologies may be less favorable to us than if we had
remained a business segment of Life Technologies and the terms of the master purchase agreement we have with 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 with Life Technologies may be less favorable to us than if we remained part of 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 Life Technologies used in our products and
services and research and development, as well as future Life Technologies materials. The master purchase agreement provides for price increases for materials and components during each year of the agreement after the one year anniversary 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 Life Technologies. In addition, Life Technologies has licensed to us specified intellectual
property rights which we and Life Technologies may 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 Life Technologies. This could result
in us receiving less from these licenses than if we remained part of Life Technologies.

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

Our separation agreement with Life Technologies requires us to indemnify 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 Life Technologies, we have agreed from and after the split-off date to indemnify 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;
| | - |  | ---------------------------



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



| |  |  | certain 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
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | liabilities resulting from the oversight and/or management of the businesses and affairs of Life Technologies or one or both of Celera or 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 Life Technologies insurance. There is no limit on the maximum
amount of monetary damages for which we may be required to indemnify 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., and we could be harmed if Abbott or other distributors fail to perform under or terminate their agreements with us.

We lack our own sales organization to sell our diagnostic products to unaffiliated clinical testing laboratories. Accordingly, we rely
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



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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 are
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 if there is an uncured material breach of the agreement by either party or upon specified insolvency events, among other matters. The amount and timing of resources to be devoted
to sales activities by Abbott 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.

We expect that other distribution and similar agreements we enter into in the future, if any, will have similar terms and
limitations. Furthermore, even if these agreements contain commitments regarding commercialization activities, our distributors may not perform their obligations as expected. If they terminate their agreements or otherwise fail to conduct their
activities in a timely manner, or at all, the commercialization of our diagnostic products may be delayed or prevented. If we take on the responsibility for commercializing our diagnostic products on our own or through a new distributor, we may be
required to devote additional resources to such activities. Any reallocation of additional resources to product commercialization may 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 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 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 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,



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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 budget or 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 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 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,



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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. 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.

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 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 Life Technologies, and we may not be able to secure adequate debt or equity financing on desirable terms. In addition, 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.



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

Our common stock issued in the split-off traded publicly for the first time following the split-off. The market price of our common stock
from July 1, 2008 through June 26, 2010 has been volatile, ranging from a high of $17.56 to a low of $5.03.

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. 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.

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.



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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.

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



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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 6.    |  | Exhibits                                                                                                                                         
|           | 
|EXHIBITNO. |  | DOCUMENT                                                                                                                                         
|           | 
|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



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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:

August 4, 2010/s/  UGO DEBLASIName:

Ugo DeBlasiTitle:

Chief Financial OfficerDate:

August 4, 2010




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