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

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

Business Overview

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

Relationship with Applied Biosystems (now Life Technologies)

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

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

• Celera Group common stock that was intended to reflect the relative performance of the Celera Group.

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

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

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

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

Basis of Presentation

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

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

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

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

Business Developments

In July 2009, we implemented cost-saving measures, which included a restructuring program to reduce headcount by approximately 80 full-time positions nationally, or 13% of the workforce. This included a major redeployment of resources at BHL as we realigned our disease management program to a model focused on web and telephone support, which we expect to be more efficient.

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

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

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

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

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

Goodwill and Intangible Assets Impairment

Goodwill

In accordance with SFAS No. 142, Goodwill and Other Intangible Assets, we perform a goodwill impairment analysis using the two-step method on an annual basis and whenever events or changes in circumstances indicate that the carrying value may not be recoverable. We completed our annual impairment analysis during the fourth quarter of 2008 and determined that no goodwill impairment existed as of the date of that analysis. We reduced our 2009 forecasted financial results due to a combination of factors, including broad economic pressures and the effects of changing business conditions. We considered this reduction in our forecast to be an impairment indicator requiring an interim goodwill impairment test to be performed as of June 27, 2009 for each of our reporting units, which we have determined to be consistent with our operating segments.

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

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

Indefinite-Lived Intangibles

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

As a result of the impairment indicators described above and in accordance with SFAS No. 142, we evaluated trade names for impairment at June 27, 2009 using the relief from royalty method. It was determined that the carrying values of the trade names exceeded their fair values and we recorded pre-tax non-cash impairment charges in our Corporate segment for the three months ended June 27, 2009 of $14.9 million for the BHL trade name and of $0.8 million for the Atria trade name. A total charge of $15.7 million was recorded in impairment of intangible assets in our Condensed Consolidated Statements of Operations for the three and six months ended June 27, 2009. Significant judgments inherent in our analysis included assumptions regarding appropriate revenue growth rates, discount rates and royalty rates.

Long-Lived Assets

In accordance with SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets, we review long-lived assets, including our intangible assets subject to amortization, for impairment whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. Recoverability of long-lived assets is measured by a comparison of the carrying amount of the asset group to the future undiscounted net cash flows expected to be generated by those assets. If such assets are considered to be impaired, an impairment charge is recognized for the amount by which the carrying amounts of the assets exceed the fair value of the assets. As a result of the impairment indicators described above, we tested our long-lived assets for impairment at June 27, 2009 and determined that there was no impairment.

Results of Operations

Three Months Ended June 27, 2009 Compared to Three Months Ended June 30, 2008

The following discussion and analysis relates to our results of operations for
the three months ended June 27, 2009 and June 30, 2008. The selected financial
information contained in the table below should be read in conjunction with our
unaudited condensed consolidated financial statements and accompanying notes.



                                                         Three Months Ended
                                                     June 27,           June 30,            %
(Dollar amounts in millions)                           2009               2008            Change
Net revenues                                        $      41.4        $     42.7             (3 )%
Cost of sales                                              13.4              12.1             11 %

Gross margin                                               28.0              30.6             (8 )%

Selling, general and administrative                        41.1              25.2             63 %
Research and development                                    7.4               9.4            (21 )%
Amortization of purchased intangible assets                 2.6               2.5              4 %
Employee-related charges, asset impairments and
other                                                      (0.1 )             2.6           (104 )%
Impairment of intangible assets                            15.7                -              -

Operating loss                                             38.7               9.1            325 %

Interest income, net                                        1.7               2.6            (35 )%

Loss before income taxes                                   37.0               6.5            469 %
Benefit (provision) for income taxes                        5.3             (97.6 )         (105 )%

Net loss                                            $      31.7        $    104.1            (70 )%

Effective income tax rate                                  14.3 %        (1,501.5 )%

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

                                            Three Months Ended
                                          June 27,      June 30,      %
          (Dollar amounts in millions)      2009          2008      Change
          Lab Services                   $     25.2    $     25.8       (2 )%
          Products                              9.7           9.1        7 %
          Corporate                             6.5           7.8      (17 )%

          Net revenues                   $     41.4    $     42.7       (3 )%

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

                                           Three Months Ended
                                        June 27,         June 30,         %
        (Dollar amounts in millions)      2009             2008         Change
        Lab Services                   $    (17.5 )     $      0.3      (5,933 )%
        Products                              0.8             (0.1 )      (900 )%
        Corporate                           (22.0 )           (9.3 )       137 %

        Operating loss                 $    (38.7 )     $     (9.1 )       325 %

Revenues

Revenues from our Lab Services segment for the three months ended June 27, 2009 decreased $0.6 million compared to the three months ended June 30, 2008. The decrease was primarily as a result of lower reimbursement rates. Overall, reimbursement rates, reflecting the impact of denied tests and historical collection activities, declined compared to the second quarter of 2008. Sample volume grew marginally year over year and was negatively impacted by broad economic pressures and lost business as a result of our efforts to collect aged accounts receivable.

Revenues for our Products segment for the three months ended June 27, 2009 increased by $0.6 million compared to the three months ended June 30, 2008. For the three months ended June 27, 2009, these revenues were primarily from sales of Celera-manufactured products and from royalties from sales of RealTimeTM assays used on the m2000TM system from Abbott. For the three months ended June 30, 2008, revenues were recorded based on our alliance agreement with Abbott and included equalization revenue of $4.0 million.

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

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

Corporate revenue, which primarily consists of royalties, licenses and milestones, decreased $1.3 million for the three months ended June 27, 2009 compared to the three months ended June 30, 2008. The decrease in revenue was due primarily to lower royalty revenue received from a licensee, partially offset by higher licensing revenue. Corporate revenue for the three months ended June 27, 2009 included licensing revenue of $1.5 million from Life Technologies related to human in-vitro diagnostics (HIVD) licenses entered into by Life Technologies during the first quarter of 2009. In January 2009, Life Technologies granted licenses to two life science companies under its patents relating to real-time technology in the HIVD field. Under our agreement with Applied Biosystems (now Life Technologies), revenues from these third-party licenses are shared between us and Applied Biosystems (now Life Technologies). Corporate revenue for the three months ended June 27, 2009 also included revenue of $1.0 million from Pharmacyclics, Inc. related to the execution of an amendment to our 2006 licensing agreement. The prior year quarter included licensing revenues of $2.0 million from Beckman Coulter, Inc.; the last payment under this license was received in the three months ended December 27, 2008.

Gross Margin

Gross margin for the three months ended June 27, 2009 decreased $2.6 million compared to the three months ended June 30, 2008 primarily due to a decrease in revenue in our Lab Services and Corporate segments, and a change in product mix and increased material cost in our Products segment. As a result, gross margin as a percentage of net revenues decreased to 68% for the three months ended June 27, 2009 compared to 72% for the three months ended June 30, 2008.

Operating Expenses

SG&A expenses increased $15.9 million for the three months ended June 27, 2009 compared to the prior year quarter, primarily due to a $15.8 million increase in allowance for doubtful accounts expense for our Lab Services segment. This increase in allowance for doubtful accounts expense was primarily due to provision for accounts receivable over 360 days outstanding and tests that have been denied for reimbursement. These balances were primarily due from patients. We also incurred increased costs associated primarily with the expansion of accounts receivable collection and increased sales efforts in our Lab Services segment, partially offset by lower costs in our Corporate and Products segments primarily related to reduced employee-related costs.

Research and development expenses decreased by $2.0 million for the three months ended June 27, 2009 compared to the prior year quarter primarily due to the completion of certain discovery research projects, including reduced proteomic-based target discovery and validation related activities, and associated lower employee-related costs in our Corporate and Products segments and the termination of the strategic alliance with Abbott.

The amortization of purchased intangible assets for the three months ended June 27, 2009 and June 30, 2008 related to our acquisitions of BHL and Atria in October 2007.

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 action, which expired during the quarter. The benefit was included in our Corporate segment. This compares to employee-related charges, asset impairments and other expenses of $2.6 million for the three months ended June 30, 2008, which consisted of $2.6 million for professional fees related to the split-off from Applied Biosystems (now Life Technologies) and an asset impairment charge of $0.3 million, both of which were recorded in our Corporate segment, partially offset by a $0.2 million benefit in our Products segment for the reversal of accrued litigation costs.

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

Operating Income (Loss)

Our Lab Services segment had an operating loss of $17.5 million for the three months ended June 27, 2009 compared to operating income of $0.3 million for the three months ended June 30, 2008. This change was primarily due to an increase in SG&A expenses of $17.2 million, $15.8 million of which was due to an increase in the allowance for doubtful accounts, in addition to costs primarily associated with the expansion of accounts receivable collection and increased sales efforts, and lower gross margin. These changes are further described above.

Our Products segment had operating income of $0.8 million for the three months ended June 27, 2009 compared to an operating loss of $0.1 million for the three months ended June 30, 2008. This change was primarily due to a decrease in SG&A and R&D expenses, partially offset by a decrease in gross margin. These changes are further described above.

The operating loss for our Corporate segment was $22.0 million for the three months ended June 27, 2009, an increase of $12.7 million compared to the prior year quarter. 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, partially offset by a decrease in employee-related charges, asset impairments and other of $3.0 million, and decreases in SG&A and R&D expenses. These changes are further described above. Recording the impairment charge in the Corporate segment is consistent with the financial information provided to our chief operating decision maker.

Interest Income, Net

Interest income, net for the three months ended June 27, 2009 decreased $0.9 million compared to the prior year quarter primarily due to lower interest rates combined with lower average balances of cash and cash equivalents and short-term investments. Interest income, net for the three months ended June 27, 2009 included $0.2 million of accrued interest related to the long-term receivable from Abbott.

Benefit (Provision) 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. A tax charge of $97.6 million was recorded for the three months ended June 30, 2008 primarily due to a valuation allowance recorded against deferred tax assets at June 30, 2008.

Subsequent to the split-off from Applied Biosystems (now Life Technologies), a full valuation allowance was established against our federal deferred tax assets as a result of our historic losses.

Six Months Ended June 27, 2009 Compared to Six Months Ended June 30, 2008

The following discussion and analysis relates to our results of operations for
the six months ended June 27, 2009 and June 30, 2008. The selected financial
information contained in the table below should be read in conjunction with our
unaudited condensed consolidated financial statements and accompanying notes.



                                                           Six Months Ended
                                                       June 27,        June 30,           %
(Dollar amounts in millions)                             2009            2008           Change
Net revenues                                          $     87.1       $    82.2             6 %
Cost of sales                                               27.4            25.3             8 %

Gross margin                                                59.7            56.9             5 %

Selling, general and administrative                         66.4            46.5            43 %
Research and development                                    15.1            19.6           (23 )%
Amortization of purchased intangible assets                  5.1             5.0             2 %
Employee-related charges, asset impairments and
other                                                        0.6             6.5           (91 )%
Legal settlement                                              -             (1.1 )        (100 )%
Impairment of intangible assets                             15.7              -             -
. . .