Celera and the Virus Celera and the Virus A review of current prospects of Applera SoCalBSI 2004 Timothy Ng 07/07/04

What is Applera? founded in 1998, recapitalized by PE Inc in 1999 founded in 1998, recapitalized by PE Inc in 1999 Divided into three groups: Celera Genomics (CG), Applied Biosystems (AB) and Celera Diagnostics Divided into three groups: Celera Genomics (CG), Applied Biosystems (AB) and Celera Diagnostics Only CG and AB publicly traded Only CG and AB publicly traded Diagnostics begun as join venture Diagnostics begun as join venture CG develops wetlab materials and machines, e.g. drugs CG develops wetlab materials and machines, e.g. drugs AB develops and markets instrument based hardware, e.g. ABI PRISM sequencers; consumables, software and services AB develops and markets instrument based hardware, e.g. ABI PRISM sequencers; consumables, software and services Diagnostics focuses on developing new and unique diagnostic tools Diagnostics focuses on developing new and unique diagnostic tools

Who controls Applera? Controlled by executive board and board of directors Controlled by executive board and board of directors Tony White, CEO and President Tony White, CEO and President Dennis Winger, CFO Dennis Winger, CFO Kathy Ordonez, President of CG and Diagnostics Kathy Ordonez, President of CG and Diagnostics Michael Hunkapiller, President of AB Michael Hunkapiller, President of AB Divided into several committees: Audit/Finance, Board, Management Resource, Nominating/Corporate Governance, Technology Advisory Committee Divided into several committees: Audit/Finance, Board, Management Resource, Nominating/Corporate Governance, Technology Advisory Committee Note: Technology Advisory Committee seems to perform function of HOT for Applera Note: Technology Advisory Committee seems to perform function of HOT for Applera

Applera Governance

What about Diagnostics? AB and CG fund operating costs of Diagnostics AB and CG fund operating costs of Diagnostics CG is responsible for funding $300 M of initial operating costs of Diagnostics CG is responsible for funding $300 M of initial operating costs of Diagnostics If operating costs > $300 M, CG and AB will equally fund costs If operating costs > $300 M, CG and AB will equally fund costs Profits of Diagnostics distributed in 65:35 ratio to CG and AB respectively Profits of Diagnostics distributed in 65:35 ratio to CG and AB respectively After operating costs are reimbursed, profits will be reimbursed 50:50 After operating costs are reimbursed, profits will be reimbursed 50:50 AB will reimburse CG for all tax benefits generated by Diagnostics AB will reimburse CG for all tax benefits generated by Diagnostics Expect for $200 M of initial loss before equal sharing between CG and AB Expect for $200 M of initial loss before equal sharing between CG and AB

Alliances Bristol-Myers Squibb, which receives information from Applera studies and in turn has given exclusive rights for diagnostic product marketing Bristol-Myers Squibb, which receives information from Applera studies and in turn has given exclusive rights for diagnostic product marketing UCSF’s Comprehensive Cancer Center UCSF’s Comprehensive Cancer Center Merck & Co., Inc. joint venture – cancer prognostic tests Merck & Co., Inc. joint venture – cancer prognostic tests Genomics Collaborative, Inc. identifying sequence patterns in rheumatoid arthritis Genomics Collaborative, Inc. identifying sequence patterns in rheumatoid arthritis Abbott Laboratories -helping to market VIROSeq and assists CG with clinical studies Abbott Laboratories -helping to market VIROSeq and assists CG with clinical studies

Alliances (cont) Aventis, develop and market Cathepsin S inhibitor compounds Aventis, develop and market Cathepsin S inhibitor compounds Merck & Co., Inc., in vivo evidence of the role of Cathepsin K inhibitors in osteoporosis Merck & Co., Inc., in vivo evidence of the role of Cathepsin K inhibitors in osteoporosis Maxim Pharmaceuticals which is using nearly 500 k compounds from the Celera library to test for induced cell apoptosis in cancer cells. Maxim Pharmaceuticals which is using nearly 500 k compounds from the Celera library to test for induced cell apoptosis in cancer cells.

VIROSeq Developed by Diagnostics Developed by Diagnostics Designed to detect mutation in HIV-1 single to multiple samples Designed to detect mutation in HIV-1 single to multiple samples Algorithm includes tests for gene patterns known to cause resistance in 23 anti-retroviral drugs Algorithm includes tests for gene patterns known to cause resistance in 23 anti-retroviral drugs Recently acquired FDA 510(k) approval in February Recently acquired FDA 510(k) approval in February Analyzes 335 first codons of protease and reverse transcriptase (roughly 2/3 of the reverse transcriptase gene) Analyzes 335 first codons of protease and reverse transcriptase (roughly 2/3 of the reverse transcriptase gene) Program creates consensus sequence of multiple samples or continuous assembled sequence which is compared to a reference strain, pNL4-3 Program creates consensus sequence of multiple samples or continuous assembled sequence which is compared to a reference strain, pNL4-3 Design for physician use Design for physician use

VIROSeq Protocol Obtain Blood Sample Isolate HIV Purify HIV RNA cDNA PCR Amp Purify DNA Dye-Label DNA Purify DNA DNA Sequence HIV Genotype Report

Protocol Notes Single primer is used for transcription, due to polymorphism at 5’ end several primers may have to be used Single primer is used for transcription, due to polymorphism at 5’ end several primers may have to be used Software checks for poor quality data, corrects for basecalling errors, checks of base mutations that result in amino acid sequence changes, gene patterns that correlate with drug resistance, discrepancies between consensus and reference sequences, etc. Software checks for poor quality data, corrects for basecalling errors, checks of base mutations that result in amino acid sequence changes, gene patterns that correlate with drug resistance, discrepancies between consensus and reference sequences, etc. Designed specifically to work with ABI PRISM 377 DNA Sequencer and ABI PRISM 310 Genetic Analyzer, AB GeneAmp PCR System 9600 and 9700 Designed specifically to work with ABI PRISM 377 DNA Sequencer and ABI PRISM 310 Genetic Analyzer, AB GeneAmp PCR System 9600 and 9700 Sold with most required hardware to perform protocol Sold with most required hardware to perform protocol For further reference: For further reference:

Company Profile Summarises CRA NASDAQ over 2 years Summarises CRA NASDAQ over 2 years Experienced -4% loss over the last 52-week period Experienced -4% loss over the last 52-week period Net revenue $ 62 M Net revenue $ 62 M Current stock value approx. $ 11 per share Current stock value approx. $ 11 per share

Company Profile (cont) Fiscal year ends: June 30 Fiscal year ends: June 30 According to Investors.com: 29 th percentile of all stocks in Investors.com database According to Investors.com: 29 th percentile of all stocks in Investors.com database Total Net Worth: $ M Total Net Worth: $ M Total Debt: $ M Total Debt: $ M Share Holders: Company 1.44%, Institutions 73.65% Share Holders: Company 1.44%, Institutions 73.65% in the technical rating: 24th place out of 44 stocks in the Medical-Genetics stock group, 40th out of 44 in fundamentals, and 15th out of 44 in stock attractiveness in the technical rating: 24th place out of 44 stocks in the Medical-Genetics stock group, 40th out of 44 in fundamentals, and 15th out of 44 in stock attractiveness Received lowest possible company grade from Investors.com Received lowest possible company grade from Investors.com

Conclusions I do not think the company will do well in the future due to present trends in company management and recent financial trends in the last fiscal year. I do not think the company will do well in the future due to present trends in company management and recent financial trends in the last fiscal year. However, due to the number of projects and their possible implications, it is likely that Applera will continue to be a viable company for a few more years. However, due to the number of projects and their possible implications, it is likely that Applera will continue to be a viable company for a few more years.

References 1 (510(k) approval of VIROSeq) 1 (510(k) approval of VIROSeq) pds/ViroSeq%20kit/F _User%20Manual- Viroseq.pdf (User Manual) pds/ViroSeq%20kit/F _User%20Manual- Viroseq.pdf (User Manual) (Company Website) (Company Website)