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

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

Business Overview

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

Relationship with Applied Biosystems (now Life Technologies)

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

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

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

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

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

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

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

Basis of Presentation

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

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

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

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

Business Developments

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

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

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

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

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

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

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

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

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

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

Testing for Impairment

Goodwill

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

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

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

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

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

Intangible and Other Long-Lived Assets

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

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

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

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

Results of Operations

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

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

                                                        Three Months Ended
                                             September 26,              September 27,
(Dollar amounts in millions)                      2009                      2008                % Change
Net revenues                                $           40.0           $          45.8               (13 )%
Cost of sales                                           12.7                      14.6               (13 )%

Gross margin                                            27.3                      31.2               (13 )%

Selling, general and administrative                     22.6                      25.2               (10 )%
Research and development                                 6.2                       7.9               (22 )%
Amortization of purchased intangible
assets                                                   2.6                       2.6                -
Employee-related charges, asset
impairments and other                                    3.7                       1.8               106 %
Litigation-related charge                                1.0                        -                 -

Operating loss                                           8.8                       6.3                40 %

Loss on investments                                       -                        3.2              (100 )%
Interest income, net                                    (1.4 )                    (2.5 )             (44 )%

Loss before income taxes                                 7.4                       7.0                 6 %
Benefit (provision) for income taxes                      -                         -                 -

Net loss                                    $            7.4           $           7.0                 6 %

Effective income tax rate                                0.0 %                     0.0 %

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

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

    Net revenues                   $          40.0    $          45.8        (13 )%

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

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

  Operating loss                 $          (8.8 )      $          (6.3 )          40 %

Revenues

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

Revenues from our Products segment for the three months ended September 26, 2009 decreased by $0.5 million compared to the three months ended September 27, 2008. For the three months ended September 26, 2009, revenues were primarily from sales of Celera-manufactured products and from royalties from sales of RealTimeTM assays used on the m2000TM system from Abbott. For the three months ended September 27, 2008, revenues were recorded based on our alliance agreement with Abbott and included equalization revenues of $5.3 million. The decline in revenues was largely attributable to variations in sales volume, with the prior year quarter including a large order of Celera-manufactured products.

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

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

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

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

Gross Margin

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

Operating Expenses

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

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

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

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

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

Operating Income (Loss)

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

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

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

Loss on Investments

For the three months ended September 27, 2008 we recorded a $3.2 million loss on investments for an other-than-temporary impairment of our investments in senior debt securities issued by Lehman Brothers Holdings, Inc. and Washington Mutual . . .