10-K

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K

ANNUAL REPORT PURSUANT TO SECTIONS 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

(Mark One)
x	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the fiscal year ended December 31, 2006
or
o	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 000-16789

INVERNESS MEDICAL INNOVATIONS, INC.

(Exact Name of Registrant as Specified in Its Charter)

Delaware	04-3565120
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
51 Sawyer Road, Suite 200, Waltham, Massachusetts	02453
(Address of principal executive offices)	(Zip Code)

(781) 647-3900

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Securities Exchange Act of 1934 (the “Exchange Act”):

Title of Each Class	Name of Each Exchange on Which Registered
Common Stock, $0.001 per share par value	American Stock Exchange

Securities registered pursuant to Section 12(g) of the Exchange Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act of 1933.  Yes x     No o

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act.  Yes o     No x

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act 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 such filing requirements for the past 90 days.  Yes x     No o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer o     Accelerated filer x     Non-accelerated filer o

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

The aggregate market value of the voting common stock held by non-affiliates of the registrant based on the closing price of the registrant’s stock on the American Stock Exchange on June 30, 2006 (the last business day of the registrant’s most recently completed second fiscal quarter) was $690,432,458.

As of February 26, 2007, the registrant had 46,239,163 shares of common stock, par value $0.001 per share, outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the registrant’s definitive Proxy Statement to be filed with the Securities and Exchange Commission on or prior to April 30, 2007 are incorporated by reference into Part III of this Form 10-K.

TABLE OF CONTENTS

PART I
ITEM 1. BUSINESS
	GENERAL
RECENT DEVELOPMENTS
ITEM 1A. RISK FACTORS
ITEM 1B. UNRESOLVED STAFF COMMENTS
ITEM 2. PROPERTIES
ITEM 3. LEGAL PROCEEDINGS
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
PART II
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
ITEM 9A. CONTROLS AND PROCEDURES
REPORT OF THE INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
ITEM 9B. OTHER INFORMATION
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
ITEM 11. EXECUTIVE COMPENSATION
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
PART IV
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
SIGNATURES
INVERNESS MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES CONSOLIDATED FINANCIAL STATEMENTS
EX-2.10 ASSET PURCHASE AGREEMENT
EX-2.11 CONTRIBUTION AGREEMENT
EX-3.4 AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
EX-3.5 CERTIFICATE OF CORRECTION
EX-10.28 NINTH AMENDMENT AND CONSENT TO THIRD AMENDED AND RESTATED CREDIT AGREEMENT
EX-10.40 SUBUNDERLEASE, DATED 15 FEBRUARY 2007
EX-10.41 AMENDMENT NO. 4 TO 2001 STOCK OPTION AND INCENTIVE PLAN
EX-10.42 AMENDMENT NO. 5 TO 2001 STOCK OPTION AND INCENTIVE PLAN
EX-14.50 BUSINESS CONDUCT GUIDELINES
EX-21.1 LIST OF SUBSIDIARIES
EX-23.1 CONSENT OF BDO SEIDMAN, LLP
EX-31.1 CERTIFICATION OF CHIEF EXECUTIVE OFFICER
EX-31.2 CERTIFICATION OF CHIEF FINANCIAL OFFICER
EX-32.1 CERTIFICATION OF CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER

PART I

This Annual Report on Form 10-K contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. You can identify these statements by forward-looking words such as “may,” “could,” “should,” “would,” “intend,” “will,” “expect,” “anticipate,” “believe,” “estimate,” “continue” or similar words. You should read statements that contain these words carefully because they discuss our future expectations, contain projections of our future results of operations or of our financial condition or state other “forward-looking” information. We caution investors that all such forward-looking statements involve risks and uncertainties that could cause our actual results to differ materially from any projected results or expectations that we discuss in this report. You should therefore carefully review the risk factors and uncertainties discussed in Item 1A entitled “Risk Factors,” which begins on page 11 of this report, as well as those factors identified from time to time in our periodic filings with the Securities and Exchange Commission. We undertake no obligation to update any forward-looking statements.

Unless the context requires otherwise, references in this Annual Report on Form 10-K to “we,” “us,” “our,” or “our company” refer to Inverness Medical Innovations, Inc. and its subsidiaries.

ITEM 1.   BUSINESS

GENERAL

We are a leading global developer, manufacturer and marketer of in vitro diagnostic products for the over-the-counter pregnancy and fertility/ovulation test market and the professional rapid diagnostic test markets. Our company, Inverness Medical Innovations, Inc., a Delaware corporation, was formed to acquire the women’s health, nutritional supplements and professional diagnostics businesses of its predecessor, Inverness Medical Technology, Inc., through a split-off and merger transaction, which occurred in November 2001. We became an independent, publicly traded company immediately after the split-off and our common stock is listed on the American Stock Exchange under the symbol “IMA.” Since the split-off, we have grown our businesses by leveraging our proprietary lateral flow immunoassay technology and our strong intellectual property portfolio, and by making selected strategic acquisitions. We have an experienced research and development team and a continuing commitment to product development, and have a demonstrated capability for introducing new and innovative products through internal research and development efforts. We are presently exploring new opportunities in a variety of professional diagnostic and consumer-oriented applications, including immuno-diagnostics with a focus on cardiology, infectious disease and women’s health.

Our objective is to be a leading provider of innovative rapid diagnostic products in cardiology to both consumer and professional diagnostic markets, while enhancing our current position as a leader in the professional rapid diagnostic test market though geographic and product line expansions and selective acquisitions. We plan to further expand our position in the consumer rapid diagnostic test product market, including the over-the-counter pregnancy and fertility/ovulation test market, through our pending joint venture with The Procter & Gamble Company, which is discussed further below.

Our principal executive offices are located at 51 Sawyer Road, Suite 200, Waltham, Massachusetts 02453 and our telephone number is (781) 647-3900. Our website is www.invmed.com and we make available through this site, free of charge, our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports, filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, as soon as reasonably practicable after such reports are electronically filed with, or furnished to, the Securities and Exchange Commission, or the SEC. These reports may be accessed through our website’s investor information page. We also make our code of ethics and certain other governance documents and policies available through this site.

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RECENT DEVELOPMENTS

Agreement with The Procter & Gamble Company to Form Consumer Diagnostics Joint Venture

In December 2006, we signed a definitive agreement with The Procter & Gamble Company, or P&G, to form a 50/50 joint venture for the development, acquisition, manufacturing, marketing and sale of existing and to-be-developed consumer diagnostic products outside of the fields of cardiology and diabetes. In connection with this agreement, we will be contributing our related consumer diagnostic and monitoring assets, other than manufacturing and core intellectual property assets, to a new joint venture entity, and P&G will be acquiring its interest in the joint venture in consideration for a cash payment of $325.0 million to us. P&G will retain an option to require us to purchase its interest in the joint venture at fair market value during a 60-day period beginning on the fourth anniversary of the closing. Our primary role in the collaboration will be to develop and manufacture consumer diagnostic products, while P&G’s primary role will be to market, sell and distribute existing and to-be-developed products. We will retain all rights with respect to the development and sale of cardiology diagnostic products and our professional point-of-care diagnostic businesses.

Following the completion of the transaction and the formation of the joint venture, we will cease to consolidate the operating results of our consumer diagnostics business, which represented $171.6 million of net product revenue in 2006 and instead will account for our 50% interest in the results of the joint venture under the equity method. In our capacity as the manufacturer of products for the joint venture, we will supply products to the joint venture and we will record revenue on those sales. No gain on the proceeds that we receive from P&G through the formation of the joint venture will be recognized in our financial statements until P&G’s option to require us to purchase its interest in the joint venture at fair market value expires.

The transaction is expected to close in the first half of 2007, subject to the satisfaction of customary closing and other conditions.

Sale of 6,900,000 Shares of Common Stock

We recently raised net proceeds of approximately $261.3 million through an underwritten public offering of 6,900,000 shares of our common stock. In January 2007, we sold 6,000,000 shares to the public at $39.65 per share, and in February 2007, our underwriters exercised in full an option to purchase an additional 900,000 shares to cover over-allotments. Net proceeds include deductions for underwriting discounts and commissions and take into effect the reimbursement by the underwriters of a portion of our offering expenses. Of this amount, we used $44.9 million to repay principal outstanding and accrued interest on our term loan under our senior credit facility, with the remainder of the net proceeds retained for working capital and other general corporate purposes, including the financing of potential acquisitions or other investments.

Acquisition of First Check

In February 2007, we acquired substantially all of the assets of First Check Diagnostics LLC (‘First Check‘), a privately-held diagnostics company, for approximately $24.5 million in cash. In addition, we will pay an earn-out to First Check equal to the incremental revenue growth of the acquired products for 2007 and for the first nine months of 2008, as compared to the immediately preceding comparable periods.

First Check is the market leader in the rapidly-growing field of home testing for drugs of abuse, including marijuana, cocaine, methamphetamines and opiates. In addition, it offers tests, also sold through retail channels, for alcohol abuse, cholesterol monitoring and colon cancer screening.

Segments

Our major reportable segments are consumer diagnostic products, vitamins and nutritional supplements and professional diagnostic products. Below are discussions of each of these reportable segments. Financial information about our reportable segments is provided in Note 18 of the “Notes to Consolidated Financial Statements,” which are included elsewhere in this report.

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Products

Consumer Diagnostic Products.  Our current consumer diagnostic products primarily target the worldwide over-the-counter pregnancy and fertility/ovulation test market. There are numerous pregnancy self-tests on the market, which are typically urine-based tests and provide results in less than five minutes. Our pregnancy and fertility/ovulation tests display visual results in approximately one minute or three minutes depending on the product. Fertility/ovulation prediction tests inform women of the best time to conceive a baby by detecting the surge of the luteinizing hormone, which precedes ovulation. Fertility/ovulation prediction tests, which are generally disposable stick tests similar to pregnancy stick tests, are easy to use and are widely accepted for home use by professional fertility care providers and the general public. Our fertility/ovulation prediction test kits provide 24 to 36 hours notice of when ovulation is likely to occur. By identifying the days when a woman is most fertile, these products assist couples in planning conception.

To serve these markets we offer premium branded products, value branded products and private label diagnostic products. Our premium branded Clearblue home pregnancy and fertility/ovulation prediction tests are global leaders in terms of both sales and technology. We also offer Clearblue Easy Digital pregnancy and fertility/ovulation prediction tests. Our Clearblue Easy Digital pregnancy test was launched in June 2003 as the first consumer pregnancy test to display test results in words, as opposed to displaying results with colored lines that require interpretation. During 2006 we introduced, under the Clearblue Easy Digital brand, the first one piece digital pregnancy test, which contains both the absorbent wick and the digital read technology in a single disposable stick. To supplement our premium line of traditional Clearblue fertility/ovulation disposable stick tests, we also offer the Clearblue Easy Fertility Monitor, the only hormone-based reusable monitoring device available for home use to assist women attempting to conceive. This product, which is sold primarily in the United States and Canada, not only detects the surge of the luteinizing hormone, or LH, which causes ovulation, but it is also the only fertility/ovulation prediction device that identifies additional days when a woman may conceive by detecting a rise in estrogen levels that precedes the LH surge.

Our Fact plus and Accu-Clear branded pregnancy and fertility/ovulation prediction products are marketed to value-oriented consumers. We also sell Crystal Clear, the leading brand pregnancy test in Australia. We are also a major supplier of private label home pregnancy detection and fertility/ovulation prediction products and we currently supply Johnson & Johnson, who recently acquired the consumer healthcare business of Pfizer, with both the digital and non-digital versions of its e.p.t brand pregnancy tests. We also sell Persona, a diagnostic monitoring device that provides for a natural method of contraception by allowing the user to monitor her menstrual cycle, in foreign countries, primarily in Germany and the United Kingdom.

In February 2007, we acquired First Check, the market leading brand of over-the-counter drugs of abuse tests for at-home testing for marijuana, cocaine, methamphetamines and opiates. We also acquired over-the-counter tests for alcohol abuse, cholesterol monitoring, and colon cancer screening which are also sold under the First Check brand.

Vitamins and Nutritional Supplements.  We market a wide variety of vitamins and nutritional supplements primarily within the United States. Most growth in this market is attributed to new products that generate attention in the marketplace. Well-established market segments, where competition is greater and media commentary less frequent, are generally stable. Slow overall growth in the industry has resulted in retailers reducing shelf space for nutritional supplements and has forced many under-performing items out of distribution, including several broad product lines. Sales growth of private label products has generally outpaced the overall industry growth, as retailers continue to add to the number of private label nutritional products on their shelves.

Our subsidiary, Inverness Medical Nutritionals Group, or IMN, is a national supplier of private label vitamin and nutritional products for major drug and food chains and also manufactures bulk vitamins, minerals, nutritional supplements and over-the-counter drug products under contract for unaffiliated brand name distributors. IMN also manufactures an assortment of vitamin, mineral and nutritional supplement products for sale under Inverness Medical brand names.

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Our Inverness Medical branded nutritional products are high quality products sold at moderate prices through national and regional drug stores, groceries and mass merchandisers. These branded products include Stresstabs, a B-complex vitamin with added antioxidants; Ferro-Sequels, a time-release iron supplement; Protegra, an antioxidant vitamin and mineral supplement; Posture-D, a calcium supplement; SoyCare, a soy supplement for menopause; ALLBEE, a line of B-complex vitamins; and Z-BEC, a zinc supplement with B-complex vitamins and added antioxidants.

Professional Diagnostic Products.  Professional diagnostic products are designed to assist medical professionals in both preventative and interventional medicine. These products provide for qualitative or quantitative analysis of a patient’s body fluids or tissue for evidence of a specific medical condition or disease state or to measure response to therapy. Our current professional diagnostic products consist primarily of laboratory and point-of-care tests in the areas of women’s health, infectious disease, cardiovascular disease and drugs of abuse. The market for rapid diagnostic products consists primarily of small and medium sized, non-centralized laboratories and testing locations such as physician office laboratories, specialist mobile clinics, emergency rooms and some rapid-response laboratories in larger medical centers. We distinguish the professional point-of-care rapid diagnostic test market from clinical diagnostic markets that consist of large, centralized laboratories that offer a wide range of highly-automated laboratory services in hospital or related settings.

We believe that the demand for infectious disease diagnostic products is growing faster than many other segments of the immunoassay market due to the increasing incidence of certain diseases or groups of diseases, including viral hepatitis, respiratory syncytial virus (RSV), influenza, tuberculosis, acquired immunodeficiency syndrome and other sexually transmitted diseases. We also believe that, in general, the ability to deliver faster, accurate results at reasonable prices drives demand for professional diagnostic products. This means that while there is growing demand for faster, more efficient automated equipment from large hospitals and major reference testing laboratories, there is also growing demand by point-of-care facilities and smaller laboratories for fast, high-quality, inexpensive, self-contained diagnostic kits. As the speed and accuracy of such products improve, we believe that these products will play an increasingly important role in achieving early diagnosis, timely intervention and therapy-monitoring outside of acute medicine environments.

Our professional diagnostics products, which are generally marketed under the trade name, Inverness Medical Professional Diagnostics, include:

•  Rapid Membrane Test Products.  We develop and market a wide variety of rapid membrane tests for pregnancy, drugs of abuse, RSV, Influenza A/B, strep throat, HIV, C.difficile, Lyme disease, chlamydia, H.pylori, fecal occult blood, D-dimer, mononucleosis and rubella. Our rapid tests are qualitative, visually-interpreted rapid diagnostic tests that are used in point-of-care environments where a rapid response is desired or where the volume of testing is too low to warrant high-volume methods. Our rapid tests are sold under brand names which include Acceava, BinaxNOW, BioStar OIA, Clearview, Determine, Signify, SureStep, Inverness Medical TestPack and Wampole.

•  ELISA Products.  We offer over 70 enzyme linked immunosorbent assays (ELISA) tests for a wide variety of infectious and autoimmune diseases, as well as a full line of automated instrumentation for processing ELISA assays. Our ELISA products are generally marketed under our Wampole brand.

•  AtheNA Multi-Lyte Test System.  We are the exclusive U.S. distributor of the AtheNA Multi-Lyte Test System, which is capable of simultaneously performing multiple assays from a single patient sample in the areas of autoimmune and infectious disease. The AtheNA Multi-Lyte Test System provides improved clinical sensitivity and comparable clinical specificity to ELISA in a labor saving, automated user-friendly format.

•  IFA/Serology Products.  We also offer a line of indirect fluorescent antibody, or IFA, assays for over 20 viral, bacterial and autoimmune diseases and a full line of serology diagnostic products covering a broad range of disease categories. Many of our kits are available in multiple formats including rapid membrane, latex, red cell and color-enhanced agglutination. These serology assays provide cost-effective testing alternatives and most offer results in two minutes or less.

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•  Ischemia Test.  Our Albumin Cobalt Binding, or ACB, test is a clinical chemistry assay that detects Ischemia Modified Albumin, or IMA, by measuring the cobalt binding capacity of albumin in a patient serum sample. IMA concentrations in blood rise quickly and remain elevated during an ischemic event, returning to normal level several hours after cessation of ischemia. IMA can be used in conjunction with electrocardiogram (ECG) and troponin as an aid to rule out acute coronary syndrome at presentation; saving time, resources and money. ACB test reagents are used by clinical laboratories in conjunction with clinical chemistry instruments sold by third parties, including Roche Diagnostics.

Methods of Distribution

Consumer Diagnostic Products.  We market and sell our consumer diagnostic products under our own brand names as well as under store brands. Our customers include retail drug stores, drug wholesalers, groceries and mass merchandisers in North America, Europe and Japan such as Walgreens, CVS, Wal-Mart and Boots. Our Clearblue products are marketed as premium products and compete intensively with other premium brand name products. Persona is also marketed as a premium product in Europe. Marketing of premium branded products focuses on brand awareness as well as feature and performance differentiation. We achieve this through radio, television and print advertising. Our Fact plus and Accu-Clear brand products are value-oriented brands which are not currently advertised. Our consumer diagnostic products are marketed in the United States, the United Kingdom and parts of Western Europe using our own sales managers and a network of sales representatives. In other areas of the world, our consumer diagnostic products are sold though distribution contracts. Private label and contract manufacturing arrangements accounted for 34% of our consumer diagnostics business’ net product sales for 2006.

Vitamins and Nutritional Supplements.  We primarily market and sell our vitamins and nutritional supplements in the United States through private label arrangements with retail drug stores, groceries, mass merchandisers and warehouse clubs who sell our products under their store brands. We also sell a variety of branded products to the retail drug stores, groceries and mass merchandisers. To a lesser extent, we provide contract manufacturing services to third parties. Our two largest customers during 2006, based on net product sales, together accounted for almost 63% of our net product sales for this segment. Our rights to the trademarks Stresstabs, Ferro-Sequels, Posture-D, Protegra, ALLBEE and Z-BEC are limited to use in the United States, but we are not restricted from marketing the formulations sold under those brand names in other areas of the world.

Professional Diagnostic Products.  In the United States, the United Kingdom, Germany, Spain, Portugal, France and Israel, we distribute our professional diagnostic products to hospitals, reference laboratories, physician’s offices and other point-of-care settings through our own sales forces and distribution networks. We have also recently acquired distribution operations in Australia, Italy, Canada and Japan. In all other major markets around the world we utilize third party distributors to sell our products. We also distribute products for other parties, primarily in Germany, Spain, Portugal, France, Italy and Canada.

Under the terms of our acquisition of our Determine products from Abbott Laboratories in June 2005, Abbott distributes our Determine products, which are sold outside of the United States, for up to 32 months in order to allow us time to obtain various marketing or sales licenses in the many countries where these products are sold. Abbott acts as our exclusive distributor, although we have certain rights to terminate the distribution arrangement on a country by country basis in the future. We also sell these products to Abbott as the exclusive supplier of its global “Access to HIV Care” program, through which Abbott provides free or low-cost testing products for HIV testing in underdeveloped countries around the world.

Manufacturing

Consumer Diagnostic Products.  We manufacture nearly all of our disposable consumer diagnostic products at our facilities in Shanghai, China and Bedford, England. These facilities are ISO certified and registered with the United States Food and Drug Administration, or the FDA. We use our Bedford facility to manufacture the diagnostic test portion of our Clearblue Easy Digital products, and the non-digital and digital e.p.t pregnancy tests for Johnson & Johnson. We purchase the electronic portion of our digital pregnancy and

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ovulation prediction tests, our Clearblue Easy Fertility Monitor and Persona to our specifications from third party suppliers in Europe and China. Because most components of our consumer diagnostic products are produced to our specifications, some of our suppliers are single source suppliers with few, if any, alternative sources immediately available.

Vitamins and Nutritional Supplements.  We manufacture substantially all of our vitamin and nutritional products at IMN’s facilities in Freehold and Irvington, New Jersey. IMN internally manufactures substantially all of its softgel requirements at the Irvington facility. Our Freehold facility manufactures in full compliance with Good Manufacturing Practices, or GMP, standards recently proposed by the FDA for the dietary supplement industry. Our Irvington facility manufactures to GMP standards applicable to drug makers and is registered with both the United States Drug Enforcement Agency, or the DEA, and the FDA.

Professional Diagnostic Products.  Approximately 40% of the professional diagnostic products that we sell, based on net product sales for the fiscal year ended December 31, 2006 were manufactured by third parties. We manufacture the remainder, including substantially all of our BinaxNOW, BioStar OIA, Clearview, Signify, SureStep and Inverness Medical TestPack products, ourselves at our facilities in Hangzhou and Shanghai, China; Bedford, UK; Yavne, Israel; Scarborough, Maine and Louisville, Colorado. We also manufacture our Determine HIV products, acquired from Abbott Laboratories in June 2005, at Abbott’s facility in Matsudo, Japan in space rented from Abbott under a manufacturing and support services agreement entered into in connection with the acquisition.

Research and Development

A significant portion our budget for research and development currently is allocated to the development of cardiovascular disease management products. On February 25, 2005, we entered into a co-development agreement with ITI Scotland Limited, or ITI, whereby ITI agreed to provide us with approximately £30.0 million over three years to partially fund research and development programs focused on identifying novel biomarkers and near-patient and home use tests for cardiovascular and other diseases. We agreed to invest £37.5 million in these programs over three years and we established a new research center in Stirling, Scotland where we conduct most of the funded research and development activities and where we will ultimately commercialize products arising from these efforts. ITI and Stirling will have exclusive rights to developed technology in their respective fields of use.

The remainder of our research and development efforts is focused on expanding our range of product offerings and enhanced features for our lines of consumer and professional diagnostic products. Our other research and development activities are carried out in Bedford, England; Jena, Germany; Scarborough, Maine; and Yavne, Israel.

Foreign Operations

Our business relies heavily on our foreign operations. Five of our nine current manufacturing facilities are outside the United States, including our facility in Hangzhou, China, our primary consumer diagnostic products manufacturing facilities in Bedford, England and Shanghai, China, and our manufacturing operation in Matsudo, Japan. Since late 2005, we have also focused significant effort on expanding our worldwide distribution network supporting our professional diagnostics business by acquiring distribution operations in Spain, Australia, Germany, Japan, Italy and Canada. Approximately 41% of our net revenues were generated from outside of the United States during 2006. Our Clearblue products, pregnancy tests in particular, have historically been much stronger brands outside the United States, with 64% of our net product sales of Clearblue products coming from outside the United States during 2006. Our Inverness Medical TestPack and Determine product lines are sold exclusively outside the United States.

Competitive Conditions

Consumer Diagnostic Products.  Competition in the pregnancy detection and fertility/ovulation prediction market is intense. Our competitors in the United States, and worldwide, are numerous and include, among others, large medical and consumer products companies with substantially greater resources than we

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have. However, we believe that we can continue to compete effectively in the consumer diagnostics market based on our research and development capabilities, advanced manufacturing expertise, diversified product positioning, global market presence and established wholesale and retail distribution networks. Our competitors for the sale of pregnancy test products worldwide include Church & Dwight, Johnson & Johnson, Omega Pharma, Princeton BioMeditech, Arax and Rohto, among others, although we currently supply Johnson & Johnson and others with their pregnancy test products. Our competitors for the sale of fertility/ovulation prediction tests include Church & Dwight and Princeton BioMeditech, among others. For both pregnancy and fertility/ovulation tests worldwide, we also face growing competition from manufacturers located in Asia. Competition among branded consumer diagnostic products is based on brand recognition and price. Products sold under well-established or “premium” brand names can demand higher prices and maintain high market shares due to brand loyalty. Our Clearblue brand qualifies as a premium brand worldwide with respect to both pregnancy tests and fertility/ovulation prediction products. Our Clearblue pregnancy tests are market leaders outside of the United States, as is our Crystal Clear brand in Australia, and our Clearblue fertility/ovulation prediction products are market leaders both in the United States and globally. Our Fact plus and Accu-Clear branded consumer products compete based on price and do not attempt to compete based on brand recognition. For private label manufacturers, competition is based primarily on the delivery of products at lower prices that have substantially the same features and performance as brand name products. The Clearblue Fertility Monitor and Persona are unique products and their competitors or markets are not easily defined. Our recently acquired First Check tests compete against over-the-counter diagnostic tests sold primarily by Phamatech, Inc., but also by other smaller competitors.

Vitamins and Nutritional Supplements.  The market for private label vitamins and nutritional supplements is extremely price sensitive, with quality, customer service and marketing support also being important. Many of the companies that mass market branded vitamins and nutritionals, including U.S. Nutrition, Pharmavite and Leiner Health Products, also sell to private label customers and constitute our major competitors for private label business. In addition, there are several companies, such as Perrigo Company, that compete only in the private label business.

In the branded nutritional supplements industry, competition is based upon brand name recognition, price, quality, customer service and marketing support. There are many companies, both small and large, selling vitamin products to retailers. A number of these companies, particularly manufacturers of nationally advertised brand name products, are substantially larger than we are and have greater financial resources. Among the major competitors of our branded products that are sold through groceries and other mass retailers are U.S. Nutrition, Wyeth, Pharmavite and GlaxoSmithKline.

Professional Diagnostic Products.  In the rapid membrane market, our main competitors are Becton Dickinson, Quidel and Genzyme Diagnostics. Some competitors in this market, such as Becton Dickinson, are large companies with substantially greater resources than we have. Other competitors in some product segments, particularly drugs of abuse, are smaller yet aggressive companies. These competitors include WHPM and Princeton BioMeditech. Some automated immunoassay systems can be considered competitors when labor shortages force laboratories to automate or when the costs of such systems are lower. Such systems are provided by Abbott, Bayer, Roche Diagnostics, Beckman Coulter and other large diagnostic companies. In the infectious disease area, new technologies utilizing amplification techniques for analyzing molecular DNA gene sequences from companies such as Abbott, Roche and Gen-Probe are making in-roads into this market. Competition in this market is intense and is primarily based on price, breadth of line and distribution capabilities.

Our competitors in the ELISA diagnostics market include large corporations, such as Abbott Laboratories and Diagnostic Products Corporation, which manufacture state-of-the-art automated immunoassay systems and a wide array of diagnostic products designed for processing on those systems. These entities benefit from economies of scale and have the resources to design and manufacture state-of-the-art automated equipment. Other competitors in this market, DiaSorin and Diamedics in particular, are more similar in size to us and compete with us based on quality and service. In the United States and Canada, we focus on matching the instrumentation and product testing requirements of our customers by offering a wide selection of diagnostic products and test equipment.

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The markets for our serology and our IFA and microbiology products are mature, and competition is based primarily on price and customer service. Our main competitors in serology and microbiology testing include Remel and Biokit. Our main competitors in IFA testing are Bio-Rad Laboratories, INOVA Diagnostics, Immuno Concepts, The Binding Site and DiaSorin. However, products in these categories also compete to a large extent against rapid membrane and ELISA products, which are often easier to perform and read and can be more precise.

We believe that our dedication to research and development and our strong intellectual property portfolio, coupled with our advanced manufacturing expertise, diversified product positioning, global market presence and established distribution networks, provide us with a competitive advantage in the point-of-care markets in which we compete.

Patents and Proprietary Technology; Trademarks

We have built a strong intellectual property portfolio in the area of lateral flow immunoassays, the technology which underlies many rapid diagnostic test formats including most one step home pregnancy and fertility/ovulation tests and most of our rapid membrane products for the point-of-care marketplaces that we serve. Through acquisitions and strategic licensing, we have obtained rights to the major patent families in this area of technology. We believe that these intellectual property rights give us a distinct advantage over our competitors and underpin our continuing success in this area. In addition, our intellectual property portfolio also includes an increasing number of other patents, patent applications and licensed patents protecting our vision of the technologies and products of the future. Our intellectual property portfolio consists of patents that we own and, in some cases, licenses to patents or other proprietary rights of third parties which may be limited in terms of field of use, transferability or may require royalty payments.

The medical products industry, including the diagnostic testing industry, historically has been characterized by extensive litigation regarding patents, licenses and other intellectual property rights. We believe that our recent successes in enforcing our intellectual property rights in the United States and abroad demonstrate our resolve in enforcing our intellectual property rights, the strength of our intellectual property portfolio and the competitive advantage that we have in this area. We have incurred substantial costs, both in asserting infringement claims against others and in defending ourselves against patent infringement claims, and may to incur substantial litigation costs as we continue to aggressively protect our technology and defend our proprietary rights.

Finally, we believe that certain of our trademarks are valuable assets that are important to the marketing of both our consumer and professional products. Many of these trademarks have been registered with the United States Patent and Trademark Office or internationally, as appropriate.

The medical products industry, including the diagnostic testing industry, places considerable importance on obtaining and enforcing patent and trade secret protection for new technologies, products and processes. Trademark protection is an important factor in the success of certain of our consumer and professional diagnostic product lines. Our success therefore depends, in part, on our abilities to obtain and enforce the patents and trademark registrations necessary to protect our products, to preserve our trade secrets and to avoid or neutralize threats to our proprietary rights from third parties. We cannot, however, guarantee our success in enforcing or maintaining our patent rights; in obtaining future patents or licensed patents in a timely manner or at all; or as to the breadth or degree of protection that our patents or trademark registrations or other intellectual property rights might afford us. For more information regarding the risks associated with our reliance on intellectual property rights see the risk factors discussed in Item 1A entitled “Risk Factors” on pages 11 through 24 of this report.

Government Regulation

Our research, development and clinical programs, as well as our manufacturing and marketing operations, are subject to extensive regulation in the United States and other countries. Most notably all of our products sold in the United States are subject to the Federal Food, Drug and Cosmetic Act, or the FDCA, as implemented and enforced by the U.S. Food and Drug Administration, or the FDA. All of our diagnostic

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products sold in the United States require FDA clearance to market under Section 510(k) of the FDCA, which may require pre-clinical and clinical trials. Foreign countries may require similar or more onerous approvals to manufacture or market these products. The marketing of our consumer diagnostic products is also subject to regulation by the U.S. Federal Trade Commission, or the FTC. In addition, we are required to meet regulatory requirements in countries outside the United States, which can change rapidly with relatively short notice.

The manufacturing, processing, formulation, packaging, labeling and advertising of our nutritional supplements are subject to regulation by one or more federal agencies, including the FDA, the U.S. Drug Enforcement Administration, or DEA, the FTC and the Consumer Product Safety Commission. These activities are also regulated by various agencies of the states, localities and foreign countries in which our nutritional supplements are now sold or may be sold in the future. In particular, the FDA regulates the safety, manufacturing, labeling and distribution of dietary supplements, including vitamins, minerals and herbs, as well as food additives, over-the-counter and prescription drugs and cosmetics. The GMP standards promulgated by the FDA are different for nutritional supplement, drug and device products. In addition, the FTC has jurisdiction along with the FDA to regulate the promotion and advertising of dietary supplements, over-the-counter drugs, cosmetics and foods.

Employees

As of January 31, 2007, we had approximately 2,561 employees, of which 1,056 employees are located in the United States. In addition, we utilize the services of temporary and contract employees, including approximately 1,000 contract employees leased from agencies in connection with our Chinese operations, as well as a number of consultants specializing in areas such as research and development, risk management, regulatory compliance, strategic planning and marketing.

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ITEM 1A.   RISK FACTORS

The risks described below may materially impact your investment in our company or may in the future, and, in some cases already do, materially affect us and our business, financial condition and results of operations. You should carefully consider these factors with respect to your investment in our securities. This section includes or refers to certain forward-looking statements; you should read the explanation of the qualifications and limitations on such forward-looking statements beginning on pages 2 and 30 of this report.

Our business has substantial indebtedness, which could, among other things, make it more difficult for us to satisfy our debt obligations, require us to use a large portion of our cash flow from operations to repay and service our debt or otherwise create liquidity problems, limit our flexibility to adjust to market conditions, place us at a competitive disadvantage and expose us to interest rate fluctuations.

We currently have, and we will likely continue to have, a substantial amount of indebtedness. As of December 31, 2006, we had approximately $203.0 million in aggregate principal indebtedness outstanding, of which $53.0 million is secured indebtedness, and $110.0 million of additional borrowing capacity under the revolving portions of our credit facilities. In addition, subject to restrictions in our credit facilities and the indenture governing our $150.0 million in outstanding 8.75% senior subordinated notes, or the senior subordinated notes, we may incur additional indebtedness. During the fiscal years ended December 31, 2006 and 2005, we recorded $26.6 million and $21.8 million, respectively, of interest expense related to our indebtedness, which included $4.2 million and $2.3 million, respectively, in non-cash interest primarily related to amortization of debt origination costs.

Our substantial indebtedness could affect our future operations in important ways. For example, it could:

•  make it more difficult to satisfy our obligations under the senior subordinated notes, our credit facilities and our other debt-related instruments;

•  require us to use a large portion of our cash flow from operations to pay principal and interest on our indebtedness, which would reduce the amount of cash available to finance our operations and service obligations, to delay or reduce capital expenditures or the introduction of new products and/or forego business opportunities, including acquisitions, research and development projects or product design enhancements;

•  limit our flexibility to adjust to market conditions, leaving us vulnerable in a downturn in general economic conditions or in our business and less able to plan for, or react to, changes in our business and the industries in which we operate;

•  impair our ability to obtain additional financing;

•  place us at a competitive disadvantage compared to our competitors that have less debt; and

•  expose us to fluctuations in the interest rate environment with respect to our indebtedness that bears interest at variable rates.

We expect to obtain the money to pay our expenses and to pay the principal and interest on the senior subordinated notes, our senior credit facility and our other debt from cash flow from our operations and from additional loans under our senior credit facility, subject to continued covenant compliance, and potentially from other debt or equity offerings. Our ability to meet our expenses thus depends on our future performance, which will be affected by financial, business, economic and other factors. We will not be able to control many of these factors, such as economic conditions in the markets in which we operate and pressure from competitors. We cannot be certain that our cash flow will be sufficient to allow us to pay principal and interest on our debt and meet our other obligations. If our cash flow and capital resources prove inadequate, we could face substantial liquidity problems and might be required to dispose of material assets or operations, restructure or refinance our debt, including the notes, seek additional equity capital or borrow more money. We cannot guarantee that we will be able to do so on terms acceptable to us. In addition, the terms of existing or future debt agreements, including the credit agreement governing our senior credit facility and the indenture governing the senior subordinated notes, may restrict us from adopting any of these alternatives.

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We have entered into agreements governing our indebtedness that subject us to various restrictions that may limit our ability to pursue business opportunities.

The agreements governing our indebtedness, including the credit agreement governing our senior credit facility and the indenture governing the senior subordinated notes, subject us to various restrictions on our ability to engage in certain activities, including, among other things, our ability to:

•  incur additional indebtedness;

•  pay dividends or make distributions or repurchase or redeem our stock;

•  acquire other businesses;

•  make investments;

•  make loans to or extend credit for the benefit of third parties or our subsidiaries;

•  enter into transactions with affiliates;

•  raise additional capital;

•  make capital or finance lease expenditures;

•  dispose of or encumber assets; and

•  consolidate, merge or sell all or substantially all of our assets.

These restrictions may limit our ability to pursue business opportunities or strategies that we would otherwise consider to be in our best interests. In particular, all acquisitions of other businesses, other than very small acquisitions, will require us to obtain our lenders’ consent under our senior credit facility. We have been required to obtain, and have obtained, our lenders’ consent under our senior credit facility in order to complete many of our acquisitions, including the Wampole Division of MedPointe Inc., or Wampole; Ostex International, Inc., or Ostex; Applied Biotech, Inc., or ABI; the rapid diagnostics business that we acquired from Abbott Laboratories, or the Abbott rapid diagnostics business; Ischemia, Inc., or Ischemia; Binax, Inc., or Binax; the Determine/DainaScreen business that we acquired from Abbott Laboratories in 2005, or the Determine business; Thermo BioStar Inc, or BioStar; and the rapid diagnostics business that we acquired from ACON Laboratories, Inc., or the Innovacon business.

Our senior credit facilities contain certain financial covenants that we may not satisfy which, if not satisfied, could result in the acceleration of the amounts due under these facilities and the limitation of our ability to borrow additional funds in the future.

The agreements governing our senior credit facility subject us to various financial and other covenants with which we must comply on an ongoing or periodic basis. These include covenants pertaining to fixed charge coverage, capital expenditures, various leverage ratios, minimum EBITDA and minimum cash requirements. If we violate any of these covenants, we may suffer a material adverse effect. Most notably, our outstanding debt under our senior credit facility could become immediately due and payable, our lenders could proceed against any collateral securing such indebtedness, and our ability to borrow additional funds in the future may be limited.

A default under any of our agreements governing our indebtedness could result in a default and acceleration of indebtedness under other agreements.

The agreements governing our indebtedness, including our senior credit facility and the indenture governing the senior subordinated notes, contain cross-default provisions whereby a default under one agreement could result in a default and acceleration of our repayment obligations under other agreements. If a cross-default were to occur, we may not be able to pay our debts or borrow sufficient funds to refinance them. Even if new financing were available, it may not be on commercially reasonable terms or terms that are acceptable to us. If some or all of our indebtedness is in default for any reason, our business, financial condition and results of operations could be materially and adversely affected.

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We may not be able to satisfy our debt obligations upon a change of control, which could limit our opportunity to enter into a change of control transaction.

Upon the occurrence of a “change of control,” as defined in the indenture governing the senior subordinated notes, each holder of our senior subordinated notes will have the right to require us to purchase the notes at a price equal to 101% of the principal amount, together with any accrued and unpaid interest. Our failure to purchase, or give notice of purchase of, the senior subordinated notes would be a default under the indenture, which would in turn be a default under our senior credit facility. In addition, a change of control may constitute an event of default under our senior credit facility. A default under our senior credit facility would result in an event of default under our 10% subordinated notes and, if the lenders accelerate the debt under our senior credit facility, the indenture governing the senior subordinated notes, and may result in the acceleration of any of our other indebtedness outstanding at the time. As a result, if we do not have enough cash to repay all of our indebtedness or to repurchase all of the senior subordinated notes, we may be limited in the change of control transactions that we may pursue.

Our acquisitions may not be profitable, and the integration of these businesses may be costly and difficult and may cause disruption to our business.

Since commencing activities in November 2001, we have acquired and attempted to integrate, or we are in the process of integrating, into our operations Unipath Limited and its associated companies and assets, or the Unipath business, IVC Industries, Inc. (now doing business as Inverness Medical Nutritionals Group, or IMN), Wampole, Ostex, ABI, the Abbott rapid diagnostics business, Ischemia, Binax, the Determine business, BioStar, the Innovacon business and other smaller acquisitions. We have also made a number of smaller acquisitions. The ultimate success of all of our acquisitions depends, in part, on our ability to realize the anticipated synergies, cost savings and growth opportunities from integrating these businesses or assets into our existing businesses. However, the successful integration of independent businesses or assets is a complex, costly and time-consuming process. The difficulties of integrating companies and acquired assets include among others:

•  consolidating manufacturing and research and development operations, where appropriate;

•  integrating newly acquired businesses or product lines into a uniform financial reporting system;

•  coordinating sales, distribution and marketing functions;

•  establishing or expanding manufacturing, sales, distribution and marketing functions in order to accommodate newly acquired businesses or product lines;

•  preserving the important licensing, research and development, manufacturing and supply, distribution, marketing, customer and other relationships;

•  minimizing the diversion of management’s attention from ongoing business concerns; and

•  coordinating geographically separate organizations.

We may not accomplish the integration of our acquisitions smoothly or successfully. The diversion of the attention of our management from our current operations to the integration effort and any difficulties encountered in combining operations could prevent us from realizing the full benefits anticipated to result from these acquisitions and adversely affect our other businesses. Additionally, the costs associated with the integration of our acquisitions can be substantial. To the extent that we incur integration costs that are not anticipated when we finance our acquisitions, these unexpected costs could adversely impact our liquidity or force us to borrow additional funds. Ultimately, the value of any business or asset that we have acquired may not be greater than or equal to its purchase price.

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If we choose to acquire or invest in new and complementary businesses, products or technologies instead of developing them ourselves, such acquisitions or investments could disrupt our business and, depending on how we finance these acquisitions or investments, could result in the use of significant amounts of cash.

Our success depends in part on our ability to continually enhance and broaden our product offerings in response to changing technologies, customer demands and competitive pressures. Accordingly, from time to time we may seek to acquire or invest in businesses, products or technologies instead of developing them ourselves. Acquisitions and investments involve numerous risks, including:

•  the inability to complete the acquisition or investment;

•  disruption of our ongoing businesses and diversion of management attention;

•  difficulties in integrating the acquired entities, products or technologies;

•  difficulties in operating the acquired business profitably;

•  difficulties in transitioning key customer, distributor and supplier relationships;

•  risks associated with entering markets in which we have no or limited prior experience; and

•  unanticipated costs.

In addition, any future acquisitions or investments may result in:

•  issuances of dilutive equity securities, which may be sold at a discount to market price;

•  use of significant amounts of cash;

•  the incurrence of debt;

•  the assumption of significant liabilities;

•  unfavorable financing terms;

•  large one-time expenses; and

•  the creation of certain intangible assets, including goodwill, the write-down of which may result in significant charges to earnings.

We may not complete our pending joint venture transaction with P&G.

In December 2006, we announced that we had signed a definitive agreement with P&G to form a joint venture for the development, acquisition, manufacturing, marketing and sale of existing and to-be-developed consumer diagnostic products outside of the fields of cardiology and diabetes. The transaction is expected to close in the first half of 2007, subject to the satisfaction of customary closing and other conditions, such as that there be no material adverse change in our consumer diagnostics business, that the transaction be permitted under the indenture governing our senior subordinated notes or that we repay all of our outstanding senior subordinated notes and that we receive favorable tax rulings from the Swiss tax authorities, the receipt of regulatory approvals, and obtaining certain third-party consents to the transaction. There can be no assurance that all of these conditions will be satisfied. If these conditions are not satisfied or waived, we may be unable to complete the joint venture. In addition, in connection with the regulatory approval process or the FTC’s ongoing investigation relating to our acquisition of the Innovacon business, the terms of the joint venture may require modification, in which event we may not realize all of the benefits of the joint venture that we expect or the joint venture may not be completed at all.

Even if we complete the P&G joint venture transaction, we may not realize all of its intended benefits.

If we complete the P&G joint venture transaction, we may experience:

•  difficulties in integrating the respective corporate cultures and business objectives of Inverness and P&G into the new joint venture;

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•  difficulties or delays in transitioning clinical studies;

•  diversion of our management’s time and attention from other business concerns;

•  higher costs of integration at the joint venture than we anticipated;

•  difficulties in retaining key employees who are necessary to manage the joint venture; or

•  difficulties in working with an entity based in Switzerland and thus remote or inconvenient to our Waltham, Massachusetts headquarters.

For any of these reasons or as a result of other factors, we may not realize the anticipated benefits of the joint venture. P&G will retain an option to require us to purchase its interest in the joint venture at fair market value during the 60-day period beginning on the fourth anniversary of the closing.

Additionally, in connection with the completion of the joint venture, we will transfer or sell substantially all of the assets of our consumer diagnostics business, other than our manufacturing and core intellectual property assets, in exchange for $325.0 million in cash and a 50% interest in the joint venture. Our management will have broad discretion over the use and investment of this cash. Cash flow that we derive from the combination of any reinvestment of the $325.0 million we received in cash in connection with the transaction and our 50% interest in the joint venture may be less than the cash flow we derived from the disposed of assets.

If goodwill and/or other intangible assets that we have recorded in connection with our acquisitions of other businesses become impaired, we could have to take significant charges against earnings.

In connection with the accounting for certain of our acquisitions, including the Unipath business, Wampole, Ostex, ABI, the Abbott rapid diagnostics product lines, Ischemia, Binax, the Determine business, BioStar, and the Innovacon business, we have recorded a significant amount of goodwill and other intangible assets. Under current accounting guidelines, we must assess, at least annually and potentially more frequently, whether the value of goodwill and other intangible assets has been impaired. Any reduction or impairment of the value of goodwill or other intangible assets will result in a charge against earnings which could materially adversely affect our reported results of operations in future periods.

We may experience manufacturing problems or delays, which could result in decreased revenues or increased costs.

Many of our manufacturing processes are complex and require specialized and expensive equipment. Replacement parts for our specialized equipment can be expensive and, in some cases, can require lead times of up to a year to acquire. In addition, our private label consumer diagnostic products business, and our private label and bulk nutritional supplements business in particular, rely on operational efficiency to mass produce products at low margins per unit. We also rely on numerous third parties to supply production materials and in some cases there may not be alternative sources immediately available.

In addition, during 2006 we closed two manufacturing facilities and are shifting the production of products from these facilities to China. We have shifted the production of additional products to our manufacturing facilities in China. Moving the production of products is difficult and involves significant risk. Problems establishing relationships with local materials suppliers; acquiring or adapting the new facility and its equipment to the production of new products; hiring, training and retaining personnel and establishing and maintaining compliance with governmental regulations and industry standards can cause delays and inefficiencies which could have a material negative impact on our financial performance. We also currently rely on approximately ten significant third-party manufacturers, as well as numerous other less significant manufacturers, to produce many of our professional diagnostic products and certain components of our consumer diagnostic products. In addition, we manufacture the products acquired with the Determine business from a facility in Matsudo, Japan that is made available to us by Abbott Laboratories, from whom we also receive support services related to this facility. Any event which negatively impacts our manufacturing facilities, our manufacturing systems or equipment, or our contract manufacturers or suppliers, including,

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without limitation, wars, terrorist activities, natural disasters and outbreaks of infectious disease, could delay or suspend shipments of products or the release of new products or could result in the delivery of inferior products. Our revenues from the affected products would decline or we could incur losses until such time as we were able to restore our production processes or put in place alternative contract manufacturers or suppliers. Even though we carry business interruption insurance policies, we may suffer losses as a result of business interruptions that exceed the coverage available under our insurance policies.

We may experience difficulties that may delay or prevent our development, introduction or marketing of new or enhanced products.

We intend to continue to invest in product and technology development. The development of new or enhanced products is a complex and uncertain process. We may experience research and development, manufacturing, marketing and other difficulties that could delay or prevent our development, introduction or marketing of new products or enhancements. We cannot be certain that:

•  any of the products under development will prove to be effective in clinical trials;

•  we will be able to obtain, in a timely manner or at all, regulatory approval to market any of our products that are in development or contemplated;

•  any of such products can be manufactured at acceptable cost and with appropriate quality; or

•  any such products, if and when approved, can be successfully marketed.

The factors listed above, as well as manufacturing or distribution problems, or other factors beyond our control, could delay new product launches. In addition, we cannot assure you that the market will accept these products. Accordingly, there is no assurance that our overall revenues will increase if and when new products are launched.

Our failure to meet strict regulatory requirements could require us to pay fines, incur other costs or even close our facilities.

Our facilities and manufacturing techniques generally must conform to standards that are established by government agencies, including those of European and other foreign governments, as well as the FDA, and, to a lesser extent, the U.S. Drug Enforcement Administration and local health agencies. These regulatory agencies may conduct periodic audits of our facilities or our processes to monitor our compliance with applicable regulatory standards. If a regulatory agency finds that we fail to comply with the appropriate regulatory standards, it may impose fines on us, delay or withdraw pre-market clearances or other regulatory approvals or if such a regulatory agency determines that our non-compliance is severe, it may close our facilities. Any adverse action by an applicable regulatory agency could impair our ability to produce our products in a cost-effective and timely manner in order to meet our customers’ demands. We may also be required to bear other costs or take other actions that may have a negative impact on our future sales and profits.

Regulatory agencies may also impose new or enhanced standards that would increase our costs as well as the risks associated with non-compliance. For example, we anticipate that the FDA may soon finalize and implement “good manufacturing practice,” or GMP, regulations for nutritional supplements. GMP regulations would require supplements to be prepared, packaged and held in compliance with certain rules, and might require quality control provisions similar to those in the GMP regulations for drugs. While our manufacturing facilities for nutritional supplements have been subjected to, and passed, third party inspections against anticipated GMP standards, the ongoing compliance required in the event that GMP regulations are adopted would involve additional costs and would present new risks associated with any failure to comply with the regulations in the future.

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If we deliver products with defects, our credibility may be harmed, market acceptance of our products may decrease and we may be exposed to liability in excess of our product liability insurance coverage.

The manufacturing and marketing of consumer and professional diagnostic products involve an inherent risk of product liability claims. In addition, our product development and production are extremely complex and could expose our products to defects. Any defects could harm our credibility and decrease market acceptance of our products. In addition, our marketing of vitamins and nutritional supplements may cause us to be subjected to various product liability claims, including, among others, claims that the vitamins and nutritional supplements have inadequate warnings concerning side effects and interactions with other substances. Potential product liability claims may exceed the amount of our insurance coverage or may be excluded from coverage under the terms of the policy. In the event that we are held liable for a claim for which we are not indemnified, or for damages exceeding the limits of our insurance coverage, that claim could materially damage our business and our financial condition.

Our sales of branded nutritional supplements have been trending downward since 1998 due to the maturity of the market segments they serve and the age of that product line and we may experience further declines in sales of those products.

Our aggregate sales of all of our brand name nutritional products, including, among others, Ferro-Sequels, Stresstabs, Protegra, Posture, SoyCare, ALLBEE, and Z-BEC, have declined each year since 1998 through the year 2006, except in 2002 when they increased slightly as compared to 2001. We believe that these products have under-performed because they are, for the most part, aging brands with limited brand recognition that face increasing private label competition. The overall age of this product line means that we are subject to future distribution loss for under-performing brands, while our opportunities for new distribution on the existing product lines are limited. As a result, we do not expect significant sales growth of our existing brand name nutritional products and we may experience further declines in overall sales of our brand name nutritional products in the future.

Our sales of specific vitamins and nutritional supplements could be negatively impacted by media attention or other news developments that challenge the safety and effectiveness of those specific vitamins and nutritional supplements.

Most growth in the vitamin and nutritional supplement industry is attributed to new products that tend to generate greater attention in the marketplace than do older products. Positive media attention resulting from new scientific studies or announcements can spur rapid growth in individual segments of the market, and also impact individual brands. Conversely, news that challenges individual segments or products can have a negative impact on the industry overall as well as on sales of the challenged segments or products. Most of our vitamin and nutritional supplements products serve well-established market segments and, absent unforeseen new developments or trends, are not expected to benefit from rapid growth. A few of our vitamin and nutritional products are newer products that are more likely to be the subject of new scientific studies or announcements, which could be either positive or negative. News or other developments that challenge the safety or effectiveness of these products could negatively impact the profitability of our vitamin and nutritional supplements business.

We could suffer monetary damages, incur substantial costs or be prevented from using technologies important to our products as a result of a number of pending legal proceedings.

We are involved in various legal proceedings arising out of our consumer diagnostics, nutritional supplements and professional diagnostics business. Because of the nature of our business, we may be subject at any particular time to commercial disputes, consumer product claims or various other lawsuits arising in the ordinary course of our business, including employment matters, and expect that this will continue to be the case in the future. Such lawsuits generally seek damages, sometimes in substantial amounts, for commercial or personal injuries allegedly suffered and can include claims for punitive or other special damages. An adverse ruling or rulings in one or more such lawsuits could, individually or in the aggregate, have a material adverse effect on our sales, operations or financial performance. In addition, we aggressively defend our patent and

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other intellectual property rights. This often involves bringing infringement or other commercial claims against third parties. These suits can be expensive and result in counterclaims challenging the validity of our patents and other rights. We cannot assure you that these lawsuits or any future lawsuits relating to our businesses will not have a material adverse effect on us.

The profitability of our consumer products businesses may suffer if we are unable to establish and maintain close working relationships with our customers.

For the years ended December 31, 2006 and 2005, approximately 46% and 58%, respectively, of our net product sales were derived from our consumer products business, which consists of our consumer diagnostic products and vitamin and nutritional supplements segments. These businesses rely to a great extent on close working relationships with our customers rather than long-term exclusive contractual arrangements. Customer concentration in these businesses is relatively high, especially in our vitamin and nutritional supplements segment where two customers accounted for approximately 63% of sales during 2006. In addition, customers of our branded and private label consumer products businesses purchase products through purchase orders only and are not obligated to make future purchases. We therefore rely on our ability to deliver quality products on time in order to retain and generate customers. If we fail to meet our customers’ needs or expectations, whether due to manufacturing issues that affect quality or capacity issues that result in late shipments, we will harm our reputation and customer relationships and likely lose customers. Additionally, if we are unable to maintain close working relationships with our customers, sales of all of our products and our ability to successfully launch new products could suffer. The loss of a major customer and the failure to generate new accounts could significantly reduce our revenues or prevent us from achieving projected growth.

The profitability of our consumer products businesses may suffer if Johnson & Johnson, who recently acquired the consumer healthcare business of Pfizer, Inc., is unable to successfully market and sell its e.p.t pregnancy tests.

Under the terms of a manufacturing, packaging and supply agreement, with Johnson & Johnson, or JNJ, JNJ purchases its non-digital e.p.t pregnancy tests from us through June 6, 2009. Additionally, pursuant to the terms of a five-year supply agreement entered into in December 2003, as amended on June 1, 2005, we currently supply JNJ with a digital version of its e.p.t brand pregnancy tests on an exclusive basis. The amount of revenues or profits that we generate under these agreements will depend on the volume of orders that we receive from JNJ. As a result, if JNJ is unable to successfully market and sell its e.p.t pregnancy tests, or if other events adversely affect the volume of JNJ sales of its e.p.t pregnancy tests, then our future revenues and profit may be adversely affected.

Because sales of our private label nutritional supplements are generally made at low margins, the profitability of these products may suffer significantly as a result of relatively small increases in raw material or other manufacturing costs.

Sales of our private label nutritional supplements, which for the years ended December 31, 2006 and 2005, provided approximately 13% and 16%, respectively, of our net product sales, generate low profit margins. We rely on our ability to efficiently mass produce nutritional supplements in order to make meaningful profits from these products. Changes in raw material or other manufacturing costs can drastically cut into or eliminate the profits generated from the sale of a particular product. For the most part, we do not have long-term supply contracts for our required raw materials and, as a result, our costs can increase with little notice. The private label nutritional supplements business is also highly competitive such that our ability to raise prices as a result of increased costs is limited. Customers generally purchase private label products via purchase order, not through long-term contracts, and they often purchase these products from the lowest bidder on a product by product basis. The internet has enhanced price competition among private label manufacturers through the advent of on-line auctions, where customers will auction off the right to manufacture a particular product to the lowest bidder. The resulting margin erosion in our nutritionals business has resulted in a reduction in our overall gross margin over the last several years and contributed to our losses in 2006.

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Our financial condition or results of operations may be adversely affected by international business risks.

Approximately 41% and 42% of our net revenue was generated from outside the United States for the year ended December 31, 2006 and 2005, respectively. A significant number of our employees, including manufacturing, sales, support and research and development personnel, are located in foreign countries, including England, Scotland, Japan, China, and Israel. Conducting business outside of the United States subjects us to numerous risks, including:

•  increased costs or reduced revenue as a result of movements in foreign currency exchange rates;

•  decreased liquidity resulting from longer accounts receivable collection cycles typical of foreign countries;

•  lower productivity resulting from difficulties managing our sales, support and research and development operations across many countries;

•  lost revenues resulting from difficulties associated with enforcing agreements and collecting receivables through foreign legal systems;

•  lost revenues resulting from the imposition by foreign governments of trade protection measures;

•  higher cost of sales resulting from import or export licensing requirements;

•  lost revenues or other adverse affects as a result of economic or political instability in or affecting foreign countries in which we sell our products or operate; and

•  adverse effects resulting from changes in foreign regulatory or other laws affecting the sales of our products or our foreign operations.

Because our business relies heavily on foreign operations and revenues, changes in foreign currency exchange rates and our ability to convert currencies may negatively affect our financial condition and results of operations.

Our business relies heavily on our foreign operations. Five of our manufacturing operations are conducted outside the United States, in Bedford, England; Hangzhou and Shanghai, China; Matsudo, Japan and Yavne, Israel. We have consolidated much of our cardiovascular related research and development in Scotland and we intend to establish a significant manufacturing operation there. Approximately 41% and 42% of our net revenue was generated from outside the United States for the years ended December 31, 2006 and 2005, respectively. Our Clearblue pregnancy test product sales have historically been much stronger outside the United States, with 64% of net product sales of these products coming from outside the United States during the year ended December 31, 2006. In addition, the Abbott rapid diagnostics business generates a majority of its sales outside the United States, and all of the revenues of the Determine business are derived outside of the United States. Because of our foreign operations and foreign sales, we face exposure to movements in foreign currency exchange rates. Our primary exposures are related to the operations of our European subsidiaries and our manufacturing facilities in China and Japan. These exposures may change over time as business practices evolve and could result in increased costs or reduced revenue and could impact our actual cash flow.

Intense competition could reduce our market share or limit our ability to increase market share, which could impair the sales of our products and harm our financial performance.

The medical products industry is rapidly evolving and developments are expected to continue at a rapid pace. Competition in this industry, which includes both our consumer diagnostics and professional diagnostics businesses, is intense and expected to increase as new products and technologies become available and new competitors enter the market. Our competitors in the United States and abroad are numerous and include, among others, diagnostic testing and medical products companies, universities and other research institutions.

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Our future success depends upon maintaining a competitive position in the development of products and technologies in our areas of focus. Our competitors may:

•  develop technologies and products that are more effective than our products or that render our technologies or products obsolete or noncompetitive;

•  obtain patent protection or other intellectual property rights that would prevent us from developing our potential products; or

•  obtain regulatory approval for the commercialization of their products more rapidly or effectively than we do.

Also, the possibility of patent disputes with competitors holding foreign patent rights may limit or delay expansion possibilities for our diagnostics businesses in certain foreign jurisdictions. In addition, many of our existing or potential competitors have or may have substantially greater research and development capabilities, clinical, manufacturing, regulatory and marketing experience and financial and managerial resources.

The market for the sale of vitamins and nutritional supplements is also highly competitive. This competition is based principally upon price, quality of products, customer service and marketing support. There are numerous companies in the vitamins and nutritional supplements industry selling products to retailers such as mass merchandisers, drug store chains, independent drug stores, supermarkets, groceries and health food stores. As most of these companies are privately held, we are unable to obtain the information necessary to assess precisely the size and success of these competitors. However, we believe that a number of our competitors, particularly manufacturers of nationally advertised brand name products, are substantially larger than we are and have greater financial resources.

The rights we rely upon to protect the intellectual property underlying our products may not be adequate, which could enable third parties to use our technology and would reduce our ability to compete in the market.

Our success will depend in part on our ability to develop or acquire commercially valuable patent rights and to protect our intellectual property. Our patent position is generally uncertain and involves complex legal and factual questions. The degree of present and future protection for our proprietary rights is uncertain.

The risks and uncertainties that we face with respect to our patents and other proprietary rights include the following:

•  the pending patent applications we have filed or to which we have exclusive rights may not result in issued patents or may take longer than we expect to result in issued patents;

•  the claims of any patents which are issued may not provide meaningful protection;

•  We may not be able to develop additional proprietary technologies that are patentable;

•  the patents licensed or issued to us or our customers may not provide a competitive advantage;

•  other parties may challenge patents or patent applications licensed or issued to us or our customers;

•  patents issued to other companies may harm our ability to do business; and

•  other companies may design around technologies we have patented, licensed or developed.

In addition to patents, we rely on a combination of trade secrets, nondisclosure agreements and other contractual provisions and technical measures to protect our intellectual property rights. Nevertheless, these measures may not be adequate to safeguard the technology underlying our products. If they do not protect our rights, third parties could use our technology and our ability to compete in the market would be reduced. In addition, employees, consultants and others who participate in the development of our products may breach their agreements with us regarding our intellectual property and we may not have adequate remedies for the breach. We also may not be able to effectively protect our intellectual property rights in some foreign countries. For a variety of reasons, we may decide not to file for patent, copyright or trademark protection or

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prosecute potential infringements of our patents. We also realize that our trade secrets may become known through other means not currently foreseen by us. Despite our efforts to protect our intellectual property, our competitors or customers may independently develop similar or alternative technologies or products that are equal or superior to our technology and products without infringing on any of our intellectual property rights or design around our proprietary technologies.

Claims by other companies that our products infringe on their proprietary rights could adversely affect our ability to sell our products and increase our costs.

Substantial litigation over intellectual property rights exists in both the consumer and professional diagnostic industries. We expect that our products and products in these industries could be increasingly subject to third party infringement claims as the number of competitors grows and the functionality of products and technology in different industry segments overlaps. Third parties may currently have, or may eventually be issued, patents on which our products or technology may infringe. Any of these third parties might make a claim of infringement against us. Any litigation could result in the expenditure of significant financial resources and the diversion of management’s time and resources. In addition, litigation in which we are accused of infringement may cause negative publicity, have an impact on prospective customers, cause product shipment delays or require us to develop non-infringing technology, make substantial payments to third parties, or enter into royalty or license agreements, which may not be available on acceptable terms, or at all. If a successful claim of infringement was made against us and we could not develop non-infringing technology or license the infringed or similar technology on a timely and cost-effective basis, our revenue may decrease and we could be exposed to legal actions by our customers.

We have initiated, and may need to further initiate, lawsuits to protect or enforce our patents and other intellectual property rights, which could be expensive and, if we lose, could cause us to lose some of our intellectual property rights, which would reduce our ability to compete in the market.

We rely on patents to protect a portion of our intellectual property and our competitive position. In order to protect or enforce our patent rights, we may initiate patent litigation against third parties, such as infringement suits or interference proceedings. Litigation may be necessary to:

•  assert claims of infringement;

•  enforce our patents;

•  protect our trade secrets or know-how; or

•  determine the enforceability, scope and validity of the proprietary rights of others.

Currently, we have initiated a number of lawsuits against competitors who we believe to be selling products that infringe our proprietary rights. These current lawsuits and any other lawsuits that we initiate could be expensive, take significant time and divert management’s attention from other business concerns. Litigation also puts our patents at risk of being invalidated or interpreted narrowly and our patent applications at risk of not issuing. Additionally, we may provoke third parties to assert claims against us.

Patent law relating to the scope of claims in the technology fields in which we operate is still evolving and, consequently, patent positions in our industry are generally uncertain. We may not prevail in any of these suits and the damages or other remedies awarded, if any, may not be commercially valuable. During the course of these suits, there may be public announcements of the results of hearings, motions and other interim proceedings or developments in the litigation. If securities analysts or investors perceive any of these results to be negative, our stock price could decline.

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In December 2005, we learned that the Securities and Exchange Commission, or the SEC, had issued a formal order of investigation in connection with the previously disclosed revenue recognition matter at one of our diagnostic divisions. We cannot predict what the outcome of this investigation will be.

In December 2005, we learned that the SEC had issued a formal order of investigation in connection with the previously disclosed revenue recognition matter at one of our diagnostic divisions, and we subsequently received a subpoena for documents. We believe that we fully responded to the subpoena and we have continued to fully cooperate with the SEC’s investigation. We cannot predict whether the SEC will seek additional information or what the outcome of its investigation will be.

In March 2006, the Federal Trade Commission, or the FTC, opened a preliminary, non-public investigation into our acquisition of the Innovacon business to determine whether this acquisition may be anticompetitive. We cannot predict what the outcome of this investigation will be.

In March, 2006, the FTC opened a preliminary, non-public investigation into our then pending acquisition of the Innovacon business we acquired from ACON Laboratories to determine whether this acquisition may be anticompetitive, and we subsequently received a Civil Investigative Demand and a subpoena requesting documents. We believe that we have fully responded to the Civil Investigative Demand and we are continuing to produce documents in connection with the subpoena and to otherwise cooperate with the FTC’s investigation. We cannot predict whether the FTC will seek additional information or what the outcome of this investigation will be. The FTC generally has the power to commence administrative or federal court proceedings seeking injunctive relief or divestiture of assets. In the event that an order were to be issued requiring divestiture of significant assets or imposing other injunctive relief, our business, financial condition and results of operations could be materially adversely affected.

Non-competition obligations and other restrictions will limit our ability to take full advantage of our management team, the technology we own or license and our research and development capabilities.

Members of our management team have had significant experience in the diabetes field. In addition, technology we own or license may have potential applications to this field and our research and development capabilities could be applied to this field. However, in conjunction with our split-off from Inverness Medical Technology, Inc., or IMT, we agreed not to compete with IMT and Johnson & Johnson in the field of diabetes through 2011. In addition, our license agreement with IMT prevents us from using any of the licensed technology in the field of diabetes. As a result of these restrictions, we cannot pursue opportunities in the field of diabetes.

Our operating results may fluctuate due to various factors and as a result period-to-period comparisons of our results of operations will not necessarily be meaningful.

Factors relating to our business make our future operating results uncertain and may cause them to fluctuate from period to period. Such factors include:

•  the timing of new product announcements and introductions by us and our competitors;

•  market acceptance of new or enhanced versions of our products;

•  changes in manufacturing costs or other expenses;

•  competitive pricing pressures;

•  the gain or loss of significant distribution outlets or customers;

•  increased research and development expenses;

•  the timing of any future acquisitions;

•  general economic conditions; or

•  general stock market conditions or other economic or external factors.

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Because our operating results may fluctuate from quarter to quarter, it may be difficult for us or our investors to predict our future performance by viewing our historical operating results.

Period-to-period comparisons of our operating results may not be meaningful due to our acquisitions.

We have engaged in a number of acquisitions in recent years which makes it difficult to analyze our results and to compare them from period to period, including our significant acquisitions of IVC Industries, Inc. in March 2002, Wampole in September 2002, Ostex in June 2003, ABI in August 2003, the Abbott rapid diagnostics product lines in September 2003, Binax and Ischemia in March 2005, the Determine business in June 2005, BioStar in September 2005, and the Innovacon business in March 2006. Period-to-period comparisons of our results of operations may not be meaningful due to these acquisitions and are not indications of our future performance. Any future acquisitions will also make our results difficult to compare from period to period in the future.

Our stock price may fluctuate significantly and stockholders who buy or sell our common stock may lose all or part of the value of their investment, depending on the price of our common stock from time to time.

Our common stock has only been listed on the American Stock Exchange since November 23, 2001 and we have a limited market capitalization. As a result, we are currently followed by only a few market analysts and a portion of the investment community. Limited trading of our common stock may therefore make it more difficult for you to sell your shares.

In addition, our share price may be volatile due to our operating results, as well as factors beyond our control. It is possible that in some future periods the results of our operations will be below the expectations of the public market. In any such event, the market price of our common stock could decline. Furthermore, the stock market may experience significant price and volume fluctuations, which may affect the market price of our common stock for reasons unrelated to our operating performance. The market price of our common stock may be highly volatile and may be affected by factors such as:

•  our quarterly and annual operating results, including our failure to meet the performance estimates of securities analysts;

•  changes in financial estimates of our revenues and operating results or buy/sell recommendations by securities analysts;

•  the timing of announcements by us or our competitors of significant products, contracts or acquisitions or publicity regarding actual or potential results or performance thereof;

•  changes in general conditions in the economy, the financial markets or the health care industry;

•  government regulation in the health care industry;

•  changes in other areas such as tax laws;

•  sales of substantial amounts of common stock or the perception that such sales could occur;

•  changes in investor perception of our industry, our businesses or our prospects;

•  the loss of key employees, officers or directors; or

•  other developments affecting us or our competitors.

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Anti-takeover provisions in our organizational documents and Delaware law may limit the ability of our stockholders to control our policies and effect a change of control of our company and prevent attempts by our stockholders to replace or remove our current management, which may not be in your best interests.

There are provisions in our certificate of incorporation and bylaws that may discourage a third party from making a proposal to acquire us, even if some of our stockholders might consider the proposal to be in their best interests, and prevent attempts by our stockholders to replace or remove our current management. These provisions include the following:

•  our certificate of incorporation provides for three classes of directors with the term of office of one class expiring each year, commonly referred to as a staggered board. By preventing stockholders from voting on the election of more than one class of directors at any annual meeting of stockholders, this provision may have the effect of keeping the current members of our board of directors in control for a longer period of time than stockholders may desire;

•  our certificate of incorporation authorizes our board of directors to issue shares of preferred stock without stockholder approval and to establish the preferences and rights of any preferred stock issued, which would allow the board to issue one or more classes or series of preferred stock that could discourage or delay a tender offer or change in control;

•  our certificate of incorporation prohibits our stockholders from filling board vacancies, calling special stockholder meetings or taking action by written consent;

•  our certificate of incorporation provides for the removal of a director only with cause and by the affirmative vote of the holders of 75% or more of the shares then entitled to vote at an election of our directors; and

•  our bylaws require advance written notice of stockholder proposals and director nominations.

Additionally, we are subject to Section 203 of the Delaware General Corporation Law, which, in general, imposes restrictions upon acquirers of 15% or more of our stock. Finally, the board of directors may in the future adopt other protective measures, such as a stockholder rights plan, which could delay, deter or prevent a change of control.

Because we do not intend to pay dividends on our common stock, you will benefit from an investment in our common stock only if it appreciates in value.

We currently intend to retain our future earnings, if any, to finance the expansion of our business and do not expect to pay any cash dividends on our common stock in the foreseeable future. In addition, our senior credit facility currently prohibits the payment of dividends and the indenture governing the terms of our senior subordinated notes restricts the amount of any dividends that we may pay. As a result, the success of your investment in our common stock will depend entirely upon any future appreciation. There is no guarantee that our common stock will appreciate in value or even maintain the price at which you purchased your shares.

ITEM 1B.   UNRESOLVED STAFF COMMENTS

None.

ITEM 2.   PROPERTIES

Our principal corporate administrative office, together with the administrative office for most of our United States operations, is housed in approximately 22,600 square feet of leased space located at 51 Sawyer Road, Waltham, Massachusetts. Our lease of this facility expires on May 31, 2008.

Our European consumer and professional diagnostics operations are currently administered from a 150,000 square foot facility located in Bedford, England. We also manufacture products for these operations

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and conduct research and development activity at the Bedford facility. Our lease for this facility expires on September 27, 2021.

We also have manufacturing operations in Hangzhou and Shanghai, China; Scarborough, Maine; Louisville, Colorado; Yavne, Israel; Matsudo, Japan; Freehold and Irvington, New Jersey. We currently manufacture a portion of our professional diagnostic products, and some consumer diagnostic products, out of a newly constructed manufacturing facility of approximately 300,000 square feet in Hangzhou, China, which we own. We acquired this facility from ACON Laboratories, Inc. in May 2006. We currently manufacture a portion of our consumer diagnostic products out of approximately 25,000 square feet of space in Shanghai, China made available by our joint venture partner with the remainder manufactured at our Bedford, England facility. We manufacture certain of our professional diagnostic products out of a 64,000 square foot facility that we lease in Scarborough, Maine and out of a 75,000 square foot facility that we lease in Louisville, Colorado, portions of which we sublease to third parties. We house the development, manufacturing, administrative and marketing operations related to our Orgenics professional diagnostic products in a leased facility of approximately 10,000 square feet in Yavne, Israel. The products that we acquired from Abbott in June 2005 are manufactured by us in Matsudo, Japan in 19,000 square feet of space rented from Abbott under a manufacturing and support services agreement entered into in connection with the acquisition. We also own a 160,000 square foot manufacturing facility in Freehold, New Jersey and lease a 35,000 square foot facility in Irvington, New Jersey. These New Jersey facilities manufacture our vitamin and nutritional supplement products. Consistent with our previously announced timeline, we have recently ceased manufacturing operations at our manufacturing facility in San Diego, California.

We also have leases or other arrangements for administrative or sales offices, lab space and warehouses in various locations worldwide.

ITEM 3.   LEGAL PROCEEDINGS

We currently are not a party to any material pending legal proceedings.

Because of the nature of our business, we may be subject at any particular time to consumer product claims or various other lawsuits arising in the ordinary course of our business, including employment matters, and expect that this will continue to be the case in the future. Such lawsuits generally seek damages, sometimes in substantial amounts, for personal injuries or other commercial or employment claims. In addition, we aggressively defend our patent and other intellectual property rights. This often involves bringing infringement or other commercial claims against third parties. These suits can be expensive and result in counterclaims challenging the validity of our patents and other rights.

In December 2005, we learned that the SEC had issued a formal order of investigation in connection with the previously disclosed revenue recognition matter at one of our diagnostic divisions, and we subsequently received a subpoena for documents. We believe that we fully responded to the subpoena and we will continue to fully cooperate with the SEC’s investigation. We cannot predict whether the SEC will seek additional information or what the outcome of its investigation will be.

In March, 2006, the FTC opened a preliminary, non-public investigation into our then pending acquisition of the business we acquired from ACON Laboratories to determine whether this acquisition may be anticompetitive, and we subsequently received a Civil Investigative Demand and a subpoena requesting documents. We believe that we have fully responded to the Civil Investigative Demand and we are continuing to produce documents in connection with the subpoena and to otherwise cooperate with the FTC’s investigation. We cannot predict whether the FTC will seek additional information or what the outcome of this investigation will be. The FTC generally has the power to commence administrative or federal court proceedings seeking injunctive relief or divestiture of assets. In the event that an order were to be issued requiring divestiture of significant assets or imposing other injunctive relief, our business, financial condition and results of operations could be materially adversely affected.

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ITEM 4.   SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

At a special meeting of stockholders held on December 15, 2006, the stockholders approved the matters set forth below. The stockholders approved and adopted (i) a proposal to increase the total number of shares of common stock that we are authorized to issue by 50,000,000 shares from 50,000,000 shares to 100,000,000 shares, and (ii) a proposal to increase the maximum number of shares of common stock available for issuance under the Inverness Medical Innovations, Inc. 2001 Stock Option and Incentive Plan from 6,074,081 to 8,074,081 shares.

The following table summarizes the votes for, against or withheld, with regard to each matter voted upon:

Matter	For		Against		Withheld
Proposal to increase total number of authorized shares of common stock:		23,091,744		1,196,816		45,066
Proposal to increase maximum number of shares of common stock available for issuance under option plan:		23,298,081		1,005,265		30,280

PART II

ITEM 5.   MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Market Information

Our common stock trades on the American Stock Exchange (AMEX) under the symbol “IMA.” The following table sets forth the high and low sales prices of our common stock on AMEX for each quarter during fiscal 2006 and 2005.

	High		Low
Fiscal 2006
Fourth Quarter	$	41.50	$	34.01
Third Quarter	$	36.02	$	25.99
Second Quarter	$	32.00	$	24.60
First Quarter	$	29.00	$	23.63
Fiscal 2005
Fourth Quarter	$	27.01	$	21.90
Third Quarter	$	29.51	$	24.70
Second Quarter	$	29.99	$	21.25
First Quarter	$	25.87	$	20.49

On February 26, 2007, there were 921 holders of record of our common stock.

Dividend Policy

We have never declared or paid any cash dividends on our common stock. We currently intend to retain earnings to support our growth strategy and do not anticipate paying cash dividends on our common stock in the foreseeable future. Payment of future dividends, if any, on our common stock will be at the discretion of our board of directors after taking into account various factors, including our financial condition, operating results, current and anticipated cash needs and plans for expansion. In addition, restrictive covenants under our senior credit facility and the indenture governing the terms of the senior subordinated notes currently prohibit the payment of cash or stock dividends.

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Stock Performance Graph

The following line graph compares the change in the cumulative total stockholder return on our common stock from December 31, 2001 through December 31, 2006. This graph assumes an investment of $100 on December 31, 2001 in our common stock, and compares its performance with the AMEX US Total Return Index and the AMEX Health Products & Services Total Return Index (the “Current Indices”). We currently pay no dividends. The Current Indices reflect a cumulative total return based upon the reinvestment of dividends of the stocks included in those indices. Measurement points are December 31, 2001 and the last trading day of each subsequent fiscal quarter through December 31, 2006.

The comparisons shown in the graph below are based upon historical data. We caution that the stock price performance shown in the graph below is not necessarily indicative of, nor is it intended to forecast, the potential future performance of our common stock.

Current Indices

Date	12/31/01		12/31/02		12/31/03		12/31/04		12/30/05		12/29/06
IMA	$	100.00	$	72.85	$	120.66	$	139.06	$	131.36	$	214.40
AMEX US Total Return Index	$	100.00	$	81.74	$	110.63	$	127.83	$	138.33	$	160.48
AMEX Health Products & Services Total Return Index	$	100.00	$	69.12	$	121.08	$	124.55	$	107.72	$	138.96

The performance graph above shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (The “Exchange Act”), or otherwise subject to the liability of that section. This graph will not be deemed incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act, whether made before or after the date hereof, regardless of any general incorporation language in such filing.

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ITEM 6.   SELECTED CONSOLIDATED FINANCIAL DATA

The following tables set forth selected consolidated financial data of our company as of and for each of the years in the five-year period ended December 31, 2006 and should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and notes thereto included elsewhere in this Annual Report on Form 10-K.

The selected consolidated financial data as of December 31, 2006 and 2005 and for each of the three years in the period ended December 31, 2006 have been derived from our consolidated financial statements which are included elsewhere in this Annual Report on Form 10-K and were audited by BDO Seidman, LLP, independent registered public accounting firm. The selected consolidated financial data as of December 31, 2004, 2003 and 2002 have been derived from our consolidated financial statements not included herein, which were audited by BDO Seidman, LLP.

For a discussion of certain factors that materially affect the comparability of the selected consolidated financial data or cause the data reflected herein not to be indicative of our future results of operations or financial condition, see Item 1A “Risk Factors” and Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

	For the Year Ended December 31,
	2006			2005			2004			2003			2002(2)
	(in thousands, except per share data)
Statement of Operations Data:
Net product sales	$	552,130		$	406,457		$	365,432		$	285,430		$	200,399
License and royalty revenue		17,324			15,393			8,559			9,728			6,405
Net revenue		569,454			421,850			373,991			295,158			206,804
Cost of sales		340,231			269,538			226,987			167,641			114,653
Gross profit		229,223			152,312			147,004			127,517			92,151
Operating expenses:
Research and development		53,666			30,992			31,954			24,367			14,508
Sales and marketing		94,445			72,103			57,957			52,504			39,570
General and administrative		71,243			59,990			52,707			35,812			38,628
Loss on dispositions, net		3,498			—			—			—			—
Charge related to asset impairment		—			—			—			—			12,682
Operating income (loss)		6,371			(10,773	)		4,386			14,834			(13,237	)
Interest expense and other expenses, net		(17,486	)		(1,617	)		(18,707	)		(3,270	)		(5,955	)
(Loss) income from continuing operations before provision for income taxes		(11,115	)		(12,390	)		(14,321	)		11,564			(19,192	)
Provision for income taxes		5,727			6,819			2,275			2,911			3,443
(Loss) income from continuing operations	$	(16,842	)	$	(19,209	)	$	(16,596	)	$	8,653		$	(22,635	)
(Loss) income from continuing operations available to common stockholders—basic and diluted(1)	$	(16,842	)	$	(19,209	)	$	(17,345	)	$	7,695		$	(34,583	)
(Loss) income per common share(1):
Basic(1)	$	(0.49	)	$	(0.79	)	$	(0.87	)	$	0.49		$	(3.48	)
Diluted(1)	$	(0.49	)	$	(0.79	)	$	(0.87	)	$	0.44		$	(3.48	)

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	December 31,
	2006		2005		2004		2003		2002
	(in thousands)
Balance Sheet Data:
Cash and cash equivalents	$	71,104	$	34,270	$	16,756	$	24,622	$	30,668
Working capital	$	133,313	$	84,523	$	62,615	$	44,693	$	27,685
Total assets	$	1,085,771	$	791,166	$	568,269	$	540,529	$	356,495
Total debt	$	202,976	$	262,504	$	191,224	$	176,181	$	104,613
Redeemable convertible preferred stock	$	—	$	—	$	—	$	6,185	$	9,051
Total stockholders’ equity	$	714,138	$	397,308	$	271,416	$	265,173	$	161,849

(1)

(Loss) income available to common stockholders and basic and diluted (loss) income per common share are computed as described in Notes 2(m) and 13 of our consolidated financial statements included elsewhere in this Annual Report on Form 10-K.

(2)

Upon the adoption of Statement of Financial Accounting Standards, “SFAS,” No. 142, Goodwill and Other Intangible Assets, on January 1, 2002, we recorded an impairment charge of $12.1 million, or $1.22 per basic and diluted share, and accounted for the charge as a cumulative effect of a change in accounting principle which was subtracted from loss before provision for income taxes to arrive at net loss. Consequently, net loss available to common stockholders in 2002 was $46.7 million, or $4.70 per basic and diluted share.

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ITEM 7.   MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Forward-Looking Statements

This Annual Report on Form 10-K, including this Item 7, contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. You can identify these statements by forward-looking words such as “may,” “could,” “should,” “would,” “intend,” “will,” “expect,” “anticipate,” “believe,” “estimate,” “continue” or similar words. You should read statements that contain these words carefully because they discuss our future expectations, contain projections of our future results of operations or of our financial condition or state other “forward-looking” information. Forward-looking statements in this Item 7 include, without limitation, statements regarding our expectations with respect to our pending joint venture with The Procter & Gamble Company, or P&G, the impact of our expanded distribution network, the impact of the consolidation of our manufacturing facilities on margins, the impact of improved margins on operating cash flow, new product introductions, research and development expenditures, anticipated growth in our professional diagnostics business, and our funding plans for our future working capital needs and commitments. Actual results or developments could differ materially from those projected in such statements as a result of numerous factors, including, without limitation, those risks and uncertainties set forth in Item 1A entitled “Risk Factors,” which begins on page 11 of this report, as well as those factors identified from time to time in our periodic filings with the Securities and Exchange Commission. We do not undertake any obligation to update any forward-looking statements. This report and, in particular, the following discussion and analysis of our financial condition and results of operations, should be read in light of those risks and uncertainties and in conjunction with our accompanying consolidated financial statements and notes thereto.

Overview

As a leading global manufacturer and supplier of rapid diagnostic products for consumer and professional markets, we are continually exploring new opportunities for our proprietary electrochemical and other technologies in a variety of professional diagnostic and consumer-oriented applications, including immuno-diagnostics with a focus on women’s health, cardiology and infectious disease. As part of this strategy, we are focused on opportunities, including acquisitions and strategic partnerships, aimed at expanding both our product offerings and our distribution capability in the rapid diagnostic marketplace. Our 2006 acquisition of the assets of ACON Laboratories’ business of researching, developing, manufacturing, marketing and selling lateral flow immunoassay and directly-related products in the United States, Canada, Australia, Japan and most of western Europe, or the Innovacon business, not only expanded our product offerings but had an immediate positive impact on our operating results. We have also continued to expand the worldwide distribution network supporting our professional diagnostics segment which will ultimately enable us to get our future cardiology diagnostic products to the professional users critical to market acceptance. Since the beginning of the fourth quarter of 2005, we have acquired distributors in Spain, Australia, Canada, Germany, Italy and Japan.

We are also focused on improving our margins through consolidation of certain of our manufacturing operations at lower cost facilities. Our acquisition of the Innovacon business also represents a key component of this strategy. To date we have benefited from the higher margins that this business enjoys. These margins result from the lower costs associated with manufacturing at the new 300,000 square foot manufacturing facility located in Hangzhou, China, or the ABON facility, which we acquired in May 2006 as part of the transaction with ACON Laboratories. In 2007, we expect to begin to see improved margins on some of our existing products as we move production of certain products from higher costs facilities to the ABON facility.

Our agreement with P&G to form a 50/50 joint venture for the development, manufacturing, marketing and sale of existing and to-be-developed consumer diagnostic products outside of the fields of cardiology and diabetes presents us an exciting and unique opportunity. By leveraging P&G’s marketing and distribution capabilities, we expect this partnership to simultaneously expand the reach of our over-the-counter diagnostic

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products, while enabling enhanced focus on our rapidly growing professional diagnostics segment and, in particular, on our cardiology development programs.

We also continue to emphasize new product development. This requires substantial investment and involves significant inherent risk. We intend to continue to devote substantial resources to research and development activities. We will also continue to aggressively defend our substantial intellectual property portfolio, which underlies our emphasis on new product development, against potential infringers.

2006 Financial Highlights

Net revenue in 2006 of $569.5 million increased by $147.6 million, or 35%, from $421.9 million in 2005 primarily as a result of our acquisition of the Innovacon business and businesses acquired during 2005, most notably Binax and the Determine business acquired from Abbott Laboratories, higher license and royalty revenue and, to a lesser extent, organic growth.

Gross profit increased by $76.9 million, or 50%, to $229.2 million in 2006 from $152.3 million in 2005 principally as a result of increased license and royalty revenue and from gross profit earned on incremental revenue from acquired businesses, primarily in our professional diagnostic business. Gross profit from our nutritional supplements business also increased in 2006, principally as a result of improved factory utilization as a result of increasing revenue and cost reduction initiatives in our private label manufacturing business. Offsetting these increases were a variety of charges totaling $9.8 million associated with the closures of our ABI operation in San Diego, California and our manufacturing facility in Galway, Ireland and non-cash stock-based compensation expense. Gross profit in 2005 was adversely impacted by $8.1 million associated with the closing of our Galway, Ireland manufacturing facility and with charges associated with excess inventories and a product recall.

We continue to invest aggressively in research and development of new products and technologies as evidenced by our increased research and development expense of $53.7 million in 2006 from $31.0 million in 2005. Expenditures in 2006 and 2005 are reported net of $16.6 million and $17.2 million, respectively, arising from the co-development funding arrangement that we entered into with ITI Scotland in February 2005. Research and development expense before considering the co-development funding was $70.3 million in 2006 and $48.2 million in 2005, an increase of $22.1 million. The increase in spending resulted in part from expenditures of $8.9 million associated with our acquisitions of Clondiag and the Innovacon business, including a $5.0 million charge related to the write-off of in-process research and development projects that had not achieved technical feasibility as of the date of our acquisition of Clondiag. The remaining research and development spending primarily related to our continued significant investment in the development of products in the field of cardiology. Our co-development funding arrangement with ITI Scotland expires in March 2008 and we expect to receive approximately £10 million (or $19.6 million at December 31, 2006) of aggregate additional funding through the end of the arrangement.

Results of Operations

Year Ended December 31, 2006 Compared to Year Ended December 31, 2005

Net Product Sales.  Net product sales increased by $145.7 million, or 36%, to $552.1 million in 2006 from $406.5 million in 2005. Excluding the unfavorable impact of currency translation, net product sales in 2006 grew by approximately $143.5 million, or 35%, over 2005. Of the currency adjusted increase, revenue increased as a result of our acquisitions of: (i) Binax in March 2005, which contributed revenue of $9.6 million, (ii) the Determine business in June 2005, which contributed revenue of $15.9 million, (iii) BioStar in September 2005, which contributed revenue of $21.0 million, (iv) IDT in September 2005, which contributed $10.4 million, (v) the Innovacon business in March 2006, which contributed $54.9 million, and (vi) various less significant acquisitions, which contributed an aggregate of $1.9 million of such increase.

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Net Product Sales by Business Segment.  Net product sales by business segment for 2006 and 2005 are as follows:

	2006		2005		% Increase
	(in thousands)
Consumer diagnostic products	$	171,607	$	161,695		6%
Vitamins and nutritional supplements		82,051		75,411		9%
Professional diagnostic products		298,472		169,351		76%
Net product sales	$	552,130	$	406,457		36%

Consumer Diagnostic Products

The currency adjusted increase in net product sales from our consumer diagnostic products was $8.3 million, or 5.1%, comparing 2006 to 2005. Of the currency adjusted increase, $7.4 million resulted from our acquisition of the Innovacon business in March 2006.

Vitamins and Nutritional Supplements

Our vitamins and nutritional supplements net product sales increased by $6.6 million, or 9%, comparing 2006 to 2005. The increase was driven primarily by our private label business.

Professional Diagnostic Products

The currency adjusted increase in net product sales from our professional diagnostic products was $128.6 million, or 75.9%, comparing 2006 to 2005. Of the currency adjusted increase, revenue increased as a result of our acquisitions of: (i) Binax in March 2005, which contributed revenue of $9.6 million, (ii) the Determine business in June 2005, which contributed revenue of $15.9 million, (iii) BioStar in September 2005, which contributed revenue of $21.0 million, (iv) IDT in September 2005, which contributed revenue of $10.4 million, (v) the Innovacon business in March 2006, which contributed $47.5 million and (vi) various less significant acquisitions, which contributed an aggregate of $1.9 million of such increase. Organic growth, particularly from our highly differentiated respiratory products, also contributed to the growth.

Net Product Sales by Geographic Location.  Net product sales by geographic location for 2006 and 2005 are as follows:

	2006		2005		% Increase
	(in thousands)
United States	$	323,046	$	234,229		38%
Europe		134,528		108,981		23%
Other		94,556		63,247		50%
Net product sales	$	552,130	$	406,457		36%

Net product sales of $323.0 million and $234.2 million generated in the United States were approximately 59% and 58% of total net product sales for the year ended December 31, 2006 and 2005, respectively. The growth in net product sales in all geographic regions resulted from the various acquisitions discussed above, and organic growth.

License and Royalty Revenue.  License and royalty revenue represents license and royalty fees from intellectual property license agreements with third parties. License and royalty revenue increased by $1.9 million, or 13%, to $17.3 million in 2006 from $15.4 million in 2005. The increase primarily relates to royalty revenue received as a result of the settlement and licensing arrangements that we entered into with Quidel Corporation in April 2005 and Vedalab in November 2006.

Gross Profit and Margin.  Gross profit increased by $76.9 million, or 50%, to $229.2 million in 2006 from $152.3 million in 2005. Gross profit during 2006 benefited from higher than average margins earned on

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revenue from our recently acquired businesses and from favorable product mix. Included in cost of sales during 2006 was a restructuring charge of $9.5 million related to the closure of our ABI operation in San Diego, California, along with the write-off of fixed assets at other facilities impacted by our 2006 restructuring plans and the closure of CDIL, our manufacturing facility in Galway, Ireland. Cost of sales during 2006 also included a $0.4 million charge for stock-based compensation related to our January 1, 2006 adoption of SFAS No. 123-R, Share-Based Payment. Cost of sales during 2005 included: (i) the inclusion in cost of sales of a $4.1 million charge principally associated with our decision to close our Galway, Ireland manufacturing facility, (ii) a charge of $2.4 million associated with a reserve established during the second quarter of 2005 at our Wampole subsidiary for excess quantities of certain raw materials and finished goods, including certain finished goods held at distributors but subject to rights of return, and (iii) a $1.6 million provision for returns and inventory reserve which was established as a result of our recall of the drugs of abuse diagnostic products during the first quarter of 2005, offset in part by the gross profit earned on increased professional diagnostics products revenue, as discussed above.

Cost of sales included amortization expense of $11.2 million and $7.2 million in 2006 and 2005, respectively.

Overall gross margin was 40% in 2006 compared to 36% in 2005. Overall gross margin in 2006 was adversely affected by the $9.5 million restructuring charge and $0.4 million stock-based compensation charge discussed above. Overall gross margin in 2005 was adversely affected by the $4.1 million charge associated with the CDIL closing, the $2.4 million Wampole inventory reserve, and the $1.6 million returns and inventory reserve associated with the drugs of abuse product recalls discussed above.

Gross Profit from Net Product Sales by Business Segment.  Gross profit from net product sales represents total gross profit less gross profit associated with license and royalty revenue. Gross profit from net product sales increased by $75.8 million to $217.3 million in 2006 from $141.5 million in 2005. Gross profit from net product sales by business segment for 2006 and 2005 is as follows:

	2006		2005		% Increase
	(in thousands)
Consumer diagnostic products	$	82,658	$	76,515		8%
Vitamins and nutritional supplements		5,037		2,738		84%
Professional diagnostic products		129,636		62,252		108%
Gross profit from net product sales	$	217,331	$	141,505		54%

Consumer Diagnostic Products

Gross profit from our consumer diagnostic product sales increased $6.1 million, or 8%, comparing 2006 to 2005. Cost of sales for 2006 included restructuring charges totaling $2.2 million related to the closure of our CDIL manufacturing facility and a $0.4 million charge for stock-based compensation. Included in cost of sales for 2005, and adversely effecting gross profit, was a $4.1 million charge principally associated with our decision to close our CDIL manufacturing facility.

As a percentage of our consumer diagnostic net product sales, gross profit was 48% for 2006 compared to 47% in 2005. The increase in gross profit from our consumer diagnostic product sales resulted from a change in product mix.

Vitamins and Nutritional Supplements

Gross profit in our vitamins and nutritional supplements business increased $2.3 million, or 84%, comparing 2006 to 2005. The increase is primarily the result of improved factory utilization and our cost reduction initiatives in our private label manufacturing business.

As a percentage of vitamin and nutritional supplements net product sales, gross profit for our vitamins and nutritional supplements business was 6% in 2006 compared to 4% in 2005.

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Professional Diagnostic Products

Gross profit from our professional diagnostic products increased by $67.4 million, or 108%, comparing 2006 to 2005, principally as a result of gross profit earned on revenue from acquired businesses, as discussed above, offset by a $7.2 million restructuring charge to cost of sales associated with management’s decision to close our ABI operations in San Diego, California. Reducing gross profit for 2005 were a charge of $2.4 million associated with a reserve established during the second quarter of 2005 at our Wampole subsidiary for excess quantities of certain raw materials and finished goods, including certain finished goods held at distributors but subject to rights of return, and a $1.6 million provision for returns and inventory reserve which were established as a result of our recall of the drugs of abuse diagnostic products during the first quarter of 2005.

As a percentage of our professional diagnostic net product sales, gross profit from our professional diagnostic product sales was 43% in 2006, compared to 37% in 2005.

Research and Development Expense.  Research and development expense increased by $22.7 million, or 73%, to $53.7 million in 2006 from $31.0 million in 2005. Research and development expense in 2006 and 2005 is reported net of co-development funding of $16.6 million and $17.2 million, respectively, arising from the co-development funding arrangement that we entered into with ITI in February 2005. The year over year increase in research and development expense is primarily the result of increased spending related to our cardiology research programs, $8.9 million of spending related to our 2006 acquisitions, a $2.9 million charge related to the write-off of fixed assets impacted by our restructuring plans and a $1.4 million charge for stock-based compensation related to our January 1, 2006 adoption of SFAS No. 123-R. Included in the $8.9 million of additional spending related to recent acquisitions is a $5.0 million charge related to the write-off of in-process research and development projects that had not achieved technical feasibility as of the date of our acquisition of Clondiag.

Amortization expense of $3.3 million and $2.3 million was included in research and development expense for 2006 and 2005, respectively.

Research and development expense as a percentage of net product sales increased to 10% for 2006, from 8% for 2005.

Sales and Marketing Expense.  Sales and marketing expense increased by $22.3 million, or 31%, to $94.4 million in 2006, from $72.1 million in 2005. The increase in sales and marketing expense is primarily attributed to our expanded sales and marketing infrastructure to support the growth in our professional diagnostics business, with additional expense of approximately $16.0 million related to our acquisitions of Binax, the Determine business, BioStar and IDT during 2005 and our acquisitions of Clondiag and the Innovacon business during 2006. Approximately $1.3 million of the increase in sales and marketing expense resulted from our increased advertising efforts to promote our premium consumer diagnostic products in 2006. Sales and marketing for 2006 also included a charge of $0.7 million for stock-based compensation related to our January 1, 2006 adoption of SFAS No. 123-R.

Amortization expense of $6.8 million and $2.9 million was included in sales and marketing expense for 2006 and 2005, respectively.

Sales and marketing expense as a percentage of net product sales decreased to 17% for 2006, from 18% for 2005.

General and Administrative Expense.  General and administrative expense increased by $11.3 million, or 19%, to $71.2 million in 2006, from $60.0 million in 2005. Of the increase in general and administrative expense, approximately $12.2 million resulted from additional spending related to our acquisitions of Binax, the Determine business, BioStar and IDT which were completed during 2005 and to our 2006 acquisitions of Clondiag and the Innovacon business. The increase in general and administrative expense during 2006 was partially offset by a decrease in legal expenses of $4.7 million. Also included in general and administrative expense is a $3.0 million charge for stock-based compensation related to our January 1, 2006 adoption of SFAS No. 123-R.

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Amortization expense included in general and administrative expense was $0.4 million for both 2006 and 2005.

General and administrative expense as a percentage of net revenue decreased to 13% for 2006, from 14% for 2005.

Loss on Dispositions, Net.  During 2006, we recorded a net loss on dispositions of $3.5 million. Included in this charge is a loss of $4.9 million associated with management’s decision to dispose of our Scandinavian Micro Biodevices ApS, or SMB, research operation. The $4.9 million charge includes a loss of $2.0 million on impaired assets, most of which represents goodwill associated with SMB, and a $2.9 million loss on the sale of SMB, which was finalized during the fourth quarter of 2006. The $4.9 million loss is offset by a $1.4 million gain on the sale of an idle manufacturing facility in Galway, Ireland, as a result of our 2005 restructuring plan.

Interest Expense.  Interest expense for 2006 includes interest charges, the write-off and amortization of deferred financing costs and the amortization of non-cash discounts associated with our debt issuances in 2004. Interest expense for 2005 includes interest charges, the write-off and amortization of deferred financing costs and the amortization of non-cash discounts associated with our debt issuances in 2004, and the change in market value of our interest rate swap agreement of $0.7 million which did not qualify as a hedge for accounting purposes. Interest expense increased by $4.8 million, or 22%, to $26.6 million in 2006, from $21.8 million in 2005. In 2006, we recorded a charge of $1.3 million related to prepayment penalties and the write-off of debt origination costs resulting from the early repayment of our $20.0 million, 10% subordinated promissory notes on September 8, 2006. In addition to the $1.3 million charge, higher applicable interest rates on the senior credit facility during 2006, compared to 2005, and an increase in the amortization of deferred financing costs related to the debt refinancings that occurred later in 2005 and during the first quarter of 2006, also contributed to the increase in interest expense for 2006.

Other Income (Expense), Net.  Other income (expense), net, includes interest income, realized and unrealized foreign exchange gains and losses, and other income and expense. The components and the respective amounts of other income (expense), net, are summarized as follows:

	2006		2005
	(in thousands)
Interest income	$	1,693	$	1,035
Foreign exchange gains (losses), net		2,643		(340	)
Other		4,748		19,483
Other income (expense), net	$	9,084	$	20,178

Other income (expense), net for 2006 includes a foreign exchange gain of $4.3 million associated with the closure of our Galway, Ireland manufacturing operation and $4.7 million in other income, related to the portion of our settlement with Vedalab relating to periods prior to 2006.

Other income (expense), net for 2005 includes the following items: (i) $15.0 million in other income, being the portion of our settlement with Quidel relating to periods prior to 2005, (ii) an $8.4 million gain from a legal settlement of class action suit against several raw material suppliers in our vitamins and nutritional supplements business (iii) $2.6 million of income related to the value of an option received under a licensing arrangement, (iv) a $2.7 million charge related to a legal settlement of a nutritional segment commercial dispute arising from a distribution arrangement entered into in September 1996, and (v) a $4.3 million charge related to a legal settlement with Princeton BioMeditech Corporation, or PBM.

Provision for Income Taxes.  Provision for income taxes decreased by $1.1 million, or 16%, to $5.7 million in 2006, from $6.8 million in 2005. The effective tax rate in 2006 was (52)%, compared to (55)% in 2005. The decrease in the provision for income taxes from 2005 to 2006 is primarily related to taxes on foreign income. The primary components of the 2006 provision for income taxes related to the recognition of U.S. deferred tax liabilities for temporary differences between the book and tax bases of goodwill and certain intangible assets with indefinite lives and to taxes on foreign income. The amount related to the U.S. deferred

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tax liabilities is approximately $3.4 million. The primary components of the 2005 provision for income taxes related to the recognition of U.S. deferred tax liabilities for temporary differences between the book and tax bases of goodwill and certain intangible assets with indefinite lives and to taxes on foreign income. The amount related to the U.S. deferred tax liabilities is approximately $2.9 million.

Net (Loss) Income.  We incurred a net loss of $16.8 million in 2006, while we incurred a net loss of $19.2 million in 2005. Net loss per common share available to common stockholders was $0.49 per basic and diluted common share in 2006, as compared to net loss of $0.79 per basic and diluted common share in 2005. The net loss in 2006 and 2005 resulted from the various factors as discussed above. See Note 13 of our consolidated financial statements included elsewhere in this Annual Report on Form 10-K for the calculation of net (loss) income per share.

Year Ended December 31, 2005 Compared to Year Ended December 31, 2004

Net Product Sales.  Net product sales increased by $41.0 million, or 11%, to $406.5 million in 2005, from $365.4 million in 2004. Excluding the unfavorable impact of currency translation, net product sales in 2005 grew by approximately $41.8 million, or 11%, over 2004. Revenue increased as a result of our acquisitions in 2005: (i) Binax, acquired in March 2005, contributed $18.4 million of such increase, (ii) the Determine rapid diagnostics business, acquired in June 2005, contributed revenues of $17.2 million, (iii) BioStar, acquired in September 2005, contributed revenues of $6.9 million, and (iv) various less significant acquisitions contributed an aggregate of $9.7 million of such increase.

Net Product Sales by Business Segment.  Net product sales by business segment for 2005 and 2004 are as follows:

					% Increase
	2005		2004		(Decrease)
	(in thousands)
Consumer diagnostic products	$	161,695	$	158,706		2	%
Vitamins and nutritional supplements		75,411		77,923		(3	)%
Professional diagnostic products		169,351		128,803		31	%
Net product sales	$	406,457	$	365,432		11	%

Consumer Diagnostic Products

The currency adjusted increase in net product sales from our consumer diagnostic products was $3.5 million, or 2%, comparing 2005 to 2004. Of the currency adjusted increase, $1.9 million resulted from our acquisition of the consumer pregnancy test business of Advanced Clinical Systems Pty Ltd, or ACS, in January 2005. Organic growth, principally in the U.S., accounted for the remaining growth.

Vitamins and Nutritional Supplements

Net product sales of our vitamins and nutritional supplements decreased by $2.5 million, or 3%, comparing 2005 to 2004. The decrease was primarily due to our brand name nutritional business. Our aggregate sales of all of our brand name nutritional products, including, among others, Ferro-Sequels, Stresstabs, Protegra, Posture, SoyCare, ALLBEE, and Z-BEC, have declined on an annual basis over the past several years. We believe that these products have under-performed because they are, for the most part, aging brands with limited brand recognition that face increasing private label competition.

Professional Diagnostic Products

The currency adjusted increase in net product sales from our professional diagnostic products was $40.8 million, or 31%, comparing 2005 to 2004. Of the currency adjusted increase, revenue increased as a result of our acquisitions in 2005: (i) Binax contributed $18.4 million of such increase, (ii) the Determine rapid diagnostics business contributed revenues of $17.2 million, (iii) BioStar contributed revenues of $6.9 million, and (iv) various less significant acquisitions contributed an aggregate of $7.8 million of such increase.

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Net Product Sales by Geographic Location.  Net product sales by geographic location for 2005 and 2004 are as follows:

	2005		2004		% Increase
	(in thousands)
United States	$	234,229	$	218,251		7%
Europe		108,981		98,136		11%
Other		63,247		49,045		29%
Net product sales	$	406,457	$	365,432		11%

The growth in net product sales in all geographic regions resulted from the various acquisitions discussed above.

License and Royalty Revenue.  License and royalty revenue represents license and royalty fees from intellectual property license agreements with third parties. License and royalty revenue increased by $6.8 million, or 80%, to $15.4 million in 2005, from $8.6 million in 2004. The increase primarily related to royalty revenues received as a result of the settlement and licensing arrangement that we entered into with Quidel Corporation in April 2005.

Gross Profit and Margin.  Gross profit increased by $5.3 million, or 4%, to $152.3 million in 2005 from $147.0 million in 2004. The increase in gross profit was attributable to higher gross margins on the increased license and royalty revenue discussed above. Offsetting this increase was: (i) the inclusion in cost of sales of a $4.1 million charge principally associated with our decision to close our CDIL manufacturing facility, (ii) a charge of $2.4 million associated with a reserve established during the second quarter of 2005 at our Wampole subsidiary for excess quantities of certain raw materials and finished goods, including certain finished goods held at distributors but subject to rights of return, and (iii) a $1.6 million provision for returns and inventory reserve which was established as a result of our recall of the drugs of abuse diagnostic products during the first quarter of 2005, offset in part by the gross profit earned on increased professional diagnostics products revenue, as discussed above. Gross profit from our nutritional supplements business decreased $6.0 million from $8.8 million in 2004 to $2.7 million in 2005. Our private label nutritional supplements business suffered from excess capacity in the industry and increasing price competition.

Cost of sales included amortization expense of $7.2 million and $5.5 million in 2005 and 2004, respectively.

Overall gross margin was 36% in 2005, compared to 39% in 2004. Overall gross margin in 2005 was adversely affected by the $4.1 million charge associated with the CDIL closing, the $2.4 million Wampole inventory reserve, and the $1.6 million returns and inventory reserve associated with the drugs of abuse product recalls discussed above. Excluding these charges, gross margin was 38% for 2005.

Gross Profit from Net Product Sales by Business Segment.  Gross profit from net product sales represents total gross profit less gross profit associated with license and royalty revenue. Gross profit from total net product sales decreased by $0.3 million to $141.5 million in 2005, from $141.8 million in 2004. Gross profit from net product sales by business segment for 2005 and 2004 are as follows:

					% Increase
	2005		2004		(Decrease)
	(in thousands)
Consumer diagnostic products	$	76,515	$	82,909		(8	)%
Vitamins and nutritional supplements		2,738		8,775		(69	)%
Professional diagnostic products		62,252		50,079		24	%
Gross profit from net product sales	$	141,505	$	141,763		0	%

Gross profit from our consumer diagnostic product sales decreased by $6.4 million, or 8%, comparing 2005 to 2004. Included in cost of sales, and adversely effecting gross profit, was a $4.1 million charge principally associated with our decision to close our CDIL manufacturing facility.

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Consumer Diagnostic Products

Gross profit from our consumer diagnostic product sales was 47% for 2005, compared to 52% in 2004. Excluding the $4.1 million CDIL closure charge discussed above, gross margin from our consumer diagnostic products segment was 50% in 2005. The remaining decrease in gross margin from our consumer diagnostic product sales resulted from a change in product mix.

Vitamins and Nutritional Supplements

Gross profit in our vitamins and nutritional supplements business decreased by $6.0 million, or 69%, comparing 2005 to 2004. Our private label nutritional supplements business suffered from excess capacity in the industry which led to increasing price competition and generally decreasing margins. Revenue decreases in our brand named nutritional products also contributed to lower gross profit in 2005 than 2004.

Professional Diagnostic Products

Gross profit from our professional diagnostic products increased by $12.2 million, or 24%, comparing 2005 to 2004, principally as a result of gross profit earned on revenues from acquired businesses, as discussed above. Reducing gross margin for 2005 were a charge of $2.4 million associated with a reserve established during the second quarter of 2005 at our Wampole subsidiary for excess quantities of certain raw materials and finished goods, including certain finished goods held at distributors but subject to rights of return, and a $1.6 million provision for returns and inventory reserve which were established as a result of our recall of the drugs of abuse diagnostic products during the first quarter of 2005. Excluding these charges, gross profit from our professional diagnostic products segment increased by $16.2 million comparing 2005 to 2004.

Gross margin from our professional diagnostic product sales was 37% in 2005, compared to 39% in 2004. Excluding the $2.4 million Wampole inventory reserve and the $1.6 million drugs of abuse charge discussed above, gross margin from our professional diagnostic product sales was 39% for 2005.

Research and Development Expense.  Research and development expense decreased by $1.0 million, or 3%, to $31.0 million in 2005 from $32.0 million in 2004. Research and development expense in 2005 is reported net of co-development funding of $17.2 million arising from the co-development funding arrangement that we entered into with ITI Scotland in February 2005. Research and development expense before considering the co-development funding was $48.2 million in 2005, an increase of $16.2 million from 2004.

The increase in spending resulted in part from expenditures of $5.0 million in our professional diagnostics business associated with our acquisitions of Binax, BioStar and Ischemia. The remaining research and development spending primarily related to our continued significant investment in the development of products in the field of cardiology.

Amortization expense of $2.3 million and $0.8 million was included in research and development expense for 2005 and 2004, respectively.

Research and development expense as a percentage of net product sales is 8% and 9% for 2005 and 2004, respectively.

Sales and Marketing Expense.  Sales and marketing expense increased by $14.1 million, or 24%, to $72.1 million in 2005 from $58.0 million in 2004. Acquisitions completed during 2005 accounted for $8.3 million of the increase. Approximately $1.8 million of the increase in sales and marketing expense resulted from our increased advertising efforts to promote our premium consumer diagnostic products in 2005. The remaining increase in sales and marketing expense resulted from our expanded sales and marketing infrastructure to support the anticipated growth in our professional diagnostics business.

Amortization expense of $2.9 million and $3.9 million was included in sales and marketing expense for 2005 and 2004, respectively.

Sales and marketing expense as a percentage of net product sales increased to 18% in 2005, from 16% in 2004. The increase in sales and marketing expense as a percentage of net product sales primarily resulted from

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our investment in advertising efforts for our premium consumer diagnostic products and sales and marketing infrastructure to support our anticipated growth in the professional diagnostics business.

General and Administrative Expense.  General and administrative expense increased by $7.3 million, or 14%, to $60.0 million in 2005, from $52.7 million in 2004. Acquisitions completed during 2005 accounted for $4.2 million of the increase. The remaining increase in general and administrative expense resulted from an increase in consulting and legal spending, due to the formal order of investigation in connection with the previously disclosed revenue recognition matter at Wampole and our active pursuits and defenses in litigations, including our lawsuits and settlements with Quidel and PBM.

Amortization expense of $0.4 million and $0.2 million was included in general and administrative expense for 2005 and 2004, respectively.

General and administrative expense as a percentage of net revenue was consistent in 2005 and 2004 at 14%.

Interest Expense.  Interest expense includes interest charges, the write-off and amortization of deferred financing costs and the amortization of non-cash discounts associated with our debt issuances in 2004, and the change in market value of our interest rate swap agreement of $0.7 million which did not qualify as a hedge for accounting purposes. Interest expense decreased by $0.3 million, or 1%, to $21.8 million in 2005, from $22.1 million in 2004. In 2004, we recorded a charge of $3.8 million representing the write-off of deferred financing costs and prepayment fees and penalties related to the repayment of borrowings under our primary senior credit facility and certain subordinated notes with the proceeds from our $150.0 million bond offering in February 2004. Excluding such charge, interest expense increased $3.5 million in 2005. Such increase was primarily due to a higher average outstanding debt balance which was $215.3 million during 2005, compared to $194.4 million during 2004, primarily as a result of the borrowings to finance various acquisitions and operations, offset in part by funds raised from our sale of common stock in August 2005. Additionally, the 8.75% interest rate on the $150.0 million bonds, together with its 50 basis points interest penalty during a portion of the first quarter of 2005 due to the late registration of the related exchange offer, coupled with the impact of the increase in short-term interest rates which effected the borrowings under our senior credit facility, increased our average cash interest rate to 9.0% for 2005 from 8.8% for 2004. The bonds, which are due in 2012, provide us with a long-term fixed rate on a significant portion of our indebtedness, as compared to the variable rates under our senior credit facility.

Other Income (Expense), Net.  Other income (expense), net, includes interest income, realized and unrealized foreign exchange gains and losses, and other income and expense. The components and the respective amounts of other income (expense), net, are summarized as follows:

	2005			2004
	(in thousands)
Interest income	$	1,035		$	1,050
Foreign exchange (losses) gains, net		(340	)		(720	)
Other		19,483			3,077
Other income (expense), net	$	20,178		$	3,407

Included in other income (expense), net, for 2005 are the following items: (i) $15.0 million in income, being the portion of our settlement with Quidel relating to periods prior to 2005, (ii) an $8.4 million gain from a legal settlement of class action suit against several raw material suppliers in our vitamins and nutritional supplements business (iii) $2.6 million of income related to the value of an option received under a licensing arrangement, (iv) a $2.7 million charge related to a legal settlement of a nutritional segment commercial dispute arising from a distribution arrangement entered into in September 1996, and (v) a $4.3 million charge related to a legal settlement with PBM.

Included in other income (expense), net, for 2004 are the following items: (i) $0.5 million in income, of royalties received attributable to periods prior to 2004 associated with a license arrangement that had historically been underpaid, (ii) $0.9 million in release of a pre-acquisition legal contingency reserve upon reaching and signing a settlement agreement, and (iii) $0.5 million in litigation settlement gain.

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Provision for Income Taxes.  Provision for income taxes increased by $4.5 million, or 200%, to $6.8 million in 2005 from $2.3 million in 2004. The effective tax rate in 2005 was (55)%, compared to (16)% in 2004. The increase in the provision for income taxes from 2004 to 2005 is primarily related to taxes on foreign income. The primary components of the 2005 provision for income taxes related to the recognition of U.S. deferred tax liabilities for temporary differences between the book and tax bases of goodwill and certain intangible assets with indefinite lives and to taxes on foreign income. The amount related to the U.S. deferred tax liabilities is approximately $2.9 million. In 2004, we recognized $0.8 million of benefit from the reduction of the valuation allowance related to net operating loss, or NOL, carryforward of two of our foreign subsidiaries due to our assessment that we would more likely than not realize the benefit of these NOLs.

Net (Loss) Income.  We incurred a net loss of $19.2 million in 2005, while we incurred a net loss of $16.6 million in 2004. After taking into account charges for redemption interest and amortization of a beneficial conversion feature related to our Series A redeemable convertible preferred stock, we had a net loss available to common stockholders of $17.3 million in 2004. Net loss per common share available to common stockholders was $0.79 per basic and diluted common share in 2005 as compared to net loss of $0.87 per basic and diluted common share in 2004. The net loss in 2005 and 2004 resulted from the various factors as discussed above. See Note 13 of our consolidated financial statements included elsewhere in this Annual Report on Form 10-K for the calculation of net (loss) income per share.

Liquidity and Capital Resources

Based upon our current working capital position, current operating plans and expected business conditions, we believe that our existing capital resources, credit facilities and expected funding resulting from our co-development funding agreement with ITI will be adequate to fund our operations, including our outstanding debt and other commitments, as discussed below, for the next 12 months. In the long run we expect to fund our working capital needs and other commitments primarily through our operating cash flow, which we expect to improve as we improve our operating margins and grow our business through new product introductions and by continuing to leverage our strong intellectual property position. We also expect to rely on our credit facilities and the capital markets to fund a portion of our capital needs and other commitments. If we raise additional funds by issuing equity or convertible securities, dilution to then existing stockholders may result.

Summary of Changes in Cash Position

As of December 31, 2006, we had cash and cash equivalents of $71.1 million, a $36.8 million increase from December 31, 2005. Our primary sources of cash during 2006, included $235.0 million in proceeds from the issuance of our common stock, including common stock issues under employee stock option and stock purchase plans, $14.7 million in proceeds from the repayment of notes receivable and $34.3 million from operating activities during 2006. Our investing activities during 2006 used $178.8 million of cash and consisted primarily of $131.5 million of cash used for acquisitions, $12.6 million used for the purchase of available-for-sale securities, $13.2 million used for minority interest and other investments, $19.7 million used for capital equipment purchases, offset by $2.2 million of net proceeds from the sale of our Galway, Ireland facility and sales of capital equipment, and a $4.1 million decrease in other assets. Our non-equity financing activities, primarily related to our senior credit facility and the 10% subordinated promissory notes, used cash of $70.6 million during 2006. Fluctuations in foreign currencies favorably impacted our cash balance by $2.4 million during 2006.

Cash Flows from Operating Activities

Net cash provided by operating activities during 2006 was $34.3 million, an increase of $7.7 million over the prior year. Our net loss during 2006 of $16.8 million was funded by our net cash from operating activities, along with a $10.3 million increase in working capital as offset by $39.4 million of depreciation and amortization and $22.0 million of other non-cash items. The $10.3 million increase in working capital was primarily driven by an increase in our accounts receivable over prior year.

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Cash Flows from Investing Activities

During 2006, we paid $131.5 million in cash for acquisitions and transaction-related costs, net of cash acquired, primarily with respect to our acquisitions of Clondiag and the Innovacon business.

On February 28, 2006, we acquired 67.45% ownership of Clondiag, a privately-held company located in Jena in Germany which has developed a multiplexing technology for nucleic acid and immunoassay-based diagnostics and, on August 31, 2006, we acquired the remaining 32.55%. The aggregate purchase price for Clondiag was $24.4 million, consisting of $17.7 million in cash, 243,398 shares of our common stock valued at $6.5 million, $0.1 million direct acquisition costs and a $0.1 million remaining obligation. The terms of the Clondiag acquisition also provide for $8.9 million of contingent consideration, consisting of 224,316 shares of our common stock and approximately $3.0 million of cash or stock in the event that four specified products are developed on Clondiag’s platform technology during the three years following the acquisition date.

On March 31, 2006, we acquired the Innovacon business, although this acquisition involved several stages and payments during 2006. The aggregate purchase price for the acquisition of the Innovacon business, including the acquisition of the ABON facility in May 2006, was $184.1 million, consisting of cash payments totaling $112.0 million, 1,871,250 shares of our common stock valued at $53.0 million, $9.1 million in estimated direct acquisition costs and an additional liability of $10.0 million payable to the sellers on a deferred payment date. In connection with this acquisition, we also entered into an agreement for the purchase of ACON Laboratories’ lateral flow immunoassay sales and distribution business in all territories not included as part of the Innovacon business acquired during 2006. Under the terms of this agreement, in the event that this business achieves a specified level of profitability, we will acquire this business in 2009 for a formulaic price based on the revenues and earnings of the business. Alternatively, we may elect not to complete the acquisition of the business in exchange for a payment equal to 15% of the purchase price that would have been due had we elected to complete the acquisition.

In addition, on February 5, 2007, we acquired substantially all of the assets of First Check Diagnostics LLC, or First Check, a privately-held diagnostics company, for approximately $24.5 million in cash. In addition, we are obligated to pay an earn-out to First Check equal to the incremental revenue growth of the acquired products for 2007 and for the first nine months of 2008, as compared to the immediately preceding comparable periods.

During 2006, we purchased $12.6 million worth of marketable equity securities which we intend to hold indefinitely and therefore carry on our consolidated balance sheet as available-for-sale securities. These securities were recorded at their fair market value as of December 31, 2006.

Other cash investments made during 2006 include a 40% investment in Vedalab, a French manufacturer and supplier of rapid diagnostic tests in the professional markets. The aggregate purchase price was $9.7 million which consisted of $7.6 million in cash, 49,787 shares of our common stock with an aggregate fair value of $2.0 million and $0.1 million in estimated direct acquisition costs. Under the terms of the agreement, we also settled an on-going patent infringement claim with Vedalab, resulting in a settlement payment to us of $5.1 million.

Cash Flows from Financing Activities

On February 8 and 9, 2006, we sold an aggregate 3,400,000 shares of our common stock at $24.41 per share to funds affiliated with 14 accredited institutional investors in a private placement. Proceeds from the private placement were approximately $79.3 million, net of issuance costs of $3.7 million. Of this amount, we repaid principal and interest outstanding under our senior credit facility of $74.1 million, with the remainder of the net proceeds retained for general corporate purposes.

On August 23, 2006, we sold an aggregate 5,000,000 shares of our common stock at $30.25 per share to funds affiliated with 17 accredited institutional investors in a private placement. Proceeds from the private placement were approximately $145.5 million, net of issuance costs of $5.7 million. Of this amount, we used $41.3 million for payments related to our ABON acquisition, $5.3 million to purchase the remaining 32.55% of Clondiag, repaid principal outstanding under our senior credit facility of $54.0 million and repaid principal

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and interest outstanding, along with a prepayment penalty, under our 10% subordinated promissory notes of $20.8 million, with the remainder of the net proceeds retained for general corporate purposes.

On January 31, 2007, we sold an aggregate 6,000,000 shares of our common stock at $39.65 per share through an underwritten public offering, and on February 5, 2007, our underwriters exercised in full an option to purchase an additional 900,000 shares to cover over-allotments. Proceeds from the offering were approximately $261.3 million, net of issuance costs of $12.3 million, which include deductions for underwriting discounts and commissions and take into effect the reimbursement by the underwriters of a portion of our offering expenses. Of this amount, we used $44.9 million to repay all principal and accrued interest owing on the term loan under our senior credit facility, with the remainder of the net proceeds retained for working capital and other general corporate purposes.

In December 2006, we signed a definitive agreement with P&G to form a 50/50 joint venture for the development, manufacturing, marketing and sale of existing and to-be-developed consumer diagnostic products outside of the fields of cardiology and diabetes. In connection with this agreement, we will contribute our related consumer diagnostic and monitoring assets, other than manufacturing and core intellectual property assets, to a new joint venture entity, and P&G will acquire its interest in the joint venture in consideration for a cash payment of $325.0 million. Our primary role in the collaboration will be to develop and manufacture consumer diagnostic products, while P&G’s primary role will be to market, sell, and distribute existing and to-be-developed products. We will retain all rights with respect to the development and sale of cardiology diagnostic products and our professional point of care diagnostic businesses. Following the completion of the transaction and the formation of the joint venture, we will cease to consolidate the operating results of our formerly wholly-owned consumer diagnostics business and instead will account for our 50% interest in the results of the joint venture under the equity method. In addition, because we will share control of the joint venture with P&G we may not have access to cash generated through the operations of the joint venture and, in certain circumstances, we could be required to provide working capital to the joint venture. Under the terms of our agreement with P&G, P&G can require us to repurchase its interest in the joint venture at market value after the fourth anniversary of the closing.

Our primary senior credit facility with a group of banks, as amended, consists of a $45.0 million U.S. term loan and revolving lines of credit in the aggregate amount of up to $110.0 million, subject to continuing covenant compliance. Our aggregate indebtedness under the senior credit facility was $44.8 million as of December 31, 2006, outstanding under the U.S. term loan. On February 1, 2007, we paid all remaining principal and accrued interest owing under our senior credit facility.

We may repay any future borrowings under the revolving lines of credit at any time but in no event later than March 31, 2008. We are required to make mandatory prepayments under our primary senior credit facility if we meet certain cash flow thresholds, issue equity securities or subordinated debt, or sell assets not in the ordinary course of our business above certain thresholds.

Borrowings under the revolving lines of credit bear interest at either (1) the London Interbank Offered Rate, or LIBOR, as defined in the credit agreement, plus applicable margins or, at our option, (2) a floating Index Rate, as defined in the credit agreement, plus applicable margins. Applicable margins if we choose to use the LIBOR or the Index Rate can range from 2.75% to 3.75% or 1.50% to 2.50%, respectively, depending on the quarterly adjustments that are based on our consolidated financial performance. As of December 31, 2006, the applicable interest rate under the revolving lines of credit, including the applicable margin, ranged from 6.85% to 9.35%.

Borrowings under our primary senior credit facility are secured by the stock of our U.S. and European subsidiaries, substantially all of our intellectual property rights and the assets of our businesses in the U.S. and Europe, excluding those assets of our subsidiaries in Israel, China, Japan, Australia and Sweden, and the stock of Orgenics and certain smaller subsidiaries. Under the senior credit agreement, as amended, we must comply with various financial and non-financial covenants. The primary financial covenants pertain to, among other things, fixed charge coverage ratio, capital expenditures, various leverage ratios, earnings before interest, taxes, depreciation and amortization, or EBITDA, and a minimum cash requirement. Additionally, the senior credit

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agreement currently prohibits us from paying dividends. We are currently in compliance with the covenants, as amended.

In February 2004, we completed the sale of $150.0 million of 8.75% senior subordinated notes, or bonds, due 2012 in a private placement to qualified institutional buyers. These bonds accrue interest from the date of their issuance, or February 10, 2004, at the rate of 8.75% per year. Interest on the bonds are payable semi-annually in arrears on each February 15 and August 15. As of December 31, 2006, accrued interest related to the bonds amounted to $4.9 million.

The bonds are unsecured and are subordinated in right of payment to all of our existing and future senior debt, including our guarantee of all borrowings under our primary senior credit facility. The bonds are effectively subordinated to all existing and future liabilities, including trade payables, of those of our subsidiaries that do not guarantee the bonds.

The bonds are guaranteed by all of our domestic subsidiaries that are guarantors or borrowers under our primary senior credit facility. The guarantees are general unsecured obligations of the guarantors and are subordinated in right of payment to all existing and future senior debt of the applicable guarantors, which includes their guarantees of, and borrowings under our primary senior credit facility.

The indenture governing the bonds contains covenants that will limit our ability and the ability of our subsidiaries to, among other things, incur additional indebtedness in the aggregate, subject to our interest coverage ratio, pay dividends or make other distributions or repurchase or redeem our stock, make investments, sell assets, incur liens, enter into agreements restricting our subsidiaries’ ability to pay dividends, enter into transactions with affiliates and consolidate, merge or sell all or substantially all of our assets. These covenants are subject to certain exceptions and qualifications.

As of December 31, 2006, we had an aggregate of $1.0 million in outstanding capital lease obligations which are payable through 2009.

Income Taxes

As of December 31, 2006, we had approximately $188.2 million of domestic net operating loss carryforwards and $45.9 million of foreign net operating loss, or NOL, carryforwards, respectively, which either expire on various dates through 2026 or can be carried forward indefinitely. These losses are available to reduce federal and foreign taxable income, if any, in future years. These losses are also subject to review and possible adjustments by the applicable taxing authorities. In addition, the domestic operating loss carryforward amount at December 31, 2006 included approximately $70.5 million of pre-acquisition losses at IMN, Ischemia, Ostex and ADC. The future benefit of these losses will be applied first to reduce to zero any goodwill and other non-current intangible assets related to the acquisitions, prior to reducing our income tax expense. Also included in our domestic NOL carryforwards at December 31, 2006 was approximately $2.6 million resulting from the exercise of employee stock options, the tax benefit of which, when recognized, will be accounted for as a credit to additional paid-in capital rather than a reduction of income tax.

Furthermore, all domestic losses are subject to the Internal Revenue Service Code Section 382 limitation and may be limited in the event of certain cumulative changes in ownership interests of significant shareholders over a three-year period in excess of 50%. Section 382 imposes an annual limitation on the use of these losses to an amount equal to the value of the company at the time of the ownership change multiplied by the long term tax exempt rate. We have recorded a valuation allowance against a portion of the deferred tax assets related to our net operating losses and certain of our other deferred tax assets to reflect uncertainties that might affect the realization of such deferred tax assets, as these assets can only be realized via profitable operations.

Off-Balance Sheet Arrangements

We had no material off-balance sheet arrangements as of December 31, 2006.

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Contractual Obligations

The following table summarizes our principal contractual obligations as of December 31, 2006 and the effects such obligations are expected to have on our liquidity and cash flow in future periods.

	Payments Due by Period
Contractual Obligations	Total		2007		2008-2009		2010-2011		Thereafter
	(in thousands)
Long-term debt obligations(1)	$	201,977	$	51,830	$	147	$	—	$	150,000
Capital lease obligations(2)		1,066		643		415		8		—
Operating lease obligations(3)		67,803		10,454		16,146		10,441		30,762
Long-term and other liabilities(4)		6,442		3,103		1,992		1,347		—
Minimum royalty obligations		260		220		40		—		—
Purchase obligations—capital expenditure		8,813		8,813		—		—		—
Purchase obligations—other(5)		48,044		47,566		478		—		—
Remaining obligations—Innovacon business(6)		17,158		17,158		—		—		—
Interest on debt(7)		67,828		13,128		26,256		26,256		2,188
Total	$	419,391	$	152,915	$	45,474	$	38,052	$	182,950

(1)	See description of various financing arrangements in this section and Note 6 of our consolidated financial statements included elsewhere in this Annual Report on Form 10-K.
(2)	See Note 7 of our consolidated financial statements included elsewhere in this Annual Report on Form 10-K.
(3)	See Note 10(a) of our consolidated financial statements included elsewhere in this Annual Report on Form 10-K.
(4)	Included in long-term and other liabilities are $1.0 million in technology license payment obligations and $5.4 million in pension obligations.
(5)	Other purchase obligations relate to inventory purchases and other operating expense commitments.
(6)	In connection with our acquisition of the Innovacon business, we are obligated to make a $6.0 million payment for the remaining first territory business and a $1.1 million payment related to one European customer that has continued to take supply from the seller. Additionally, we are required to make a $10.0 million payment payable to the sellers on the deferred payment date.
(7)	Amounts are based on $150.0 million senior subordinated notes. Amounts exclude interest on all other debt due to variable interest rates. See Note 6 of our consolidated financial statements included elsewhere in this Annual Report on Form 10-K.

As of December 31, 2006, we had outstanding material contingent contractual obligations related to our acquisitions of Binax and Clondiag. With respect to Binax, the terms of the acquisition agreement provide for $11.0 million of contingent cash consideration payable to the Binax shareholders upon the successful completion of certain new product developments during the five years following the acquisition. With respect to the acquisition of Clondiag, the terms of the acquisition agreement provide for $8.9 million of contingent consideration, consisting of 224,316 shares of our common stock and approximately $3.0 million of cash or stock in the event that four specified products are developed on Clondiag’s platform technology during the three years following the acquisition date. The contingent considerations will be accounted for as increases in the aggregate purchase prices if and when the contingencies occur.

Critical Accounting Policies

The consolidated financial statements included elsewhere in this Annual Report on Form 10-K are prepared in accordance with accounting principles generally accepted in the United States of America, or GAAP. The accounting policies discussed below are considered by our management and our audit committee

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to be critical to an understanding of our financial statements because their application depends on management’s judgment, with financial reporting results relying on estimates and assumptions about the effect of matters that are inherently uncertain. Specific risks for these critical accounting policies are described in the following paragraphs. For all of these policies, management cautions that future events rarely develop exactly as forecast and the best estimates routinely require adjustment. In addition, the notes to our audited consolidated financial statements for the year ended December 31, 2006 included elsewhere in this Annual Report on Form 10-K include a comprehensive summary of the significant accounting policies and methods used in the preparation of our consolidated financial statements.

Revenue Recognition

We primarily recognize revenue when the following four basic criteria have been met: (1) persuasive evidence of an arrangement exists; (2) delivery has occurred or services rendered; (3) the fee is fixed and determinable; and (4) collection is reasonably assured.

The majority of our revenue is derived from product sales. We recognize revenue upon title transfer of the products to third-party customers, less a reserve for estimated product returns and allowances. Determination of the reserve for estimated product returns and allowances is based on our management’s analyses and judgments regarding certain conditions, as discussed below in the critical accounting policy “Use of Estimates for Sales Returns and Other Allowances and Allowance for Doubtful Accounts.” Should future changes in conditions prove management’s conclusions and judgments on previous analyses to be incorrect, revenue recognized for any reporting period could be adversely affected.

In connection with the acquisition of the Abbott rapid diagnostics business in September 2003 and the Determine business in June 2005 from Abbott Laboratories, we entered into a transition services agreement with Abbott, whereby Abbott would continue to distribute certain of the acquired products for a period of up to 18 months following each acquisition, subject to certain extensions. During the transition period, we recognized revenue on sales of the products when title transferred from Abbott to third party customers.

We also receive license and royalty revenue from agreements with third-party licensees. Revenue from fixed fee license and royalty agreements are recognized on a straight-line basis over the obligation period of the related license agreements. License and royalty fees that the licensees calculate based on their sales, which we have the right to audit under most of our agreements, are generally recognized upon receipt of the license or royalty payments unless we are able to reasonably estimate the fees as they are earned. License and royalty fees that are determinable prior to the receipt thereof are recognized in the period they are earned.

Use of Estimates for Sales Returns and Other Allowances and Allowance for Doubtful Accounts

Certain sales arrangements require us to accept product returns. From time to time, we also enter into sales incentive arrangements with our retail customers, which generally reduce the sale prices of our products. As a result, we must establish allowances for potential future product returns and claims resulting from our sales incentive arrangements against product revenue recognized in any reporting period. Calculation of these allowances requires significant judgments and estimates. When evaluating the adequacy of the sales returns and other allowances, our management analyzes historical returns, current economic trends, and changes in customer and consumer demand and acceptance of our products. When such analysis is not available and a right of return exists the Company records revenue when the right of return is no longer applicable. Material differences in the amount and timing of our product revenue for any reporting period may result if changes in conditions arise that would require management to make different judgments or utilize different estimates.

Our total provision for sales returns and other allowances related to sales incentive arrangements amounted to $52.8 million, $51.2 million and $55.2 million, or 10%, 13% and 15%, respectively, of net product sales in 2006, 2005 and 2004, respectively, which have been recorded against product sales to derive our net product sales.

Similarly, our management must make estimates regarding uncollectible accounts receivable balances. When evaluating the adequacy of the allowance for doubtful accounts, management analyzes specific accounts

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receivable balances, historical bad debts, customer concentrations, customer credit-worthiness, current economic trends and changes in our customer payment terms and patterns. Our accounts receivable balance was $100.4 million and $70.5 million, net of allowances for doubtful accounts of $8.4 million and $9.7 million, as of December 31, 2006 and December 31, 2005, respectively.

Valuation of Inventories

We state our inventories at the lower of the actual cost to purchase or manufacture the inventory or the estimated current market value of the inventory. In addition, we periodically review the inventory quantities on hand and record a provision for excess and obsolete inventory. This provision reduces the carrying value of our inventory and is calculated based primarily upon factors such as forecasts of our customers’ demands, shelf lives of our products in inventory, loss of customers and manufacturing lead times. Evaluating these factors, particularly forecasting our customers’ demands, requires management to make assumptions and estimates. Actual product sales may prove our forecasts to be inaccurate, in which case we may have underestimated or overestimated the provision required for excess and obsolete inventory. If, in future periods, our inventory is determined to be overvalued, we would be required to recognize the excess value as a charge to our cost of sales at the time of such determination. Likewise, if, in future periods, our inventory is determined to be undervalued, we would have over-reported our cost of sales, or understated our earnings, at the time we recorded the excess and obsolete provision. Our inventory balance was $78.3 million and $71.2 million, net of a provision for excess and obsolete inventory of $8.2 million and $7.7 million, as of December 31, 2006 and 2005, respectively.

Valuation of Goodwill and Other Long-Lived and Intangible Assets

Our long-lived assets include (1) property, plant and equipment, (2) goodwill and (3) other intangible assets. As of December 31, 2006, the balances of property, plant and equipment, goodwill and other intangible assets, net of accumulated depreciation and amortization, were $82.3 million, $439.4 million and $239.6 million, respectively.

Goodwill and other intangible assets are initially created as a result of business combinations or acquisitions of intellectual property. The values we record for goodwill and other intangible assets represent fair values calculated by accepted valuation methods. Such valuations require us to provide significant estimates and assumptions which are derived from information obtained from the management of the acquired businesses and our business plans for the acquired businesses or intellectual property. Critical estimates and assumptions used in the initial valuation of goodwill and other intangible assets include, but are not limited to: (i) future expected cash flows from product sales, customer contracts and acquired developed technologies and patents, (ii) expected costs to complete any in-process research and development projects and commercialize viable products and estimated cash flows from sales of such products, (iii) the acquired companies’ brand awareness and market position, (iv) assumptions about the period of time over which we will continue to use the acquired brand, and (v) discount rates. These estimates and assumptions may be incomplete or inaccurate because unanticipated events and circumstances may occur. If estimates and assumptions used to initially value goodwill and intangible assets prove to be inaccurate, ongoing reviews of the carrying values of such goodwill and intangible assets, as discussed below, may indicate impairment which will require us to record an impairment charge in the period in which we identify the impairment.

Where we believe that property, plant and equipment and intangible assets have finite lives, we depreciate and amortize those assets over their estimated useful lives. For purposes of determining whether there are any impairment losses, as further discussed below, our management has historically examined the carrying value of our identifiable long-lived tangible and intangible assets and goodwill, including their useful lives where we believe such assets have finite lives, when indicators of impairment are present. In addition, SFAS No. 142 requires that impairment reviews be performed on the carrying values of all goodwill on at least an annual basis. For all long-lived tangible and intangible assets and goodwill, if an impairment loss is identified based on the fair value of the asset, as compared to the carrying value of the asset, such loss would be charged to expense in the period we identify the impairment. Furthermore, if our review of the carrying values of the long-lived tangible and intangible assets with finite lives indicates impairment of such assets, we may

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determine that shorter estimated useful lives are more appropriate. In that event, we will be required to record additional depreciation and amortization in future periods, which will reduce our earnings.

Valuation of Goodwill

We have goodwill balances related to our consumer diagnostics and professional diagnostics reporting units, which amounted to $86.0 million and $353.4 million, respectively, as of December 31, 2006. As of September 30, 2006, we performed our annual impairment review on the carrying values of such goodwill using the discounted cash flows approach. Based upon this review, we do not believe that the goodwill related to our consumer diagnostics and professional diagnostics reporting units were impaired. Because future cash flows and operating results used in the impairment review are based on management’s projections and assumptions, future events can cause such projections to differ from those used at September 30, 2006, which could lead to significant impairment charges of goodwill in the future. No events or circumstances have occurred since our review as of September 30, 2006, that would require us to reassess whether the carrying values of our goodwill have been impaired.

Valuation of Other Long-Lived Tangible and Intangible Assets

Factors we generally consider important which could trigger an impairment review on the carrying value of other long-lived tangible and intangible assets include the following: (1) significant underperformance relative to expected historical or projected future operating results; (2) significant changes in the manner of our use of acquired assets or the strategy for our overall business; (3) underutilization of our tangible assets; (4) discontinuance of product lines by ourselves or our customers; (5) significant negative industry or economic trends; (6) significant decline in our stock price for a sustained period; (7) significant decline in our market capitalization relative to net book value; and (8) goodwill impairment identified during an impairment review under SFAS No. 142. Although we believe that the carrying value of our long-lived tangible and intangible assets was realizable as of December 31, 2006, future events could cause us to conclude otherwise.

Stock-Based Compensation

As of January 1, 2006, we account for stock-based compensation in accordance with SFAS No. 123-R, Share-Based Payment. Under the fair value recognition provisions of this statement, share-based compensation cost is measured at the grant date based on the value of the award and is recognized as expense over the vesting period. Determining the fair value of share-based awards at the grant date requires judgment, including estimating our stock price volatility and employee stock option exercise behavior. If actual results differ significantly from these estimates, stock-based compensation expense and our results of operations could be materially impacted.

Our expected volatility is based upon the historical volatility of our stock. We have chosen to utilize the simplified method to calculate the expected life of options which averages an award’s weighted average vesting period and its contractual term. As stock-based compensation expense is recognized in our consolidated statement of operations is based on awards ultimately expected to vest, the amount of expense has been reduced for estimated forfeitures. SFAS No. 123-R requires forfeitures to be estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. Forfeitures were estimated based on historical experience. If factors change and we employ different assumptions in the application of SFAS No. 123-R, the compensation expense that we record in future periods may differ significantly from what we have recorded in the current period.

Accounting for Income Taxes

As part of the process of preparing our consolidated financial statements, we are required to estimate our income taxes in each of the jurisdictions in which we operate. This process involves us estimating our actual current tax exposure and assessing temporary differences resulting from differing treatment of items, such as reserves and accruals and lives assigned to long-lived and intangible assets, for tax and accounting purposes. These differences result in deferred tax assets and liabilities. We must then assess the likelihood that our

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deferred tax assets will be recovered through future taxable income and, to the extent we believe that recovery is not likely, we must establish a valuation allowance. To the extent we establish a valuation allowance or increase this allowance in a period, we must include an expense within our tax provision.

Significant management judgment is required in determining our provision for income taxes, our deferred tax assets and liabilities and any valuation allowance recorded against our net deferred tax assets. We have recorded a valuation allowance of $107.6 million as of December 31, 2006 due to uncertainties related to the future benefits, if any, from our deferred tax assets related primarily to our U.S. businesses and certain foreign net operating losses and tax credits. The valuation allowance is based on our estimates of taxable income by jurisdiction in which we operate and the period over which our deferred tax assets will be recoverable. In the event that actual results differ from these estimates or we adjust these estimates in future periods, we may need to establish an additional valuation allowance or reduce our current valuation allowance which could materially impact our tax provision.

In accordance with SFAS No. 109, Accounting for Income Taxes, and SFAS No. 5, Accounting for Contingencies, we established reserves for tax contingencies that reflect our best estimate of the transactions and deductions that we may be unable to sustain or that we could be willing to concede as part of a broader tax settlement. We are currently undergoing routine tax examinations by various state and foreign jurisdictions. Tax authorities periodically challenge certain transactions and deductions we reported on our income tax returns. We do not expect the outcome of these examinations, either individually or in the aggregate, to have a material adverse effect on our financial position, results of operations, or cash flows.

Loss Contingencies

In the section of this Annual Report on Form 10-K titled “Item 3 Legal Proceedings,” we have reported on material legal proceedings. In addition, because of the nature of our business, we may from time to time be subject to commercial disputes, consumer product claims or various other lawsuits arising in the ordinary course of our business, and we expect this will continue to be the case in the future. These lawsuits generally seek damages, sometimes in substantial amounts, for commercial or personal injuries allegedly suffered and can include claims for punitive or other special damages. In addition, we aggressively defend our patent and other intellectual property rights. This often involves bringing infringement or other commercial claims against third parties, which can be expensive and can result in counterclaims against us.

We do not accrue for potential losses on legal proceedings where our company is the defendant when we are not able to reasonably estimate our potential liability, if any, due to uncertainty as to the nature, extent and validity of the claims against us, uncertainty as to the nature and extent of the damages or other relief sought by the plaintiff and the complexity of the issues involved. Our potential liability, if any, in a particular case may become reasonably estimable and probable as the case progresses, in which case we will begin accruing for the expected loss.

Recent Accounting Pronouncements

Recently Issued Standards

In February 2006, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 155, Accounting for Certain Hybrid Financial Instruments, which amends SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities and SFAS No. 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities. SFAS No. 155 simplifies the accounting for certain derivatives embedded in other financial instruments by allowing them to be accounted for as a whole if the holder elects to account for the whole instrument on a fair value basis. SFAS No. 155 also clarifies and amends certain other provisions of SFAS No. 133 and SFAS No. 140. SFAS No. 155 is effective for all financial instruments acquired, issued or subject to a remeasurement event occurring in fiscal years beginning after September 15, 2006. Earlier adoption is permitted, provided we have not yet issued financial statements, including for interim periods, for that fiscal year. We do not expect the adoption of SFAS No. 155 to have a material impact on our financial position, results of operations or cash flows.

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In June 2006, the FASB ratified the consensus on EITF Issue No. 06-03, How Taxes Collected from Customers and Remitted to Governmental Authorities Should Be Presented in the Income Statement. The scope of EITF Issue No. 06-03 includes any tax assessed by a governmental authority that is directly imposed on a revenue-producing transaction between a seller and a customer and may include, but is not limited to, sales, use, value added, Universal Service Fund (“USF”) contributions and some excise taxes. The Task Force affirmed its conclusion that entities should present these taxes in the income statement on either a gross or a net basis, based on their accounting policy, which should be disclosed pursuant to APB Opinion No. 22, Disclosure of Accounting Policies. If such taxes are significant, and are presented on a gross basis, the amounts of those taxes should be disclosed. The consensus on Issue No. 06-03 will be effective for interim and annual reporting periods beginning after December 15, 2006. We are currently evaluating the impact of EITF No. 06-03. Should we need to change the manner in which we record gross receipts, it is not expected that the change would have a material impact on total operating revenue and expenses and operating income and net income would not be affected.

In June 2006, the FASB issued FASB Interpretation No. (“FIN”) 48, Accounting for Uncertainty in Income Taxes—An Interpretation of FASB Statement No. 109, which prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. FIN 48 also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. FIN 48 is effective for fiscal years beginning after December 15, 2006 and we will be adopting the provisions of FIN 48 beginning with the first quarter of 2007. We continue to evaluate the impact that the adoption of FIN 48 will have, if any, on our consolidated financial statements.

In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements. SFAS No. 157 establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosures about fair value measurements. The standard applies whenever other standards require (or permit) assets or liabilities to be measured at fair value. The standard does not expand the use of fair value in any new circumstances. SFAS No. 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years. Earlier application is encouraged. We continue to evaluate the impact that the adoption of SFAS No. 157 will have, if any, on our consolidated financial statements.

In December 2006, the FASB issued FASB Staff Position (“FSP”) No. EITF 00-19-2, Accounting for Registration Payment Arrangements. This FSP specifies that the contingent obligation to make future payments or otherwise transfer consideration under a registration payment arrangement, whether issued as separate agreement or included as a provision of a financial instrument or other agreement, should be separately recognized and measured in accordance with FASB Statement No. 5, Accounting for Contingencies.  The guidance in this FSP amends FASB Statement No. 133, Accounting for Derivative Financial Instruments and Hedging Activities, and No. 150, Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity and FIN 45, Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others to include scope exceptions for registration payment arrangements. This FSP is effective immediately for registration payment arrangements and the financial instruments subject to those arrangements that are entered into or modified subsequent to the date of issuance of this FSP. For registration payment arrangements and financial instruments subject to those arrangements that were entered into prior to the issuance of this FSP, this guidance shall be effective for financial statements issued for fiscal years beginning after December 15, 2006, and interim periods within those fiscal years. We do not believe the adoption of EITF 00-19-2 will have a material impact on our consolidated financial statements.

Recently Adopted Standards

In November 2004, the FASB issued SFAS No. 151, Inventory Costs—An Amendment of ARB No. 43, Chapter 4. SFAS No. 151 clarifies the accounting for abnormal amounts of idle facility expense, freight, handling costs and wasted materials (spoilage). In addition, this statement requires that allocation of fixed production overheads to the costs of conversion be based on normal capacity of production facilities. As

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required by SFAS No. 151, we adopted this new accounting standard on January 1, 2006. The adoption of SFAS No. 151 did not have a material impact on our financial position, results of operations or cash flows.

In December 2004, the FASB issued SFAS No. 123-R, Share-Based Payment, which addresses the accounting for transactions in which a company receives employee services in exchange for (a) equity instruments of the company or (b) liabilities that are based on the fair value of the company’s equity instruments or that may be settled by the issuance of such equity instruments. As required by SFAS No. 123-R and the SEC, we adopted SFAS No. 123-R on January 1, 2006 (Note 15).

In May 2005, the FASB issued SFAS No. 154, Accounting Changes and Error Corrections—A Replacement of APB Opinion No. 20 and FASB Statement No. 3, which replaces APB Opinion No. 20, Accounting Changes, and SFAS No. 3, Reporting Accounting Changes in Interim Financial Statements. The statement requires a voluntary change in accounting principle be applied retrospectively to all prior period financial statements so that those financial statements are presented as if the current accounting principle had always been applied. APB Opinion No. 20 previously required most voluntary changes in accounting principle to be recognized by including in net income of the period of change the cumulative effect of changing to the new accounting principle. In addition, SFAS No. 154 carries forward, without change, the guidance contained in APB Opinion No. 20 for reporting a correction of an error in previously issued financial statements and a change in accounting estimate. SFAS No. 154 was effective for accounting changes and corrections of errors made after January 1, 2006. The adoption of SFAS No. 154 had no impact on our financial statements.

In September 2006, the SEC issued SEC Staff Accounting Bulletin (“SAB”) No. 108, Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements to provide guidance on the consideration of the effects of prior year misstatements in quantifying current year misstatements for the purpose of a materiality assessment. Under SAB No. 108, companies should evaluate a misstatement based on its impact on the current year income statement, as well as the cumulative effect of correcting such misstatements that existed in prior years existing in the current year’s ending balance sheet. SAB No. 108 is effective for fiscal years ending after November 15, 2006. The adoption of SAB No. 108 did not have a material impact on our financial position, results of operations or cash flows.

Effective December 31, 2006, we adopted the recognition provisions of SFAS No. 158, Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans—An Amendment of FASB Statements No. 87, 88, 106, and 132(R). This Statement requires employers to recognize in their balance sheets the overfunded or underfunded status of defined benefit postretirement plans, measured as the difference between the fair value of plan assets and the benefit obligation (the projected benefit obligation for pension plans and the accumulated postretirement benefit obligation for other post-retirement plans). Employers must recognize the change in the funded status of the plan in the year in which the change occurs through other comprehensive income. This Statement also requires plan assets and obligations to be measured as of the employer’s balance sheet date. The measurement provision of this Statement will be effective for years beginning after December 15, 2008, with early application encouraged. We have not yet adopted the measurement provisions of this Statement and are in the process of determining the impact of the adoption on our consolidated financial statements.

Prior to the adoption of the recognition provisions of SFAS No. 158, we accounted for our defined benefit post-retirement plans under SFAS No. 87, Employers’ Accounting for Pensions. SFAS No. 87 required that a liability (minimum pension liability) be recorded when the accumulated benefit obligation liability exceeded the fair value of plan assets. Any adjustment is recorded as a non-cash charge to accumulated other comprehensive income in stockholders’ equity. Under SFAS No. 87, changes in the funded status were not immediately recognized, rather they were deferred and recognized ratably over future periods. Upon adoption of the recognition provisions of SFAS No. 158, we recognized the amounts of prior changes in the funded status of our postretirement benefit plans through accumulated other comprehensive income. As a result, we

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recognized the following adjustments in individual line items of our consolidated balance sheet as of December 31, 2006:

							As
	Prior to			Effect of			Reported at
	Application of			Adopting			December 31,
	SFAS No. 158			SFAS No. 158			2006
	(in thousands)
Deferred tax asset, current portion	$	4,435		$	897		$	5,332
Deferred tax asset, long-term	$	(29	)	$	107		$	78
Other long-term liabilities	$	6,043		$	4,487		$	10,530
Accumulated other comprehensive income	$	17,919		$	(3,738	)	$	14,181

The adoption of SFAS No. 158 had no effect on our consolidated statement of operations for the year ended December 31, 2006, or for any prior period presented.

As of December 31, 2006, included in accumulated other comprehensive income was unrecognized prior service costs of $6.8 million and unrecognized actuarial gain of $2.3 million. The estimated prior service cost and actuarial loss that will be recognized in net periodic postretirement benefit obligation expense during 2007 is $0 million and $0.1 million, respectively.

ITEM 7A.   QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The following discussion about our market risk disclosures involves forward-looking statements. Actual results could differ materially from those discussed in the forward-looking statements. We are exposed to market risk related to changes in interest rates and foreign currency exchange rates. We do not use derivative financial instruments for speculative or trading purposes.

Interest Rate Risk

We are exposed to market risk from changes in interest rates primarily through our investing and financing activities. In addition, our ability to finance future acquisition transactions or fund working capital requirements may be impacted if we are not able to obtain appropriate financing at acceptable rates.

Our investing strategy, to manage interest rate exposure, is to invest in short-term, highly liquid investments. Our investment policy also requires investment in approved instruments with an initial maximum allowable maturity of eighteen months and an average maturity of our portfolio that should not exceed six months, with at least $500,000 cash available at all times. Currently, our short-term investments are in money market funds with original maturities of 90 days or less. At December 31, 2006, our short-term investments approximated market value.

At December 31, 2006, we had revolving lines of credit available to us of up to $110.0 million and a term loan of $44.8 million, under our primary senior credit facility. As of December 31, 2006, no borrowings were outstanding under the line of credit. We may repay any future borrowings under the revolving lines of credit at any time but in no event later than March 31, 2008. Borrowings under the revolving lines of credit bear interest at either (i) the London Interbank Offered Rate, or LIBOR, as defined in the credit agreement, plus applicable margins or, at our option, (ii) a floating Index Rate, as defined in the agreement, plus applicable margins. Applicable margins if we choose to use the LIBOR or the Index Rate can range from 2.75% to 3.75% or 1.50% to 2.50%, respectively, depending on the quarterly adjustments that are based on our consolidated financial performance. On February 1, 2007, we paid the remaining principal balance outstanding of $44.8 million and accrued interests under our senior credit facility.

As of December 31, 2006, the LIBOR and Index rates applicable under our primary senior credit facility were 9.35% and 11%, respectively. Assuming no changes in our leverage ratio, which would affect the margin of the interest rate under the senior credit agreement, the effect of interest rate fluctuations on outstanding

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borrowings under the revolving lines of credit as of December 31, 2006 over the next twelve months is quantified and summarized as follows:

	Interest Expense
	Increase
	(in thousands)
Interest rates increase by 1 basis point	$	448
Interest rates increase by 2 basis points	$	896

Foreign Currency Risk

We face exposure to movements in foreign currency exchange rates whenever we, or any of our subsidiaries, enter into transactions with third parties that are denominated in currencies other than our, or its, functional currency. Intercompany transactions between entities that use different functional currencies also expose us to foreign currency risk. During 2006, the net impact of foreign currency changes on transactions was a loss of $2.7 million. Historically, we have not used derivative financial instruments or other financial instruments with original maturities in excess of three months to hedge such economic exposures. However, during 2005 we entered into forward exchange contracts totaling $24.9 million with monthly maturity dates of January 18, 2005 to February 15, 2006. Maturing forward exchange contracts were used to lock in U.S. dollar to British Pound Sterling (GBP) or U.S. dollar to Euro exchange rates and hedge anticipated intercompany sales. The change in value of the derivative was analyzed quarterly for changes in the spot and forward rates based on rates given by the issuing financial institution for each quarter end date. The effective portion of the gain or loss on the derivative is reported in other comprehensive income (“OCI”) during the period prior to the forecasted purchase or sale. For forecasted sales on credit, the amount of income ascribed to each forecasted period was reclassified from OCI to income or expense on the date of the sale. The income or cost ascribed to each period encompassed within the periods of the recognized foreign-currency-denominated receivable or payable was reclassified from OCI to income or expense at the end of each reporting period. The changes in the derivative instrument’s fair values from inception of the hedge were compared to the cumulative change in the hedged item’s fair value attributable to the risk hedged. Effectiveness was based on the change in the spot rates.

Gross margins of products we manufacture at our European plants and sell in U.S. dollar are also affected by foreign currency exchange rate movements. Our gross margin on total net product sales was 39% in 2006. If the U.S. dollar had been stronger by 1%, 5% or 10%, compared to the actual rates during 2006, our gross margin on total net product sales would have been 39.5%, 39.8% and 40.3%, respectively.

In addition, because a substantial portion of our earnings is generated by our foreign subsidiaries, whose functional currencies are other than the U.S. dollar (in which we report our consolidated financial results), our earnings could be materially impacted by movements in foreign currency exchange rates upon the translation of the earnings of such subsidiaries into the U.S. dollar. If the U.S. dollar had been stronger by 1%, 5% or 10%, compared to the actual average exchange rates used to translate the financial results of our foreign subsidiaries, our net revenue and net income would have been lower by approximately the following amounts:

	Approximate		Approximate
	Decrease in		Increase in
(in thousands)	Net Revenue		Net Loss
If, during 2006, the U.S. dollar was stronger by:
1%	$	1,700	$	136
5%	$	8,500	$	323
10%	$	17,000	$	557

ITEM 8.   FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The financial statements and supplementary data, except for selected quarterly financial data which are summarized below, are listed under Item 15.(a) and have been filed as part of this report on the pages indicated.

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The following table presents selected quarterly financial data for each of the quarters in the years ended December 31, 2006 and 2005:

	2006
	First			Second			Third			Fourth
	Quarter(2)			Quarter(3)			Quarter(4)			Quarter(5)
	(in thousands, except per share data)
Net revenue	$	127,821		$	139,713		$	144,912		$	157,008
Gross profit	$	52,254		$	48,496		$	61,145		$	67,328
Net (loss) income	$	(2,630	)	$	(10,556	)	$	(9,683	)	$	6,027
Net (loss) income per common share—basic(1)	$	(0.09	)	$	(0.33	)	$	(0.27	)	$	0.15
Net (loss) income per common share—diluted(1)	$	(0.09	)	$	(0.33	)	$	(0.27	)	$	0.15

	2005
	First			Second		Third			Fourth
	Quarter(6)			Quarter(7)		Quarter(8)			Quarter(9)
Net revenue	$	91,920		$	102,271	$	106,294		$	121,365
Gross profit	$	32,189		$	34,713	$	39,635		$	45,775
Net (loss) income	$	(7,802	)	$	2,503	$	(6,572	)	$	(7,338	)
Net (loss) income per common share—basic(1)	$	(0.37	)	$	0.11	$	(0.25	)	$	(0.27	)
Net (loss) income per common share—diluted(1)	$	(0.37	)	$	0.11	$	(0.25	)	$	(0.27	)

(1)	Net (loss) income available to common stockholders and basic and diluted net (loss) income per common share are computed as consistent with the annual per share calculations described in Notes 2(m) and 13 of our consolidated financial statements included elsewhere in this Annual Report on Form 10-K.
(2)	Included in net loss in the first quarter of 2006 is a $0.9 million charge related to the closure of our manufacturing facility in Galway, Ireland, a $1.2 million unrealized foreign exchange loss associated with the closure our Galway, Ireland facility and $1.3 million of non-cash stock-based compensation expense.
(3)	Included in net loss in the second quarter of 2006 is a $4.4 million restructuring charge, including $9.9 million primarily related to the closure of our ABI operation in San Diego, California, offset by income of $5.5 million related to a foreign exchange gain associated with the final closure of our manufacturing facility in Galway, Ireland, a $3.2 million net loss on disposition resulting from a $4.6 million loss associated with management’s decision to dispose of our Scandinavian research operation, offset by a $1.4 million gain on the sale of an idle manufacturing facility and $1.2 million of non-cash stock-based compensation expense.
(4)	Included in net loss in the third quarter of 2006 is a $5.0 million charge for the write-off of in-process research and development acquired in connection with the Clondiag acquisition, a $1.2 million restructuring charge related to the closure of our ABI operation, along with the write-off of fixed assets at other facilities impacted by our restructuring plans and $1.3 million of non-cash stock-based compensation expense.
(5)	Included in net income in the fourth quarter of 2006 is a $1.2 million restructuring charge associated with the closure of our ABI operation, a $0.3 million net loss on disposition resulting from the finalization of our disposition of our Scandinavian research operation and $1.6 million of non-cash stock-based compensation expense.
(6)	Included in net loss in the first quarter of 2005 is a charge of $1.6 million associated with a recall of certain drugs of abuse products and an $8.4 million gain from a legal settlement in our nutritionals business.
(7)	Included in net income in the second quarter of 2005 is a charge of $2.4 million associated with a reserve for excess quantities of certain raw materials and finished goods, a charge of $3.5 million associated with our decision to cease operations at our facility in Galway, Ireland, a charge of $4.2 million related to a legal settlement with PBM, and a $15.0 million gain related to an intellectual property settlement with Quidel relating to periods prior to 2005.

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(8)	Included in net loss in the third quarter of 2005 is a charge of $0.7 million associated with our decision to cease operations at our facility in Galway, Ireland.
(9)	Included in net loss in the fourth quarter of 2005 is a charge of $0.9 million principally associated with our decision to cease operations at our facility in Galway, Ireland.

ITEM 9.   CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

Not applicable.

ITEM 9A.   CONTROLS AND PROCEDURES

Management’s conclusions regarding the effectiveness of our disclosure controls and procedures

Our management evaluated, with the participation of our Chief Executive Officer (CEO) and Chief Financial Officer (CFO), the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended) as of the end of the period covered by this annual report on Form 10-K. Based on this evaluation, our management, including the CEO and CFO, concluded that our disclosure controls and procedures were effective at that time. We and our management understand nonetheless that controls and procedures, no matter how well designed and operated, can provide only reasonable assurances of achieving the desired control objectives, and our management necessarily was required to apply its judgment in evaluating and implementing possible controls and procedures. In reaching their conclusions stated above regarding the effectiveness of our disclosure controls and procedures, our CEO and CFO concluded that such disclosure controls and procedures were effective as of such date at the “reasonable assurance” level.

Management’s Annual Report on Internal Control Over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rule 13a-15(f) under the Securities Exchange Act of 1934, as amended. Our company’s internal control over financial reporting is a process designed under the supervision of the CEO and CFO to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Our internal control over financial reporting includes those policies and procedures that:

(i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets;

(ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of our company are being made only in accordance with authorizations of our management and directors; and

(iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of assets that could have a material effect on the financial statements.

There are inherent limitations in the effectiveness of any internal control, including the possibility of human error and the circumvention or overriding of controls. Accordingly, even effective internal controls can provide only reasonable assurances with respect to financial statement preparation. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Management assessed the effectiveness of our company’s internal control over financial reporting as of December 31, 2006. In making this assessment, management used the criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission

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(COSO). Based on management’s assessment and those criteria, management determined that the Company maintained effective internal control over financial reporting as of December 31, 2006.

In conducting management’s evaluation of the effectiveness of our company’s internal control over financial reporting, management excluded the acquisitions which were completed in 2006. The contribution from these acquisitions represented approximately 10.0% and 5.2% of net revenue and total assets, respectively, as of and for the year ended December 31, 2006. Refer to Note 4 of the accompanying consolidated financial statements for further discussion of our acquisitions and their impact on our consolidated financial statements.

As indicated in its Attestation Report included below, BDO Seidman, LLP, the independent registered public accounting firm that audited the financial statements included in this report, has attested to our management’s assessments regarding the effectiveness of our internal control over financial reporting as of December 31, 2006.

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REPORT OF THE INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Stockholders of

Inverness Medical Innovations, Inc. and Subsidiaries:

We have audited management’s assessment, included in the accompanying Management’s Annual Report on Internal Control Over Financial Reporting appearing under Item 9a, that Inverness Medical Innovations, Inc. and subsidiaries maintained effective internal control over financial reporting as of December 31, 2006 based on the criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Inverness Medical Innovations, Inc. and subsidiaries’ management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting. Our responsibility is to express an opinion on management’s assessment and an opinion on the effectiveness of Inverness Medical Innovations, Inc. and subsidiaries’ internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, evaluating management’s assessment, testing and evaluating the design and operation effectiveness of internal control, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

As indicated in the accompanying Management’s Annual Report on Internal Control Over Financial Reporting, management’s assessment of and conclusion on the effectiveness of internal control over financial reporting did not include the internal controls of acquisitions completed in 2006 which are included in the 2006 consolidated financial statements of Inverness Medical Innovations, Inc. and subsidiaries and constituted approximately 10.0% and 5.2% of consolidated net revenue and consolidated total assets, respectively, as of and for the year ended December 31, 2006. Management did not assess the effectiveness of internal control over financial reporting at these entities because Inverness Medical Innovations, Inc. and subsidiaries acquired these entities during 2006. Refer to Note 4 of the accompanying consolidated financial statements for further discussion of these acquisitions and their impact on Inverness Medical Innovations, Inc. and subsidiaries’ consolidated financial statements. Our audit of internal control over financial reporting of Inverness Medical Innovations, Inc. and subsidiaries also did not include an evaluation of the internal control over financial reporting of the entities referred to above.

In our opinion, management’s assessment that Inverness Medical Innovations, Inc. and subsidiaries maintained effective internal control over financial reporting as of December 31, 2006, is fairly stated, in all material respects, is based on the criteria established in Internal Control—Integrated Framework issued by the

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COSO. Also, in our opinion, Inverness Medical Innovations, Inc. and subsidiaries maintained, in all material respects, effective internal control over financial reporting as of December 31, 2006, based on the criteria established in Internal Control—Integrated Framework issued by the COSO.

We have also audited, in accordance with the standards of the Public Accounting Oversight Board (United States) the consolidated financial statements of Inverness Medical Innovations, Inc. and subsidiaries and our report therein dated March 1, 2007 expressed an unqualified opinion.

/s/  BDO Seidman, LLP

Boston, MA

March 1, 2007

Changes in internal control over financial reporting

There was no change in our internal control over financial reporting that occurred during our fourth fiscal quarter of 2006 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

ITEM 9B.   OTHER INFORMATION

Not applicable.

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PART III

ITEM 10.   DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

The information regarding directors, executive officers and corporate governance included in our definitive Proxy Statement to be filed pursuant to Regulation 14A in connection with our 2007 Annual Meeting of Shareholders (the Proxy Statement) is incorporated herein by reference.

ITEM 11.   EXECUTIVE COMPENSATION

The information regarding executive compensation included in the Proxy Statement is incorporated herein by reference.

ITEM 12.   SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

The information regarding security ownership of certain beneficial owners and management and related stockholder matters included in the Proxy Statement is incorporated herein by reference.

ITEM 13.   CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

The information regarding certain relationships and related transactions, and director independence included in the Proxy Statement is incorporated herein by reference.

ITEM 14.   PRINCIPAL ACCOUNTING FEES AND SERVICES

The information regarding principal accounting fees and services included in the Proxy Statement is incorporated herein by reference.

PART IV

ITEM 15.   EXHIBITS, FINANCIAL STATEMENT SCHEDULES

(a)  1. Financial Statements.

The financial statements listed below have been filed as part of this report on the pages indicated:

Report of Independent Registered Public Accounting Firm	F-2
Consolidated Statements of Operations for the Years Ended December 31, 2006, 2005 and 2004	F-3
Consolidated Balance Sheets as of December 31, 2006 and 2005	F-4
Consolidated Statements of Stockholders’ Equity and Comprehensive Income (Loss) for the Years Ended December 31, 2006, 2005 and 2004	F-5
Consolidated Statements of Cash Flows for the Years Ended December 31, 2006, 2005 and 2004	F-8
Notes to Consolidated Financial Statements	F-11

2.  Financial Statement Schedules.

All schedules for which provision is made in the applicable accounting regulation of the Securities and Exchange Commission have been omitted because they are inapplicable or the required information is shown in the consolidated financial statements, or the notes, thereto, included herein.

58

3.  Exhibits.

2.1	Sale Agreement, dated December 20, 2001, between Inverness Medical Innovations, Inc. (the “Company”) and Unilever U.K. Holdings Limited (incorporated by reference to Exhibit 2.1 to the Company’s Current Report on Form 8-K dated December 20, 2001)
2.2	Stock Purchase Agreement, dated as of July 30, 2003, by and among Inverness Medical Innovations, Inc., Applied Biotech, Inc. and Erie Scientific Company (incorporated by reference to Exhibit 2.1 to the Company’s Current Report of Form 8-K dated August 27, 2003)
2.3	Asset Purchase Agreement, as of September 30, 2003, by and among Abbott Laboratories and Inverness Medical Innovations, Inc. and Inverness Medical Switzerland GmbH, Morpheus Acquisition Corp. and Morpheus Acquisition LLC. (incorporated by reference to Exhibit 2.1 to the Company’s Current Report of Form 8-K dated September 30, 2003)
2.4	Agreement and Plan of Merger, dated February 8, 2005, by and among Inverness Medical Innovations, Inc., a Delaware corporation to be formed as a wholly-owned subsidiary of Inverness Medical Innovations, Inc., Binax, Inc., Roger N. Piasio and Myron C. Hamer, and Roger N. Piasio, as stockholder representative (incorporated by reference to Exhibit 99.1 to the Company’s Current Report of Form 8-K dated February 9, 2005)
2.5	Agreement and Plan of Merger, dated February 15, 2005, by and among Inverness Medical Innovations, Inc., a Delaware corporation to be formed as a wholly-owned subsidiary of Inverness Medical Innovations, Inc., and Ischemia Technologies, Inc. (incorporated by reference to Exhibit 99.1 to the Company’s current report on form 8-K dated February 15, 2005)
2.6	Asset Purchase Agreement, dated as of May 28, 2005 by and among Abbott Laboratories, Abbott Cardiovascular, Inc., Abbott Japan, Co., Ltd., Inverness Medical Innovations, Inc., Inverness Medical Switzerland GmbH and Inverness Medical Japan, Ltd. (incorporated by reference to Exhibit 2.1 to the Company’s Current Report of Form 8-K dated June 30, 2005)
2.7	Stock Purchase Agreement, dated September 16, 2005, by and between Inverness Medical Innovations, Inc., Thermo Electron Corporation and Thermo Bioanalysis Corporation (incorporated by reference to Exhibit 2.7 to the Company’s Annual Report on Form 10-K, as amended, for the year ended December 30, 2006)
2.8	Acquisition Agreement, dated February 24, 2006, by and among Inverness Medical Innovations, Inc., ACON Laboratories, Inc., AZURE Institute, Inc., LBI, Inc., Oakville Hong Kong Co., Ltd., ACON Biotech (Hangzhou) Co., Ltd. And Karsson Overseas Ltd. (incorporated by reference to Exhibit 99.1 to the Company’s Current Report of Form 8-K dated February 24, 2006)
2.9	Share Purchase Agreement, dated February 28, 2006, by and between Inverness Medical Switzerland Gmbh, Inverness Medical Innovations, Inc., CLONDIAG Beteiligungs-Gesellschaft GmbH, Eugen Ermantraut, Dr. Stefan Wölfl, Dr. Torsten Schulz, Prof. Dr. Albert Hinnen, Karl Fusseis, Prof. Dr. Michael Köhler and Thomas Ellinger (incorporated by reference to Exhibit 2.9 to the Company’s Annual Report on Form 10-K, as amended, for the year ended December 30, 2006)
*2.10	Asset Purchase Agreement, dated December 22, 2006, by and between Inverness Medical Switzerland GmbH, Procter & Gamble International Operations, and IMJV GmbH
*2.11	Contribution Agreement, dated December 22, 2006, by and between Inverness Medical Switzerland GmbH, Procter & Gamble International Operations, and IMJV GmbH
3.1	Amended and Restated Certificate of Incorporation of the Company (incorporated by reference to Exhibit 3.1 to the Company’s Annual Report on Form 10-K, as amended, for the year ended December 31, 2001)
3.2	Certificate of Designation, Preferences and Rights of Series A Convertible Preferred Stock of the Company (incorporated by reference to Exhibit 99.2 to the Company’s Current Report on Form 8-K dated December 20, 2001)
3.3	Amended and Restated By-laws of the Company (incorporated by reference to Exhibit 3.3 to the Company’s Annual Report on Form 10-K, as amended, for the year ended December 31, 2001)
*3.4	Amended and Restated Certificate of Incorporation of the Company
*3.5	Certificate of Correction to Amended and Restated Certificate of Incorporation of the Company

59

4.1	Indenture, dated as of February 10, 2004, between Inverness Medical Innovations, Inc., the Guarantors named therein and U.S. Bank Trust National Association (incorporated by reference to Exhibit 4.3 to the Company’s Annual Report on Form 10-K, as amended, for the year ended December 31, 2004)
4.2	First Supplemental Indenture, dated as of June 15, 2004, among Inverness Medical Innovations, Inc., the Guarantors, Advantage Diagnostics Corporation and U.S. Bank Trust National Association, as Trustee (incorporated by reference to Exhibit 4.1 to the Company’s Quarterly Report on Form 10-Q for the period ended June 30, 2004)
4.3	Second Supplemental Indenture, dated as of October 20, 2004, among Inverness Medical Innovations, Inc., the Guarantors, IVC Industries, Inc. and U.S. Bank Trust National Association, as Trustee (incorporated by reference to Exhibit 4.1 to the Company’s Quarterly Report on Form 10-Q for the period ended September 30, 2004)
4.4	Third Supplement Indenture, dated as of March 16, 2005, among Inverness Medical Innovations, Inc., the Guarantors, Ischemia Technologies, Inc. and U.S. Bank Trust National Association as Trustee (incorporated by reference to Exhibit 4.1 to the Company’s Quarterly Report on Form 10-Q for the period ended March 31, 2005)
4.5	Fourth Supplement Indenture, dated as of March 31, 2005, among Inverness Medical Innovations, Inc., the Guarantors, Binax, Inc. and U.S. Bank Trust National Association, as Trustee (incorporated by reference to Exhibit 4.2 to the Company’s Quarterly Report on Form 10-Q for the period ended March 31, 2005)
4.6	Fifth Supplemental Indenture, dated as of September 30, 2005, among Inverness Medical Innovations, Inc., the Guarantors, Thermo BioStar Inc. and U.S. Bank Trust National Association, as Trustee (incorporated by reference to Exhibit 4.1 to the Company’s Quarterly Report on Form 10-Q for the period ended September 30, 2005)
10.1	Post-Closing Covenants Agreement, dated as of November 21, 2001, by and among Johnson & Johnson, IMT, the Company, certain subsidiaries of IMT and certain subsidiaries of the Company (incorporated by reference to Exhibit 10.1 to the Company’s Annual Report on Form 10-K, as amended, for the year ended December 31, 2001)
10.2	Supply of Goods Agreement, dated July 28, 1998, between Schleicher & Schuell GmbH and Unipath Limited (incorporated by reference to Exhibit 10.3 to the Company’s Annual Report on Form 10-K, as amended, for the year ended December 31, 2001)
10.3	Inverness Medical Innovations, Inc. 2001 Stock Option and Incentive Plan (incorporated by reference to Exhibit 10.1 to the Company’s Registration Statement on Form S-4, as amended (File No. 333-67392))
10.4	Inverness Medical Innovations, Inc. 2001 Employee Stock Purchase Plan (incorporated by reference to Exhibit 10.2 to the Company’s Registration Statement on Form S-4, as amended (File No. 333-67392))
10.5	Inverness Medical Innovations, Inc. 2001 Employee Stock Purchase Plan—First Amendment (incorporated by reference to Exhibit 10.9 to the Company’s Annual Report on Form 10-K, as amended, for the year ended December 31, 2001)
10.6	Inverness Medical Innovations, Inc. 2001 Employee Stock Purchase Plan—Second Amendment (incorporated by reference to Exhibit 10.6 to the Company’s Annual Report on Form 10-K, as amended, for the year ended December 30, 2006)
10.7	Lease between WE 10 Southgate LLC and Binax, Inc. dated as of August 26, 2004 (incorporated by reference to Exhibit 10.7 to the Company’s Quarterly Report on Form 10-Q for the period ended June 30, 2005)
+10.8	Research and Development Agreement, dated February 25, 2005, among ITI Scotland Limited and Inverness Medical Innovations, Inc., Stirling Medical Innovations Limited and Inverness Medical Switzerland GmbH (incorporated by reference to Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q for the period ended March 31, 2005)
10.9	Form of Warrant for the Purchase of Shares of Common Stock of the Company issued pursuant to the Note and Warrant Purchase Agreement dated as of December 14, 2001 (incorporated by reference to Exhibit 99.5 to the Company’s Current Report on Form 8-K dated December 20, 2001)

60

10.10	Agreement, dated December 1, 1986, between Bernard Levere, Zelda Levere, Pioneer Pharmaceuticals, Inc. and Essex Chemical Corp. and Unconditional Guarantee by Essex Chemical Corp. (incorporated by reference to Exhibit 10.33 to the Company’s Annual Report on Form 10-K, as amended, for the year ended December 31, 2001)
10.11	Option to Assume and Extend Lease, dated as of February   , 1995, between Bernard Levere, Zelda Levere and International Vitamin Corporation (incorporated by reference to Exhibit 10.34 to the Company’s Annual Report on Form 10-K, as amended, for the year ended December 31, 2001)
10.12	Warrant for the Purchase of Shares of Common Stock of the Company, dated as of March 31, 2005, issued to Roger Piasio (incorporated by reference to Exhibit 10.23 to the Company’s Annual Report on Form 10-K, as amended, for the year ended December 30, 2006)
10.13	Licensing Agreement, dated March 14, 1988, between Unilever Plc and Behringwerke AG (incorporated by reference to Exhibit 10.37 to the Company’s Annual Report on Form 10-K, as amended, for the period ended December 31, 2001)
10.14	Supplemental Agreement, dated October 16, 1994, between Unilever Plc, Unilever NV and Behringwerke AG (incorporated by reference to Exhibit 10.38 to the Company’s Annual Report on Form 10-K, as amended, for the period ended December 31, 2001)
10.15	Supply of Goods Agreement, dated December 19, 1994, between AFC Worldwide and Unipath Limited (incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q, as amended, for the period ended March 30, 2002)
10.16	Amendment to Supply of Goods Agreement, dated March 14, 2002, between Schleicher & Schuell GmbH and Unipath Limited (incorporated by reference to Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q, as amended, for the period ended March 30, 2002)
10.17	Amendment No. 1 to Inverness Medical Innovations, Inc. 2001 Stock Option and Incentive Plan (incorporated by reference to Exhibit 4.4 to the Company’s Registration Statement on Form S-8 (File No. 333-90530))
10.18	Form of Warrant Agreement issued pursuant to the Note and Warrant Purchase Agreement (incorporated by reference to Exhibit 99.3 to the Company’s Current Report on Form 8-K dated September 20, 2002)
10.19	Third Amended and Restated Credit Agreement, dated as of June 30, 2005 by and among Wampole Laboratories, LLC and Inverness Parties Signatory thereto, as Credit Parties, the Lenders Signatory thereto from time to time, as Lenders, General Electric Capital Corporation, as administrative agent, Merrill Lynch Capital, a division of Merrill Lynch Business Financial Services Inc., as documentation agent, a co-syndication agent and a co-lead arranger, UBS Securities LLC, as a co-syndication agent and GECC Capital Markets Group, Inc., as a co-lead arranger (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, event date June 30, 2005, filed on July 7, 2005)
10.20	First Amendment and Consent to Third Amended and Restated Credit Agreement, dated as of September 29, 2005, to the Third Amended and Restated Credit Agreement, dated as of June 30, 2005, by and among General Electric Capital Corporation, as Agent, Inverness Medical Innovations, Inc., Wampole Laboratories, LLC and Inverness Medical (UK) Holdings Limited, as borrowers, the other Credit Parties signatory thereto, Merrill Lynch Capital, a division of Merrill Lynch Business Financial Services Inc., as documentation agent, a co-syndication agent and lender, UBS Securities LLC, as a co-syndication agent, and the lenders signatory thereto from time to time (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, event date September 29, 2005, filed on October 4, 2005)
10.21	Second Amendment to Third Amended and Restated Credit Agreement, dated as of November 8, 2005, to the Third Amended and Restated Credit Agreement, dated as of June 30, 2005, by and among General Electric Capital Corporation, as Agent, Inverness Medical Innovations, Inc., Wampole Laboratories, LLC and Inverness Medical (UK) Holdings Limited, as borrowers, the other Credit Parties signatory thereto, Merrill Lynch Capital, a division of Merrill Lynch Business Financial Services Inc., as documentation agent, a co-syndication agent and lender, UBS Securities LLC, as a co-syndication agent, and the lenders signatory thereto from time to time (incorporated by reference to Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q, as amended, for the period ended September 30, 2005)

61

10.22	Third Amendment to Third Amended and Restated Credit Agreement, dated as of November 22, 2005, to the Third Amended and Restated Credit Agreement, dated as of June 30, 2005, by and among General Electric Capital Corporation, as Agent, Inverness Medical Innovations, Inc., Wampole Laboratories, LLC and Inverness Medical (UK) Holdings Limited, as borrowers, the other Credit Parties signatory thereto, Merrill Lynch Capital, a division of Merrill Lynch Business Financial Services Inc., as documentation agent, a co-syndication agent and lender, UBS Securities LLC, as co-syndication agent, and the lenders signatory thereto from time to time (incorporated by reference to Exhibit 10.35 to the Company’s Annual Report on Form 10-K, as amended, for the year ended December 30, 2006)
10.23	Fourth Amendment and Consent to Third Amended and Restated Credit Agreement, dated as of February 27, 2006, to the Third Amended and Restated Credit Agreement, dated as of June 30, 2005, by and among General Electric Capital Corporation, as Agent, Inverness Medical Innovations, Inc., Wampole Laboratories, LLC and Inverness Medical (UK) Holdings Limited, as borrowers, the other Credit Parties signatory thereto, Merrill Lynch Capital, a division of Merrill Lynch Business Financial Services Inc., as documentation agent, a co-syndication agent and lender, UBS Securities LLC, as co-syndication agent, and the lenders signatory thereto from time to time (incorporated by reference to Exhibit 10.36 to the Company’s Annual Report on Form 10-K, as amended, for the year ended December 30, 2006)
10.24	Fifth Amendment and Consent to Third Amended and Restated Credit Agreement, dated as of March 31, 2006, to the Third Amended and Restated Credit Agreement, dated as of June 30, 2005 (as amended, supplemented or otherwise modified from time to time), by and among General Electric Capital Corporation, as Agent, Inverness Medical Innovations, Inc., Wampole Laboratories, LLC and Inverness Medical (UK) Holdings Limited, as Borrowers, the other Credit Parties signatory thereto, Merrill Lynch Capital, a division of Merrill Lynch Business Financial Services Inc., as documentation agent, co-syndication agent and lender, UBS Securities LLC, as co-syndication agent, and the Lenders signatory thereto from time to time (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, event date September 29, 2005, filed on October 4, 2005)
10.25	Sixth Amendment and Consent to Third Amended and Restated Credit Agreement, dated as of May 3, 2006, to the Third Amended and Restated Credit Agreement, dated as of June 30, 2005 (as amended, supplemented or otherwise modified from time to time), by and among General Electric Capital Corporation, as Agent, Inverness Medical Innovations, Inc., Wampole Laboratories, LLC and Inverness Medical (UK) Holdings Limited, as Borrowers, the other Credit Parties signatory thereto, Merrill Lynch Capital, a division of Merrill Lynch Business Financial Services Inc., as documentation agent, co-syndication agent and lender, UBS Securities LLC, as co-syndication agent, and the Lenders signatory thereto from time to time (incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the period ended September 30, 2006)
10.26	Seventh Amendment and Consent to Third Amended and Restated Credit Agreement, dated as of October 6, 2006, to the Third Amended and Restated Credit Agreement, dated as of June 30, 2005 (as amended, supplemented or otherwise modified from time to time), by and among General Electric Capital Corporation, as Agent, Inverness Medical Innovations, Inc., Wampole Laboratories, LLC and Inverness Medical (UK) Holdings Limited, as Borrowers, the other Credit Parties signatory thereto, Merrill Lynch Capital, a division of Merrill Lynch Business Financial Services Inc., as documentation agent, co-syndication agent and lender, UBS Securities LLC, as co-syndication agent, and the Lenders signatory thereto from time to time (incorporated by reference to Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q for the period ended September 30, 2006)
10.27	Eighth Amendment and Consent to Third Amended and Restated Credit Agreement, dated as of October 30, 2006, to the Third Amended and Restated Credit Agreement, dated as of June 30, 2005 (as amended, supplemented or otherwise modified from time to time), by and among General Electric Capital Corporation, as Agent, Inverness Medical Innovations, Inc., Wampole Laboratories, LLC and Inverness Medical (UK) Holdings Limited, as Borrowers, the other Credit Parties signatory thereto, Merrill Lynch Capital, a division of Merrill Lynch Business Financial Services Inc., as documentation agent, co-syndication agent and lender, UBS Securities LLC, as co-syndication agent, and the Lenders signatory thereto from time to time (incorporated by reference to Exhibit 10.3 to the Company’s Quarterly Report on Form 10-Q for the period ended September 30, 2006)

62

*10.28	Ninth Amendment and Consent to Third Amended and Restated Credit Agreement, dated as of November 10, 2006, to the Third Amended and Restated Credit Agreement, dated as of June 30, 2005 (as amended, supplemented or otherwise modified from time to time), by and among General Electric Capital Corporation, as Agent, Inverness Medical Innovations, Inc., Wampole Laboratories, LLC and Inverness Medical (UK) Holdings Limited, as Borrowers, the other Credit Parties signatory thereto, Merrill Lynch Capital, a division of Merrill Lynch Business Financial Services Inc., as documentation agent, co-syndication agent and lender, UBS Securities LLC, as co-syndication agent, and the Lenders signatory thereto from time to time
10.29	Amendment No. 2 to Inverness Medical Innovations, Inc. 2001 Stock Option and Incentive Plan (incorporated by reference to Exhibit 4.6 to Company’s Registration Statement on Form S-8, as amended (File No. 333-106996))
10.30	Amendment No. 3 to Inverness Medical Innovations, Inc. 2001 Stock Option and Incentive Plan (incorporated by reference to Exhibit 10.3 to Company’s Quarterly Report on Form 10-Q, for the period ended June 30, 2005)
10.31	Rules of Inverness Medical Innovations, Inc. Inland Revenue Approved Option Plan (adopted as subplan to Inverness Medical Innovations, Inc. 2001 Stock Option and Incentive Plan) (incorporated by reference to Exhibit 10.2 to Company’s Quarterly Report on Form 10-Q for the period ended June 30, 2005)
10.32	Form of Non-Qualified Stock Option Agreement for Non-Employee Directors under the Inverness Medical Innovations, Inc. 2001 Stock Option and Incentive Plan (incorporated by reference to Exhibit 10.4 to Company’s Quarterly Report on Form 10-Q for the period ended June 30, 2005)
10.33	Form of Non-Qualified Stock Option Agreement for Senior Executives under the Inverness Medical Innovations, Inc. 2001 Stock Option and Incentive Plan (incorporated by reference to Exhibit 10.5 to Company’s Quarterly Report on Form 10-Q for the period ended June 30, 2005)
10.34	Form of Incentive Stock Option Agreement for Senior Executives under the Inverness Medical Innovations, Inc. 2001 Stock Option and Incentive Plan (incorporated by reference to Exhibit 10.6 to Company’s Quarterly Report on Form 10-Q for the period ended June 30, 2005)
+10.35	Manufacturing and Support Services Agreement, dated June 30, 2005, by and among Abbott Japan Co., Ltd., Abbott Laboratories, Inverness Medical Innovations, Inc., Inverness Medical Switzerland GmbH and Inverness Medical Japan, Ltd. (incorporated by reference to Exhibit 10.8 to Company’s Quarterly Report on Form 10-Q for the period ended June 30, 2005)
+10.36	Manufacturing, Packaging and Supply Agreement, dated as of June 6, 2003, among Inverness Medical Innovations, Inc., Inverness Medical Switzerland GmbH, Unipath, Ltd. and Warner-Lambert Company LLC (incorporated by reference to Exhibit 10.45 to Amendment No. 2 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2004)
+10.37	Reagent Supply Agreement, dated June 30, 2005, by and between Abbott Laboratories, Inverness Medical Innovations, Inc. and Inverness Medical Japan, Ltd (incorporated by reference to Exhibit 10.9 to Company’s Quarterly Report on Form 10-Q for the period ended June 30, 2005)
10.38	Investor Rights Agreement, dated March 31, 2006, by and among Inverness Medical Innovations, Inc., Ron Zwanziger, ACON Laboratories, Inc., AZURE Institute, Inc., LBI, Inc., Oakville Hong Kong Co., Ltd., ACON Biotech (Hangzhou) Co., Ltd., Karsson Overseas Ltd., Manfield Top Worldwide Ltd., Overseas Square Ltd., Jixun Lin and Feng Lin (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, event date September 29, 2005, filed on October 4, 2005)
10.39	Second Territory Letter Agreement, dated March 31, 2006, by and among Inverness Medical Innovations, Inc., ACON Laboratories, Inc., AZURE Institute, Inc., LBI, Inc., Oakville Hong Kong Co., Ltd., ACON Biotech (Hangzhou) Co., Ltd., Karsson Overseas Ltd., Jixun Lin and Feng Lin (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, event date September 29, 2005, filed on October 4, 2005)
*10.40	Subunderlease, dated 15 February 2007, between the Landlord, Unilever U.K. Central Resources Limited, the Tenant, Unipath Limited, and the Surety, Inverness Medical Innovations, Inc.
*10.41	Amendment No. 4 to Inverness Medical Innovations, Inc. 2001 Stock Option and Incentive Plan
*10.42	Amendment No. 5 to Inverness Medical Innovations, Inc. 2001 Stock Option and Incentive Plan

63

10.43	Underwriting Agreement dated January 25, 2007 (incorporated by reference to Exhibit 1.1 to the Company’s Current Report on Form 8-K, dated January 26, 2007)
*14.50	Inverness Medical Innovations Business Conduct Guidelines
*21.1	List of Subsidiaries of the Company as of March 1, 2007
*23.1	Consent of BDO Seidman, LLP
*31.1	Certification by Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act
*31.2	Certification by Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act
*32.1	Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act

*	Filed herewith.
+	We have omitted portions of this exhibit which have been granted confidential treatment.

64

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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.

INVERNESS MEDICAL INNOVATIONS, INC.

Date: March 1, 2007

By:  /s/  Ron Zwanziger

Ron Zwanziger

Chairman, Chief Executive Officer and President

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.

Signature	Title	Date
/s/  Ron ZwanzigerRon Zwanziger	Chief Executive Officer, President and Director (Principal Executive Officer)	March 1, 2007
/s/  David Teitel David Teitel	Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer)	March 1, 2007
/s/  Carol R. Goldberg Carol R. Goldberg	Director	March 1, 2007
/s/  Robert P. Khederian Robert P. Khederian	Director	March 1, 2007
/s/  John F. Levy John F. Levy	Director	March 1, 2007
/s/  Jerry McAleer Jerry McAleer	Director	March 1, 2007
/s/  John A. Quelch John A. Quelch	Director	March 1, 2007
/s/  David Scott David Scott	Director	March 1 2007
/s/  Peter Townsend Peter Townsend	Director	March 1, 2007
/s/  Alfred M. Zeien Alfred M. Zeien	Director	March 1, 2007

65

INVERNESS MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES

CONSOLIDATED FINANCIAL STATEMENTS

Table of Contents

	Page
Report of Independent Registered Public Accounting Firm	F-2
Consolidated Statements of Operations for the Years Ended December 31, 2006, 2005 and 2004	F-3
Consolidated Balance Sheets as of December 31, 2006 and 2005	F-4
Consolidated Statements of Stockholders’ Equity and Comprehensive Income (Loss) for the Years Ended December 31, 2006, 2005 and 2004	F-5
Consolidated Statements of Cash Flows for the Years Ended December 31, 2006, 2005 and 2004	F-8
Notes to Consolidated Financial Statements	F-11

F-1

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Stockholders of
Inverness Medical Innovations, Inc. and Subsidiaries:

We have audited the accompanying consolidated balance sheets of Inverness Medical Innovations, Inc. and Subsidiaries (the “Company”) as of December 31, 2006 and 2005, and the related consolidated statements of operations, stockholders’ equity and comprehensive income (loss), and cash flows for each of the three years in the period ended December 31, 2006. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Inverness Medical Innovations, Inc. and Subsidiaries at December 31, 2006 and 2005, and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 2006, in conformity with accounting principles generally accepted in the United States of America.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the effectiveness of the Company’s internal control over financial reporting as of December 31, 2006, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). Our report dated March 1, 2007, expressed an unqualified opinion on management’s assessment on the effectiveness of internal control over financial reporting and an unqualified opinion on the effectiveness of internal control over financial reporting.

/s/  BDO Seidman, LLP

Boston, Massachusetts

March 1, 2007

F-2

INVERNESS MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share amounts)

	2006			2005			2004
Net product sales	$	552,130		$	406,457		$	365,432
License and royalty revenue		17,324			15,393			8,559
Net revenue		569,454			421,850			373,991
Cost of sales		340,231			269,538			226,987
Gross profit		229,223			152,312			147,004
Operating expenses:
Research and development (Note 11)		53,666			30,992			31,954
Sales and marketing		94,445			72,103			57,957
General and administrative		71,243			59,990			52,707
Loss on dispositions, net (Note 22)		3,498			—			—
Operating income (loss)		6,371			(10,773	)		4,386
Interest expense, including amortization of original issue discounts and write-off of deferred financing costs (Note 6)		(26,570	)		(21,795	)		(22,114	)
Other income (expense), net		9,084			20,178			3,407
Loss before provision for income taxes		(11,115	)		(12,390	)		(14,321	)
Provision for income taxes		5,727			6,819			2,275
Net loss	$	(16,842	)	$	(19,209	)	$	(16,596	)
Net loss available to common stockholders—basic and diluted (Note 13)	$	(16,842	)	$	(19,209	)	$	(17,345	)
Net loss per common share—basic (Notes 2(m) and 13)	$	(0.49	)	$	(0.79	)	$	(0.87	)
Net loss per common share—diluted (Notes 2(m) and 13)	$	(0.49	)	$	(0.79	)	$	(0.87	)
Weighted average shares—basic		34,109			24,358			19,969
Weighted average shares—diluted		34,109			24,358			19,969

The accompanying notes are an integral part of these consolidated financial statements.

F-3

INVERNESS MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(in thousands, except per share amounts)

	December 31,
	2006			2005
ASSETS
Current assets:
Cash and cash equivalents	$	71,104		$	34,270
Accounts receivable, net of allowances of $8,401 and $9,748 at December 31, 2006 and 2005, respectively		100,388			70,476
Inventories, net		78,322			71,209
Deferred tax assets		5,332			844
Prepaid expenses and other current assets		20,398			17,534
Total current assets		275,544			194,333
Property, plant and equipment, net		82,312			72,211
Goodwill		439,369			322,210
Other intangible assets with indefinite lives		68,107			63,742
Core technology and patents, net		87,732			64,050
Other intangible assets, net		83,794			60,489
Deferred financing costs, net, and other non-current assets		13,218			13,013
Other investments and available for sale securities		35,617			456
Deferred tax assets		78			662
Total assets	$	1,085,771		$	791,166
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Current portion of long-term debt	$	7,504		$	2,367
Current portion of capital lease obligations		584			542
Accounts payable		46,342			42,155
Accrued expenses and other current liabilities		87,801			64,746
Total current liabilities		142,231			109,810
Long-term liabilities:
Long-term debt, net of current portion		194,473			258,617
Capital lease obligations, net of current portion		415			978
Deferred tax liabilities		23,984			18,881
Other long-term liabilities		10,530			5,572
Total long-term liabilities		229,402			284,048
Commitments and contingencies (Notes 7, 8 and 10)
Series A redeemable convertible preferred stock, $0.001 par value:
Authorized: 2,667 shares
Issued: 2,527 shares at December 31, 2006 and 2005
Outstanding: none at December 31, 2006 and 2005		—			—
Stockholders’ equity:
Preferred stock, $0.001 par value
Authorized: 2,333 shares
Issued: none		—			—
Common stock, $0.001 par value
Authorized: 100,000 shares
Issued and outstanding: 39,215 shares at December 31, 2006 and 27,497 shares at December 31, 2005		39			27
Additional paid-in capital		826,987			515,147
Notes receivable from stockholders		—			(14,691	)
Accumulated deficit		(127,069	)		(110,227	)
Accumulated other comprehensive income		14,181			7,052
Total stockholders’ equity		714,138			397,308
Total liabilities and stockholders’ equity	$	1,085,771		$	791,166

The accompanying notes are an integral part of these consolidated financial statements.

F-4

INVERNESS MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY AND COMPREHENSIVE INCOME (LOSS)

(in thousands, except per share amounts)

	Common Stock						Notes						Accumulated
			$0.001		Additional		Receivable						Other		Total
	Number of		Par		Paid-in		from			Accumulated			Comprehensive		Stockholders’			Comprehensive
	Shares		Value		Capital		Stockholders			Deficit			Income		Equity			Income (Loss)
BALANCE, DECEMBER 31, 2003		19,640	$	20	$	341,704	$	(14,691	)	$	(73,673	)	$	11,813	$	265,173
Issuance of common stock in connection with acquisitions, net of issuance costs of $88		156		—		2,914		—			—			—		2,914
Exercise of common stock options and warrants and shares issued under employee stock purchase plan		153		—		1,998		—			—			—		1,998
Conversion of series A redeemable convertible preferred stock to common stock (Note 14(b))		416		1		6,933		—			(739	)		—		6,195
Redemption interest related to series A redeemable convertible preferred stock (Note 14(b))		—		—		—		—			(10	)		—		(10	)
Conversion of convertible subordinated promissory notes to common stock (Note 6(d))		346		—		6,034		—			—			—		6,034
Other (Note 16)		—		—		—		—			—			33		33		$	33
Pension liability adjustment		—		—		—		—			—			434		434			434
Changes in cumulative translation adjustment		—		—		—		—			—			5,241		5,241			5,241
Net loss		—		—		—		—			(16,596	)		—		(16,596	)		(16,596	)
Total comprehensive loss																		$	(10,888	)
BALANCE, DECEMBER 31, 2004		20,711	$	21	$	359,583	$	(14,691	)	$	(91,018	)	$	17,521	$	271,416

The accompanying notes are an integral part of these consolidated financial statements.

F-5

INVERNESS MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY AND COMPREHENSIVE INCOME (LOSS)
(Continued)
(in thousands, except per share amounts)

	Common Stock						Notes						Accumulated
			$0.001		Additional		Receivable						Other			Total
	Number of		Par		Paid-in		From			Accumulated			Comprehensive			Stockholders’			Comprehensive
	Shares		Value		Capital		Stockholders			Deficit			Income			Equity			Loss
BALANCE, DECEMBER 31, 2004		20,711	$	21	$	359,583	$	(14,691	)	$	(91,018	)	$	17,521		$	271,416
Issuance of common stock in connection with acquisitions and equity offering, net of issuance costs of $2,481		6,391		6		150,210		—			—			—			150,216
Exercise of common stock options and warrants and shares issued under employee stock purchase plan		395		—		5,185		—			—			—			5,185
Stock-based compensation related to grants of common stock options		—		—		169		—			—			—			169
Changes in cumulative translation adjustment		—		—		—		—			—			(10,300	)		(10,300	)	$	(10,300	)
Reclassification of gain related to sale of available-for-sale securities		—		—		—		—			—			(169	)		(169	)		(169	)
Net loss		—		—		—		—			(19,209	)		—			(19,209	)		(19,209	)
Total comprehensive loss																			$	(29,678	)
BALANCE, DECEMBER 31, 2005		27,497	$	27	$	515,147	$	(14,691	)	$	(110,227	)	$	7,052		$	397,308

The accompanying notes are an integral part of these consolidated financial statements.

F-6

INVERNESS MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY AND COMPREHENSIVE INCOME (LOSS)
(Continued)
(in thousands, except per share amounts)

	Common Stock						Notes						Accumulated
			$0.001		Additional		Receivable						Other			Total
	Number of		Par		Paid-in		From			Accumulated			Comprehensive			Stockholders’			Comprehensive
	Shares		Value		Capital		Stockholders			Deficit			Income			Equity			Income (Loss)
BALANCE, DECEMBER 31, 2005		27,497	$	27	$	515,147	$	(14,691	)	$	(110,227	)	$	7,052		$	397,308
Issuance of common stock in connection with acquisitions and equity offering, net of issuance costs of $9,617		10,893		11		295,488		—			—			—			295,499
Exercise of common stock options and warrants and shares issued under employee stock purchase plan		825		1		10,330		—			—			—			10,331
Stock-based compensation related to grants of common stock options		—		—		5,455		—			—			—			5,455
Stock option income tax benefits		—		—		567		—			—			—			567
Repayment of notes receivable from stockholder options		—		—		—		14,691			—			—			14,691
Pension liability adjustment		—		—		—		—			—			(3,738	)		(3,738	)	$	(3,738	)
Changes in cumulative translation adjustment		—		—		—		—			—			10,823			10,823			10,823
Unrealized gain on available-for-sale securities		—		—		—		—			—			44			44			44
Net loss		—		—		—		—			(16,842	)		—			(16,842	)		(16,842	)
Total comprehensive loss																			$	(9,713	)
BALANCE, DECEMBER 31, 2006		39,215	$	39	$	826,987	$	—		$	(127,069	)	$	14,181		$	714,138

The accompanying notes are an integral part of these consolidated financial statements.

F-7

INVERNESS MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)

	2006			2005			2004
Cash Flows from Operating Activities:
Net loss	$	(16,842	)	$	(19,209	)	$	(16,596	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Interest expense related to amortization and write-off of non-cash original issue discount, non-cash beneficial conversion feature and deferred financing costs		4,158			2,345			4,929
Non-cash loss (income) related to currency hedge and interest rate swap agreements		(217	)		217			(695	)
Non-cash stock-based compensation expense		5,455			169			—
Charge for in-process research and development		4,960			—			—
Non-cash value on settlement of litigation		—			(2,593	)		(495	)
Impairment of long-lived assets		9,573			1,740			—
(Gain) loss on sale of fixed assets		(1,528	)		263			—
Interest in minority investments		(635	)		—			—
Depreciation and amortization		39,362			27,756			23,500
Deferred income taxes		(409	)		5,969			2,232
Other non-cash items		714			141			(36	)
Changes in assets and liabilities, net of acquisitions:
Accounts receivable, net		(13,846	)		10,404			(4,095	)
Inventories, net		167			(4,047	)		(11,073	)
Prepaid expenses and other current assets		(86	)		(7,598	)		2,116
Accounts payable		210			6,201			(6,897	)
Accrued expenses and other current liabilities		3,294			4,496			15,049
Other non-current liabilities		(60	)		339			356
Net cash provided by operating activities		34,270			26,593			8,295
Cash Flows from Investing Activities:
Purchases of property, plant and equipment		(19,717	)		(20,233	)		(20,389	)
Proceeds from sale of property, plant and equipment		2,244			241			385
Cash paid for purchase of Ischemia Technologies, Inc., net of cash acquired		(99	)		(4,096	)		—
Cash paid for purchase of Binax, Inc., net of cash acquired		—			(7,972	)		—
Cash paid for purchase of the Determine business		—			(58,102	)		—
Cash paid for purchase of Thermo BioStar, Inc.		—			(53,607	)		—
Cash paid for purchase of Innogenetics Diagnostica Y Terapeutica, S.A.U, net of cash acquired		(237	)		(20,030	)		—
Cash paid for purchase of CLONDIAG chip technologies Gmbh, net of cash acquired		(17,576	)		—			—
Cash paid for purchase of ABON BioPharm (Hangzhou) Co. Ltd. and ACON Laboratories, net of cash acquired		(112,643	)		—			—
Cash paid for purchase of other businesses and intellectual property		(910	)		(5,175	)		(12,409	)
Cash paid for investments in minority interests and available-for-sale securities		(25,817	)		—			—
Decrease in other assets		(4,077	)		(1,787	)		(1,889	)
Net cash used in investing activities		(178,832	)		(170,761	)		(34,302	)
Cash Flows from Financing Activities:
Cash paid for financing costs		(2,787	)		(2,873	)		(5,671	)
Proceeds from issuance of common stock, net of issuance costs		234,961			97,440			1,905
Net (payments) proceeds under revolving line of credit		(47,879	)		69,442			(30,830	)
Stock-based compensation excess tax benefit		567			—			—
Proceeds from issuance of senior subordinated notes		—			—			150,000
Proceeds from borrowings under notes payable		—			269			—
Repayments of notes payable		(20,000	)		—			(97,830	)
Repayments of notes receivable		14,691			—			—
Principal payments of capital lease obligations		(546	)		(501	)		(477	)
Net cash provided by financing activities		179,007			163,777			17,097
Foreign exchange effect on cash and cash equivalents		2,389			(2,095	)		1,044
Net increase (decrease) in cash and cash equivalents		36,834			17,514			(7,866	)
Cash and cash equivalents, beginning of year		34,270			16,756			24,622
Cash and cash equivalents, end of year	$	71,104		$	34,270		$	16,756
Supplemental Disclosure of Cash Flow Information:
Interest paid	$	22,686		$	19,268		$	13,535
Taxes paid	$	8,841		$	4,106		$	3,067

The accompanying notes are an integral part of these consolidated financial statements.

F-8

INVERNESS MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
(in thousands)

	2006			2005			2004
Supplemental Disclosure of Non-cash Activities:
On May 15, 2006, we acquired ABON BioPharm (Hangzhou) Co. Ltd. and ACON Laboratories (Note 4(a))—
Accounts receivable	$	11,328		$	—		$	—
Inventories		4,814			—			—
Property, plant and equipment		10,274			—			—
Other assets		1,369			—			—
Intangible assets		160,116			—			—
Accounts payable and accrued expenses		(4,081	)		—			—
Other liabilities		(18,125	)		—			—
Cash paid for purchase of ABON BioPharm (Hangzhou) Co. Ltd. and ACON Laboratories, net of cash acquired		(112,643	)		—			—
Fair value of common stock issued	$	53,052		$	—		$	—
On February 28, 2006, we acquired CLONDIAG chip technologies Gmbh (Note 4(a))—
Accounts receivable	$	295		$	—		$	—
Inventories		90			—			—
Property, plant and equipment		1,790			—			—
Other assets		556			—			—
Intangible assets		22,901			—			—
Accounts payable and accrued expenses		(1,581	)		—			—
Cash paid for purchase of CLONDIAG chip technologies Gmbh, net of cash acquired		(17,576	)		—			—
Fair value of common stock issued	$	6,475		$	—		$	—
On September 30, 2005, we acquired Thermo BioStar, Inc. (Note 4(b))—
Accounts receivable	$	—		$	5,247		$	—
Inventories		—			2,046			—
Property, plant and equipment		—			1,510			—
Other assets		—			795			—
Intangible assets		—			49,083			—
Accrued exit costs		—			(83	)		—
Accounts payable and accrued expenses		—			(4,991	)		—
Cash paid for purchase of Thermo BioStar, Inc.		—			(53,607	)		—
	$	—		$	—		$	—
On September 30, 2005, we acquired Innogenetics Diagnostica Y Terapeutica, S.A.U. (Note 4(b))—
Accounts receivable	$	—		$	10,913		$	—
Inventories		—			520			—
Property, plant and equipment		—			771			—
Prepaid expenses and Other assets		—			188			—
Intangible assets		—			12,062			—
Accrued acquisition costs		237			(210	)		—
Accounts payable and Accrued expenses		—			(3,164	)		—
Deferred tax liability		—			(1,050	)		—
Cash paid for purchase of Innogenetics Diagnostica Y Terapeutica, S.A.U., net of acquired cash	$	(237	)		(20,030	)		—
	$	—		$	—		$	—
On June 30, 2005, we acquired the Determine business from Abbott Laboratories (Note 4(b))—
Inventories	$	—		$	3,412		$	—
Property, plant and equipment		—			1,500			—
Intangible assets		—			56,913			—
Accounts payable and Accrued expenses		—			(3,723	)		—
Cash paid for purchase of the Determine business		—			(58,102	)		—
	$	—		$	—		$	—

The accompanying notes are an integral part of these consolidated financial statements.

F-9

INVERNESS MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
(in thousands)

	2006			2005			2004
On March 31, 2005, we acquired Binax, Inc. (Note 4(b))—
Accounts receivable	$	—		$	5,264		$	—
Inventories		—			3,086			—
Property, plant and equipment		—			2,421			—
Prepaid expenses and Other assets		—			688			—
Intangible assets		—			35,596			—
Accounts payable and accrued expenses		—			(2,076	)		—
Deferred tax liability, net		—			(1,794	)		—
Cash paid for purchase of Binax, Inc., net of cash acquired		—			(7,972	)		—
Fair value of common stock issued	$	—		$	35,213		$	—
On March 16, 2005, we acquired Ischemia Technologies, Inc. (Note 4(b))—
Accounts receivable	$	—		$	58		$	—
Inventories		—			40			—
Property, plant and equipment		—			288			—
Intangible assets		—			26,932			—
Other assets		—			99			—
Assumed liabilities		—			(50	)		—
Accrued acquisition costs		99			(144	)		—
Accounts payable and accrued expenses		—			(377	)		—
Cash paid for purchase of Ischemia Technologies, Inc., net of cash acquired		(99	)		(4,096	)		—
Fair value of common stock issued	$	—		$	22,750		$	—
During 2006, 2005, 2004, 2003 and 2002, we acquired other businesses and intellectual property —
Accounts receivable	$	—		$	—		$	496
Inventories		455			—			875
Property, plant and equipment		3			—			(903	)
Intangible assets		346			4,971			14,493
Prepaid expenses and other assets		—			—			170
Accounts payable and accrued expenses		(3	)		—			(2,827	)
Accrued acquisition costs		109			204			3,553
Net deferred tax liabilities		—			—			(446	)
Cash paid for purchase of other businesses and intellectual property		(910	)		(5,175	)		(12,409	)
Fair value of common stock issued	$	—		$	—		$	3,002
Dividends, interest and amortization of beneficial conversion feature related to preferred stock (Notes 13 and 14(b))	$	—		$	—		$	749
Conversion of preferred stock to common stock (Note 14(b))	$	—		$	—		$	6,934
Conversion of subordinated notes to common stock	$	—		$	—		$	6,034

The accompanying notes are an integral part of these consolidated financial statements.

F-10

INVERNESS MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(1) Description of Business and Basis of Presentation

Inverness Medical Innovations, Inc. and subsidiaries develop, manufacture and market in vitro diagnostic products for the over-the-counter pregnancy and fertility/ovulation test market and the professional rapid diagnostic test market worldwide. In addition, we manufacture a variety of vitamins and nutritional supplements that we market under our brands and those of private label retailers in the consumer market primarily in the United States.

Our business is organized into three primary operating segments: (i) consumer diagnostic products, (ii) vitamins and nutritional supplements, and (iii) professional diagnostic products. The consumer diagnostic products segment includes our over-the-counter pregnancy and fertility/ovulation tests. The vitamins and nutritional supplements segment includes branded and private label vitamins and nutritional supplements that are sold over-the-counter. The professional diagnostic products segment includes an array of innovative rapid diagnostic test products and other in vitro diagnostic tests marketed to medical professionals and laboratories for detection of infectious diseases, drugs of abuse and pregnancy.

Acquisitions are an important part of our growth strategy. When we acquire businesses, we seek to complement existing products and services, enhance or expand our product lines and/or expand our customer base. We determine what we are willing to pay for each acquisition partially based on our expectation that we can cost effectively integrate the products and services of the acquired companies into our existing infrastructure. In addition, we utilize existing infrastructure of the acquired companies to cost effectively introduce our products to new geographic areas. All these factors contributed to the acquisition prices of acquired businesses that were in excess of the fair value of net assets acquired and the resultant goodwill (Note 4).

In December 2006, we signed a definitive agreement with The Procter & Gamble Company (“P&G”) to form a 50/50 joint venture for the development, acquisition, manufacturing, marketing and sale of existing and to-be-developed consumer diagnostic products outside of the fields of cardiology and diabetes. Following the completion of the transaction, we will contribute our related consumer diagnostic and monitoring assets, other than manufacturing and core intellectual property assets, to a new joint venture entity, and P&G will acquire its interest in the joint venture in consideration for a cash payment of $325.0 million. P&G will retain an option to require us to purchase its interest in the venture back at fair market value during the 60-day period beginning on the fourth anniversary of the closing. Our primary role in the collaboration will be to develop and manufacture consumer diagnostic products while P&G’s primary role will be to market, sell, and distribute existing and to-be-developed products. We will retain all rights with respect to the development and sale of cardiology diagnostic products and its professional point-of-care diagnostic businesses.

Following the completion of the transaction and the formation of the joint venture, we will cease to consolidate the operating results of our consumer diagnostics business, which represented $171.6 million of net product revenue in 2006, and instead will account for our 50% interest in the results of the joint venture under the equity method. In our capacity as the manufacturer of products for the joint venture, we will supply product to the joint venture and will record revenue on those sales. No gain on the proceeds that we receive from P&G through the formation of the joint venture will be recognized in our financial statements until P&G’s option to require us to purchase its interest in the joint venture at market value expires after the fourth anniversary of the closing.

The transaction is expected to close in the first half of 2007, subject to the satisfaction of customary closing and other conditions, such as that there be no material adverse change in our consumer diagnostics business, that the transaction be permitted under the indenture governing our senior subordinated notes or that we repay all of our outstanding senior subordinated notes and that we receive favorable tax rulings from the Swiss tax authorities, the receipt of regulatory approvals, and obtaining certain third-party consents to the

F-11

INVERNESS MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(1) Description of Business and Basis of Presentation (Continued)

transaction. There can be no assurance that all of these conditions will be satisfied. If these conditions are not satisfied or waived, we may be unable to complete the joint venture.

The consolidated financial statements include the accounts of Inverness Medical Innovations, Inc. and its subsidiaries. Intercompany transactions and balances are eliminated and net earnings are reduced by the portion of the net earnings of subsidiaries applicable to minority interests. Equity investments in which we exercise significant influence but do not control and are not the primary beneficiary are accounted for using the equity method. Investments in which we are not able to exercise significant influence over the investee and which do not have readily determinable fair values are accounted for under the cost method. Certain amounts for prior periods have been reclassified to conform to the current period classification.

(2) Summary of Significant Accounting Policies

(a) Use of Estimates

To prepare our financial statements in conformity with accounting principles generally accepted in the United States of America, our management must make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from such estimates.

(b) Foreign Currencies

We follow the provisions of Statement of Financial Accounting Standards (“SFAS”) No. 52, Foreign Currency Translation. In general, the functional currencies of our foreign subsidiaries are the local currencies. For purpose of consolidating the financial statements of our foreign subsidiaries, all assets and liabilities of the foreign subsidiaries are translated into U.S. dollars using the exchange rate at each balance sheet date while the stockholders’ equity accounts are translated at historical exchange rates. Translation gains and losses that result from the conversion of the balance sheets of the foreign subsidiaries into U.S. dollars are recorded to cumulative translation adjustment which is a component of accumulated other comprehensive income within stockholders’ equity (Note 14).

The income and expense accounts of our foreign subsidiaries are translated using the average rates of exchange during each reporting period. Net realized and unrealized foreign currency exchange transaction gains of $2.6 million during 2006, and losses of $0.3 million and $0.7 million during 2005 and 2004, respectively, are included as a component of other income, net, in the accompanying consolidated statements of operations.

(c) Cash and Cash Equivalents

We consider all highly liquid investments purchased with original maturities of three months or less at the date of acquisition to be cash equivalents. Cash equivalents consisted of money market funds at December 31, 2006 and 2005.

(d) Inventories

Inventories are stated at the lower of cost (first-in, first-out) or market and made up of raw material, work-in-process and finished goods. The costs elements of work-in-process and finished goods inventory consist of raw material, direct labor and manufacturing overhead. Where finished goods inventory is purchased from third-party manufacturers, the costs of such finished goods inventory represent the costs to acquire such inventory.

F-12

INVERNESS MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(2) Summary of Significant Accounting Policies (Continued)

(e) Property, Plant and Equipment

We record property, plant and equipment at historical cost or, in the case of a business combination, at fair value on the date of the business combination. Depreciation and amortization are computed using the straight-line method based on the following estimated useful lives of the related assets: machinery, laboratory equipment and tooling—3-11 years, buildings—20-39 years, leasehold improvements—lesser of remaining term of lease or estimated useful life of asset, computer software and equipment—3-5 years and furniture and fixtures—3-15 years. Land is not depreciated. Depreciation expense related to property, plant and equipment amounted to $17.6 million, $14.9 million and $13.1 million in 2006, 2005 and 2004, respectively. Expenditures for repairs and maintenance are expensed as incurred.

(f) Investment in Available-for-sale Securities

Available-for-sale securities include publicly-traded equity investments which are classified as available-for-sale and recorded at fair value using the specific identification method. Unrealized gains and losses (except for other than temporary impairments) are recorded in other comprehensive income (loss), which is reported as a component of stockholders’ equity. We evaluate our investments on a quarterly basis to determine if a potential other than temporary impairment exists. Our evaluation considers the investees’ specific business conditions, as well as general industry and market conditions.

(g) Goodwill

We review the valuation of goodwill in accordance with SFAS No. 142, Goodwill and Other Intangible Assets. Under the provisions of SFAS No. 142, goodwill is required to be tested for impairment annually, in lieu of being amortized, using a fair value approach at the reporting unit level. Furthermore, goodwill is required to be tested for impairment on an interim basis if an event or circumstance indicates that it is more likely than not an impairment loss has been incurred. An impairment loss shall be recognized to the extent that the carrying amount of goodwill exceeds its implied fair value. Impairment losses shall be recognized in operations. Our valuation methodology for assessing impairment requires management to make judgments and assumptions based on historical experience and projections of future operating performance. If these assumptions differ materially from future results, we may record impairment charges in the future. Our annual impairment review performed on September 30, 2006 did not indicate that goodwill related to our consumer diagnostic products or to our professional diagnostic products reporting units was impaired.

(h) Impairment of Other Long-Lived Tangible and Intangible Assets

We examine, in accordance with SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets, on a periodic basis the carrying value of our long-lived tangible and intangible assets to determine whether there are any impairment losses. If indicators of impairment were present with respect to long-lived tangible and intangible assets used in operations and undiscounted future cash flows were not expected to be sufficient to recover the assets’ carrying amount, an impairment loss would be charged to expense in the period the impairment is identified based on the fair value of the asset. We believe that the carrying values of our other long-lived tangible and intangible assets were realizable as of December 31, 2006.

(i) Business Acquisitions

We account for our acquisitions using the purchase method of accounting as defined under SFAS No. 141, Business Combinations. Accordingly, the operating results of the acquired company is included in our consolidated financial statements of operations after the acquisition date as part of reporting unit it relates to. Accounting for these acquisitions has resulted in the capitalization of the cost in excess of fair value of the net assets acquired in each of these acquisitions as goodwill. We estimated the fair values of the assets acquired in each acquisition as of the date of acquisition and these estimates are subject to adjustment. We complete these

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(2) Summary of Significant Accounting Policies (Continued)

assessments within one year of the date of acquisition. We have undertaken certain restructurings of the acquired businesses to realize efficiencies and potential cost savings. Our restructuring activities include the elimination of duplicate facilities, reductions in staffing levels, and other costs associated with exiting certain activities of the businesses we acquire. The estimated cost of these restructuring activities are included as costs of the acquisition and are recorded as additional purchase price consistent with the guidance of Emerging Issue Task Force (“EITF”) Issue No. 95-3, Recognition of Liabilities in Connection with a Purchase Business Combination. Any common stock issued with our acquisitions is determined based on the average market price of our common stock pursuant to Issue No. 99-12, Determination of the Measurement Date for the Market Price of Acquirer Securities Issued in a Purchase Business Combination.

(j) Income Taxes

We follow the provisions of SFAS No. 109, Accounting for Income Taxes, under which deferred tax assets and liabilities are determined based on differences between financial reporting and tax bases of assets and liabilities. Deferred tax assets and liabilities are measured using the enacted tax rates and laws that are expected to be in effect when the differences are expected to reverse. The provisions of SFAS No. 109 also require the recognition of future tax benefits such as net operating loss carry-forwards, to the extent that the realization of such benefits is more likely than not. To the extent that it is not likely that we will realize such benefits, we must establish a valuation allowance against the related deferred tax assets (Note 17).

(k) Revenue Recognition

The majority of our revenues is derived from product sales. We recognize revenue when the following four basic criteria have been met: (1) persuasive evidence of an arrangement exists, (2) delivery has occurred or services rendered, (3) the fee is fixed and determinable and (4) collection is reasonably assured. We recognize revenue upon title transfer of the products to third-party customers, less a reserve for estimated product returns and allowances. Certain sale arrangements require us to accept product returns. When a right of return exists, we record revenue when the right of return is no longer applicable or is estimable. In connection with the acquisitions of the Abbott rapid diagnostic business in September 2003 and the Determine/Daina Screen assets (“the Determine” business) in June 2005 (Note 4(b)) from Abbott Laboratories, we entered into a transition services agreement with Abbott, whereby Abbott would continue to distribute certain of the acquired products sold for a period of up to 18 months following each acquisition. During the transition period, which ended in 2006, we recognized revenue on sales of the products when title transferred from Abbott to third-party customers.

Deferred revenue is recorded when payments are received in advance of performing our service obligations and is recognized ratably over the service period. Amounts related to deferred revenue are included in “Accrued expenses and other current liabilities” on our consolidated balance sheet.

To a lesser extent, we also receive license and royalty revenue from agreements with third-party licensees. Revenue from fixed fee license and royalty agreements are recognized on a straight-line basis over the obligation period of the related license agreements. License and royalty fees that are calculated based on the licensees’ sales are generally recognized upon receipt of the license or royalty payments, unless we are able to reasonably estimate the fees as they are earned. License and royalty fees that are determinable prior to the receipt thereof are recognized in the period they are earned.

(l) Employee Stock-Based Compensation Arrangements

Effective January 1, 2006, we began recording compensation expense associated with stock options and other forms of equity compensation in accordance with SFAS No. 123-R, Share-Based Payment, as interpreted by SEC Staff Accounting Bulletin (“SAB”) No. 107. Prior to January 1, 2006, we accounted for stock options according to the provisions of Accounting Principles Board (“APB”) Opinion No. 25, Accounting for Stock Issued to Employees, and related interpretations, and therefore no related compensation expense was recorded

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INVERNESS MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(2) Summary of Significant Accounting Policies (Continued)

for awards granted with no intrinsic value. We adopted the modified prospective transition method provided for under SFAS No. 123-R, and consequently have not retroactively adjusted results from prior periods. Under this transition method, compensation cost associated with stock options now includes: (i) amortization related to the remaining unvested portion of all stock option awards granted prior to January 1, 2006, based on the grant-date fair value estimated in accordance with the original provisions of SFAS No. 123, and (ii) amortization related to all stock option awards granted subsequent to January 1, 2006, based on the grant-date fair value estimated in accordance with the provisions of SFAS 123-R. In addition, we record expense over the offering period in connection with shares issued under our employee stock purchase plan. The compensation expense for stock-based compensation awards includes an estimate for forfeitures and is recognized over the expected term of the options using the straight-line method.

For stock options granted prior to the adoption of SFAS No. 123-R, if expense for stock-based compensation had been determined under the fair value method of the original SFAS 123 for the year ended December 31, 2005 and 2004, our net loss per common share would have been adjusted to the following pro forma amounts:

	2005			2004
	(in thousands,
	except for per share data)
Net loss—as reported	$	(19,209	)	$	(16,596	)
Stock-based employee compensation—as reported		139			—
Pro forma stock-based employee compensation		(6,366	)		(5,675	)
Net loss—pro forma	$	(25,436	)	$	(22,271	)
Net loss per common share—basic
Net loss—as reported	$	(0.79	)	$	(0.87	)
Stock-based employee compensation—as reported		0.01			—
Pro forma stock-based employee compensation		(0.26	)		(0.28	)
Net loss per common share—pro forma	$	(1.04	)	$	(1.15	)
Net loss per common share—diluted
Net loss—as reported	$	(0.79	)	$	(0.87	)
Stock-based employee compensation—as reported		0.01			—
Pro forma stock-based employee compensation		(0.26	)		(0.28	)
Net loss per common share—pro forma	$	(1.04	)	$	(1.15	)

Our stock option plans provide for grants of options to employees to purchase common stock at the fair market value of such shares on the grant date of the award. The options typically vest over a four year period, beginning on the date of grant, with a graded vesting schedule of 25% at the end of each of the four years. The fair value of each option grant is estimated on the date of grant using the Black-Scholes option-pricing method. We use historical data to estimate the expected price volatility and the expected forfeiture rate. For the year ended December 31, 2006, we have chosen to employ the simplified method of calculating the expected option term, which averages an award’s weighted average vesting period and its contractual term. The contractual term of our stock option awards is ten years. The risk-free rate is based on the U.S. Treasury yield curve in effect at the time of grant with a remaining term equal to the expected term of the option. We have not made any dividend payments nor do we have plans to pay dividends in the foreseeable future.

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INVERNESS MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(2) Summary of Significant Accounting Policies (Continued)

(m) Net (Loss) Income per Common Share

Net (loss) income per common share, computed in accordance with SFAS No. 128, Earnings per Share, is based upon the weighted average number of outstanding common shares and the dilutive effect of common share equivalents, such as options and warrants to purchase common stock, convertible preferred stock and convertible notes, if applicable, that are outstanding each year (Note 13).

(n) Other Operating Expenses

We expense advertising costs as incurred. In 2006, 2005 and 2004, advertising costs amounted to $23.0 million, $21.7 million and $19.9 million, respectively, and are included in sales and marketing expenses in the accompanying consolidated statements of operations.

Shipping and handling costs are included in cost of sales in the accompanying consolidated statements of operations. Additionally, to the extent that we charge our customers for shipping and handling costs, these costs are recorded as product revenues.

(o) Concentration of Credit Risk, Off-Balance Sheet Risks and Other Risks and Uncertainties

Financial instruments that potentially subject us to concentration of credit risk primarily consist of cash and cash equivalents and accounts receivable. We invest our excess cash primarily in high quality securities and limit the amount of our credit exposure to any one financial institution. We do not require collateral or other securities to support customer receivables; however, we perform ongoing credit evaluations of our customers and maintain allowances for potential credit losses.

There were no individual customer accounts receivable balances outstanding at December 31, 2006 and 2005 that were in excess of 10% of the gross accounts receivable balance on those dates. During 2006, no customers represented greater than 10% of our net revenues. During 2005 and 2004, we had one customer that represented 10% and 11%, respectively, of our net revenues, and purchased both our consumer diagnostic products and vitamins and nutritional supplements.

We rely on a number of third parties to manufacture certain of our products. If any of our third party manufacturers cannot, or will not, manufacture our products in the required volumes, on a cost-effective basis, in a timely manner, or at all, we will have to secure additional manufacturing capacity. Any interruption or delay in manufacturing could have a material adverse effect on our business and operating results.

(p) Financial Instruments and Fair Value of Financial Instruments

Our primary financial instruments at December 31, 2006 and 2005 consisted of cash equivalents, accounts receivable, accounts payable and debt. The estimated fair value of these financial instruments approximates their carrying values at December 31, 2006 and 2005. The estimated fair values have been determined through information obtained from market sources. Additionally, our subsidiary in England enters into short-term foreign currency exchange forward contracts from time to time to minimize its exposure to foreign currency exchange fluctuations because a substantial portion of its business is transacted in currencies other than its functional currency. We account for our derivative instruments in accordance with SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities, and related amendments, including SFAS No. 149, Amendment of Statement 133 on Derivative Instruments and Hedging Activities. At December 31, 2006, we had no outstanding foreign currency exchange forward contracts. Changes of $0.2 million in the market value of these contracts during 2006 were recorded to other income (expense), net in our consolidated statements of operations.

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INVERNESS MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(2) Summary of Significant Accounting Policies (Continued)

(q) Recent Accounting Pronouncements

Recently Issued Standards

In February 2006, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 155, Accounting for Certain Hybrid Financial Instruments, which amends SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities and SFAS No. 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities. SFAS No. 155 simplifies the accounting for certain derivatives embedded in other financial instruments by allowing them to be accounted for as a whole if the holder elects to account for the whole instrument on a fair value basis. SFAS No. 155 also clarifies and amends certain other provisions of SFAS No. 133 and SFAS No. 140. SFAS No. 155 is effective for all financial instruments acquired, issued or subject to a remeasurement event occurring in fiscal years beginning after September 15, 2006. Earlier adoption is permitted, provided we have not yet issued financial statements, including for interim periods, for that fiscal year. We do not expect the adoption of SFAS No. 155 to have a material impact on our financial position, results of operations or cash flows.

In June 2006, the FASB ratified the consensus on EITF Issue No. 06-03, How Taxes Collected from Customers and Remitted to Governmental Authorities Should Be Presented in the Income Statement. The scope of EITF Issue No. 06-03 includes any tax assessed by a governmental authority that is directly imposed on a revenue-producing transaction between a seller and a customer and may include, but is not limited to, sales, use, value added, Universal Service Fund (“USF”) contributions and some excise taxes. The Task Force affirmed its conclusion that entities should present these taxes in the income statement on either a gross or a net basis, based on their accounting policy, which should be disclosed pursuant to APB Opinion No. 22, Disclosure of Accounting Policies. If such taxes are significant, and are presented on a gross basis, the amounts of those taxes should be disclosed. The consensus on Issue No. 06-03 will be effective for interim and annual reporting periods beginning after December 15, 2006. We are currently evaluating the impact of EITF No. 06-03. Should we need to change the manner in which we record gross receipts, it is not expected that the change would have a material impact on total operating revenue and expenses and operating income and net income would not be affected.

In June 2006, the FASB issued FASB Interpretation No. (“FIN”) 48, Accounting for Uncertainty in Income Taxes—An Interpretation of FASB Statement No. 109, which prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. FIN 48 also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. FIN 48 is effective for fiscal years beginning after December 15, 2006 and we will be adopting the provisions of FIN 48 beginning with the first quarter of 2007. We continue to evaluate the impact that the adoption of FIN 48 will have, if any, on our consolidated financial statements.

In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements. SFAS No. 157 establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosures about fair value measurements. The standard applies whenever other standards require (or permit) assets or liabilities to be measured at fair value. The standard does not expand the use of fair value in any new circumstances. SFAS No. 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years. Earlier application is encouraged. We continue to evaluate the impact that the adoption of SFAS No. 157 will have, if any, on our consolidated financial statements.

In December 2006, the FASB issued FASB Staff Position (“FSP”) No. EITF 00-19-2, Accounting for Registration Payment Arrangements. This FSP specifies that the contingent obligation to make future payments or otherwise transfer consideration under a registration payment arrangement, whether issued as

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INVERNESS MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(2) Summary of Significant Accounting Policies (Continued)

separate agreement or included as a provision of a financial instrument or other agreement, should be separately recognized and measured in accordance with FASB Statement No. 5, Accounting for Contingencies.  The guidance in this FSP amends FASB Statement No. 133, Accounting for Derivative Financial Instruments and Hedging Activities, and No. 150, Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity and FIN 45, Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others to include scope exceptions for registration payment arrangements. This FSP is effective immediately for registration payment arrangements and the financial instruments subject to those arrangements that are entered into or modified subsequent to the date of issuance of this FSP. For registration payment arrangements and financial instruments subject to those arrangements that were entered into prior to the issuance of this FSP, this guidance shall be effective for financial statements issued for fiscal years beginning after December 15, 2006, and interim periods within those fiscal years. We do not believe the adoption of EITF 00-19-2 will have a material impact on our consolidated financial statements.

Recently Adopted Standards

In November 2004, the FASB issued SFAS No. 151, Inventory Costs—An Amendment of ARB No. 43, Chapter 4. SFAS No. 151 clarifies the accounting for abnormal amounts of idle facility expense, freight, handling costs and wasted materials (spoilage). In addition, this statement requires that allocation of fixed production overheads to the costs of conversion be based on normal capacity of production facilities. As required by SFAS No. 151, we adopted this new accounting standard on January 1, 2006. The adoption of SFAS No. 151 did not have a material impact on our financial position, results of operations or cash flows.

In December 2004, the FASB issued SFAS No. 123-R, Share-Based Payment, which addresses the accounting for transactions in which a company receives employee services in exchange for (a) equity instruments of the company or (b) liabilities that are based on the fair value of the company’s equity instruments or that may be settled by the issuance of such equity instruments. As required by SFAS No. 123-R and the Securities and Exchange Commission (“SEC”), we adopted SFAS No. 123-R on January 1, 2006 (Note 15).

In May 2005, the FASB issued SFAS No. 154, Accounting Changes and Error Corrections—A Replacement of APB Opinion No. 20 and FASB Statement No. 3, which replaces APB Opinion No. 20, Accounting Changes, and SFAS No. 3, Reporting Accounting Changes in Interim Financial Statements. The statement requires a voluntary change in accounting principle be applied retrospectively to all prior period financial statements so that those financial statements are presented as if the current accounting principle had always been applied. APB Opinion No. 20 previously required most voluntary changes in accounting principle to be recognized by including in net income of the period of change the cumulative effect of changing to the new accounting principle. In addition, SFAS No. 154 carries forward, without change, the guidance contained in APB Opinion No. 20 for reporting a correction of an error in previously issued financial statements and a change in accounting estimate. SFAS No. 154 was effective for accounting changes and corrections of errors made after January 1, 2006. The adoption of SFAS No. 154 had no impact on our financial statements.

In September 2006, the SEC issued SAB No. 108, Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements to provide guidance on the consideration of the effects of prior year misstatements in quantifying current year misstatements for the purpose of a materiality assessment. Under SAB No. 108, companies should evaluate a misstatement based on its impact on the current year income statement, as well as the cumulative effect of correcting such misstatements that existed in prior years existing in the current year’s ending balance sheet. SAB No. 108 is effective for fiscal years ending after November 15, 2006. The adoption of SAB No. 108 did not have a material impact on our financial position, results of operations or cash flows.

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INVERNESS MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(2) Summary of Significant Accounting Policies (Continued)

Effective December 31, 2006, we adopted the recognition provisions of SFAS No. 158, Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans—An Amendment of FASB Statements No. 87, 88, 106, and 132(R). This Statement requires employers to recognize in their balance sheets the overfunded or underfunded status of defined benefit postretirement plans, measured as the difference between the fair value of plan assets and the benefit obligation (the projected benefit obligation for pension plans and the accumulated postretirement benefit obligation for other post-retirement plans). Employers must recognize the change in the funded status of the plan in the year in which the change occurs through other comprehensive income. This Statement also requires plan assets and obligations to be measured as of the employer’s balance sheet date. The measurement provision of this Statement will be effective for years beginning after December 15, 2008, with early application encouraged. We have not yet adopted the measurement provisions of this Statement and are in the process of determining the impact of the adoption on our consolidated financial statements.

Prior to the adoption of the recognition provisions of SFAS No. 158, we accounted for our defined benefit post-retirement plans under SFAS No. 87, Employers’ Accounting for Pensions. SFAS No. 87 required that a liability (minimum pension liability) be recorded when the accumulated benefit obligation liability exceeded the fair value of plan assets. Any adjustment is recorded as a non-cash charge to accumulated other comprehensive income in stockholders’ equity. Under SFAS No. 87, changes in the funded status were not immediately recognized, rather they were deferred and recognized ratably over future periods. Upon adoption of the recognition provisions of SFAS No. 158, we recognized the amounts of prior changes in the funded status of our postretirement benefit plans through accumulated other comprehensive income. As a result, we recognized the following adjustments in individual line items of our consolidated balance sheet as of December 31, 2006:

							As
	Prior to			Effect of			Reported at
	Application of			Adopting			December 31,
	SFAS No. 158			SFAS No. 158			2006
	(in thousands)
Deferred tax asset, current portion	$	4,435		$	897		$	5,332
Deferred tax asset, long-term	$	(29	)	$	107		$	78
Other long-term liabilities	$	6,043		$	4,487		$	10,530
Accumulated other comprehensive income	$	17,919		$	(3,738	)	$	14,181

The adoption of SFAS No. 158 had no effect on our consolidated statement of operations for the year ended December 31, 2006, or for any prior period presented.

As of December 31, 2006, included in accumulated other comprehensive income was unrecognized prior service costs of $6.8 million and unrecognized actuarial gain of $2.3 million. The estimated prior service cost and actuarial loss that will be recognized in net periodic postretirement benefit obligation expense during 2007 is $0 million and $0.1 million, respectively.

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INVERNESS MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(3) Other Balance Sheet Information

Components of selected captions in the consolidated balance sheets consist of:

	December 31,
	2006			2005
	(in thousands)
Inventories, net:
Raw materials	$	29,372		$	25,488
Work-in-process		19,080			17,812
Finished goods		29,870			27,909
	$	78,322		$	71,209
Property, plant and equipment, net:
Machinery, laboratory equipment and tooling	$	81,198		$	78,559
Land and buildings		18,582			8,942
Leasehold improvements		20,870			18,980
Computer software and equipment		11,063			8,811
Furniture and fixtures		4,515			3,982
		136,228			119,274
Less: Accumulated depreciation and amortization		(53,916	)		(47,063	)
	$	82,312		$	72,211
Accrued expenses and other current liabilities:
Compensation and compensation-related	$	13,395		$	8,959
Advertising and marketing		9,743			6,608
Professional fees		5,291			5,649
Interest payable		6,234			6,002
Royalty obligations		4,923			4,001
Deferred revenue		6,685			5,981
Taxes payable		8,864			6,023
Acquisition related obligations		17,655			2,200
Other		15,011			19,323
	$	87,801		$	64,746

(4) Business Combinations

(a) Significant Acquisitions in 2006

(i) Acquisition of the Innovacon business, including the ABON Facility

On March 31, 2006, we acquired the assets of ACON Laboratories’ business of researching, developing, manufacturing, marketing and selling lateral flow immunoassay and directly-related products in the United States, Canada, Europe (excluding Russia, the former Soviet Republics that are not part of the European Union and Turkey), Israel, Australia, Japan and New Zealand (“the Innovacon business”). The preliminary aggregate purchase price was approximately $93.9 million which consisted of $55.1 million in cash, 711,676 shares of our common stock with an aggregate fair value of $19.7 million, $9.1 million in estimated

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INVERNESS MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(4)  Business Combinations (Continued)

direct acquisition costs and an additional liability of $10.0 million payable to the sellers on the deferred payment date, pursuant to the purchase agreement.

On May 15, 2006, as part of the Innovacon business we acquired a newly-constructed manufacturing facility in Hangzhou, China pursuant to the terms of our acquisition agreement with ACON Laboratories, Inc. and its affiliates. In connection with the acquisition of the new facility, we acquired ABON BioPharm (Hangzhou) Co., Ltd (“ABON”), the direct owner of the new factory and now our subsidiary. The preliminary aggregate purchase price was approximately $20.8 million which consisted of $8.8 million in cash and 417,446 shares of our common stock with an aggregate fair value of $12.0 million. In addition, pursuant to the acquisition agreement, we made an additional payment of $4.1 million in cash as a result of the amount of cash acquired, net of indebtedness assumed, which increased the preliminary aggregate purchase price to $24.9 million.

Subsequent, between August and November 2006, we made cash payments totaling $44.0 million and issued 742,128 shares of our common stock with an aggregate fair value of $21.3 million as various milestones were achieved. This brings the aggregate purchase price for the Innovacon business, including the ABON facility to a total of $184.1 million.

The aggregate purchase price for the Innovacon business, including the ABON facility discussed above, was allocated to the assets acquired and liabilities assumed at the date of acquisition as follows:

	(in thousands)
Cash	$	8,403
Accounts receivable		11,328
Inventories		4,814
Property, plant and equipment, net		10,274
Goodwill		112,116
Trademarks		800
Customer relationships		27,700
Supply agreements		3,300
Core technology		16,200
Other assets		1,369
Accounts payable and accrued expenses		(4,081	)
Long-term debt		(8,125	)
	$	184,098

Goodwill generated from this acquisition is not deductible for tax purposes. We estimate the useful lives of the trademarks, customer relationships, supply agreements and product technology to be 10 years, 16.8 years and 17.8 years, 1.8 years and 7 years, respectively, and have included them in core technology and patents, net, and other intangible assets, net, respectively, in the accompanying consolidated balance sheets. The weighted average amortization period for the acquired intangible assets with finite lives is 12.7 years.

The operating results of the Innovacon business are included in our consumer and professional diagnostic products reporting units and business segments.

Additionally, in connection with the acquisition of the Innovacon business, we entered into an agreement for the purchase of Acon Laboratories’ lateral flow immunoassay sales and distribution business in all territories not included within the territories acquired in connection with our March 31, 2006 acquisition

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(4)  Business Combinations (Continued)

described above. Under the terms of this agreement, in the event that this business achieves a specified level of profitability, we will acquire this business in 2009 for a formulaic price based on the revenues and earnings of the business. Alternatively, we may elect not to complete the acquisition of the business in exchange for a payment equal to 15% of the purchase price that would have been due had we elected to complete the acquisition.

(ii) Acquisition of Clondiag

On February 28, 2006, we acquired 67.45% of CLONDIAG chip technologies GmbH (“Clondiag”), a privately-held company located in Jena in Germany which is developing a multiplexing technology for nucleic acid and immunoassay-based diagnostics. Pursuant to the acquisition agreement, we purchased the remaining 32.55% on August 31, 2006. The aggregate purchase price was $23.1 million, which consisted of an initial cash payment of $11.9 million, 218,502 shares of our common stock with an aggregate fair value of $5.8 million, a $5.3 million cash payment to acquire the remaining 32.55% stock ownership and $0.1 million in direct acquisition costs. Additionally, pursuant to the terms of the acquisition agreement, we have an obligation to settle existing employee bonus arrangements with the Clondiag employees totaling €1.1 million ($1.3 million). In connection with this obligation, we issued 24,896 shares of our common stock with a fair value of $0.7 million to the employees of Clondiag and a cash payment of $0.5 million. As of December 31, 2006, our remaining obligation was $0.1 million. This obligation increased our aggregate purchase price to $24.4 million as of December 31, 2006 and resulted in additional goodwill.

In addition, the terms of the acquisition agreement provide for $8.9 million of contingent consideration, consisting of 224,316 shares of our common stock and approximately $3.0 million of cash or stock in the event that four specified products are developed on Clondiag’s platform technology during the three years following the acquisition date. This contingent consideration will be accounted for as an increase in the aggregate purchase price if and when the contingency occurs.

The aggregate purchase price was allocated to the assets acquired and liabilities assumed at the date of acquisition as follows:

	(in thousands)
Cash and cash equivalents	$	270
Accounts receivable		295
Inventories		90
Prepaid expenses and other current assets		536
Property, plant and equipment		1,790
Goodwill		6,631
Patents		11,310
In-process research and development		4,960
Other assets		20
Accounts payable and accrued expenses		(1,517	)
	$	24,385

We estimate the useful lives of the acquired patents to be 20 years and have included them in core technology and patents, net, in the accompanying consolidated balance sheet. We have also evaluated certain in-process research and development projects and have expensed, as in-process research and development, those projects that have not yet attained technical feasibility. The amount expensed during the year ended

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(4)  Business Combinations (Continued)

December 31, 2006 was $5.0 million, and is included in research and development expense in our consolidated statement of operations.

The operating expenses of Clondiag, which consist principally of research and development activities, have been included in our corporate and other business segment. Goodwill generated from this acquisition is not deductible for tax purposes.

(b) Significant Acquisitions in 2005

(i) Acquisition of BioStar

On September 30, 2005, we acquired Thermo BioStar, Inc. (“Biostar”), a leading developer and manufacturer of high-performance, rapid diagnostic tests, including tests for the detection of infectious diseases. The aggregate purchase price was $53.7 million, which consisted of $53.1 million in cash, $0.5 million in estimated direct acquisition costs and $0.1 million in estimated exit costs.

The following is a summary of the allocation of the aggregate purchase price to the assets acquired and the liabilities assumed at the date of the acquisition:

	(in thousands)
Accounts receivable	$	5,247
Inventories		1,911
Property, plant and equipment		1,695
Goodwill		30,836
Core technology		4,550
Customer relationships		6,760
Trade name		2,730
Trademarks		4,200
Other assets		745
Accounts payable and accrued expenses		(5,023	)
	$	53,651

Goodwill generated from this acquisition is fully deductible for tax purposes over 15 years. The values allocated to the acquired core technology, customer relationships and trade name are being amortized on a straight-line basis over their estimated useful lives of 10, 5 and 10 years, respectively. The weighted average amortization period for the acquired intangible assets with finite lives is 6.8 years. The trademarks, core technology, customer relationships and trade name are allocated respectively to other intangible assets with indefinite lives, core technology and patents, net and other intangible assets, net on the accompanying consolidated balance sheet at December 31, 2005.

The operating results of BioStar have been included in our professional diagnostic products reporting unit.

(ii) Acquisition of IDT

On September 30, 2005, we acquired Innogenetics Diagnostica Y Terapeutica, S.A.U (“IDT”), a Spanish distributor of diagnostic products. The aggregate purchase price was $20.3 million, which consisted of $11.7 million in cash, an $8.4 million working capital adjustment, which was paid during the fourth quarter of fiscal year 2005, and $0.2 million in estimated direct acquisition costs.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(4)  Business Combinations (Continued)

The following is a summary of the allocation of the aggregate purchase price to the assets acquired and the liabilities assumed at the date of the acquisition:

	(in thousands)
Cash and cash equivalents	$	76
Accounts receivable		10,913
Inventories		520
Property, plant and equipment		771
Goodwill		7,991
Customer relationships		4,100
Other assets		188
Accounts payable and accrued expenses		(3,165	)
Deferred tax liability		(1,050	)
	$	20,344

Goodwill generated from this acquisition is not deductible for tax purposes. We estimate the useful lives of the customer relationships to be 5 years and have included them in other intangible assets, net in the accompanying consolidated balance sheets.

The operating results of IDT have been included in our professional diagnostic products reporting unit.

(iii) Acquisition of the Determine Business

On June 30, 2005, we acquired the Determine business which produces diagnostic tests that are designed to provide rapid qualitative results for detecting several diseases, including hepatitis, HIV 1/2 and syphilis. The aggregate purchase price was $58.1 million, which consisted of $56.5 million in cash and $1.6 million in estimated direct acquisition costs.

The following is a summary of the allocation of the aggregate purchase price to the assets acquired and liabilities assumed at the date of the acquisition:

	(in thousands)
Inventories	$	2,912
Property, plant and equipment		1,500
Goodwill		32,113
Customer relationships		12,000
Trademark		8,500
Manufacturing know-how		4,300
Core technology		500
Accrued expenses		(3,723	)
	$	58,102

We have assigned indefinite lives to the trademark and product technology. Goodwill resulting from this acquisition is deductible for tax purposes over lives varying from 10 to 25 years, depending on the tax jurisdiction. We estimate the useful lives of the manufacturing know-how to be ten years and the customer relationships asset to be six years and included them in other intangible assets, net, in the accompanying

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INVERNESS MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(4)  Business Combinations (Continued)

consolidated balance sheets. The weighted average amortization period for the acquired intangible assets with finite lives is 7.1 years.

The operating results of the Determine business have been included in our professional diagnostic products reporting unit.

(iv) Acquisition of Binax

On March 31, 2005, we acquired Binax, Inc. (“Binax”), a privately-held developer, manufacturer and distributor of rapid diagnostic products for infectious disease testing, primarily related to the respiratory system. The aggregate purchase price was $44.7 million, which consisted of $9.0 million in cash, 1.4 million shares of our common stock with an aggregate fair value of $35.2 million and $0.5 million in estimated direct acquisition costs. The terms of the acquisition agreement also provide for $11.0 million of contingent cash consideration payable to the Binax shareholders upon the successful completion of certain new product developments during the five years following the acquisition. This contingent consideration will be accounted for as an increase in the aggregate purchase price if and when the contingency occurs.

The following is a summary of the allocation of the aggregate purchase price to the assets acquired and the liabilities assumed at the date of the acquisition:

	(in thousands)
Cash and cash equivalents	$	1,556
Accounts receivable		5,304
Inventories		3,186
Property, plant and equipment		2,421
Goodwill		14,868
Customer relationships		11,700
Core technology		3,900
Trademark		4,500
Non-compete agreement		30
Other assets		1,146
Deferred tax asset		6,312
Accounts payable and accrued expenses		(2,076	)
Deferred tax liability		(8,106	)
	$	44,741

We have assigned indefinite lives to the trademarks. Goodwill generated from this acquisition is not deductible for tax purposes. We estimate the useful lives of the product technology, customer relationships and the non-compete agreement to be 7 years, 13 years and 7 years, respectively, and have included them in core technology and patents, net, and other intangible assets, net, respectively, in the accompanying consolidated balance sheets. The weighted average amortization period for the acquired intangible assets with finite lives is 10.7 years.

The operating results of Binax have been included in our professional diagnostic products reporting unit.

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INVERNESS MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(4)  Business Combinations (Continued)

(v) Acquisition of Ischemia

On March 16, 2005, we acquired Ischemia Technologies, Inc. (“Ischemia”), a privately held, venture-backed company that has developed, manufactured and marketed the only FDA-cleared in vitro diagnostic test targeted on cardiac ischemia. The aggregate purchase price was $27.2 million, which consisted of 968,000 shares of our common stock with an aggregate fair value of $22.8 million, estimated exit costs of $1.5 million to vacate Ischemia’s manufacturing and administrative facilities estimated direct acquisition costs of $2.4 million and $0.5 million in assumed debt.

The following is a summary of the allocation of the aggregate purchase price to the assets acquired and the liabilities assumed at the date of the acquisition:

	(in thousands)
Cash and cash equivalents	$	115
Accounts receivable		58
Inventories		40
Property, plant and equipment		288
Goodwill		7,532
Patents		19,200
Customer relationships		200
Other assets		99
Deferred tax asset		7,760
Accounts payable and accrued expenses		(377	)
Deferred tax liability		(7,760	)
	$	27,155

Goodwill generated from this acquisition is not deductible for tax purposes. We estimated the useful lives of the patents to be from 9 to 15 years and customer related intangible asset to be 11 years and included them in core technology and patents, net, and other intangible assets, net, respectively, in the accompanying consolidated balance sheets.

The operating results of Ischemia have been included in our professional diagnostic products reporting unit.

(c) Recent Acquisitions

In February 2007 we acquired substantially all of the assets of First Check Diagnostics LLC (“First Check”), a privately-held diagnostics company, for approximately $24.5 million in cash. In addition, we will pay an earn-out to First Check equal to the incremental revenue growth of the acquired products for 2007 and for the first nine months of 2008, as compared to the immediately preceding comparable periods.

First Check is the market leader in the rapidly-growing field of home testing for drugs of abuse, including marijuana, cocaine, methamphetamines and opiates. In addition, it offers tests, also sold through retail channels, for alcohol abuse, cholesterol monitoring and colon cancer screening.

(d) Restructuring Plans Related to Business Combinations

In connection with our acquisitions of BioStar, Ischemia, Ostex International, Inc. (“Ostex”), IVC Industries, Inc. (now operating as Inverness Medical Nutritionals Group or “IMN”) and certain entities,

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(4)  Business Combinations (Continued)

businesses and intellectual property of Unilever Plc (the “Unipath business”), we recorded restructuring costs as part of the respective aggregate purchase prices in accordance with EITF No. 95-3.

During 2005, we established a restructuring plan in connection with our acquisition of BioStar and recorded restructuring costs of $0.5 million, of which $0.4 million related to impairment of fixed assets and $0.1 million related to severance costs associated with a headcount reduction. The total number of employees to be involuntarily terminated was nine, of which all were terminated as of December 31, 2006. Of the costs recorded during 2005, $10,000 remains unpaid as of December 31, 2006. Although we believe our plan and estimated exit costs are reasonable, actual spending for exit activities may differ from current estimated exit costs.

In connection with our acquisition of Ischemia in March 2005, we established a restructuring plan whereby we exited the current facilities of Ischemia in Denver, Colorado and combined its activities with our existing manufacturing and distribution facilities during the third quarter of 2005. Total severance costs associated with involuntarily terminated employees were estimated to be $1.6 million, of which all has been paid as of December 31, 2006. We estimated costs to vacate the Ischemia facilities to be approximately $135,000, of which $90,000 has been paid as of December 31, 2006. The total number of involuntarily terminated employees was 17, of which all were terminated as of December 31, 2006.

As a result of our acquisition of Ostex, we established a restructuring plan whereby we exited the facilities of Ostex in Seattle, Washington, and combined the activities of Ostex with our existing manufacturing and distribution facilities. The total number of employees to be involuntarily terminated under the restructuring plan was 38, of which all were terminated as of December 31, 2006. Total severance costs associated with involuntarily terminated employees were $1.6 million, all of which has been paid as of December 31, 2006. Costs to vacate the Ostex facilities are $0.5 million, of which $0.2 million has been paid as of December 31, 2006. Additionally, the remaining costs to exit the operations, primarily facilities lease commitments, were $1.9 million, of which $1.5 million has been paid as of December 31, 2006. Total unpaid exit costs amounted to $0.7 million as of December 31, 2006.

Immediately after the close of the acquisition, we reorganized the business operations of IMN to improve efficiencies and eliminate redundant activities on a company-wide basis. The restructuring affected all cost centers within the organization, but most significantly responsibilities at the sales and executive levels, as such activities were combined with our existing business operations. Also, as part of the restructuring plan, we relocated one of IMN’s warehouses to a closer proximity of the manufacturing facility to improve efficiency. Of the $1.6 million in total exit costs, which includes severance costs for 47 involuntarily terminated employees and costs to vacate the warehouse, $1.5 million has been paid as of December 31, 2006.

As a result of the acquisition of the Unipath business from Unilever Plc in 2001, we reorganized the operations of the Unipath business for purposes of improving efficiencies and achieving economies of scale on a company-wide basis. Such reorganization affected all major cost centers at the operations in England. Additionally, most business activities of the U.S. division were merged into our existing U.S. businesses. Total exit costs, which primarily related to severance and early retirement obligations for 65 involuntarily terminated employees, were $4.1 million. As of December 31, 2006, $1.5 million, adjusted for foreign exchange effect, in exit costs remained unpaid.

(e) Pro Forma Financial Information

The following table presents selected unaudited financial information of our company, including Binax, Ischemia, the Determine business, BioStar, IDT and the Innovacon business including ABON as if the acquisitions of these entities had occurred on January 1, 2005. Pro forma results exclude adjustments for Advanced Clinical Systems Pty Ltd (“ACS”) and Clondiag as these acquisitions did not materially affect our results of operations. The pro forma results are derived from the historical financial results of the acquired

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(4)  Business Combinations (Continued)

businesses for all periods presented and are not necessarily indicative of the results that would have occurred had the acquisitions been consummated on January 1, 2005.

	2006			2005
(In thousands, except per share amounts)	(unaudited)
Pro forma net revenues	$	582,901		$	528,212
Pro forma net loss available to common stockholders—basic and diluted	$	(14,449	)	$	(2,972	)
Pro forma net loss per common share—basic and diluted(1)	$	(0.41	)	$	(0.09	)

(1) Net loss per share amounts are computed as described in Note 13.

(5) Goodwill and Other Intangible Assets

The following is a summary of goodwill and other intangible assets as of December 31, 2006:

	Gross				Net
	Carrying		Accumulated		Carrying
	Amount		Amortization		Value		Useful Life
	(in thousands, except useful life)
Amortized intangible assets:
Core technology and patents	$	111,550	$	23,818	$	87,732		1-20 years
Other intangible assets:
Supplier relationships		14,320		6,093		8,227		10 years
Trademarks and trade names		18,440		7,867		10,573		5-25 years
License agreements		10,105		6,725		3,380		5-8.5 years
Customer relationships		72,190		14,338		57,852		1.5-17.8 years
Manufacturing know-how		7,800		4,076		3,724		10-15 years
Other		540		502		38		2-7 years
Total other intangible assets		123,395		39,601		83,794
Total intangible assets with finite lives	$	234,945	$	63,419	$	171,526
Intangible assets with indefinite lives:
Goodwill	$	439,369	$	—	$	439,369
Other intangible assets		68,107		—		68,107
Total intangible assets with indefinite lives	$	507,476	$	—	$	507,476

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(5)  Goodwill and Other Intangible Assets (Continued)

The following is a summary of goodwill and other intangible assets as of December 31, 2005:

	Gross				Net
	Carrying		Accumulated		Carrying
	Amount		Amortization		Value		Useful Life
	(in thousands, except useful life)
Amortized intangible assets:
Core technology and patents	$	79,163	$	15,113	$	64,050		1-20 years
Other intangible assets:
Supplier relationships		11,020		3,616		7,404		10 years
Trademarks and trade names		17,414		6,335		11,079		5-25 years
License agreements		9,967		5,297		4,670		5-8.5 years
Customer relationships		38,100		7,196		30,904		1.5-17.8 years
Manufacturing know-how		7,000		720		6,280		10-15 years
Other		490		338		152		2-7 years
Total other intangible assets		83,991		23,502		60,489
Total intangible assets with finite lives	$	163,154	$	38,615	$	124,539
Intangible assets with indefinite lives:
Goodwill	$	322,210	$	—	$	322,210
Other intangible assets		63,742		—		63,742
Total intangible assets with indefinite lives	$	385,952	$	—	$	385,952

We amortize intangible assets with finite lives using primarily the straight-line method over the above estimated useful lives of the respective intangible asset. We believe that the straight-line method is appropriate, as it approximates the pattern in which economic benefits are consumed in circumstances where such patterns can be reliably determined. In certain circumstances, such as certain customer relationship assets, accelerated amortization is recognized which reflect estimate of the cash flows. Amortization expense of intangible assets, which in the aggregate amounted to $21.8 million, $12.9 million and $10.4 million in 2006, 2005 and 2004, respectively, is included in cost of sales, research and development and sales and marketing in the accompanying consolidated statements of operations. The allocation of amortization expense to the expense categories is based on the intended usage and the expected benefits of the intangible assets in relation to the expense categories.

The following is a summary of estimated aggregate amortization expense of intangible assets for each of the five succeeding fiscal years as of December 31, 2006:

	(in thousands)
2007	$	23,907
2008	$	21,843
2009	$	19,942
2010	$	19,339
2011	$	18,153

In accordance with SFAS No. 142, we perform annual impairment tests of the carrying value of our goodwill by reporting unit. Our annual impairment review on September 30, 2006 did not indicate that goodwill related to our consumer diagnostic products and professional diagnostic products reporting units were

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(5)  Goodwill and Other Intangible Assets (Continued)

impaired. The values assigned to the trade names that were acquired as part of our acquisition have been assigned indefinite lives and therefore, in accordance with SFAS No. 142 are not being amortized.

We allocate goodwill by reporting unit based on the relative percentage of estimated future revenues generated for the respective reporting unit as of the acquisition date. Goodwill amounts allocated to our consumer diagnostic products and professional diagnostic products reporting units are summarized as follows:

	Consumer			Professional
	Diagnostic			Diagnostic
	Products			Products			Total
	(in thousands)
Goodwill, at December 31, 2004	$	86,078		$	135,077		$	221,155
Acquisitions		—			103,815			103,815
Other(1)		(904	)		(1,856	)		(2,760	)
Goodwill, at December 31, 2005		85,174			237,036			322,210
Acquisitions		304			113,849			114,153
Other(1)		530			2,476			3,006
Goodwill at December 31, 2006	$	86,008		$	353,361		$	439,369

(1) These amounts relate primarily to adjustments resulting from fluctuations in foreign currency exchange rates.

We generally expense costs incurred to internally develop intangible assets, except for costs that are incurred to establish patents and trademarks, such as legal fees for initiating, filing and obtaining the patents and trademarks. As of December 31, 2006, we had approximately $3.8 million of costs capitalized in connection with establishing patents and trademarks which are included in other intangible assets, net, in the accompanying consolidated balance sheets. Upon the successful registration of the patents and trademarks, we commence amortization of such intangible assets over their estimated useful lives. Costs incurred to maintain the patents and trademarks are expensed as incurred.

(6) Long-term Debt

We had the following long-term debt balances outstanding:

	December 31,
	2006			2005
	(in thousands)
Senior credit facilities	$	44,775		$	89,000
8.75% Senior Subordinated notes		150,000			150,000
10% Subordinated notes		—			20,000
Line of credit		6,785			2,212
Other		417			316
		201,977			261,528
Less: Unamortized original issue discount		—			(544	)
Less: Current portion		(7,504	)		(2,367	)
	$	194,473		$	258,617

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(6) Long-term Debt (Continued)

The following describes each of the above listed debt instruments:

(a) Senior Credit Facilities

As of December 31, 2005, $89.0 million of borrowings were outstanding under our senior credit facility. On February 8 and 9, 2006, we sold an aggregate 3.4 million shares of our common stock at $24.41 per share to funds affiliated with 14 accredited institutional investors in a private placement. Proceeds from the private placement were approximately $79.3 million, net of issuance costs of $3.7 million. Of this amount, we repaid principal and interest outstanding under our senior credit facility of $74.1 million, with the remainder of the net proceeds retained for general corporate purposes.

On February 27, 2006, we borrowed $13.0 million under our European revolving line of credit to fund our acquisition of Clondiag. In March 2006, we entered into an amendment to our third amended and restated credit agreement. The amendment increased the total amount of credit available to us under the credit agreement to $155.0 million, from $100.0 million, consisting of a new $45.0 million U.S. term loan, a $40.0 million U.S. revolving line of credit, reduced from $60.0 million under the credit agreement prior to the amendment, and a $70.0 million European revolving line of credit, increased from $40.0 million under the credit agreement prior to the amendment. On March 31, 2006, in connection with our acquisition of the Innovacon business, we incurred $58.0 million in indebtedness under the credit agreement when we received the proceeds of the entire U.S. term loan and drew an additional $13.0 million under the U.S. revolving line of credit. On May 12, 2006, in the connection with the acquisition of the ABON facility, we drew $13.0 million under the U.S. revolving line of credit.

On August 23, 2006, we sold an aggregate 5.0 million shares of our common stock at $30.25 per share to funds affiliated with 17 accredited institutional investors in a private placement. Proceeds from the private placement were approximately $145.5 million, net of issuance costs of $5.7 million. Of this amount, we repaid principal outstanding on our revolving lines of credit under our senior credit facility of $54.0 million.

We began repaying the U.S. term loan in seven consecutive quarterly installments in October 2006, in an amount of $112,500, which is equal to 0.25% of the aggregate $45.0 million of U.S. term loan commitments. Our aggregate indebtedness under the amended credit agreement was $44.8 million as of December 31, 2006. On February 1, 2007, using a portion of the proceeds from our sale of 6.9 million shares of common stock in the first quarter of 2007 (Note 14), we paid the remaining principal balance outstanding and accrued interests under our senior credit facility. In accordance with SFAS No. 6, Classification of Short-Term Obligations Expected to Be Refinanced, we did not reclassify our February 2007 prepayment on our U.S. term loan and continued to carry the balance as long-term on our December 31, 2006 balance sheet.

Borrowings under the revolving lines of credit and term loan bear interest at either (i) the London Interbank Offered Rate (“LIBOR”), as defined in the agreement, plus applicable margins or, at our option or (ii) a floating Index Rate, as defined in the agreement, plus applicable margins. Applicable margins, if we choose to use the LIBOR or the Index Rate, can range from 2.75% to 3.75% or 1.50% to 2.50%, respectively, for our revolving lines of credit depending on the quarterly adjustments that are based on our consolidated financial performance, and 4.00% or 2.75%, respectively, on our term loan. As of December 31, 2006, the interest rate under the U.S. term loan bore interest per annum of 9.35%. We recorded interest expense, including amortization of deferred financing costs, under these senior credit facilities in the aggregate amount of $8.9 million, $4.8 million and $2.0 million in 2006, 2005 and 2004, respectively. As of December 31, 2006, accrued interest related to the senior credit facility amounted to $0.1 million.

Borrowings under the senior credit facility are secured by the stock of certain of our U.S. and foreign subsidiaries, substantially all of our intellectual property rights, substantially all of the assets of our businesses in the U.S. and a significant portion of the assets of our businesses outside the U.S. Under the senior credit agreement, as amended, we must comply with various financial and non-financial covenants. The primary

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(6) Long-term Debt (Continued)

financial covenants pertain to, among other things, fixed charge coverage ratio, capital expenditure, various leverage ratios, earnings before interest, taxes, depreciation and amortization (“EBITDA”) and minimum cash requirement. Additionally, the senior credit agreement currently prohibits us from paying dividends. As of December 31, 2006, we were in compliance with the covenants.

(b) Senior Subordinated Notes, 8.75%, Principal Amount $150.0 million

On February 10, 2004, we completed the sale of $150.0 million of 8.75% Bonds due 2012 in a private placement to qualified institutional buyers. Net proceeds from this offering amounted to $145.9 million, which was net of underwriters’ commissions of $4.1 million. Of the net proceeds, we used $125.3 million to repay all of our outstanding indebtedness and related financing fees under our primary senior credit facility (Note 6(a)) and $9.2 million to prepay our outstanding 9% subordinated promissory notes and related prepayment penalties. The remaining $11.4 million of proceeds was used for Bond offering expenses and general corporate purposes.

The Bonds accrue interest from the date of their issuance, or February 10, 2004, at the rate of 8.75% per year. Interest on the Bonds are payable semi-annually in arrears on each February 15 and August 15, which commenced on August 15, 2004. In addition, under the related registration rights agreement, we were to cause the registration statement with the SEC with respect to a registered exchange offer to exchange the notes underlying the Bonds for new notes, to be declared effective under the Securities Act of 1933, as amended, within 240 days after the date of the Bonds issuance and consummate the exchange offer within 270 days after the date of the Bonds issuance. As we were unable to consummate the exchange offer until March 28, 2005, interest on the bonds increased by 0.25% point per year for the first 90-day period immediately following the default (from November 7, 2004 to February 4, 2005) and an additional 0.25% point per year until March 28, 2005. As of December 31, 2006, accrued interest related to the bonds amounted to $4.9 million.

We may redeem the Bonds, in whole or in part, at any time on or after February 15, 2008, at redemption price equal to 100% of the principal amount plus a premium declining ratably to par, plus accrued and unpaid interest. In addition, prior to February 15, 2007, we may redeem up to 35% of the aggregate principal amount of the Bonds issued with the proceeds of qualified equity offerings at a redemption price equal to 108.75% of the principal amount, plus accrued and unpaid interest. If we experience a change of control, we may be required to offer to purchase the Bonds at a purchase price equal to 101% of the principal amount, plus accrued and unpaid interest. We might not be able to pay the required price for Bonds presented to us at the time of a change of control because our primary senior credit facility or other indebtedness may prohibit payment or we might not have enough funds at that time.

The Bonds are unsecured and are subordinated in right of payment to all of our existing and future senior debt, including the guarantee of all borrowings under our senior credit facilities. The Bonds are effectively subordinated to all existing and future liabilities, including trade payables, of those of our subsidiaries that do not guarantee the Bonds.

The Bonds are guaranteed by all of our domestic subsidiaries that are guarantors or borrowers under our primary senior credit facility. The guarantees are general unsecured obligations of the guarantors and are subordinated in right of payment to all existing and future senior debt of the applicable guarantors, which includes their guarantees of, and borrowings under our primary senior credit facility. See Note 23 for guarantor financial information.

The indenture governing the Bonds contains covenants that will limit our ability and the ability of our subsidiaries to, among other things, incur additional indebtedness in the aggregate, subject to our interest coverage ratio, pay dividends or make other distributions or repurchase or redeem our stock, make

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(6) Long-term Debt (Continued)

investments, sell assets, incur liens, enter into agreements restricting our subsidiaries’ ability to pay dividends, enter into transactions with affiliates and consolidate, merge or sell all or substantially all of our assets. These covenants are subject to certain exceptions and qualifications.

(c) Subordinated Promissory Notes, 10%, Principal Amount $20.0 million

On September 20, 2002, we sold units (“Units”) having an aggregate purchase price of $20.0 million to private investors to help finance the Wampole acquisition. Each Unit consisted of (i) a 10% subordinated promissory note (a “10% Subordinated Note”) in the principal amount of $50,000 and (ii) a warrant to acquire 0.4 shares of our common stock at an exercise price of $13.54 per share. In the aggregate, we issued fully vested warrants to purchase 0.2 million shares of our common stock, which may be exercised at any time on or prior to September 20, 2012. All warrants issued in relation to this debt have been classified in equity, pursuant to the provisions of EITF No. 96-13.

Among the purchasers of the 10% Subordinated Notes were three directors and officers of our company and an entity controlled by our chief executive officer, who collectively purchased Units that aggregated $1.9 million in principal amount and warrants to purchase an aggregate of 15,000 shares of our common stock.

On September 8, 2006, in connection with the August 2006 equity offering, we repaid the 10% Subordinated Notes which were due to mature on September 20, 2008. The total payment aggregated $20.8 million, which represented the principal balance outstanding plus accrued and unpaid interest, as well as a prepayment penalty of $0.4 million. The prepayment penalty, along with the remaining unamortized deferred financing cost and unamortized original interest discount write-offs, aggregating $0.9 million, was charged to interest expense for the year ended December 31, 2006.

(d) Maturities of Long-term Debt

The following is a summary of the maturities of long-term debt outstanding on December 31, 2006:

	(in thousands)
2007	$	7,504
2008		44,469
2009		4
2010		—
2011		—
Thereafter		150,000
	$	201,977

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INVERNESS MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(7) Capital Leases

The following is a schedule of the future minimum lease payments under the capital leases, together with the present value of such payments as of December 31, 2006:

	(in thousands)
2007	$	643
2008		399
2009		16
2010		4
2011		4
Total future minimum lease payments		1,066
Less: Imputed interest		(67	)
Present value of future minimum lease payments		999
Less: Current portion		(584	)
	$	415

At December 31, 2006, the capitalized amounts of the building, machinery and equipment and computer equipment under the capital leases were as follows:

	(in thousands)
Machinery, laboratory equipment and tooling	$	263
Buildings		2,186
		2,449
Less: Accumulated amortization		(1,750	)
	$	699

The amortization expense of assets recorded under capital leases is included in depreciation and amortization expense of property, plant and equipment.

(8) Postretirement Benefit Plans

(a) Employee Savings Plans

Our company and several of our U.S.-based subsidiaries sponsor various 401(k) savings plans, to which eligible domestic employees may voluntarily contribute a portion of their income, subject to statutory limitations. In addition to the participants’ own contributions to these 401(k) savings plans, we match such contributions up to a designated level. Total matching contributions related to employee savings plans were $0.8 million, $0.5 million and $0.4 million in 2006, 2005 and 2004, respectively.

(b) UK Pension Plans

Our subsidiary in England, Unipath Ltd. (“Unipath”), adopted a pension plan (the “Unipath Pension Scheme”) in December 2002. The Unipath Pension Scheme consists of two parts: (i) the defined benefit section (the “Defined Benefit Plan”), and (ii) the defined contribution section (the “Defined Contribution Plan”). Employees of Unipath were allowed to join the Unipath Pension Scheme starting on December 1, 2002.

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INVERNESS MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(8) Postretirement Benefit Plans (Continued)

As part of the purchase agreement of the Unipath business in December 2001, we agreed to establish a new defined benefit pension plan for the acquired employees based in England, who are former participants of the Unilever pension plan (the “Acquired UK Employees”), and to continue to accumulate benefits under such plan for a period of at least three years after the acquisition date of the Unipath business. Consequently, the Defined Benefit Plan was established as part of the Unipath Pension Scheme, which covers the Acquired UK Employees during the last two years of the three year post-acquisition period starting on December 1, 2002. During the first year of the three year post-acquisition period through November 2002, the Acquired UK Employees continued to accumulate benefits under the Unilever pension plan, to which Unipath contributed $1.9 million in that period.

At the time of the acquisition, pursuant to SFAS No. 87, Employers’ Accounting for Pensions, and SFAS No. 88, Employers’ Accounting for Settlements and Curtailments of Defined Benefit Pension Plans and for Termination Benefits, we recorded an unfunded pension liability of $3.7 million as part of the purchase price of the Unipath business (withdrawal obligation). Such unfunded pension liability represented the excess of the benefit obligation, or $20.5 million over the fair value of the plan assets, or $16.8 million, initially allocated by Unilever to the plan assets for the benefit of the Acquired UK Employees. As some of the Acquired UK Employees were terminated under our restructuring plan upon acquisition, the unfunded pension liability initially recorded by us, or $3.7 million, was reduced by the portion of these employees’ severance pay-out that represented pension benefits, or $1.1 million, which was reclassified to severance costs for purposes of aggregating the purchase price of the Unipath business.

Through November 2004, the Acquired UK Employees could elect, at their option, to transfer contributions and benefits from the Unilever pension plan to the Defined Benefit Plan. As required, we had established the Defined Benefit Plan and believed that the benefits available under this plan were no less favorable to the Acquired UK Employees than Unilever’s plan and we maintained these benefits for the period required by the acquisition agreement. Nevertheless, we were engaged in a dispute with Unilever over the equity of benefits under the old and new plans.

During May 2004, we entered into mediation with Unilever to resolve the differences over the relative levels of benefits in Unilever’s Plan and the Defined Benefit Plan. The mediation produced a settlement agreement between Unilever and us dated August 17, 2004. This settlement agreement provided that we would match certain benefits available in the Unilever plan to ensure that the plan was viewed as being no less favorable than the Unilever plan for employees considering whether to transition in November of 2004. These changes increased the benefits available to a retiree under the Defined Benefit Plan to: (i) allow for retirees upon retirement to receive unreduced benefits at age 60 rather than age 65; and (ii) calculate the final pension benefit payable to retirees based on the retirees’ salary at the date on which pension benefits ceased accruing under the Unipath plan (December 2004) plus 1% over inflation for each year of service after December 2004 until retirement.

In November 2004, the final number of employees who elected to transfer into the Defined Benefit Plan from the Unilever plan was determined. Substantially fewer Acquired UK Employees transferred into the Defined Benefit Plan than were previously anticipated to transfer when the unfunded pension liability was initially established in 2001. As a result, an actuarial gain of $1.8 million was recorded and deferred as a component of other comprehensive income in 2004.

As discussed in Note 2, we adopted the recognition provisions of SFAS No. 158 as of December 31, 2006 and, accordingly recognized a liability for the unfunded status of our pension plans of $4.5 million. We

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INVERNESS MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(8) Postretirement Benefit Plans (Continued)

also recognized in accumulated other comprehensive income (loss) the prior service cost and net actuarial gain (loss) of this plan. Future changes to the funded status of these plans will be recognized in the year in which the change occurs through other comprehensive income.

Prior to December 31, 2006, we accounted for our defined benefit pension plan under SFAS No. 87. Accordingly, we recognized a pension liability of $1.8 million. There was no non-cash charge to accumulated other comprehensive income (loss) within stockholders’ equity at December 31, 2005.

We do not expect any non-cash pension expense in 2007.

The following table sets forth an analysis of the changes in the benefit obligation, the plan assets and the funded status of the Defined Benefit Plan during 2006 and 2005:

	2006			2005
	(in thousands)
Change in projected benefit obligation
Benefit obligation at beginning of year	$	11,144		$	11,646
Interest cost		586			583
Actuarial (gain) loss		(726	)		258
Benefits paid		(129	)		(122	)
Foreign exchange impact		1,495			(1,221	)
Benefit obligation at end of year	$	12,370		$	11,144
Change in accumulated benefit obligation
Benefit obligation at beginning of year	$	8,141		$	8,304
Interest cost		586			583
Actuarial (gain) loss		(726	)		258
Benefits paid		(129	)		(122	)
Foreign exchange impact		1,087			(882	)
Benefit obligation at end of year	$	8,959		$	8,141
Change in plan assets
Fair value of plan assets at beginning of year	$	6,436		$	5,327
Actual return on plan assets		403			1,316
Employer contribution		553			546
Benefits paid		(129	)		(122	)
Foreign exchange impact		926			(631	)
Fair value of plan assets at end of year	$	8,189		$	6,436
Funded status	$	(4,181	)	$	(4,708	)
Unrecognized net actuarial gain		—			(1,414	)
Unrecognized prior service cost		—			5,967
Net amount recognized	$	(4,181	)	$	(155	)

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INVERNESS MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(8) Postretirement Benefit Plans (Continued)

The net amount recognized in the accompanying consolidated balance sheet that relates to the Defined Benefit Plan during 2006 and 2005 consists of:

	2006			2005
	(in thousands)
Accrued benefit liability	$	(733	)	$	(1,672	)
Intangible asset		1,039			1,517
Net amount recognized	$	306		$	(155	)

The measurement date used to determine plan assets and benefit obligations for the Defined Benefit Plan was December 31, 2006 and 2005.

The following table provides the weighted-average actuarial assumptions:

	2006			2005
Assumptions used to determine benefit obligations:
Discount rate		5.25	%		4.80	%
Rate of compensation increase		3.80	%		3.55	%
Assumptions used to determine net periodic benefit cost:
Discount rate		4.80	%		5.30	%
Expected return on plan assets		6.63	%		6.84	%
Rate of compensation increase		3.55	%		3.55	%

The actuarial assumptions are reviewed on an annual basis. The overall expected long-term rate of return on plan assets assumption was determined based on historical investment return rates on portfolios with a high proportion of equity securities.

The annual cost of the Defined Benefit Plan is as follows:

	2006			2005
	(in thousands)
Interest cost	$	586		$	583
Expected return on plan assets		(461	)		(360	)
Amortization of net loss		(26	)		54
Net periodic benefit cost	$	99		$	277

The plan assets of the Defined Benefit Plan comprise of a mix of stocks and fixed income securities and other investments. At December 31, 2006, these stocks and fixed income securities represented 70% and 30%, respectively, of the market value of the pension assets. We expect to contribute approximately 0.3 million British Pounds Sterling (or $0.6 million at December 31, 2006) to the Defined Benefit Plan in 2007. We expect benefits to be paid to plan participants of approximately $0.2 million per year for each of the next five years and for benefits totaling $0.2 million to be paid annually for the five years thereafter.

Unipath contributed $1.2 million, $1.1 million and $0.3 million to the Defined Contribution Plan, which was recognized as an expense in the accompanying consolidated statement of operations, in 2006, 2005 and 2004, respectively.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(9) Derivative Instruments

We entered into an interest rate swap agreement with one of our lenders, effective February 25, 2002, which was intended to protect our long-term debt on which interest was charged at the LIBOR against fluctuation in such rate. Under the interest rate swap agreement, the LIBOR was set at a minimum of 3.36% and a maximum of 5.00%. Because the interest rate swap agreement did not qualify as a hedge for accounting purposes under SFAS No. 133 and related amendments, we recorded income of $0.7 million during 2004, to mark to market this interest rate swap agreement. The adjustment to fair value of the interest rate swap agreement was recorded as a component of interest expense in the accompanying consolidated statements of operations. The interest rate swap agreement expired on December 30, 2004.

During 2005, we entered into forward exchange contracts totaling $24.9 million with monthly maturity dates of January 18, 2005 to February 15, 2006. Maturing forward exchange contracts were used to lock in U.S. dollar to British Pound Sterling (GBP) or U.S. dollar to Euro exchange rates and hedge anticipated intercompany sales.

The change in value of the derivative was analyzed quarterly for changes in the spot and forward rates based on rates given by the issuing financial institution for each quarter end date. The effective portion of the gain or loss on the derivative is reported in other comprehensive income (“OCI”) during the period prior to the forecasted purchase or sale. For forecasted sales on credit, the amount of income ascribed to each forecasted period was reclassified from OCI to income or expense on the date of the sale. The income or cost ascribed to each period encompassed within the periods of the recognized foreign-currency-denominated receivable or payable was reclassified from OCI to income or expense at the end of each reporting period. The changes in the derivative instrument’s fair values from inception of the hedge were compared to the cumulative change in the hedged item’s fair value attributable to the risk hedged. Effectiveness was based on the change in the spot rates.

At December 31, 2005, we had two forward exchange contracts outstanding for $1.5 million each against the GBP. The contracts matured during January and February 2006.

See Note 12(a) regarding our Chembio Diagnostics Inc. (“Chembio”) warrant which is accounted for as a derivative instrument.

(10) Commitments and Contingencies

(a) Operating Leases

We have operating lease commitments for certain of our facilities and equipment that expire on various dates through 2021. The following schedule outlines future minimum annual rental payments under these leases at December 31, 2006:

	(in thousands)
2007	$	10,454
2008		9,042
2009		7,104
2010		5,254
2011		5,187
Thereafter		30,762
	$	67,803

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INVERNESS MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(10) Commitments and Contingencies (Continued)

Rent expense relating to operating leases was approximately $11.8 million, $10.0 million and $7.4 million during 2006, 2005 and 2004, respectively.

(b) Capital Expenditure Commitments

At December 31, 2006, we had total outstanding non-cancelable equipment purchase commitments of $8.8 million.

(c) Legal Proceedings

We currently are not a party to any material pending legal proceedings.

Because of the nature of our business, we may be subject at any particular time to consumer product claims or various other lawsuits arising in the ordinary course of our business, including employment matters, and expect that this will continue to be the case in the future. Such lawsuits generally seek damages, sometimes in substantial amounts, for personal injuries or other commercial or employment claims. In addition, we aggressively defend our patent and other intellectual property rights. This often involves bringing infringement or other commercial claims against third parties. These suits can be expensive and result in counterclaims challenging the validity of our patents and other rights.

In December 2005, we learned that the SEC had issued a formal order of investigation in connection with the previously disclosed revenue recognition matter at one of our diagnostic divisions, and we subsequently received a subpoena for documents. We believe that we fully responded to the subpoena and we will continue to fully cooperate with the SEC’s investigation. We cannot predict whether the SEC will seek additional information or what the outcome of its investigation will be.

In March, 2006, the U.S. Federal Trade Commission (“FTC”) opened a preliminary, non-public investigation into our then pending acquisition of the business we acquired from ACON Laboratories to determine whether this acquisition may be anticompetitive, and we subsequently received a Civil Investigative Demand and a subpoena requesting documents. We believe that we have fully responded to the Civil Investigative Demand and we are continuing to produce documents in connection with the subpoena and to otherwise cooperate with the FTC’s investigation. We cannot predict whether the FTC will seek additional information or what the outcome of this investigation will be. The FTC generally has the power to commence administrative or federal court proceedings seeking injunctive relief or divestiture of assets. In the event that an order were to be issued requiring divestiture of significant assets or imposing other injunctive relief, our business, financial condition and results of operations could be materially adversely affected.

(11) Other Arrangements

(a) Co-development Agreement with ITI Scotland Limited

On February 25, 2005, we entered into a co-development agreement with ITI Scotland Limited (“ITI”), whereby ITI agreed to provide us with £30 million over three years to partially fund research and development programs focused on identifying novel biomarkers and near-patient and home-use tests for cardiovascular and other diseases (“the programs”). We agreed to invest £37.5 million in the programs over three years from the date of the agreement. Through our subsidiary, Stirling Medical Innovations Limited (“Stirling”), we established a new research center in Stirling, Scotland, where we consolidated many of our existing cardiology programs and will ultimately commercialize products arising from the programs. ITI and Stirling will have exclusive rights to the developed technology in their respective fields of use. As of December 31, 2006, we had received approximately $40.9 million in funding from ITI. As qualified expenditures are made under the co-development arrangement, we recognize the fee earned during the period as a reduction of our related

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INVERNESS MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(11) Other Arrangements (Continued)

expenses, subject to certain limitations. For the fiscal years ended December 31, 2006 and 2005, we recognized $18.4 million and $18.1 million of reimbursements, respectively, of which $16.6 million and $17.2 million, respectively, offset our research and development spending and $1.8 million and $0.9 million, respectively, reduced our general, administrative and marketing spending incurred by Stirling. Funds received from ITI in excess of amounts earned are considered deferred revenue and are included in accrued expenses and other current liabilities, the balance of which was $4.9 million as of December 31, 2006.

(b) Joint Venture in China

In September 2004, we began manufacturing a small amount of product in China through a third party. In February 2005, we entered into a joint venture with this Chinese manufacturer and acquired controlling ownership of the manufacturing facility.

(12) Other Investments and Available-for-sale Securities

(a) Investment in Chembio

In September 2006, we acquired 5% of Chembio, a developer and manufacturer of rapid diagnostic tests for infectious diseases, through the purchase of 40 shares of their preferred stock. The preferred stock pays a dividend of 7%, payable in cash or common stock. The aggregate purchase price of $2.0 million was paid in cash. In addition to the preferred stock, we received a warrant to purchase 625,000 shares of Chembio’s common stock at $0.80 per share. Chembio’s stock is publicly traded. The warrant, accounted for as a derivative instrument, had a fair value of approximately $0.4 million at the date of issuance. The fair value of this warrant was estimated at the time of issuance using the Black-Scholes pricing model and assuming no dividend yield, expected volatility of 116%, risk-free rate of 4.9% and a contractual term of 5 years. We mark to market the warrant over the contractual term. As of December 31, 2006, the warrant was valued at $0.4 million.

(b) Equity Method Investments

In November 2006, we acquired 40% of Vedalab S.A. (“Vedalab”), a French manufacturer and supplier of rapid diagnostic tests in the professional markets. The aggregate purchase price was $9.7 million which consisted of $7.6 million in cash, 49,787 shares of our common stock with an aggregate fair value of $2.0 million and $0.1 million in estimated direct acquisition costs. On the same date, we settled an ongoing patent infringement claim with Vedalab. Under the terms of the settlement, Vedalab paid to us $5.1 million and agreed to pay royalties on future sales ranging from 5% to 10%, depending on the products being sold in exchange for a license under certain patents to manufacture its current products as its facility in Alencon, France. The payment of $5.1 million has been included in as income our financial results for the year ended December 31, 2006, of which $4.6 million relates to periods prior to 2006 and has been included in other income, net and the remaining $0.5 million has been recorded as license and royalty revenue. We account for our 40% investment in Vedalab under the equity method of accounting in accordance with APB Opinion No. 18, The Equity Method of Accounting for Investments in Common Stock.

In May 2006, we acquired 49% of TechLab, Inc. (“TechLab”), a privately-held developer, manufacturer and distributor of rapid non-invasive intestinal diagnostics tests in the areas of intestinal inflammation, antibiotic associated diarrhea and parasitology. The aggregate purchase price was $8.8 million which consisted of 303,417 shares of our common stock with an aggregate fair value of $8.6 million and $0.2 million in estimated direct acquisition costs. We account for our 49% investment in TechLab under the equity method of accounting, in accordance with APB Opinion No. 18. For the year ended December 31, 2006, we recorded

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

$0.6 million in other income, which represented our minority share of TechLab’s profit in the respective periods.

(c) Available-for-sale Securities

Our investment in available-for-sale securities (long-term) consists of marketable equity securities purchased in December 2006. We currently intend to hold these investments indefinitely. On receipt, the shares were recorded at their market value. At December 31, 2006, their fair value was approximately $12.7 million, representing an unrealized holding gain of approximately $0.1 million which was recorded in other comprehensive income within stockholders’ equity in our consolidated balance sheet.

(13) Loss per Share

The following table sets forth the computation of basic and diluted loss per share:

	2006			2005			2004
	(in thousands)
Numerator:
Net loss	$	(16,842	)	$	(19,209	)	$	(16,596	)
Dividends, redemption interest and amortization of beneficial conversion feature related to Series A Preferred Stock (Note 14(b))		—			—			(749	)
Net loss available to common stockholders—basic and diluted	$	(16,842	)	$	(19,209	)	$	(17,345	)
Denominator:
Denominator for basic and dilutive loss per share—adjusted weighted average shares		34,109			24,358			19,969
Net loss per common share—basic and diluted	$	(0.49	)	$	(0.79	)	$	(0.87	)

We had the following potential dilutive securities outstanding on December 31, 2006: options and warrants to purchase an aggregate of 4.1 million shares of our common stock at a weighted average exercise price of $20.75 per share. Potential dilutive securities were not included in the computation of diluted loss per share in 2006 because the inclusion thereof would be antidilutive.

We had the following potential dilutive securities outstanding on December 31, 2005: (a) options and warrants to purchase an aggregate of 4.7 million shares of our common stock at a weighted average exercise price of $18.44 per share and (b) 104,000 shares of common stock held in escrow. Potential dilutive securities were not included in the computation of diluted loss per share in 2005 because the inclusion thereof would be antidilutive.

We had the following potential dilutive securities outstanding on December 31, 2004: options and warrants to purchase an aggregate of 4.3 million shares of our common stock at a weighted average exercise price of $16.43 per share. Potential dilutive securities were not included in the computation of diluted loss per share in 2004 because the inclusion thereof would be antidilutive.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(14) Stockholders’ Equity

(a) Common Stock

As of December 31, 2006, we had 100.0 million shares of common stock, $0.001 par value, authorized, of which approximately 39.2 million shares were issued and outstanding, 8.1 million shares were reserved for issuance upon grant and exercise of stock options under current stock option plans and 0.3 million shares were reserved for issuance upon exercise of outstanding warrants.

In August 2005, we sold 4.0 million shares of our common stock at $23.76 per share to funds affiliated with three accredited institutional investors in a private placement. Proceeds from the private placement were approximately $92.8 million, net of issuance costs of $2.5 million. Of this amount, we repaid principal and interest outstanding under our senior credit facility of $84.4 million, with the remainder of the net proceeds retained for general corporate purposes.

In February 2006, we sold 3.4 million shares of our common stock at $24.41 per share to funds affiliated with 14 accredited institutional investors in a private placement. Proceeds from the private placement were approximately $79.3 million, net of issuance costs of $3.7 million. Of this amount, we repaid principal and interest outstanding under our senior credit facility of $74.1 million, with the remainder of the net proceeds retained for general corporate purposes.

In August 2006, we sold an aggregate 5.0 million shares of our common stock at $30.25 per share to funds affiliated with 17 accredited institutional investors in a private placement. Proceeds from the private placement were approximately $145.5 million, net of issuance costs of $5.7 million. Of this amount, we used $41.3 million for payments related to our acquisition of the ABON facility, $5.3 million to purchase the remaining 32.55% of Clondiag, $54.0 million to repay principal outstanding under our senior credit facility and $20.8 million to repay principal and interest outstanding, along with a prepayment penalty, under our 10% subordinated promissory notes, with the remainder of the net proceeds retained for general corporate purposes.

In January 2007, we sold an aggregate 6.0 million shares of our common stock at $39.65 per share through an underwritten public offering and in February 2007, our underwriters exercised in full an option to purchase an additional 0.9 million shares to cover over-allotments. Proceeds from the offering were approximately $261.3 million, net of issuance costs of $12.3 million, which include deductions for underwriting discounts and commissions and take into effect the reimbursement by the underwriters of a portion of our offering expenses. Of this amount, we used $44.9 million to repay principal outstanding and accrued interest on our term loan under our senior credit facility, with the remainder of the net proceeds retained for working capital and other general corporate purposes.

(b) Preferred Stock

As of December 31, 2006, we had 5.0 million shares of preferred stock, $0.001 par value, authorized, of which 2.7 million shares were designated as Series A Preferred Stock, $0.001 par value. During 2004 and 2003, 0.2 million and 0.1 million shares of Series A Preferred Stock, respectively, were converted into 0.4 million and 0.2 million shares of our common stock, respectively. No shares of Series A Preferred Stock were outstanding as of December 31, 2006.

(c) Stock Options and Awards

In 2001, we adopted the 2001 Stock Option and Incentive Plan (as amended, the “2001 Plan”) which allows for the issuance of up to 8.1 million shares of common stock and other awards, as amended. The 2001 Plan is administered by the Compensation Committee of the Board of Directors in order to select the individuals eligible to receive awards, determine or modify the terms and conditions of the awards granted,

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(14) Stockholders’ Equity (Continued)

accelerate the vesting schedule of any award and generally administer and interpret the 2001 Plan. The key terms of the 2001 Plan permit the granting of incentive or nonqualified stock options with a term of up to ten years and the granting of stock appreciation rights, restricted stock awards, unrestricted stock awards, performance share awards and dividend equivalent rights. The 2001 Plan also provides for option grants to non-employee directors and automatic vesting acceleration of all options and stock appreciation rights upon a change in control, as defined by the 2001 Plan. As of December 31, 2006, there were 2.3 million shares available for future grant under the 2001 plan.

In August 2001, we sold to our chief executive officer 1.2 million shares of restricted common stock at a price of $9.13 per share. Two-thirds of the restricted stock, or 0.8 million shares, vested ratably over 36 months; the remaining one-third, or 0.4 million shares, vested ratably over 48 months. Except for the par value of the common stock, which was paid in cash, the chief executive officer purchased the restricted stock with a five-year promissory note, which, for accounting purposes, was treated as a non-recourse note. The total interest under the promissory note was fully recourse to our chief executive officer. The note was due and payable on August 16, 2006 and bore interest at an annual rate of 4.99%. Interest income recorded under this note amounted to $0.3 million for the year ended December 31, 2006 and $0.5 million for each of the years ended December 31, 2005 and 2004. In August, 2006, the note and accrued interest were paid in full (Note 19).

In August 2001, we granted two nonqualified stock options to purchase an aggregate of 0.8 million shares of common stock at an exercise price of $6.20 per share to two other key executive officers. These options were set to expire on January 31, 2002. In December 2001, the executive officers exercised these options (one fully; one partially) by paying cash in the amount of par value and delivering promissory notes for the difference, as permitted pursuant to the terms of the original grant. For accounting purposes, the promissory notes were treated as non-recourse notes. The notes were due and payable in December 2006 and bore interest at an annual rate of 3.97%, the applicable federal rate for a five-year note in effect during the month of exercise. The notes and accrued interest were paid in full in December 2006 (Note 19). Interest income recorded under these notes amounted to $0.2 million for each year ended December 31, 2006, 2005 and 2004, respectively. Shares issued upon exercise vested ratably over 36 months and were fully vested at December 31, 2004.

The following summarizes all stock option activity during the year ended December 31,:

	2006					2005					2004
				Weighted					Weighted					Weighted
				Average					Average					Average
	Options			Exercise Price		Options			Exercise Price		Options			Exercise Price
	(in thousands)					(in thousands)					(in thousands)
Outstanding at January 1		3,902		$	18.82		3,619		$	16.58		3,398		$	15.85
Granted		666		$	31.88		809		$	26.67		394		$	21.75
Exercised		(510	)	$	17.30		(331	)	$	11.94		(90	)	$	10.40
Canceled/expired/forfeited		(283	)	$	21.81		(195	)	$	21.48		(83	)	$	18.12
Outstanding at December 31		3,775		$	21.11		3,902		$	18.82		3,619		$	16.58
Exercisable at December 31		2,408		$	17.16		2,424		$	16.19		2,141		$	15.06

The aggregate intrinsic value of the options outstanding at December 31, 2006 was $66,664,961. The aggregate intrinsic value of the options exercisable at December 31, 2006 was $52,139,392.

F-43

INVERNESS MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(14) Stockholders’ Equity (Continued)

The following represents additional information related to stock options outstanding and exercisable at December 31, 2006:

	Outstanding
			Weighted				Exercisable
			Average		Weighted				Weighted
	Number of		Remaining		Average		Number of		Average
Exercise Price	Shares		Contract Life		Exercise Price		Shares		Exercise Price
	(in thousands)		(in years)				(in thousands)
$1.25-$14.92		378		3.57	$	8.11		376	$	8.08
$15.35-$15.47		654		4.97	$	15.46		654	$	15.46
$15.55-$16.76		465		5.58	$	16.27		391	$	16.29
$16.95-$19.80		381		5.52	$	18.24		333	$	18.15
$19.85-$22.75		400		5.53	$	21.28		353	$	21.31
$22.78-$25.50		462		8.27	$	24.44		148	$	24.20
$25.64-$28.03		458		8.52	$	27.51		109	$	27.82
$28.10-$34.40		419		9.44	$	32.06		27	$	28.22
$35.29-$139.72		153		9.27	$	38.82		12	$	52.82
$165.96		5		.91	$	165.96		5	$	165.96
$1.25-$165.96		3,775		6.53	$	21.11		2,408	$	17.16

(d) Warrants

The following is a summary of all warrant activity during the three years ended December 31, 2006:

						Weighted
	Number of					Average
	Shares			Exercise Price		Exercise Price
	(in thousands)
Warrants outstanding and exercisable, December 31, 2003		712		$	3.81-$23.76	$	15.62
Exercised		(9	)	$	11.55-$14.17	$	13.03
Expired		(4	)	$	9.89-$18.25	$	14.06
Warrants outstanding and exercisable, December 31, 2004		699		$	3.81-$23.76	$	15.66
Granted		75		$	24.00	$	24.00
Exercised		(7	)	$	5.50-$13.54	$	13.47
Expired		(9	)	$	14.15-$23.76	$	18.66
Warrants outstanding and exercisable, December 31, 2005		758		$	3.81-$24.00	$	16.47
Exercised		(452	)	$	3.88-$18.12	$	16.51
Warrants outstanding and exercisable, December 31, 2006		306		$	3.81-$24.00	$	16.42

F-44

INVERNESS MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(14) Stockholders’ Equity (Continued)

The following represents additional information related to warrants outstanding and exercisable at December 31, 2006:

	Outstanding and Exercisable
			Weighted
			Average		Weighted
	Number of		Remaining		Average
Exercise Price	Shares		Contract Life		Exercise Price
	(in thousands)		(in years)
$3.81-$3.93		4		3.48	$	3.87
$4.48-$4.57		1		3.54	$	4.54
$5.44-$5.57		4		3.58	$	5.53
$7.37-$7.55		2		3.66	$	7.48
$13.54-$18.12		220		4.97-5.72	$	14.40
$24.00		75		8.25	$	24.00
		306		6.16	$	16.42

The majority of the warrants included in the table above were issued in connection with debt and equity financings, or amendments thereto, of which warrants to purchase an aggregate of 0.3 million shares of our common stock were issued to officers and directors of our company or entities controlled by these officers and directors and were outstanding at December 31, 2006. The value of warrants issued in connection with debt financings has yielded original issue discounts and additional interest expense of $0.5 million in 2006 and $0.2 million for both 2005 and 2004. All outstanding warrants have been classified in equity, pursuant to provision EITF No. 00-19.

(e)  Employee Stock Purchase Plan

In 2001, we adopted the 2001 Employee Stock Purchase Plan under which eligible employees are allowed to purchase shares of our common stock at a discount through periodic payroll deductions. Purchases may occur at the end of every six month offering period at a purchase price equal to 85% of the market value of our common stock at either the beginning or end of the offering period, whichever is lower. We may issue up to 0.5 million shares of common stock under this plan. At December 31, 2006, 0.3 million shares had been issued under this plan.

F-45

INVERNESS MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(15) Stock-based compensation

In accordance with SFAS No. 123-R, our results of operations for the year ended December 31, 2006 reflected compensation expense for new stock options granted since January 1, 2006, and vested under our stock incentive plan and employee stock purchase plan and the unvested portion of previous stock option grants which vested during the year ended December 31, 2006. Stock-based compensation expense in the amount of $5.5 million ($4.9 million, net of tax) was reflected in our consolidated statements of operations for the year ended December 31, 2006, as follows:

	(in thousands)
Cost of sales	$	391
Research and development		1,390
Sales and marketing		682
General and administrative		2,992
	$	5,455

Prior to our adoption of SFAS No. 123-R, all tax benefits resulting from the exercise of stock options would have been reported as operating cash flows in our consolidated statements of cash flows. In accordance with SFAS No. 123-R, for the year ended December 31, 2006, the presentation of our cash flows reports the excess tax benefits from the exercise of stock options as financing cash flows. For the year ended December 31, 2006, excess tax benefits generated from option exercises amounted to $0.6 million.

The following assumptions were used to estimate the fair value of options granted during the year ended December 31, 2006, 2005 and 2004 using the Black-Scholes option-pricing model:

	2006	2005	2004
Risk-free interest rate	4.00-4.67%	3.58-4.46%	2.80-3.95%
Expected dividend yield	—	—	—
Expected life	6.25 years	5 years	5 years
Expected volatility	41%	45%	47%

The weighted average fair value under the Black-Scholes option pricing model of options granted to employees during 2006, 2005 and 2004 was $15.29, $11.85 and $9.86, respectively. All options granted during these periods were granted at fair market value on date of grants.

For the year ended December 31, 2006, in accordance with SFAS 123-R, we recorded compensation expense of $0.3 million related to our Employee Stock Purchase Plan. The fair value of the option component of the Employee Stock Purchase Plan shares were estimated at the date of grant using the Black-Scholes pricing model and assumed an expected volatility of 33%, a risk-free interest rate range of 4.55% to 4.99% and an expected life of 0.5 years. The charge is included in general and administrative in the table above.

F-46

INVERNESS MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(16) Other Comprehensive Income

SFAS No. 130, Reporting Comprehensive Income, establishes standards for the reporting and display of comprehensive income. In general, comprehensive income combines net income and other changes in equity during the year from non-owner sources. Accumulated other comprehensive income is recorded as a component of stockholders’ equity. The following is a summary of the components of and changes in accumulated other comprehensive income as of December 31, 2006 and in each of the three years then ended:

	Cumulative			Pension						Accumulated
	Translation			Liability						Other
	Adjustment			Adjustment						Comprehensive
	(Note 2(b))			(Note 8(b))			Other (i)			Income (ii)
	(in thousands)
Balance at December 31, 2003	$	12,111		$	(434	)	$	136		$	11,813
Period change		5,241			434			33			5,708
Balance at December 31, 2004		17,352			—			169			17,521
Period change		(10,300	)		—			(169	)		(10,469	)
Balance at December 31, 2005		7,052			—			—			7,052
Period change		10,823			(3,738	)		44			7,129
Balance at December 31, 2006	$	17,875		$	(3,738	)	$	44		$	14,181

(i) Other represents (realization of) unrealized gains on available-for-sale securities.

(ii) All of the components of accumulated other comprehensive income relate to our foreign subsidiaries except item (i), above. No adjustments for income taxes were recorded against other comprehensive income as we intend to permanently invest in our foreign subsidiaries in the foreseeable future.

(17) Income Taxes

Our income tax provision in 2006, 2005 and 2004 mainly represents those recorded by us and certain of our U.S. subsidiaries and by our foreign subsidiaries Unipath Limited in the United Kingdom, Inverness Medical Japan in Japan, and Inverness Medical Switzerland GmbH in Switzerland. Loss before provision for income taxes consists of the following:

	2006			2005			2004
	(in thousands)
United States	$	(4,728	)	$	(40,582	)	$	(20,102	)
Foreign		(6,387	)		28,192			5,781
	$	(11,115	)	$	(12,390	)	$	(14,321	)

F-47

INVERNESS MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Our primary temporary differences that give rise to the deferred tax asset and liability are net operating loss (“NOL”) carryforwards, nondeductible reserves and accruals and differences in bases of the tangible and intangible assets. The income tax effects of these temporary differences are as follows:

	2006			2005
	(in thousands)
NOL and capital loss carryforwards	$	86,516		$	71,926
Tax credit carryforwards		3,515			833
Nondeductible reserves		7,385			8,721
Nondeductible accruals		16,741			10,199
Difference between book and tax bases of tangible assets		1,624			932
Difference between book and tax bases of intangible assets		9,125			5,616
Gross deferred tax asset		124,906			98,227
Less: Valuation allowance		(107,622	)		(96,721	)
Total deferred tax assets		17,284			1,506
Deferred tax liabilities:
Difference between book and tax bases of tangible assets		7,068			2,171
Difference between book and tax bases of intangible assets		28,790			16,710
Total deferred tax liability		35,858			18,881
Net deferred tax liability	$	18,574		$	17,375
Reported as:
Deferred tax assets, current portion	$	5,332		$	844
Deferred tax assets, long-term		78			662
Deferred tax liabilities, long-term		(23,984	)		(18,881	)
Net deferred tax liability	$	(18,574	)	$	(17,375	)

As of December 31, 2006, we had approximately $188.7 million of domestic NOL carryforwards and $31.5 million of foreign NOL and foreign capital loss carryforwards, which either expire on various dates through 2026 or can be carried forward indefinitely. These loss carryforwards are available to reduce future federal and foreign taxable income, if any. These loss carryforwards are subject to review and possible adjustment by the appropriate taxing authorities. The domestic NOL carryforwards include approximately $70.6 million of pre-acquisition losses at IMN, Ischemia, Ostex and ADC. These pre-acquisition losses are subject to the Internal Revenue Service Code Section 382 limitation. Section 382 imposes an annual limitation on the use of these losses to an amount equal to the value of the company at the time of the ownership change multiplied by the long-term tax exempt rate. The valuation allowance relates to our U.S. NOLs and deferred tax assets and certain other foreign deferred tax assets and is recorded based upon the uncertainty surrounding their realizability, as these assets can only be realized via profitable operations in the respective tax jurisdictions.

In accordance with SFAS No. 109, the accounting for the tax benefits of acquired deductible temporary differences and NOL carryforwards, which are not recognized at the acquisition date because a valuation allowance is established and which are recognized subsequent to the acquisitions, will be applied first to reduce to zero any goodwill and other non-current intangible assets related to the acquisitions. Any remaining benefits would be recognized as a reduction of income tax expense. As of December 31, 2006, $17.3 million of our deferred tax asset pertains to acquired companies, the future benefits of which will be applied first to

F-48

INVERNESS MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

reduce to zero any goodwill and other non-current intangible assets related to the acquisitions, prior to reducing our income tax expense. Included in the valuation allowance is approximately $2.6 million related to certain NOL carryforwards resulting from the exercise of employee stock options, the tax benefit of which, when recognized, will be accounted for as a credit to additional paid-in capital rather than a reduction of income tax.

Our China based manufacturing subsidiaries qualify for an income tax holiday. The tax holiday provides an income tax rate of 0% in 2006 and 2007. The income tax rate is scheduled to increase to 16% for 2008, 2009, and 2010, and then to the regular tax rate of 32% for 2011 and future years.

The estimated amount of undistributed earnings of our foreign subsidiaries is $38.7 million at December 31, 2006. No amount for U.S. income tax has been provided on undistributed earnings of our foreign subsidiaries because we consider such earnings to be indefinitely reinvested. In the event of distribution of those earnings in the form of dividends or otherwise, we would be subject to both U.S. income taxes, subject to an adjustment, if any, for foreign tax credits, and foreign withholding taxes payable to certain foreign tax authorities. Determination of the amount of U.S. income tax liability that would be incurred is not practicable because of the complexities associated with this hypothetical calculation, however, unrecognized foreign tax credit carryforwards may be available to reduce some portion of the U.S. tax liability, if any.

In accordance with SFAS No. 109 and SFAS No. 5, Accounting for Contingencies, we established reserves for tax contingencies that reflect our best estimate of the transactions and deductions that we may be unable to sustain or that we could be willing to concede as part of a broader tax settlement. We are currently undergoing routine tax examinations by various state and foreign jurisdictions. Tax authorities periodically challenge certain transactions and deductions we reported on our income tax returns. We do not expect the outcome of these examinations, either individually or in the aggregate, to have a material adverse effect on our financial position, results of operations, or cash flows.

The following table presents the components of our provision for income taxes:

	2006			2005		2004
	(in thousands)
Current :
State	$	423		$	256	$	404
Foreign		5,315			575		(365	)
		5,738			831		39
Deferred :
Federal		3,152			2,650		2,341
State		289			247		209
Foreign		(3,452	)		3,091		(314	)
		(11	)		5,988		2,236
Total tax provision	$	5,727		$	6,819	$	2,275

F-49

INVERNESS MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The following table presents reconciliation from the U.S. statutory tax rate to our effective tax rate:

	2006			2005			2004
Statutory rate		35	%		35	%		35	%
Effect of losses and expenses not benefited		(28	)		1			1
Rate differential on foreign earnings		(2	)		55			12
Research and development benefit		14			(12	)		8
State income taxes, net of federal benefit		(4	)		(2	)		(3	)
Deferred tax on indefinite-lived assets		(31	)		(24	)		(21	)
Accrual to return reconciliation		(9	)		—			—
Change in valuation allowance		(27	)		(108	)		(48	)
Effective tax rate		(52	)%		(55	)%		(16	)%

(18)  Financial Information by Segment

Under SFAS No. 131, Disclosures about Segments of an Enterprise and Related Information, operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker, or decision making group, in deciding how to allocate resources and in assessing performance. Our chief operating decision making group is composed of the chief executive officer and members of senior management. Our reportable operating segments are Consumer Diagnostic Products, Vitamins and Nutritional Supplements, Professional Diagnostic Products, and Corporate and Other. Our allocation of certain expenditures benefiting multiple segments has been refined during 2005 and applied on a consistent basis for all period presented below. Included in the operating results of Corporate and Other are non-allocable corporate expenditures and expenses related to our research and development activities in the area of cardiology, the latter of which amounted to $30.2 million, $16.8 million and $19.4 million in 2006, 2005 and 2004, respectively. With respect to cardiology expenditures in 2006 and 2005, the amount included in Corporate and Other is net of $16.6 million and $17.2 million, respectively, of reimbursements received from ITI Scotland as part of the co-development arrangement that we entered into in February 2005. Total assets in the area of cardiology, which are included in Corporate and Other in the tables below, amounted to $51.6 million at December 31, 2006 and $41.2 million at December 31, 2005.

The accounting policies of the segments are the same as those described in the summary of significant accounting policies. We evaluate performance of our operating segments based on revenue and operating income (loss). Revenues are attributed to geographic areas based on where the customer is located. Segment information for 2006, 2005, and 2004 are as follows:

	Consumer		Vitamins and			Professional		Corporate
	Diagnostic		Nutritional			Diagnostic		and
2006	Products		Supplements			Products		Other			Total
	(in thousands)
Net revenue to external customers	$	176,771	$	82,051		$	310,632	$	—		$	569,454
Operating income (loss)	$	26,975	$	(3,013	)	$	42,554	$	(60,145	)	$	6,371
Depreciation and amortization	$	5,062	$	3,270		$	27,030	$	4,000		$	39,362
Restructuring charge	$	2,921	$	—		$	7,625	$	2,587		$	13,133
Stock-based compensation	$	—	$	—		$	—	$	5,455		$	5,455
Assets	$	314,815	$	49,896		$	625,560	$	95,500		$	1,085,771
Expenditures for property, plant and equipment	$	1,807	$	475		$	9,905	$	7,530		$	19,717

F-50

INVERNESS MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(18)  Financial Information by Segment (Continued)

	Consumer		Vitamins and			Professional		Corporate
	Diagnostic		Nutritional			Diagnostic		and
2005	Products		Supplements			Products		Other		Total
	(in thousands)
Net revenue to external customers	$	166,928	$	75,411		$	179,511	$	—	$	421,850
Operating income (loss)	$	25,117	$	(7,010	)	$	2,179	$	(31,059)	$	(10,773	)
Depreciation and amortization	$	8,464	$	3,460		$	13,915	$	1,917	$	27,756
Restructuring charge	$	4,797	$	—		$	303	$	—	$	5,100
Stock-based compensation	$	—	$	—		$	—	$	169	$	169
Assets	$	253,063	$	52,967		$	434,796	$	50,340	$	791,166
Expenditures for property, plant and equipment	$	8,020	$	3,439		$	6,578	$	2,196	$	20,233

	Consumer		Vitamins and			Professional		Corporate
	Diagnostic		Nutritional			Diagnostic		and
2004	Products		Supplements			Products		Other		Total
	(in thousands)
Net revenue to external customers	$	164,211	$	77,923		$	131,857	$	—	$	373,991
Operating income (loss)	$	29,160	$	(1,003	)	$	5,840	$	(29,611)	$	4,386
Depreciation and amortization	$	9,642	$	3,686		$	9,430	$	742	$	23,500
Restructuring charge	$	1,725	$	—		$	—	$	—	$	1,725
Assets	$	243,001	$	48,072		$	264,260	$	12,936	$	568,269
Expenditures for property, plant and equipment	$	6,779	$	2,530		$	6,499	$	4,581	$	20,389

	2006		2005		2004
	(in thousands)
Revenue by Geographic Area:
United States	$	335,405	$	244,719	$	222,640
Europe		136,971		111,838		100,693
Other		97,078		65,293		50,658
	$	569,454	$	421,850	$	373,991

	December 31,
	2006		2005
	(in thousands)
Long-lived Tangible Assets by Geographic Area:
United States	$	27,039	$	33,810
United Kingdom		31,470		31,316
China		15,815		1,593
Other		7,988		5,492
	$	82,312	$	72,211

F-51

INVERNESS MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(19)  Related Party Transactions

In June 2006, we issued 25,000 shares of our common stock as consideration for the acquisition of all of the capital stock of Innovative Medical Devices BVBA. The seller of the capital stock of Innovative Medical Devices BVBA is the spouse of the Vice President of our Consumer Diagnostics business unit.

In August 2006, our Chairman, Chief Executive Officer and President, paid us $11,197,096 in full satisfaction of his obligations to us, including principal and accrued interest, under a previously disclosed, five-year promissory note dated August 16, 2001. The promissory note was provided to us in connection with his purchase of 1,168,191 shares of our common stock in August, 2001 (Note 14).

In December 2006, one of our key executive officers, paid us $1,606,831 in full satisfaction of his obligations to us, including principal and accrued interest, under a previously disclosed, five-year promissory note dated August 16, 2001. The promissory note was provided to us in connection with his purchase of 250,000 shares of our common stock in August, 2001 (Note 14).

In December 2006, one of our key executive officers, paid us $2,571,320 in full satisfaction of his obligations to us, including principal and accrued interest, under a previously disclosed, five-year promissory note dated August 16, 2001. The promissory note was provided to us in connection with his purchase of 399,381 shares of our common stock in August, 2001 (Note 14).

(20)  Valuation and Qualifying Accounts

We have established reserves against accounts receivable for doubtful accounts, product returns, discounts and other allowances. The activity in the table below includes all accounts receivable reserves. Provisions for doubtful accounts are recorded as a component of general and administrative expenses. Provisions for returns, discounts and other allowances are charged against net product sales. The following table sets forth activities in our accounts receivable reserve accounts:

					Amounts
	Balance at				Charged			Balance at
	Beginning of				Against			End of
	Period		Provision		Reserves			Period
	(in thousands)
Year ended December 31, 2004	$	7,492	$	27,908	$	(26,041	)	$	9,359
Year ended December 31, 2005	$	9,359	$	25,015	$	(24,626	)	$	9,748
Year ended December 31, 2006	$	9,748	$	22,914	$	(24,261	)	$	8,401

We have established reserves against obsolete and slow-moving inventories. The activity in the table below includes all inventory reserves. Provisions for obsolete and slow-moving inventories are recorded as a component of costs of sales. The following table sets forth activities in our inventory reserve accounts:

					Amounts
	Balance at				Charged			Balance at
	Beginning of				Against			End of
	Period		Provision		Reserves			Period
	(in thousands)
Year ended December 31, 2004	$	2,089	$	6,761	$	(4,724	)	$	4,126
Year ended December 31, 2005	$	4,126	$	10,057	$	(6,441	)	$	7,742
Year ended December 31, 2006	$	7,742	$	6,661	$	(6,184	)	$	8,219

F-52

INVERNESS MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(21)  Restructuring Activities

The following table sets forth the aggregate restructuring charges for 2006, 2005, and 2004:

	2006		2005		2004
	(in thousands)
Severance	$	2,886	$	2,229	$	1,725
Fixed asset and inventory write-off		6,989		2,259		—
Intangible asset write-off		2,722		—		—
Facility and other exit costs		536		612		—
	$	13,133	$	5,100	$	1,725

(a)  Recent Restructuring Plans

On May 22, 2006, we committed to a plan to cease operations at our manufacturing facility in San Diego, California and to write off certain excess manufacturing equipment at other impacted facilities. Additionally, on June 7, 2006, we committed to a plan to reorganize the sales and marketing and customer service functions in certain of our U.S. professional diagnostic companies. As a result of these restructuring plans, we recorded $12.1 million in restructuring charges during the year ended December 31, 2006. The $12.1 million charge included $2.5 million related to severance charges, $6.9 million related to impairment charges on fixed assets and inventory and $2.7 million related to an impairment charge on an intangible asset. This restructuring charge consisted of $8.8 million charged to cost of sales, $2.9 million charged to research and development, $0.2 million charged to sales and marketing expenses and $0.2 million charged to general and administrative expenses, of which $1.9 million, $7.6 million and $2.6 million were included in our consumer diagnostic products, professional diagnostic products and corporate and other business segments, respectively.

We expect to complete these plans during the first half of 2007. Including the charges recorded through December 31, 2006, we expect the total restructuring charge related to these plans to be approximately $12.6 million, with additional charges of $0.1 million relating to severance and $0.4 million relating to facility exit and closure costs. The total number of employees to be involuntarily terminated under these plans is 132, of which 86 have been terminated as of December 31, 2006. Of the $2.5 million related to severance charges, $1.6 million remains unpaid as of December 31, 2006.

(b)  2005 Restructuring Plan

On May 9, 2005, we committed to a plan to cease operations at our facility in Galway, Ireland. During the year ended December 31, 2006, we recorded a net restructuring gain of $3.2 million, of which $0.4 million related to charges for severance, early retirement and outplacement services, $0.1 million related to an impairment charge of fixed assets, $0.6 million related to facility closing costs and $4.3 million related to foreign exchange gains as a result of recording a cumulative translation adjustment to other income relating primarily to this plan of termination. The charges for the year ended December 31, 2006 consisted of $0.7 million charged to cost of goods sold, $0.4 million charged to general and administrative and $4.3 million in gains recorded to other expense. Of the net restructuring gain of $3.2 million included in our net loss for the year ended December 31, 2006, the $1.1 million loss and the $4.3 million gain were included in our consumer diagnostic products and corporate and other business segments, respectively. Additionally, during the year ended December 31, 2006, we recorded a $1.4 million gain on the sale of our CDIL facility in Ireland which has been recorded in loss on dispositions, net in our consolidated statements of operations and is included in our corporate and other business segment for these periods (Note 22).

Net restructuring charges since the commitment date consist of $2.6 million related to severance, early retirement and outplacement services, $2.4 million related to impairment of fixed assets and inventory and

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(21)  Restructuring Activities (Continued)

$1.2 million related to facility closing costs, offset by $4.3 million related to net foreign exchange gains relating primarily to this plan of termination and a $1.4 million gain on the sale of the manufacturing facility. Of the total $6.2 million restructuring charges recorded in operating income, $5.9 million and $0.3 million were included in our consumer diagnostic products and professional diagnostic products business segments, respectively. The $4.3 million and $1.4 million gains are included in our corporate and other business segment. The plan of termination is substantially complete as of December 31, 2006 and all 113 employees under this plan have been involuntarily terminated. All costs related to severance, early retirement, outplacement services and facility closing costs have been paid as of December 31, 2006.

(c)  2004 Restructuring Plan

In the third quarter of 2004, we completed a plan of restructuring at our operations at Unipath, our manufacturing facility in Bedford, England, to reduce operating expenses and organizational complexities and increase overall accountability at Unipath. As a result, we recorded a $1.7 million restructuring charge in the third quarter of 2004, which is included in cost of sales in the accompanying statements of operations, to cover costs for severance, early retirement and outplacement services. The total number of involuntarily terminated employees was 18, all of whom were terminated in 2004. All restructuring costs have been paid.

(d)  Restructuring Reserves

The following table summarizes our liabilities related to restructuring activities:

	Balance at		Additions							Balance at
	Beginning		to the		Amounts					End of
	of Period		reserve		Paid			Other (i)		Period
	(in thousands)
Year ended December 31, 2004	$	—	$	1,725	$	(1,725	)	$	—	$	—
Year ended December 31, 2005	$	—	$	2,841	$	(1,892	)	$	—	$	949
Year ended December 31, 2006	$	949	$	3,422	$	(2,820	)	$	14	$	1,565

(i) Represents foreign currency translation adjustment.

(22)  Loss on Dispositions, net

During 2006, we recorded a net loss on dispositions of $3.5 million. Included in this net loss is a $4.9 million charge associated with management’s decision to dispose of our Scandinavian Micro Biodevices ApS (“SMB”) research operation, which is part of our professional diagnostic products and corporate and other business segments, of which $2.0 million is related to impaired assets, primarily goodwill associated with SMB, and a $2.9 million estimated loss on the sale of SMB. The sale of this operation was completed in the fourth quarter of 2006. The net loss on dispositions also includes an offsetting $1.4 million gain on the sale of an idle manufacturing facility in Galway, Ireland, as a result of our 2005 restructuring plan. This facility was associated with our consumer diagnostic products business segment.

(23)  Guarantor Financial Information

We issued $150.0 million in Bonds to qualified institutional buyers in reliance on Rule 144A under the Securities Act of 1933, as amended (the “Securities Act”), and outside the United States in compliance with Regulation S of the Securities Act (Note 6(b)). Our payment obligations under the Bonds are guaranteed by all of our domestic subsidiaries (the “Guarantor Subsidiaries”) as of December 31, 2006. The guarantee is full and unconditional. Separate financial statements of the Guarantor Subsidiaries are not presented because we

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(23) Guarantor Financial Information (Continued)

have determined that they would not be material to investors in the Bonds. The following supplemental financial information sets forth, on a consolidating basis, the statements of operations and cash flows for each of the three years in the period ended December 31, 2006 and the balance sheets as of December 31, 2006 and 2005 for our company (the “Issuer”), the Guarantor Subsidiaries and our other subsidiaries (the “Non-Guarantor Subsidiaries”). The supplemental financial information reflects our investments and the Guarantor Subsidiaries’ investments in the Guarantor and Non-Guarantor Subsidiaries using the equity method of accounting.

We have extensive transactions and relationships between various members of the consolidated group. These transactions and relationships include inter-company pricing agreements, intellectual property royalty agreements and general and administrative and research and development cost sharing agreements. Because of these relationships, it is possible that the terms of these transactions are not the same as those that would result from transactions among wholly unrelated parties.

On October 20, 2004, our subsidiary IMN became a Guarantor Subsidiary under the Bonds. Prior to this change, IMN was a Non-Guarantor Subsidiary. As a result, we have included the financial results of IMN in the results of the Guarantor Subsidiaries in the following supplemental financial information for all periods presented.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(23) Guarantor Financial Information (Continued)

INVERNESS MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES
CONSOLIDATING STATEMENT OF OPERATIONS
For the Year Ended December 31, 2006
(in thousands)

				Guarantor			Non-Guarantor
	Issuer			Subsidiaries			Subsidiaries			Eliminations			Consolidated
Net product sales	$	23,100		$	334,471		$	272,028		$	(77,469	)	$	552,130
License and royalty revenue		—			306			17,018			—			17,324
Net revenue		23,100			334,777			289,046			(77,469	)		569,454
Cost of sales		22,395			232,429			165,515			(80,108	)		340,231
Gross profit		705			102,348			123,531			2,639			229,223
Operating expenses:
Research and development		1,750			7,705			44,211			—			53,666
Sales and marketing		4,096			48,684			41,665			—			94,445
General and administrative		21,345			18,999			30,899			—			71,243
Loss on dispositions, net		—			—			3,498			—			3,498
Operating (loss) income		(26,486	)		26,960			3,258			2,639			6,371
Equity in earnings of subsidiaries, net of tax		14,716			—			—			(14,716	)		—
Interest expense, including amortization of original issue discounts and write-off of deferred financing cost		(16,895	)		(6,206	)		(20,461	)		16,992			(26,570	)
Other income (expense), net		13,213			4,686			8,298			(17,113	)		9,084
(Loss) income before provision for income taxes		(15,452	)		25,440			(8,905	)		(12,198	)		(11,115	)
Provision for income taxes		1,390			2,012			1,935			390			5,727
Net (loss) income	$	(16,842	)	$	23,428		$	(10,840	)	$	(12,588	)	$	(16,842	)

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(23) Guarantor Financial Information (Continued)

INVERNESS MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES
CONSOLIDATING STATEMENT OF OPERATIONS
For the Year Ended December 31, 2005
(in thousands)

				Guarantor			Non-Guarantor
	Issuer			Subsidiaries			Subsidiaries			Eliminations			Consolidated
Net product sales	$	23,811		$	235,141		$	207,431		$	(59,926	)	$	406,457
License and royalty revenue		—			259			15,134			—			15,393
Net revenue		23,811			235,400			222,565			(59,926	)		421,850
Cost of sales		24,846			187,744			116,847			(59,899	)		269,538
Gross (loss) profit		(1,035	)		47,656			105,718			(27	)		152,312
Operating expenses:
Research and development		374			6,796			23,822			—			30,992
Sales and marketing		2,849			35,761			33,493			—			72,103
General and administrative		12,579			16,927			30,484			—			59,990
Operating (loss) income		(16,837	)		(11,828	)		17,919			(27	)		(10,773	)
Equity in earnings of subsidiaries, net of tax		13,537			—			—			(13,537	)		—
Interest expense, including amortization of original issue discounts and write-off of deferred financing cost		(16,502	)		(2,941	)		(7,839	)		5,487			(21,795	)
Other income (expense), net		1,461			6,762			17,442			(5,487	)		20,178
(Loss) income before provision for income taxes		(18,341	)		(8,007	)		27,522			(13,564	)		(12,390	)
Provision for income taxes		868			2,283			3,494			174			6,819
Net (loss) income	$	(19,209	)	$	(10,290	)	$	24,028		$	(13,738	)	$	(19,209	)

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(23) Guarantor Financial Information (Continued)

INVERNESS MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES

CONSOLIDATING STATEMENT OF OPERATIONS

For the Year Ended December 31, 2004

(in thousands)

				Guarantor			Non-Guarantor
	Issuer			Subsidiaries			Subsidiaries			Eliminations			Consolidated
Net product sales	$	20,842		$	214,132		$	180,685		$	(50,227	)	$	365,432
License and royalty revenue		—			114			8,445			—			8,559
Net revenue		20,842			214,246			189,130			(50,227	)		373,991
Cost of sales		20,182			164,383			92,713			(50,291	)		226,987
Gross profit		660			49,863			96,417			64			147,004
Operating expenses:
Research and development		246			3,088			28,620			—			31,954
Sales and marketing		1,899			25,377			30,681			—			57,957
General and administrative		10,982			14,716			27,009			—			52,707
Operating (loss) income		(12,467	)		6,682			10,107			64			4,386
Equity in earnings of subsidiaries, net of tax		7,394			—			—			(7,394	)		—
Interest expense, including amortization of original issue discounts and write-off of deferred financing cost		(15,345	)		(5,699	)		(5,893	)		4,823			(22,114	)
Other income (expense), net		4,870			1,857			1,503			(4,823	)		3,407
(Loss) income before provision (benefit) for income taxes		(15,548	)		2,840			5,717			(7,330	)		(14,321	)
Provision (benefit) for income taxes		1,048			1,276			(458	)		409			2,275
Net (loss) income	$	(16,596	)	$	1,564		$	6,175		$	(7,739	)	$	(16,596	)

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(23) Guarantor Financial Information (Continued)

INVERNESS MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES
CONSOLIDATING BALANCE SHEET
December 31, 2006
(in thousands)

			Guarantor			Non-Guarantor
	Issuer		Subsidiaries			Subsidiaries		Eliminations			Consolidated
ASSETS
Current Assets:
Cash and cash equivalents	$	16,350	$	19,755		$	34,999	$	—		$	71,104
Accounts receivable, net of allowances		2,538		53,544			44,306		—			100,388
Inventories, net		5,984		38,804			37,116		(3,582	)		78,322
Deferred tax assets		—		—			5,332		—			5,332
Prepaid expenses and other current assets		2,238		2,444			15,716		—			20,398
Intercompany receivables		57,748		67,589			8,542		(133,879	)		—
Total current assets		84,858		182,136			146,011		(137,461	)		275,544
Property, plant and equipment, net		2,098		24,710			55,504		—			82,312
Goodwill		71,136		109,116			259,117		—			439,369
Other intangible assets with indefinite lives		—		21,120			46,987		—			68,107
Core technology and patents, net		18,496		13,304			55,932		—			87,732
Other intangible assets, net		14,321		31,098			38,375		—			83,794
Deferred financing costs, net, and other non-current assets		6,314		2,277			4,627		—			13,218
Other investments and available-for-sale securities		387,818		(778	)		10,835		(362,258	)		35,617
Deferred tax assets		—		—			78		—			78
Intercompany notes receivable		355,074		56,267			—		(411,341	)		—
Total assets	$	940,115	$	439,250		$	617,466	$	(911,060	)	$	1,085,771
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Current portion of long-term debt	$	—	$	450		$	7,054	$	—		$	7,504
Current portion of capital lease obligations		—		551			33		—			584
Accounts payable		5,302		19,998			21,042		—			46,342
Accrued expenses and other current liabilities		24,920		19,721			42,642		518			87,801
Intercompany payables		40,803		35,967			60,179		(136,949	)		—
Total current liabilities		71,025		76,687			130,950		(136,431	)		142,231
Long-term liabilities:
Long-term debt, net of current portion		150,000		44,325			148		—			194,473
Capital lease obligations, net of current portion		—		360			55		—			415
Deferred tax liabilities		4,903		8,149			10,932		—			23,984
Other long-term liabilities		49		305			10,176		—			10,530
Intercompany notes payable		—		85,983			322,275		(408,258	)		—
Total long-term liabilities		154,952		139,122			343,586		(408,258	)		229,402
Stockholders’ equity		714,138		223,441			142,930		(366,371	)		714,138
Total liabilities and stockholders’ equity	$	940,115	$	439,250		$	617,466	$	(911,060	)	$	1,085,771

F-59

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(23) Guarantor Financial Information (Continued)

INVERNESS MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES
CONSOLIDATING BALANCE SHEET
December 31, 2005
(in thousands)

			Guarantor			Non-Guarantor
	Issuer		Subsidiaries			Subsidiaries		Eliminations			Consolidated
ASSETS
Current Assets:
Cash and cash equivalents	$	1,196	$	8,080		$	24,994	$	—		$	34,270
Accounts receivable, net of allowances		2,344		34,834			33,298		—			70,476
Inventories, net		7,518		42,794			26,997		(6,100	)		71,209
Deferred tax assets		—		—			844		—			844
Prepaid expenses and other current assets		2,228		2,720			12,586		—			17,534
Intercompany receivables		38,919		34,346			19,974		(93,239	)		—
Total current assets		52,205		122,774			118,693		(99,339	)		194,333
Property, plant and equipment, net		2,632		31,164			38,415		—			72,211
Goodwill		72,787		109,637			139,786		—			322,210
Other intangible assets with indefinite lives		8,700		12,420			42,622		—			63,742
Core technology and patents, net		28,269		5,556			30,225		—			64,050
Other intangible assets, net		20,321		18,429			21,739		—			60,489
Deferred financing costs, net, and other non-current assets		6,696		2,051			4,266		—			13,013
Other investments		297,607		(866	)		160		(296,445	)		456
Deferred tax assets		—		—			662		—			662
Intercompany notes receivable		130,001		43,066			—		(173,067	)		—
Total assets	$	619,218	$	344,231		$	396,568	$	(568,851	)	$	791,166
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Current portion of long-term debt	$	—	$	—		$	2,367	$	—		$	2,367
Current portion of capital lease obligations		—		508			34		—			542
Accounts payable		1,549		25,438			15,168		—			42,155
Accrued expenses and other current liabilities		12,935		22,939			28,872		—			64,746
Intercompany payables		34,070		31,357			27,812		(93,239	)		—
Total current liabilities		48,554		80,242			74,253		(93,239	)		109,810
Long-term liabilities:
Long-term debt, net of current portion		169,456		60,000			29,161		—			258,617
Capital lease obligations, net of current portion		—		914			64		—			978
Deferred tax liabilities		3,900		5,964			8,889		128			18,881
Other long-term liabilities		—		278			5,294		—			5,572
Intercompany notes payable		—		42,331			130,736		(173,067	)		—
Total long-term liabilities		173,356		109,487			174,144		(172,939	)		284,048
Stockholders’ equity		397,308		154,502			148,171		(302,673	)		397,308
Total liabilities and stockholders’ equity	$	619,218	$	344,231		$	396,568	$	(568,851	)	$	791,166

F-60

INVERNESS MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(23) Guarantor Financial Information (Continued)

INVERNESS MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES
CONSOLIDATING STATEMENT OF CASH FLOWS
For the Year Ended December 31, 2006
(in thousands)

				Guarantor			Non-Guarantor
	Issuer			Subsidiaries			Subsidiaries			Eliminations			Consolidated
Cash Flows from Operating Activities:
Net (loss) income	$	(16,842	)	$	23,428		$	(10,840	)	$	(12,588	)	$	(16,842	)
Adjustments to reconcile net (loss) income to net cash (used in) provided by operating activities:
Equity in earnings of subsidiaries, net of tax		(14,716	)		—			—			14,716			—
Interest expense related to amortization and write-off of non-cash original issue discount, non-cash beneficial conversion feature and deferred financing costs		1,937			1,213			1,008			—			4,158
Non-cash loss related to currency hedge and interest swap agreement		(217	)		—			—			—			(217	)
Non-cash stock-based compensation expense		5,455			—			—			—			5,455
Charge for in-process research and development		—			—			4,960			—			4,960
Non-cash value of settlement of litigation		—			—			—			—			—
Impairment of long-lived assets		—			5,646			3,927			—			9,573
(Gain) loss on sale of fixed assets		—			9			(1,537	)		—			(1,528	)
Interest in minority investments		(635	)		—			—			—			(635	)
Depreciation and amortization		4,989			13,378			20,995			—			39,362
Deferred income taxes		84			2,186			(2,551	)		(128	)		(409	)
Other non-cash items		159			—			555			—			714
Changes in assets and liabilities, net of acquisitions:
Accounts receivable, net		(194	)		(8,931	)		(4,721	)		—			(13,846	)
Inventories, net		1,534			5,533			(4,382	)		(2,518	)		167
Prepaid expenses and other current assets		(10	)		740			(816	)		—			(86	)
Intercompany payable (receivable)		(12,998	)		(15,288	)		28,409			(123	)		—
Accounts payable		3,757			(5,652	)		2,105			—			210
Accrued expenses and other current liabilities		2,510			(4,962	)		5,228			518			3,294
Other non-current liabilities		—			28			(88	)		—			(60	)
Net cash (used in) provided by operating activities		(25,187	)		17,328			42,252			(123	)		34,270

F-61

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(23) Guarantor Financial Information (Continued)

INVERNESS MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES
CONSOLIDATING STATEMENT OF CASH FLOWS (Continued)
For the Year Ended December 31, 2006
(in thousands)

				Guarantor			Non-Guarantor
	Issuer			Subsidiaries			Subsidiaries			Eliminations		Consolidated
Cash Flows from Investing Activities:
Purchases of property, plant and equipment		(558	)		(3,332	)		(15,827	)		—		(19,717	)
Proceeds from sale of property, plant and equipment		—			15			2,229			—		2,244
Cash paid for purchase of Ischemia, net of cash acquired		(99	)		—			—			—		(99	)
Cash paid for purchase of IDT Spain, net of cash acquired		(237	)		—			—			—		(237	)
Cash paid for purchase of Clondiag, net of cash acquired		(5,338	)		—			(12,238	)		—		(17,576	)
Cash paid for purchase of Innovacon business including ABON, net of cash acquired		(64,128	)		—			(48,515	)		—		(112,643	)
Cash paid for purchase of other businesses and intellectual property		(801	)		(109	)		—			—		(910	)
Cash paid for investments in minority interests and available-for-sale securities		(14,455	)		—			(11,362	)		—		(25,817	)
Increase in other assets		(933	)		(133	)		(3,011	)		—		(4,077	)
Net cash used in investing activities		(86,549	)		(3,559	)		(88,724	)		—		(178,832	)
Cash Flows from Financing Activities:
Cash paid for financing costs		(79	)		(1,358	)		(1,350	)		—		(2,787	)
Proceeds from issuance of common stock, net of issuance costs		234,961			—			—			—		234,961
Stock-based compensation tax benefit		567			—			—			—		567
Net (payments) proceeds under revolving line of credit		—			(15,225	)		(32,654	)		—		(47,879	)
Repayments of notes payable		(20,000	)		—			—			—		(20,000	)
Repayments of notes receivable		14,691			—			—			—		14,691
Principal payments of capital lease obligations		—			(511	)		(35	)		—		(546	)
Intercompany notes payable (receivable)		(103,247	)		15,000			88,247			—		—
Net cash provided by (used in) financing activities		126,893			(2,094	)		54,208			—		179,007
Foreign exchange effect on cash and cash equivalents		(3	)		—			2,269			123		2,389
Net increase in cash and cash equivalents		15,154			11,675			10,005			—		36,834
Cash and cash equivalents, beginning of year		1,196			8,080			24,994			—		34,270
Cash and cash equivalents, end of year	$	16,350		$	19,755		$	34,999		$	—	$	71,104

F-62

INVERNESS MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(23) Guarantor Financial Information (Continued)

INVERNESS MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES

CONSOLIDATING STATEMENT OF CASH FLOWS

For the Year Ended December 31, 2005

(in thousands)

				Guarantor			Non-Guarantor
	Issuer			Subsidiaries			Subsidiaries			Eliminations			Consolidated
Cash Flows from Operating Activities:
Net (loss) income	$	(19,436	)	$	(10,290	)	$	24,028		$	(13,511	)	$	(19,209	)
Adjustments to reconcile net (loss) income to net cash (used in) provided by operating activities:
Equity in earnings of subsidiaries, net of tax		(13,310	)		—			—			13,310			—
Interest expense related to amortization of original issue discount, non-cash beneficial conversion feature and write-off of deferred financing costs		1,181			665			499			—			2,345
Non-cash loss related to currency hedge and interest swap agreement		217			—			—			—			217
Non-cash stock-based compensation expense		169			—			—			—			169
Non-cash value of settlement of litigation		—			—			(2,593	)		—			(2,593	)
Impairment of long-lived assets		—			—			1,740			—			1,740
(Gain) loss on sale of fixed assets		—			(13	)		276			—			263
Depreciation and amortization		3,877			10,178			13,701			—			27,756
Deferred income taxes		665			2,231			2,899			174			5,969
Other non-cash items		141			—			—			—			141
Changes in assets and liabilities, net of acquisitions:
Accounts receivable, net		316			12,039			(1,951	)		—			10,404
Inventories, net		(1,558	)		3,530			(6,046	)		27			(4,047	)
Prepaid expenses and other current assets		(950	)		815			(7,463	)		—			(7,598	)
Intercompany payable (receivable)		3,390			(9,143	)		5,055			698			—
Accounts payable		(3,066	)		4,914			4,353			—			6,201
Accrued expenses and other current liabilities		(915	)		(2,092	)		7,503			—			4,496
Other non-current liabilities		—			(3	)		342			—			339
Net cash (used in) provided by operating activities		(29,279	)		12,831			42,343			698			26,593

F-63

INVERNESS MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(23) Guarantor Financial Information (Continued)

INVERNESS MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES
CONSOLIDATING STATEMENT OF CASH FLOWS (Continued)
For the Year Ended December 31, 2005
(in thousands)

				Guarantor			Non-Guarantor
	Issuer			Subsidiaries			Subsidiaries			Eliminations			Consolidated
Cash Flows from Investing Activities:
Purchases of property, plant and equipment		(613	)		(6,851	)		(12,769	)		—			(20,233	)
Proceeds from sale of property, plant and equipment		—			81			160			—			241
Cash paid for purchase of Ischemia, net of cash acquired		(4,211	)		115			—			—			(4,096	)
Cash paid for purchase of Binax, net of cash acquired		(9,528	)		1,556			—			—			(7,972	)
Cash paid for purchase of the Determine business		(1,602	)		—			(56,500	)		—			(58,102	)
Cash paid for purchase of BioStar		(53,607	)		—			—			—			(53,607	)
Cash paid for purchase of IDT Spain, net of cash acquired		—			—			(20,030	)		—			(20,030	)
Cash paid for purchase of other businesses and intellectual property		(63	)		(141	)		(4,971	)		—			(5,175	)
Increase in other assets		(128	)		(282	)		(1,377	)		—			(1,787	)
Net cash used in investing activities		(69,752	)		(5,522	)		(95,487	)		—			(170,761	)
Cash Flows from Financing Activities:
Cash paid for financing costs		(148	)		(1,388	)		(1,337	)		—			(2,873	)
Proceeds from issuance of common stock, net of issuance costs		97,440			—			—			—			97,440
Net (payments) proceeds under revolving line of credit		(77	)		40,000			29,519			—			69,442
Proceeds from issuance of notes payable		—			—			269			—			269
Principal payments of capital lease obligations		—			(488	)		(13	)		—			(501	)
Intercompany notes payable (receivable)		3,000			(41,000	)		38,000			—			—
Net cash provided by (used in) financing activities		100,215			(2,876	)		66,438			—			163,777
Foreign exchange effect on cash and cash equivalents		—			96			(1,493	)		(698	)		(2,095	)
Net increase in cash and cash equivalents		1,184			4,529			11,801			—			17,514
Cash and cash equivalents, beginning of year		12			3,551			13,193			—			16,756
Cash and cash equivalents, end of year	$	1,196		$	8,080		$	24,994		$	—		$	34,270

F-64

INVERNESS MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(23) Guarantor Financial Information (Continued)

INVERNESS MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES
CONSOLIDATING STATEMENT OF CASH FLOWS
For the Year Ended December 31, 2004
(in thousands)

				Guarantor			Non-Guarantor
	Issuer			Subsidiaries			Subsidiaries			Eliminations			Consolidated
Cash Flows from Operating Activities:
Net (loss) income	$	(16,596	)	$	1,564		$	6,175		$	(7,739	)	$	(16,596	)
Adjustments to reconcile net (loss) income to net cash (used in) provided by operating activities:
Equity in earnings of subsidiaries, net of tax		(7,394	)		—			—			7,394			—
Interest expense related to amortization of non-cash original issue discount, non-cash beneficial conversion feature and deferred financing costs		1,181			3,282			466			—			4,929
Non-cash gain related to currency hedge and interest rate swap agreement		(695	)		—			—			—			(695	)
Non-cash value on settlement of litigation		—			—			(495	)		—			(495	)
Depreciation and amortization		1,051			8,884			13,565			—			23,500
Deferred income taxes		1,056			1,497			(733	)		412			2,232
Other non-cash items		—			40			(76	)		—			(36	)
Changes in assets and liabilities, net of acquisitions:
Accounts receivable, net		1,255			(1,049	)		(4,301	)		—			(4,095	)
Inventories, net		(1,497	)		(7,686	)		(1,826	)		(64	)		(11,073	)
Prepaid expenses and other current assets		86			(54	)		2,084			—			2,116
Intercompany payable (receivable)		10,082			(12,268	)		2,778			(592	)		—
Accounts payable		(2,773	)		(283	)		(3,841	)		—			(6,897	)
Accrued expenses and other current liabilities		6,925			2,903			5,221			—			15,049
Other non-current liabilities		—			29			327			—			356
Net cash (used in) provided by operating activities		(7,319	)		(3,141	)		19,344			(589	)		8,295

F-65

INVERNESS MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(23) Guarantor Financial Information (Continued)

INVERNESS MEDICAL INNOVATIONS, INC. AND SUBSIDIARIES
CONSOLIDATING STATEMENT OF CASH FLOWS (Continued)
For the Year Ended December 31, 2004
(in thousands)

				Guarantor			Non-Guarantor
	Issuer			Subsidiaries			Subsidiaries			Eliminations		Consolidated
Cash Flows from Investing Activities:
Purchases of property, plant and equipment		(1,635	)		(7,836	)		(10,918	)		—		(20,389	)
Proceeds from sale of property, plant and equipment		—			244			141			—		385
Cash paid for purchase of other businesses and intellectual property		(4,791	)		(1,624	)		(5,994	)		—		(12,409	)
(Increase) decrease in other assets		(1,069	)		79			(899	)		—		(1,889	)
Net cash used in investing activities		(7,495	)		(9,137	)		(17,670	)		—		(34,302	)
Cash Flows from Financing Activities:
Cash paid for financing costs		(5,055	)		(430	)		(186	)		—		(5,671	)
Proceeds from issuance of common stock, net of issuance costs		1,905			—			—			—		1,905
Net (repayments) proceeds under revolving line of credit		77			(7,682	)		(23,225	)		—		(30,830	)
Proceeds from issuance of senior subordinated notes		150,000			—			—			—		150,000
Repayments of notes payable		(9,000	)		(78,817	)		(10,013	)		—		(97,830	)
Principal payments of capital lease obligations		—			(473	)		(4	)		—		(477	)
Intercompany notes (receivable) payable		(124,809	)		91,949			32,860			—		—
Net cash provided by (used in) financing activities		13,118			4,547			(568	)		—		17,097
Foreign exchange effect on cash and cash equivalents		—			(33	)		488			589		1,044
Net (decrease) increase in cash and cash equivalents		(1,696	)		(7,764	)		1,594			—		(7,866	)
Cash and cash equivalents, beginning of year		1,708			11,315			11,599			—		24,622
Cash and cash equivalents, end of year	$	12		$	3,551		$	13,193		$	—	$	16,756

F-66

EX-2.10

                                                                    Exhibit 2.10

================================================================================

                            ASSET PURCHASE AGREEMENT

                          dated as of December 22, 2006

                                      among

                       INVERNESS MEDICAL SWITZERLAND GMBH,

                  PROCTER & GAMBLE INTERNATIONAL OPERATIONS, SA

                                       and

                                    IMJV GMBH

================================================================================



                                TABLE OF CONTENTS



                                                                            PAGE
                                                                            ----
                                                                         
ARTICLE 1 PURCHASE AND SALE .............................................     2
   Section 1.1  Purchase and Sale .......................................     2
   Section 1.2  Purchased Assets ........................................     2
   Section 1.3  Excluded Assets .........................................     4
   Section 1.4  Assumption of Liabilities ...............................     6
   Section 1.5  Liabilities Not Assumed by PGIO .........................     7
   Section 1.6  Purchase Price; Allocation of Purchase Price ............     9
   Section 1.7  Post-Closing Working Capital Adjustment .................     9

ARTICLE 2 CLOSING .......................................................    10
   Section 2.1  Closing .................................................    10
   Section 2.2  Closing Deliveries ......................................    10

ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF IMS .........................    11
   Section 3.1  Organization and Existence ..............................    11
   Section 3.2  Power and Authority; Binding Agreement ..................    11
   Section 3.3  Noncontravention ........................................    12
   Section 3.4  Compliance with Laws ....................................    13
   Section 3.5  Governmental Licenses ...................................    13
   Section 3.6  Financial Statements ....................................    13
   Section 3.7  Absence of Changes or Events ............................    15
   Section 3.8  Undisclosed Liabilities .................................    15
   Section 3.9  Assets other than Real Property .........................    15
   Section 3.10 [Reserved] ..............................................    15
   Section 3.11 Contracts ...............................................    15
   Section 3.12 Intellectual Property ...................................    17
   Section 3.13 Legal Proceedings .......................................    20
   Section 3.14 Tax Matters .............................................    21
   Section 3.15 Insurance ...............................................    21
   Section 3.16 Benefit Plans ...........................................    21
   Section 3.17 Employee and Labor Matters ..............................    22
   Section 3.18 Environmental Matters ...................................    23
   Section 3.19 Transactions with Affiliates ............................    24
   Section 3.20 Certain Business Practices ..............................    24
   Section 3.21 Regulatory Compliance ...................................    24
   Section 3.22 Product Liability Claims; Product Recalls ...............    26
   Section 3.23 Product Registrations ...................................    26
   Section 3.24 Brokers' Fees ...........................................    27

ARTICLE 4 COVENANTS .....................................................    27
   Section 4.1  Filings .................................................    27
   Section 4.2  Access and Investigation ................................    27
   Section 4.3  Conduct of Business .....................................    28
   Section 4.4  Commercially Reasonable Efforts .........................    30



                                       -i-



                                                                         
   Section 4.5  Public Announcements ....................................    30
   Section 4.6  Enforcement .............................................    31
   Section 4.7  Inventory ...............................................    31
   Section 4.8  Transfer ................................................    31
   Section 4.9  Further Assurances ......................................    31
   Section 4.10 Accounts Receivable .....................................    32
   Section 4.11 Expenses ................................................    32
   Section 4.12 Confidentiality .........................................    32
   Section 4.13 [Reserved] ..............................................    32
   Section 4.14 Preparation for Transition ..............................    32
   Section 4.15 Other Subsidiaries ......................................    32
   Section 4.16 Compliance with Contractual Obligations .................    32
   Section 4.17 Issuance of Shares ......................................    33
   Section 4.17 Unipath Purchase ........................................    33

ARTICLE 5 TAX MATTERS ...................................................    33
   Section 5.1  Cooperation .............................................    33
   Section 5.2  Apportioned Obligations .................................    33
   Section 5.3  Transfer Taxes ..........................................    33
   Section 5.4  Tax Payments ............................................    34

ARTICLE 6 CONDITIONS TO CLOSING .........................................    34
   Section 6.1  Conditions to Each Party's Obligation ...................    34
   Section 6.2  Conditions to PGIO's Obligations ........................    35
   Section 6.3  Conditions to IMS's Obligation ..........................    36

ARTICLE 7 INDEMNIFICATION ...............................................    37
   Section 7.1  Indemnification of PGIO .................................    37
   Section 7.2  Indemnification of IMS ..................................    38
   Section 7.3  Indemnification Claims ..................................    38
   Section 7.4  Survival ................................................    40
   Section 7.5  Sole and Exclusive Remedy ...............................    40

ARTICLE 8 TERMINATION ...................................................    40
   Section 8.1  Termination .............................................    40
   Section 8.2  Effect of Termination ...................................    41
   Section 8.3  Amendment ...............................................    41
   Section 8.4  Extension; Waiver .......................................    41

ARTICLE 9 GENERAL PROVISIONS ............................................    42
   Section 9.1  Notices .................................................    42
   Section 9.2  Definitions .............................................    43
   Section 9.3  Descriptive Headings; Certain Interpretations ...........    48
   Section 9.4  Assignment ..............................................    48
   Section 9.5  Specific Enforcement ....................................    48
   Section 9.6  Entire Agreement ........................................    48
   Section 9.7  No Third-Party Beneficiaries ............................    48




                                      -ii-



                                                                         
   Section 9.8  Counterparts ............................................    49
   Section 9.9  Governing Law ...........................................    49
   Section 9.10 Arbitration .............................................    49
   Section 9.11 Severability ............................................    50
   Section 9.12 Nonassignable Contracts .................................    50



EXHIBITS:

Exhibit A   Form of PGIO Contribution Agreement


                                      -iii-



                             INDEX OF DEFINED TERMS

                                                                           
- --A--
Accounts Receivable .......................................................    2
Affiliate .................................................................   43
Agreement .................................................................    1
Apportioned Obligations ...................................................   33
Arbitration Request .......................................................   49
Assumed Accounts Payable ..................................................    6
Assumed Liabilities .......................................................    6

- --B--
Benefit Plans .............................................................   21
Bond Indenture ............................................................   35
Business Contract .........................................................   43
Business Day ..............................................................   43
Business Intellectual Property ............................................   17
Business Purchased Intellectual Property ..................................    4
Business Registered Intellectual Property .................................   43

- --C--
CD Business ...............................................................    1
CD Financial Statements ...................................................   14
Claim Notice ..............................................................   38
Closing ...................................................................   10
Closing Date ..............................................................   10
Closing Date Balance Sheet ................................................    9
COBRA .....................................................................   22
Code ......................................................................   43
Company ...................................................................    1
Constitutive Documents ....................................................   43
Contingent Obligation .....................................................   43
Contract ..................................................................   44
Contributed Asset .........................................................   44
Contributed CD Business ...................................................    1
Contribution Agreement ....................................................    1
Control ...................................................................   44
Controlled ................................................................   44

- --D--
Determination Date ........................................................   10
Distribution Arrangements .................................................    2

- --E--
Environmental Law .........................................................   44
Environmental Liability ...................................................   44
Environmental Permits .....................................................   44
ERISA .....................................................................   21
Exchange Act ..............................................................   12
Excluded Assets ...........................................................    4
Excluded Businesses .......................................................    5
Excluded Contracts ........................................................    5
Excluded Liabilities ......................................................    7

- --F--
FDA .......................................................................   13
FDCA ......................................................................   25
Finished Product Purchase Agreement .......................................    2

- --G--
GAAP ......................................................................   14
General Limitations .......................................................   12
Governmental Entity .......................................................   44
Governmental Licenses .....................................................    3
Guarantee .................................................................    1

- --H--
Hazardous Materials .......................................................   44
House Marks ...............................................................    5
HSR Act ...................................................................   12

- --I--
IMA .......................................................................    1
IMA Audited Financial Statements ..........................................   14
IMA Balance Sheet Date ....................................................   14
IMA Facilities ............................................................   45
IMA Financial Statements ..................................................   14
IMA Indemnified Party .....................................................   38
IMA Indemnity Threshold ...................................................   38
IMA Interim Balance Sheet .................................................   14
IMA Unaudited Financial Statements ........................................   14
IMS .......................................................................    1
Indebtedness ..............................................................   45
Indemnified Party .........................................................   45
Indemnifying Party ........................................................   45
Intellectual Property .....................................................   45
IP Liens ..................................................................   17
IRS .......................................................................   22

- --J--
Judgment ..................................................................   12

- --K--
Knowledge .................................................................   46

- --L--
Labeling ..................................................................   25
Law .......................................................................   12
Legal Proceeding ..........................................................    7
Legal Restraints ..........................................................   34
Lien ......................................................................   12




                                      -iv-



                                                                           
Losses ....................................................................   46

- --M--
Material Adverse Effect ...................................................   46
Most Recent Balance Sheet .................................................   14
Most Recent Balance Sheet Date ............................................   14

- --N--
Nonassignable Contract ....................................................   50

- --O--
Ordinary Course of Business ...............................................   14
Outside Date ..............................................................   40

- --P--
Permitted IP Liens ........................................................   46
Permitted Liens ...........................................................   46
Person ....................................................................   47
PGIO ......................................................................    1
PGIO Contribution Agreement ...............................................    1
PGIO Indemnified Party ....................................................   37
Post-Closing Tax Period ...................................................   33
Product ...................................................................   47
Product Registrations .....................................................   26
Purchased Assets ..........................................................    2
Purchased CD Business .....................................................    1
Purchased Inventory .......................................................    2

- --R--
Representatives ...........................................................   47
Restructuring .............................................................    1
Returned Inventory ........................................................   31

- --S--
Sale ......................................................................    2
Scheduled Contracts .......................................................   15
Share .....................................................................   47
Shareholder Agreement .....................................................    1
Subsidiary ................................................................   47

- --T--
Tax .......................................................................   47
Tax Return ................................................................   47
Third Party Claim .........................................................   47
Transaction Agreements ....................................................   47
Transfer Taxes ............................................................   33
Transferred Employees .....................................................   48

- --W--
Working Capital ...........................................................    9
Working Capital Target ....................................................    9




                                       -v-


          ASSET PURCHASE AGREEMENT, dated as of December 22, 2006 (this
          "Agreement"), among Inverness Medical Switzerland GmbH, a Swiss
          company ("IMS"), Procter & Gamble International Operations, SA, a
          Swiss company ("PGIO") and IMJV GmbH, a Swiss company (the "Company")

                                  INTRODUCTION

          IMS formed the Company on December 19, 2006. On the Closing Date,
PGIO, IMS and the Company will enter into a shareholder agreement in a form to
be mutually agreed upon (the "Shareholder Agreement"), which shall establish the
respective rights and obligations of PGIO and IMS with respect to the Company.

          IMS, Inverness Medical Innovations, Inc. ("IMA") and certain of their
Affiliates are in the business of developing, manufacturing, marketing, selling
and distributing human diagnostics and monitoring products for sale and
distribution through over-the-counter channels, including retail outlets and
emerging channels located in such retail outlets (the "CD Business").

          Prior to the Closing Date, IMA and certain of its Subsidiaries
(including IMS) will restructure (the "Restructuring") their businesses.

          IMS and its Affiliates contemplate selling certain assets and
contributing certain assets and liabilities of the CD Business, other than
assets used in, and liabilities arising from, the Excluded Fields (as defined in
the License Agreement).

          On the Closing Date and subject to the terms set forth in this
Agreement (including with respect to the Excluded Assets and Excluded
Liabilities), IMS will sell and PGIO will purchase certain assets of the CD
Business, and PGIO will assume certain liabilities of the CD Business, in each
case, as set forth in this Agreement (the "Purchased CD Business").
Simultaneously with the Closing hereunder, PGIO will contribute the Purchased CD
Business to the Company pursuant to the PGIO Contribution Agreement
substantially in the form attached hereto as Exhibit A (the "PGIO Contribution
Agreement").

          On the Closing Date, IMA will execute a guarantee (the "Guarantee"),
pursuant to which IMA guarantees all of IMS' obligations under this Agreement
and the Contribution Agreement.

          Concurrently with the execution of this Agreement, IMS is entering
into a Contribution Agreement (the "Contribution Agreement") with PGIO and the
Company pursuant to which IMS will contribute to the Company certain assets of
the CD Business on terms and conditions set forth in the Contribution Agreement
(the "Contributed CD Business"). Such contribution will be consummated
concurrently with the Closing hereunder.

          As a consideration for the contribution of the Contributed CD Business
by IMS to the Company, IMS will receive one quota (one Share representing, as of
the Closing, 50% of the Company's outstanding Shares). As a consideration for
the contribution by PGIO of the Purchased CD Business to the Company, PGIO will
receive one quota (one Share representing, as of the Closing, 50% of the
Company's outstanding Shares).



          On the Closing Date, the Company and IMA and certain of its
Subsidiaries will enter into a mutually agreeable finished product purchase
agreement (the "Finished Product Purchase Agreement"), pursuant to which IMA
and/or such Subsidiaries will manufacture and sell to the Company the products
described therein.

          On the Closing Date, the Company and certain Affiliates of PGIO will
enter into distribution and commissionaire arrangements pursuant to which such
Affiliates of PGIO will distribute and act as sales agents for products of the
Company (collectively, the "Distribution Arrangements").

          Capitalized terms shall have the meanings assigned to them in Section
9.2 or as otherwise provided in this Agreement.

          In consideration of the foregoing and the respective representations,
warranties, covenants and agreements set forth herein, the parties hereto agree
as follows:

                                    ARTICLE 1
                                PURCHASE AND SALE

          Section 1.1 Purchase and Sale. Subject to the terms and conditions of
this Agreement, PGIO agrees to purchase the Purchased Assets from IMS, and IMS
agrees to sell the Purchased Assets to PGIO, at the Closing.

          Section 1.2 Purchased Assets. Except for the Excluded Assets as
provided in Section 1.3 and without duplication of the Contributed CD Business,
at the Closing and with effect as of the Closing Date, IMS shall assign,
transfer, convey and deliver to PGIO, free and clear of all Liens except
Permitted Liens (the "Sale"), and PGIO shall acquire from IMS, all of the right,
title and interest of IMS in and to any and all of the assets, properties,
rights and business of the Purchased CD Business of every kind, nature, type and
description, real, personal and mixed, tangible and intangible, whether known or
unknown, fixed or unfixed, or otherwise, whether or not specifically referred to
in this Agreement and whether or not reflected on the books and records of IMS
(collectively, the "Purchased Assets"), including the following:

          (i) all accounts receivable, and notes receivable (if any), of any
     nature arising from the Purchased CD Business existing on the Closing Date
     (the "Accounts Receivable");

          (ii) all supplies and finished goods, including goods in transit, as
     sold, used or held for use as part of the Purchased CD Business (the
     "Purchased Inventory");

          (iii) all tangible assets, furniture, fixtures and property, if any,
     used by the Transferred Employees upon the hiring of such Transferred
     Employees;

          (iv) the Business Contracts (other than Excluded Contracts);

          (v) all licenses, registrations, notifications, franchises,
     qualifications, provider numbers, permits, approvals, clearances and
     authorizations issued by any Governmental Entity that relate to the
     Purchased CD Business or the Purchased Assets (the


                                       -2-



     "Governmental Licenses"), in each case to the extent transferable or
     assignable and subject to IMA retaining such of the foregoing as are
     necessary for IMA and/or certain of its Subsidiaries to fulfill their
     respective obligations under the Finished Product Purchase Agreement;
     provided that such licenses, registrations, notifications, franchises,
     qualifications, provider numbers, permits, approvals, clearances and
     authorizations as then in existence shall be transferred to PGIO (which
     shall simultaneously contribute them to the Company) following termination
     or expiration of the Finished Product Purchase Agreement, in each case to
     the extent transferable or assignable;

          (vi) all lists, documents, records, written information, computer
     files and other computer readable media concerning present customers, and
     to the extent reasonably available, past and potential customers, of goods
     or services arising from or used in the Purchased CD Business;

          (vii) all lists, documents, records, written information, computer
     files and other computer readable media concerning present suppliers and
     vendors of goods or services, and to the extent reasonably available, past
     and potential suppliers and vendors, arising from or used in the Purchased
     CD Business, excluding any such lists, records, written information,
     computer files and other media concerning suppliers and vendors whose goods
     and services will be used by IMA and its Subsidiaries in the performance of
     their obligations under the Finished Product Purchase Agreement; provided
     that such lists, records, written information, computer files and other
     media as then in existence shall be conveyed and delivered to PGIO (which
     shall simultaneously contribute them to the Company) following termination
     or expiration of the Finished Product Purchase Agreement;

          (viii) all product records, product data, correspondence with and to
     customers of the CD Business, production records, contract files,
     technical, accounting, and procedural manuals, studies, reports or
     summaries relating to the general condition of the Purchased Assets, and
     any confidential information which has been reduced to writing or
     electronic form, to the extent that any of the foregoing relate to or arose
     from the Purchased CD Business;

          (ix) all rights under express or implied warranties from the suppliers
     and vendors relating to or arising out of the operation of the Purchased CD
     Business, except for such rights arising out of or relating to the
     manufacturing of any product of the CD Business;

          (x) to the extent related to an Assumed Liability, all claims,
     warranties, guarantees, refunds, causes of action, rights of recovery,
     rights of set-off and rights of recoupment of any kind and nature;

          (xi) all currently outstanding unfilled purchase orders and proposals
     received for the purchase of inventory of the Purchased CD Business;

          (xii) all (A) Intellectual Property owned by IMS or any of its
     Affiliates that are exclusively used in the CD Business, including those
     Trademarks of which IMS is the


                                       -3-



     registered owner as set forth on Section 3.12(a) of the Disclosure
     Schedule, and (B) Trademarks (other than House Marks) owned by IMS or IMA
     or any of their respective Subsidiaries that are not presently exclusively
     used by the CD Business or any other business of IMS or such Affiliate but
     that were exclusively used by the CD Business in the past, in each case
     including the Business Registered Intellectual Property (the "Business
     Purchased Intellectual Property");

          (xiii) to the extent assignable, all rights under any non-disclosure
     agreements, non-solicitation agreements and non-competition agreements
     entered into with any parties, to the extent that any of the foregoing
     relates to or arose from the Purchased CD Business;

          (xiv) all prepaid expenses and other deposits related to the Purchased
     CD Business;

          (xv) all rights and claims, including refunds, to the extent that such
     rights and claims relate to or arose from the Purchased CD Business;

          (xvi) all insurance policies (to the extent separable and assignable)
     with respect to the CD Business, and rights, benefits, claims and proceeds
     thereunder arising from or relating to the Assumed Liabilities;

          (xvii) all other tangible assets or movable property used in
     connection with the Purchased CD Business, if any; and

          (xviii) all goodwill relating to the foregoing.

          Section 1.3 Excluded Assets. Notwithstanding the provisions of Section
1.2, the parties hereto acknowledge and agree that the following are not
included among either the Purchased Assets or the Contributed Assets (as defined
in the Contribution Agreement) and are excluded from the Sale (collectively, the
"Excluded Assets"):

          (i) the assets, properties, Contracts and rights of IMS and its
     Affiliates in the Excluded Fields (which shall include, for the avoidance
     of doubt, the tangible assets and real property located at Stirling,
     Scotland) and the Intellectual Property of IMS and its Affiliates in the
     Excluded Fields;

          (ii) (A) Intellectual Property owned by third parties and licensed to
     IMS or one of its Affiliates for use in the CD Business and which are
     listed in Section 1.3(ii) of the Disclosure Schedule, (B) Intellectual
     Property, other than Trademarks, not used exclusively in the CD Business,
     and (C) Trademarks that have never been at any time exclusively used in the
     CD Business (other than Trademarks that have been held for use in the CD
     Business but have never been used by any business);

          (iii) the assets, properties, Contracts and rights of IMS and its
     Affiliates (including vendor and supplier contracts, information, files and
     data) used in the manufacturing of the products of the CD Business,
     including all tangible assets, properties, and contracts of IMS' or its
     Affiliates' manufacturing facilities located in


                                       -4-



     Bedford, England, Hangzhou, People's Republic of China ("PRC") and
     Shanghai, PRC, excluding any product specifications, product registrations
     or similar assets, used in the conduct of the CD Business;

          (iv) the assets, properties, Contracts and rights arising from or used
     in IMA and their Subsidiaries' professional diagnostics and nutritional
     supplement businesses (collectively, the "Excluded Businesses");

          (v) the Contracts arising from the CD Business set forth on Section
     1.3(v) of the Disclosure Schedule (the "Excluded Contracts");

          (vi) the Trademarks or trade names "Inverness", and any variants
     thereof that include "Inverness", internet domain names that include
     "Inverness", and the Inverness "little man" logo (collectively, the "House
     Marks");

          (vii) real property, buildings, structures and improvements thereon,
     whether owned or leased by IMS or its Affiliates, and all fixtures and
     fittings attached thereto, including all manufacturing, distribution and
     administration facilities of IMS and its Affiliates;

          (viii) rights to refunds of Taxes paid by or on behalf of IMS or any
     of its Affiliates (other than those paid by the Company), except for the
     rights to refunds of Taxes that constitute Assumed Liabilities or refunds
     accrued on the Closing Date Balance Sheet;

          (ix) except as provided in Section 1.2(xvi), insurance policies and
     rights and benefits and claims thereunder;

          (x) tangible assets, properties, Contracts and Intellectual Property
     of IMA or its Subsidiaries (including animals and cell lines) used in the
     manufacturing, production and storage of reagents and other biological
     materials used in the CD Business;

          (xi) all inventory (including raw materials and work-in-process of IMA
     and IMS), wherever located, other than the Purchased Inventory;

          (xii) the services of any employees of IMA or its Subsidiaries (except
     for Transferred Employees upon hiring of such Transferred Employee by the
     Company or a Subsidiary of the Company) or assets of any employee benefit
     plan, arrangement, or program maintained or contributed to by IMA or any of
     its Subsidiaries with respect to any employees other than Transferred
     Employees (upon the hiring of such Transferred Employee by the Company or a
     Subsidiary of the Company); and

          (xiii) any other assets, tangible or intangible, wherever situated,
     not included in the Purchased Assets, including those used in the Excluded
     Businesses;

provided that IMS and its Affiliates, upon reasonable request and to the extent
IMS and its Affiliates has the right to so provide, will provide the Company
reasonable access during normal business hours to the Excluded Assets that,
prior to the Closing Date, were used in the CD


                                       -5-



Business and are not being transferred pursuant to this Agreement or the
Contribution Agreement, for the Company's use to facilitate its manufacturing
and research and development activities; provided, further, that with respect to
access to the Bedford, England, Hangzhou, PRC or Shanghai, PRC manufacturing
facilities, the terms of the Finished Products Purchase Agreement shall control
and this provision shall not expand the rights set forth therein.

          Section 1.4 Assumption of Liabilities. At the Closing, PGIO shall
assume, and shall agree to pay, perform and discharge according to their
respective terms (if any), the following (and only the following) liabilities
and obligations of IMS and its Affiliates arising primarily from or related
primarily to the Purchased CD Business, and no other liabilities or obligations
of IMS or its Affiliates (liabilities to be assumed by PGIO pursuant to this
Section 1.4 being collectively referred to as the "Assumed Liabilities"):

          (i) all obligations of IMS or its Affiliates under the Business
     Contracts (other than Excluded Contracts) that are part of the Purchased CD
     Business that, by the terms of such Business Contracts, arise after the
     Closing Date, relate to periods following the Closing Date and are to be
     observed, paid, discharged, or performed, as the case may be, in each case
     at any time after the Closing Date;

          (ii) all unpaid liabilities and obligations, including trade accounts
     payable, of the Purchased CD Business (but excluding all payables to IMS or
     any of its Affiliates), incurred in the Ordinary Course of Business and
     other similar current liabilities of the Purchased CD Business as may be
     included in the calculation of Working Capital under Section 1.7 hereof
     (collectively, the "Assumed Accounts Payable");

          (iii) any product warranty, product liability or product returns,
     rebates, coupons, allowances or other discounting and promotional
     commitments arising from any product line produced or sold by the Purchased
     CD Business that has not been discontinued prior to the date hereof;

          (iv) any product warranty, product liability or product returns,
     rebates, coupons, allowances or other discounting and promotional
     commitments arising from any product line that has been discontinued prior
     to the date hereof by the Purchased CD Business, only to the extent of any
     contingency reserve related thereto on the Closing Date Balance Sheet;

          (v) any liability, obligation or expense of any kind or nature
     relating to Taxes (other than corporate Taxes based upon the income of such
     entity), including sales and value added taxes, owed by IMS or any of its
     Affiliates (including any contractual liability with respect to Taxes of
     another Person) arising from the conduct of the Purchased CD Business, to
     the extent as included in the calculation of Working Capital under Section
     1.7; provided that Transfer Taxes and Apportioned Obligations shall be paid
     in the manner set forth in Sections 5.2 and 5.3 hereof;

          (vi) except as set forth in Section 1.4(vi) of the Disclosure Schedule
     and with respect to any matter involving Taxes, any liability, obligation,
     cost or expense of IMS or any of its Affiliates arising out of or relating
     to any investigation, claim, action, suit,


                                       -6-



     complaint, dispute, audit, demand, litigation or judicial, administrative
     or arbitration proceeding (collectively, "Legal Proceeding") as and to the
     extent it arose or arises from the Purchased CD Business to which IMS or
     any of its Subsidiaries is or was a party whether it relates to any time
     prior to, at or after the Closing (regardless of whether the Legal
     Proceeding is commenced before or after the Closing), and any contingency
     reserve related thereto;

          (vii) upon hiring of a Transferred Employee by the Company or a
     Subsidiary of the Company, any liability or obligation with respect to such
     Transferred Employee including all liabilities for accrued vacation pay,
     excluding any pension or similar liabilities;

          (viii) any liability, obligation or expense arising from the Business
     Purchased Intellectual Property after the Closing Date; and

          (ix) any liability or obligation arising from the conduct of the
     Purchased CD Business after the Closing Date.

          Section 1.5 Liabilities Not Assumed by PGIO. Notwithstanding anything
to the contrary in this Agreement, PGIO shall not assume, or in any way be
liable or responsible for any, and IMS and its Affiliates shall pay, perform and
discharge all, obligations and liabilities of them, direct or indirect, known or
unknown, fixed or unfixed, choate or inchoate, liquidated or unliquidated,
secured or unsecured, accrued, absolute, contingent or otherwise, except for the
Assumed Liabilities (collectively, the "Excluded Liabilities") and IMS shall
hold PGIO harmless with respect to the Excluded Liabilities. For the avoidance
of doubt, the term Assumed Liabilities does not include any of the Excluded
Liabilities and the term Excluded Liabilities includes all liabilities and
obligations of IMS or any of its Affiliates (including without limitation
liabilities and obligations imposed by operation of law) other than the Assumed
Liabilities. Without limiting the generality of the foregoing, Excluded
Liabilities shall include the following obligations and liabilities:

          (i) any liability or obligation of IMS or any of its Affiliates
     arising from or relating to the Excluded Businesses, or the business, if
     any, of such entities in the Excluded Fields;

          (ii) any liability or obligation of IMS or any of its Affiliates
     arising out of or in connection with the negotiation and preparation of
     this Agreement or any of the other Transaction Agreements or the
     consummation and performance of the transactions contemplated hereby and
     thereby, including any liability for Taxes so arising;

          (iii) any liability or obligation (other than Assumed Liabilities)
     arising under, relating to or resulting from any asset of IMS or its
     Affiliates other than the Contributed Assets and the Purchased Assets;

          (iv) any liability or obligation of IMS of any of its Affiliates
     arising (i) from their failure to perform, or negligent performance of,
     their obligations under, or (ii) out of or relating to any breach or claim
     of breach of a representation, warranty, covenant or agreement of IMS or
     any of its Affiliates contained in, any of the Business Contracts;


                                       -7-



          (v) except as provided in Section 1.4(v), any liability, obligation or
     expense of any kind or nature relating to Taxes owed by IMS or any of its
     Affiliates (including any contractual liability with respect to Taxes of
     another Person); provided that Transfer Taxes and Apportioned Obligations
     shall be paid in the manner set forth in Sections 5.2 and 5.3 hereof;

          (vi) any liability or obligation to any of the directors, officers or
     Affiliates of IMS;

          (vii) except for Legal Proceedings assumed pursuant to Section
     1.4(vi), any liability, obligation, cost or expense of IMS or any of its
     Affiliates arising out of or relating to any Legal Proceeding to which IMS
     or any of its Affiliates is or was a party and that relates to any time at
     or prior to the Closing (regardless of whether the Legal Proceeding is
     commenced before or after the Closing), and any contingency reserve related
     thereto;

          (viii) any liability or obligation of IMS or its Affiliates with
     respect to any Indebtedness or Contingent Obligations (including any
     accrued interest, fees and any penalties thereon);

          (ix) any liability or obligation of IMS or its Affiliates to or with
     respect to employees, former employees, consultants and former consultants
     and Benefit Plans and other employee and employment-related liabilities,
     including any liability for severance, incentive, bonus or other
     compensation, health, welfare and other benefit plans of IMS or IMA or
     their Subsidiaries whether arising prior to or after the Closing;

          (x) any accounts payable other than the Assumed Accounts Payable;

          (xi) any product warranty, product liability or product returns,
     rebates, coupons, allowances or other discounting and promotional
     commitments with respect to any product line of the CD Business that was
     discontinued prior to the Closing Date, as and to the extent in excess of
     any contingency reserve therefor on the Closing Date Balance Sheet;

          (xii) any liability or obligation of IMS or its Affiliates arising out
     of or relating to the failure of IMS or its Affiliates to obtain any
     Governmental Licenses material to or necessary for the conduct of the CD
     Business;

          (xiii) any liability or obligation of IMS or its Affiliates arising
     out of or relating to IMA Facilities under applicable Environmental Laws;

          (xiv) any liability or obligation of IMS or its Affiliates to fund or
     finance any pension or similar liabilities; and

          (xv) all liabilities and obligations of IMS or its Affiliates under
     this Agreement and the other Transaction Agreements.


                                       -8-



          Section 1.6 Purchase Price; Allocation of Purchase Price. (a) In
consideration of the Sale of the Purchased Assets, together with any Working
Capital adjustment payment pursuant to Section 1.7, on the Closing Date, IMS
shall receive $325,000,000 in cash (reduced by the amount to be paid in the
transaction described in Section 6.1(vii) and by the purchase price paid or
contributed by PGIO pursuant to Section 4.18).

          (b) As soon as practicable after the Closing, PGIO shall deliver to
IMS a allocation statement, allocating such purchase price (plus Assumed
Liabilities to the extent properly taken into account under Section 1060 of the
Code) among the Purchased Assets in accordance with Section 1060 of the Code. If
within 10 days after the delivery of such allocation statement, IMS notifies
PGIO in writing that IMS objects to the allocation set forth in such allocation
statement, PGIO and IMS shall use commercially reasonably efforts to resolve
such dispute within 20 days. In the event that PGIO and IMS are unable to
resolve such dispute within 20 days, PGIO and IMS shall jointly retain a
nationally recognized accounting firm to resolve the disputed items. Upon
resolution of the disputed items, the allocation reflected on such allocation
statement shall be adjusted to reflect such resolution.

          Section 1.7 Post-Closing Working Capital Adjustment.

          (a) To the extent the Working Capital of the Company as of the
Closing, upon completion of the transactions contemplated by this Agreement and
the Contribution Agreement and including all assets and liabilities of the
Contributed CD Business and the Purchased CD Business is more than $22,300,000
(the "Working Capital Target"), PGIO shall make an additional cash payment to
IMS of 50% of the amount of such excess within five Business Days after the
Determination Date. "Working Capital" means those receivables and other current
assets (other than cash), including Purchased Inventory, that are Purchased
Assets and Contributed Assets less the accounts payable, accrued expenses and
other current liabilities that are Assumed Liabilities under this Agreement and
the Contribution Agreement.

          (b) As promptly as practicable, but in no event later than 60 days
after the Closing Date, the Company shall cause to be prepared and furnished to
PGIO and IMS a balance sheet, certified by the Company's Chief Financial
Officer, for the Company as of the Closing Date (the "Closing Date Balance
Sheet"), including a computation of Working Capital as of such date and a
calculation of the additional cash contribution, if any, or cash payment, if
any, as the case may be, required pursuant to this Section 1.7 or under the
equivalent provision in the Contribution Agreement. The Closing Date Balance
Sheet shall be prepared in accordance with GAAP applied on a basis consistent
with the preparation of the Most Recent Balance Sheet.

          (c) Each of IMS and its independent accountants and PGIO and its
independent accountants shall have the right for a period of 60 days after the
receipt of the Closing Date Balance Sheet to review the Closing Date Balance
Sheet and the working papers relating thereto and to present in writing to the
Company any objections in reasonable detail. The Company shall provide
reasonable access to the records, files and other information reasonably
requested by IMS and/or its independent accountants or by PGIO and/or its
independent accountants, including those used to prepare the Closing Date
Balance Sheet, as well as access to such personnel of the Company (and PGIO to
the extent such personnel were involved in the process described above) as IMS
and/or its independent accountants or PGIO


                                       -9-



and/or its independent accountants may reasonably request. The Closing Date
Balance Sheet shall be deemed to be acceptable to IMS and PGIO, and shall become
final and binding on all parties, except to the extent that within such 60 day
period IMS or PGIO shall have made a written objection thereto, which objection
shall specify in reasonable detail the grounds for such objection. PGIO and IMS
shall attempt in good faith to resolve any dispute concerning the item or items
subject to an objection raised in accordance with this Section 1.7(c). If PGIO
and IMS are unable to resolve any such dispute within 30 days (or such longer
period as they shall mutually agree in writing), such dispute shall be resolved
by an independent accounting firm of national recognition mutually selected by
PGIO and IMS acting as arbitrator. Such determination shall be final and binding
on the parties, and judgment may be entered thereon in any court having
jurisdiction over the party against which such determination is to be enforced.
The date on which the Closing Date Balance Sheet, together with the Working
Capital computation therein, is deemed final and binding is referred to as the
"Determination Date". Only items specified in the written objection shall be
subject to adjustment by the independent accounting firm. The fees and expenses
of the independent accounting firm shall be borne by PGIO and IMS in proportions
inverse to the extent to which they prevail in the dispute, with such
allocations to be finally determined by the accounting firm.

                                    ARTICLE 2
                                     CLOSING

          Section 2.1 Closing. The closing of the transactions contemplated by
this Agreement (the "Closing") shall be held at the offices of Covington &
Burling LLP, 1330 Avenue of the Americas, New York, New York, at 10:00 a.m. on
the date as soon as practicable, and in any event not later than two Business
Days, following satisfaction of all conditions and taking of all other actions
(other than those that by their terms are to be satisfied or taken at the
Closing) set forth in Article 6 (or, to the extent permitted by Law, waived by
the parties hereto entitled to the benefits thereof), or on such other date, and
at such other time or place, as PGIO and IMA may mutually agree in writing. The
date on which the Closing occurs is referred to in this Agreement as the
"Closing Date".

          Section 2.2 Closing Deliveries. (a) At the Closing, PGIO shall deliver
or cause to be delivered to IMS:

          (i) cash in an amount equal to $325,000,000 (reduced by the amount to
     be paid in the transaction described in Section 6.1(vii)); and

          (ii) an assignment and assumption agreement reasonably satisfactory to
     PGIO and IMS under which PGIO assumes the Assumed Liabilities, executed by
     PGIO.

          (b) At the Closing, IMS shall deliver or cause to be delivered to
PGIO:

          (i) the assignment and assumption agreement delivered pursuant to
     Section 2.2(a)(ii), executed by IMS;

          (ii) an instrument of sale or contribution in a form reasonably
     satisfactory to PGIO transferring to PGIO all of IMS and its Affiliates'
     right, title and interest in and to the Purchased Assets; and


                                      -10-



          (iii) such other bills of sale, endorsements, assignments and other
     instruments of transfer, conveyance and assignment (in a form reasonably
     satisfactory to PGIO) as shall be required by law or necessary in the
     reasonable judgment of PGIO to transfer, convey and assign the Purchased
     Assets to PGIO.

          (c) At the Closing, PGIO shall deliver or cause to be delivered to the
Company:

          (i) the PGIO Contribution Agreement, executed by PGIO; and

          (ii) an assignment and assumption agreement and such other bills of
     sale, endorsements, assignments and other instruments of transfer,
     conveyance and assignment, in each case in substantially the same form as
     those delivered pursuant to Section 2.2(b) but substituting (x) the Company
     for PGIO and (y) PGIO for IMS and with such other conforming changes as
     PGIO and IMS shall mutually agree, executed by PGIO.

          (d) At the Closing, the Company shall deliver or cause to be delivered
to PGIO:

          (i) the PGIO Contribution Agreement, executed by the Company; and

          (ii) the assignment and assumption agreement delivered pursuant to
     Section 2.2(c)(ii), executed by the Company.

                                    ARTICLE 3
                      REPRESENTATIONS AND WARRANTIES OF IMS

          IMS represents and warrants to the Company and PGIO as follows, as of
the date of this Agreement and as of the Closing:

          Section 3.1 Organization and Existence. Each of IMS and the Company is
duly organized and validly existing under the Laws of Switzerland, has all
requisite power and authority to carry on the CD Business as now being conducted
and is duly qualified or licensed to do business and in good standing in each
jurisdiction in which the nature of the CD Business or the ownership, leasing or
operation of its properties makes such qualification or licensing necessary,
except for those jurisdictions where the failure to be so qualified or licensed
would not have a Material Adverse Effect. Other than wholly-owned Subsidiaries,
IMA has no Subsidiaries or Affiliates that conduct the CD Business or own
Contributed Assets other than Inverness Medical (Shanghai), Co., Ltd.

          Section 3.2 Power and Authority; Binding Agreement. Each of IMS and
the Company has all requisite power and authority to execute and deliver this
Agreement, to consummate the transactions contemplated hereby and to perform its
respective obligations hereunder, and has, or on the Closing Date will have, the
requisite power and authority to enter into the Transaction Agreements and to
perform its respective obligations thereunder. This Agreement is a valid and
binding obligation of each of IMS and the Company, enforceable against each of
them in accordance with its terms, except as the same may be limited by


                                      -11-



bankruptcy, insolvency, reorganization, moratorium or other laws affecting the
rights of creditors generally and subject to the rules of law governing (and all
limitations on) specific performance, injunctive relief and other equitable
remedies (the "General Limitations"). When executed, each other Transaction
Agreement will be the valid and binding obligation of each of IMS and the
Company enforceable against each of them in accordance with its terms, except as
the same may be limited by the General Limitations. Except as set forth in
Section 3.2 of the Disclosure Schedule, no other act, approval or proceedings on
the part of IMS or the Company is, or will be, required to authorize the
execution and delivery of this Agreement and the other Transaction Agreements or
the consummation of the transactions contemplated hereby and thereby.

          Section 3.3 Noncontravention. (a) Except as set forth in Section
3.3(a) of the Disclosure Schedule, the execution and delivery by IMS or the
Company of this Agreement and the other Transaction Agreements to which either
of them is a party, and the consummation of the transactions contemplated hereby
and thereby and the compliance by either of them with the provisions hereof and
thereof do not and will not result in the creation of any lien, pledge, claim,
charge, mortgage, encumbrance or other security interest of any kind, whether
arising by Contract or by operation of Law (a "Lien"), in or upon any of the
properties or assets of IMS or its Affiliates that are material to the conduct
of the CD Business. Except as set forth in Section 3.3(a) of the Disclosure
Schedule, the execution and delivery by IMS or the Company of this Agreement and
the other Transaction Agreements to which either of them is a party, and the
consummation of the transactions contemplated hereby and thereby and the
compliance by either of them with the provisions hereof and thereof do not and
will not (i) conflict with or result in any violation or default (with or
without notice or lapse of time or both) under, (ii) give rise to a right of, or
result in, termination or cancellation of, or acceleration of any obligation
under, (iii) result in a loss of a material benefit under, or (iv) give rise to
any increased, additional, accelerated or guaranteed rights or entitlements
under, any provision of (A) the Constitutive Documents of IMS or the Company,
(B) any material Business Contract to which IMS or any of its Affiliate or the
Company is a party or is bound by, or any Purchased Assets are bound by or
subject, or under which IMS or any of its Affiliates or the Company has material
rights or benefits or (C) subject to the governmental filings and other matters
referred to in Section 3.3(b), any constitution, act, statute, law (including
common law), ordinance, treaty, rule or regulation of any Governmental Entity (a
"Law") or any judgment, order or decree (a "Judgment"), in each case applicable
to IMS or any of its Affiliates or the Contributed Assets or the Purchased
Assets, or the Company.

          (b) No consent, approval, license, permit, order or authorization of,
registration, declaration or filing with, or notice to, any Governmental Entity
is required by or with respect to IMS or the Company in connection with the
execution and delivery of this Agreement, the other Transaction Agreements the
consummation of the transactions contemplated hereby or thereby or the
compliance by IMS or the Company with the provisions hereof and thereof, except
(i) for filings required under, and compliance with other applicable
requirements of, the Hart Scott Rodino Antitrust Improvements Act of 1976 (the
"HSR Act"), and any similar competition filing with any Governmental Entity, if
applicable to this Agreement, the other Transaction Agreements and the
transactions contemplated hereby and thereby; (ii) the filing with the SEC of
such reports under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), as may be required in connection with this Agreement and the
other Transaction Agreements and the transactions contemplated hereby and
thereby; (iii) filings


                                      -12-



with, and notices and submissions to, the United States Food and Drug
Administration (the "FDA"); (iv) such filings as may be required to transfer the
ownership of Intellectual Property rights and (v) such other consents,
approvals, orders, authorizations, registrations, declarations, filings and
notices, the failure of which to be obtained or made individually or in the
aggregate would not impair in any material respect the ability of IMS or the
Company to perform its obligations under this Agreement or prevent or materially
impede or delay the consummation of the transactions contemplated hereby.

          Section 3.4 Compliance with Laws. Except as set forth in Section 3.4
of the Disclosure Schedule, IMS and its Affiliates are in compliance in all
material respects with all applicable Laws and Judgments. Except as set forth in
Section 3.4 of the Disclosure Schedule, since January 1, 2004 neither IMS nor
any of its Affiliates has received a written notice from a Governmental Entity
alleging a possible violation by it of any applicable Law or Judgment applicable
to the CD Business. Notwithstanding the foregoing, this Section 3.4 shall not
constitute a representation or warranty as to intellectual property, tax,
employee benefit plan, environmental or the specific regulatory matters covered
in Sections 3.21, 3.22 and 3.23 which are limited to those representations and
warranties set forth in Sections 3.12, 3.14, 3.16, 3.17, 3.18, 3.21, 3.22 and
3.23, respectively.

          Section 3.5 Governmental Licenses. IMS and its Affiliates validly hold
and have in full force and effect all Governmental Licenses that are material to
the conduct of the CD Business, and neither IMS nor any of its Affiliates is in
violation (other than an immaterial violation) of, or default (with or without
notice or lapse of time or both) (other than an immaterial default) under, or
event giving to any other Person any right of termination, amendment or
cancellation of, any Governmental License material to the conduct of the CD
Business. Each of IMS and its Affiliates is in compliance in all material
respects with the terms and conditions of all Governmental Licenses issued to or
held by it that are material to the CD Business, and such Governmental Licenses
will not be subject to suspension, modification, revocation or nonrenewal as a
result of the execution and delivery of this Agreement or the other Transaction
Agreements or the consummation of the transactions contemplated hereby and
thereby. No proceeding is pending or, to the Knowledge of IMS or IMA, threatened
seeking the revocation or limitation of any Governmental License that is
material to the conduct of the CD Business. Section 3.5 of the Disclosure
Schedule lists each Governmental License held by IMS or its Subsidiaries that is
material to the conduct of the CD Business, except for any licenses related to,
or necessary for, the manufacture or storage of the products of the CD Business.
Except as set forth therein, all of the Governmental Licenses listed in Section
3.5 of the Disclosure Schedule are held in the name of IMS or its Affiliates,
and none are held in the name of any current or former director, officer,
employee, independent contractor or consultant of IMS or its Affiliates or
agents or otherwise on behalf of IMS or its Affiliates. Except for those
Governmental Licenses retained pursuant to Section 1.2(v) hereof in order to
perform the obligations under the Finished Products Purchase Agreement or as set
forth in Section 3.5 of the Disclosure Schedule, all Governmental Licenses that
are material to the conduct of the CD Business are transferable to the Company.
Notwithstanding the foregoing, this Section 3.5 shall not constitute a
representation or warranty as to the specific regulatory matters covered in
Sections 3.21 and 3.23.

          Section 3.6 Financial Statements. (a) Section 3.6(a) of the Disclosure
Schedule refers to the audited consolidated balance sheets of IMA as of December
31, 2005 (the


                                      -13-



"IMA Balance Sheet Date"), and December 31, 2004 and audited statements of
income and cash flows of IMA for each of the fiscal years ending on such dates,
together with any notes thereto and accountant's reports thereon (collectively,
the "IMA Audited Financial Statements"), and the unaudited consolidated balance
sheet of IMA (the "IMA Interim Balance Sheet") as of September 30, 2006 and the
unaudited statement of income of IMA for the period ending on such date
(collectively, the "IMA Unaudited Financial Statements" and together with the
IMA Audited Financial Statements, the "IMA Financial Statements"). Except as
disclosed in Section 3.6(a) of the Disclosure Schedule, the IMA Financial
Statements fairly present, in all material respects, the consolidated financial
position and results of operations and cash flows of IMA for the periods and as
of the dates referred to in the IMA Financial Statements, all in accordance with
United States generally accepted accounting principles, consistently applied
("GAAP") (except, in the case of the IMA Unaudited Financial Statements, for the
absence of footnotes and normal year-end adjustments that are not material
individually or in the aggregate). The IMA Financial Statements are consistent
in all material respects with the books and records of IMA, subject, in the case
of the IMA Unaudited Financial Statements, to normal year-end adjustments that
are not material individually or in the aggregate.

          (b) Section 3.6(b) of the Disclosure Schedule sets forth the unaudited
pro forma balance sheet (the "Most Recent Balance Sheet") of CD Business as of
September 30, 2006 (the "Most Recent Balance Sheet Date"), and the unaudited pro
forma statements of revenues and direct expenses of the CD Business for the
period then ended (the financial statements collectively, the "CD Financial
Statements"). Except as set forth in Section 3.6(b) of the Disclosure Schedule,
the CD Financial Statements (i) are consistent with the books and records of IMS
and IMA, (ii) have been prepared in accordance with GAAP and (iii) present
fairly the pro forma financial condition, results of operations of the CD
Business as of the respective dates thereof and for the periods referred to
therein, subject to normal year-end adjustments that are not material
individually or in the aggregate.

          (c) All Accounts Receivable (net of any reserves) are current and
arose from valid transactions in the ordinary course of business consistent with
past practice (the "Ordinary Course of Business") with unrelated third parties,
except as otherwise identified on the Most Recent Balance Sheet. Except as set
forth in Section 3.6(c) of the Disclosure Schedule, neither IMS nor any of its
Affiliates has received notice or other indication that any of the Accounts
Receivable will not be collectible in full, net of any reserves. Nothing
contained in this representation shall be construed as a guaranty of the
complete collectibility of all Accounts Receivable.

          (d) All of the Purchased Inventory whether or not shown on the Most
Recent Balance Sheet, net of any reserves shown thereon, consists of a quality
and quantity usable and salable in the Ordinary Course of Business, except for
obsolete items and items of below-standard quality, all of which shall have been
written off or written down to net realizable value in the CD Financial
Statements or on the Company's accounting records as of the Closing Date, as the
case may be. This representation and warranty shall expire as of the
Determination Date, net of any reserves shown on the books and records of IMS
and IMA.

          (e) IMA maintains a system of internal accounting controls sufficient
to provide reasonable assurance that: (i) transactions are executed in
accordance with management's general or specific authorizations; (ii)
transactions are recorded as necessary to


                                      -14-



permit preparation of financial statements in accordance with GAAP and to
maintain asset accountability; (iii) access to assets is permitted only in
accordance with management's general or specific authorization; and (iv) the
recorded accountability for assets is compared with the existing assets at
reasonable intervals and appropriate actions are taken with respect to any
differences.

          Section 3.7 Absence of Changes or Events. Since the IMA Balance Sheet
Date, (i) except as set forth in Section 3.7 of the Disclosure Schedule, the CD
Business has been conducted only in the Ordinary Course of Business, (ii) there
has occurred no Material Adverse Effect, and (iii) other than as set forth in
Section 3.7 of the Disclosure Schedule, none of IMA and its Subsidiaries has
taken any actions that, if taken after the date of this Agreement, would
constitute a breach of any of the covenants set forth in Section 4.3(a), (b) and
(c).

          Section 3.8 Undisclosed Liabilities. Except with respect to their
respective obligations under this Agreement, the Contribution Agreement and
other Transaction Agreements, neither IMS nor IMA has liabilities or obligations
relating to the CD Business (in each case whether known, absolute, contingent,
accrued or otherwise), except for such liabilities and obligations (a) to the
extent shown on the Most Recent Balance Sheet, (b) incurred in the Ordinary
Course of Business since the Most Recent Balance Sheet Date, (c) under the
Business Contracts, other than liabilities and obligations due to any material
breaches or non-performance thereunder, or (d) listed in Section 3.8 of the
Disclosure Schedule.

          Section 3.9 Assets other than Real Property. Except as set forth in
Section 3.9 of the Disclosure Schedule, (i) each of IMS and IMA owns outright
and has good and marketable title to, or has valid leasehold interests in, all
of the tangible Purchased Assets free and clear of all Liens, (ii) other than
the Excluded Assets and together with the assets contributed by IMA to the
Company pursuant to the Contribution Agreement, the Company's rights under the
License Agreements, the Finished Product Purchase Agreement, the Distribution
Agreement and the Transition Services Agreement, the Purchased Assets constitute
all of the assets, properties, permits, rights, agreements and other Contract
rights and interests that are necessary to enable the Company after the Closing
to operate the CD Business in a manner consistent with the manner in which the
CD Business is currently being operated, (iii) the Sale will vest good and
marketable title in and to the tangible Purchased Assets in PGIO free and clear
of all Liens except for Permitted Liens and (iv) the consummation of the
transactions contemplated by the PGIO Contribution Agreement will vest good and
marketable title in and to the tangible Purchased Assets in the Company free and
clear of all Liens except for Permitted Liens. To the Knowledge of IMS or IMA,
the tangible Contributed Assets are in good operating condition and repair and
none of such tangible assets that are material to the conduct of the CD Business
is in need of maintenance or repairs except for ordinary, routine maintenance
and repairs that are not material in nature or cost.

          Section 3.10 [Reserved]

          Section 3.11 Contracts. (a) Section 3.11(a) of the Disclosure Schedule
sets forth a true, accurate and complete list of each Business Contract
(collectively, "Scheduled Contracts") to which IMA, IMS or any of their
Subsidiaries is a party that (x) is material to the CD Business; (y) provides
for aggregate annual payments, or has a value in excess, of fifty thousand
dollars ($50,000); or (z) falls within one or more of the following categories:


                                      -15-


          (i) Contracts under which IMA, IMS or their Subsidiaries own, have
     under license, have a right to acquire (by option or otherwise), have a
     right to use or exercise (including any covenant not to sue or other
     similar right of forbearance), or otherwise Control, or have any other
     right or interest in or to any Intellectual Property that is necessary to
     the conduct of the CD Business as currently conducted;

          (ii) Contracts with any labor union or similar representative covering
     any Transferred Employee;

          (iii) Contracts under which products of the CD Business are
     manufactured or distributed by IMA, IMS or their Subsidiaries, including
     any distribution agreements, wholesalers, manufacturing and supply
     agreements and Contracts with managed care organizations or Governmental
     Entities; and

          (iv) Contracts limiting or restraining IMA, IMS or their Subsidiaries
     in any material respect from engaging or competing in any business of the
     CD Business with any Person or from purchasing any products, services or
     inventory from any third parties.

Notwithstanding the foregoing, neither IMA nor IMS shall be required to set
forth on the aforementioned Section 3.11(a) of the Disclosure Schedule any
Contract relating to IMA's and certain of its Subsidiaries' manufacturing of
products of the CD Business, including Contracts to purchase raw materials,
components or supplies, Contracts to supply or procure reagents or other
biological components and Contracts with subcontractors, suppliers or service
providers used in the conduct of such manufacturing activity.

          (b) Except as indicated in Section 3.11(b) of the Disclosure Schedule,
IMA has delivered or made available to PGIO complete and correct copies of all
written Scheduled Contracts, including all amendments, modifications and
material waivers relating thereto.

          (c) Each Scheduled Contract is in full force and effect in accordance
with the terms thereof and constitutes a legal, valid and binding agreement of
IMA, IMS or their Subsidiaries, as applicable, and is enforceable in accordance
with its terms by IMA, IMS or their Subsidiaries, as applicable, against each
counterparty thereto, except as the same may be limited by General Limitations.
IMA, IMS and its Subsidiaries, as applicable, have performed in all material
respects all of their obligations, and are not in default under, any Business
Contract. To IMS's or IMA's Knowledge, no other party to any Business Contract
is in material breach of or default under such Business Contract.

          (d) Except as set forth in Section 3.11(d) of the Disclosure Schedule,
neither IMA nor IMS has any Knowledge that any party to any Scheduled Contract
(i) intends to either terminate or not renew such Scheduled Contract, or (ii)
has or intends to submit to IMA, IMS or their Subsidiaries any claim of material
breach by any such party with respect to the performance of its obligations
under any such Scheduled Contract.

          (e) Section 3.11(e) of the Disclosure Schedule sets forth a true,
accurate and complete list of the Scheduled Contracts for which third party
consents are required to assign such Business Contracts to the Company. Subject
to the receipt of the third party consents listed on Section 3.11(e) of the
Disclosure Schedule and Closing, the Company will succeed to all


                                      -16-



rights, title and interests of IMA, IMS or their respective Subsidiaries under
each such Contract without the necessity to obtain the consent of any other
Person(s) to the assignment of such Contract.

          (f) None of the Business Contracts have been entered into by IMA, IMS
or any of their respective Subsidiaries other than in its or their Ordinary
Course of Business (other than agreements in settlement of Legal Proceedings
listed on Section 3.13 of the Disclosure Schedule) and other than on an arm's
length basis.

          (g) Except as set forth in Section 3.11(g) of the Disclosure Schedule,
the Scheduled Contracts do not contain any provision that provides for automatic
termination upon the occurrence of the transactions contemplated hereby or for
the right of any party to any such Contract to terminate, accelerate or receive
any payment or other more favorable terms and conditions upon occurrence of the
transactions contemplated hereby.

          (h) Except as set forth in Section 3.11(h) of the Disclosure Schedule,
there are no Persons holding a power of attorney on behalf of IMS, IMA or any of
their Subsidiaries that would enable such Persons to sell, lease or otherwise
encumber any Purchased Asset.

          Section 3.12 Intellectual Property. (a) Section 3.12(a) of the
Disclosure Schedule sets forth, as of the date hereof, a complete and accurate
list of all Business Registered Intellectual Property. "Business Intellectual
Property" means (i) Business Contributed Intellectual Property (as defined in
the Contribution Agreement), (ii) Business Purchased Intellectual Property and
(iii) all other Intellectual Property constituting Inverness Licensed IP and
Inverness Licensed Trademarks (as defined in the License Agreements). Except to
the extent indicated in Section 3.12(a) of the Disclosure Schedule, all Business
Intellectual Property is either (x) owned by, or subject to an obligation of
sole and exclusive assignment to, IMS or IMA or one of their respective
Subsidiaries free and clear of all Liens or other exceptions to title that
affect such Business Intellectual Property or restrict the use by IMS or IMA or
any of their respective Subsidiaries of the Business Intellectual Property in
any way or require IMS or IMA or any of their respective Subsidiaries to make
any payment or give anything of value as a condition to its use in any way of
such Business Intellectual Property (collectively, "IP Liens"), except in each
case for Permitted IP Liens or (y) Controlled but not owned by IMS or IMA or one
of their respective Subsidiaries pursuant to a license from, or a similar
agreement with, a third party free and clear, to the Knowledge of IMS and IMA,
of all IP Liens except for Permitted IP Liens. To the Knowledge of IMS or IMA,
with respect to all Business Intellectual Property owned by IMS or IMA or one of
their respective Subsidiaries that are United States patents or applications
subject to a terminal disclaimer against another patent or application, each
such patent or application has been and remains commonly owned with the patent
or application it is terminally disclaimed against since the terminal disclaimer
was filed with the United States Patent Office. Except to the extent indicated
in Section 3.12(a) of the Disclosure Schedule, IMS or IMA or one of their
respective Subsidiaries is (A) the sole owner of all Business Contributed
Intellectual Property and all Business Purchased Intellectual Property and (B)
the sole owner or sole and exclusive licensee (as the case may be) of all
Inverness Licensed IP and Inverness Licensed Trademarks. There are no actions
pending or, to the Knowledge of IMS or IMA, threatened with regard to the
ownership or Control by IMS or IMA or one of their respective Subsidiaries of
any Business Intellectual Property. Except as specified in Section 3.12(a) of
the


                                      -17-



Disclosure Schedule, each of IMS and IMA has the legal power to convey or
license (as applicable) to the Company all of its or their respective
Subsidiaries' right, title and interest that is being conveyed or licensed in
and to the Business Intellectual Property. No Business Intellectual Property
will terminate or cease to be valid Intellectual Property by reason of the
execution and delivery of this Agreement by IMS and IMA, the performance of IMS
and IMA of their obligations hereunder, or the consummation by IMS and IMA of
the transactions contemplated hereby.

          (b) Except as disclosed in Section 3.12(b) of the Disclosure Schedule,
to the Knowledge of IMS or IMA, there is no unauthorized use, infringement,
misappropriation or violation of any of the Business Intellectual Property by
any Person.

          (c) Except as disclosed in Section 3.12(c) of the Disclosure Schedule,
there are no pending or, to the Knowledge of IMS or IMA, threatened written
claims that the CD Business has infringed or is infringing any Intellectual
Property of any Person. Except for any third-party Intellectual Property
referred to in Section 3.12(c) of the Disclosure Schedule, to the Knowledge of
IMS or IMA, there are no patents or patent applications of any third party that
claim the same subject matter as a patent or patent application included in the
Business Intellectual Property that could reasonably serve as the basis for an
interference proceeding involving a patent or patent application included in the
Business Intellectual Property.

          (d) (i) The patent applications owned by IMS or IMA or one of their
respective Subsidiaries and included in the Business Intellectual Property and,
to the Knowledge of IMS or IMA, the patent applications licensed by any third
party to IMS or IMA or one of their respective Subsidiaries and included in the
Business Intellectual Property, are pending and have not been abandoned, and
have been and continue to be prosecuted. All patents, registered Trademarks and
applications for Trademarks owned by IMS or IMA or one of their respective
Subsidiaries and included in the Business Intellectual Property and, to the
Knowledge of IMS or IMA, all patents, registered Trademarks and applications for
Trademarks licensed by any third party to IMS or IMA or one of their respective
Subsidiaries and included in the Business Intellectual Property, have been duly
registered or filed with or issued by the appropriate Governmental Entity, all
necessary affidavits of continuing use have been timely filed, and all necessary
maintenance fees timely paid to continue all such rights in effect. Except as
set forth on Schedule 3.12(d)(i) of the Disclosure Schedule, none of the patents
owned by IMS or IMA or one of their respective Subsidiaries and included in the
Business Intellectual Property and, to the Knowledge of IMS or IMA, none of the
patents licensed by any third party to IMS or IMA or one of their respective
Subsidiaries and included in the Business Intellectual Property, have expired or
been declared invalid, in whole or in part, by any Governmental Entity. Except
as set forth in Schedule 3.12(d) of the Disclosure Schedule, there are no
ongoing interferences, oppositions, reissues, or reexaminations or other
proceedings that could result in a loss or limitation of a patent right or claim
involving any of the patents or patent applications owned by IMS or IMA or one
of their respective Subsidiaries and included in the Business Intellectual
Property. To the Knowledge of IMS or IMA, there are no ongoing interferences,
oppositions, reissues, or reexaminations or other proceedings that could result
in a loss or limitation of a patent right or claim involving any of the patents
or patent applications licensed by any third party to IMS or IMA or one of their
respective Subsidiaries and included in the Business Intellectual Property.


                                      -18-



                    (ii) To the Knowledge of IMS or IMA, (A) the patents
     included in the Business Intellectual Property have not been declared
     invalid or unenforceable by any court, (B) there is no reason to believe
     that any patent included in the Business Intellectual Property and material
     to the CD Business would be declared invalid or unenforceable by a court,
     and (C) each of IMS and IMA has met its duty of candor as required under 37
     C.F.R. 1.56 and complied with analogous Laws outside the United States
     requiring disclosure of references. To the Knowledge of IMS or IMA, each of
     the patents and patent applications included in the Business Intellectual
     Property that were filed by IMS or IMA or one of their respective
     Subsidiaries properly identifies each and every inventor of the claims
     thereof as determined in accordance with the Laws of the jurisdiction in
     which such patent is issued or such patent application is pending.

                    (iii) Each inventor named on the patents and patent
     applications included in the Business Intellectual Property that were filed
     by IMS or IMA or one of their respective Subsidiaries, alone or together
     with any joint owners, has executed an agreement agreeing to assign or
     actually assigning his or her entire right, title and interest in and to
     such patent or patent application, and the inventions embodied and claimed
     therein, to IMS or IMA or such Subsidiary, alone or together with any joint
     owners as appropriate, except as indicated in Section 3.12(a) of the
     Disclosure Schedule. To the Knowledge of IMS or IMA, no such inventor has
     any contractual or other obligation that would preclude any such assignment
     or otherwise conflict with the obligations of such inventor to IMS or IMA
     or such Subsidiary.

          (e) Section 3.12(e) of the Disclosure Schedule sets forth a true,
complete and accurate list of all Contracts with respect to any options, rights,
licenses or interests of any kind relating to Business Intellectual Property
that have been granted (i) by a third party to IMS or IMA or any of their
respective Subsidiaries, (ii) by IMS or IMA or any of their respective
Subsidiaries to any other Person (other than agreements commonly generated in
the Ordinary Course of Business (including software licenses for generally
available software, employee assignment agreements, nondisclosure agreements,
consulting agreements, material transfer agreements, clinical trial agreements
and evaluation agreements) that individually and in the aggregate have not
caused and would not reasonably be expected to cause a Material Adverse Effect).
In addition, Section 3.12(e) of the Disclosure Schedule sets forth a true,
complete and accurate list of all Contracts under which IMS or IMA or any of
their respective Subsidiaries is obligated to make to, or receives from third
parties payments (in any form, including royalties, license fees, milestones and
other contingent payments) for use of any Business Intellectual Property. Other
than as set forth on Section 3.12(e) of the Disclosure Schedule, no royalties,
license fees or other payment obligations are owed to any Person in connection
with the exercise of Intellectual Property rights in the conduct of the CD
Business after the Closing Date by IMS or IMA or any of their respective
Subsidiaries under any Contract (other than Contracts relating to "off the
shelf" commercially available software) to which any of them are a party. Each
of IMS and IMA and their respective Subsidiaries is in compliance in all
material respects with the terms of all Contracts set forth on Section 3.12(e)
of the Disclosure Schedule and, to the Knowledge of IMS or IMA, each of the
licensees and licensors, as the case may be, is in compliance in all material
respects with all such Contracts, and there are no material disputes or
proceedings threatened or pending regarding the same.


                                      -19-



          (f) The Business Intellectual Property constitutes all the
Intellectual Property necessary and sufficient to conduct the CD Business as
currently conducted; provided, that this Section 3.12(f) shall not constitute a
non-infringement representation (which non-infringement representation is the
subject of Section 3.12(g) below).

          (g) Except as disclosed in Section 3.12(g) of the Disclosure Schedule,
to the Knowledge of IMS or IMA, the operation of the CD Business does not, and
as a result of Closing will not, infringe on or violate the rights of any Person
under any Intellectual Property.

          (h) Each of IMS and IMA and their respective Subsidiaries has taken
reasonable steps to protect the confidentiality of the confidential information
and trade secrets included in the Business Intellectual Property, including by
entering into Contracts that generally require licensees, contractors and other
third persons with access to such trade secrets to keep such trade secrets
confidential.

          (i) Each of IMS and IMA uses reasonable procedures designed to ensure
the recording and maintenance of all know-how that is included in the Business
Intellectual Property and material to the conduct of the CD Business.

          (j) All former and current employees, consultants and contractors of
IMS or IMA or their respective Subsidiaries (i) having access to the Business
Intellectual Property have executed and delivered to IMS or IMA or the relevant
Subsidiary an agreement regarding the protection of the confidential information
included in the Business Intellectual Property and (to the extent required by
any customer or business partner or IMS or IMA) confidential information of
IMS's or IMA's customers or business partners made available to such employees,
consultants or contractors and (ii) who were involved in, or who contributed to,
the creation or development of any Business Intellectual Property have executed
and delivered to IMS or IMA or the relevant Subsidiary an agreement regarding
the assignment by such employees, consultants and contractors to IMS or IMA (or
the relevant Subsidiary) of any and all Business Intellectual Property; and true
and complete copies of all such agreements have been made available to PGIO.
Each of IMS and IMA and their respective Subsidiaries has secured from all
former and current employees, consultants and contractors who were involved in,
or who contributed to, the creation or development of the subject matter of any
patents that are included in Business Intellectual Property that is owned by IMS
or IMA or the relevant Subsidiary, valid written assignments of the rights to
such contributions that may be owned by such persons or that IMS or IMA or the
relevant Subsidiary does not already own by other agreement or operation of Law,
including obtaining valid written assignments from the inventors of any and all
pending patent applications.

          (k) Under any and all Contracts under which a third party has granted
IMA, IMS or any of their respective Subsidiaries any Intellectual Property
rights that are used in the CD Business and on which IMA, IMS or such Subsidiary
relies to allow its Subsidiaries of which IMA, IMS or such Subsidiary owns 50%
or more of the voting equity to exercise the Intellectual Property rights
thereunder, the Company shall have the right to exercise (subject to the terms
and conditions in the Transaction Documents) such Intellectual Property rights
for so long as IMS owns 50% or more of the interest in the Company.

          Section 3.13 Legal Proceedings. Except as disclosed in Section 3.13 of
the Disclosure Schedule, (a) neither IMS nor IMA is, or since January 1, 2004
has it been, a party to,


                                      -20-



or to its Knowledge threatened with, any material Legal Proceeding with respect
to or in connection with the CD Business, (b) to the Knowledge of IMS or IMA,
there are no facts or circumstances that would reasonably be expected to give
rise to any material Legal Proceeding with respect to or in connection with the
CD Business and (c) there are no Judgments outstanding against IMS or IMA with
respect to or in connection with the CD Business.

          Section 3.14 Tax Matters. Except as set forth in Section 3.14 of the
Disclosure Schedule (with paragraph references corresponding to those set forth
below):

          (a) All Tax Returns required to be filed by IMS or IMA, and any
affiliated, combined, consolidated or unitary group of which IMS or IMA is or
has been a member, have been timely filed, except where failure to file would
not have a Material Adverse Effect.

          (b) Each of IMS and IMA has timely paid all Taxes which were required
to have been paid on or prior to the date hereof, the nonpayment of which could
result in a Lien on any Purchased Asset. Each of IMS and IMA has established, in
accordance with GAAP, adequate reserves for the payment of, and will timely pay,
all Taxes which arise from or with respect to the Purchased Assets or the
operation of the CD Business and are incurred or attributable to taxable periods
(or portions thereof) prior to the Closing (the "Pre-Closing Tax Periods"), the
nonpayment of which would result in a Lien on any Purchased Asset.

          (c) Each of IMS and IMA has withheld and paid all Taxes required by
Law to have been withheld and paid and has complied in all respects with all
rules and regulations relating to the withholding or remittance of Taxes
(including, without limitation, employee-related Taxes), except where failure to
so withhold, pay or comply would not impose a liability or other obligation on
the Company.

          Section 3.15 Insurance. IMS and IMA maintain, with respect to the CD
Business, or under contractual arrangements is named as an additional insured
in, policies or binders of fire, liability (including without limitation product
liability), workers' compensation, vehicular and other insurance customarily
maintained by Persons engaged in businesses similar to the CD Business. A true,
correct and complete list of such policies insuring the CD Business is set forth
in Section 3.15 of the Disclosure Schedule. Such policies and binders are in
full force and effect.

          Section 3.16 Benefit Plans. (a) Section 3.16(a) of the Disclosure
Schedule contains a list of all written plans, programs, or arrangements
maintained by IMS or IMA or any of their Subsidiaries, in each case as and to
the extent related to the CD Business, or providing benefits to employees of the
CD Business, or under which IMS or IMA or any of their Subsidiaries, in each
case as and to the extent related to the CD Business, or providing benefits to
employees of the CD Business, has or may have any obligation to contribute, with
respect to any employee of them, whether such plan, program or arrangement is
formal or informal, written or unwritten, and whether or not such plan, program,
or arrangement is an "employee benefit plan" subject to the Employee Retirement
Income Security Act of 1974, as amended ("ERISA") (collectively, the "Benefit
Plans"). The Company will not be responsible for any existing or future
liability under any Benefit Plan.


                                      -21-



          (b) Each of IMS and IMA has made available to or provided to PGIO true
and complete copies of: (i) each Benefit Plan that is an "employee welfare
benefit plan" under Section 3(1) of ERISA; (ii) each Benefit Plan that is an
"employee pension benefit plan" under Section 3(2) of ERISA; (iii) the most
recent annual report required to be filed, including Form 5500, for each Benefit
Plan described under clauses (i) and (ii) of this Section 3.16(b); (iv) the
current summary plan description and any material modifications thereto; and
(iv) the most recent determination or opinion letter received from the Internal
Revenue Service (the "IRS") upon which IMS and IMA are entitled to rely with
respect to a Benefit Plan described under clause (ii) of this Section 3.16(b)
that is intended to be tax-qualified under Section 401(a) of the Code, or the
application therefor, if such letter has not been issued by the IRS.

          (c) Except as set forth on Section 3.16(c) of the Disclosure Schedule,
neither IMS nor IMA or any of their subsidiaries, in each case as and to the
extent related to the CD Business, or providing benefits to employees of the CD
Business, has offered to provide health or life insurance coverage to any
individual, or to the family members of any individual, for any period extending
beyond the termination of the individual's employment by IMS or IMA, except to
the extent required by the health care continuation (also known as "COBRA")
provisions of ERISA and the Code or similar state benefit continuation Laws.
Each Benefit Plan that is a group health plan, as such term is defined in
Section 5000(b)(1) of the Code, complies in all material respects with Sections
601 et seq. and 701 et seq. of ERISA and Section 4980B and Subtitle K of the
Code.

          (d) The Company will not be responsible for any existing Contract
between IMS or IMA and any business employee of them, including a Contract (i)
the benefits of which are contingent, or the terms of which are materially
altered, upon the occurrence of a transaction in the nature of any of the
transactions contemplated by this Agreement or any other Transaction Agreement,
(ii) providing any term of employment or compensation guarantee or (iii)
providing severance benefits or other benefits after the termination of
employment of such employee regardless of the reason for such termination of
employment.

          Section 3.17 Employee and Labor Matters. Except as set forth on
Section 3.17 of the Disclosure Schedule, there is not, and since January 1, 2004
there has not been, any labor strike, dispute, work stoppage, slowdown or
lockout against IMS or IMA with respect to the CD Business and, except as set
forth on Section 3.17 of the Disclosure Schedule, there is not any pending, or,
to the Knowledge of IMS or IMA, threatened, labor strike, dispute, work
stoppage, slowdown or lockout against IMS or IMA with respect to the CD
Business. To the Knowledge of IMS or IMA, since January 1, 2004, no union
organizational campaign or petition for certification is in progress with
respect to personnel of the CD Business. Neither IMS nor IMA is a party to any
collective bargaining or other similar labor Contracts with respect to any
personnel of the CD Business. There are no pending, or, to the Knowledge of IMS
or IMA, threatened, charges against IMS or IMA or any business personnel of them
before the Equal Employment Opportunity Commission or any other Governmental
Entity responsible for the prevention of unlawful employment practices. Except
as set forth on Section 3.17 of the Disclosure Schedule, since January 1, 2004,
neither IMS nor IMA has received written notice of the intent of any
Governmental Entity responsible for the enforcement of labor or employment Laws
to conduct an investigation of IMS or IMA with respect to the CD Business and,
to the Knowledge of IMS or IMA, no such investigation is in progress. To the
Knowledge of IMS or


                                      -22-



IMA, no activity of any executive officer or significant employee of the CD
Business as or while an employee of the CD Business has caused a material
violation of any such employee's employment Contract, confidentiality agreement,
patent disclosure agreement or other similar Contract. The Restructuring will be
effected in compliance in all material respects with all applicable employment
laws and regulations.

          Section 3.18 Environmental Matters. Except as disclosed in Section
3.18 of the Disclosure Schedule and except for such matters as would not cause a
material Loss to the Company or PGIO:

          (a) The CD Business and IMA Facilities are and have for the past four
years been in compliance in all material respects with all Environmental Laws
and Environmental Permits. The CD Business and IMA Facilities have no material
unbudgeted or unreserved environmental capital expenditure necessary to achieve
or maintain compliance in all material respects with Environmental Laws and
Environmental Permits. There are no unresolved or, to the Knowledge of IMS or
IMA, threatened (whether orally or in writing) claims, demands, notices, suits,
investigations, inquiries, proceedings or actions against IMS, IMA or the IMA
Facilities, alleging non-compliance in any material respect with Environmental
Law or Environmental Permits. To the Knowledge of IMS or IMA, there are no
circumstances or conditions involving the CD Business or IMA Facilities or any
real property currently owned, operated or leased by any of them that could
reasonably be expected to result in any material Environmental Liability for
which the Company or PGIO would be responsible.

          (b) No property constituting a Contributed Asset or a Purchased Asset
(including soils, groundwater, surface water, buildings or other structures)
currently owned, operated or leased by the CD Business and no IMA Facilities are
contaminated with any Hazardous Material at levels or in amounts that violate or
require investigation, monitoring or response actions pursuant to applicable
Environmental Laws. Neither IMS or IMA nor any of their Subsidiaries is subject
to any material Environmental Liability for Hazardous Material disposal or
contamination on any third party property. Neither IMS or IMA nor any of their
Subsidiaries has manufactured, generated, received, used, handled, processed,
stored, treated, released, discharged, emitted, shipped or disposed of any
Hazardous Material (whether or not on its own leased, owned or operated
properties or properties owned leased or operated by others) except in material
compliance with all Environmental Laws.

          (c) The CD Business and IMA Facilities have obtained and maintained in
effect all Environmental Permits material to the conduct of their businesses
and, where applicable, have filed timely applications for renewal or
modification of Environmental Permits. No Environmental Permit material to the
conduct of the CD Business or the operation of the IMA Facilities is subject to
major modification, revision, rescission, public notice and comment or prior
consent by any Governmental Entity as a result of the consummation of the
transactions contemplated by this Agreement and the other Transaction
Agreements.

          (d) Neither the CD Business nor any of the IMA Facilities has received
any notice from any Person or is aware of any condition, event or circumstance
(including but not limited to the release or threatened release of any Hazardous
Material at any property currently or formerly owned, leased or used by IMS or
IMA, any Affiliate, or any third party) that would


                                      -23-



reasonably be expected to result in a material Environmental Liability for which
the Company or PGIO could be responsible.

          (e) Except for indemnifications under manufacturing, supply or similar
agreements set forth in Section 3.18 of the Disclosure Schedule, neither IMS or
IMA nor any of their Subsidiaries has assumed or retained by operation of law or
by Contract any Environmental Liability of any third-party for which the Company
or PGIO could be responsible.

          (f) To the Knowledge of IMS and IMA, no Lien or "super lien" has been
placed on any site owned or operated by the CD Business or IMA Facilities
pursuant to the Federal Comprehensive, Environmental Response, Compensation, and
Liability Act of 1980 or any similar Law.

          (g) This Section 3.18 constitutes the sole representations and
warranties of IMS or IMA relating to environmental matters.

          Section 3.19 Transactions with Affiliates. Section 3.19 of the
Disclosure Schedule describes any material transaction, since January 1, 2004,
between IMS or IMA, on the one hand, and any of their Affiliates (other than
wholly-owned Subsidiaries of IMS or IMA and the Inverness Medical (Shanghai),
Co., Ltd.), on the other hand, with respect to the CD Business, other than any
employment Contract, Contract with any employee pertaining to any Benefit Plan
or equity incentive award, Contract not to compete with IMS or IMA, Contract to
maintain the confidential information of IMS or IMA, or Contract assigning
Intellectual Property Rights to IMS or IMA. Except as set forth in Section 3.19
of the Disclosure Schedule, no Affiliate of IMS or IMA (other than wholly-owned
Subsidiaries of IMS or IMA and Inverness Medical (Shanghai), Co., Ltd.) (i) owns
or has any interest in any property (real or personal, tangible or intangible),
Intellectual Property Rights or Contract used or held for use in or pertaining
to the CD Business, (ii) to the Knowledge of IMS or IMA, has any claim or cause
of action against IMS or IMA with respect to the CD Business or (iii) owes any
money to, or is owed any money by, IMS or IMA with respect to the CD Business
except, in each case, pursuant to any employment Contract, Benefit Plan or for
reimbursement of business expenses in the Ordinary Course of Business. For the
avoidance of doubt, the matters set forth in this Section 3.19 are neither
intended to relate to, nor is any disclosure provided with respect to,
intercompany arrangements, Contracts or understandings among IMA and its
Subsidiaries or Inverness Medical (Shanghai), Co., Ltd.

          Section 3.20 Certain Business Practices. Neither IMS or IMA nor any of
their directors, officers, agents or employees, has (i) used any funds for
unlawful contributions, gifts, entertainment or other unlawful expenses related
to political activity; (ii) made any unlawful payment to foreign or domestic
government officials or employees or to foreign or domestic political parties or
campaigns or violated any provision of the Foreign Corrupt Practices Act of 1977
or similar laws in any other jurisdiction or (iii) made any payment in the
nature of criminal bribery.

          Section 3.21 Regulatory Compliance. (a) Except as set forth in Section
3.21(a) of the Disclosure Schedule, each Product that is subject to the
jurisdiction of the FDA or similar Governmental Entity, or subject to the
Federal Food, Drug and Cosmetic Act, as amended, and


                                      -24-



the regulations promulgated thereunder (the "FDCA") or similar Laws in any
foreign jurisdiction, is being formulated, developed, manufactured, packaged,
tested, advertised, marketed, promoted, distributed and sold by IMS, IMA or one
of their respective Subsidiaries in compliance in all material respects with all
applicable requirements under the FDCA and similar Laws, including those
relating to investigational use, good clinical practices, current good
manufacturing practices, introduction of products into interstate commerce,
record keeping, advertising and marketing, reporting of adverse events and
filing of other reports. Except as set forth in Section 3.21(a) of the
Disclosure Schedule, since January 1, 2004, neither IMS nor IMA nor any of their
respective Subsidiaries has received any written notice from the FDA or any
other Governmental Entity alleging any material violation of any Law by IMS or
IMA or any of their respective Subsidiaries applicable to any Product. Except as
set forth in Section 3.21(a) of the Disclosure Schedule, since January 1, 2004
neither IMS nor IMA nor any of their respective Subsidiaries has received any
written notices of inspectional observations (including those recorded on form
FDA 483), establishment inspection reports, warning letters and any other
documents received from or issued by the FDA or any similar Governmental Entity
asserting non-compliance in any material respect with FDA regulatory
requirements or other applicable Laws of any similar Governmental Entity by IMS
or IMA or any of their respective Subsidiaries with respect to the CD Business
or Persons otherwise performing services for the benefit of IMS or IMA or any of
their respective Subsidiaries with respect to the CD Business, except for
matters resolved prior to the date hereof. In addition, no Governmental Entity
or other Person has commenced or, to the Knowledge of IMS or IMA, threatened to
initiate any proceeding alleging any violations of any federal, state or local
consumer protection laws.

          (b) Section 3.21(b) of the Disclosure Schedule sets forth for each
Product a true, correct and complete list of all pre-clinical and clinical
studies and trials ongoing with respect to such Product as of the date hereof.

          (c) All physician and consumer product information required to
accompany the distribution of each Product (hereafter "Labeling") complies in
all material respects with all Laws and guidelines published and enforced by the
FDA, including Section 502 (21 U.S.C. Section 352) of the FDCA and 21 C.F.R.
Section 801, or similar Laws in any foreign jurisdiction.

          (d) For each Product, all required post-approval regulatory reports
and submissions, including those required by 21 C.F.R. Parts 803 and 806, or
similar Laws in any foreign jurisdiction, have been timely submitted and all
post-marketing obligations have been timely completed or fulfilled, except where
such failure to so timely submit, complete or fulfill would not prohibit or
delay the continued manufacture, sale and distribution of any Product currently
manufactured, marketed, sold and distributed by the CD Business. Except as set
forth on Section 3.21(d) of the Disclosure Schedule, there has not been any
occurrence of any medical device report concerning any Products under 21 C.F.R.
Part 803 that has not been resolved prior to the date hereof.

          (e) Except as set forth on Section 3.21(e) of the Disclosure Schedule,
neither IMS or IMA or any of their respective Subsidiaries, nor, to their
Knowledge, any officer, employee or agent of them, has made an untrue statement
of a material fact or fraudulent statement to the FDA or any other Governmental
Entity, failed to disclose a material fact


                                      -25-



required to be disclosed to the FDA or any other Governmental Entity, or
committed an act, made a statement, or failed to make a statement that, at the
time such disclosure was made, would reasonably be expected to provide a basis
for the FDA or any other Governmental Entity to invoke its policy respecting
"Fraud, Untrue Statements of Material Facts, Bribery, and Illegal Gratuities",
set forth in 56 Fed. Reg. 46191 (September 10, 1991) or any similar policy.
Neither IMS or IMA nor, to their Knowledge, any officer, employee or agent of
them, has been convicted of any crime or engaged in any conduct for which
debarment is mandated by 21 U.S.C. Section 335a(a) or any similar Law or
authorized by 21 U.S.C. Section 335a(b) or any similar Law, nor has IMS or IMA
(or any of their respective Subsidiaries) received written notice of any
proposed disqualification, debarment or exclusion including exclusion under 42
U.S.C. Section 1320a-7 or any similar Law. Neither IMS or IMA or any of their
respective Subsidiaries nor, to their Knowledge, any officer, employee or agent
of them, has been convicted of any crime or engaged in any conduct for which
such Person or entity could be excluded from participating in the federal health
care programs under Section 1128 of the Social Security Act or any similar Law.

          Section 3.22 Product Liability Claims; Product Recalls. Except as set
forth on Section 3.22 of the Disclosure Schedule, since January 1, 2004 neither
IMS nor IMA has received any written notice from any Person regarding any
actual, alleged, possible or potential claim by any Person or group of Persons,
including any Governmental Entity, for money damages or any other form of
relief, whether in law or equity, in respect of potential or actual injury or
harm allegedly resulting from or due and owing in connection with the purchase,
use, application of, or defect (including alleged failure to warn) relating to
any of the Products, irrespective of the legal theory of liability except for
Product returns in the Ordinary Course of Business and other claims that were
resolved prior to the date hereof without payment of significant money damages
or the entry of, or agreement to, other forms of relief that were material to
the CD Business. Except as set forth on Section 3.22 of the Disclosure Schedule,
since January 1, 2004 no Product has been the subject of any recall, market
withdrawal, correction, or removal, and neither IMS nor IMA has received any
written notice that the FDA or any other Governmental Entity has (i) commenced
or threatened in writing to initiate any action to withdraw its approval or
request the recall, market withdrawal, correction, or removal of any Product or
(ii) commenced or threatened in writing to initiate, any action to enjoin
production of any Product at any facility. Except as set forth in Section 3.22
of the Disclosure Schedule, no event has occurred, and to the Knowledge of IMS
or IMA, no condition or circumstance exists (including any adverse reactions or
Product failure), that might (with or without notice or lapse of time) directly
or indirectly give rise to or serve as a basis for any such recall, market
withdrawal, correction, or removal or other similar actions relating to any such
Product.

          Section 3.23 Product Registrations. Section 3.23 of the Disclosure
Schedule sets forth, as of the date hereof, a list of all material Governmental
Licenses granted to IMS or IMA to market any of the Products (the "Product
Registrations"). Except as set forth in Section 3.23 of the Disclosure Schedule,
(i) all Products sold under the Product Registrations are manufactured and
marketed in accordance with the specifications and standards contained in such
Product Registrations, (ii) IMS or IMA is the sole and exclusive owner of the
Product Registrations and has not granted any right of reference to any Person
with respect thereto, and (iii) the Product Registrations do not include or
require reference to any other Governmental Licenses or other filings with any
Governmental Entity. The Product Registrations are all the


                                      -26-



registrations, approvals, licenses or authorizations required to market the
Products currently marketed by the CD Business. IMS and IMA have made available
to PGIO true, complete and accurate copies of all Product Registrations and all
material correspondence, written notices or written communications received from
or sent to the FDA or other Governmental Entities relating to the Products.

          Section 3.24 Brokers' Fees. No broker, finder, financial advisor,
investment banker or other Person is or will be entitled to any brokerage,
finder's, financial advisor's or other similar fee or commission in connection
with the transactions contemplated by this Agreement and the Transaction
Agreements for which PGIO or the Company could be liable.

                                    ARTICLE 4
                                    COVENANTS

          Section 4.1 Filings. Each of the parties hereto agrees to cooperate
fully with the others in the preparation and filing, whether before or after the
Closing Date, of all documents and instruments required to be filed by PGIO,
IMS, IMA or the Company in connection with the transactions contemplated by this
Agreement and the other Transaction Agreements, including, without limitation,
any business certificate, or any trade, assumed or fictitious name certificates,
or any applications for authority to do business, or any registrations or
assignments of registrations of any patents, trademarks, trade names, service
marks, copyrights or similar rights.

          Section 4.2 Access and Investigation. (a) Subject to Section 4.12
hereof, prior to the Closing Date and subject to any restrictions imposed by
applicable Law or any Business Contract, IMS, IMA and their Affiliates and
Representatives shall: (i) afford PGIO and its Affiliates and Representatives,
during normal business hours and upon reasonable notice, full and free access to
the personnel, properties, contracts, books and records, and other documents and
data relating to the CD Business (ii) furnish PGIO and its Representatives with
copies of all such contracts, books and records, and other existing documents
and data relating to the CD Business, as PGIO may from time to time reasonably
request, and (iii) furnish PGIO and its Representatives with such additional
financial, operating, and other data and information relating to the CD Business
as PGIO may reasonably from time to time request; provided that any such
investigation by PGIO shall be conducted in such a manner as not to interfere
unreasonably with the normal operations of IMS or IMA.

          (b) Subject to Section 4.12 hereof, prior to the Closing Date and
subject to any restrictions imposed by applicable Law, PGIO, and its Affiliates
and Representatives shall: (i) afford IMS and its Affiliates and
Representatives, during normal business hours and upon reasonable notice, full
and free access to the personnel, properties, contracts, books and records, and
other documents and data relating to the portions of PGIO that will perform
services under the Transaction Agreements to the extent reasonably necessary to
plan to integrate, as applicable, the operations and activities of the CD
Business with the Company and PGIO, (ii) furnish IMS and its Representatives
with copies of all such contracts, books and records (if any), and other
existing documents and data relating to the portions of PGIO that will perform
services under the Transaction Agreements as IMS may from time to time
reasonably request to the extent reasonably necessary to plan to integrate, as
applicable, the operations and activities of the CD


                                      -27-



Business with the Company and PGIO, and (iii) furnish IMS and its
Representatives with such additional financial, operating, and other data and
information relating to the portions of PGIO that will perform services under
the Transaction Agreements as IMS may reasonably from time to time request to
the extent reasonably necessary to plan to integrate, as applicable, the
operations and activities of the CD Business with the Company and PGIO; provided
that any such investigation by IMS shall be conducted in such a manner as not to
interfere unreasonably with the normal operations of PGIO.

          Section 4.3 Conduct of Business. (a) From the date hereof through the
Closing Date, IMS and IMA shall (x) except as set forth in Section 4.3(a) of the
Disclosure Schedule, conduct the CD Business only in the Ordinary Course of
Business, (y) use their commercially reasonable efforts to preserve the CD
Business intact and (z) use their commercially reasonable efforts to keep
available to the CD Business the services of its present officers, employees,
consultants and agents, maintain its present vendors, customers, suppliers and
distributors and preserve and enhance its goodwill. Without limiting the
generality of the foregoing:

          (b) Except as set forth in Section 4.3(b) of the Disclosure Schedule,
from the date hereof through the Closing Date, except as otherwise expressly
required or permitted pursuant to this Agreement or in connection with the
Restructuring, neither IMS nor IMA shall, without the prior written consent of
PGIO which consent shall not be unreasonably withheld, take or cause to be taken
any of the following actions with respect to the CD Business:

          (i) (A) sell, transfer, license, mortgage, lease or otherwise dispose
     of or agree to sell, transfer, license, mortgage, lease or otherwise
     dispose of or otherwise encumber or subject to any Lien, other than a
     Permitted Lien or any Lien that will be unconditionally and fully released
     prior to the Closing, any Purchased Assets, which are material,
     individually or in the aggregate, to the CD Business (excluding sales of
     inventory in the Ordinary Course of Business) or (B) acquire any assets,
     except in the Ordinary Course of Business, which are material, individually
     or in the aggregate, to the CD Business except for any such acquisitions
     set forth in IMA's current budget applicable the CD Business previously
     provided to PGIO or (ii) any other acquisition that will be offered to the
     Company pursuant to or on terms consistent with Article 12 of the Limited
     Liability Company Agreement;

          (ii) (x) increase or adjust in any manner the compensation (wages,
     salaries, bonuses or other compensation) of the employees of the CD
     Business or any of its consultants or agents that will become consultants
     or agents of the Company pursuant to this Agreement, unless such increase
     or adjustment is pursuant to Law or any applicable collective bargaining
     agreement or any existing agreement with such Person and except for
     increases in the compensation of employees of the CD Business made
     consistently with past practice and in the Ordinary Course of Business or
     (y) except in the Ordinary Course of Business, hire or dismiss (except for
     cause or breach or upon termination of the applicable engagement) any
     officer or significant employee of the CD Business, any other employee of
     the CD Business whose compensation is in excess of US$100,000 per annum, or
     any sales agent or consultant of the CD Business, except as otherwise
     contemplated by this Agreement;


                                      -28-



          (iii) make any material capital expenditures or improvements in the CD
     Business not provided for in the current budget for the CD Business
     previously provided to PGIO;

          (iv) cancel or waive any material claim or right relating to the CD
     Business;

          (v) cancel without replacement or reduce in any material respect any
     of the insurance coverages for the CD Business;

          (vi) except for actions permitted or required by this Agreement or
     necessary to consummate the transactions contemplated hereby, take any
     action or fail to take any action that permits any Governmental License
     material to the conduct of the CD Business to expire, be cancelled or be
     amended in a manner adverse to the CD Business;

          (vii) incur any obligation under any Business Contract or accounts
     payable of the CD Business, in each case that are to be Assumed
     Liabilities, other than in the Ordinary Course of Business;

          (viii) amend or terminate any Business Contract or Governmental
     License material to the conduct of the CD Business to which IMS or IMA is a
     party, except amendments or terminations of such Business Contracts or
     Governmental Licenses that are in the Ordinary Course of Business;

          (ix) except as required by applicable Law or any judgment arising from
     any Legal Proceeding, make any commitment to or incur liability to any
     labor organization that represents, purports to represent or is attempting
     to represent, employees of the CD Business;

          (x) make any material change of the policies or practices with respect
     to the CD Business;

          (xi) make any material change in any method of accounting or auditing
     practice, principle or policy of the CD Business, change or revalue any
     material assets or make or change any Tax election or tax accounting method
     relating to the CD Business except, in each case, as required by GAAP or
     any applicable Law;

          (xii) collect the accounts receivable relating to the CD Business
     other than in the Ordinary Course of Business;

          (xiii) write-down of the value of any of the Contributed Assets except
     in the Ordinary Course of Business or as required by GAAP;

          (xiv) engage in any other extraordinary corporate transactions that
     would materially impede the transactions contemplated by this Agreement; or

          (xv) agree, whether in writing or otherwise, to take any of the
     actions set forth in Sections 4.3(b)(i)-(xiv).


                                      -29-



          (c) From the date hereof through the Closing Date, IMS and IMA shall:

          (i) maintain and purchase adequate levels of inventories to carry on
     the CD Business in the Ordinary Course of Business;

          (ii) make capital expenditures in accordance in all material respects
     with the budget for the CD Business previously provided to PGIO;

          (iii) pay and discharge its liabilities and obligations, including
     accounts payable, with respect to the CD Business in the Ordinary Course of
     Business;

          (iv) to the extent permitted by applicable Law, confer with PGIO
     concerning operation matters of a material nature with respect to the CD
     Business;

          (v) use commercially reasonable efforts to preserve the
     confidentiality of all trade secrets eligible for protection under
     applicable trade secret law and material to the operation of the CD
     Business; and

          (vi) to the extent permitted by applicable Law, otherwise report
     periodically to PGIO concerning the status of the operations and finances
     of the CD Business.

          (d) PGIO and the Company (i) shall take no action, nor make any public
announcement or any other disclosure concerning any actions, the effect of which
may be to frustrate IMS's and IMA's ability to fulfill their obligations under
this Section 4.3, and (ii) shall use commercially reasonable efforts to assist
IMS and IMA in fulfilling their respective obligations under the preceding
sentence, including taking such actions as may be reasonably requested by IMS or
IMA in furtherance of the foregoing.

          Section 4.4 Commercially Reasonable Efforts. Upon the terms and
subject to the conditions set forth in this Agreement, each of the parties
hereto shall use commercially reasonable efforts to take, or cause to be taken,
all actions, and to do, or cause to be done, and to assist and cooperate with
the other parties in doing, all things necessary, proper or advisable to
consummate and make effective, in the most expeditious manner practicable, the
transactions contemplated by this Agreement and the other Transaction
Agreements, including (i) the obtaining of all necessary actions or nonactions,
waivers, consents and approvals from Governmental Entities and the making of all
necessary registrations and filings (including filings with Governmental
Entities, if any) and the taking of all reasonable steps as may be necessary to
obtain an approval or waiver from, or to avoid an action or proceeding by, any
Governmental Entity, (ii) the obtaining of all necessary consents, approvals or
waivers from third parties, and (iii) the execution and delivery of any
additional instruments necessary to consummate the transactions contemplated by
this Agreement and the other Transaction Agreements and to fully carry out the
purposes of this Agreement and the other Transaction Agreements.

          Section 4.5 Public Announcements. No party to this Agreement (nor any
agent or Representative thereof) will make any disclosure or public announcement
with respect to the this Agreement, the other Transaction Agreements and the
transactions contemplated hereby and thereby without the written approval of the
other party; provided that any party may make such disclosure (including filings
with the Securities and Exchange Commission) or public


                                      -30-


announcement if it is advised by counsel that such disclosure or public
announcement is legally advisable in light of the prior public disclosure
practice of such party (in which case such party shall use its reasonable best
efforts to consult with the other party regarding such disclosure or public
announcement prior to the making of such disclosure).

          Section 4.6 Enforcement. All representations, warranties, covenants
and other agreements made by IMS or IMA to the Company herein or in other
Transaction Agreements are also expressly made for the benefit of PGIO and may
be enforced by PGIO both in its own right and on behalf of the Company.

          Section 4.7 Inventory. From and after the Closing Date, with respect
to any inventory of the CD Business that is shipped to customers of the CD
Business prior to the Closing and is returned by such customers ("Returned
Inventory"), the Company shall be entitled to receive such Returned Inventory
and the Company shall credit to such customer the full value of such Returned
Inventory against the applicable Account Receivable.

          Section 4.8 Transfer. (a) IMS shall take all necessary actions to
ensure that any asset that would constitute a Contributed Asset or a Purchased
Asset that is held by a Subsidiary of IMS or IMA (other than any asset that
constitutes an Excluded Asset) are transferred to IMS on or prior to the Closing
Date but in any event in advance of the Closing contemplated by this Agreement
such that such asset is transferred by IMS to PGIO as contemplated hereby. From
and after the Closing, IMS shall, and shall cause IMA to, take, or cause to be
taken, all action necessary to transfer to PGIO (which shall simultaneously
contribute such assets to the Company) without consideration any assets owned by
them or their Affiliates that should have been transferred to PGIO at or prior
to the Closing pursuant to this Agreement.

          (b) To the extent that any list, document, record, written
information, computer file or other computer readable media described in Section
1.2(vi) or 1.2(vii) includes matters unrelated to the CD Business that cannot be
separated by IMS, IMA or a Subsidiary thereof without materially affecting the
Company's use of such list, document, record, written information, computer file
or other computer readable media, IMA and IMS shall provide the PGIO with a
complete copy of such list, document, record, written information, computer file
or other computer readable media; provided that the PGIO shall not acquire any
title to, or rights in, any portion of such list, document, record, written
information, computer file or other computer readable media that is not related
to the CD Business; and provided, further, that the Company shall not use or
disclose any portion of such list, document, record, written information,
computer file or other computer readable media that is not related to the CD
Business.

          Section 4.9 Further Assurances. Each of PGIO, IMS, IMA and the Company
shall execute, following the Closing, such documents and other papers and
perform such further acts as may be reasonably required or desirable to Transfer
all Contributed Assets and Purchased Assets to the Company or PGIO (which shall
simultaneously contribute them to the Company), respectively, and otherwise to
carry out the provisions hereof and the transactions contemplated hereby or to
carry out the provisions of the Contribution Agreement and the transactions
contemplated thereby. The Company (upon the closing under the PGIO Contribution
Agreement) shall perform and discharge the Assumed Liabilities in accordance
with their terms.


                                      -31-



          Section 4.10 Accounts Receivable. On and after the Closing Date, IMS
agrees to promptly remit to the Company any amounts in respect of Accounts
Receivable accrued after the Closing Date that are collected or received by IMS
or its Affiliates. From and after the Closing Date, the Company will ensure that
all invoices delivered to customers are conspicuously marked as payable to the
Company. From and after the Closing Date, IMS agrees to reasonably cooperate
with the Company with respect to the collection of Accounts Receivable.

          Section 4.11 Expenses. Whether or not the Closing occurs, each of the
parties hereto shall bear its own fees and expenses incurred or owed in
connection with this Agreement, the other Transaction Agreements and the
transactions contemplated hereby and thereby and the negotiations thereof
(including any due diligence or other investigation costs relating to such
transactions).

          Section 4.12 Confidentiality. Each party hereto agrees to abide by the
provisions set forth in the Confidentiality Agreement, dated as of December 16,
2005 between The Procter & Gamble Company and IMA, and executed by each of them
relating to confidentiality.

          Section 4.13 [Reserved].

          Section 4.14 Preparation for Transition. Each of IMS and PGIO agrees
to use, and to cause any of its respective Affiliates to, use its commercially
reasonable efforts to cooperate with the other and the Company after the date of
this Agreement in planning to implement any actions with respect to the CD
Business reasonably requested by PGIO in preparation for PGIO or its Affiliates
to be able to provide certain services to the Company upon Closing.

          Section 4.15 Other Subsidiaries. PGIO and IMS agree that there will be
certain costs and expenses associated with the IMA's Subsidiaries listed on
Section 4.15 of the Disclosure Schedule either ceasing to conduct the CD
Business that such entities had conducted or otherwise terminating activities
(including through liquidation, dissolution or similar activity) with respect to
the CD Business. Each of PGIO and IMS agree to bear an equal (50-50) share of
all costs, fees and expenses (other than Taxes which shall be borne by IMS or
its Affiliates) arising from, relating to or resulting from such cessation or
termination of CD Business activities by, or liquidation, dissolution or similar
activity with respect to, such Subsidiaries, including costs, fees and expenses
incurred or to be incurred in connection with employee matters, including
severance or similar costs, cancellation of leases, restructuring costs, fees
and expenses arising from, relating to or resulting from such cessation or
termination. Each of PGIO and IMA shall use commercially reasonable efforts to
implement such cessation or termination as promptly as reasonably practicable
following any decision by IMA or a Subsidiary thereof to so cease or terminate
activities, including sharing estimated costs, fees and expenses and proposed
timelines for such cessation or termination.

          Section 4.16 Compliance with Contractual Obligations. The Company
agrees that it will comply, to the extent applicable, with the provisions of
those agreements set forth in Section 4.16 of the Disclosure Schedule.


                                      -32-



          Section 4.17 Issuance of Shares. Prior to or on the closing of the
PGIO Contribution Agreement:

          (a) IMS, PGIO and the Company shall execute a short form contribution
agreement (or the PGIO Contribution Agreement) and shall procure a certified
translation into French thereof, to be filed with the commercial register at the
Company's registered seat;

          (b) the Shareholders shall approve at a shareholders meeting the
increase of the Company's share capital to issue the Shares in accordance with
Section 1.6; and

          (c) the Shareholders shall resolve to amend the Company's articles of
association so as to reflect the increase of the Company's share capital and the
agreements of the parties to the Shareholder Agreement.

          Section 4.18 Unipath Purchase. To the extent not provided for under
the Contribution Agreement, concurrently with the Closing, the Company or a
Subsidiary of the Company shall purchase (or PGIO shall purchase and
simultaneously contribute to the Company) certain assets and assume certain
liabilities of Unipath Ltd. relating to the research and development activities
for the consumer and diagnostics business pursuant to a purchase agreement which
shall be on mutually agreeable terms with such provisions as are necessary to
comply with applicable law. If the Company or a Subsidiary of the Company
purchases such assets, PGIO shall contribute to the Company the full purchase
price of such assets under the terms of the PGIO Agreement. In each case, the
purchase price provided for in Section 1.6 shall be reduced by the purchase
price paid for such assets.

                                    ARTICLE 5
                                   TAX MATTERS

          Section 5.1 Cooperation. After the Closing, each of the Company, PGIO,
IMS and IMA shall reasonably cooperate in preparing and filing all Tax Returns
to the extent such filing requires providing necessary information, records and
documents relating to the Purchased Assets or the CD Business. Each of the
Company, PGIO, IMS and IMA shall cooperate in the same manner in defending or
resolving any audit, examination or litigation relating to Taxes.

          Section 5.2 Apportioned Obligations. All real property taxes, personal
property taxes and similar ad valorem obligations levied with respect to the
Purchased Assets for a taxable period that includes (but does not end on) the
Closing Date (collectively, the "Apportioned Obligations") shall be apportioned
between the Company and IMA based on the number of days of such taxable period
included in the Pre-Closing Tax Period and the number of days of such taxable
period after the Closing Date (any such portion of such taxable period, the
"Post-Closing Tax Period"). IMA shall be liable for the proportionate amount of
such Apportioned Obligations attributable to the Pre-Closing Tax Period, and the
Company shall be liable for the proportionate amount of such Apportioned
Obligations attributable to the Post-Closing Tax Period.

          Section 5.3 Transfer Taxes. All transfer, value-added, sales, use,
stamp, registration and other such Taxes and fees (including any penalties and
interest) ("Transfer Taxes") incurred in connection with the transactions
contemplated by this Agreement and the


                                      -33-



PGIO Contribution Agreement (including any real property transfer Tax and
similar Tax) shall be borne and paid by IMS. The party required by applicable to
Law to file any Tax Return in respect of any such Transfer Taxes shall file such
Tax Returns and other documentation with respect to all such Transfer Taxes and,
if required by applicable Law, the non-filing party shall join in the execution
of any such Tax Returns and other documentation, provided that any costs, fees,
or other expenses in connection with the foregoing shall be borne by IMS and
IMA.

          Section 5.4 Tax Payments. Apportioned Obligations and Transfer Taxes
shall be timely paid, and all applicable filings, reports and returns shall be
filed, as provided by applicable Law. The paying party shall be entitled to
reimbursement from the non-paying party in accordance with Section 5.2 or 5.3,
as the case may be. Upon payment of any such Apportioned Obligation or Transfer
Tax, the paying party shall present a statement to the non-paying party setting
forth the amount of reimbursement to which the paying party is entitled under
Section 5.2 or 5.3, as the case may be, together with such supporting evidence
as is reasonably necessary to calculate the amount to be reimbursed. The
non-paying party shall make such reimbursement promptly but in no event later
than 10 days after the presentation of such statement.

                                    ARTICLE 6
                              CONDITIONS TO CLOSING

          Section 6.1 Conditions to Each Party's Obligation. The respective
obligations of each of PGIO, IMS, IMA and the Company to enter into and complete
the Closing shall be subject to the satisfaction (or express written waiver by
PGIO and IMA) on or prior to the Closing Date of the following conditions:

          (i) Anti-Trust. Any waiting period (and any extension thereof)
     applicable to this Agreement, the other Transaction Agreements or the
     transactions contemplated hereby or thereby under the HSR Act (or any
     similar Law of any Governmental Authority) shall have been terminated or
     shall have expired.

          (ii) No Injunction or Restraint.

          (A) No temporary restraining order, preliminary or permanent
     injunction or other order or decree issued by any court of competent
     jurisdiction or other legal restraint or prohibition (collectively, "Legal
     Restraints") preventing the consummation of the transactions contemplated
     hereby and by the other Transaction Agreements shall be in effect; and

          (B) There shall not be pending or threatened by any Governmental
     Entity any Legal Proceeding (or by any other Person any Legal Proceeding
     which has a reasonable likelihood of success), (a) challenging or seeking
     to restrain or prohibit the transactions contemplated by this Agreement or
     the other Transaction Agreements or seeking to obtain in connection with
     such transactions any damages that are material in relation to the CD
     Business, (b) seeking to prohibit or limit the ownership or operation by
     the Company of any material portion of their respective businesses or
     assets, or to compel the Company to dispose of, hold separate or license
     any material portion of their respective businesses or


                                      -34-



     assets, as a result of the transactions contemplated by this Agreement and
     the other Transaction Agreements, (c) seeking to impose limitations on the
     ability of PGIO or the Company to acquire or hold, or exercise full rights
     of ownership of, the CD Business or any of the Contributed Assets or the
     Purchased Assets or (d) seeking to prohibit PGIO or the Company from
     effectively controlling in any material respect the CD Business or the
     operation thereof.

          (iii) Shareholder Agreement. The Shareholder Agreement shall have been
     executed and delivered by each party thereto.

          (iv) Contribution Agreement. The closing of the transactions
     contemplated in the Contribution Agreement shall have taken place
     concurrently with the Closing hereunder.

          (v) Senior Lender Consent. IMA shall have received the consent of its
     senior lender to the consummation of the transactions contemplated by, and
     the performance of its and its subsidiaries obligations under (including
     the release of Liens), this Agreement, the Purchase Agreement, and the
     other Transaction Documents, in form and substance reasonably satisfactory
     to PGIO.

          (vi) Bonds. IMA shall either (x) provide an officer's certificate with
     respect to its bonds due 2012 to the effect that the transactions
     contemplated hereby are permitted under the applicable indenture governing
     such bonds (the "Bond Indenture"), as well as a copy of the certificate(s)
     required to be delivered by IMA under Section 4.12(a)(2) of the Bond
     Indenture, or (y) have prepaid in full or defeased such bonds.

          (vii) US CD LLC Transaction. Affiliates of IMS and PGIO shall have
     entered into a mutually agreeable Contribution Agreement and Purchase
     Agreement with respect to certain assets used in the CD Business in the
     United States and the closing thereunder shall have taken place
     concurrently with the Closing hereunder.

          (viii) Unipath Purchase. The closing of the purchase contemplated by
     Section 4.17 shall have taken place concurrently with the Closing
     hereunder.

          (ix) Tax Rulings. Tax rulings from the Swiss taxing authorities shall
     have been received with respect to the transactions contemplated hereby in
     form and substance reasonably satisfactory to IMS, IMA and PGIO.

          Section 6.2 Conditions to PGIO's Obligations. The obligations of PGIO
to enter into and complete the Closing is subject to the satisfaction (or
express written waiver by IMA) on or prior to the Closing Date of the following
conditions:

          (i) Representations, Warranties. The representations and warranties of
     IMS set forth in this Agreement and in the Contribution Agreement shall be
     true and correct as of the Closing Date or such other date that any such
     representation or warranty speaks as of, except where the failure to be
     true and correct would not, individually or in the aggregate (a) have a
     Material Adverse Effect, or (b) materially impair IMS, IMA or the Company's
     ability to consummate the transactions contemplated by this Agreement and


                                      -35-



     the Contribution Agreement or to perform their obligations under this
     Agreement or the other Transaction Agreements.

          (ii) Performance. All the terms, covenants, agreements and conditions
     of this Agreement and the Contribution Agreement to be complied with and
     performed by the Company, IMS and IMA on or before the Closing Date shall
     have been complied with and performed prior to or on the Closing Date
     except where the failure to so perform would not, individually or in the
     aggregate (a) have a Material Adverse Effect, or (b) materially impair the
     Company, IMS or IMA's ability to consummate the transactions contemplated
     by this Agreement or the Contribution Agreement or to perform their
     obligations under this Agreement or the other Transaction Agreements.

          (iii) No Material Adverse Effect. Since the Most Recent Balance Sheet
     Date, there shall not have been a Material Adverse Effect.

          (iv) Consents and Approvals. PGIO shall have received evidence, in
     form and substance reasonably satisfactory to it, that all consents and
     approvals of third parties set forth in Section 3.3(a) of the Disclosure
     Schedule or otherwise required under any Business Contract (in each case
     pursuant to written instruments in form and substance reasonably
     satisfactory to PGIO and without payment of any consideration by PGIO or
     the Company) or from any Governmental Entity in connection with this
     Agreement, the other Transaction Agreements and the transactions
     contemplated hereby and thereby, have been obtained and are in full force
     and effect except for any such consents and approvals the absence of which
     would not (a) have a Material Adverse Effect, or (b) materially impair the
     operation of the CD Business..

          (v) Officers' Certificate. IMS shall have delivered to PGIO a
     certificate, dated the Closing Date and signed by its chief executive
     officer and chief financial officer, confirming the satisfaction of the
     conditions set forth in Section 6.2(i), (ii) and (iii) and such other
     matters as may be reasonably requested by PGIO.

          (vi) Transaction Agreements. Each of IMS, IMA (and, as applicable,
     Subsidiaries thereof) and the Company shall have executed and delivered
     each Transaction Agreement to which it is a party.

          Section 6.3 Conditions to IMS's Obligation. The obligations of IMS to
enter into and complete the Closing is subject to the satisfaction (or express
written waiver by PGIO) on or prior to the Closing Date of the following
conditions:

          (i) Performance. All the terms, covenants, agreements and conditions
     of this Agreement and the Contribution Agreement to be complied with and
     performed by PGIO on or before the Closing Date shall have been complied
     with and performed prior to or on the Closing Date except where the failure
     to so perform would not materially impair PGIO's ability to consummate the
     transactions contemplated by this Agreement or to perform their obligations
     under this Agreement or the other Transaction Agreements.

          (ii) Governmental Consents and Approvals. IMS shall have received
     evidence, in form and substance reasonably satisfactory to it, that
     consents of


                                      -36-



     Governmental Entities required in connection with this Agreement, the other
     Transaction Agreements and the transactions contemplated hereby and
     thereby, have been obtained and are in full force and effect except for any
     such consents and approvals the absence of which would not materially
     impair PGIO or the Company's ability to consummate the transactions
     contemplated by this Agreement and the Contribution Agreement or to perform
     their obligations under this Agreement or the other Transaction Agreements.

          (iii) Transaction Agreements. PGIO or its Affiliates shall have
     executed and delivered each Transaction Agreement to which it is a party.

                                    ARTICLE 7
                                 Indemnification

          Section 7.1 Indemnification of PGIO. From and after the Closing, IMS
shall indemnify PGIO and its Affiliates and the Company (each, a "PGIO
Indemnified Party") against and hold each PGIO Indemnified Party harmless from
any and all Losses suffered or incurred by any such PGIO Indemnified Party
arising from, relating to or otherwise in connection with:

          (i) any breach or inaccuracy of any representation or warranty of IMS
     contained in this Agreement or in the certificates furnished by IMS under
     Section 6.2(v);

          (ii) any breach or failure to perform any covenant or agreement of IMS
     or IMA contained in this Agreement;

          (iii) the operation of the CD Business at any time during the period
     prior to the Closing (except for Assumed Liabilities);

          (iv) a claim by any third Person that any product of the Company, or
     the making, using, selling, offering for sale or importing of any such
     product, has infringed or is infringing the Intellectual Property of such
     Person the subject matter of which relates to lateral flow technology,
     including but not limited to, components and processes used to implement
     lateral flow technology;

          (v) any liability of IMS or its Affiliates related to an Excluded
     Asset and any liability that is not an Assumed Liability, including the
     Excluded Liabilities, including the cost of extinguishing any Permitted
     Lien or Permitted IP Lien securing any such Excluded Liabilities;

          (vi) the operation of the Excluded Businesses;

          (vii) any liability or obligation of IMS or its Affiliates to fund or
     finance any pension or similar liabilities; and

          (viii) any liability arising out of the operation of the IMA
     Facilities;

provided that no PGIO Indemnified Party shall be entitled to be indemnified
pursuant to clause (i) above unless the aggregate of all Losses for which IMS
would, but for this proviso, be liable under clause (i) above or under Section
7.1(i) of the Contribution Agreement or under a purchase


                                      -37-



or contribution agreement in connection with the sale or contribution to US CD
LLC of a portion of the CD Business exceeds on a cumulative basis $3,250,000
(the "IMA Indemnity Threshold"), at which point each PGIO Indemnified Party
shall be entitled to be indemnified for the aggregate Losses and not just
amounts in excess of the IMA Indemnity Threshold (except that the foregoing
proviso shall not apply to any breach of the representations and warranties set
forth in Sections 3.1, 3.2, 3.3, 3.4 and 3.15, or to any act of fraud);
provided, further, that IMS's aggregate liability pursuant to clause (i) of this
Section 7.1 together with any other liability for indemnification for breach of
representation and warranty made by IMS or IMA under the Contribution Agreement
or under a purchase or contribution agreement in connection with the sale or
contribution to US CD LLC of a portion of the CD Business shall not exceed
$81,250,000.

          Section 7.2 Indemnification of IMS. (a) From and after the Closing,
the Company shall indemnify IMS and its Affiliates (each, an "IMA Indemnified
Party") against and hold each IMA Indemnified Party harmless from any and all
Losses suffered or incurred by any such IMA Indemnified Party arising from,
relating to or otherwise in connection with:

          (i) any failure to perform any covenant or agreement of the Company
     contained in this Agreement;

          (ii) the operation of the CD Business (other than with respect to
     Excluded Liabilities or Excluded Assets) at any time at and after the
     Closing; or

          (iii) any Assumed Liability.

          (b) From and after the Closing, PGIO shall indemnify the IMA
Indemnified Parties against and hold each IMA Indemnified Party harmless from
any and all Losses suffered or incurred by any such IMA Indemnified Party
arising from, relating to or otherwise in connection with any failure to perform
any covenant or agreement of PGIO contained in this Agreement.

          Section 7.3 Indemnification Claims. (a) In order for an Indemnified
Party to be entitled to any indemnification provided for under Section 7.1 or
7.2 in respect of, arising out of or involving, a Third Party Claim, such
Indemnified Party must notify the Indemnifying Party in writing of the Third
Party Claim (including in such notice a brief description of the applicable
claims, including damages sought or estimated, to the extent actually known by
the Indemnified Party) within 20 Business Days after receipt by such Indemnified
Party of notice of such Third Party Claim (a "Claim Notice"); provided that
failure to give such notification shall not affect the indemnification provided
under Section 7.1 or 7.2 except to the extent the Indemnifying Party has been
actually prejudiced as a result of such failure. Thereafter, the Indemnified
Party shall deliver to the Indemnifying Party, within 10 Business Days after the
Indemnified Party's receipt thereof, copies of all notices and documents
received by the Indemnified Party relating to such Third Party Claim.

          (b) The Indemnifying Party will be entitled to participate in the
defense thereof and, if it so chooses, to assume the defense thereof (at the
sole cost and expense of the Indemnifying Party) with counsel selected by the
Indemnifying Party provided that (i) the Indemnifying Party provides the
Indemnified Party notice of its election to assume the defense of


                                      -38-



such Third Party Claim within 15 days of receipt of the applicable Claim Notice,
(ii) the Indemnifying Party has the financial resources to pay damages that
could reasonably be expected to arise from such Third Party Claim, and (iii)
such counsel selected by the Indemnifying Party is reasonably satisfactory to
the Indemnified Party. Should the Indemnifying Party so elect to assume the
defense of a Third Party Claim, the Indemnifying Party will not be liable to the
Indemnified Party under this Section 7.3 for any legal expenses subsequently
incurred by the Indemnified Party in connection with the defense thereof other
than reasonable costs of investigation or of assistance as contemplated by this
Section 7.3; provided that (1) if the Indemnified Party reasonably determines,
after conferring with its counsel, that it is advisable for the Indemnified
Party to be represented by separate counsel due to actual or potential conflicts
of interest, the Indemnified Party shall have the right to employ counsel
(limited to one law firm) to represent it and in that event the fees and
expenses of such separate counsel shall be paid by the Indemnifying Party, and
(2) the Indemnifying Party shall be liable for the reasonable fees and expenses
of counsel employed by the Indemnified Party for any period during which the
Indemnifying Party has not assumed the defense thereof (other than during any
period in which the Indemnified Party shall have failed to give the Claim Notice
as provided above). If the Indemnifying Party assumes such defense, the
Indemnified Party shall have the right to participate in the defense thereof and
to employ counsel, at its own expense (except as otherwise provided herein),
separate from the counsel employed by the Indemnifying Party, it being
understood that the Indemnifying Party shall control such defense. If the
Indemnifying Party assumes the defense of the Third Party Claim, it will be
conclusively established for purposes of this Agreement and the Contribution
Agreement that the claims made in that Third Party Claim are within the scope
and subject to indemnification pursuant to this Article 7. Notwithstanding the
foregoing, the Indemnifying Party shall not be entitled to assume the defense of
any Third Party Claim (and shall be liable for the reasonable fees and expenses
of counsel incurred by the Indemnified Party in defending such Third Party
Claim) if the Third Party Claim seeks an order, injunction or other equitable
relief or relief for other than money damages against the Indemnified Party
which the Indemnified Party reasonably determines, after conferring with its
counsel, cannot be separated from any related claim for money damages. The
indemnification required by Section 7.1 or 7.2, as the case may be, shall be
made by prompt payments of the amount thereof during the course of the
investigation or defense, as and when bills are received or the indemnifiable
Loss is incurred. If the Indemnifying Party chooses to defend or prosecute a
Third Party Claim, all the parties hereto reasonably necessary for such defense
or prosecution shall reasonably cooperate in the defense or prosecution thereof,
which cooperation shall include (upon the Indemnifying Party's reasonable
request) the provision to the Indemnifying Party of records and information
which are reasonably relevant to such Third Party Claim, and making employees
available on a mutually convenient basis to provide additional information and
explanation of any material provided hereunder. If the Indemnifying Party
chooses to defend or prosecute any Third Party Claim, the Indemnified Party will
agree to any settlement, compromise or discharge of such Third Party Claim which
the Indemnifying Party may recommend and which by its terms obligates the
Indemnifying Party to pay the full amount of liability in connection with such
Third Party Claim; provided that without the Indemnified Party's consent, the
Indemnifying Party shall not consent to entry of any judgment or enter into any
settlement (x) that provides for injunctive or other nonmonetary relief
affecting the Indemnified Party or (y) that does not include as an unconditional
term thereof the giving by each claimant or plaintiff to such Indemnified Party
of a release from all liability with respect to


                                      -39-



such Third Party Claim. If the Indemnifying Party shall have assumed the defense
of a Third Party Claim, the Indemnified Party shall not admit any liability with
respect to, or settle, compromise or discharge, such Third Party Claim without
the Indemnifying Party's prior written consent (which consent shall not be
unreasonably withheld).

          (c) In order for an Indemnified Party to be entitled to any
indemnification provided for under this Agreement other than in respect of,
arising out of or involving a Third Party Claim, such Indemnified Party shall
deliver notice of such claim with reasonable promptness to the Indemnifying
Party (including in such notice a brief description of the applicable claims,
including damages sought or estimated, to the extent actually known by the
Indemnified Party); provided that failure to give such notification shall not
affect the indemnification provided under Section 7.1 or 7.2 except to the
extent the Indemnifying Party has been actually prejudiced as a result of such
failure.

          Section 7.4 Survival. (a) All representations, warranties, covenants
and agreements of IMS shall survive the execution and delivery hereof and the
Closing hereunder. Except for those representations and warranties (x) in
Sections 3.1, 3.2, 3.3, 3.8, 3.9 (the first sentence thereof only) and 3.24, all
of which representations and warranties shall survive without limitation and (y)
in Sections 3.12, 3.14, 3.18 and 3.21, all of which shall survive for the
applicable statute of limitations, all representations and warranties of IMS and
IMA shall terminate and expire with respect to any theretofore unasserted claim,
on the second anniversary of the Closing Date; provided that to the extent
applicable or related to Business Intellectual Property Controlled but not owned
by IMS or IMA or one of their respective Subsidiaries pursuant to a license from
a third party, the representations and warranties in Section 3.12 shall survive
for so long as IMS's, IMA's or such Subsidiary's rights in such Business
Intellectual Property exist.

          Section 7.5 Sole and Exclusive Remedy. The sole and exclusive remedy
of an Indemnified Party with respect to any and all claims arising out of, in
connection with or relating to the subject matter of this Agreement will be
pursuant to the indemnification provisions set forth in Article 5 hereof, this
Article 7, and without duplication, Articles 5 and 7 of the Contribution
Agreement; provided that nothing in this Section 7.5 will prohibit claims by the
Indemnified Party for equitable relief, common law fraud and intentional
misrepresentation.

                                    ARTICLE 8
                                   TERMINATION

          Section 8.1 Termination. This Agreement may be terminated, and the
transactions contemplated hereby abandoned, at any time prior to the Closing,
only simultaneously with a termination of the Contribution Agreement and as
provided below:

          (a) by mutual written consent of PGIO and IMA;

          (b) by either PGIO or IMA, (i) if the Closing has not occurred by
September 30, 2007 or, if on such date all conditions to the parties'
obligations to consummate the Closing in Article 6 (other than those which by
their nature are satisfied as of the Closing Date) have been satisfied or waived
other than the condition set forth in Section 6.1(i), November 30, 2007 (the
"Outside Date"), unless the failure to effect the Closing is the result of a
material breach of


                                      -40-



this Agreement or the Contribution Agreement by the party seeking to terminate
this Agreement; (ii) if any Governmental Entity issues an order, decree or
ruling or takes any other action permanently enjoining, restraining or otherwise
prohibiting the Closing hereunder or under the Contribution Agreement and such
order, decree, ruling or other action shall have become final and nonappealable;
or (iii) if any condition to the obligation of such party to consummate the
Closing hereunder or under the Contribution Agreement becomes incapable of
satisfaction prior to the Outside Date; provided in each case that the
terminating party is not then in material breach of any representation, warranty
or covenant contained in this Agreement or the Contribution Agreement;

          (c) by PGIO, if IMS or IMA breaches or fails to perform in any
material respect any of their representations, warranties or covenants contained
in this Agreement or the Contribution Agreement, which breach or failure to
perform would give rise to a failure to satisfy the conditions set forth in
Section 6.2(i) or Section 6.2(ii) hereof or of the Contribution Agreement and
cannot be or has not been cured within 30 days after the giving of written
notice to IMA of such breach or the Outside Date, if earlier (provided that PGIO
is not then in material breach of any representation, warranty or covenant
contained in this Agreement and that neither PGIO nor the Company is then in
material breach of any representation, warranty or covenant contained in the
Contribution Agreement);

          (d) by IMS, if PGIO breaches or fails to perform in any material
respect of any of their representations, warranties or covenants contained in
this Agreement or the Contribution Agreement, which breach or failure to perform
would give rise to a failure to satisfy the condition set forth in Section
6.3(i) hereof or of the Contribution Agreement and cannot be or has not been
cured within 30 days after the giving of written notice to PGIO of such breach
or the Outside Date, if earlier (provided that neither IMA nor IMS is then in
material breach of any representation, warranty or covenant in this Agreement or
the Contribution Agreement).

          Section 8.2 Effect of Termination. In the event of termination of this
Agreement as provided in Section 8.1, this Agreement shall forthwith become void
and have no effect, without any liability or obligation on the part of PGIO or
IMS, other than Sections 4.5, 4.11, 4.12, this Section 8.2 and Article 9 which
provisions shall survive such termination, and except to the extent that such
termination results from the willful and material breach by a party of any
representation, warranty or covenant set forth in this Agreement.

          Section 8.3 Amendment. This Agreement may be amended by the parties
hereto at any time; provided that this Agreement may not be amended except by an
instrument in writing signed on behalf of each of the parties.

          Section 8.4 Extension; Waiver. At any time prior to the Closing, the
parties may (a) extend the time for the performance of any of the obligations or
other acts of the other parties, (b) waive any inaccuracies in the
representations and warranties of another party contained in this Agreement or
in any document delivered pursuant to this Agreement or (c) waive compliance
with any of the agreements or conditions of another party contained in this
Agreement. Any agreement on the part of a party to any such extension or waiver
shall be valid only if set forth in an instrument in writing signed on behalf of
such party. The failure of any


                                      -41-



party to this Agreement to assert any of its rights under this Agreement or
otherwise shall not constitute a waiver of such rights.

                                    ARTICLE 9
                               General Provisions

          Section 9.1 Notices. All notices, requests, claims, demands, waivers
and other communications under this Agreement shall be in writing and shall be
by facsimile, courier services or personal delivery to the following addresses,
or to such other addresses as shall be designated from time to time by a Party
in accordance with this Section 9.1:

          if to PGIO:

          c/o Procter & Gamble RHD, Inc.
          One Procter & Gamble Plaza
          Cincinnati, Ohio 45202
          Attention: Corporate Secretary
          Facsimile: 513-983-2611

          with a copy (which shall not constitute notice) to:

          Covington & Burling LLP
          1330 Avenue of the Americas
          New York, New York 10019
          Attention: Scott F. Smith
          Facsimile: 646-441-9056

          if to IMS or IMA:

          51 Sawyer Road
          Suite 200
          Waltham, MA 02453
          Attention: Office of the General Counsel
          Facsimile: 781-647-3939

          with a copy (which shall not constitute notice) to:

          Goodwin  Procter LLP
          Exchange Place
          Boston, MA  02109
          Attention: Scott F. Duggan
          Facsimile: 617-523-1231

All notices and communications under this Agreement shall be deemed to have been
duly given (x) when delivered by hand, if personally delivered, (y) one Business
Day after when delivered to a courier, if delivered by commercial one-day
overnight courier service or (z) when sent, if


                                      -42-



sent by facsimile, with an acknowledgment of sending being produced by the
sending facsimile machine.

          Section 9.2 Definitions. The following capitalized terms have the
following meanings:

          "Affiliate" means, with respect to any Person, a Person who is an
"affiliate" of such first Person within the meaning of Rule 405 under the
Securities Act of 1933, as amended. For purposes of this definition, a Person
shall be deemed to control another Person if it owns or controls 50% or more of
the voting equity of the other Person (or other comparable ownership if the
Person is not a corporation); provided that solely for purposes of this
Agreement, the Company shall not be deemed to be an "Affiliate" of any party
hereto (or such parties' other Affiliates).

          "Business Contract" means any Contract arising or resulting primarily
from or related primarily to the CD Business except for an Excluded Contract.

          "Business Day" means any day other than a Saturday or Sunday or a day
on which banking institutions located in New York City are permitted or required
by Law, executive order or decree of a Governmental Entity to remain closed.

          "Business Registered Intellectual Property" means any and all
Intellectual Property owned by IMS or IMA that is exclusively used in the CD
Business and consisting of (i) patents, patent applications (including
provisional applications), (ii) registered trademarks, applications to register
trademarks, intent-to-use applications, or other registrations or applications
related to trademarks and (iii) registered copyrights and applications for
copyright registration.

          "Code" means the Internal Revenue Code of 1986, as amended.

          "Constitutive Documents" means (i) with respect to a Person that is a
corporation, such Person's certificate or articles of incorporation and by-laws,
(ii) with respect to a Person that is a limited liability company, such Person's
certificate of formation and operating or limited liability company agreement,
(iii) with respect to a Person that is a partnership, such Person's partnership
agreement, (iv) with respect to a Person that is a trust, such Person's trust
instrument or agreement, and (v) with respect to a Person that is a legal entity
(including one of the type described in clauses (i) through (iv)), any
constitutive document of such entity or other document or Contract analogous to
those described in clauses (i) through this clause (v).

          "Contingent Obligation" means, as applied to any Person, any direct or
indirect liability of that Person with respect to any Indebtedness, lease,
dividend, guaranty, letter of credit or other obligation, contractual or
otherwise (the "primary obligation") of another Person (the "primary obligor"),
whether or not contingent, (a) to purchase, repurchase or otherwise acquire such
primary obligations or any property constituting direct or indirect security
therefor, (b) to advance or provide funds (i) for the payment or discharge of
any such primary obligation, or (ii) to maintain working capital or equity
capital of the primary obligor or otherwise to maintain the net worth or
solvency or any balance sheet item, level of income or financial condition of
the primary obligor, (c) to purchase property, securities or services primarily
for the purpose of


                                      -43-



assuring the owner of any such primary obligation of the ability of the primary
obligor to make payment of such primary obligation, or (d) otherwise to assure
or hold harmless the owner of any such primary obligation against loss or
failure or inability to perform in respect thereof. The amount of any Contingent
Obligation shall be deemed to be an amount equal to the stated or determinable
amount of the primary obligation in respect of which such Contingent Obligation
is made or, if not stated or determinable, the reasonably anticipated liability
in respect thereof.

          "Contract" means any loan or credit agreement, bond, debenture, note,
mortgage, indenture, guarantee, lease or other contract, commitment, agreement,
instrument, obligation, undertaking, license, permit, concession, franchise or
legally binding arrangement or understanding, whether written or oral.

          "Contributed Asset" shall have the meaning ascribed to such term in
the Contribution Agreement.

          "Control" or "Controlled" means, when used with respect to any
intellectual property right or other intangible property, and only in such case,
the possession or right of use (whether by license or ownership, or by control
over a Subsidiary having possession or right of use by license or ownership) by
a Person of the ability to grant to the other Person access, right of use or a
license or sublicense as provided herein without violating the terms of any
written contract with any third party.

          "Environmental Law" means any applicable Law and legally binding
administrative or judicial interpretations thereof relating to (i) pollution,
the protection of the environment (including indoor and outdoor air, surface
water, groundwater, wetlands, drinking water supply, surface or subsurface
land), natural resources or health and safety or (ii) the exposure to, or the
manufacture, handling, use, emission, storage, recycling, treatment, generation,
discharge, transportation or disposal of, the release or threatened release of,
or the removal or remediation of Hazardous Materials.

          "Environmental Liability" means any and all Losses arising from or
relating to: (i) failure to comply with any requirement of an Environmental Law;
(ii) failure to obtain, maintain in effect or comply with any required
Environmental Permit; (iii) actual or alleged obligation to undertake
environmental investigation, risk assessment, monitoring, remediation or
restoration or (iv) harm or injury, actual or alleged, to any real property, to
any Person, to public health, or to any natural resource as caused by any
Hazardous Material.

          "Environmental Permits" means all permits, licenses, certificates,
registrations approvals or authorizations issued or required by any
Environmental Law, including all held IMS or IMA facilities that will be used to
manufacture products for the Company under the Manufacturing Agreement.

          "Governmental Entity" means any nation, state, province, county, city
or political subdivision and any official, agency, arbitrator, authority, court,
department, commission, board, bureau, instrumentality or other governmental
entity of any thereof, whether domestic or foreign.

          "Hazardous Materials" means, whether alone or in combination, any and
all materials (including without limitation substances, chemicals, compounds,
mixtures, products or


                                      -44-



byproducts, wastes, pollutants and contaminants) that are (i) listed,
identified, licensed, prohibited, controlled, or regulated pursuant to
Environmental Law; (ii) identified or classified as "hazardous," "toxic,"
"dangerous," "pollutant," "contaminant," "explosive," "corrosive," "flammable,"
"radioactive," "reactive" or "special waste"; (iii) oils, petroleum, petroleum
products, wastes or byproducts, asbestos or asbestos containing materials,
nuclear materials, lead-based paint, polychlorinated biphenyls, urea
formaldehyde or explosives; or that could at some level require investigation,
risk assessment, monitoring, removal, treatment or remediation or otherwise give
rise to liability under any Environmental Law.

          "IMA Facilities" means those manufacturing facilities owned, operated
or leased by IMA or its Subsidiaries that are used in the production of
products.

          "Indebtedness" of any Person means, without duplication, (i) all
indebtedness of such Person for borrowed money, with respect to deposits or
advances of any kind or for the deferred purchase price of property or services
(other than current trade liabilities incurred in the Ordinary Course of
Business and payable in accordance with customary practices and not more than 90
days past due), (ii) all obligations of such Person evidenced by bonds,
debentures, notes or similar instruments, (iii) all obligations (except for
trade payables) of such Person upon which interest charges are customarily paid,
(iv) all obligations of such Person under conditional sale or other title
retention agreements relating to property or assets purchased by such Person,
(v) all Indebtedness of others secured by (or for which the holder of such
Indebtedness has an existing right, contingent or otherwise, to be secured by)
any Lien on property owned or acquired by such Person, whether or not the
obligations secured thereby have been assumed, (vi) all guarantees by such
Person of Indebtedness of others, (vii) all capital lease obligations of such
Person, (viii) all obligations of such Person in respect of interest rate
protection agreements, foreign currency exchange agreements, caps or collar
agreements or other interest or exchange rate hedging arrangements either
generally or under specific contingencies, (ix) all obligations of such Person
as an account party in respect of letters of credit and banker's acceptances,
(x) all obligations of such Person consisting of overdrafts (e.g., cash float
reflected as a negative on the cash line), (xi) all obligations of such Person
pursuant to any deferred compensation agreements and (xii) any Contingent
Obligation of such Person.

          "Indemnified Party" means either a PGIO Indemnified Party or a IMA
Indemnified Party.

          "Indemnifying Party" means (i) with respect to a claim for
indemnification pursuant to Section 7.1, IMS, (ii) with respect to a claim for
indemnification pursuant to Section 7.2(a), the Company and (iii) with respect
to a claim for indemnification pursuant to Section 7.2(b), PGIO.

          "Intellectual Property" means any or all of the following (in each
case in any domestic or foreign jurisdiction): (i) patents (including utility
patents, petty patents, design patents and certificates of invention) and
applications therefor (including provisional, non-provisional, converted
provisional and continued prosecution applications) and all reissues,
reexaminations, revalidations, divisionals, renewals, extensions or restorations
(including any supplementary protection certificate and the like), provisionals,
continuations and continuations-in-part thereof; (ii) inventions, discoveries
and ideas (whether patentable or not), (iii) trade


                                      -45-


secrets, proprietary information, know how, confidential information,
technology, technical data, and all documentation relating to any of the
foregoing and rights to limit the use of disclosure thereof by any Person; (iv)
copyrights, copyright registrations and applications therefor and all other
rights corresponding thereto, and writings and other works that are the subject
matter of such copyrights; (v) trade names, trademarks, service marks, brand
names, certification marks, trade dress and other indications of origin, the
goodwill associated with the foregoing, and the registrations and applications
for registration of any of the foregoing; (vi) databases and data collections
and all rights therein; (vii) computer software including all source code,
object code, firmware, development tools, files, records and data, and all media
on which any of the foregoing is recorded and (viii) Web addresses, sites and
domain names.

          "Knowledge" means in the case of the Company, IMS and IMA, actual
knowledge of the employees listed in Section 9.2(a) of the Disclosure Schedule
assuming each such employee has the knowledge that an employee in a similar
position would reasonably be expected to have.

          "Losses" means any debts, obligations and other liabilities (whether
known or unknown, absolute or contingent, liquidated or unliquidated, due or to
become due, accrued or not accrued, asserted or unasserted or otherwise),
losses, claims, damages, Taxes, diminutions in value, interest obligations,
deficiencies, Judgments, assessments, fines, fees, penalties and expenses
(including amounts paid in settlement, interest, court costs, fees and expenses
of attorneys, accountants, financial advisors, consultants, investigators and
other experts and other expenses of litigation).

          "Material Adverse Effect" means any change, circumstance, development,
state of facts, event or effect (i) that has had or would reasonably be expected
to have a material adverse change or effect (taken alone or in the aggregate
with any other adverse change or effect) in or with respect to the business,
assets, condition (financial or otherwise), or results of operations of the CD
Business other than (a) changes, circumstances, developments, state of facts,
events or effects that affect the U.S. or global economy or capital or financial
markets generally, including changes in interest or exchange rates, (b) changes
in general legal, tax, regulatory, political or economic conditions that, in
each case, generally affect the industries in which the CD Business operates,
(c) acts of war or terrorism or natural disasters, provided that in the case of
clauses (b) and (c) above, the CD Business is not disproportionately affected by
such changes, circumstances, developments, state of facts, events or effects as
compared to the industries in which it operates, taken as a whole; or (ii) that
could reasonably be expected to have a material adverse effect on IMS's ability
to perform its obligations under this Agreement and the other Transaction
Agreements.

          "Permitted IP Liens" means those Liens with respect to Business
Intellectual Property as set forth on Schedule 3.12(a).

          "Permitted Liens" means the following, to the extent not securing
Indebtedness: (i) statutory Liens for Taxes not yet due or payable; (ii) Liens
for assessments and other governmental charges or Liens of landlords, carriers,
warehousemen, mechanics and repairmen incurred in the Ordinary Course of
Business, in each case for sums not yet due and payable or due but not
delinquent or being contested in good faith by appropriate proceedings, (iii)
Liens


                                      -46-



incurred in the Ordinary Course of Business in connection with workers'
compensation, unemployment insurance and other types of social security, and
(iv) Liens set forth in the terms of any Business Contract (except for any Lien
securing Indebtedness) that do not detract the value of, or impair the use of,
such Business Contract.

          "Person" means an individual, corporation, partnership, limited
liability company, joint venture, association, trust, unincorporated
organization or other entity or any Governmental Entity.

          "Product" means each human diagnostics and monitoring product that is
being formulated, developed, manufactured, packaged, tested, marketed,
distributed or sold by or on behalf of IMS or IMA, in each case, as part of the
CD Business.

          "Representatives" means, with respect to a Person, such Person's
legal, financial, internal and independent accounting and other advisors and
representatives.

          "Share" has the meaning ascribed to it in the Shareholder Agreement.

          "Subsidiary" means, with respect to any Person, is an Affiliate
controlled by such Person directly, or indirectly through one or more
intermediaries.

          "Tax" means: (i) any United States federal, state, local and foreign
income, profits, excise, franchise, license, capital, transfer, ad valorem,
wage, severance, occupation, import, custom, gross receipts, payroll, sales,
value added, recording, registration, intangible, documentary, goods and
services, real estate, franchise, employment, use, stamp, alternative or add-on
minimum, environmental, withholding and any other tax, duty, assessment or
governmental tax charge of any kind whatsoever, imposed or required to be
withheld by any taxing authority; (ii) any interest, additions to tax, or
penalties applicable or related thereto and (iii) any amount described in clause
(i) or (ii) for which a Person is liable as a successor or transferee, or by
Contract, indemnity or otherwise.

          "Tax Return" means any return, declaration, report, claim for refund,
or information return or statement or other form relating to Taxes filed or
required to be filed with a Governmental Entity, including any schedule or
attachment thereto, and including any amendment thereof.

          "Third Party Claim" means any Legal Proceeding, claim or demand by a
Person other than a Person from which indemnification may be sought under
Article 7.

          "Trademarks" means trade names, trademarks, service marks, brand
names, certification marks, trade dress and other indications of origin, the
goodwill associated with the foregoing, and the registrations and applications
for registration of any of the foregoing.

          "Transaction Agreements" means, collectively, this Agreement, the
Contribution Agreement, the Guarantee, the Shareholder Agreement, the License
Agreements, the Finished Product Purchase Agreement, the Distribution
Arrangements, the Transition Services Agreement, and the PGIO Contribution
Agreement.


                                      -47-



          "Transferred Employees" means each employee of IMA, IMS or any of
their respective Affiliates who is hired by the Company.

          Section 9.3 Descriptive Headings; Certain Interpretations. The table
of contents and headings contained in this Agreement are for reference purposes
only and shall not control or affect the meaning or construction of this
Agreement. Except where expressly stated otherwise in this Agreement, the
following rules of interpretation apply to this Agreement: (i) "or" is not
exclusive and "include", "includes" and "including" are not limiting; (ii)
"hereof", "hereto", "hereby", "herein" and "hereunder" and words of similar
import when used in this Agreement refer to this Agreement as a whole and not to
any particular provision of this Agreement; (iii) "date hereof" refers to the
date of this Agreement; (iv) "extent" in the phrase "to the extent" means the
degree to which a subject or other thing extends, and such phrase does not mean
simply "if"; (v) definitions contained in this Agreement are applicable to the
singular as well as the plural forms of such terms; (vi) references to an
agreement or instrument mean such agreement or instrument as from time to time
amended, modified or supplemented; (vii) references to a Person are also to its
permitted successors and assigns; (viii) references to an "Article", "Section",
"Clause", "Exhibit" or "Schedule" refer to an Article of, a Section or Clause
of, or an Exhibit or Schedule to, this Agreement; (ix) words importing the
masculine gender include the feminine or neuter and, in each case, vice versa
and (x) references to a Law include any amendment or modification to such Law
and any rules or regulations issued thereunder, whether such amendment or
modification is made, or issuance of such rules or regulations occurs, before or
after the date of this Agreement.

          Section 9.4 Assignment. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned, in whole or in part, by
operation of Law or otherwise by any of the parties hereto without the prior
written consent of the other parties hereto. Any purported assignment without
such consent shall be void. Subject to the preceding sentence, this Agreement
shall be binding upon, inure to the benefit of and be enforceable by, the
parties hereto and their respective successors and assigns.

          Section 9.5 Specific Enforcement. The parties hereto agree that
irreparable damage would occur in the event that any of the provisions of this
Agreement were not performed in accordance with their specific terms or were
otherwise breached. It is accordingly agreed that the parties hereto shall be
entitled to an injunction or injunctions to prevent breaches of this Agreement
and to enforce specifically the terms and provisions of this Agreement, this
being in addition to any other remedy to which they are entitled at Law, in
equity or otherwise.

          Section 9.6 Entire Agreement. The Transaction Agreements contain the
entire agreement and understanding between the parties hereto with respect to
the subject matter hereof and thereof and supersede all prior agreements and
understandings, both written and oral, with respect to the transactions
contemplated thereby.

          Section 9.7 No Third-Party Beneficiaries. This Agreement is for the
sole benefit of the parties hereto and their permitted successors and assigns
and nothing herein express or implied shall give or be construed to give to any
Person, other than the parties hereto and such successors and assigns, any legal
or equitable rights or remedies.


                                      -48-



          Section 9.8 Counterparts. This Agreement may be executed in one or
more counterparts, all of which shall be considered one and the same agreement
and shall become effective when one or more counterparts have been signed by
each of the parties hereto and delivered to the other parties hereto. Delivery
of an executed counterpart of this Agreement by facsimile or other electronic
transmission shall be as effective as delivery of a manually executed
counterpart of this Agreement.

          Section 9.9 Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of New York, regardless of
the laws that might otherwise govern under applicable principles of conflicts of
laws thereof.

          Section 9.10 Arbitration. (a) In the event that a material dispute
relating to this Agreement arises between the parties, good faith discussions
and negotiations shall be conducted by a designated management representative of
each party to resolve such dispute. If such representatives are unable to
resolve the dispute within 10 Business Days after the initial request for
negotiations at this level, then the matter shall be referred to the most senior
executive officer of each of party, who shall attempt, through good faith
negotiations and discussions, to resolve the dispute within five Business Days
immediately following such initial 10 Business Day period. If the dispute is not
resolved within the aforementioned five Business Day period, then the matter may
be submitted for binding arbitration as provided in Section 9.10(b). This
Section 9.10(a) shall not apply to or limit the right of a party to seek a
temporary restraining order or other provisional or permanent remedy to preserve
the status quo or to prevent irreparable harm.

          (b) Except as otherwise provided in this Agreement, any controversy or
claim arising out of or relating to this Agreement, or the breach hereof, that
has not been resolved in accordance with Section 9.10(a) shall be settled by
binding arbitration in the following manner:

          (i) If a party intends to commence arbitration to resolve a dispute
     arising under this Agreement, such party shall provide written notice (the
     "Arbitration Request") to the other party of such intention and the issues
     for resolution. Within one Business Day after the receipt of the
     Arbitration Request, the other party may, by written notice, add additional
     issues for resolution, provided that such issues are eligible for
     arbitration under this Section 9.10(b).

          (ii) Arbitration shall be held in the continental US under the CPR
     Rules for Non-Administered Arbitration. The arbitration shall be conducted
     by three arbitrators who are knowledgeable in the subject matter at issue
     in the dispute. One arbitrator will be selected by PGIO, one arbitrator
     will be selected by IMS, and the third arbitrator will be selected by
     mutual agreement of the two arbitrators selected by the parties. Each party
     shall submit to such arbitrators its proposed ruling and remedy for each
     issue that is the subject of arbitration. The arbitrators shall, within 15
     days after the conclusion of the arbitration hearing, issue a written award
     and statement of decision describing the essential findings and conclusions
     on which the award is based, including the calculation of any damages
     awarded. Any such award and decision shall reflect the proposed ruling and
     remedy of one of the parties as to each disputed issue. The arbitrators
     shall be authorized to award compensatory damages, but shall not be
     authorized to award non-economic damages or punitive damages, or to reform,
     modify or materially change this


                                      -49-



     Agreement or any other agreements contemplated hereunder. The arbitrators
     shall also be authorized to grant any temporary, preliminary or permanent
     equitable remedy or relief the arbitrators deem just and equitable and
     within the scope of this Agreement, including an injunction or order for
     specific performance. The award of the arbitrators shall be the sole and
     exclusive remedy of the parties (except for any other remedies set forth in
     this Agreement). The arbitrators may proceed to an award, notwithstanding
     the failure of either party to participate in the proceedings. Judgment on
     the award rendered by the arbitrators may be enforced in any court having
     competent jurisdiction thereof, subject only to revocation on grounds of
     fraud or clear bias on the part of the arbitrators.

          Section 9.11 Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule or Law,
or public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
materially adverse to any party. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the parties hereto
shall negotiate in good faith to modify this Agreement so as to effect the
original intent of the parties hereto as closely as possible in an acceptable
manner to the end that transactions contemplated hereby are fulfilled to the
extent possible.

          Section 9.12 Nonassignable Contracts. (a) In the event that the
transactions contemplated by this Agreement involve the assignment of rights
under any contract, agreement, license, claim, or of other rights, assets, or
property, which are nonassignable without the consent, authorization or approval
of the other party or parties thereto or any other third party (a "Nonassignable
Contract"), and such consent, authorization or approval shall not have been
obtained by IMS or IMA prior to the Closing Date, then, notwithstanding anything
in this Agreement to the contrary (and without relieving IMS or IMA of any
liability or obligation it may have under this Agreement), any such
Nonassignable Contract shall not be assigned (except any rights to receive
payments thereunder) until all such necessary consents, authorizations and
approvals with respect to such Nonassignable Contract shall have been obtained,
whereupon IMS or IMA shall, without further consideration, promptly assign or
cause the assignment of same to the Company.

          (b) Until such time, if any, as all the necessary consents,
authorizations and approvals shall have been obtained for the assignment of a
Nonassignable Contract, IMS or IMA, at its own expense, shall retain, preserve
and hold in trust for the sole benefit of the Company all rights, interests and
claims with respect to such Nonassignable Contract from and after the Closing
Date. IMS or IMA shall use commercially reasonable efforts to obtain such
consents, authorizations and approvals and shall, at the request of PGIO or the
Company, use commercially reasonable efforts to take such actions, enter into
such arrangements and do or cause to be done such things, as shall be reasonably
requested by PGIO or the Company to provide, make available and secure for the
Company's benefits all of the funds, income and payments that would have inured
to the Company upon an outright assignment of such Nonassignable Contract to the
extent permitted by Law and by contract. Except as provided by Law or the
Nonassignable Contract in question, the performance obligations of IMS or IMA
under such Nonassignable Contract as shall arise both (x) exclusively in respect
of periods from and after the date on which the aforesaid funds are so made
available thereunder and


                                      -50-



(y) exclusively in connection with the exploitation of such funds by the
Company, shall be deemed to be sublicensed or subcontracted to the Company but
only until such time (if any) as the rights under such Nonassignable Contract
have been effectively assigned to the Company. IMS and IMA shall pay over to the
Company any amounts received by them after the Closing Date in respect of any
Nonassignable Contract, and the Company shall pay over to IMS and IMA any
amounts paid, or expenses incurred, by them in performing any Nonassignable
Contract after the Closing Date.

                            [SIGNATURE PAGE FOLLOWS]


                                      -51-



          IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed as of the day and year first herein above written.

                                        INVERNESS MEDICAL SWITZERLAND GmbH


                                        By: /s/ Paul T. Hempel
                                            ------------------------------------
                                        Name:
                                              ----------------------------------
                                        Title:
                                               ---------------------------------


                                        PROCTER & GAMBLE INTERNATIONAL
                                        OPERATIONS, SA


                                        By: /s/ Jeffrey D. Weedman
                                            ------------------------------------
                                        Name:
                                              ----------------------------------
                                        Title:
                                               ---------------------------------


                                        IMJV GmbH


                                        By: /s/ Anne T. Warner
                                            ------------------------------------
                                        Name:
                                              ----------------------------------
                                        Title:
                                               ---------------------------------

                  [SIGNATURE PAGE TO ASSET PURCHASE AGREEMENT]

EX-2.11

                                                                    Exhibit 2.11

================================================================================

                             CONTRIBUTION AGREEMENT

                          dated as of December 22, 2006

                                      among

                       INVERNESS MEDICAL SWITZERLAND GMBH,

                  PROCTER & GAMBLE INTERNATIONAL OPERATIONS, SA

                                       and

                                    IMJV GMBH

================================================================================



                                TABLE OF CONTENTS



                                                                            PAGE
                                                                            ----
                                                                         
ARTICLE 1 FORMATION AND CONTRIBUTIONS....................................     2
   Section 1.1 Formation of the Company..................................     2
   Section 1.2 Transfer of the Contributed CD Business...................     2
   Section 1.3 Excluded Assets...........................................     4
   Section 1.4 Assumption of Liabilities.................................     6
   Section 1.5 Liabilities Not Assumed by the Company....................     7
   Section 1.6 Shares....................................................     9
   Section 1.7 Post-Closing Working Capital Adjustment...................     9

ARTICLE 2 CLOSING........................................................    10
   Section 2.1 Closing...................................................    10
   Section 2.2 Closing Deliveries........................................    10

ARTICLE 3. REPRESENTATIONS AND WARRANTIES OF IMS AND IMA.................    12
   Section 3.1  Organization and Existence...............................    12
   Section 3.2  Power and Authority; Binding Agreement...................    12
   Section 3.3  Noncontravention.........................................    12
   Section 3.4  Compliance with Laws.....................................    13
   Section 3.5  Governmental Licenses....................................    14
   Section 3.6  Financial Statements.....................................    14
   Section 3.7  Absence of Changes or Events.............................    15
   Section 3.8  Undisclosed Liabilities..................................    15
   Section 3.9  Assets other than Real Property..........................    16
   Section 3.10 [Reserved]...............................................    16
   Section 3.11 Contracts................................................    16
   Section 3.12 Intellectual Property....................................    18
   Section 3.13 Legal Proceedings........................................    21
   Section 3.14 Tax Matters..............................................    21
   Section 3.15 Insurance................................................    22
   Section 3.16 Benefit Plans............................................    22
   Section 3.17 Employee and Labor Matters...............................    23
   Section 3.18 Environmental Matters....................................    23
   Section 3.19 Transactions with Affiliates.............................    25
   Section 3.20 Certain Business Practices...............................    25
   Section 3.21 Regulatory Compliance....................................    25
   Section 3.22 Product Liability Claims; Product Recalls................    27
   Section 3.23 Product Registrations....................................    27
   Section 3.24 Purchase for Investment..................................    27
   Section 3.25 Brokers' Fees............................................    28

ARTICLE 4 COVENANTS......................................................    28
   Section 4.1  Filings..................................................    28
   Section 4.2  Access and Investigation.................................    28
   Section 4.3  Conduct of Business......................................    29



                                       i



                                                                         
   Section 4.4  Commercially Reasonable Efforts..........................    31
   Section 4.5  Public Announcements.....................................    31
   Section 4.6  Enforcement..............................................    32
   Section 4.7  Inventory................................................    32
   Section 4.8  Transfer.................................................    32
   Section 4.9  Further Assurances.......................................    32
   Section 4.10 Accounts Receivable......................................    32
   Section 4.11 Expenses.................................................    33
   Section 4.12 Confidentiality..........................................    33
   Section 4.13 [Reserved]...............................................    33
   Section 4.14 Preparation for Transition...............................    33
   Section 4.15 Other Subsidiaries.......................................    33
   Section 4.16 Compliance with Contractual Obligations..................    33
   Section 4.17 Issuance of Shares.......................................    33
   Section 4.18 Unipath Purchase.........................................    34

ARTICLE 5 TAX MATTERS....................................................    34
   Section 5.1 Cooperation...............................................    34
   Section 5.2 Apportioned Obligations...................................    34
   Section 5.3 Transfer Taxes............................................    34
   Section 5.4 Tax Payments..............................................    35
   Section 5.5 Transaction Treated as a Contribution.....................    35

ARTICLE 6 CONDITIONS TO CLOSING..........................................    35
   Section 6.1 Conditions to Each Party's Obligation.....................    35
   Section 6.2 Conditions to the Company's Obligations...................    36
   Section 6.3 Conditions to IMS's Obligation............................    37

ARTICLE 7 INDEMNIFICATION................................................    38
   Section 7.1 Indemnification of PGIO...................................    38
   Section 7.2 Indemnification of IMS....................................    39
   Section 7.3 Indemnification Claims....................................    39
   Section 7.4 Survival..................................................    41
   Section 7.5 Sole and Exclusive Remedy.................................    41

ARTICLE 8 TERMINATION....................................................    41
   Section 8.1 Termination...............................................    41
   Section 8.2 Effect of Termination.....................................    42
   Section 8.3 Amendment.................................................    42
   Section 8.4 Extension; Waiver.........................................    42

ARTICLE 9 GENERAL PROVISIONS.............................................    43
   Section 9.1 Notices...................................................    43
   Section 9.2 Definitions...............................................    44
   Section 9.3 Descriptive Headings; Certain Interpretations.............    49
   Section 9.4 Assignment................................................    49
   Section 9.5 Specific Enforcement......................................    49




                                       ii



                                                                         
   Section 9.6 Entire Agreement..........................................    49
   Section 9.7 No Third-Party Beneficiaries..............................    49
   Section 9.8 Counterparts..............................................    50
   Section 9.9 Governing Law.............................................    50
   Section 9.10 Arbitration..............................................    50
   Section 9.11 Severability.............................................    51
   Section 9.12 Nonassignable Contracts..................................    51




                                      iii



                             INDEX OF DEFINED TERMS

                                                                          
- --A--
Accounts Receivable.......................................................     2
Affiliate.................................................................    44
Agreement.................................................................     1
Apportioned Obligations...................................................    34
Arbitration Request.......................................................    50
Assignment and Assumption Agreement.......................................    10
Assumed Accounts Payable..................................................     6
Assumed Liabilities.......................................................     6

- --B--
Benefit Plans.............................................................    22
Bond Indenture............................................................    36
Business Contract.........................................................    44
Business Contributed Intellectual Property................................     4
Business Day..............................................................    44
Business Intellectual Property............................................    18
Business Registered Intellectual Property.................................    44

- --C--
CD Business...............................................................     1
CD Financial Statements...................................................    15
Claim Notice..............................................................    39
Closing...................................................................    10
Closing Date..............................................................    10
Closing Date Balance Sheet................................................     9
COBRA.....................................................................    23
Code......................................................................    44
Company...................................................................     1
Constitutive Documents....................................................    44
Contingent Obligation.....................................................    44
Contract..................................................................    45
Contributed Assets........................................................     2
Contributed CD Business...................................................     1
Contributed Inventory.....................................................     2
Contributed Leases........................................................     2
Control...................................................................    45
Controlled................................................................    45

- --D--
Determination Date........................................................    10
Distribution Agreement....................................................     2

- --E--
Environmental Law.........................................................    45
Environmental Liability...................................................    45
Environmental Permits.....................................................    45
ERISA.....................................................................    22
Exchange Act..............................................................    13
Excluded Assets...........................................................     4
Excluded Businesses.......................................................     5
Excluded Contracts........................................................     5
Excluded Liabilities......................................................     7

- --F--
FDA.......................................................................    13
FDCA......................................................................    25
Finished Product Purchase Agreement.......................................     2

- --G--
GAAP......................................................................    14
General Limitations.......................................................    12
Governmental Entity.......................................................    45
Governmental Licenses.....................................................     3
Guarantee.................................................................     1

- --H--
Hazardous Materials.......................................................    45
House Marks...............................................................     5
HSR Act...................................................................    13

- --I--
IMA.......................................................................     1
IMA Audited Financial Statements..........................................    14
IMA Balance Sheet Date....................................................    14
IMA Facilities............................................................    46
IMA Financial Statements..................................................    14
IMA Indemnified Party.....................................................    39
IMA Indemnity Threshold...................................................    39
IMA Interim Balance Sheet.................................................    14
IMA Unaudited Financial Statements........................................    14
IMS.......................................................................     1
Indebtedness..............................................................    46
Indemnified Party.........................................................    46
Indemnifying Party........................................................    46
Intellectual Property.....................................................    46
IP License Agreement......................................................    11
IP Liens..................................................................    18
IRS.......................................................................    22

- --J--
Judgment..................................................................    13

- --K--
Knowledge.................................................................    47

- --L--
Labeling..................................................................    26
Law.......................................................................    13




                                       iv



                                                                          
Legal Proceeding..........................................................     7
Legal Restraints..........................................................    35
Lien......................................................................    13
Losses....................................................................    47

- --M--
Material Adverse Effect...................................................    47
Most Recent Balance Sheet.................................................    15
Most Recent Balance Sheet Date............................................    15

- --N--
Nonassignable Contract....................................................    51

- --O--
Ordinary Course of Business...............................................    15
Outside Date..............................................................    41

- --P--
Permitted IP Liens........................................................    47
Permitted Liens...........................................................    47
Person....................................................................    48
PGIO......................................................................     1
PGIO Indemnified Party....................................................    38
Post-Closing Tax Period...................................................    34
Product...................................................................    48
Product Registrations.....................................................    27
Purchase Agreement........................................................     1
Purchased Asset...........................................................    48
Purchased CD Business.....................................................     1

- --R--
Representatives...........................................................    48
Restructuring.............................................................     1
Returned Inventory........................................................    32

- --S--
Scheduled Contracts.......................................................    16
Securities Act............................................................    27
Share.....................................................................    48
Shareholder Agreement.....................................................     1
Shareholders..............................................................    48
Subsidiary................................................................    48

- --T--
Tax.......................................................................    48
Tax Return................................................................    48
Third Party Claim.........................................................    48
Trademarks................................................................    48
Transaction Agreements....................................................    48
Transfer..................................................................     2
Transfer Taxes............................................................    34
Transferred Employee......................................................    49
Transition Services Agreement.............................................    11

- --W--
Working Capital...........................................................     9
Working Capital Target....................................................     9




                                       v


          CONTRIBUTION AGREEMENT, dated as of December 22, 2006 (this
          "Agreement"), among Inverness Medical Switzerland GmbH, a Swiss
          company ("IMS"), Procter & Gamble International Operations, SA, a
          Swiss company ("PGIO") and IMJV GmbH, a Swiss company (the "Company").

                                  INTRODUCTION

          IMS formed the Company on December 19, 2006. On the Closing Date,
PGIO, IMS and the Company will enter into a shareholder agreement in a form to
be mutually agreed upon (the "Shareholder Agreement"), which shall establish the
respective rights and obligations of PGIO and IMS with respect to the Company.

          IMS, Inverness Medical Innovations, Inc. ("IMA") and certain of their
Affiliates are in the business of developing, manufacturing, marketing, selling
and distributing human diagnostics and monitoring products for sale and
distribution through over-the-counter channels, including retail outlets and
emerging channels located in such retail outlets (the "CD Business").

          Prior to the Closing Date, IMA and certain of its Subsidiaries
(including IMS) will restructure (the "Restructuring") their businesses.

          IMS and its Affiliates contemplate selling certain assets and
contributing certain assets and liabilities of the CD Business, other than
assets used in, and liabilities arising from, the Excluded Fields (as defined in
the License Agreement).

          On the Closing Date and subject to the terms set forth in this
Agreement (including with respect to the Excluded Assets and Excluded
Liabilities), IMS will contribute to the Company assets of the CD Business, and
the Company will assume certain liabilities of the CD Business, in each case, as
set forth in this Agreement (the "Contributed CD Business").

          Concurrently with the execution of this Agreement, PGIO is entering
into an Asset Purchase Agreement (the "Purchase Agreement") with IMS, pursuant
to which PGIO will purchase from IMS assets of the CD Business (the "Purchased
CD Business") on terms and conditions set forth in the Purchase Agreement. Such
purchase and sale will be consummated concurrently with the Closing hereunder,
and simultaneously with the Closing, PGIO will contribute the Purchased CD
Business into the Company pursuant to the PGIO Contribution Agreement (as
defined in the Purchase Agreement).

          On the Closing Date, IMA will execute a guarantee (the "Guarantee")
pursuant to which IMA guarantees all of IMS' obligations under this Agreement
and the Purchase Agreement.

          As a consideration for the contribution of the Contributed CD Business
by IMS to the Company, IMS will receive one quota (one Share representing, as of
the Closing, 50% of the Company's outstanding Shares). As a consideration for
the contribution by PGIO of the Purchased CD Business to the Company, PGIO will
receive one quota (one Share representing, as of the Closing, 50% of the
Company's outstanding Shares).


                                       1



          On the Closing Date, the Company and IMA and certain of its
Subsidiaries will enter into a mutually agreeable finished product purchase
agreement (the "Finished Product Purchase Agreement"), pursuant to which IMA
and/or such Subsidiaries will manufacture and sell to the Company the products
described therein.

          On the Closing Date, the Company and certain Affiliates of PGIO will
enter into distribution and commissionaire arrangements pursuant to which such
Affiliates of PGIO will distribute and act as sales agents for products of the
Company (collectively, the "Distribution Arrangements").

          Capitalized terms shall have the meanings assigned to them in Section
9.2 or as otherwise provided in this Agreement.

          In consideration of the foregoing and the respective representations,
warranties, covenants and agreements set forth herein, the parties hereto agree
as follows:

                                   ARTICLE 1
                           FORMATION AND CONTRIBUTIONS

          Section 1.1 Formation of the Company. Prior to the date hereof, IMS
has formed the Company and has made an initial contribution of CHF 20,000.00 to
capital of the Company in exchange for 100% of the outstanding Shares of the
Company.

          Section 1.2 Transfer of the Contributed CD Business. Except for the
Excluded Assets as provided in Section 1.3 and without duplication of the
Purchased CD Business, at the Closing and with effect as of the Closing Date,
IMS shall assign, transfer, convey and deliver to the Company, free and clear of
all Liens except Permitted Liens (the "Transfer"), and the Company shall acquire
from IMS, all of the right, title and interest of IMS in and to any and all of
the assets, properties, rights and business of the Contributed CD Business of
every kind, nature, type and description, real, personal and mixed, tangible and
intangible, whether known or unknown, fixed or unfixed, or otherwise, whether or
not specifically referred to in this Agreement and whether or not reflected on
the books and records of IMS (collectively, the "Contributed Assets"), including
the following:

          (i) all accounts receivable, and notes receivable (if any), of any
     nature arising from the Contributed CD Business existing on the Closing
     Date (the "Accounts Receivable");

          (ii) all supplies and finished goods, including goods in transit, as
     sold, used or held for use as part of the Contributed CD Business (the
     "Contributed Inventory");

          (iii) all tangible assets, furniture, fixtures and property, if any,
     used by the Transferred Employees upon the hiring of such Transferred
     Employees;

          (iv) the Business Contracts (other than Excluded Contracts);

          (v) all licenses, registrations, notifications, franchises,
     qualifications, provider numbers, permits, approvals, clearances and
     authorizations issued by any Governmental


                                       2



     Entity that relate to the Contributed CD Business or the Contributed Assets
     (the "Governmental Licenses"), in each case to the extent transferable or
     assignable and subject to IMA retaining such of the foregoing as are
     necessary for IMA and/or certain of its Subsidiaries to fulfill their
     respective obligations under the Finished Product Purchase Agreement;
     provided that such licenses, registrations, notifications, franchises,
     qualifications, provider numbers, permits, approvals, clearances and
     authorizations as then in existence shall be transferred to the Company
     following termination or expiration of the Finished Product Purchase
     Agreement, in each case to the extent transferable or assignable;

          (vi) all lists, documents, records, written information, computer
     files and other computer readable media concerning present customers, and
     to the extent reasonably available, past and potential customers, of goods
     or services arising from or used in the Contributed CD Business;

          (vii) all lists, documents, records, written information, computer
     files and other computer readable media concerning present suppliers and
     vendors of goods or services, and to the extent reasonably available, past
     and potential suppliers and vendors, arising from or used in the
     Contributed CD Business, excluding any such lists, records, written
     information, computer files and other media concerning suppliers and
     vendors whose goods and services will be used by IMA and its Subsidiaries
     in the performance of their obligations under the Finished Product Purchase
     Agreement; provided that such lists, records, written information, computer
     files and other media as then in existence shall be conveyed and delivered
     to the Company following termination or expiration of the Finished Product
     Purchase Agreement;

          (viii) all product records, product data, correspondence with and to
     customers of the CD Business, production records, contract files,
     technical, accounting, and procedural manuals, studies, reports or
     summaries relating to the general condition of the Contributed Assets, and
     any confidential information which has been reduced to writing or
     electronic form, to the extent that any of the foregoing relate to or arose
     from the Contributed CD Business;

          (ix) all rights under express or implied warranties from the suppliers
     and vendors relating to or arising out of the operation of the Contributed
     CD Business, except for such rights arising out of or relating to the
     manufacturing of any product of the CD Business;

          (x) to the extent related to an Assumed Liability, all claims,
     warranties, guarantees, refunds, causes of action, rights of recovery,
     rights of set-off and rights of recoupment of any kind and nature;

          (xi) all currently outstanding unfilled purchase orders and proposals
     received for the purchase of inventory of the Contributed CD Business;

          (xii) except for those Trademarks set forth in Section 3.12(a) of the
     Disclosure Schedule as registered in the name of IMS, which will be
     assigned, transferred and


                                       3



     conveyed pursuant to the Purchase Agreement and the PGIO Contribution
     Agreement, all (A) Intellectual Property owned by IMS or any of its
     Affiliates that are exclusively used in the CD Business, and (B) Trademarks
     (other than House Marks) owned by IMS or IMA or any of their respective
     Subsidiaries that are not presently exclusively used by the CD Business or
     any other business of IMS or such Affiliate but that were exclusively used
     by the CD Business in the past, in each case including the Business
     Registered Intellectual Property (the "Business Contributed Intellectual
     Property");

          (xiii) to the extent assignable, all rights under any non-disclosure
     agreements, non-solicitation agreements and non-competition agreements
     entered into with any parties, to the extent that any of the foregoing
     relates to or arose from the Contributed CD Business;

          (xiv) all prepaid expenses and other deposits related to the
     Contributed CD Business;

          (xv) all rights and claims, including refunds, to the extent that such
     rights and claims relate to or arose from the Contributed CD Business;

          (xvi) all insurance policies (to the extent separable and assignable)
     with respect to the CD Business, and rights, benefits, claims and proceeds
     thereunder arising from or relating to the Assumed Liabilities;

          (xvii) all other tangible assets or movable property used in
     connection with the Contributed CD Business, if any; and

          (xviii) all goodwill relating to the foregoing.

          Section 1.3 Excluded Assets. Notwithstanding the provisions of Section
1.2, the parties hereto acknowledge and agree that the following are not
included among either the Contributed Assets or the Purchased Assets (as defined
in the Purchase Agreement) and are excluded from the Transfer (collectively, the
"Excluded Assets"):

          (i) the assets, properties, Contracts and rights of IMS and its
     Affiliates in the Excluded Fields (which shall include, for the avoidance
     of doubt, the tangible assets and real property located at Stirling,
     Scotland) and the Intellectual Property of IMS and its Affiliates in the
     Excluded Fields;

          (ii) (A) Intellectual Property owned by third parties and licensed to
     IMS or one of its Affiliates for use in the CD Business and which are
     listed in Section 1.3(ii) of the Disclosure Schedule, (B) Intellectual
     Property, other than Trademarks, not used exclusively in the CD Business,
     and (C) Trademarks that have never been at any time exclusively used in the
     CD Business (other than Trademarks that have been held for use in the CD
     Business but have never been used by any business);

          (iii) the assets, properties, Contracts and rights of IMS and its
     Affiliates (including vendor and supplier contracts, information, files and
     data) used in the manufacturing of the products of the CD Business,
     including all tangible assets,


                                       4



     properties, and contracts of IMS' or its Affiliates' manufacturing
     facilities located in Bedford, England, Hangzhou, People's Republic of
     China ("PRC") and Shanghai, PRC, excluding any product specifications,
     product registrations or similar assets used in the conduct of the CD
     Business;

          (iv) the assets, properties, Contracts and rights arising from or used
     in IMA and their Subsidiaries' professional diagnostics and nutritional
     supplement businesses (collectively, the "Excluded Businesses");

          (v) the Contracts arising from the CD Business set forth on Section
     1.3(v) of the Disclosure Schedule (the "Excluded Contracts");

          (vi) the Trademarks or trade names "Inverness", and any variants
     thereof that include "Inverness", internet domain names that include
     "Inverness", and the Inverness "little man" logo (collectively, the "House
     Marks");

          (vii) real property, buildings, structures and improvements thereon,
     whether owned or leased by IMS or its Affiliates, and all fixtures and
     fittings attached thereto, including all manufacturing, distribution and
     administration facilities of IMS and its Affiliates;

          (viii) rights to refunds of Taxes paid by or on behalf of IMS or any
     of its Affiliates (other than those paid by the Company), except for the
     rights to refunds of Taxes that constitute Assumed Liabilities or refunds
     accrued on the Closing Date Balance Sheet;

          (ix) except as provided in Section 1.2(xvi), insurance policies and
     rights and benefits and claims thereunder;

          (x) tangible assets, properties, Contracts and Intellectual Property
     of IMA or its Subsidiaries (including animals and cell lines) used in the
     manufacturing, production and storage of reagents and other biological
     materials used in the CD Business;

          (xi) all inventory (including raw materials and work-in-process of IMA
     and IMS), wherever located, other than the Contributed Inventory;

          (xii) the services of any employees of IMA or its Subsidiaries (except
     for Transferred Employees upon hiring of such Transferred Employee by the
     Company or a Subsidiary of the Company) or assets of any employee benefit
     plan, arrangement, or program maintained or contributed to by IMA or any of
     its Subsidiaries with respect to any employees other than Transferred
     Employees (upon the hiring of such Transferred Employee by the Company or a
     Subsidiary of the Company); and

          (xiii) any other assets, tangible or intangible, wherever situated,
     not included in the Contributed Assets, including those used in the
     Excluded Businesses;

provided that IMS and its Affiliates, upon reasonable request and to the extent
IMS or any of its Affiliates has the right to so provide, will provide the
Company reasonable access during normal


                                       5



business hours to the Excluded Assets that, prior to the Closing Date, were used
in the CD Business and are not being transferred pursuant to this Agreement or
the Purchase Agreement, for the Company's use to facilitate its manufacturing
and research and development activities; provided, further, that with respect to
access to the Bedford, England, Hangzhou, PRC or Shanghai, PRC manufacturing
facilities, the terms of the Finished Products Purchase Agreement shall control
and this provision shall not expand the rights set forth therein.

          Section 1.4 Assumption of Liabilities. At the Closing, the Company
shall assume, and shall agree to pay, perform and discharge according to their
respective terms (if any), the following (and only the following) liabilities
and obligations of IMS and its Affiliates arising primarily from or related
primarily to the Contributed CD Business, and no other liabilities or
obligations of IMS or its Affiliates (liabilities to be assumed by the Company
pursuant to this Section 1.4 being collectively referred to as the "Assumed
Liabilities"):

          (i) all obligations of IMS or its Affiliates under the Business
     Contracts (other than Excluded Contracts) that are part of the Contributed
     CD Business that, by the terms of such Business Contracts, arise after the
     Closing Date, relate to periods following the Closing Date and are to be
     observed, paid, discharged, or performed, as the case may be, in each case
     at any time after the Closing Date;

          (ii) all unpaid liabilities and obligations, including trade accounts
     payable, of the Contributed CD Business (but excluding all payables to IMS
     or any of its Affiliates), incurred in the Ordinary Course of Business and
     other similar current liabilities of the Contributed CD Business as may be
     included in the calculation of Working Capital under Section 1.7 hereof
     (collectively, the "Assumed Accounts Payable");

          (iii) any product warranty, product liability or product returns,
     rebates, coupons, allowances or other discounting and promotional
     commitments arising from any product line produced or sold by the
     Contributed CD Business that has not been discontinued prior to the date
     hereof;

          (iv) any product warranty, product liability or product returns,
     rebates, coupons, allowances or other discounting and promotional
     commitments arising from any product line that has been discontinued prior
     to the date hereof by the Contributed CD Business, only to the extent of
     any contingency reserve related thereto on the Closing Date Balance Sheet;

          (v) any liability, obligation or expense of any kind or nature
     relating to Taxes (other than corporate Taxes based upon the income of such
     entity), including sales and value added taxes, owed by IMS or any of its
     Affiliates (including any contractual liability with respect to Taxes of
     another Person) arising from the conduct of the Contributed CD Business, to
     the extent as included in the calculation of Working Capital under Section
     1.7; provided that Transfer Taxes and Apportioned Obligations shall be paid
     in the manner set forth in Sections 5.2 and 5.3 hereof;

          (vi) except as set forth in Section 1.4(vi) of the Disclosure Schedule
     and with respect to any matter involving Taxes, any liability, obligation,
     cost or expense of IMS or


                                       6



     any of its Affiliates arising out of or relating to any investigation,
     claim, action, suit, complaint, dispute, audit, demand, litigation or
     judicial, administrative or arbitration proceeding (collectively, "Legal
     Proceeding") as and to the extent it arose or arises from the Contributed
     CD Business to which IMS or any of its Affiliates is or was a party whether
     it relates to any time prior to, at or after the Closing (regardless of
     whether the Legal Proceeding is commenced before or after the Closing), and
     any contingency reserve related thereto;

          (vii) upon hiring of a Transferred Employee by the Company or a
     Subsidiary of the Company, any liability or obligation with respect to such
     Transferred Employee including all liabilities for accrued vacation pay,
     excluding any pension or similar liabilities;

          (viii) any liability, obligation or expense arising from the Business
     Contributed Intellectual Property after the Closing Date; and

          (ix) any liability or obligation arising from the conduct of the
     Contributed CD Business after the Closing Date.

          Section 1.5 Liabilities Not Assumed by the Company. Notwithstanding
anything to the contrary in this Agreement, the Company shall not assume, or in
any way be liable or responsible for any, and IMS and its Affiliates shall pay,
perform and discharge all, obligations and liabilities of them, direct or
indirect, known or unknown, fixed or unfixed, choate or inchoate, liquidated or
unliquidated, secured or unsecured, accrued, absolute, contingent or otherwise,
except for the Assumed Liabilities (collectively, the "Excluded Liabilities")
and IMS shall hold the Company harmless with respect to the Excluded
Liabilities. For the avoidance of doubt, the term Assumed Liabilities does not
include any of the Excluded Liabilities and the term Excluded Liabilities
includes all liabilities and obligations of IMS or any of its Affiliates
(including without limitation liabilities and obligations imposed by operation
of law) other than the Assumed Liabilities. Without limiting the generality of
the foregoing, Excluded Liabilities shall include the following obligations and
liabilities:

          (i) any liability or obligation of IMS or any of its Affiliates
     arising from or relating to the Excluded Businesses, or the business, if
     any, of such entities in the Excluded Fields;

          (ii) any liability or obligation of IMS or any of its Affiliates
     arising out of or in connection with the negotiation and preparation of
     this Agreement or any of the other Transaction Agreements or the
     consummation and performance of the transactions contemplated hereby and
     thereby, including any liability for Taxes so arising;

          (iii) any liability or obligation (other than Assumed Liabilities)
     arising under, relating to or resulting from any asset of IMS or its
     Affiliates other than the Contributed Assets and the Purchased Assets;

          (iv) any liability or obligation of IMS of any of its Affiliates
     arising (i) from their failure to perform, or negligent performance of,
     their obligations under, or (ii) out of


                                       7



     or relating to any breach or claim of breach of a representation, warranty,
     covenant or agreement of IMS or any of its Affiliates contained in, any of
     the Business Contracts;

          (v) except as provided in Section 1.4(v), any liability, obligation or
     expense of any kind or nature relating to Taxes owed by IMS or any of its
     Affiliates (including any contractual liability with respect to Taxes of
     another Person); provided that Transfer Taxes and Apportioned Obligations
     shall be paid in the manner set forth in Sections 5.2 and 5.3 hereof;

          (vi) any liability or obligation to any of the directors, officers or
     Affiliates of IMS;

          (vii) except for Legal Proceedings assumed pursuant to Section
     1.4(vi), any liability, obligation, cost or expense of IMS or any of its
     Affiliates arising out of or relating to any Legal Proceeding to which IMS
     or any of its Affiliates is or was a party and that relates to any time at
     or prior to the Closing (regardless of whether the Legal Proceeding is
     commenced before or after the Closing), and any contingency reserve related
     thereto;

          (viii) any liability or obligation of IMS or its Affiliates with
     respect to any Indebtedness or Contingent Obligations (including any
     accrued interest, fees and any penalties thereon);

          (ix) any liability or obligation of IMS or its Affiliates to or with
     respect to employees, former employees, consultants and former consultants
     and Benefit Plans and other employee and employment-related liabilities,
     including any liability for severance, incentive, bonus or other
     compensation, health, welfare and other benefit plans of IMS or IMA or
     their Subsidiaries whether arising prior to or after the Closing;

          (x) any accounts payable other than the Assumed Accounts Payable;

          (xi) any product warranty, product liability or product returns,
     rebates, coupons, allowances or other discounting and promotional
     commitments with respect to any product line of the CD Business that was
     discontinued prior to the Closing Date, as and to the extent in excess of
     any contingency reserve therefor on the Closing Date Balance Sheet;

          (xii) any liability or obligation of IMS or its Affiliates arising out
     of or relating to the failure of IMS or its Affiliates to obtain any
     Governmental Licenses material to or necessary for the conduct of the CD
     Business;

          (xiii) any liability or obligation of IMS or its Affiliates arising
     out of or relating to IMA Facilities under applicable Environmental Laws;

          (xiv) any liability or obligation of IMS or its Affiliates to fund or
     finance any pension or similar liabilities; and


                                       8



          (xv) all liabilities and obligations of IMS or its Affiliates under
     this Agreement and the other Transaction Agreements.

          Section 1.6 Shares. In consideration of the Transfer of the
Contributed Assets, together with any Working Capital adjustment payment
pursuant to Section 1.7, on the Closing Date, IMS shall receive one quota of the
Company (representing, as of the Closing, 50% of outstanding Shares of the
Company).

          Section 1.7 Post-Closing Working Capital Adjustment.

          (a) To the extent the Working Capital of the Company as of the
Closing, upon completion of the transactions contemplated by this Agreement and
the Purchase Agreement and including all assets and liabilities of the
Contributed CD Business and the Purchased CD Business is less than $22,300,000
(the "Working Capital Target"), IMS shall make an additional cash contribution
to the Company in the amount of such deficiency within five Business Days after
the Determination Date. "Working Capital" means those receivables and other
current assets (other than cash), including Contributed Inventory, that are
Purchased Assets and Contributed Assets less the accounts payable, accrued
expenses and other current liabilities that are Assumed Liabilities under this
Agreement and the Purchase Agreement.

          (b) As promptly as practicable, but in no event later than 60 days
after the Closing Date, the Company shall cause to be prepared and furnished to
PGIO and IMS a balance sheet, certified by the Company's Chief Financial
Officer, for the Company as of the Closing Date (the "Closing Date Balance
Sheet"), including a computation of Working Capital as of such date and a
calculation of the additional cash contribution, if any, or cash payment, if
any, as the case may be, required pursuant to this Section 1.7 or under the
equivalent provision in the Purchase Agreement. The Closing Date Balance Sheet
shall be prepared in accordance with GAAP applied on a basis consistent with the
preparation of the Most Recent Balance Sheet.

          (c) Each of IMS and its independent accountants and PGIO and its
independent accountants shall have the right for a period of 60 days after the
receipt of the Closing Date Balance Sheet to review the Closing Date Balance
Sheet and the working papers relating thereto and to present in writing to the
Company any objections in reasonable detail. The Company shall provide
reasonable access to the records, files and other information reasonably
requested by IMS and/or its independent accountants or by PGIO and/or its
independent accountants, including those used to prepare the Closing Date
Balance Sheet, as well as access to such personnel of the Company (and PGIO to
the extent such personnel were involved in the process described above) as IMS
and/or its independent accountants or PGIO and/or its independent accountants
may reasonably request. The Closing Date Balance Sheet shall be deemed to be
acceptable to IMS and PGIO, and shall become final and binding on all parties,
except to the extent that within such 60 day period IMS or PGIO shall have made
a written objection thereto, which objection shall specify in reasonable detail
the grounds for such objection. PGIO and IMS shall attempt in good faith to
resolve any dispute concerning the item or items subject to an objection raised
in accordance with this Section 1.7(c). If PGIO and IMS are unable to resolve
any such dispute within 30 days (or such longer period as they shall mutually
agree in writing), such dispute shall be resolved by an independent accounting
firm of national recognition mutually selected by PGIO and IMS acting as
arbitrator. Such


                                       9



determination shall be final and binding on the parties, and judgment may be
entered thereon in any court having jurisdiction over the party against which
such determination is to be enforced. The date on which the Closing Date Balance
Sheet, together with the Working Capital computation therein, is deemed final
and binding is referred to as the "Determination Date". Only items specified in
the written objection shall be subject to adjustment by the independent
accounting firm. The fees and expenses of the independent accounting firm shall
be borne by PGIO and IMS in proportions inverse to the extent to which they
prevail in the dispute, with such allocations to be finally determined by the
accounting firm.

                                   ARTICLE 2
                                    CLOSING

          Section 2.1 Closing. The closing of the transactions contemplated by
this Agreement (the "Closing") shall be held at the offices of Covington &
Burling LLP, 1330 Avenue of the Americas, New York, New York, at 10:00 a.m. on
the date as soon as practicable, and in any event not later than two Business
Days, following satisfaction of all conditions and taking of all other actions
(other than those that by their terms are to be satisfied or taken at the
Closing) set forth in Article 6 (or, to the extent permitted by Law, waived by
the parties hereto entitled to the benefits thereof), or on such other date, and
at such other time or place, as PGIO and IMA may mutually agree in writing. The
date on which the Closing occurs is referred to in this Agreement as the
"Closing Date".

          Section 2.2 Closing Deliveries. (a) At the Closing, the Company shall
deliver or cause to be delivered to IMS and PGIO:

          (i) a certified copy of the current extract from the commercial
     register of the Company;

          (ii) the Shareholder Agreement, executed by the Company;

          (iii) a public deed evidencing that IMS is the legal owner of one
     quota (representing, on the Closing Date, 50% of the Company's outstanding
     Shares);

          (iv) a public deed evidencing that PGIO is the legal owner of one
     quota (representing, on the Closing Date, 50% of the Company's outstanding
     Shares);

          (v) a quota holders resolution approving the ownership as evidenced
     per (iii) and (iv) above;

          (vi) an assignment and assumption agreement (the "Assignment and
     Assumption Agreement") reasonably satisfactory to PGIO, the Company and IMS
     under which the Company assumes the Assumed Liabilities, executed by the
     Company;

          (vii) the Distribution Arrangements, executed by the Company;

          (viii) the License Agreements, executed by the Company;


                                       10


          (ix) the Finished Products Purchase Agreement, (the "Finished Products
     Purchase Agreement") in a form mutually agreed by the parties, executed by
     the Company;

          (x) a Transition Services Agreement (the "Transition Services
     Agreement"), in a form mutually agreed by the parties, executed by the
     Company;

          (xi) the other Transaction Agreements to which the Company is a party;
     and

          (xii) (1) the exclusive trademark license agreement by US CD LLC to
     the Company with respect to the U.S. Trademarks ACCU-CLEAR and ACCU-CLEAR
     READY OR NOT, and (2) the license agreement among the Company, IMS and IMA,
     each upon terms mutually agreed by the parties.

          (b) At the Closing, IMS shall deliver or cause to be delivered to the
Company and PGIO:

          (i) a cash contribution to the Company in the amount of $1,000,000;

          (ii) the Shareholder Agreement, executed by IMS;

          (iii) the Assignment and Assumption Agreement, executed by IMS;

          (iv) the Intellectual Property license agreements in a form mutually
     agreed by the parties (the "License Agreements"), executed by IMS and such
     other Affiliates of IMS as set forth therein;

          (v) the Finished Product Purchase Agreement in a form mutually agreed
     by the parties, executed by certain Affiliates of IMS as set forth therein;

          (vi) the Transition Services Agreement, executed by IMA and certain
     Subsidiaries of IMA as set forth therein;

          (vii) the other Transaction Agreements to which IMS or any of its
     Affiliates is a party;

          (viii) the Guarantee in a form reasonably acceptable to PGIO under
     which IMA guarantees all of the obligations of IMS hereunder and under the
     Purchase Agreement;

          (ix) an instrument of sale or contribution in a form reasonably
     satisfactory to PGIO transferring to the Company all of IMS and its
     Affiliates' right, title and interest in and to the Contributed Assets; and

          (x) such other bills of sale, endorsements, assignments and other
     instruments of transfer, conveyance and assignment (in a form reasonably
     satisfactory to PGIO) as shall be required by law or necessary in the
     reasonable judgment of PGIO or the Company to transfer, convey and assign
     the Contributed Assets to the Company.


                                       11



          (c) At the Closing, PGIO shall deliver or cause to be delivered to the
Company and IMS:

          (i) a cash contribution to the Company in the amount of $1,000,000;

          (ii) the Shareholder Agreement, executed by PGIO; and

          (iii) other Transaction Agreements to which PGIO or any of its
     Affiliates is a party.

                                    ARTICLE 3
                  REPRESENTATIONS AND WARRANTIES OF IMS AND IMA

          IMS represents and warrants to the Company and PGIO as follows, as of
the date of this Agreement and as of the Closing:

          Section 3.1 Organization and Existence. Each of IMS and the Company is
duly organized and validly existing under the Laws of Switzerland, has all
requisite power and authority to carry on the CD Business as now being conducted
and is duly qualified or licensed to do business and in good standing in each
jurisdiction in which the nature of the CD Business or the ownership, leasing or
operation of its properties makes such qualification or licensing necessary,
except for those jurisdictions where the failure to be so qualified or licensed
would not have a Material Adverse Effect. Other than wholly-owned Subsidiaries,
IMA has no Subsidiaries that conduct the CD Business or own Contributed Assets
other than Inverness Medical (Shanghai), Co., Ltd.

          Section 3.2 Power and Authority; Binding Agreement. Each of IMS and
the Company has all requisite power and authority to execute and deliver this
Agreement, to consummate the transactions contemplated hereby and to perform its
respective obligations hereunder, and has, or on the Closing Date will have, the
requisite power and authority to enter into the Transaction Agreements and to
perform its respective obligations thereunder. This Agreement is a valid and
binding obligation of each of IMS and the Company, enforceable against each of
them in accordance with its terms, except as the same may be limited by
bankruptcy, insolvency, reorganization, moratorium or other laws affecting the
rights of creditors generally and subject to the rules of law governing (and all
limitations on) specific performance, injunctive relief and other equitable
remedies (the "General Limitations"). When executed, each other Transaction
Agreement will be the valid and binding obligation of each of IMS and the
Company enforceable against each of them in accordance with its terms, except as
the same may be limited by the General Limitations. Except as set forth in
Section 3.2 of the Disclosure Schedule, no other act, approval or proceedings on
the part of IMS or the Company is, or will be, required to authorize the
execution and delivery of this Agreement and the other Transaction Agreements or
the consummation of the transactions contemplated hereby and thereby.

          Section 3.3 Noncontravention. (a) Except as set forth in Section
3.3(a) of the Disclosure Schedule, the execution and delivery by IMS or the
Company of this Agreement and the other Transaction Agreements to which either
of them is a party, and the consummation of the transactions contemplated hereby
and thereby and the compliance by either of them with the provisions hereof and
thereof do not and will not result in the creation of any lien, pledge, claim,


                                       12



charge, mortgage, encumbrance or other security interest of any kind, whether
arising by Contract or by operation of Law (a "Lien"), in or upon any of the
properties or assets of IMS or its Affiliates that are material to the conduct
of the CD Business. Except as set forth in Section 3.3(a) of the Disclosure
Schedule, the execution and delivery by IMS or the Company of this Agreement and
the other Transaction Agreements to which either of them is a party, and the
consummation of the transactions contemplated hereby and thereby and the
compliance by either of them with the provisions hereof and thereof do not and
will not (i) conflict with or result in any violation or default (with or
without notice or lapse of time or both) under, (ii) give rise to a right of, or
result in, termination or cancellation of, or acceleration of any obligation
under, (iii) result in a loss of a material benefit under, or (iv) give rise to
any increased, additional, accelerated or guaranteed rights or entitlements
under, any provision of (A) the Constitutive Documents of IMS or the Company,
(B) any material Business Contract to which IMS or any of its Affiliate or the
Company is a party or is bound by, or any Contributed Assets are bound by or
subject, or under which IMS or any of its Affiliates or the Company has material
rights or benefits or (C) subject to the governmental filings and other matters
referred to in Section 3.3(b), any constitution, act, statute, law (including
common law), ordinance, treaty, rule or regulation of any Governmental Entity (a
"Law") or any judgment, order or decree (a "Judgment"), in each case applicable
to IMS or any of its Affiliates or the Contributed Assets or the Purchased
Assets, or the Company.

          (b) No consent, approval, license, permit, order or authorization of,
registration, declaration or filing with, or notice to, any Governmental Entity
is required by or with respect to IMS or the Company in connection with the
execution and delivery of this Agreement, the other Transaction Agreements, the
consummation of the transactions contemplated hereby or thereby or the
compliance by IMS or the Company with the provisions hereof and thereof, except
(i) for filings required under, and compliance with other applicable
requirements of, the Hart Scott Rodino Antitrust Improvements Act of 1976 (the
"HSR Act"), and any similar competition filing with any Governmental Entity, if
applicable to this Agreement, the other Transaction Agreements and the
transactions contemplated hereby and thereby; (ii) the filing with the SEC of
such reports under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), as may be required in connection with this Agreement and the
other Transaction Agreements and the transactions contemplated hereby and
thereby; (iii) filings with, and notices and submissions to, the United States
Food and Drug Administration (the "FDA"); (iv) such filings as may be required
to transfer the ownership of Intellectual Property rights and (v) such other
consents, approvals, orders, authorizations, registrations, declarations,
filings and notices, the failure of which to be obtained or made individually or
in the aggregate would not impair in any material respect the ability of IMS or
the Company to perform its obligations under this Agreement or prevent or
materially impede or delay the consummation of the transactions contemplated
hereby.

          Section 3.4 Compliance with Laws. Except as set forth in Section 3.4
of the Disclosure Schedule, IMS and its Affiliates are in compliance in all
material respects with all applicable Laws and Judgments. Except as set forth in
Section 3.4 of the Disclosure Schedule, since January 1, 2004 neither IMS nor
any of its Affiliates has received a written notice from a Governmental Entity
alleging a possible violation by it of any applicable Law or Judgment applicable
to the CD Business. Notwithstanding the foregoing, this Section 3.4 shall not
constitute a representation or warranty as to intellectual property, tax,
employee benefit plan,


                                       13



environmental or the specific regulatory matters covered in Sections 3.21, 3.22
and 3.23 which are limited to those representations and warranties set forth in
Sections 3.12, 3.14, 3.16, 3.17, 3.18, 3.21, 3.22 and 3.23, respectively.

          Section 3.5 Governmental Licenses. IMS and its Affiliates validly hold
and have in full force and effect all Governmental Licenses that are material to
the conduct of the CD Business, and neither IMS nor any of its Affiliates is in
violation (other than an immaterial violation) of, or default (with or without
notice or lapse of time or both) (other than an immaterial default) under, or
event giving to any other Person any right of termination, amendment or
cancellation of, any Governmental License material to the conduct of the CD
Business. Each of IMS and its Affiliates is in compliance in all material
respects with the terms and conditions of all Governmental Licenses issued to or
held by it that are material to the CD Business, and such Governmental Licenses
will not be subject to suspension, modification, revocation or nonrenewal as a
result of the execution and delivery of this Agreement or the other Transaction
Agreements or the consummation of the transactions contemplated hereby and
thereby. No proceeding is pending or, to the Knowledge of IMS or IMA, threatened
seeking the revocation or limitation of any Governmental License that is
material to the conduct of the CD Business. Section 3.5 of the Disclosure
Schedule lists each Governmental License held by IMS or its Subsidiaries that is
material to the conduct of the CD Business, except for any licenses related to,
or necessary for, the manufacture or storage of the products of the CD Business.
Except as set forth therein, all of the Governmental Licenses listed in Section
3.5 of the Disclosure Schedule are held in the name of IMS or its Affiliates,
and none are held in the name of any current or former director, officer,
employee, independent contractor or consultant of IMS or its Affiliates or
agents or otherwise on behalf of IMS or its Affiliates. Except for those
Governmental Licenses retained pursuant to Section 1.2(v) hereof in order to
perform the obligations under the Finished Products Purchase Agreement or as set
forth in Section 3.5 of the Disclosure Schedule, all Governmental Licenses that
are material to the conduct of the CD Business are transferable to the Company.
Notwithstanding the foregoing, this Section 3.5 shall not constitute a
representation or warranty as to the specific regulatory matters covered in
Sections 3.21 and 3.23.

          Section 3.6 Financial Statements. (a) Section 3.6(a) of the Disclosure
Schedule refers to the audited consolidated balance sheets of IMA as of December
31, 2005 (the "IMA Balance Sheet Date"), and December 31, 2004 and audited
statements of income and cash flows of IMA for each of the fiscal years ending
on such dates, together with any notes thereto and accountant's reports thereon
(collectively, the "IMA Audited Financial Statements"), and the unaudited
consolidated balance sheet of IMA (the "IMA Interim Balance Sheet") as of
September 30, 2006 and the unaudited statement of income of IMA for the period
ending on such date (collectively, the "IMA Unaudited Financial Statements" and
together with the IMA Audited Financial Statements, the "IMA Financial
Statements"). Except as disclosed in Section 3.6(a) of the Disclosure Schedule,
the IMA Financial Statements fairly present, in all material respects, the
consolidated financial position and results of operations and cash flows of IMA
for the periods and as of the dates referred to in the IMA Financial Statements,
all in accordance with United States generally accepted accounting principles,
consistently applied ("GAAP") (except, in the case of the IMA Unaudited
Financial Statements, for the absence of footnotes and normal year-end
adjustments that are not material individually or in the aggregate). The IMA
Financial Statements are consistent in all material respects with the books and
records of IMA, subject, in


                                       14



the case of the IMA Unaudited Financial Statements, to normal year-end
adjustments that are not material individually or in the aggregate.

          (b) Section 3.6(b) of the Disclosure Schedule sets forth the unaudited
pro forma balance sheet (the "Most Recent Balance Sheet") of CD Business as of
September 30, 2006 (the "Most Recent Balance Sheet Date"), and the unaudited pro
forma statements of revenues and direct expenses of the CD Business for the
period then ended (the financial statements collectively, the "CD Financial
Statements"). Except as set forth in Section 3.6(b) of the Disclosure Schedule,
the CD Financial Statements (i) are consistent with the books and records of IMS
and IMA, (ii) have been prepared in accordance with GAAP and (iii) present
fairly the pro forma financial condition, results of operations of the CD
Business as of the respective dates thereof and for the periods referred to
therein, subject to normal year-end adjustments that are not material
individually or in the aggregate.

          (c) All Accounts Receivable (net of any reserves) are current and
arose from valid transactions in the ordinary course of business consistent with
past practice (the "Ordinary Course of Business") with unrelated third parties,
except as otherwise identified on the Most Recent Balance Sheet. Except as set
forth in Section 3.6(c) of the Disclosure Schedule, neither IMS nor any of its
Affiliates has received notice or other indication that any of the Accounts
Receivable will not be collectible in full, net of any reserves. Nothing
contained in this representation shall be construed as a guaranty of the
complete collectibility of all Accounts Receivable.

          (d) All of the Contributed Inventory whether or not shown on the Most
Recent Balance Sheet, net of any reserves shown thereon, consists of a quality
and quantity usable and salable in the Ordinary Course of Business, except for
obsolete items and items of below-standard quality, all of which shall have been
written off or written down to net realizable value in the CD Financial
Statements or on the Company's accounting records as of the Closing Date, as the
case may be. This representation and warranty shall expire as of the
Determination Date, net of any reserves shown on the books and records of IMS
and IMA.

          (e) IMA maintains a system of internal accounting controls sufficient
to provide reasonable assurance that: (i) transactions are executed in
accordance with management's general or specific authorizations; (ii)
transactions are recorded as necessary to permit preparation of financial
statements in accordance with GAAP and to maintain asset accountability; (iii)
access to assets is permitted only in accordance with management's general or
specific authorization; and (iv) the recorded accountability for assets is
compared with the existing assets at reasonable intervals and appropriate
actions are taken with respect to any differences.

          Section 3.7 Absence of Changes or Events. Since the IMA Balance Sheet
Date, (i) except as set forth in Section 3.7 of the Disclosure Schedule, the CD
Business has been conducted only in the Ordinary Course of Business, (ii) there
has occurred no Material Adverse Effect, and (iii) other than as set forth in
Section 3.7 of the Disclosure Schedule, none of IMA and its Subsidiaries has
taken any actions that, if taken after the date of this Agreement, would
constitute a breach of any of the covenants set forth in Section 4.3(a), (b) and
(c).

          Section 3.8 Undisclosed Liabilities. Except with respect to their
respective obligations under this Agreement, the Purchase Agreement and other
Transaction Agreements,


                                       15



neither IMS nor IMA has liabilities or obligations relating to the CD Business
(in each case whether known, absolute, contingent, accrued or otherwise), except
for such liabilities and obligations (a) to the extent shown on the Most Recent
Balance Sheet, (b) incurred in the Ordinary Course of Business since the Most
Recent Balance Sheet Date, (c) under the Business Contracts, other than
liabilities and obligations due to any material breaches or non-performance
thereunder, or (d) listed in Section 3.8 of the Disclosure Schedule.

          Section 3.9 Assets other than Real Property. Except as set forth in
Section 3.9 of the Disclosure Schedule, (i) each of IMS and IMA owns outright
and has good and marketable title to, or has valid leasehold interests in, all
of the tangible Contributed Assets free and clear of all Liens, (ii) other than
the Excluded Assets and together with the assets acquired by the Company
pursuant to the Purchase Agreement, the Company's rights under the License
Agreements, the Finished Product Purchase Agreement, the Distribution Agreement
and the Transition Services Agreement, the Contributed Assets constitute all of
the assets, properties, permits, rights, agreements and other Contract rights
and interests that are necessary to enable the Company after the Closing to
operate the CD Business in a manner consistent with the manner in which the CD
Business is currently being operated and (iii) the Transfer will vest good and
marketable title in and to the tangible Contributed Assets in the Company free
and clear of all Liens except for Permitted Liens. To the Knowledge of IMS or
IMA, the tangible Contributed Assets are in good operating condition and repair
and none of such tangible assets that are material to the conduct of the CD
Business is in need of maintenance or repairs except for ordinary, routine
maintenance and repairs that are not material in nature or cost.

          Section 3.10 [Reserved].

          Section 3.11 Contracts. (a) Section 3.11(a) of the Disclosure Schedule
sets forth a true, accurate and complete list of each Business Contract
(collectively, "Scheduled Contracts") to which IMA, IMS or any of their
Subsidiaries is a party that (x) is material to the CD Business; (y) provides
for aggregate annual payments, or has a value in excess, of fifty thousand
dollars ($50,000); or (z) falls within one or more of the following categories:

          (i) Contracts under which IMA, IMS or their Subsidiaries own, have
     under license, have a right to acquire (by option or otherwise), have a
     right to use or exercise (including any covenant not to sue or other
     similar right of forbearance), or otherwise Control, or have any other
     right or interest in or to any Intellectual Property that is necessary to
     the conduct of the CD Business as currently conducted;

          (ii) Contracts with any labor union or similar representative covering
     any Transferred Employee;

          (iii) Contracts under which products of the CD Business are
     manufactured or distributed by IMA, IMS or their Subsidiaries, including
     any distribution agreements, wholesalers, manufacturing and supply
     agreements and Contracts with managed care organizations or Governmental
     Entities; and


                                       16



          (iv) Contracts limiting or restraining IMA, IMS or their Subsidiaries
     in any material respect from engaging or competing in any business of the
     CD Business with any Person or from purchasing any products, services or
     inventory from any third parties.

Notwithstanding the foregoing, neither IMA nor IMS shall be required to set
forth on the aforementioned Section 3.11(a) of the Disclosure Schedule any
Contract relating to IMA's and certain of its Subsidiaries' manufacturing of
products of the CD Business, including Contracts to purchase raw materials,
components or supplies, Contracts to supply or procure reagents or other
biological components and Contracts with subcontractors, suppliers or service
providers used in the conduct of such manufacturing activity.

          (b) Except as indicated in Section 3.11(b) of the Disclosure Schedule,
IMA has delivered or made available to PGIO complete and correct copies of all
written Scheduled Contracts, including all amendments, modifications and
material waivers relating thereto.

          (c) Each Scheduled Contract is in full force and effect in accordance
with the terms thereof and constitutes a legal, valid and binding agreement of
IMA, IMS or their Subsidiaries, as applicable, and is enforceable in accordance
with its terms by IMA, IMS or their Subsidiaries, as applicable, against each
counterparty thereto, except as the same may be limited by General Limitations.
IMA, IMS and its Subsidiaries, as applicable, have performed in all material
respects all of their obligations, and are not in default under, any Business
Contract. To IMS's or IMA's Knowledge, no other party to any Business Contract
is in material breach of or default under such Business Contract.

          (d) Except as set forth in Section 3.11(d) of the Disclosure Schedule,
neither IMA nor IMS has any Knowledge that any party to any Scheduled Contract
(i) intends to either terminate or not renew such Scheduled Contract, or (ii)
has or intends to submit to IMA, IMS or their Subsidiaries any claim of material
breach by any such party with respect to the performance of its obligations
under any such Scheduled Contract.

          (e) Section 3.11(e) of the Disclosure Schedule sets forth a true,
accurate and complete list of the Scheduled Contracts for which third party
consents are required to assign such Business Contracts to the Company. Subject
to the receipt of the third party consents listed on Section 3.11(e) of the
Disclosure Schedule and Closing, the Company will succeed to all rights, title
and interests of IMA, IMS or their respective Subsidiaries under each such
Contract without the necessity to obtain the consent of any other Person(s) to
the assignment of such Contract.

          (f) None of the Business Contracts have been entered into by IMA, IMS
or any of their respective Subsidiaries other than in its or their Ordinary
Course of Business (other than agreements in settlement of Legal Proceedings
listed on Section 3.13 of the Disclosure Schedule) and other than on an arm's
length basis.

          (g) Except as set forth in Section 3.11(g) of the Disclosure Schedule,
the Scheduled Contracts do not contain any provision that provides for automatic
termination upon the occurrence of the transactions contemplated hereby or for
the right of any party to any such


                                       17



Contract to terminate, accelerate or receive any payment or other more favorable
terms and conditions upon occurrence of the transactions contemplated hereby.

          (h) Except as set forth in Section 3.11(h) of the Disclosure Schedule,
there are no Persons holding a power of attorney on behalf of IMS, IMA or any of
their Subsidiaries that would enable such Persons to sell, lease or otherwise
encumber any of the Contributed Assets.

          Section 3.12 Intellectual Property. (a) Section 3.12(a) of the
Disclosure Schedule sets forth, as of the date hereof, a complete and accurate
list of all Business Registered Intellectual Property. "Business Intellectual
Property" means (i) Business Contributed Intellectual Property, (ii) Business
Purchased Intellectual Property (as defined in the Purchase Agreement) and (iii)
all other Intellectual Property constituting Inverness Licensed IP and Inverness
Licensed Trademarks (as defined in the License Agreements). Except to the extent
indicated in Section 3.12(a) of the Disclosure Schedule, all Business
Intellectual Property is either (x) owned by, or subject to an obligation of
sole and exclusive assignment to, IMS or IMA or one of their respective
Subsidiaries free and clear of all Liens or other exceptions to title that
affect such Business Intellectual Property or restrict the use by IMS or IMA or
any of their respective Subsidiaries of the Business Intellectual Property in
any way or require IMS or IMA or any of their respective Subsidiaries to make
any payment or give anything of value as a condition to its use in any way of
such Business Intellectual Property (collectively, "IP Liens"), except in each
case for Permitted IP Liens or (y) Controlled but not owned by IMS or IMA or one
of their respective Subsidiaries pursuant to a license from, or a similar
agreement with, a third party free and clear, to the Knowledge of IMS and IMA,
of all IP Liens except for Permitted IP Liens. To the Knowledge of IMS or IMA,
with respect to all Business Intellectual Property owned by IMS or IMA or one of
their respective Subsidiaries that are United States patents or applications
subject to a terminal disclaimer against another patent or application, each
such patent or application has been and remains commonly owned with the patent
or application it is terminally disclaimed against since the terminal disclaimer
was filed with the United States Patent Office. Except to the extent indicated
in Section 3.12(a) of the Disclosure Schedule, IMS or IMA or one of their
respective Subsidiaries is (A) the sole owner of all Business Contributed
Intellectual Property and all Business Purchased Intellectual Property and (B)
the sole owner or sole and exclusive licensee (as the case may be) of all
Inverness Licensed IP and Inverness Licensed Trademarks. There are no actions
pending or, to the Knowledge of IMS or IMA, threatened with regard to the
ownership or Control by IMS or IMA or one of their respective Subsidiaries of
any Business Intellectual Property. Except as specified in Section 3.12(a) of
the Disclosure Schedule, each of IMS and IMA has the legal power to convey or
license (as applicable) to the Company all of its or their respective
Subsidiaries' right, title and interest that is being conveyed or licensed in
and to the Business Intellectual Property. No Business Intellectual Property
will terminate or cease to be valid Intellectual Property by reason of the
execution and delivery of this Agreement by IMS and IMA, the performance of IMS
and IMA of their obligations hereunder, or the consummation by IMS and IMA of
the transactions contemplated hereby.

          (b) Except as disclosed in Section 3.12(b) of the Disclosure Schedule,
to the Knowledge of IMS or IMA, there is no unauthorized use, infringement,
misappropriation or violation of any of the Business Intellectual Property by
any Person.


                                       18



          (c) Except as disclosed in Section 3.12(c) of the Disclosure Schedule,
there are no pending or, to the Knowledge of IMS or IMA, threatened written
claims that the CD Business has infringed or is infringing any Intellectual
Property of any Person. Except for any third-party Intellectual Property
referred to in Section 3.12(c) of the Disclosure Schedule, to the Knowledge of
IMS or IMA, there are no patents or patent applications of any third party that
claim the same subject matter as a patent or patent application included in the
Business Intellectual Property that could reasonably serve as the basis for an
interference proceeding involving a patent or patent application included in the
Business Intellectual Property.

          (d) (i) The patent applications owned by IMS or IMA or one of their
respective Subsidiaries and included in the Business Intellectual Property and,
to the Knowledge of IMS or IMA, the patent applications licensed by any third
party to IMS or IMA or one of their respective Subsidiaries and included in the
Business Intellectual Property, are pending and have not been abandoned, and
have been and continue to be prosecuted. All patents, registered Trademarks and
applications for Trademarks owned by IMS or IMA or one of their respective
Subsidiaries and included in the Business Intellectual Property and, to the
Knowledge of IMS or IMA, all patents, registered Trademarks and applications for
Trademarks licensed by any third party to IMS or IMA or one of their respective
Subsidiaries and included in the Business Intellectual Property, have been duly
registered or filed with or issued by the appropriate Governmental Entity, all
necessary affidavits of continuing use have been timely filed, and all necessary
maintenance fees timely paid to continue all such rights in effect. Except as
set forth in Section 3.12(d)(i) of the Disclosure Schedule, none of the patents
owned by IMS or IMA or one of their respective Subsidiaries and included in the
Business Intellectual Property and, to the Knowledge of IMS or IMA, none of the
patents licensed by any third party to IMS or IMA or one of their respective
Subsidiaries and included in the Business Intellectual Property, have expired or
been declared invalid, in whole or in part, by any Governmental Entity. Except
as set forth in Section 3.12(d) of the Disclosure Schedule, there are no ongoing
interferences, oppositions, reissues, or reexaminations or other proceedings
that could result in a loss or limitation of a patent right or claim involving
any of the patents or patent applications owned by IMS or IMA or one of their
respective Subsidiaries and included in the Business Intellectual Property. To
the Knowledge of IMS or IMA, there are no ongoing interferences, oppositions,
reissues, or reexaminations or other proceedings that could result in a loss or
limitation of a patent right or claim involving any of the patents or patent
applications licensed by any third party to IMS or IMA or one of their
respective Subsidiaries and included in the Business Intellectual Property.

               (ii) To the Knowledge of IMS or IMA, (A) the patents included in
     the Business Intellectual Property have not been declared invalid or
     unenforceable by any court, (B) there is no reason to believe that any
     patent included in the Business Intellectual Property and material to the
     CD Business would be declared invalid or unenforceable by a court, and (C)
     each of IMS and IMA has met its duty of candor as required under 37 C.F.R.
     1.56 and complied with analogous Laws outside the United States requiring
     disclosure of references. To the Knowledge of IMS or IMA, each of the
     patents and patent applications included in the Business Intellectual
     Property that were filed by IMS or IMA or one of their respective
     Subsidiaries properly identifies each and every inventor of the claims
     thereof as determined in accordance with the Laws of the jurisdiction in
     which such patent is issued or such patent application is pending.


                                       19



               (iii) Each inventor named on the patents and patent applications
     included in the Business Intellectual Property that were filed by IMS or
     IMA or one of their respective Subsidiaries, alone or together with any
     joint owners, has executed an agreement agreeing to assign or actually
     assigning his or her entire right, title and interest in and to such patent
     or patent application, and the inventions embodied and claimed therein, to
     IMS or IMA or such Subsidiary, alone or together with any joint owners as
     appropriate, except as indicated in Section 3.12(a) of the Disclosure
     Schedule. To the Knowledge of IMS or IMA, no such inventor has any
     contractual or other obligation that would preclude any such assignment or
     otherwise conflict with the obligations of such inventor to IMS or IMA or
     such Subsidiary.

          (e) Section 3.12(e) of the Disclosure Schedule sets forth a true,
complete and accurate list of all Contracts with respect to any options, rights,
licenses or interests of any kind relating to Business Intellectual Property
that have been granted (i) by a third party to IMS or IMA or any of their
respective Subsidiaries, (ii) by IMS or IMA or any of their respective
Subsidiaries to any other Person (other than agreements commonly generated in
the Ordinary Course of Business (including software licenses for generally
available software, employee assignment agreements, nondisclosure agreements,
consulting agreements, material transfer agreements, clinical trial agreements
and evaluation agreements) that individually and in the aggregate have not
caused and would not reasonably be expected to cause a Material Adverse Effect).
In addition, Section 3.12(e) of the Disclosure Schedule sets forth a true,
complete and accurate list of all Contracts under which IMS or IMA or any of
their respective Subsidiaries is obligated to make to, or receives from third
parties payments (in any form, including royalties, license fees, milestones and
other contingent payments) for use of any Business Intellectual Property. Other
than as set forth on Section 3.12(e) of the Disclosure Schedule, no royalties,
license fees or other payment obligations are owed to any Person in connection
with the exercise of Intellectual Property rights in the conduct of the CD
Business after the Closing Date by IMS or IMA or any of their respective
Subsidiaries under any Contract (other than Contracts relating to "off the
shelf" commercially available software) to which any of them are a party. Each
of IMS and IMA and their respective Subsidiaries is in compliance in all
material respects with the terms of all Contracts set forth on Section 3.12(e)
of the Disclosure Schedule and, to the Knowledge of IMS or IMA, each of the
licensees and licensors, as the case may be, is in compliance in all material
respects with all such Contracts, and there are no material disputes or
proceedings threatened or pending regarding the same.

          (f) The Business Intellectual Property constitutes all the
Intellectual Property necessary and sufficient to conduct the CD Business as
currently conducted; provided, that this Section 3.12(f) shall not constitute a
non-infringement representation (which non-infringement representation is the
subject of Section 3.12(g) below).

          (g) Except as disclosed in Section 3.12(g) of the Disclosure Schedule,
to the Knowledge of IMS or IMA, the operation of the CD Business does not, and
as a result of Closing will not, infringe on or violate the rights of any Person
under any Intellectual Property.

          (h) Each of IMS and IMA and their respective Subsidiaries has taken
reasonable steps to protect the confidentiality of the confidential information
and trade secrets included in the Business Intellectual Property, including by
entering into Contracts that generally require licensees, contractors and other
third persons with access to such trade secrets to keep such trade secrets
confidential.


                                       20



          (i) Each of IMS and IMA uses reasonable procedures designed to ensure
the recording and maintenance of all know-how that is included in the Business
Intellectual Property and material to the conduct of the CD Business.

          (j) All former and current employees, consultants and contractors of
IMS or IMA or their respective Subsidiaries (i) having access to the Business
Intellectual Property have executed and delivered to IMS or IMA or the relevant
Subsidiary an agreement regarding the protection of the confidential information
included in the Business Intellectual Property and (to the extent required by
any customer or business partner or IMS or IMA) confidential information of
IMS's or IMA's customers or business partners made available to such employees,
consultants or contractors and (ii) who were involved in, or who contributed to,
the creation or development of any Business Intellectual Property have executed
and delivered to IMS or IMA or the relevant Subsidiary an agreement regarding
the assignment by such employees, consultants and contractors to IMS or IMA (or
the relevant Subsidiary) of any and all Business Intellectual Property; and true
and complete copies of all such agreements have been made available to PGIO.
Each of IMS and IMA and their respective Subsidiaries has secured, from all
former and current employees, consultants and contractors who were involved in,
or who contributed to, the creation or development of the subject matter of any
patents that are included in Business Intellectual Property that is owned by IMS
or IMA or the relevant Subsidiary, valid written assignments of the rights to
such contributions that may be owned by such persons or that IMS or IMA or the
relevant Subsidiary does not already own by other agreement or operation of Law,
including obtaining valid written assignments from the inventors of any and all
pending patent applications.

          (k) Under any and all Contracts under which a third party has granted
IMA, IMS or any of their respective Subsidiaries any Intellectual Property
rights that are used in the CD Business and on which IMA, IMS or such Subsidiary
relies to allow its Subsidiaries of which IMA, IMS or such Subsidiary owns 50%
or more of the voting equity to exercise the Intellectual Property rights
thereunder, the Company shall have the right to exercise (subject to the terms
and conditions in the Transaction Documents) such Intellectual Property rights
for so long as IMS owns 50% or more of the interest in the Company.

          Section 3.13 Legal Proceedings. Except as disclosed in Section 3.13 of
the Disclosure Schedule, (a) neither IMS nor IMA is, or since January 1, 2004
has it been, a party to, or to its Knowledge threatened with, any material Legal
Proceeding with respect to or in connection with the CD Business, (b) to the
Knowledge of IMS or IMA, there are no facts or circumstances that would
reasonably be expected to give rise to any material Legal Proceeding with
respect to or in connection with the CD Business and (c) there are no Judgments
outstanding against IMS or IMA with respect to or in connection with the CD
Business.

          Section 3.14 Tax Matters. Except as set forth in Section 3.14 of the
Disclosure Schedule (with paragraph references corresponding to those set forth
below):

          (a) All Tax Returns required to be filed by IMS or IMA, and any
affiliated, combined, consolidated or unitary group of which IMS or IMA is or
has been a member, have been timely filed, except where failure to file would
not have a Material Adverse Effect.


                                       21



          (b) Each of IMS and IMA has timely paid all Taxes which were required
to have been paid on or prior to the date hereof, the nonpayment of which could
result in a Lien on any Contributed Asset. Each of IMS and IMA has established,
in accordance with GAAP, adequate reserves for the payment of, and will timely
pay, all Taxes which arise from or with respect to the Contributed Assets or the
operation of the CD Business and are incurred or attributable to taxable periods
(or portions thereof) prior to the Closing (the "Pre-Closing Tax Periods"), the
nonpayment of which would result in a Lien on any Contributed Asset.

          (c) Each of IMS and IMA has withheld and paid all Taxes required by
Law to have been withheld and paid and has complied in all respects with all
rules and regulations relating to the withholding or remittance of Taxes
(including, without limitation, employee-related Taxes), except where failure to
so withhold, pay or comply would not impose a liability or other obligation on
the Company.

          Section 3.15 Insurance. IMS and IMA maintain, with respect to the CD
Business, or under contractual arrangements is named as an additional insured
in, policies or binders of fire, liability (including without limitation product
liability), workers' compensation, vehicular and other insurance customarily
maintained by Persons engaged in businesses similar to the CD Business. A true,
correct and complete list of such policies insuring the CD Business is set forth
in Section 3.15 of the Disclosure Schedule. Such policies and binders are in
full force and effect.

          Section 3.16 Benefit Plans. (a) Section 3.16(a) of the Disclosure
Schedule contains a list of all written plans, programs, or arrangements
maintained by IMS or IMA or any of their Subsidiaries, in each case as and to
the extent related to the CD Business, or providing benefits to employees of the
CD Business, or under which IMS or IMA or any of their Subsidiaries, in each
case as and to the extent related to the CD Business, or providing benefits to
employees of the CD Business, has or may have any obligation to contribute, with
respect to any employee of them, whether such plan, program or arrangement is
formal or informal, written or unwritten, and whether or not such plan, program,
or arrangement is an "employee benefit plan" subject to the Employee Retirement
Income Security Act of 1974, as amended ("ERISA") (collectively, the "Benefit
Plans"). The Company will not be responsible for any existing or future
liability under any Benefit Plan.

          (b) Each of IMS and IMA has made available to or provided to PGIO true
and complete copies of: (i) each Benefit Plan that is an "employee welfare
benefit plan" under Section 3(1) of ERISA; (ii) each Benefit Plan that is an
"employee pension benefit plan" under Section 3(2) of ERISA; (iii) the most
recent annual report required to be filed, including Form 5500, for each Benefit
Plan described under clauses (i) and (ii) of this Section 3.16(b); (iv) the
current summary plan description and any material modifications thereto; and
(iv) the most recent determination or opinion letter received from the Internal
Revenue Service (the "IRS") upon which IMS and IMA are entitled to rely with
respect to a Benefit Plan described under clause (ii) of this Section 3.16(b)
that is intended to be tax-qualified under Section 401(a) of the Code, or the
application therefor, if such letter has not been issued by the IRS.

          (c) Except as set forth on Section 3.16(c) of the Disclosure Schedule,
neither IMS nor IMA or any of their subsidiaries, in each case as and to the
extent related to the CD


                                       22



Business, or providing benefits to employees of the CD Business, has offered to
provide health or life insurance coverage to any individual, or to the family
members of any individual, for any period extending beyond the termination of
the individual's employment by IMS or IMA, except to the extent required by the
health care continuation (also known as "COBRA") provisions of ERISA and the
Code or similar state benefit continuation Laws. Each Benefit Plan that is a
group health plan, as such term is defined in Section 5000(b)(1) of the Code,
complies in all material respects with Sections 601 et seq. and 701 et seq. of
ERISA and Section 4980B and Subtitle K of the Code.

          (d) The Company will not be responsible for any existing Contract
between IMS or IMA and any business employee of them, including a Contract (i)
the benefits of which are contingent, or the terms of which are materially
altered, upon the occurrence of a transaction in the nature of any of the
transactions contemplated by this Agreement or any other Transaction Agreement,
(ii) providing any term of employment or compensation guarantee or (iii)
providing severance benefits or other benefits after the termination of
employment of such employee regardless of the reason for such termination of
employment.

          Section 3.17 Employee and Labor Matters. Except as set forth on
Section 3.17 of the Disclosure Schedule, there is not, and since January 1, 2004
there has not been, any labor strike, dispute, work stoppage, slowdown or
lockout against IMS or IMA with respect to the CD Business and, except as set
forth on Section 3.17 of the Disclosure Schedule, there is not any pending, or,
to the Knowledge of IMS or IMA, threatened, labor strike, dispute, work
stoppage, slowdown or lockout against IMS or IMA with respect to the CD
Business. To the Knowledge of IMS or IMA, since January 1, 2004, no union
organizational campaign or petition for certification is in progress with
respect to personnel of the CD Business. Neither IMS nor IMA is a party to any
collective bargaining or other similar labor Contracts with respect to any
personnel of the CD Business. There are no pending, or, to the Knowledge of IMS
or IMA, threatened, charges against IMS or IMA or any business personnel of them
before the Equal Employment Opportunity Commission or any other Governmental
Entity responsible for the prevention of unlawful employment practices. Except
as set forth on Section 3.17 of the Disclosure Schedule, since January 1, 2004,
neither IMS nor IMA has received written notice of the intent of any
Governmental Entity responsible for the enforcement of labor or employment Laws
to conduct an investigation of IMS or IMA with respect to the CD Business and,
to the Knowledge of IMS or IMA, no such investigation is in progress. To the
Knowledge of IMS or IMA, no activity of any executive officer or significant
employee of the CD Business as or while an employee of the CD Business has
caused a material violation of any such employee's employment Contract,
confidentiality agreement, patent disclosure agreement or other similar
Contract. The Restructuring will be effected in compliance in all material
respects with all applicable employment laws and regulations.

          Section 3.18 Environmental Matters. Except as disclosed in Section
3.18 of the Disclosure Schedule and except for such matters as would not cause a
material Loss to the Company or PGIO:

          (a) The CD Business and IMA Facilities are and have for the past four
years been in compliance in all material respects with all Environmental Laws
and Environmental Permits. The CD Business and IMA Facilities have no material
unbudgeted or unreserved environmental capital expenditure necessary to achieve
or maintain compliance in all material


                                       23



respects with Environmental Laws and Environmental Permits. There are no
unresolved or, to the Knowledge of IMS or IMA, threatened (whether orally or in
writing) claims, demands, notices, suits, investigations, inquiries, proceedings
or actions against IMS, IMA or the IMA Facilities, alleging non-compliance in
any material respect with Environmental Law or Environmental Permits. To the
Knowledge of IMS or IMA, there are no circumstances or conditions involving the
CD Business or IMA Facilities or any real property currently owned, operated or
leased by any of them that could reasonably be expected to result in any
material Environmental Liability for which the Company or PGIO would be
responsible.

          (b) No property constituting a Contributed Asset or a Purchased Asset
(including soils, groundwater, surface water, buildings or other structures)
currently owned, operated or leased by the CD Business and no IMA Facilities are
contaminated with any Hazardous Material at levels or in amounts that violate or
require investigation, monitoring or response actions pursuant to applicable
Environmental Laws. Neither IMS or IMA nor any of their Subsidiaries is subject
to any material Environmental Liability for Hazardous Material disposal or
contamination on any third party property. Neither IMS or IMA nor any of their
Subsidiaries has manufactured, generated, received, used, handled, processed,
stored, treated, released, discharged, emitted, shipped or disposed of any
Hazardous Material (whether or not on its own leased, owned or operated
properties or properties owned leased or operated by others) except in material
compliance with all Environmental Laws.

          (c) The CD Business and IMA Facilities have obtained and maintained in
effect all Environmental Permits material to the conduct of their businesses
and, where applicable, have filed timely applications for renewal or
modification of Environmental Permits. No Environmental Permit material to the
conduct of the CD Business or the operation of the IMA Facilities is subject to
major modification, revision, rescission, public notice and comment or prior
consent by any Governmental Entity as a result of the consummation of the
transactions contemplated by this Agreement and the other Transaction
Agreements.

          (d) Neither the CD Business nor any of the IMA Facilities has received
any notice from any Person or is aware of any condition, event or circumstance
(including but not limited to the release or threatened release of any Hazardous
Material at any property currently or formerly owned, leased or used by IMS or
IMA, any Affiliate, or any third party) that would reasonably be expected to
result in a material Environmental Liability for which the Company or PGIO could
be responsible.

          (e) Except for indemnifications under manufacturing, supply or similar
agreements set forth in Section 3.18 of the Disclosure Schedule, neither IMS or
IMA nor any of their Subsidiaries has assumed or retained by operation of law or
by Contract any Environmental Liability of any third-party for which the Company
or PGIO could be responsible.

          (f) To the Knowledge of IMS and IMA, no Lien or "super lien" has been
placed on any site owned or operated by the CD Business or IMA Facilities
pursuant to the Federal Comprehensive, Environmental Response, Compensation, and
Liability Act of 1980 or any similar Law.


                                       24



          (g) This Section 3.18 constitutes the sole representations and
warranties of IMS or IMA relating to environmental matters.

          Section 3.19 Transactions with Affiliates. Section 3.19 of the
Disclosure Schedule describes any material transaction, since January 1, 2004,
between IMS or IMA, on the one hand, and any of their Affiliates (other than
wholly-owned Subsidiaries of IMS or IMA and the Inverness Medical (Shanghai),
Co., Ltd.), on the other hand, with respect to the CD Business, other than any
employment Contract, Contract with any employee pertaining to any Benefit Plan
or equity incentive award, Contract not to compete with IMS or IMA, Contract to
maintain the confidential information of IMS or IMA, or Contract assigning
Intellectual Property Rights to IMS or IMA. Except as set forth in Section 3.19
of the Disclosure Schedule, no Affiliate of IMS or IMA (other than wholly-owned
Subsidiaries of IMS or IMA and Inverness Medical (Shanghai), Co., Ltd.) (i) owns
or has any interest in any property (real or personal, tangible or intangible),
Intellectual Property Rights or Contract used or held for use in or pertaining
to the CD Business, (ii) to the Knowledge of IMS or IMA, has any claim or cause
of action against IMS or IMA with respect to the CD Business or (iii) owes any
money to, or is owed any money by, IMS or IMA with respect to the CD Business
except, in each case, pursuant to any employment Contract, Benefit Plan or for
reimbursement of business expenses in the Ordinary Course of Business. For the
avoidance of doubt, the matters set forth in this Section 3.19 are neither
intended to relate to, nor is any disclosure provided with respect to,
intercompany arrangements, Contracts or understandings among IMA and its
Subsidiaries or Inverness Medical (Shanghai), Co., Ltd.

          Section 3.20 Certain Business Practices. Neither IMS or IMA nor any of
their directors, officers, agents or employees, has (i) used any funds for
unlawful contributions, gifts, entertainment or other unlawful expenses related
to political activity; (ii) made any unlawful payment to foreign or domestic
government officials or employees or to foreign or domestic political parties or
campaigns or violated any provision of the Foreign Corrupt Practices Act of 1977
or similar laws in any other jurisdiction or (iii) made any payment in the
nature of criminal bribery.

          Section 3.21 Regulatory Compliance. (a) Except as set forth in Section
3.21(a) of the Disclosure Schedule, each Product that is subject to the
jurisdiction of the FDA or similar Governmental Entity, or subject to the
Federal Food, Drug and Cosmetic Act, as amended, and the regulations promulgated
thereunder (the "FDCA") or similar Laws in any foreign jurisdiction, is being
formulated, developed, manufactured, packaged, tested, advertised, marketed,
promoted, distributed and sold by IMS, IMA or one of their respective
Subsidiaries in compliance in all material respects with all applicable
requirements under the FDCA and similar Laws, including those relating to
investigational use, good clinical practices, current good manufacturing
practices, introduction of products into interstate commerce, record keeping,
advertising and marketing, reporting of adverse events and filing of other
reports. Except as set forth in Section 3.21(a) of the Disclosure Schedule,
since January 1, 2004 neither IMS nor IMA nor any of their respective
Subsidiaries has received any written notice from the FDA or any other
Governmental Entity alleging any material violation of any Law by IMS or IMA or
any of their respective Subsidiaries applicable to any Product. Except as set
forth in Section 3.21(a) of the Disclosure Schedule, since January 1, 2004,
neither IMS nor IMA nor any of their respective Subsidiaries has received any
written notices of inspectional observations (including those


                                       25



recorded on form FDA 483), establishment inspection reports, warning letters and
any other documents received from or issued by the FDA or any similar
Governmental Entity asserting non-compliance in any material respect with FDA
regulatory requirements or other applicable Laws of any similar Governmental
Entity by IMS or IMA or any of their respective Subsidiaries with respect to the
CD Business or Persons otherwise performing services for the benefit of IMS or
IMA or any of their respective Subsidiaries with respect to the CD Business,
except for matters resolved prior to the date hereof. In addition, no
Governmental Entity or other Person has commenced or, to the Knowledge of IMS or
IMA, threatened to initiate any proceeding alleging, any violations of any
federal, state or local consumer protection laws.

          (b) Section 3.21(b) of the Disclosure Schedule sets forth for each
Product a true, correct and complete list of all pre-clinical and clinical
studies and trials ongoing with respect to such Product as of the date hereof.

          (c) All physician and consumer product information required to
accompany the distribution of each Product (hereafter "Labeling") complies in
all material respects with all Laws and guidelines published and enforced by the
FDA, including Section 502 (21 U.S.C. Section 352) of the FDCA and 21 C.F.R.
Section 801, or similar Laws in any foreign jurisdiction.

          (d) For each Product, all required post-approval regulatory reports
and submissions, including those required by 21 C.F.R. Parts 803 and 806, or
similar Laws in any foreign jurisdiction, have been timely submitted and all
post-marketing obligations have been timely completed or fulfilled, except where
such failure to so timely submit, complete or fulfill would not prohibit or
delay the continued manufacture, sale and distribution of any Product currently
manufactured, marketed, sold and distributed by the CD Business. Except as set
forth on Section 3.21(d) of the Disclosure Schedule, there has not been any
occurrence of any medical device report concerning any Products under 21 C.F.R.
Part 803 that has not been resolved prior to the date hereof.

          (e) Except as set forth on Section 3.21(e) of the Disclosure Schedule,
neither IMS or IMA or any of their respective Subsidiaries, nor, to their
Knowledge, any officer, employee or agent of them, has made an untrue statement
of a material fact or fraudulent statement to the FDA or any other Governmental
Entity, failed to disclose a material fact required to be disclosed to the FDA
or any other Governmental Entity, or committed an act, made a statement, or
failed to make a statement that, at the time such disclosure was made, would
reasonably be expected to provide a basis for the FDA or any other Governmental
Entity to invoke its policy respecting "Fraud, Untrue Statements of Material
Facts, Bribery, and Illegal Gratuities", set forth in 56 Fed. Reg. 46191
(September 10, 1991) or any similar policy. Neither IMS or IMA nor, to their
Knowledge, any officer, employee or agent of them, has been convicted of any
crime or engaged in any conduct for which debarment is mandated by 21 U.S.C.
Section 335a(a) or any similar Law or authorized by 21 U.S.C. Section 335a(b) or
any similar Law, nor has IMS or IMA (or any of their respective Subsidiaries)
received written notice of any proposed disqualification, debarment or exclusion
including exclusion under 42 U.S.C. Section 1320a 7 or any similar Law. Neither
IMS or IMA or any of their respective Subsidiaries nor, to their Knowledge, any
officer, employee or agent of them, has been convicted of any crime or engaged
in any conduct for which such Person or entity could be excluded from


                                       26



participating in the federal health care programs under Section 1128 of the
Social Security Act or any similar Law.

          Section 3.22 Product Liability Claims; Product Recalls. Except as set
forth on Section 3.22 of the Disclosure Schedule, since January 1, 2004 neither
IMS nor IMA has received any written notice from any Person regarding any
actual, alleged, possible or potential claim by any Person or group of Persons,
including any Governmental Entity, for money damages or any other form of
relief, whether in law or equity, in respect of potential or actual injury or
harm allegedly resulting from or due and owing in connection with the purchase,
use, application of, or defect (including alleged failure to warn) relating to
any of the Products, irrespective of the legal theory of liability except for
Product returns in the Ordinary Course of Business and other claims that were
resolved prior to the date hereof without payment of significant money damages
or the entry of, or agreement to, other forms of relief that were material to
the CD Business. Except as set forth on Section 3.22 of the Disclosure Schedule,
since January 1, 2004 no Product has been the subject of any recall, market
withdrawal, correction, or removal, and neither IMS nor IMA has received any
written notice that the FDA or any other Governmental Entity has (i) commenced
or threatened in writing to initiate any action to withdraw its approval or
request the recall, market withdrawal, correction, or removal of any Product or
(ii) commenced or threatened in writing to initiate, any action to enjoin
production of any Product at any facility. Except as set forth in Section 3.22
of the Disclosure Schedule, no event has occurred, and to the Knowledge of IMS
or IMA, no condition or circumstance exists (including any adverse reactions or
Product failure), that might (with or without notice or lapse of time) directly
or indirectly give rise to or serve as a basis for any such recall, market
withdrawal, correction, or removal or other similar actions relating to any such
Product.

          Section 3.23 Product Registrations. Section 3.23 of the Disclosure
Schedule sets forth, as of the date hereof, a list of all material Governmental
Licenses granted to IMS or IMA to market any of the Products (the "Product
Registrations"). Except as set forth in Section 3.23 of the Disclosure Schedule,
(i) all Products sold under the Product Registrations are manufactured and
marketed in accordance with the specifications and standards contained in such
Product Registrations, (ii) IMS or IMA is the sole and exclusive owner of the
Product Registrations and has not granted any right of reference to any Person
with respect thereto, and (iii) the Product Registrations do not include or
require reference to any other Governmental Licenses or other filings with any
Governmental Entity. The Product Registrations are all the registrations,
approvals, licenses or authorizations required to market the Products currently
marketed by the CD Business. IMS and IMA have made available to PGIO true,
complete and accurate copies of all Product Registrations and all material
correspondence, written notices or written communications received from or sent
to the FDA or other Governmental Entities relating to the Products.

          Section 3.24 Purchase for Investment. The Shares issued or issuable to
IMS under this Agreement and the Limited Liability Company Agreement are being
acquired for its own account for the purpose of investment, it being understood
that the right to dispose of such Shares shall be entirely within the discretion
of IMS. IMS will refrain from transferring or otherwise disposing of any of the
Shares, or any interest therein, in such manner as to cause the Company or PGIO
to be in violation of the registration requirements of the Securities Act of
1933, as amended (the "Securities Act"), or applicable state securities or blue
sky laws.


                                       27



          Section 3.25 Brokers' Fees. No broker, finder, financial advisor,
investment banker or other Person is or will be entitled to any brokerage,
finder's, financial advisor's or other similar fee or commission in connection
with the transactions contemplated by this Agreement and the Transaction
Agreements for which PGIO or the Company could be liable.

                                    ARTICLE 4
                                    COVENANTS

          Section 4.1 Filings. Each of the parties hereto agrees to cooperate
fully with the others in the preparation and filing, whether before or after the
Closing Date, of all documents and instruments required to be filed by PGIO,
IMS, IMA or the Company in connection with the transactions contemplated by this
Agreement and the other Transaction Agreements, including, without limitation,
any business certificate, or any trade, assumed or fictitious name certificates,
or any applications for authority to do business, or any registrations or
assignments of registrations of any patents, trademarks, trade names, service
marks, copyrights or similar rights.

          Section 4.2 Access and Investigation. (a) Subject to Section 4.12
hereof, prior to the Closing Date and subject to any restrictions imposed by
applicable Law or any Business Contract, IMS, IMA and their Affiliates and
Representatives shall: (i) afford PGIO and its Affiliates and Representatives,
during normal business hours and upon reasonable notice, full and free access to
the personnel, properties, contracts, books and records, and other documents and
data relating to the CD Business (ii) furnish PGIO and its Representatives with
copies of all such contracts, books and records, and other existing documents
and data relating to the CD Business, as PGIO may from time to time reasonably
request, and (iii) furnish PGIO and its Representatives with such additional
financial, operating, and other data and information relating to the CD Business
as PGIO may reasonably from time to time request; provided that any such
investigation by PGIO shall be conducted in such a manner as not to interfere
unreasonably with the normal operations of IMS or IMA.

          (b) Subject to Section 4.12 hereof, prior to the Closing Date and
subject to any restrictions imposed by applicable Law, PGIO and its Affiliates
and Representatives shall: (i) afford IMS and its Affiliates and
Representatives, during normal business hours and upon reasonable notice, full
and free access to the personnel, properties, contracts, books and records, and
other documents and data relating to the portions of PGIO that will perform
services under the Transaction Agreements to the extent reasonably necessary to
plan to integrate, as applicable, the operations and activities of the CD
Business with the Company and PGIO, (ii) furnish IMS and its Representatives
with copies of all such contracts, books and records (if any), and other
existing documents and data relating to the portions of PGIO that will perform
services under the Transaction Agreements as IMS may from time to time
reasonably request to the extent reasonably necessary to plan to integrate, as
applicable, the operations and activities of the CD Business with the Company
and PGIO, and (iii) furnish IMS and its Representatives with such additional
financial, operating, and other data and information relating to the portions of
PGIO that will perform services under the Transaction Agreements as IMS may
reasonably from time to time request to the extent reasonably necessary to plan
to integrate, as applicable, the operations and activities of the CD Business
with the Company and PGIO; provided that any


                                       28



such investigation by IMS shall be conducted in such a manner as not to
interfere unreasonably with the normal operations of PGIO.

          Section 4.3 Conduct of Business. (a) From the date hereof through the
Closing Date, IMS and IMA shall (x) except as set forth in Section 4.3(a) of the
Disclosure Schedule, conduct the CD Business only in the Ordinary Course of
Business, (y) use their commercially reasonable efforts to preserve the CD
Business intact and (z) use their commercially reasonable efforts to keep
available to the CD Business the services of its present officers, employees,
consultants and agents, maintain its present vendors, customers, suppliers and
distributors and preserve and enhance its goodwill. Without limiting the
generality of the foregoing:

          (b) Except as set forth in Section 4.3(b) of the Disclosure Schedule,
from the date hereof through the Closing Date, except as otherwise expressly
required or permitted pursuant to this Agreement or in connection with the
Restructuring, neither IMS nor IMA shall, without the prior written consent of
PGIO which consent shall not be unreasonably withheld, take or cause to be taken
any of the following actions with respect to the CD Business:

          (i) (A) sell, transfer, license, mortgage, lease or otherwise dispose
     of or agree to sell, transfer, license, mortgage, lease or otherwise
     dispose of or otherwise encumber or subject to any Lien, other than a
     Permitted Lien or any Lien that will be unconditionally and fully released
     prior to the Closing, any Contributed Assets, which are material,
     individually or in the aggregate, to the CD Business (excluding sales of
     inventory in the Ordinary Course of Business) or (B) acquire any assets,
     except in the Ordinary Course of Business, which are material, individually
     or in the aggregate, to the CD Business except for any such acquisitions
     set forth in IMA's current budget applicable the CD Business previously
     provided to PGIO or (ii) any other acquisition that will be offered to the
     Company pursuant to or on terms consistent with Article 12 of the Limited
     Liability Company Agreement;

          (ii) (x) increase or adjust in any manner the compensation (wages,
     salaries, bonuses or other compensation) of the employees of the CD
     Business or any of its consultants or agents that will become consultants
     or agents of the Company pursuant to this Agreement, unless such increase
     or adjustment is pursuant to Law or any applicable collective bargaining
     agreement or any existing agreement with such Person and except for
     increases in the compensation of employees of the CD Business made
     consistently with past practice and in the Ordinary Course of Business or
     (y) except in the Ordinary Course of Business, hire or dismiss (except for
     cause or breach or upon termination of the applicable engagement) any
     officer or significant employee of the CD Business, any other employee of
     the CD Business whose compensation is in excess of US $100,000 per annum,
     or any sales agent or consultant of the CD Business, except as otherwise
     contemplated by this Agreement;

          (iii) make any material capital expenditures or improvements in the CD
     Business not provided for in the current budget for the CD Business
     previously provided to PGIO;

          (iv) cancel or waive any material claim or right relating to the CD
     Business;


                                       29



          (v) cancel without replacement or reduce in any material respect any
     of the insurance coverages for the CD Business;

          (vi) except for actions permitted or required by this Agreement or
     necessary to consummate the transactions contemplated hereby, take any
     action or fail to take any action that permits any Governmental License
     material to the conduct of the CD Business to expire, be cancelled or be
     amended in a manner adverse to the CD Business;

          (vii) incur any obligation under any Business Contract or accounts
     payable of the CD Business, in each case that are to be Assumed
     Liabilities, other than in the Ordinary Course of Business;

          (viii) amend or terminate any Business Contract or Governmental
     License material to the conduct of the CD Business to which IMS or IMA is a
     party, except amendments or terminations of such Business Contracts or
     Governmental Licenses that are in the Ordinary Course of Business;

          (ix) except as required by applicable Law or any judgment arising from
     any Legal Proceeding, make any commitment to or incur liability to any
     labor organization that represents, purports to represent or is attempting
     to represent, employees of the CD Business;

          (x) make any material change of the policies or practices with respect
     to the CD Business;

          (xi) make any material change in any method of accounting or auditing
     practice, principle or policy of the CD Business, change or revalue any
     material assets or make or change any Tax election or tax accounting method
     relating to the CD Business except, in each case, as required by GAAP or
     any applicable Law;

          (xii) collect the accounts receivable relating to the CD Business
     other than in the Ordinary Course of Business;

          (xiii) write-down of the value of any of the Contributed Assets except
     in the Ordinary Course of Business or as required by GAAP;

          (xiv) engage in any other extraordinary corporate transactions that
     would materially impede the transactions contemplated by this Agreement; or

          (xv) agree, whether in writing or otherwise, to take any of the
     actions set forth in Sections 4.3(b)(i)-(xiv).

          (c) From the date hereof through the Closing Date, IMS and IMA shall:

          (i) maintain and purchase adequate levels of inventories to carry on
     the CD Business in the Ordinary Course of Business;


                                       30



          (ii) make capital expenditures in accordance in all material respects
     with the budget for the CD Business previously provided to PGIO;

          (iii) pay and discharge its liabilities and obligations, including
     accounts payable, with respect to the CD Business in the Ordinary Course of
     Business;

          (iv) to the extent permitted by applicable Law, confer with PGIO
     concerning operation matters of a material nature with respect to the CD
     Business;

          (v) use commercially reasonable efforts to preserve the
     confidentiality of all trade secrets eligible for protection under
     applicable trade secret law and material to the operation of the CD
     Business; and

          (vi) to the extent permitted by applicable Law, otherwise report
     periodically to PGIO concerning the status of the operations and finances
     of the CD Business.

          (d) PGIO and the Company (i) shall take no action, nor make any public
announcement or any other disclosure concerning any actions, the effect of which
may be to frustrate IMS's and IMA's ability to fulfill their obligations under
this Section 4.3, and (ii) shall use commercially reasonable efforts to assist
IMS and IMA in fulfilling their respective obligations under the preceding
sentence, including taking such actions as may be reasonably requested by IMS or
IMA in furtherance of the foregoing.

          Section 4.4 Commercially Reasonable Efforts. Upon the terms and
subject to the conditions set forth in this Agreement, each of the parties
hereto shall use commercially reasonable efforts to take, or cause to be taken,
all actions, and to do, or cause to be done, and to assist and cooperate with
the other parties in doing, all things necessary, proper or advisable to
consummate and make effective, in the most expeditious manner practicable, the
transactions contemplated by this Agreement and the other Transaction
Agreements, including (i) the obtaining of all necessary actions or nonactions,
waivers, consents and approvals from Governmental Entities and the making of all
necessary registrations and filings (including filings with Governmental
Entities, if any) and the taking of all reasonable steps as may be necessary to
obtain an approval or waiver from, or to avoid an action or proceeding by, any
Governmental Entity, (ii) the obtaining of all necessary consents, approvals or
waivers from third parties, and (iii) the execution and delivery of any
additional instruments necessary to consummate the transactions contemplated by
this Agreement and the other Transaction Agreements and to fully carry out the
purposes of this Agreement and the other Transaction Agreements.

          Section 4.5 Public Announcements. No party to this Agreement (nor any
agent or Representative thereof) will make any disclosure or public announcement
with respect to the this Agreement, the other Transaction Agreements and the
transactions contemplated hereby and thereby without the written approval of the
other party; provided that any party may make such disclosure (including filings
with the Securities and Exchange Commission) or public announcement if it is
advised by counsel that such disclosure or public announcement is legally
advisable in light of the prior public disclosure practice of such party (in
which case such party shall use its reasonable best efforts to consult with the
other party regarding such disclosure or public announcement prior to the making
of such disclosure).


                                       31



          Section 4.6 Enforcement . All representations, warranties, covenants
and other agreements made by IMS or IMA to the Company herein or in other
Transaction Agreements are also expressly made for the benefit of PGIO and may
be enforced by PGIO both in its own right and on behalf of the Company.

          Section 4.7 Inventory. From and after the Closing Date, with respect
to any inventory of the CD Business that is shipped to customers of the CD
Business prior to the Closing and is returned by such customers ("Returned
Inventory"), the Company shall be entitled to receive such Returned Inventory
and the Company shall credit to such customer the full value of such Returned
Inventory against the applicable Account Receivable.

          Section 4.8 Transfer. (a) IMS and IMA shall take all necessary actions
to ensure that any asset that would constitute a Contributed Asset or a
Purchased Asset that is held by a Subsidiary of IMS or IMA (other than any asset
that constitutes an Excluded Asset) are Transferred to IMS on or prior to the
Closing Date but in any event in advance of the Closing contemplated by this
Agreement such that such asset is transferred by IMS or IMA to the Company as
contemplated hereby. From and after the Closing, IMS shall, and shall cause IMA
to, take, or cause to be taken, all action necessary to transfer to the Company
without consideration any assets owned by them or their Affiliates that should
have been transferred to the Company at or prior to the Closing pursuant to this
Agreement.

          (b) To the extent that any list, document, record, written
information, computer file or other computer readable media described in Section
1.2(vi) or 1.2(vii) includes matters unrelated to the CD Business that cannot be
separated by IMS, IMA or a Subsidiary thereof without materially affecting the
Company's use of such list, document, record, written information, computer file
or other computer readable media, IMA and IMS shall provide the Company with a
complete copy of such list, document, record, written information, computer file
or other computer readable media; provided that the Company shall not acquire
any title to, or rights in, any portion of such list, document, record, written
information, computer file or other computer readable media that is not related
to the CD Business; and provided further that the Company shall not use or
disclose any portion of such list, document, record, written information,
computer file or other computer readable media that is not related to the CD
Business.

          Section 4.9 Further Assurances. Each of PGIO, IMS, IMA and the Company
shall execute, following the Closing, such documents and other papers and
perform such further acts as may be reasonably required or desirable to Transfer
all Contributed Assets and Purchased Assets to the Company or PGIO (which shall
simultaneously contribute them to the Company), respectively, and otherwise to
carry out the provisions hereof and the transactions contemplated hereby or to
carry out the provisions of the Purchase Agreement and the transactions
contemplated thereby. The Company shall perform and discharge the Assumed
Liabilities in accordance with their terms.

          Section 4.10 Accounts Receivable. On and after the Closing Date, IMS
agrees to promptly remit to the Company any amounts in respect of Accounts
Receivable accrued after the Closing Date that are collected or received by IMS
or its Affiliates. From and after the Closing Date, the Company will ensure that
all invoices delivered to customers are


                                       32



conspicuously marked as payable to the Company. From and after the Closing Date,
IMS agrees to reasonably cooperate with the Company with respect to the
collection of Accounts Receivable.

          Section 4.11 Expenses. Whether or not the Closing occurs, each of the
parties hereto shall bear its own fees and expenses incurred or owed in
connection with this Agreement, the other Transaction Agreements and the
transactions contemplated hereby and thereby and the negotiations thereof
(including any due diligence or other investigation costs relating to such
transactions).

          Section 4.12 Confidentiality. Each party hereto agrees to abide by the
provisions set forth in the Confidentiality Agreement, dated as of December 16,
2005 between The Procter & Gamble Company and IMA, and executed by each of them
relating to confidentiality.

          Section 4.13 [Reserved].

          Section 4.14 Preparation for Transition. Each of IMS and PGIO agrees
to use, and to cause any of its respective Affiliates to use, its commercially
reasonable efforts to cooperate with the other and the Company after the date of
this Agreement in planning to implement any actions with respect to the CD
Business reasonably requested by PGIO in preparation for PGIO or its Affiliates
to be able to provide certain services to the Company upon Closing.

          Section 4.15 Other Subsidiaries. PGIO and IMS agree that there will be
certain costs and expenses associated with the IMA's Subsidiaries listed on
Section 4.15 of the Disclosure Schedule either ceasing to conduct the CD
Business that such entities had conducted or otherwise terminating activities
(including through liquidation, dissolution or similar activity) with respect to
the CD Business. Each of PGIO and IMS agree to bear an equal (50-50) share of
all costs, fees and expenses (other than Taxes which shall be borne by IMS or
its Affiliates) arising from, relating to or resulting from such cessation or
termination of CD Business activities by, or liquidation, dissolution or similar
activity with respect to, such Subsidiaries, including costs, fees and expenses
incurred or to be incurred in connection with employee matters, including
severance or similar costs, cancellation of leases, restructuring costs, fees
and expenses arising from, relating to or resulting from such cessation or
termination. Each of PGIO and IMA shall use commercially reasonable efforts to
implement such cessation or termination as promptly as reasonably practicable
following any decision by IMA or a Subsidiary thereof to so cease or terminate
activities, including sharing estimated costs, fees and expenses and proposed
timelines for such cessation or termination.

          Section 4.16 Compliance with Contractual Obligations. The Company
agrees that it will comply, to the extent applicable, with the provisions of the
agreements set forth in Section 4.16 of the Disclosure Schedule.

          Section 4.17 Issuance of Shares. Prior to or on the Closing Date:

          (a) IMS, PGIO and the Company shall execute a short form contribution
agreement and shall procure a certified translation into French thereof, to be
filed with the commercial register at the Company's registered seat;


                                       33



          (b) the Shareholders shall approve at a shareholders meeting the
increase of the Company's share capital to issue the Shares in accordance with
Section 1.6; and

          (c) the Shareholders shall resolve to amend the Company's articles of
association so as to reflect the increase of the Company's share capital and the
agreements of the parties to the Shareholder Agreement.

          Section 4.18 Unipath Purchase. Concurrently with the Closing, the
Company or a Subsidiary of the Company shall purchase (or PGIO shall purchase
and simultaneously contribute to the Company) certain assets and assume certain
liabilities of Unipath Ltd. relating to the research and development activities
for the consumer and diagnostics business pursuant to a purchase agreement which
shall be on mutually agreeable terms with such provisions as are necessary to
comply with applicable law. If the Company or a Subsidiary of the Company
purchases such assets, PGIO shall contribute to the Company the full purchase
price of such assets under the terms of the PGIO Contribution Agreement. In each
case, the purchase price provided for in Section 1.6 of the Purchase Agreement
shall be reduced by the purchase price paid for such assets.

                                    ARTICLE 5
                                   TAX MATTERS

          Section 5.1 Cooperation. After the Closing, each of the Company, PGIO,
IMS and IMA shall reasonably cooperate in preparing and filing all Tax Returns
to the extent such filing requires providing necessary information, records and
documents relating to the Contributed Assets or the CD Business. Each of the
Company, PGIO, IMS and IMA shall cooperate in the same manner in defending or
resolving any audit, examination or litigation relating to Taxes.

          Section 5.2 Apportioned Obligations. All real property taxes, personal
property taxes and similar ad valorem obligations levied with respect to the
Contributed Assets for a taxable period that includes (but does not end on) the
Closing Date (collectively, the "Apportioned Obligations") shall be apportioned
between the Company and IMA based on the number of days of such taxable period
included in the Pre-Closing Tax Period and the number of days of such taxable
period after the Closing Date (any such portion of such taxable period, the
"Post-Closing Tax Period"). IMA shall be liable for the proportionate amount of
such Apportioned Obligations attributable to the Pre-Closing Tax Period, and the
Company shall be liable for the proportionate amount of such Apportioned
Obligations attributable to the Post-Closing Tax Period.

          Section 5.3 Transfer Taxes. All transfer, value-added, sales, use,
stamp, registration and other such Taxes and fees (including any penalties and
interest) ("Transfer Taxes") incurred in connection with the transactions
contemplated by this Agreement (including any real property transfer Tax and
similar Tax) shall be borne and paid by IMS. The party required by applicable to
Law to file any Tax Return in respect of any such Transfer Taxes shall file such
Tax Returns and other documentation with respect to all such Transfer Taxes and,
if required by applicable Law, the non-filing party shall join in the execution
of any such Tax


                                       34



Returns and other documentation, provided that any costs, fees or other expenses
in connection with the foregoing shall be borne by IMS and IMA.

          Section 5.4 Tax Payments. Apportioned Obligations and Transfer Taxes
shall be timely paid, and all applicable filings, reports and returns shall be
filed, as provided by applicable Law. The paying party shall be entitled to
reimbursement from the non-paying party in accordance with Section 5.2 or 5.3,
as the case may be. Upon payment of any such Apportioned Obligation or Transfer
Tax, the paying party shall present a statement to the non-paying party setting
forth the amount of reimbursement to which the paying party is entitled under
Section 5.2 or 5.3, as the case may be, together with such supporting evidence
as is reasonably necessary to calculate the amount to be reimbursed. The
non-paying party shall make such reimbursement promptly but in no event later
than 10 days after the presentation of such statement.

          Section 5.5 Transaction Treated as a Contribution. The parties agree
that the contribution transactions set forth in this Agreement shall be treated
for U.S. federal income tax purposes as contributions of property in exchange
for interests in the Company within the meaning of Section 721(a) of the Code.

                                    ARTICLE 6
                              CONDITIONS TO CLOSING

          Section 6.1 Conditions to Each Party's Obligation. The respective
obligations of each of PGIO, IMS, IMA and the Company to enter into and complete
the Closing shall be subject to the satisfaction (or express written waiver by
PGIO and IMA) on or prior to the Closing Date of the following conditions:

          (i) Anti-Trust. Any waiting period (and any extension thereof)
     applicable to this Agreement, the other Transaction Agreements or the
     transactions contemplated hereby or thereby under the HSR Act (or any
     similar Law of any Governmental Authority) shall have been terminated or
     shall have expired.

          (ii) No Injunction or Restraint.

          (A) No temporary restraining order, preliminary or permanent
     injunction or other order or decree issued by any court of competent
     jurisdiction or other legal restraint or prohibition (collectively, "Legal
     Restraints") preventing the consummation of the transactions contemplated
     hereby and by the other Transaction Agreements shall be in effect; and

          (B) There shall not be pending or threatened by any Governmental
     Entity any Legal Proceeding (or by any other Person any Legal Proceeding
     which has a reasonable likelihood of success), (a) challenging or seeking
     to restrain or prohibit the transactions contemplated by this Agreement or
     the other Transaction Agreements or seeking to obtain in connection with
     such transactions any damages that are material in relation to the CD
     Business, (b) seeking to prohibit or limit the ownership or operation by
     the Company of any material portion of their respective businesses or
     assets, or to compel the Company to dispose of, hold separate or license
     any material portion of their respective businesses or


                                       35



     assets, as a result of the transactions contemplated by this Agreement and
     the other Transaction Agreements, (c) seeking to impose limitations on the
     ability of PGIO or the Company to acquire or hold, or exercise full rights
     of ownership of, the CD Business or any of the Contributed Assets or the
     Purchased Assets or (d) seeking to prohibit PGIO or the Company from
     effectively controlling in any material respect the CD Business or the
     operation thereof.

          (iii) Shareholder Agreement. The Shareholder Agreement shall have been
     executed and delivered by each party thereto.

          (iv) Purchase Agreement. The closing of the transactions contemplated
     in the Purchase Agreement shall have taken place concurrently with the
     Closing hereunder.

          (v) Senior Lender Consent. IMA shall have received the consent of its
     senior lender to the consummation of the transactions contemplated by, and
     the performance of its and its subsidiaries obligations under (including
     the release of Liens), this Agreement, the Purchase Agreement, and the
     other Transaction Documents, in form and substance reasonably satisfactory
     to PGIO.

          (vi) Bonds. IMA shall either (x) provide an officer's certificate with
     respect to its bonds due 2012 to the effect that the transactions
     contemplated hereby are permitted under the applicable indenture governing
     such bonds (the "Bond Indenture"), as well as a copy of the certificate(s)
     required to be delivered by IMA under Section 4.12(a)(2) of the Bond
     Indenture, or (y) have prepaid in full or defeased such bonds.

          (vii) US CD LLC Transaction. Affiliates of IMS and PGIO shall have
     entered into a mutually agreeable Contribution Agreement and Purchase
     Agreement with respect to certain assets used in the CD Business in the
     United States and the closing thereunder shall have taken place
     concurrently with the Closing hereunder.

          (viii) Unipath Purchase. The closing of the purchase contemplated by
     Section 4.18 shall have taken place concurrently with the Closing
     hereunder.

          (ix) Tax Rulings. Tax rulings from the Swiss taxing authorities shall
     have been received with respect to the transactions contemplated hereby in
     form and substance reasonably satisfactory to IMS, IMA and PGIO.

          Section 6.2 Conditions to the Company's Obligations. The obligations
of the Company to complete the Closing is subject to the satisfaction (or
express written waiver by the Company and PGIO) on or prior to the Closing Date
of the following conditions:

          (i) Representations, Warranties. The representations and warranties of
     IMS and the Company set forth in this Agreement and in the Purchase
     Agreement shall be true and correct as of the Closing Date or such other
     date that any such representation or warranty speaks as of, except where
     the failure to be true and correct would not, individually or in the
     aggregate (a) have a Material Adverse Effect, or (b) materially impair IMS,
     IMA or the Company's ability to consummate the transactions contemplated


                                       36



     by this Agreement and the Purchase Agreement or to perform their
     obligations under this Agreement or the other Transaction Agreements.

          (ii) Performance. All the terms, covenants, agreements and conditions
     of this Agreement and the Purchase Agreement to be complied with and
     performed by the Company, IMS and IMA on or before the Closing Date shall
     have been complied with and performed prior to or on the Closing Date
     except where the failure to so perform would not, individually or in the
     aggregate (a) have a Material Adverse Effect, or (b) materially impair the
     Company, IMS or IMA's ability to consummate the transactions contemplated
     by this Agreement or the Purchase Agreement or to perform their obligations
     under this Agreement or the other Transaction Agreements.

          (iii) No Material Adverse Effect. Since the Most Recent Balance Sheet
     Date, there shall not have been a Material Adverse Effect.

          (iv) Consents and Approvals. The Company and PGIO shall have received
     evidence, in form and substance reasonably satisfactory to them, that all
     consents and approvals of third parties set forth in Section 3.3(a) of the
     Disclosure Schedule or otherwise required under any Business Contract (in
     each case pursuant to written instruments in form and substance reasonably
     satisfactory to PGIO and without payment of any consideration by the
     Company or PGIO) or from any Governmental Entity in connection with this
     Agreement, the other Transaction Agreements and the transactions
     contemplated hereby and thereby, have been obtained and are in full force
     and effect except for any such consents and approvals the absence of which
     would not (a) have a Material Adverse Effect, or (b) materially impair the
     operation of the CD Business.

          (v) Officers' Certificate. IMS shall have delivered to PGIO a
     certificate, dated the Closing Date and signed by its chief executive
     officer and chief financial officer, confirming the satisfaction of the
     conditions set forth in Section 6.2(i), (ii) and (iii) and such other
     matters as may be reasonably requested by PGIO.

          (vi) Transaction Agreements. Each of IMS, IMA (and, as applicable,
     Subsidiaries thereof) and the Company shall have executed and delivered
     each Transaction Agreement to which it is a party.

          Section 6.3 Conditions to IMS's Obligation. The obligations of IMS to
enter into and complete the Closing is subject to the satisfaction (or express
written waiver by PGIO) on or prior to the Closing Date of the following
conditions:

          (i) Performance. All the terms, covenants, agreements and conditions
     of this Agreement and the Purchase Agreement to be complied with and
     performed by PGIO on or before the Closing Date shall have been complied
     with and performed prior to or on the Closing Date except where the failure
     to so perform would not materially impair PGIO's ability to consummate the
     transactions contemplated by this Agreement or to perform their obligations
     under this Agreement or the other Transaction Agreements.

          (ii) Governmental Consents and Approvals. IMS and IMA shall have
     received evidence, in form and substance reasonably satisfactory to it,
     that consents of


                                       37



     Governmental Entities required in connection with this Agreement, the other
     Transaction Agreements and the transactions contemplated hereby and
     thereby, have been obtained and are in full force and effect except for any
     such consents and approvals the absence of which would not materially
     impair PGIO or the Company's ability to consummate the transactions
     contemplated by this Agreement and the Purchase Agreement or to perform
     their obligations under this Agreement or the other Transaction Agreements.

          (iii) Transaction Agreements. PGIO or its Affiliates shall have
     executed and delivered each Transaction Agreement to which it is a party.

                                    ARTICLE 7
                                 INDEMNIFICATION

          Section 7.1 Indemnification of PGIO. From and after the Closing, IMS
shall indemnify PGIO and its Affiliates and the Company (each, a "PGIO
Indemnified Party") against and hold each PGIO Indemnified Party harmless from
any and all Losses suffered or incurred by any such PGIO Indemnified Party
arising from, relating to or otherwise in connection with:

          (i) any breach or inaccuracy of any representation or warranty of IMS
     contained in this Agreement or in the certificates furnished by IMS under
     Section 6.2(v);

          (ii) any breach or failure to perform any covenant or agreement of IMS
     or IMA contained in this Agreement;

          (iii) the operation of the CD Business at any time during the period
     prior to the Closing (except for Assumed Liabilities);

          (iv) a claim by any third Person that any product of the Company, or
     the making, using, selling, offering for sale or importing of any such
     product, has infringed or is infringing the Intellectual Property of such
     Person the subject matter of which relates to lateral flow technology,
     including but not limited to, components and processes used to implement
     lateral flow technology;

          (v) any liability of IMS or its Affiliates related to an Excluded
     Asset and any liability that is not an Assumed Liability, including the
     Excluded Liabilities, including the cost of extinguishing any Permitted
     Lien or Permitted IP Lien securing any such Excluded Liabilities;

          (vi) the operation of the Excluded Businesses;

          (vii) any liability or obligation of IMS or its Affiliates to fund or
     finance any pension or similar liabilities; and

          (viii) any liability arising out of the operation of the IMA
     Facilities;

provided that no PGIO Indemnified Party shall be entitled to be indemnified
pursuant to clause (i) above unless the aggregate of all Losses for which IMS
would, but for this proviso, be liable under clause (i) above or under Section
7.1(i) of the Purchase Agreement or under similar


                                       38



provisions of a purchase or contribution agreement in connection with the sale
or contribution to US CD LLC of a portion of the CD Business exceeds on a
cumulative basis $3,250,000 (the "IMA Indemnity Threshold"), at which point each
PGIO Indemnified Party shall be entitled to be indemnified for the aggregate
Losses and not just amounts in excess of the IMA Indemnity Threshold (except
that the foregoing proviso shall not apply to any breach of the representations
and warranties set forth in Sections 3.1, 3.2, 3.3, 3.4 and 3.15, or to any act
of fraud); provided, further, that IMS's aggregate liability pursuant to clause
(i) of this Section 7.1 together with any other liability for indemnification
for breach of representation and warranty made by IMS or IMA under the Purchase
Agreement or under a purchase or contribution agreement in connection with the
sale or contribution to US CD LLC of a portion of the CD Business shall not
exceed $81,250,000.

          Section 7.2 Indemnification of IMS. From and after the Closing, the
Company shall indemnify IMS and its Affiliates (each, an "IMA Indemnified
Party") against and hold each IMA Indemnified Party harmless from any and all
Losses suffered or incurred by any such IMA Indemnified Party arising from,
relating to or otherwise in connection with:

          (i) any failure to perform any covenant or agreement of the Company
     contained in this Agreement;

          (ii) the operation of the CD Business (other than with respect to
     Excluded Liabilities or Excluded Assets) at any time at and after the
     Closing; or

          (iii) any Assumed Liability.

          Section 7.3 Indemnification Claims. (a) In order for an Indemnified
Party to be entitled to any indemnification provided for under Section 7.1 or
7.2 in respect of, arising out of or involving, a Third Party Claim, such
Indemnified Party must notify the Indemnifying Party in writing of the Third
Party Claim (including in such notice a brief description of the applicable
claims, including damages sought or estimated, to the extent actually known by
the Indemnified Party) within 20 Business Days after receipt by such Indemnified
Party of notice of such Third Party Claim (a "Claim Notice"); provided that
failure to give such notification shall not affect the indemnification provided
under Section 7.1 or 7.2 except to the extent the Indemnifying Party has been
actually prejudiced as a result of such failure. Thereafter, the Indemnified
Party shall deliver to the Indemnifying Party, within 10 Business Days after the
Indemnified Party's receipt thereof, copies of all notices and documents
received by the Indemnified Party relating to such Third Party Claim.

          (b) The Indemnifying Party will be entitled to participate in the
defense thereof and, if it so chooses, to assume the defense thereof (at the
sole cost and expense of the Indemnifying Party) with counsel selected by the
Indemnifying Party; provided that (i) the Indemnifying Party provides the
Indemnified Party notice of its election to assume the defense of such Third
Party Claim within 15 days of receipt of the applicable Claim Notice, (ii) the
Indemnifying Party has the financial resources to pay damages that could
reasonably be expected to arise from such Third Party Claim, and (iii) such
counsel selected by the Indemnifying Party is reasonably satisfactory to the
Indemnified Party. Should the Indemnifying Party so elect to assume the defense
of a Third Party Claim, the Indemnifying Party will not be liable to the
Indemnified Party under this Section 7.3 for any legal expenses subsequently
incurred by the


                                       39



Indemnified Party in connection with the defense thereof other than reasonable
costs of investigation or of assistance as contemplated by this Section 7.3;
provided that (1) if the Indemnified Party reasonably determines, after
conferring with its counsel, that it is advisable for the Indemnified Party to
be represented by separate counsel due to actual or potential conflicts of
interest, the Indemnified Party shall have the right to employ counsel (limited
to one law firm) to represent it and in that event the fees and expenses of such
separate counsel shall be paid by the Indemnifying Party, and (2) the
Indemnifying Party shall be liable for the reasonable fees and expenses of
counsel employed by the Indemnified Party for any period during which the
Indemnifying Party has not assumed the defense thereof (other than during any
period in which the Indemnified Party shall have failed to give the Claim Notice
as provided above). If the Indemnifying Party assumes such defense, the
Indemnified Party shall have the right to participate in the defense thereof and
to employ counsel, at its own expense (except as otherwise provided herein),
separate from the counsel employed by the Indemnifying Party, it being
understood that the Indemnifying Party shall control such defense. If the
Indemnifying Party assumes the defense of the Third Party Claim, it will be
conclusively established for purposes of this Agreement and the Purchase
Agreement that the claims made in that Third Party Claim are within the scope
and subject to indemnification pursuant to this Article 7. Notwithstanding the
foregoing, the Indemnifying Party shall not be entitled to assume the defense of
any Third Party Claim (and shall be liable for the reasonable fees and expenses
of counsel incurred by the Indemnified Party in defending such Third Party
Claim) if the Third Party Claim seeks an order, injunction or other equitable
relief or relief for other than money damages against the Indemnified Party
which the Indemnified Party reasonably determines, after conferring with its
counsel, cannot be separated from any related claim for money damages. The
indemnification required by Section 7.1 or 7.2, as the case may be, shall be
made by prompt payments of the amount thereof during the course of the
investigation or defense, as and when bills are received or the indemnifiable
Loss is incurred. If the Indemnifying Party chooses to defend or prosecute a
Third Party Claim, all the parties hereto reasonably necessary for such defense
or prosecution shall reasonably cooperate in the defense or prosecution thereof,
which cooperation shall include (upon the Indemnifying Party's reasonable
request) the provision to the Indemnifying Party of records and information
which are reasonably relevant to such Third Party Claim, and making employees
available on a mutually convenient basis to provide additional information and
explanation of any material provided hereunder. If the Indemnifying Party
chooses to defend or prosecute any Third Party Claim, the Indemnified Party will
agree to any settlement, compromise or discharge of such Third Party Claim which
the Indemnifying Party may recommend and which by its terms obligates the
Indemnifying Party to pay the full amount of liability in connection with such
Third Party Claim; provided that, without the Indemnified Party's consent, the
Indemnifying Party shall not consent to entry of any judgment or enter into any
settlement (x) that provides for injunctive or other nonmonetary relief
affecting the Indemnified Party or (y) that does not include as an unconditional
term thereof the giving by each claimant or plaintiff to such Indemnified Party
of a release from all liability with respect to such Third Party Claim. If the
Indemnifying Party shall have assumed the defense of a Third Party Claim, the
Indemnified Party shall not admit any liability with respect to, or settle,
compromise or discharge, such Third Party Claim without the Indemnifying Party's
prior written consent (which consent shall not be unreasonably withheld).

          (c) In order for an Indemnified Party to be entitled to any
indemnification provided for under this Agreement other than in respect of,
arising out of or involving a Third


                                       40


Party Claim, such Indemnified Party shall deliver notice of such claim with
reasonable promptness to the Indemnifying Party (including in such notice a
brief description of the applicable claims, including damages sought or
estimated, to the extent actually known by the Indemnified Party); provided that
failure to give such notification shall not affect the indemnification provided
under Section 7.1 or 7.2 except to the extent the Indemnifying Party has been
actually prejudiced as a result of such failure.

          Section 7.4 Survival. (a) All representations, warranties, covenants
and agreements of IMS shall survive the execution and delivery hereof and the
Closing hereunder. Except for those representations and warranties (x) in
Sections 3.1, 3.2, 3.3, 3.8, 3.9 (the first sentence thereof only) and 3.25, all
of which representations and warranties shall survive without limitation and (y)
in Sections 3.12, 3.14, 3.18 and 3.21, all of which shall survive for the
applicable statute of limitations, all representations and warranties of IMS and
IMA shall terminate and expire with respect to any theretofore unasserted claim,
on the second anniversary of the Closing Date; provided that to the extent
applicable or related to Business Intellectual Property Controlled but not owned
by IMS or IMA or one of their respective Subsidiaries pursuant to a license from
a third party, the representations and warranties in Section 3.12 shall survive
for so long as IMS's, IMA's or such Subsidiary's rights in such Business
Intellectual Property exist.

          Section 7.5 Sole and Exclusive Remedy. The sole and exclusive remedy
of an Indemnified Party with respect to any and all claims arising out of, in
connection with or relating to the subject matter of this Agreement will be
pursuant to the indemnification provisions set forth in Article 5 hereof, this
Article 7, and without duplication, Articles 5 and 7 of the Purchase Agreement;
provided that nothing in this Section 7.5 will prohibit claims by the
Indemnified Party for equitable relief, common law fraud and intentional
misrepresentation.

                                    ARTICLE 8
                                   TERMINATION

          Section 8.1 Termination. This Agreement may be terminated, and the
transactions contemplated hereby abandoned, at any time prior to the Closing,
only simultaneously with a termination of the Purchase Agreement and as provided
below:

          (a) by mutual written consent of PGIO and IMA;

          (b) by either PGIO or IMA, (i) if the Closing has not occurred by
September 30, 2007 or, if on such date all conditions to the parties'
obligations to consummate the Closing in Article 6 (other than those which by
their nature are satisfied on the Closing Date) have been satisfied or waived
other than the condition set forth in Section 6.1(i), November 30, 2007 (the
"Outside Date"), unless the failure to effect the Closing is the result of a
material breach of this Agreement or the Purchase Agreement by the party seeking
to terminate this Agreement; (ii) if any Governmental Entity issues an order,
decree or ruling or takes any other action permanently enjoining, restraining or
otherwise prohibiting the Closing hereunder or under the Purchase Agreement and
such order, decree, ruling or other action shall have become final and
nonappealable; or (iii) if any condition to the obligation of such party to
consummate the Closing hereunder or under the Purchase Agreement becomes
incapable of satisfaction prior to the Outside Date; provided in each case that
the terminating party is not then in material breach of


                                       41



any representation, warranty or covenant contained in this Agreement or the
Purchase Agreement;

          (c) by PGIO, if IMS or IMA breaches or fails to perform in any
material respect any of their representations, warranties or covenants contained
in this Agreement or the Purchase Agreement, which breach or failure to perform
would give rise to a failure to satisfy the conditions set forth in Section
6.2(i) or Section 6.2(ii) hereof or of the Purchase Agreement and cannot be or
has not been cured within 30 days after the giving of written notice to IMA of
such breach or the Outside Date, if earlier (provided that PGIO is not then in
material breach of any representation, warranty or covenant contained in the
Purchase Agreement and that neither PGIO nor the Company is then in material
breach of any representation, warranty or covenant contained in this Agreement);
or

          (d) by IMS, if PGIO breaches or fails to perform in any material
respect of any of their representations, warranties or covenants contained in
this Agreement or the Purchase Agreement, which breach or failure to perform
would give rise to a failure to satisfy the condition set forth in Section
6.3(i) hereof or of the Purchase Agreement and cannot be or has not been cured
within 30 days after the giving of written notice to PGIO and the Company of
such breach or the Outside Date, if earlier (provided that neither IMA nor IMS
is then in material breach of any representation, warranty or covenant in this
Agreement or the Purchase Agreement).

          Section 8.2 Effect of Termination. In the event of termination of this
Agreement as provided in Section 8.1, this Agreement shall forthwith become void
and have no effect, without any liability or obligation on the part of PGIO or
IMS, other than Sections 4.5, 4.11, 4.12, this Section 8.2 and Article 9 which
provisions shall survive such termination, and except to the extent that such
termination results from the willful and material breach by a party of any
representation, warranty or covenant set forth in this Agreement.

          Section 8.3 Amendment. This Agreement may be amended by the parties
hereto at any time; provided that this Agreement may not be amended except by an
instrument in writing signed on behalf of each of the parties.

          Section 8.4 Extension; Waiver. At any time prior to the Closing, the
parties may (a) extend the time for the performance of any of the obligations or
other acts of the other parties, (b) waive any inaccuracies in the
representations and warranties of another party contained in this Agreement or
in any document delivered pursuant to this Agreement or (c) waive compliance
with any of the agreements or conditions of another party contained in this
Agreement. Any agreement on the part of a party to any such extension or waiver
shall be valid only if set forth in an instrument in writing signed on behalf of
such party. The failure of any party to this Agreement to assert any of its
rights under this Agreement or otherwise shall not constitute a waiver of such
rights.


                                       42



                                    ARTICLE 9
                               GENERAL PROVISIONS

          Section 9.1 Notices. All notices, requests, claims, demands, waivers
and other communications under this Agreement shall be in writing and shall be
by facsimile, courier services or personal delivery to the following addresses,
or to such other addresses as shall be designated from time to time by a Party
in accordance with this Section 9.1:

          if to PGIO:

          c/o Procter & Gamble RHD, Inc.
          One Procter & Gamble Plaza
          Cincinnati, Ohio 45202
          Attention: Corporate Secretary
          Facsimile: 513-983-2611

          with a copy (which shall not constitute notice) to:

          Covington & Burling LLP
          1330 Avenue of the Americas
          New York, New York 10019
          Attention: Scott F. Smith
          Facsimile: 646-441-9056

          if to IMS or IMA:

          51 Sawyer Road
          Suite 200
          Waltham, MA 02453
          Attention: Office of the General Counsel
          Facsimile:781-647-3939

          with a copy (which shall not constitute notice) to:

          Goodwin Procter LLP
          Exchange Place
          Boston, MA 02109
          Attention: Scott F. Duggan
          Facsimile: 617-523-1231

All notices and communications under this Agreement shall be deemed to have been
duly given (x) when delivered by hand, if personally delivered, (y) one Business
Day after when delivered to a courier, if delivered by commercial one-day
overnight courier service or (z) when sent, if sent by facsimile, with an
acknowledgment of sending being produced by the sending facsimile machine.


                                       43



          Section 9.2 Definitions. The following capitalized terms have the
following meanings:

          "Affiliate" means, with respect to any Person, a Person who is an
"affiliate" of such first Person within the meaning of Rule 405 under the
Securities Act of 1933, as amended. For purposes of this definition, a Person
shall be deemed to control another Person if it owns or controls 50% or more of
the voting equity of the other Person (or other comparable ownership if the
Person is not a corporation); provided that solely for purposes of this
Agreement, the Company shall not be deemed to be an "Affiliate" of any party
hereto (or such parties' other Affiliates).

          "Business Contract" means any Contract arising or resulting primarily
from or related primarily to the CD Business except for an Excluded Contract.

          "Business Day" means any day other than a Saturday or Sunday or a day
on which banking institutions located in New York City are permitted or required
by Law, executive order or decree of a Governmental Entity to remain closed.

          "Business Registered Intellectual Property" means any and all
Intellectual Property owned by IMS or IMA that is exclusively used in the CD
Business and consisting of (i) patents, patent applications (including
provisional applications), (ii) registered trademarks, applications to register
trademarks, intent-to-use applications, or other registrations or applications
related to trademarks and (iii) registered copyrights and applications for
copyright registration.

          "Code" means the Internal Revenue Code of 1986, as amended.

          "Constitutive Documents" means (i) with respect to a Person that is a
corporation, such Person's certificate or articles of incorporation and by-laws,
(ii) with respect to a Person that is a limited liability company, such Person's
certificate of formation and operating or limited liability company agreement,
(iii) with respect to a Person that is a partnership, such Person's partnership
agreement, (iv) with respect to a Person that is a trust, such Person's trust
instrument or agreement, and (v) with respect to a Person that is a legal entity
(including one of the type described in clauses (i) through (iv)), any
constitutive document of such entity or other document or Contract analogous to
those described in clauses (i) through this clause (v).

          "Contingent Obligation" means, as applied to any Person, any direct or
indirect liability of that Person with respect to any Indebtedness, lease,
dividend, guaranty, letter of credit or other obligation, contractual or
otherwise (the "primary obligation") of another Person (the "primary obligor"),
whether or not contingent, (a) to purchase, repurchase or otherwise acquire such
primary obligations or any property constituting direct or indirect security
therefor, (b) to advance or provide funds (i) for the payment or discharge of
any such primary obligation, or (ii) to maintain working capital or equity
capital of the primary obligor or otherwise to maintain the net worth or
solvency or any balance sheet item, level of income or financial condition of
the primary obligor, (c) to purchase property, securities or services primarily
for the purpose of assuring the owner of any such primary obligation of the
ability of the primary obligor to make payment of such primary obligation, or
(d) otherwise to assure or hold harmless the owner of any


                                       44



such primary obligation against loss or failure or inability to perform in
respect thereof. The amount of any Contingent Obligation shall be deemed to be
an amount equal to the stated or determinable amount of the primary obligation
in respect of which such Contingent Obligation is made or, if not stated or
determinable, the reasonably anticipated liability in respect thereof.

          "Contract" means any loan or credit agreement, bond, debenture, note,
mortgage, indenture, guarantee, lease or other contract, commitment, agreement,
instrument, obligation, undertaking, license, permit, concession, franchise or
legally binding arrangement or understanding, whether written or oral.

          "Control" or "Controlled" means, when used with respect to any
intellectual property right or other intangible property, and only in such case,
the possession or right of use (whether by license or ownership, or by control
over a Subsidiary having possession or right of use by license or ownership) by
a Person of the ability to grant to the other Person access, right of use or a
license or sublicense as provided herein without violating the terms of any
written contract with any third party.

          "Environmental Law" means any applicable Law and legally binding
administrative or judicial interpretations thereof relating to (i) pollution,
the protection of the environment (including indoor and outdoor air, surface
water, groundwater, wetlands, drinking water supply, surface or subsurface
land), natural resources or health and safety or (ii) the exposure to, or the
manufacture, handling, use, emission, storage, recycling, treatment, generation,
discharge, transportation or disposal of, the release or threatened release of,
or the removal or remediation of Hazardous Materials.

          "Environmental Liability" means any and all Losses arising from or
relating to: (i) failure to comply with any requirement of an Environmental Law;
(ii) failure to obtain, maintain in effect or comply with any required
Environmental Permit; (iii) actual or alleged obligation to undertake
environmental investigation, risk assessment, monitoring, remediation or
restoration or (iv) harm or injury, actual or alleged, to any real property, to
any Person, to public health, or to any natural resource as caused by any
Hazardous Material.

          "Environmental Permits" means all permits, licenses, certificates,
registrations approvals or authorizations issued or required by any
Environmental Law, held by IMS or IMA facilities that will be used to
manufacture products for the Company under the Manufacturing Agreement.

          "Governmental Entity" means any nation, state, province, county, city
or political subdivision and any official, agency, arbitrator, authority, court,
department, commission, board, bureau, instrumentality or other governmental
entity of any thereof, whether domestic or foreign.

          "Hazardous Materials" means, whether alone or in combination, any and
all materials (including without limitation substances, chemicals, compounds,
mixtures, products or byproducts, wastes, pollutants and contaminants) that are
(i) listed, identified, licensed, prohibited, controlled, or regulated pursuant
to Environmental Law; (ii) identified or classified as "hazardous," "toxic,"
"dangerous," "pollutant," "contaminant," "explosive," "corrosive," "flammable,"
"radioactive," "reactive" or "special waste"; (iii) oils, petroleum, petroleum


                                       45



products, wastes or byproducts, asbestos or asbestos containing materials,
nuclear materials, lead-based paint, polychlorinated biphenyls, urea
formaldehyde or explosives; or that could at some level require investigation,
risk assessment, monitoring, removal, treatment or remediation or otherwise give
rise to liability under any Environmental Law.

          "IMA Facilities" means those manufacturing facilities owned, operated
or leased by IMA or its Subsidiaries that are used in the production of
products.

          "Indebtedness" of any Person means, without duplication, (i) all
indebtedness of such Person for borrowed money, with respect to deposits or
advances of any kind or for the deferred purchase price of property or services
(other than current trade liabilities incurred in the Ordinary Course of
Business and payable in accordance with customary practices and not more than 90
days past due), (ii) all obligations (except for trade payables) of such Person
evidenced by bonds, debentures, notes or similar instruments, (iii) all
obligations of such Person upon which interest charges are customarily paid,
(iv) all obligations of such Person under conditional sale or other title
retention agreements relating to property or assets purchased by such Person,
(v) all Indebtedness of others secured by (or for which the holder of such
Indebtedness has an existing right, contingent or otherwise, to be secured by)
any Lien on property owned or acquired by such Person, whether or not the
obligations secured thereby have been assumed, (vi) all guarantees by such
Person of Indebtedness of others, (vii) all capital lease obligations of such
Person, (viii) all obligations of such Person in respect of interest rate
protection agreements, foreign currency exchange agreements, caps or collar
agreements or other interest or exchange rate hedging arrangements either
generally or under specific contingencies, (ix) all obligations of such Person
as an account party in respect of letters of credit and banker's acceptances,
(x) all obligations of such Person consisting of overdrafts (e.g., cash float
reflected as a negative on the cash line), (xi) all obligations of such Person
pursuant to any deferred compensation agreements and (xii) any Contingent
Obligation of such Person.

          "Indemnified Party" means either a PGIO Indemnified Party or a IMA
Indemnified Party.

          "Indemnifying Party" means (i) with respect to a claim for
indemnification pursuant to Section 7.1, IMS; and (ii) with respect to a claim
for indemnification pursuant to Section 7.2(a), the Company.

          "Intellectual Property" means any or all of the following (in each
case in any domestic or foreign jurisdiction): (i) patents (including utility
patents, petty patents, design patents and certificates of invention) and
applications therefor (including provisional, non-provisional, converted
provisional and continued prosecution applications) and all reissues,
reexaminations, revalidations, divisionals, renewals, extensions or restorations
(including any supplementary protection certificate and the like), provisionals,
continuations and continuations-in-part thereof; (ii) inventions, discoveries
and ideas (whether patentable or not), (iii) trade secrets, proprietary
information, know how, confidential information, technology, technical data, and
all documentation relating to any of the foregoing and rights to limit the use
of disclosure thereof by any Person; (iv) copyrights, copyright registrations
and applications therefor and all other rights corresponding thereto, and
writings and other works that are the subject matter of such copyrights; (v)
trade names, trademarks, service marks, brand names, certification marks,


                                       46



trade dress and other indications of origin, the goodwill associated with the
foregoing, and the registrations and applications for registration of any of the
foregoing; (vi) databases and data collections and all rights therein; (vii)
computer software including all source code, object code, firmware, development
tools, files, records and data, and all media on which any of the foregoing is
recorded and (viii) Web addresses, sites and domain names.

          "Knowledge" means, in the case of the Company, IMS, and IMA actual
knowledge of the employees listed in Section 9.2(a) of the Disclosure Schedule
assuming each such employee has the knowledge that an employee in a similar
position would reasonably be expected to have.

          "Losses" means any debts, obligations and other liabilities (whether
known or unknown, absolute or contingent, liquidated or unliquidated, due or to
become due, accrued or not accrued, asserted or unasserted or otherwise),
losses, claims, damages, Taxes, diminutions in value, interest obligations,
deficiencies, Judgments, assessments, fines, fees, penalties and expenses
(including amounts paid in settlement, interest, court costs, fees and expenses
of attorneys, accountants, financial advisors, consultants, investigators and
other experts and other expenses of litigation).

          "Material Adverse Effect" means any change, circumstance, development,
state of facts, event or effect (i) that has had or would reasonably be expected
to have a material adverse change or effect (taken alone or in the aggregate
with any other adverse change or effect) in or with respect to the business,
assets, condition (financial or otherwise), or results of operations of the CD
Business other than (a) changes, circumstances, developments, state of facts,
events or effects that affect the U.S. or global economy or capital or financial
markets generally, including changes in interest or exchange rates, (b) changes
in general legal, tax, regulatory, political or economic conditions that, in
each case, generally affect the industries in which the CD Business operates,
(c) acts of war or terrorism or natural disasters, provided that in the case of
clauses (b) and (c) above, the CD Business is not disproportionately affected by
such changes, circumstances, developments, state of facts, events or effects as
compared to the industries in which it operates, taken as a whole; or (ii) that
could reasonably be expected to have a material adverse effect on IMS's ability
to perform its obligations under this Agreement and the other Transaction
Agreements.

          "Permitted IP Liens" means those Liens with respect to Business
Intellectual Property as set forth on Schedule 3.12(a).

          "Permitted Liens" means the following, to the extent not securing
Indebtedness: (i) statutory Liens for Taxes not yet due or payable; (ii) Liens
for assessments and other governmental charges or Liens of landlords, carriers,
warehousemen, mechanics and repairmen incurred in the Ordinary Course of
Business, in each case for sums not yet due and payable or due but not
delinquent or being contested in good faith by appropriate proceedings, (iii)
Liens incurred in the Ordinary Course of Business in connection with workers'
compensation, unemployment insurance and other types of social security, and
(iv) Liens set forth in the terms of any Business Contract (except for any Lien
securing Indebtedness) that do not detract the value of, or impair the use of,
such Business Contract.


                                       47



          "Person" means an individual, corporation, partnership, limited
liability company, joint venture, association, trust, unincorporated
organization or other entity or any Governmental Entity.

          "Product" means each human diagnostics and monitoring product that is
being formulated, developed, manufactured, packaged, tested, marketed,
distributed or sold by or on behalf of IMS or IMA, in each case, as part of the
CD Business.

          "Purchased Asset" shall have the meaning ascribed to such term in the
Purchase Agreement.

          "Representatives" means, with respect to a Person, such Person's
legal, financial, internal and independent accounting and other advisors and
representatives.

          "Share" has the meaning ascribed to it in the Shareholder Agreement.

          "Shareholders" means PGIO and IMS and all other Persons who become
shareholders of the Company in accordance with the terms of the Shareholder
Agreement, and the term "Shareholder" shall mean any of them.

          "Subsidiary" means, with respect to any Person, is an Affiliate
controlled by such Person directly, or indirectly through one or more
intermediaries.

          "Tax" means: (i) any United States federal, state, local and foreign
income, profits, excise, franchise, license, capital, transfer, ad valorem,
wage, severance, occupation, import, custom, gross receipts, payroll, sales,
value added, recording, registration, intangible, documentary, goods and
services, real estate, franchise, employment, use, stamp, alternative or add-on
minimum, environmental, withholding and any other tax, duty, assessment or
governmental tax charge of any kind whatsoever, imposed or required to be
withheld by any taxing authority; (ii) any interest, additions to tax, or
penalties applicable or related thereto and (iii) any amount described in clause
(i) or (ii) for which a Person is liable as a successor or transferee, or by
Contract, indemnity or otherwise.

          "Tax Return" means any return, declaration, report, claim for refund,
or information return or statement or other form relating to Taxes filed or
required to be filed with a Governmental Entity, including any schedule or
attachment thereto, and including any amendment thereof.

          "Third Party Claim" means any Legal Proceeding, claim or demand by a
Person other than a Person from which indemnification may be sought under
Article 7.

          "Trademarks" means trade names, trademarks, service marks, brand
names, certification marks, trade dress and other indications of origin, the
goodwill associated with the foregoing, and the registrations and applications
for registration of any of the foregoing.

          "Transaction Agreements" means, collectively, this Agreement, the
Purchase Agreement, the Guarantee, the Shareholder Agreement, the License
Agreements, the Finished


                                       48



Product Purchase Agreement, the Distribution Arrangements, the Transition
Services Agreement and the PGIO Contribution Agreement.

          "Transferred Employee" means each employee of IMA, IMS or one of their
respective Affiliates who is hired by the Company.

          Section 9.3 Descriptive Headings; Certain Interpretations. The table
of contents and headings contained in this Agreement are for reference purposes
only and shall not control or affect the meaning or construction of this
Agreement. Except where expressly stated otherwise in this Agreement, the
following rules of interpretation apply to this Agreement: (i) "or" is not
exclusive and "include", "includes" and "including" are not limiting; (ii)
"hereof", "hereto", "hereby", "herein" and "hereunder" and words of similar
import when used in this Agreement refer to this Agreement as a whole and not to
any particular provision of this Agreement; (iii) "date hereof" refers to the
date of this Agreement; (iv) "extent" in the phrase "to the extent" means the
degree to which a subject or other thing extends, and such phrase does not mean
simply "if"; (v) definitions contained in this Agreement are applicable to the
singular as well as the plural forms of such terms; (vi) references to an
agreement or instrument mean such agreement or instrument as from time to time
amended, modified or supplemented; (vii) references to a Person are also to its
permitted successors and assigns; (viii) references to an "Article", "Section",
"Clause", "Exhibit" or "Schedule" refer to an Article of, a Section or Clause
of, or an Exhibit or Schedule to, this Agreement; (ix) words importing the
masculine gender include the feminine or neuter and, in each case, vice versa
and (x) references to a Law include any amendment or modification to such Law
and any rules or regulations issued thereunder, whether such amendment or
modification is made, or issuance of such rules or regulations occurs, before or
after the date of this Agreement.

          Section 9.4 Assignment. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned, in whole or in part, by
operation of Law or otherwise by any of the parties hereto without the prior
written consent of the other parties hereto. Any purported assignment without
such consent shall be void. Subject to the preceding sentence, this Agreement
shall be binding upon, inure to the benefit of and be enforceable by, the
parties hereto and their respective successors and assigns.

          Section 9.5 Specific Enforcement. The parties hereto agree that
irreparable damage would occur in the event that any of the provisions of this
Agreement were not performed in accordance with their specific terms or were
otherwise breached. It is accordingly agreed that the parties hereto shall be
entitled to an injunction or injunctions to prevent breaches of this Agreement
and to enforce specifically the terms and provisions of this Agreement, this
being in addition to any other remedy to which they are entitled at Law, in
equity or otherwise.

          Section 9.6 Entire Agreement. The Transaction Agreements contain the
entire agreement and understanding between the parties hereto with respect to
the subject matter hereof and thereof and supersede all prior agreements and
understandings, both written and oral, with respect to the transactions
contemplated thereby.

          Section 9.7 No Third-Party Beneficiaries. This Agreement is for the
sole benefit of the parties hereto and their permitted successors and assigns
and nothing herein


                                       49



express or implied shall give or be construed to give to any Person, other than
the parties hereto and such successors and assigns, any legal or equitable
rights or remedies.

          Section 9.8 Counterparts. This Agreement may be executed in one or
more counterparts, all of which shall be considered one and the same agreement
and shall become effective when one or more counterparts have been signed by
each of the parties hereto and delivered to the other parties hereto. Delivery
of an executed counterpart of this Agreement by facsimile or other electronic
transmission shall be as effective as delivery of a manually executed
counterpart of this Agreement.

          Section 9.9 Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of New York, regardless of
the laws that might otherwise govern under applicable principles of conflicts of
laws thereof.

          Section 9.10 Arbitration. (a) In the event that a material dispute
relating to this Agreement arises between the parties, good faith discussions
and negotiations shall be conducted by a designated management representative of
each party to resolve such dispute. If such representatives are unable to
resolve the dispute within 10 Business Days after the initial request for
negotiations at this level, then the matter shall be referred to the most senior
executive officer of each of party, who shall attempt, through good faith
negotiations and discussions, to resolve the dispute within five Business Days
immediately following such initial 10 Business Day period. If the dispute is not
resolved within the aforementioned five Business Day period, then the matter may
be submitted for binding arbitration as provided in Section 9.10(b). This
Section 9.10(a) shall not apply to or limit the right of a party to seek a
temporary restraining order or other provisional or permanent remedy to preserve
the status quo or to prevent irreparable harm.

          (b) Except as otherwise provided in this Agreement, any controversy or
claim arising out of or relating to this Agreement, or the breach hereof, that
has not been resolved in accordance with Section 9.10(a) shall be settled by
binding arbitration in the following manner:

          (i) If a party intends to commence arbitration to resolve a dispute
     arising under this Agreement, such party shall provide written notice (the
     "Arbitration Request") to the other party of such intention and the issues
     for resolution. Within one Business Day after the receipt of the
     Arbitration Request, the other party may, by written notice, add additional
     issues for resolution, provided that such issues are eligible for
     arbitration under this Section 9.10(b).

          (ii) Arbitration shall be held in the continental US under the CPR
     Rules for Non-Administered Arbitration. The arbitration shall be conducted
     by three arbitrators who are knowledgeable in the subject matter at issue
     in the dispute. One arbitrator will be selected by PGIO, one arbitrator
     will be selected by IMS, and the third arbitrator will be selected by
     mutual agreement of the two arbitrators selected by the parties. Each party
     shall submit to such arbitrators its proposed ruling and remedy for each
     issue that is the subject of arbitration. The arbitrators shall, within 15
     days after the conclusion of the arbitration hearing, issue a written award
     and statement of decision describing the essential findings and conclusions
     on which the award is based, including the calculation of any damages
     awarded. Any such award and decision shall reflect the proposed ruling


                                       50



     and remedy of one of the parties as to each disputed issue. The arbitrators
     shall be authorized to award compensatory damages, but shall not be
     authorized to award non-economic damages or punitive damages, or to reform,
     modify or materially change this Agreement or any other agreements
     contemplated hereunder. The arbitrators shall also be authorized to grant
     any temporary, preliminary or permanent equitable remedy or relief the
     arbitrators deem just and equitable and within the scope of this Agreement,
     including an injunction or order for specific performance. The award of the
     arbitrators shall be the sole and exclusive remedy of the parties (except
     for any other remedies set forth in this Agreement). The arbitrators may
     proceed to an award, notwithstanding the failure of either party to
     participate in the proceedings. Judgment on the award rendered by the
     arbitrators may be enforced in any court having competent jurisdiction
     thereof, subject only to revocation on grounds of fraud or clear bias on
     the part of the arbitrators.

          Section 9.11 Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule or Law,
or public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
materially adverse to any party. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the parties hereto
shall negotiate in good faith to modify this Agreement so as to effect the
original intent of the parties hereto as closely as possible in an acceptable
manner to the end that transactions contemplated hereby are fulfilled to the
extent possible.

          Section 9.12 Nonassignable Contracts. (a) In the event that the
transactions contemplated by this Agreement involve the assignment of rights
under any contract, agreement, license, claim, or of other rights, assets, or
property, which are nonassignable without the consent, authorization or approval
of the other party or parties thereto or any other third party (a "Nonassignable
Contract"), and such consent, authorization or approval shall not have been
obtained by IMS or IMA prior to the Closing Date, then, notwithstanding anything
in this Agreement to the contrary (and without relieving IMS or IMA of any
liability or obligation it may have under this Agreement), any such
Nonassignable Contract shall not be assigned (except any rights to receive
payments thereunder) until all such necessary consents, authorizations and
approvals with respect to such Nonassignable Contract shall have been obtained,
whereupon IMS or IMA shall, without further consideration, promptly assign or
cause the assignment of same to the Company.

          (b) Until such time, if any, as all the necessary consents,
authorizations and approvals shall have been obtained for the assignment of a
Nonassignable Contract, IMS or IMA, at its own expense, shall retain, preserve
and hold in trust for the sole benefit of the Company all rights, interests and
claims with respect to such Nonassignable Contract from and after the Closing
Date. IMS or IMA shall use commercially reasonable efforts to obtain such
consents, authorizations and approvals and shall, at the request of PGIO or the
Company, use commercially reasonable efforts to take such actions, enter into
such arrangements and do or cause to be done such things, as shall be reasonably
requested by PGIO or the Company to provide, make available and secure for the
Company's benefits all of the funds, income and payments that would have inured
to the Company upon an outright assignment of such Nonassignable Contract to the
extent permitted by Law and by contract. Except as provided by


                                       51



Law or the Nonassignable Contract in question, the performance obligations of
IMS or IMA under such Nonassignable Contract as shall arise both (x) exclusively
in respect of periods from and after the date on which the aforesaid funds are
so made available thereunder and (y) exclusively in connection with the
exploitation of such funds by the Company, shall be deemed to be sublicensed or
subcontracted to the Company but only until such time (if any) as the rights
under such Nonassignable Contract have been effectively assigned to the Company.
IMS and IMA shall pay over to the Company any amounts received by them after the
Closing Date in respect of any Nonassignable Contract, and the Company shall pay
over to IMS and IMA any amounts paid, or expenses incurred, by them in
performing any Nonassignable Contract after the Closing Date.

                            [SIGNATURE PAGE FOLLOWS]


                                       52



          IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed as of the day and year first herein above written.

                                        INVERNESS MEDICAL SWITZERLAND GmbH


                                        By: /s/ Paul T. Hempel
                                            ------------------------------------
                                        Name:
                                              ----------------------------------
                                        Title:
                                               ---------------------------------


                                        PROCTER & GAMBLE INTERNATIONAL
                                        OPERATIONS, SA


                                        By: /s/ Jeffrey D. Weedman
                                            ------------------------------------
                                        Name:
                                              ----------------------------------
                                        Title:
                                               ---------------------------------


                                        IMJV GmbH


                                        By: /s/ Anne T. Warner
                                            ------------------------------------
                                        Name:
                                              ----------------------------------
                                        Title:
                                               ---------------------------------

                   [SIGNATURE PAGE TO CONTRIBUTION AGREEMENT]

EX-3.4

                                                                     EXHIBIT 3.4

                            CERTIFICATE OF AMENDMENT
                                       OF
                AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
                                       OF
                       INVERNESS MEDICAL INNOVATIONS, INC.

     Inverness Medical Innovations, Inc., a corporation organized and existing
under the laws of the State of Delaware (the "Corporation"), hereby certifies
that the Amended and Restated Certificate of Incorporation of the Corporation
dated as of November 19, 2001, as amended, is hereby further amended as follows:

     1. Article IV is hereby amended as follows:

     The total number of shares of stock which the corporation shall have
authority to issue is One Hundred Million (100,000,000). All such shares shall
be common stock. The par value of each share of common stock shall be $0.001."

     2. The foregoing amendment was duly adopted in accordance with the
applicable requirements of Section 242 of the Delaware General Corporation Law.



     IN WITNESS WHEREOF, the Corporation has caused this Certificate of
Amendment of the Amended and Restated Certificate of Incorporation to be signed
by Ron Zwanziger, its President & CEO, this __ day of December, 2006, which
signature constitutes the affirmation or acknowledgment of such officer, under
penalties of perjury, that this instrument is the act and deed of the
Corporation, and that the facts stated therein are true.

                                        INVERNESS MEDICAL INNOVATIONS, INC.


                                        By: /s/ Ron Zwanziger
                                            ------------------------------------
                                            Ron Zwanziger
                                            President & CEO

EX-3.5

                                                                     Exhibit 3.5

                            CERTIFICATE OF CORRECTION
                                     TO THE
                             FIRST AMENDMENT TO THE
                              AMENDED AND RESTATED
                          CERTIFICATE OF INCORPORATION
                                       OF
                       INVERNESS MEDICAL INNOVATIONS, INC.

                             PURSUANT TO SECTION 103
                        OF THE GENERAL CORPORATION LAW OF
                              THE STATE OF DELAWARE

     Inverness Medical Innovations, Inc., a corporation organized and existing
under the laws of the State of Delaware (the "Corporation"), hereby certifies:

     1.   That a First Amendment to the Certificate of Incorporation was filed
          by the Secretary of State of Delaware on December 15, 2006 (the
          "Amendment") and that said Amendment requires correction as permitted
          by Section 103 of the General Corporation Law of the State of
          Delaware.

     2.   That due to a scrivener's error, the Amendment erroneously indicated
          that the Amendment was executed on behalf of the Corporation by its
          Assistant Secretary, Jay McNamara, as of the 14th of December, 2006.

     3.   The final sentence of the Amendment is hereby corrected to read as
          follows:

               "IN WITNESS WHEREOF, the Corporation has caused this First
               Amendment to the Certificate of Incorporation to be executed on
               its behalf by its Assistant Secretary, Jay McNamara, as of this
               15th day of December, 2006."



IN WITNESS WHEREOF, the Corporation has caused this Certificate of Correction to
be executed on its behalf by its Assistant Secretary, Jay McNamara, as of this
18th day of December, 2006

                                        Inverness Medical Innovations, Inc.


                                        By: /s/ Jay McNamara
                                            ------------------------------------
                                        Name: Jay McNamara
                                        Title: Assistant Secretary

EX-10.28

                                                                   Exhibit 10.28

   NINTH AMENDMENT AND CONSENT TO THIRD AMENDED AND RESTATED CREDIT AGREEMENT

          NINTH AMENDMENT AND CONSENT TO THIRD AMENDED AND RESTATED CREDIT
AGREEMENT, dated as of November 10, 2006 (this "Amendment"), to the Third
Amended and Restated Credit Agreement dated as of June 30, 2005 (as amended,
restated, supplemented or otherwise modified from time to time, the "Credit
Agreement"), by and among General Electric Capital Corporation, as Agent (in
such capacity, "Agent"), Inverness Medical Innovations, Inc. ("Innovations"),
Wampole Laboratories, LLC ("US Borrower") and Inverness Medical (UK) Holdings
Limited ("European Borrower", together with US Borrower, collectively,
"Borrowers"), the other Credit Parties signatory thereto, Merrill Lynch Capital,
a division of Merrill Lynch Business Financial Services Inc., as documentation
agent and co-syndication agent, and the lenders signatory thereto from time to
time (collectively, the "Lenders").

                                   WITNESSETH

          WHEREAS, Borrowers have informed Agent that Innovations or one of the
other Credit Parties intends to make one or more purchases (collectively, the
"Aztec Investments") of a portion of the common stock (the "Aztec Stock") of a
certain company previously identified to Agent and Lenders and having the
assumed name Aztec ("Aztec") for aggregate consideration not to exceed
$75,000,000;

          WHEREAS, Borrowers have further informed Agent that Innovations or one
of the other Credit Parties intends to purchase (the "First Check Acquisition")
100% of the common stock (the "First Check Stock") of First Check Diagnostics,
Inc. ("First Check") payable in an initial amount of $25,000,000 in cash (the
"Initial First Check Payment") plus additional contingent payments based on
future earnings over two years following the Initial First Check Payment if
certain "earnout" targets to be set forth in the related acquisition documents
are met (the "First Check Earnout Payments");

          WHEREAS, Borrowers have further informed Agent that Innovations or one
of the other Credit Parties intends to purchase (the "Instant Technologies
Investment") approximately 42% of the common stock (the "Instant Technologies
Stock") of Instant Technologies, Inc. ("Instant Technologies") in an aggregate
amount not to exceed $25,000,000;

          WHEREAS, Borrowers have informed Agent that Innovations intends to
make a loan (the "Employee Loan") to an employee of Innovations consistent with
the terms of an offer letter previously provided to Agent, in an amount not to
exceed $220,000, to permit such employee to exercise options to purchase shares
of employee's previous employer required to be exercised following his
termination of employment with such previous employer;

          WHEREAS, Borrowers have requested that Agent and Requisite Lenders
consent, and Agent and Requisite Lenders have agreed to consent, to the Aztec
Investments, the First Check Acquisition, the Instant Technologies Investment
and the Employee Loan on the terms and subject to the conditions set forth
herein; and


                                        1



          WHEREAS, Borrowers have also requested that Agent and Requisite
Lenders amend the Credit Agreement, and Agent and Requisite Lenders have agreed
to amend the Credit Agreement, on the terms and subject to the conditions set
forth herein.

          NOW THEREFORE, in consideration of the premises and for other good and
valuable consideration, the receipt, adequacy and sufficiency of which are
hereby acknowledged, the parties hereto agree as follows:

          1. Definitions. Capitalized terms not otherwise defined herein,
including in the recitals, shall have the meanings ascribed to them in the
Credit Agreement.

          2. Amendments to Credit Agreement.

               (a) Amendment to Section 3.10 of the Credit Agreement. Section
3.10 of the Credit Agreement is hereby amended, as of the Ninth Amendment
Effective Date (as hereinafter defined), by amending and restating such Section
as follows:

          "3.10 Margin Regulations. No Credit Party is engaged, nor will it
          engage, principally or as one of its important activities, in the
          business of extending credit for the purpose of "purchasing" or
          "carrying" any "margin stock" as such terms are defined in Regulation
          U of the Federal Reserve Board as now and from time to time hereafter
          in effect (such securities being referred to herein as "Margin
          Stock"). None of the proceeds of the Loans or other extensions of
          credit under this Agreement will be used, directly or indirectly, for
          the purpose of purchasing or carrying any Margin Stock (other than to
          purchase the Aztec Stock otherwise specifically permitted to be
          acquired), for the purpose of reducing or retiring any Indebtedness
          that was originally incurred to purchase or carry any Margin Stock or
          for any other purpose (other than to purchase the Aztec Stock
          otherwise specifically permitted to be acquired) that might cause any
          of the Loans or other extensions of credit under this Agreement to be
          considered a "purpose credit" within the meaning of Regulations T, U
          or X of the Federal Reserve Board. No Credit Party will take or permit
          to be taken any action that might cause any Loan Document to violate
          any regulation of the Federal Reserve Board."

               (b) Amendment to Section 6.1 of the Credit Agreement. Section 6.1
of the Credit Agreement is hereby amended, as of the Ninth Amendment Effective
Date, by amending and restating such Section as follows:

          "6.1 Mergers, Subsidiaries, Etc. No Credit Party shall directly or
          indirectly, by operation of law or otherwise, (a) merge with,
          consolidate with, acquire all or substantially all of the assets or
          Stock of, or otherwise combine with or acquire, any Person, except
          that (i) any wholly-owned Subsidiary of US Borrower may merge with US
          Borrower so long as US Borrower is the survivor thereof, (ii) any
          wholly-owned Subsidiary of European Borrower may merge with European
          Borrower so long as European Borrower is the survivor thereof, (iii)
          any US Credit Party (other than Innovations and US Borrower) may merge
          with any other US Credit Party (other than Innovations and US
          Borrower), (iv) any European


                                        2



          Credit Party (other than European Borrower) may merge with any other
          European Credit Party (other than European Borrower), and (v)
          Innovations, Swissco and Inverness Japan may consummate the
          Acquisition in accordance with the Acquisition Agreement or (b) except
          for the formation of any Subsidiary or any acquisition of all of the
          Stock of any Person (an "Acquisition Subsidiary") solely for the
          purpose of consummating an acquisition which is reasonably expected to
          be a Permitted Acquisition or for which the Credit Parties are seeking
          approval of the Requisite Lenders and provided that (A) prior to the
          consummation of such acquisition (I) such Acquisition Subsidiary shall
          constitute an Excluded US Subsidiary or Excluded European Subsidiary,
          as applicable (and, after consummation of such acquisition, shall
          constitute a US Credit Party or European Credit Party, as applicable),
          (II) such Acquisition Subsidiary shall hold no assets (other than the
          greater of $10,000 and any minimum capital required by law), (III)
          such Acquisition Subsidiary shall not conduct any business and (IV) no
          Credit Party shall transfer any funds or other assets to such
          Acquisition Subsidiary other than capital contributions permitted
          under the foregoing clause (II) and as necessary to consummate a
          Permitted Acquisition, and (B) such Acquisition Subsidiary shall be
          dissolved and the assets of such Acquisition Subsidiary shall be
          distributed to a Credit Party if (I) such Permitted Acquisition is not
          consummated within 120 days following the formation or acquisition of
          such Acquisition Subsidiary, or (II) the Credit Parties do not receive
          the consent of Requisite Lenders to such acquisition within 120 days
          following the formation or acquisition of such Acquisition Subsidiary,
          form any Subsidiary or acquire all or substantially all of the assets
          or Stock of any Person without the prior written consent of Requisite
          Lenders. Notwithstanding the foregoing, any Credit Party may acquire
          all or substantially all of the assets or Stock of any Person (or in
          the case of an asset acquisition of substantially all of the assets of
          a business line or division of a Person) (the "Target") (in each case,
          a "Permitted Acquisition"), subject to the satisfaction of each of the
          following conditions:

          (i) Agent shall receive at least three (3) Business Days prior written
          notice of such proposed Permitted Acquisition together with draft
          acquisition documentation in connection with such Permitted
          Acquisition, which notice shall include a reasonably detailed
          description of such proposed Permitted Acquisition (Agent hereby
          agreeing to provide copies of such notice to the Lenders of any such
          Permitted Acquisition at the time such entity acquired becomes a
          Credit Party under the Credit Agreement, and for assets being acquired
          in connection with such Permitted Acquisition, when such assets
          constitute Collateral);

          (ii) such Permitted Acquisition shall only involve assets comprising a
          business, or those assets of a business, of the type engaged in by
          Borrowers as of the Closing Date, and which business would not subject
          Agent or any Lender to regulatory or third party approvals in
          connection with the exercise of its rights and remedies under this
          Agreement or any other Loan Documents other than approvals applicable
          to the exercise of such rights and remedies with respect to Borrowers
          prior to such Permitted Acquisition;


                                        3



          (iii) such Permitted Acquisition shall be consensual and shall have
          been approved by the Target's board of directors or otherwise duly
          authorized by the Target;

          (iv) no additional Indebtedness, Guaranteed Indebtedness, contingent
          obligations or other liabilities (other than the First Check Earnout
          Payments) shall be incurred, assumed or otherwise be reflected on a
          consolidated balance sheet of the Reporting Credit Parties and Target
          after giving effect to such Permitted Acquisition, except ordinary
          course trade payables, accrued expenses and other Indebtedness,
          Guaranteed Indebtedness, contingent obligations or other liabilities
          of the Target to the extent no Default or Event of Default has
          occurred and is continuing or would result after giving effect to such
          Permitted Acquisition; provided, that any such Indebtedness,
          Guaranteed Indebtedness, contingent obligations or other liabilities
          (other than ordinary course trade payables and accrued expenses) shall
          not exceed $5,000,000 outstanding at any one time in respect of all
          Permitted Acquisitions;

          (v) the consideration payable in connection with all Permitted
          Acquisitions, including all transaction costs, ordinary course trade
          payables, accrued expenses and Indebtedness incurred, assumed or
          otherwise to be reflected on a consolidated balance sheet of Reporting
          Credit Parties and Target after giving effect to such Permitted
          Acquisition shall consist solely of (A) common stock, par value $.001
          per share of Innovations containing substantially the same rights and
          preferences as in effect on the date hereof and/or (B) cash not to
          exceed $20,000,000 in the aggregate for all Permitted Acquisitions in
          any Fiscal Year; provided, that should the First Check Acquisition,
          when and if it closes, constitute a Permitted Acquisition under
          Section 6.1 of the Credit Agreement, it shall (without limiting any
          other provision of the Credit Agreement or any other Loan Document)
          not be restricted by this clause (v) nor shall any cash portion of the
          purchase price count against the aggregate cash limitation set forth
          in clause (B) of this clause (v);

          (vi) the Target shall have positive EBITDA for the trailing
          twelve-month period preceding the date of the Permitted Acquisition,
          as determined based upon the Target's financial statements for its
          most recently completed fiscal year and its most recent interim
          financial period completed within 60 days prior to the date of
          consummation of such Permitted Acquisition; provided, that if the
          consideration payable in connection with such Permitted Acquisition
          consists solely of common stock, par value $.001 per share of
          Innovations containing substantially the same rights and preferences
          as in effect on the date hereof or is less than $5,000,000 in the
          aggregate, this condition need not be satisfied;

          (vii) the business and assets acquired in such Permitted Acquisition
          shall be free and clear of all Liens (other than Permitted
          Encumbrances);

          (viii) unless the consideration (whether in cash, equity or otherwise)
          with respect to all Permitted Acquisitions (other than the First Check
          Acquisition) consummated on or after the Ninth Amendment Effective
          Date is less than


                                        4



          $10,000,000 in the aggregate at any time and $5,000,000 in the
          aggregate in any Fiscal Year (it being understood that in connection
          with the First Check Acquisition, if applicable, the Credit Parties
          shall, in any event, be required to comply with this clause (viii)),
          within thirty (30) days following the closing of any Permitted
          Acquisition, subject to clause (ix) below, Agent will be granted a
          first priority perfected Lien (subject to Permitted Encumbrances) in
          all assets acquired pursuant thereto (other than with respect to
          intellectual property that is not material in which case such Lien
          shall be perfected within 60 days following the closing of such
          Permitted Acquisition) or in the assets and Stock of the Target and
          any Acquisition Subsidiary (other than with respect to intellectual
          property that is not material in which case such Lien shall be
          perfected within 60 days following the closing of such Permitted
          Acquisition), and each Credit Party, any Acquisition Subsidiary and
          the Target shall have executed such documents (including, without
          limitation, any opinions requested by Agent in connection with
          obtaining Collateral in connection with such Permitted Acquisition)
          and taken such actions as may be required by Agent in connection
          therewith;

          (ix) unless the consideration (whether in cash, equity or otherwise)
          with respect to all Permitted Acquisitions (other than the First Check
          Acquisition) consummated on or after the Ninth Amendment Effective
          Date is less than $10,000,000 in the aggregate at any time and
          $5,000,000 in the aggregate in any Fiscal Year, within sixty (60) days
          following the closing of any Permitted Acquisition in which the Target
          or any Acquisition Subsidiary is an entity formed outside of the
          United States, Agent will be granted a first priority Lien (subject to
          Permitted Encumbrances) in all assets acquired pursuant thereto or in
          the assets and Stock of the Target and any Acquisition Subsidiary
          (provided, that, in the case of Stock held by a Domestic Subsidiary,
          Agent shall be granted a Lien in such Stock under, and subject to any
          applicable limitations set forth in, the US Pledge Agreement within
          thirty (30) days of the closing of such Permitted Acquisition), and
          each Credit Party, any Acquisition Subsidiary and the Target shall
          have executed such documents (including, without limitation, any
          opinions requested by Agent in connection with obtaining Collateral in
          connection with such Permitted Acquisition) and taken such actions as
          may be required by Agent in connection therewith; provided, that,
          prior to the closing of such Permitted Acquisition, (A) the Borrowers
          shall have provided Agent with reasonably detailed written information
          as to the procedure required under applicable law for Agent to be
          granted a first priority Lien in all such assets along with
          confirmation reasonably acceptable to Agent from Borrowers' local
          counsel from such jurisdiction that such procedure is correct; (B)
          Agent shall have consented in writing to the delay in providing such
          Lien; and (C) both before and immediately after giving effect to such
          Permitted Acquisition, the European Credit Parties shall have
          Accounts, Inventory, Real Property, plant, Equipment and available
          cash (not subject to any Lien other than Permitted Encumbrances
          (except for Permitted Encumbrances of the type described in clauses
          (j) and (k) of the definition thereof)) with a net book value of not
          less than $50,000,000;


                                        5



          (x) notwithstanding the foregoing clause (ix), the Agent may, in its
          sole discretion, (I) extend the period to provide the Collateral in
          connection with such Permitted Acquisition or (II) elect to waive such
          condition with respect to all or a portion of the assets of the Target
          or any Acquisition Subsidiary to the extent that (A) the grant of such
          first priority perfected Lien, the execution of any such documents or
          the performance of any such actions is prohibited by the law of the
          jurisdiction of formation of the applicable Credit Party, any
          Acquisition Subsidiary or the Target, (B) the Agent determines that,
          taking into consideration the costs associated therewith in relation
          to the value or importance of such first priority perfected Lien, it
          is not in the best interest of both the Lenders and the Credit Parties
          to grant such Lien, or (C) the value of the assets or Stock with
          respect to any Permitted Acquisition which shall be the subject of any
          waiver under this Section 6.1(x) is, in the aggregate, less than
          $10,000,000 (or the Equivalent Amount thereof); provided, that Agent
          may, at any time and from time to time elect, in its sole discretion,
          to enforce the conditions that had been previously waived under this
          Section 6.1(x);

          (xi) within 30 days following the closing of any Permitted
          Acquisition, or, if earlier, the date upon which any Credit Party
          files a current report on Form 8-K with the Securities and Exchange
          Commission under the Exchange Act which discloses such Permitted
          Acquisition and includes the financial information provided for below,
          Borrowers shall deliver to Agent, in form and substance reasonably
          satisfactory to Agent (Agent hereby agreeing to provide copies of such
          documents to the Lenders promptly following receipt thereof), (A) if
          such Permitted Acquisition constitutes a merger or consolidation with,
          or acquisition of all of the Stock of, any Person, (x) an audited (or,
          if not available, unaudited) balance sheet and income statement and,
          if available, cash flow statement of the Target for the most recently
          completed fiscal year of the Target, and (y) a balance sheet as of the
          end of the most recently completed fiscal quarter of the Target and an
          income statement and, if available, cash flow statement, in each case,
          for the elapsed portion of the fiscal year of the Target to date
          ending on the last day of the most recently completed fiscal quarter
          of the Target, in each case, which shall be complete and shall fairly
          present in all material respects the assets, liabilities, financial
          condition and results of operations of the Target in accordance with
          GAAP consistently applied, and (B) if such Permitted Acquisition
          constitutes the acquisition of all or substantially all of the assets
          of any Person and the financial statements described in clause (A)
          above are not available, a schedule setting forth the assets acquired
          and the book value thereof and, if available, an income statement
          reflecting the performance of such assets for the most recently ended
          Fiscal Year;

          (xii) both before and immediately after giving effect to such
          Permitted Acquisition, the Credit Parties shall have aggregate US
          Revolving Borrowing Availability, European Revolving Borrowing
          Availability and available cash (not subject to any Lien other than
          Permitted Encumbrances (except for Permitted Encumbrances of the type
          described in clauses (j) and (k) of the definition thereof)) of at
          least $10 million (or the Equivalent Amount thereof);


                                        6



          (xiii) at or prior to the closing of any Permitted Acquisition (other
          than the First Check Acquisition if it is consummated on or prior to
          March 31, 2007), the Borrowers shall deliver to Agent a certificate of
          the Chief Financial Officer, Treasurer or Vice President, Finance, of
          Innovations to the effect that: (A) the Credit Parties taken as a
          whole (after taking into consideration all rights of contribution and
          indemnity the Credit Parties have against Innovations and each other
          Subsidiary of Innovations) are Solvent immediately prior to and will
          be Solvent upon the consummation of the Permitted Acquisition; (B)
          each of the applicable conditions set forth in this Section 6.1 have
          been satisfied; (C) on a pro forma basis, no Event of Default shall
          have occurred and be continuing or would result after giving effect to
          such Permitted Acquisition and the Reporting Credit Parties would have
          been in compliance with the financial covenants set forth in Annex F
          for the four quarter period reflected in the Compliance Certificate
          most recently delivered to Agent pursuant to Annex E prior to the
          consummation of such Permitted Acquisition (giving effect to such
          Permitted Acquisition and all Loans funded in connection therewith as
          if made on the first day of such period); and (D) the Reporting Credit
          Parties have completed their due diligence investigation with respect
          to the Target and such Permitted Acquisition, which investigation was
          conducted in a manner similar to that which would have been conducted
          by a prudent purchaser of a comparable business and the results of
          which investigation were delivered to Agent and Lenders;

          (xiv) on or prior to the date of such Permitted Acquisition, Agent
          shall have received copies of the executed acquisition agreement and
          related agreements and instruments; and

          (xv) at the time of such Permitted Acquisition and after giving effect
          thereto, no Default or Event of Default has occurred and is
          continuing.

          Notwithstanding anything to the contrary contained herein, no Person
          (subject to Section 6.1(x)) shall be a Credit Party and such Person
          shall be deemed to be an Excluded Subsidiary until the conditions
          (irrespective of whether or not the Credit Parties are required to
          comply with such conditions) set forth in Section 6.1(viii) or (ix),
          as applicable, are satisfied."

               (c) Amendment to Section 6.2 of the Credit Agreement. Section
6.2(h) of the Credit Agreement is hereby amended, as of the Ninth Amendment
Effective Date, by deleting such clause (h) where it appears therein and
inserting in lieu thereof the following new clause (h) as follows:

          "(h) so long as no Default or Event of Default has occurred and is
          continuing before and after giving effect to any investment or loan
          referred to in this clause (h) and Administrative Borrower has
          provided Agent with at least three (3) Business Days notice of such
          investment or loan, the Credit Parties may make and hold additional
          investments and loans not otherwise permitted by this Section 6.2,
          provided, that (i) the aggregate amount (the amount of each investment
          or loan being measured at the time of the investment or loan) of such
          investments and


                                        7



          loans permitted by this clause (h) shall not exceed $25,000,000 (or
          the Equivalent Amount thereof) at any one time outstanding, and
          provided, further, that if any investment under this clause (h) is in
          connection with the purchase of equity, the Credit Parties shall,
          within thirty (30) days after such purchase, provide Agent with (A) a
          first priority perfected pledge of the equity so purchased, together
          with undated powers of transfer executed in blank and (B) upon request
          of Agent, a legal opinion in respect of the pledge of such equity in
          form and substance satisfactory to Agent;"

          3. Amendment to Section 6.3 of the Credit Agreement. Section 6.3 of
the Credit Agreement is hereby amended, as of the Ninth Amendment Effective
Date, by deleting the word "and" before clause (xv) therein and inserting at the
end of clause (xv) the following:

          "; and (xvi) Indebtedness specifically permitted under Section 6.1."

          4. Amendment to Section 6.7 of the Credit Agreement. Section 6.7 of
the Credit Agreement is hereby amended, as of the Ninth Amendment Effective
Date, by deleting the word "and" before clause (d) therein and inserting at the
end of clause (d) the following:

          "; and (e) Liens securing Indebtedness specifically permitted under
          Section 6.1(b)(iv); provided, that such Indebtedness shall consist
          solely of Capital Leases and purchase money Indebtedness (provided,
          further, that such Liens attach only to the assets subject to such
          purchase money Indebtedness or Capital Leases and, in the case of
          purchase money Indebtedness, such Indebtedness is incurred within 30
          days following such purchase and does not exceed 100% of the purchase
          price of the subject assets)."

          5. Amendment to Article VI of the Credit Agreement. Article VI of the
Credit Agreement is hereby amended, as of the Ninth Amendment Effective Date, by
inserting a new Section 6.23 at the end of such Article as follows:

          "6.23 Minimum Excess Availability. At any date of determination, the
          Credit Parties shall have aggregate US Revolving Borrowing
          Availability, European Revolving Borrowing Availability and available
          cash (not subject to any Lien other than Permitted Encumbrances
          (except for Permitted Encumbrances of the type described in clauses
          (j) and (k) of the definition thereof)) of at least $30,000,000 (or
          the Equivalent Amount thereof); provided, that this Section 6.23 shall
          have no force or effect on any date of determination when any Credit
          Party fails to own any shares of Aztec Stock."

          6. Amendment to Annex A of the Credit Agreement. Annex A of the Credit
Agreement is hereby amended, as of the Ninth Amendment Effective Date, by:

               (a) amending the definition of "Permitted Encumbrances" by
deleting the word "and" before clause (o) where it appears there and inserting
the following at the end of clause (o):

               "; Liens permitted by Section 6.7(e)."


                                        8



               (b) amending the definition of "Excluded Subsidiaries" by
inserting at the end of such definition the following:

          "and any other Subsidiary as contemplated by the last sentence of
          Section 6.1."

               (c) inserting the following new definitions in Annex A, in the
applicable alphabetical order, as follows:

          "Aztec Stock' has the meaning ascribed to it in the Ninth Amendment.

          'First Check Acquisition' has the meaning ascribed to it in the Ninth
          Amendment.

          'Ninth Amendment' means the Ninth Amendment and Consent to Third
          Amended and Restated Credit Agreement dated as of November 10, 2006 by
          and among Agent, Innovations, Borrowers, the other Credit Parties
          signatory thereto, ML Capital and Lenders.

          'Ninth Amendment Effective Date' means November 10, 2006."

               (d) deleting the definition of "Non-Stock Investments and Loans"
where it appears therein.

          7. Aztec Consent. Notwithstanding anything to the contrary contained
in the Credit Agreement (including, without limitation, Section 6.2 therein), as
of the Ninth Amendment Effective Date, Agent and Requisite Lenders hereby
consent to the Aztec Investments; provided, that (a) each Aztec Investment is
consummated pursuant to documentation in form and substance reasonably
satisfactory to Agent, (b) simultaneously with (i) any Aztec Investment, Agent
shall be satisfied that all applicable margin regulations are complied with
(Agent's satisfaction to be assumed by the Credit Parties absent notice to the
contrary from Agent); and (ii) the initial Aztec Investment, each Lender shall
have been provided adequate information so that it and the Credit Parties, as
applicable, may complete and prepare all forms and documentation required under
Regulations T, U or X of the Federal Reserve Board, (c) in connection with the
initial Aztec Investment, Agent shall have received from Borrowers' counsel an
opinion in form and substance satisfactory to Agent confirming that the Aztec
Investments and the use of the Loan proceeds in respect thereof do not violate
Regulations T, U or X of the Federal Reserve Board, (d) Agent receives within
thirty (30) days of each Aztec Investment a first priority perfected pledge of
the Aztec Stock purchased with respect to such investment and, if applicable,
any related certificates thereto, together with undated powers of transfer
executed in blank (the "Aztec Pledge"), (e) if applicable, Agent receives within
thirty (30) days of the initial Aztec Investment a legal opinion in respect of
the control agreement to which the applicable Aztec Stock shall be credited to
the effect that such control agreement is effective under applicable law to
perfect the security interest of the Agent by control in such Aztec Stock, which
opinion shall be in form and substance satisfactory to Agent, and (f) if any
Aztec Investment occurs after March 31, 2007, at the consummation thereof, the
Borrowers shall deliver to Agent a certificate of the Chief Financial Officer,
Treasurer or Vice President, Finance, of Innovations to the effect that on a pro
forma basis, no Event of Default shall have occurred and be continuing or would
result after giving effect to such Aztec Investment occurring after March 31,
2007 and the Reporting Credit Parties would have been in compliance


                                        9



with the financial covenants set forth in Annex F of the Credit Agreement for
the four quarter period reflected in the Compliance Certificate most recently
delivered to Agent pursuant to Annex E of the Credit Agreement prior to the
consummation of such Aztec Investment (giving effect to such Aztec Investment
and all Loans funded in connection therewith as if made on the first day of such
period).

          8. Aztec Waiver. Notwithstanding anything to the contrary contained in
Sections 1.3(b)(ii) or (iii) of the Credit Agreement, Agent and Requisite
Lenders hereby waive, as of the Ninth Amendment Effective Date, the requirement
that the Credit Parties apply the proceeds of any sale of Aztec Stock to prepay
the Loans pursuant to Sections 1.3(c)(i) and (ii), as applicable; provided, that
upon the sale of Aztec Stock by any Credit Party, the proceeds of such sale
shall be applied as follows: first, by US Borrower to pay interest then due and
payable on the US Swing Line Loan until paid in full; second, by US Borrower to
prepay the principal balance of the US Swing Line Loan until paid in full;
third, by US Borrower to pay interest then due and payable on US Revolving
Credit Advances until paid in full; fourth, by US Borrower to prepay the US
Revolving Credit Advances and Swap Obligations on a ratable basis based on the
amount of such US Revolving Credit Advances then outstanding and such Eligible
Swap Obligations then due and payable until paid in full; fifth, by European
Borrower to pay interest then due and payable on the European Swing Line Loan
until paid in full; sixth, by European Borrower to prepay the principal balance
of the European Swing Line Loan until paid in full, seventh, by European
Borrower to pay interest then due and payable on European Revolving Credit
Advances until paid in full; eighth, by European Borrower to prepay European
Revolving Credit Advances until paid in full; and any excess shall be returned
to Borrowers.

          9. Instant Technologies Investment. Notwithstanding anything to the
contrary contained in the Credit Agreement (including, without limitation,
Section 6.2 therein), as of the Ninth Amendment Effective Date, Agent and
Requisite Lenders hereby consent to the Instant Technologies Investment pursuant
to documentation in form and substance reasonably satisfactory to Agent;
provided, that Agent receives within thirty (30) days of the Instant
Technologies Investment (a) a first priority perfected pledge of the Instant
Technologies Stock purchased with respect to such investment and, if applicable,
any related certificates thereto, together with undated powers of transfer
executed in blank, (b) at the request of Agent, a legal opinion in respect of
such pledge confirming Agent's perfected security interest, which opinion shall
be in form and substance satisfactory to Agent, and (c) if such Instant
Technologies Investment occurs after March 31, 2007, at the consummation
thereof, the Borrowers shall deliver to Agent a certificate of the Chief
Financial Officer, Treasurer or Vice President, Finance, of Innovations to the
effect that on a pro forma basis, no Event of Default shall have occurred and be
continuing or would result after giving effect to such Instant Technologies
Investment and the Reporting Credit Parties would have been in compliance with
the financial covenants set forth in Annex F of the Credit Agreement for the
four quarter period reflected in the Compliance Certificate most recently
delivered to Agent pursuant to Annex E of the Credit Agreement prior to the
consummation of such Instant Technologies Investment (giving effect to such
Instant Technologies Investment and all Loans funded in connection therewith as
if made on the first day of such period).

          10. Acknowledgement regarding In Vitro Technologies. Agent and
Requisite Lenders hereby acknowledge and agree that the terms and conditions of
Section 6.1 of the Credit


                                       10



Agreement, as amended hereby, shall apply to the acquisition of In Vitro
Technologies and that such acquisition shall be considered a Permitted
Acquisition under the Credit Agreement, subject to compliance with such amended
terms and conditions.

          11. Employee Loan Consent. Notwithstanding anything to the contrary in
the Credit Agreement (including, without limitation, Sections 6.2 and 6.4(b),
Agent and Requisite Lenders hereby consent, as of the Ninth Amendment Effective
Date, to the Employee Loan.

          12. Consent to Wachovia Lease Transaction. As of the Ninth Amendment
Effective Date, Lenders hereby consent to Agent releasing any security interest
and Lien, if any, which may have attached to the equipment attached hereto as
Exhibit A under the Wachovia Lease Transaction as more fully described in the
Eight Amendment and Consent to Third Amended and Restated Credit Agreement dated
as of October 30, 2006 by and among Agent, Innovations, Borrowers, the other
Credit Parties signatory thereto, ML Capital and the Lenders signatory thereto.

          13. Remedies. This Amendment shall constitute a Loan Document. The
breach by any Credit Party of any representation, warranty, covenant or
agreement in this Amendment shall constitute an immediate Event of Default
hereunder and under the other Loan Documents.

          14. Representations and Warranties. To induce Agent and Requisite
Lenders to enter into this Amendment, the Credit Parties hereby, jointly and
severally, represent and warrant that:

               (a) The execution, delivery and performance by each Credit Party
of this Amendment and the performance of the Credit Agreement, as amended by
this Amendment (the "Amended Credit Agreement"): (i) are within such Person's
corporate, company or partnership power; (ii) have been (or will be prior to
execution thereof) duly authorized by all necessary corporate, limited liability
company or limited partnership action; (iii) do not contravene any provision of
such Person's charter, bylaws or equivalent constitutive documents or
partnership or operating agreement, as applicable; (iv) do not violate any law
or regulation, or any order or decree of any court or Governmental Authority;
(v) do not conflict with or result in the breach or termination of, constitute a
default under or accelerate or permit the acceleration of any performance
required by, any indenture, mortgage, deed of trust, lease, agreement or other
instrument to which such Person is a party or by which such Person or any of its
property is bound; (vi) do not result in the creation or imposition of any Lien
upon any of the property of such Person, other than a Lien in favor of Agent;
and (vii) do not require the consent or approval of any Governmental Authority
or any other Person except those which will have been duly obtained, made or
complied with prior to the Ninth Amendment Effective Date.

               (b) This Amendment has been duly executed and delivered by or on
behalf of each of the Credit Parties.

               (c) This Amendment and the Amended Credit Agreement constitutes a
legal, valid and binding obligation of each of the Credit Parties, enforceable
against each of them in accordance with its terms, except as enforcement may be
limited by bankruptcy, insolvency,


                                       11


fraudulent conveyance or transfer or other laws affecting creditors' rights
generally or by equitable principals of general applicability.

               (d) No Default or Event of Default has occurred and is continuing
or would result after giving effect to the provisions of this Amendment.

               (e) No action, claim or proceeding is now pending or, to the
knowledge of any Credit Party, threatened against such Credit Party, at law, in
equity or otherwise, before any court, board, commission, agency or
instrumentality of any foreign, federal, state, or local government or of any
agency or subdivision thereof, or before any arbitrator or panel of arbitrators,
which (i) challenges any Credit Party's right or power to enter into or perform
any of its obligations under this Amendment or any other Loan Document to which
it is or will be, a party, or the validity or enforceability of this Amendment,
the Amended Credit Agreement or any Loan Document or any action taken
thereunder, or (ii) has a reasonable risk of being determined adversely to any
Credit Party and that, if so determined, could reasonably be expected to have a
Material Adverse Effect after giving effect to this Amendment.

               (f) The representations and warranties of the Credit Parties
contained in the Amended Credit Agreement and each other Loan Document shall,
after giving effect hereto, be true and correct on and as of (i) the date
hereof, and (ii) the Ninth Amendment Effective Date, in each case, with the same
effect as if such representations and warranties had been made on and as of such
date, except that any such representation or warranty which is expressly made
only as of a specified date need be true only as of such date.

          15. No Amendments/Waivers/Consents. Except as expressly provided
herein (a) the Credit Agreement and the other Loan Documents shall be unmodified
and shall continue to be in full force and effect in accordance with their
terms, (b) the acknowledgements, consents and agreements of the Agent and
Requisite Lenders set forth herein shall be limited strictly as written and
shall not constitute an acknowledgement, consent or agreement to any transaction
not specifically described in connection with any such consent and/or agreement,
and (c) this Amendment shall not be deemed a waiver of any term or condition of
any Loan Document and shall not be deemed to prejudice any right or rights which
Agent or any Lender may now have or may have in the future under or in
connection with any Loan Document or any of the instruments or agreements
referred to therein, as the same may be amended from time to time.

          16. Affirmation of Obligations. Each of the Credit Parties hereby
acknowledges, agrees and affirms (a) its obligations under the Credit Agreement
and the other Loan Documents, including, without limitation, its guaranty
obligations thereunder, (b) that such guaranty shall apply to the Obligations in
accordance with the terms thereof, (c) the grant of the security interest in all
of its assets pursuant to the Loan Documents and (d) that such liens and
security interests created and granted are valid and continuing and secure the
Obligations in accordance with the terms thereof.

          17. Outstanding Indebtedness; Waiver of Claims. Each of Borrowers and
the other Credit Parties hereby acknowledges and agrees that as of November 10,
2006, (a) the outstanding balance of the European Revolving Loan is $0, (b) the
outstanding balance of the US Revolving Loan is $0, (c) the outstanding balance
of the US Term Loan is $44,887,500, and (d)


                                       12



the outstanding balance of European Term Loan is $0. Borrowers and each other
Credit Party hereby waive, release, remise and forever discharge Agent, Lenders
and each other Indemnified Person from any and all claims, suits, actions,
investigations, proceedings or demands arising out of or in connection with the
Credit Agreement (collectively, "Claims"), whether based in contract, tort,
implied or express warranty, strict liability, criminal or civil statute or
common law of any kind or character, known or unknown, which any Borrower or any
other Credit Party ever had, now has or might hereafter have against Agent or
Lenders which relates, directly or indirectly, to any acts or omissions of
Agent, Lenders or any other Indemnified Person on or prior to the Ninth
Amendment Effective Date; provided, that no Borrower nor any other Credit Party
waives any Claim solely to the extent such Claim relates to Agent's or any
Lender's gross negligence or willful misconduct.

          18. Expenses. Borrowers hereby reconfirm their obligations pursuant to
Section 11.3 of the Credit Agreement to pay and reimburse Agent for all
reasonable costs and expenses (including, without limitation, reasonable fees of
counsel) incurred in connection with the negotiation, preparation, execution and
delivery of this Amendment and all other documents and instruments delivered in
connection herewith.

          19. Amendment Fee. To induce Agent and Lenders to enter into this
Amendment, Borrowers hereby agree to pay to Agent, for the benefit of those
Lenders which provide consent hereto no later than 3:00pm EST, Friday, November
10, 2006, an amendment fee in the amount of $155,000 (to be allocated among
Agent and such Lenders on a ratable basis) in immediately available funds,
payable on the Ninth Amendment Effective Date.

          20. Effectiveness. Upon satisfaction in full in the judgment of Agent
of each of the following conditions, this Amendment shall be deemed effective as
of November 10, 2006 (the "Ninth Amendment Effective Date"):

               (a) Amendment. Agent shall have received four (4) original
signature pages to this Amendment, duly executed and delivered by Agent,
Requisite Lenders, and each of the Credit Parties.

               (b) Payment of Expenses. Borrowers shall have paid to Agent all
costs, fees and expenses owing in connection with this Amendment and the other
Loan Documents and due to Agent (including, without limitation, reasonable legal
fees and expenses).

               (c) Representations and Warranties. The representations and
warranties of or on behalf of each of the Credit Parties in this Amendment shall
be true and correct on and as of the date hereof.

               (d) First Check Acquisition Documents. Agent shall have received
copies of the draft First Check Acquisition term sheet and any other
documentation in connection therewith in existence on the date hereof.

          21. GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED BY, AND
INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.


                                       13



          22. Counterparts. This Amendment may be executed by the parties hereto
on any number of separate counterparts and all of said counterparts taken
together shall be deemed to constitute one and the same instrument.

                            [SIGNATURE PAGES FOLLOW]


                                       14



     IN WITNESS WHEREOF, this Amendment has been duly executed as of the date
first written above.

                                        BORROWERS

                                        WAMPOLE LABORATORIES, LLC
                                        INVERNESS MEDICAL (UK) HOLDINGS LIMITED


                                        By: /s/ David Teitel
                                            ------------------------------------
                                        Name: David Teitel
                                        Title: Vice President, Authorized
                                               Signatory



                                        AGENT AND LENDERS

                                        GENERAL ELECTRIC CAPITAL CORPORATION,
                                        as Agent and a Lender


                                        By: /s/ Andrew Moore
                                            ------------------------------------
                                            Duly Authorized Signatory



                                        MERRILL LYNCH CAPITAL, a division of
                                        Merrill Lynch Business Financial
                                        Services Inc., as a Lender


                                        By: /s/ Mathew R. Lank
                                            ------------------------------------
                                            Duly Authorized Signatory



                                        LASALLE BANK NATIONAL ASSOCIATION,
                                        as a Lender


                                        By: /s/ David Bacon
                                            ------------------------------------
                                        Name: David Bacon
                                        Title: FVP



                                        MARATHON SPECIAL OPPORTUNITY CLO I,
                                        LTD., as a Lender

                                        By: Marathon Asset Management, LLC, its
                                            Portfolio Manager and Authorized
                                            Signatory


                                        By: /s/ Louis T. Hanover
                                            ------------------------------------
                                        Name: Louis T. Hanover
                                        Title: Authorized Signatory



                                        DRYDEN IV - LEVERAGED LOAN CDO 2003,
                                        as a Lender

                                        By: Prudential Investment Management,
                                            Inc., as Collateral Manager


                                        By: /s/ Stephen J. Collins
                                            ------------------------------------
                                        Name:
                                              ----------------------------------
                                        Title:
                                               ---------------------------------


                                        DRYDEN V - LEVERAGED LOAN CDO 2003, as a
                                        Lender

                                        By: Prudential Investment Management,
                                            Inc., as Collateral Manager


                                        By: /s/ Stephen J. Collins
                                            ------------------------------------
                                        Name:
                                              ----------------------------------
                                        Title:
                                               ---------------------------------


                                        DRYDEN VII - LEVERAGED LOAN CDO 2004, as
                                        a Lender

                                        By: Prudential Investment Management,
                                            Inc., as Collateral Manager


                                        By: /s/ Stephen J. Collins
                                            ------------------------------------
                                        Name:
                                              ----------------------------------
                                        Title:
                                               ---------------------------------


                                        DRYDEN VIII - LEVERAGED LOAN CDO 2005,
                                        as a Lender

                                        By: Prudential Investment Management,
                                            Inc., as Collateral Manager


                                        By: /s/ Stephen J. Collins
                                            ------------------------------------
                                        Name: Stephen J. Collins
                                        Title: VP


                                        Dryden XVI - Leveraged Loan CDO 2006

                                        By: Prudential Investment Management,
                                        Inc., as Collateral Manager


                                        By: /s/ Stephen J. Collins
                                            ------------------------------------
                                        Name: Stephen J. Collins
                                        Title: VP


     The following Persons are signatories to this Amendment in their capacity
as Credit Parties and not as Borrowers.

                                        INVERNESS MEDICAL INNOVATIONS, INC.
                                        APPLIED BIOTECH, INC.
                                        ADVANTAGE DIAGNOSTICS CORPORATION
                                        FOREFRONT DIAGNOSTICS, INC.
                                        INVERNESS MEDICAL INTERNATIONAL HOLDING
                                           CORP.
                                        INVERNESS MEDICAL INTERNATIONAL HOLDING
                                           CORP. II
                                        INVERNESS MEDICAL, INC.
                                        INNOVATIONS RESEARCH, LLC
                                        ISCHEMIA TECHNOLOGIES, INC.
                                        IVC INDUSTRIES, INC.
                                        INNOVACON, INC.
                                        OSTEX INTERNATIONAL, INC.
                                        SELFCARE TECHNOLOGY, INC.
                                        BINAX, INC.
                                        INVERNESS MEDICAL - BIOSTAR, INC.
                                        UNIPATH ONLINE, INC.
                                        RICH HORIZONS INTERNATIONAL LIMITED
                                        CAMBRIDGE DIAGNOSTICS IRELAND LIMITED
                                        DMD, DIENSTLEISTUNGEN & VERTRIEB FUR
                                           MEDIZIN UND DIAGNOSTIK GMBH
                                        INVERNESS MEDICAL CANADA, INC.
                                        INVERNESS MEDICAL EURASIA LIMITED
                                        INVERNESS MEDICAL FRANCE SAS
                                        INVERNESS MEDICAL GERMANY GMBH
                                        SCANDINAVIAN MICRO BIODEVICES APS
                                        STIRLING MEDICAL INNOVATIONS LIMITED
                                        INVERNESS MEDICAL SWITZERLAND GMBH
                                        UNIPATH DIAGNOSTICS GMBH
                                        INVERNESS MEDICAL DEUTSCHLAND GMBH
                                        INVERNESS MEDICAL JAPAN, LTD.
                                        INVERNESS MEDICAL IBERICA, S.A.
                                        INVERNESS MEDICAL SPAIN, S.L.U.
                                        UNIPATH LIMITED
                                        IVD MANAGEMENT LIMITED
                                        INVERNESS MEDICAL INVESTMENTS, LLC


                                        By: /s/ David Teitel
                                            ------------------------------------
                                        Name: David Teitel



                                 Title: Vice President - Finance, Vice
                                        President - Finance, Vice President -
                                        Finance, Vice President - Finance,
                                        President, President, Vice President -
                                        Finance, Vice President - Finance, Vice
                                        President - Finance, Vice President -
                                        Finance, Vice President - Finance, Vice
                                        President - Finance, Vice President -
                                        Finance, Vice President - Finance, Vice
                                        President - Finance, Vice President -
                                        Finance, Vice President, Authorized
                                        Person, Authorized Person, Authorized
                                        Person, Authorized Person, Authorized
                                        Person, Authorized Person, Authorized
                                        Person, Authorized Person, Authorized
                                        Person, Authorized Person, Authorized
                                        Person, Authorized Person, Authorized
                                        Person, Authorized Person, Authorized
                                        Person, Authorized Person, Manager,
                                        respectively

EX-10.40

                                                                   Exhibit 10.40

                             DATED 15th February 2007

                    (1) UNILEVER UK CENTRAL RESOURCES LIMITED

                               (2) UNIPATH LIMITED

                     (3) INVERNESS MEDICAL INNOVATIONS INC.

                                   ----------

                                SUB - UNDERLEASE

                                       OF

                        OFFICE AND PRODUCTION PREMISES AT
                          PRIORY BUSINESS PARK BEDFORD

                                   ----------

                                SLAUGHTER AND MAY
                                 ONE BUNHILL ROW
                                 LONDON EC1Y 8YY
                               TEL: 020 7600 1200
                               FAX: 020 7090 5000
                                  REF: DCRW/SEL
                                   PR061930053


                                   PARTICULARS

LR1.  DATE OF LEASE: 15th February, 2007

LR2   TITLE        : LR2.1  LANDLORD'S TITLE NUMBER(S)
      NUMBER(S)      BD198122

                     LR2.2  OTHER TITLE NUMBERS
                     BD 196859

LR3.  PARTIES TO   : LANDLORD
      THIS LEASE     UNILVER U.K. CENTRAL RESOURCES LIMITED (registered in
                     England number 00029140) whose registered office is at
                     UNILIEVER HOUSE, BLACKFRIARS, LONDON EC4P 4BQ

                     TENANT

                     UNIPATH LIMITED (registered in England number 00417198)
                     whose registered office is at Stannard Way, Priory Business
                     Park, Bedford MK44 3UP

                     OTHER PARTIES
                     SURETY

                     INVERNESS MEDICAL INNOVATIONS INC. (a corporation
                     registered in the State of Delaware) whose registered
                     office is at 51 Sawyer Road, Suite 200, Waltham,
                     Massachusetts

LR4.  PROPERTY     : Land lying to the north of Stannard Way, Bedford known as
                     Priory Business Park, Bedford MK44 3UP shown edged red on
                     Plan A (as defined in the lease) of the lease.

                     IN THE CASE OF A CONFLICT BETWEEN THIS CLAUSE AND THE
                     REMAINDER OF THIS LEASE THEN, FOR THE PURPOSES OF
                     REGISTRATION, THIS CLAUSE SHALL PREVAIL.

LR5.  PRESCRIBED   : None
      STATEMENTS
      ETC.

LR6.  TERM FOR     : From and including 20 December 2001 to and including 27
      WHICH THE      September 2021.
      PROPERTY IS
      LEASED

LR7.  PREMIUM      : None

LR8.  PROHIBITIONS : This lease contains a provision that prohibits or restricts
      OR             dispositions.
      RESTRICTIONS
      ON DISPOSING
      OF THIS LEASE



                                 PARTICULARS

LR9   RIGHTS OF    : LR9.1 TENANT'S CONTRACTUAL RIGHTS TO RENEW THIS LEASE, TO
      ACQUISITION    ACQUIRE THE REVERSION OR ANOTHER LEASE OF THE PROPERTY, OR
      ETC.           TO ACQUIRE AN INTEREST IN OTHER LAND

                     None

                     LR9.2 TENANT'S COVENANT TO (OR OFFER TO) SURRENDER THIS
                     LEASE

                     None

                     LR9.3 LANDLORD'S CONTRACTUAL RIGHTS TO ACQUIRE THIS LEASE

                     None

LR10. RESTRICTIVE  : None
      COVENANTS
      GIVEN IN THIS
      LEASE BY THE
      LANDLORD IN
      RESPECT OF
      LAND OTHER
      THAN THE
      PROPERTY

LR11. EASEMENTS    : LR11.1 EASEMENTS GRANTED BY THIS LEASE FOR THE BENEFIT OF
                     THE PROPERTY

                     Clause 4 (referring to the first schedule of the Headlease
                     (as defined in the lease), a copy of which is annexed to
                     the Superior Lease (as defined in the lease, a certified
                     copy of which is annexed to the lease)) LR11.2 EASEMENTS
                     GRANTED OR RESERVED BY THIS LEASE OVER THE PROPERTY FOR THE
                     BENEFIT OF OTHER PROPERTY

                     Clause 4 (referring to first schedule of the lease and to
                     the second schedule of the Headlease (as defined in the
                     lease), a copy of which is annexed to the Superior Lease
                     (as defined in the lease, a certified copy of which is
                     annexed to the lease))

LR12. ESTATE       : None
      RENTCHARGE
      BURDENING
      THE PROPERTY

LR13. APPLICATION  : None
      FOR STANDARD
      FORM OF
      RESTRICTION



                                 PARTICULARS

LR14. DECLARATION  : Not applicable
      OF TRUST
      WHERE THERE
      IS MORE THAN
      ONE PERSON
      COMPRISING
      THE TENANT




THIS SUB - UNDERLEASE is made on the ____________ 2006 between (1) the Landlord
specified in the Particulars in Clause 1 below, (2) the Tenant specified in
those Particulars and (3) the Surety specified in those Particulars

THIS DEED WITNESSES AS FOLLOWS:

1.   PARTICULARS

     THE LANDLORD UNILEVER U.K. CENTRAL RESOURCES LIMITED whose registered
     office is at Unilever House Blackfriars London EC4P 4BQ (Company
     Registration no 29140)

     THE TENANT UNIPATH LIMITED whose registered office is at Stannard Way,
     Priory Business Park, Bedford MK44 3UP, (Company Registration no 00417198)

     THE SURETY INVERNESS MEDICAL INNOVATIONS INC. Whose registered office is at
     51 Sawyer Road, Suite 200, Waltham, Massachusetts, being a corporation
     registered in the State of Delaware

     THE ESTATE all that land shown edged yellow on Plan B and known as the
     Priory Business Park Bedford

     THE PREMISES all that land shown edged red on Plan A together with the
     buildings erected thereon.

     TERM COMMENCEMENT DATE the 20th day of December 2001

     CONTRACTUAL TERM a term from and including the Term Commencement Date and
     expiring on 27th September, 2021

     RENT COMMENCEMENT DATE the 20th day of December 2001

     INITIAL RENT One million four hundred and sixty thousand pounds
     (L1,460,000) per year

     REVIEW DATES the 29th September, 2006, 29th September, 2011 and 29th
     September, 2016 and "Review Date" means any one of the review Dates

     INTEREST RATE 3% per year above the base lending rate of Lloyds Bank plc or
     if Lloyds Bank plc shall cease to publish a base lending rate such other
     bank as the Landlord acting reasonably may from time to time nominate in
     writing

     PERMITTED USER Any use or uses within Class B1 and/or Class B8 in the
     schedule to the Town and Country Planning (Use Classes) Order 1987 which is
     in keeping with a high class business park

     DECORATING YEARS are as defined in the Superior Lease



                                        2


2.   DEFINITIONS

     For the purposes of this lease the terms in the Particulars in Clause 1
     have the meanings therein set out and the following terms shall unless the
     context otherwise admits have the following meanings:

     "ESTATE ROADS" means the roadways shown for the purpose of identification
     only coloured blue on Plan B comprising the two roads linking the Premises
     to the adopted highway

     "GUARANTOR'S COVENANTS" means the covenants in the form specified in the
     Fourth Schedule

     "GROUP COMPANY" of the Landlord or of the Tenant means a company that is a
     member of the same group as the Landlord or the Tenant (where the context
     so requires) within the meaning of Section 42 of the 1954 Act

     "ACCEPTABLE SUBSTITUTE" means a company which is a Group Company of the
     Tenant and which is approved in writing by the Landlord as an acceptable
     assignee of this lease (such approval not to be withheld in the case of a
     company the covenant of which is in the reasonable opinion of the Landlord
     of equal quality to or better quality than that of the Tenant)

     "HEADLEASE" means a lease dated 26th day of November 1996 and made between
     the Bedford Borough Council (1) and Wilson Bowden Properties Limited (2);
     Title Number BD196859 (a copy of which is annexed to the Superior Lease)

     "INSURANCE RENT" means:

     (1)  the insurance premium (without deduction in respect of any commission
          paid or allowed by the insurers to the Landlord in respect of such
          insurance) and tax thereon incurred by the Landlord in relation to
          insuring the Premises against the Insured Risks including those items
          specified in Clause 7.2.2.1 and effecting the insurance against loss
          of rent and service charge specified in Clause 7.2.2.2 and

     (2)  all of any increased premium and tax thereon payable by reason of any
          act or omission of the Tenant

          and such Insurance Rent shall be paid without any deduction or set off
          PROVIDED THAT during the subsistence of the Superior Lease the
          insurance rent shall mean the Insurance Rent payable under the
          Superior Lease

     "INSURED RISKS" means fire lightning explosion aircraft damage (including
     articles dropped from aircraft) riot civil commotion malicious persons
     earthquake storm tempest flood bursting and overflowing of water pipes
     tanks and other apparatus and impact by road vehicles and such other risks
     as the Landlord from time to time in its reasonable discretion thinks fit
     to insure against



                                        3


     "INTEREST" means interest during the period from the date on which the
     payment is due to the date of payment both before and after any judgement
     at the Interest Rate then prevailing

     "THE 1954 ACT" means the Landlord and Tenant Act 1954 and all statutes
     regulations and orders included by virtue of clause 3.14

     "PERMITTED PART" means (subject to the proviso below) any of the following
     parts of the Premises:

     1.   The Office Building as a whole or

     2.   Any part of the Office Building with a net internal area not less than
          ten thousand (10,000) square feet or

     3.   The Production Building as a whole or

     4.   Any part of the Production Building with a gross internal area of not
          less than twenty thousand (20,000) square feet or

     together (in any such case) with appropriate rights in respect of access
     services and the use of parking spaces and (in the case of all or part of
     the Production Building) the service yard

     "PIPES" means all pipes sewers drains mains ducts conduits gutters
     watercourses wires cables channels flues and all other conducting media and
     includes any fixings louvres cowls and any other ancillary apparatus

     "PLAN A" "PLAN B" and "PLAN C" means the plans attached hereto labelled
     "Plan A" "Plan B" and "Plan C" respectively

     "THE PLANNING ACTS" means the Town and Country Planning Act 1990 and all
     statutes regulations and orders included by virtue of clause 3.14 the
     Planning (Listed Building and Conservation Areas) Act 1990 and the Planning
     (Consequential Provisions) Act 1990 and the Planning and Compensation Act
     1991

     "THE PRODUCTION BUILDING" means that part of the Premises shown for the
     purpose of identification only edged red on Plan C

     "RENT" means the Initial Rent and rent ascertained in accordance with Part
     I of the Second Schedule and such term includes neither the Insurance Rent
     nor the Service Charge but the term "rents" includes Rent the Insurance
     Rent and the Service Charge PROVIDED THAT during the subsistence of the
     Superior Lease the Rent shall be the Rent payable under the Superior Lease

     "THE USER COVENANTS" means the covenants set out in the Third Schedule

     "THE OFFICE BUILDING" means that part of the Premises shown for the purpose
     of identification only edged blue on Plan C



                                        4


     "THE SERVICES" means the services specified in the Fifth Schedule to the
     Headlease

     "THE SUPERIOR LEASE" means a lease of the Premises dated 11th December,
     1996 between Wilson Bowden Properties Limited (1) and Unilever UK Holdings
     Limited (2) Title number BD198122 (a certified copy of which is annexed to
     this lease)

     "THE SUPERIOR LANDLORD" means the person entitled for the time being to the
     reversion immediately expectant on the determination of the term granted by
     the Superior Lease.

     "SURVEYOR" means any person or firm appointed by or acting for the Landlord
     (including an employee of the Landlord or a Group Company of the Landlord
     and including also the person or firm appointed by the Landlord or the
     Superior Landlord to collect the rents) to perform any of the functions of
     the Surveyor under this lease

3.   INTERPRETATION

     The expressions "the Landlord" and "the Tenant" wherever the context so
     admits include respectively the person for the time being entitled to the
     reversion immediately expectant on the determination of the Term or the
     Tenant's successors in title (as the case may be)

     The expression the "Head Landlord" means the person for the time being
     entitled to the reversion immediately expectant on the determination of the
     term granted by the Headlease

     Where the Landlord or the Tenant for the time being are two or more persons
     obligations expressed or implied to be made by or with such party are
     deemed to be made by or with such persons jointly and severally

     Words importing one gender include all other genders and words importing
     the singular include the plural and vice versa

     The expression "Guarantor" means any person who enters into covenants with
     the Landlord pursuant to clause 5.9.7

     References to "the Premises" (except in relation to Clause 5.9) in the
     absence of any provision to the contrary include any part of the Premises
     (and the expression "the Premises" includes all additions and improvements
     thereto and all Landlord's fixtures and fittings from time to time in or on
     the Premises)

     The expression "the Term" includes the Contractual Term and any period of
     holding-over or extension or continuance of the Contractual Term whether by
     statute or common law

     References to "the last year of the Term" or "the expiration of the Term"
     include the last year of the Term however the Term shall determine (whether
     by effluxion of time or otherwise)

     References to any right of the Landlord to have access to the Premises
     shall be construed as extending to the Superior Landlord and Head Landlord
     and to all persons authorised by the Landlord or Superior Landlord or Head
     Landlord (including agents



                                        5


     professional advisers contractors workmen and others) where the Headlease
     or Superior Lease grants such rights of access but only on the terms set
     out in this lease

     Any covenant by the Tenant not to do an act or thing shall be deemed to
     include an obligation not knowingly to permit or suffer such act or thing
     to be done by another person

     References to "consent of the Landlord" or words to similar effect mean a
     consent in writing signed by or on behalf of the Landlord and where so
     required under the terms of the Superior Lease the Superior Landlord and
     where so required under the terms of the Headlease the Head Landlord and
     references to "approved" and "authorised" or words to similar effect mean
     (as the case may be) approved or authorised in writing by or on behalf of
     the Landlord or Superior Landlord or Head Landlord

     The terms "the parties" or "party" mean the Landlord and/or the Tenant but
     except where there is an express indication to the contrary exclude any
     Guarantor

     "Development" has the meaning given by the Town and Country Planning Act
     1990 Section 55

     Any references to a specific statute include any statutory extension or
     modification amendment or re-enactment of such statute and any regulations
     or orders made under such statute and any general reference to "statute" or
     "statutes" includes any regulations or orders made under such statute or
     statutes

     References in this lease to any clause sub-clause or schedule without
     further designation shall be construed as a reference to the clause
     sub-clause or schedule to this lease so numbered

     The clause paragraph and schedule headings do not form part of this lease
     and shall not be taken into account in its construction or interpretation

4.   DEMISE

     The Landlord demises to the Tenant with full title guarantee the Premises
     TOGETHER with the rights granted with the Premises in the Headlease but
     EXCEPTING AND RESERVING to the Landlord the rights specified in the First
     Schedule TO HOLD the Premises to the Tenant for the Contractual Term
     SUBJECT to the rights excepted and reserved to the Head Landlord in the
     Headlease YIELDING AND PAYING to the Landlord without any deduction or set
     off:

     the Rent by equal quarterly payments in advance on the usual quarter days
     in every year and proportionately for any period of less than a year

     by way of further rent the Insurance Rent payable on demand in accordance
     with clause 7.3 and by way of further rent the Service Charge payable in
     accordance with clause 5.22



                                        6


5.   THE TENANT'S COVENANTS

     The Tenant covenants with the Landlord:

5.1  Rents

     To pay the rents on the days and in the manner set out in this lease.

5.2  Outgoings and VAT

     To perform the covenants on the part of the lessee contained in Clause
     3.3.1 and (insofar as liability thereunder arises in connection with an
     application for consent or approval made by the Tenant) Clause 3.3.2 of the
     Headlease and (without prejudice to the foregoing) to pay and to indemnify
     the Landlord against:

5.2.1 all rates taxes duties charges outgoings and obligations whatsoever
     (whether imposed by statute or otherwise and whether of a national or local
     character and whether of the nature of capital or revenue and even though
     of a wholly novel character) which are now or may at any time hereafter be
     assessed charged or imposed upon the Premises or any part thereof or upon
     the owner or occupier in respect thereof including value added tax or any
     other similar tax but otherwise excluding any assessed charged or imposed
     on or by reference to the Rent or any dealing with the Landlord's, Superior
     Landlord's or Head Landlord's reversion)

5.2.2 VAT (or any tax of a similar nature that may be substituted for it or
     levied in addition to it) chargeable in respect of any payment made or to
     be made by the Tenant under any of the terms of or in connection with this
     lease or in respect of any payment made by the Landlord where the Tenant
     agrees in this lease to reimburse the Landlord for such payment and such
     VAT is irrecoverable by the Landlord

5.3  Electricity, gas and other services consumed

     To pay to the suppliers and to indemnify the Landlord against all charges
     for electricity gas and other services consumed or used at or in relation
     to the Premises (including meter rents)

5.4  Repair and cleaning

5.4.1 To repair the Premises and keep them in good and substantial repair
     (excepting damage caused by an Insured Risk save to the extent that the
     insurance money is irrecoverable in consequence of any act or default of
     the Tenant or anyone at the Premises expressly or by implication with the
     Tenant's authority and under the Tenant's control)

5.4.2 To replace from time to time the Landlord's fixtures and fittings in the
     Premises which may be or become beyond repair at any time during or at the
     expiration of the Term

5.4.3 As often as may be reasonably necessary to have professionally treated in
     accordance with the best approved manner for preserving and protecting the
     same all inside and outside parts of the Premises requiring treatment for
     their preservation and protection



                                        7


5.5  Decoration

     In each of the Decorating Years and in the last year of the Term to
     redecorate the Premises in a good and workmanlike manner and with
     appropriate materials of good quality to the reasonable satisfaction of the
     Surveyor provided that the covenants relating to the last year of the Term
     shall not apply where the Tenant shall have redecorated the Premises less
     than 18 months prior to the expiry of the Term

5.6  Aerials etc.

     Not without the prior written consent of the Landlord which shall not be
     unreasonably withheld or delayed to erect any pole mast or wire or
     satellite dish (whether in connection with telegraphic telephonic radio or
     television communication or otherwise) upon the Premises

5.7  Statutory obligations

5.7.1 At the Tenant's own expense to execute all works and provide and maintain
     all arrangements upon or in respect of the Premises or the use to which the
     Premises are being put that are required in order to comply with the
     requirements of any statute (already or in the future to be passed) or any
     government department, local authority other public or competent authority
     or court of competent jurisdiction regardless of whether such requirements
     are imposed on the lessor the lessee or the occupier

5.7.2 Not to do in or near the Premises any act or thing by reason of which the
     Landlord may under any statute incur have imposed upon it or become liable
     to pay any penalty damages compensation costs charges or expenses

5.7.3 Without prejudice to the generality of the foregoing to comply in all
     respects with the provisions of any statutes and any other obligations
     imposed by law or by any byelaws applicable to the Premises or in regard to
     carrying on the trade or business for the time being carried on the
     Premises

5.7.4 Without prejudice to the generality of the foregoing to observe and
     perform the covenants on the part of the lessee contained in Clauses 3.12
     and 3.13 of the Headlease

5.8  Access of Landlord and notice to repair

5.8.1 To permit the Landlord in accordance with the First Schedule:

5.8.1.1 to enter upon the Premises for the purpose of ascertaining that the
     covenants and conditions of this lease have been observed and performed and

5.8.1.2 to view the state of repair and condition of the Premises

5.8.2 As soon as reasonably practicable to repair cleanse maintain and paint the
     Premises if required by any notice given to the Tenant or left upon the
     Premises by the Landlord specifying any repairs cleaning maintenance or
     painting that the Tenant has failed to



                                        8


     execute in breach of the terms of this lease and requesting the Tenant
     immediately to execute the same

5.8.3 If within a reasonable period after the service of such a notice the
     Tenant shall not have commenced and be proceeding diligently with the
     execution of the work referred to in the notice or shall fail to complete
     the work within a reasonable period to permit the Landlord to enter the
     Premises to execute such work as may be necessary to remedy the breach of
     covenant and to pay to the Landlord the reasonable cost of so doing and all
     expenses reasonably incurred by the Landlord (including legal costs and
     surveyor's fees) within 14 days of a written demand

5.9  Alienation

5.9.1 Not (save pursuant to a transaction permitted by and effected in
     accordance with the provisions of this lease) to part with the possession
     of the whole or any part of the Premises or permit another to occupy the
     whole or any part of the Premises

5.9.2 Not to assign or charge part only of the Premises and not to underlet part
     save for an underletting of one or more Permitted Parts Provided that there
     shall not at any time be more than four separate occupiers of the Office
     Building and four separate occupiers of the Production Building

5.9.3 Not to create any underletting of one or more Permitted Parts unless it
     makes reasonable arrangements (including the granting and reserving of
     appropriate easements) for (i) access to the part underlet and the
     remaining part or parts of the Premises (ii) the use of parking spaces and
     where appropriate the service yard and (iii) the use of Pipes and other
     services, and it is agreed that in the case of a proposed underletting of
     the entire Office Building (on its own) or the entire Production Building
     (on its own) such arrangements may involve the physical separation of Pipes
     and other services serving the Building being underlet and shall (whether
     or not involving such physical separation) be such as are approved in
     writing by the Landlord or by the Surveyor (such approval not to be
     unreasonably withheld or delayed)

5.9.4 Not to assign underlet or charge the whole of the Premises or grant a
     lease of a Permitted Part without the prior consent of the Landlord, such
     consent not to be unreasonably withheld or delayed (save that such consent
     shall not be withheld in the case of a proposed assignment to a company
     which is an Acceptable Substitute)

5.9.5 Not to assign the Premises or underlet the Premises or any part unless the
     assignee or underlessee first enters into direct covenants with the
     Landlord in a form approved by the Landlord (such approval not to be
     unreasonably withheld or delayed) to perform and observe all the Tenant's
     covenants and all other provisions of this lease (except in the case of any
     underletting the covenant to pay rents) during the residue of the Term (and
     in so far as applicable in respect of an underletting of a Permitted Part)

5.9.6 When making application to the Landlord for consent to underlet to give to
     the Landlord full details of the annual rent and other payments or valuable
     consideration to be paid or given by the undertenant



                                        9


5.9.7 On a permitted assignment or underletting and if the Landlord shall
     reasonably so require to procure that some guarantor or guarantors
     acceptable to the Landlord (acting reasonably) enter into direct covenants
     with the Landlord in the form of the Guarantor's covenants specified in the
     Fourth Schedule

5.9.8 That each and every permitted underlease shall be granted without any fine
     or premium at a rent not less than the then open market rental value of the
     Premises (or a proportionate part thereof in the case of an underletting of
     a Permitted Part) such rent to be payable in advance on the days on which
     Rent is payable under this lease and shall contain provisions:

5.9.8.1 for the upwards only review of the rent reserved by such underlease on
     the basis (so far as applicable to the part underlet in the case of an
     underlease of a Permitted Part or Parts) and no less frequently than on the
     dates on which the Rent is to be reviewed in this lease (or on such other
     basis as the Landlord may approve in writing such approval not to be
     unreasonably withheld or delayed)

5.9.8.2 prohibiting the undertenant from doing or allowing any act or thing in
     relation to the underlet premises inconsistent with or in breach of the
     provisions of this lease

5.9.8.3 for re-entry by the Tenant on breach of any covenant by the undertenant

5.9.8.4 imposing prohibition against all dispositions of or other dealings
     whatever with the underlet premises other than in accordance with the
     provisions of this lease

5.9.8.5 prohibiting any assignment or underletting of the whole without the
     prior consent of the Landlord under this lease (such consent not to be
     unreasonably withheld or delayed)

5.9.8.6 prohibiting the undertenant from creating a further underlease or
     permitting another to occupy the whole or any part of the Premises except
     as aforesaid

5.9.8.7 imposing in relation to any disposition the same obligations for
     registration with the Landlord as are contained in this lease in relation
     to dispositions by the Tenant and

5.9.9 To use its best endeavours to enforce the performance and observance by
     every such undertenant of the provisions of the underlease and not at any
     time without the consent of the Landlord (such consent not to be
     unreasonably withheld or delayed) either expressly or by implication to
     waive any breach of the covenants or conditions on the part of any
     undertenant or assignee of any underlease or to vary the terms of any
     permitted underlease

5.9.10 In relation to any permitted underlease:

5.9.10.1 to use its best endeavours to ensure that the rent is reviewed in
     accordance with the terms of the underlease

5.9.10.2 to give notice to the Landlord of the details of the determination of
     every rent review within 28 days



                                       10


5.9.10.3 not to be a party to or permit any agreement or arrangement for
     commutation in whole or part of any annual rent to be reserved on any
     underletting of the Premises or any part thereof in consideration of the
     payment of a lump sum of money or for other valuable consideration

5.9.10.4 that any underlease (except an underlease of the whole Premises or the
     entire Office Building on its own or the entire Production Building on its
     own) shall be excluded from the security of tenure provisions of sections
     24 to 28 of the Landlord and Tenant Act 1954 (as amended) by an Order of
     the appropriate Court and the Tenant shall not grant any such underlease
     until it has produced to the Landlord a copy of the Court Order permitting
     such exclusion

5.9.10.5 not without the prior consent of the Landlord (such consent not to be
     unreasonably withheld or delayed) to accept or agree to accept any
     surrender in respect of any underlease or tenancy that may at any time
     relate to the Premises or any part thereof nor without such consent (not to
     be unreasonably withheld or delayed) to vary or permit or suffer any
     variation of the terms or conditions of any underlease or tenancy or any
     breach by an underlessee of any of the provisions of such underlease or
     tenancy

5.9.11 Within 28 days of any assignment charge underlease or any transmission or
     other devolution relating to the Premises to produce for registration with
     the Landlord's solicitor and the Superior Landlord's solicitors such deed
     or document or a certified copy of it and to pay the Landlord's solicitor's
     and the Superior Landlord's solicitors reasonable charges for the
     registration of every such document such charges not being less than
     L20 (twenty pounds) plus VAT

5.9.12 Notwithstanding clause 5.9.1 the Tenant may share the occupation of the
     whole or any part of the Premises with a company which is a Group Company
     of the Tenant for so long as such company shall remain a Group Company of
     the Tenant and otherwise than in a manner that transfers or creates a legal
     estate

5.9.13 Not to dispose or deal with the Premises otherwise than in accordance
     with the terms of the Superior Lease

5.10 Nuisance

5.10.1 Not to do nor allow to remain upon the Premises anything which may be or
     become or cause or create a legal nuisance or injury or damage to the
     Landlord or the Superior Landlord its tenants or the owners or occupiers of
     adjacent or neighbouring premises on the Estate

5.10.2 Not to use the Premises for a sale by auction or for any dangerous
     noxious noisy or offensive trade business manufacture or occupation nor for
     any illegal or immoral act or purpose nor to permit the emission of smoke

5.10.3 If the Landlord shall abate any nuisance for which the Tenant is
     responsible to pay all costs charges and expenses reasonably and properly
     incurred in abating such nuisance and executing all such works as may be
     necessary for such purpose whether or not required by a notice served by
     any local or other authority



                                       11


5.10.4 To provide and maintain receptacles for the clean and efficient removal
     of waste materials from the Premises

5.11 Landlord's costs

     To pay to the Landlord on an indemnity basis all reasonable and proper
     costs fees charges disbursements and expenses (including without prejudice
     to the generality of the above those payable to counsel solicitors
     surveyors and bailiffs) reasonably and properly incurred by the Landlord in
     relation to or incidental to:

5.11.1 every application made by the Tenant for a consent or licence required by
     the provisions of this lease whether such consent or licence is granted or
     refused or proffered subject to any lawful qualification or condition or
     whether the application is withdrawn unless such refusal qualification or
     condition is unlawful whether because it is unreasonable or otherwise

5.11.2 the preparation and service of a notice under the Law of Property Act
     1925 Section 146 or incurred by or in reasonable contemplation of
     proceedings under Sections 146 or 147 of that Act notwithstanding that
     forfeiture is avoided otherwise than by relief granted by the court

5.11.3 the recovery or attempted recovery of arrears of rent or arrears of other
     sums due from the Tenant and

5.11.4 the preparation and service of a schedule of dilapidations for which the
     Tenant is liable and whether served during or within 3 months or after the
     expiration of the Term

5.12 The Planning Acts

5.12.1 Not to commit in relation to the Premises any breach of planning control
     (such term to be construed in the way in which it is used in the Planning
     Acts)

5.12.2 Not without the consent in writing of the Landlord (such consent not to
     be unreasonably withheld or delayed) to apply for planning permission to
     carry out any Development in or upon the Premises and at the expense of the
     Tenant to supply the Landlord with a copy of any application for planning
     permission together with such plans and other documents as the Landlord may
     reasonably require and to supply prior to the commencement of any
     Development a copy of any planning permission granted to the Tenant and not
     to commence any Development without the approval in writing of the Landlord
     (such approval not to be unreasonably withheld or delayed) of the
     conditions of such consent

5.12.3 To pay and satisfy any charge that may be imposed upon any breach by the
     Tenant of planning control or otherwise under the Planning Acts

5.12.4 Unless the Landlord shall otherwise direct to carry out and complete
     before the expiry of the Term any works required to be carried out to or in
     the Premises as a condition of any planning permission which may have been
     granted during the Term and implemented or partially implemented by the
     Tenant irrespective of the date by which such works were required to be
     carried out



                                       12


5.13 Plans, documents and information

     If called upon to do so to produce to the Landlord or the Surveyor all
     plans documents and other evidence as the Landlord may reasonably require
     in order to satisfy itself that the provisions of Clause 5.12 have been
     complied with

5.14 Indemnities

     To be responsible for and to keep the Landlord fully indemnified against
     all damage damages losses costs expenses actions demands proceedings claims
     and liabilities made against or suffered or incurred by the Landlord
     arising directly or indirectly out of any breach or non-observance by the
     Tenant of the covenants conditions or other provisions of this lease or any
     of the matters to which this demise is subject

5.15 Encroachments

5.15.1 Not to stop up darken or obstruct any windows or light belonging to the
     Premises

5.15.2 To take all reasonable steps to prevent any new window light opening
     doorway path passage pipe or other encroachment or easement being made or
     acquired in against out of or upon the Premises and to notify the Landlord
     immediately if any such encroachment or easement shall be made or acquired
     (or attempted to be made or acquired) and at the request and cost of the
     Landlord to adopt such means as shall reasonably be required to prevent
     such encroachment or the acquisition of any such easement

5.16 Yield up

     At the expiration of the Term:

5.16.1 to yield up the Premises in accordance with the terms of this lease
     (damage caused by any Insured Risks excepted save insofar as payment of the
     insurance money is refused due to some act or default of the Tenant or
     anyone at the Premises expressly or by implication with the Tenant's
     authority and under the Tenant's control)

5.16.2 if so required by the Landlord (i) to remove any alterations made
     pursuant to paragraph 2.1 of the Third Schedule and (ii) to reinstate the
     premises in accordance with the Notional Office Building Specification and
     Notional Production Building Specification attached to the Superior Lease
     as qualified by the Reinstatement Provisions attached to the Superior Lease
     such reinstatement to be carried out to the reasonable satisfaction of the
     Surveyor

5.16.3 to remove all signs erected by the Tenant in upon or near the Premises
     and immediately to make good any damage caused by such removal

5.16.4 to give up all keys of the Premises to the Landlord



                                       13


5.16 Interest on arrears

     If the Tenant shall fail to pay the rents or any other sum due under this
     lease within 7 days of the date due (whether in the case of rent formally
     demanded or not) the Tenant (here meaning only the Tenant in whom this
     lease is vested at the relevant time and not its predecessors in title)
     shall pay to the Landlord Interest on the rents or other sum from the date
     when they were due to the date on which they are paid and such Interest
     shall be deemed to be rent due to the Landlord

5.17 Statutory notices etc

     To give full particulars to the Landlord, Superior Landlord and Head
     Landlord of any notice direction order or proposal for the Premises made
     given or issued to the Tenant by any local or public authority within 7
     days of receipt and if so required by the Landlord, Superior Landlord and
     Head Landlord to produce it to the Landlord, Superior Landlord and Head
     Landlord and without delay to take all necessary steps to comply with the
     notice direction or order and at the Landlord's. cost and reasonable
     request to make or join with the Landlord in making such objection or
     representation against or in respect of any notice direction order or
     proposal as the Landlord shall deem expedient unless it would be adverse to
     the Tenant's commercial interests

5.18 Re-letting Sale of reversion etc

5.19.1 To permit the Landlord in the case of a proposed sale of the Landlord's
     interest or any other superior interest at any time during the Term and in
     the case of reletting the Premises during the last twelve months before the
     end of the Term to fit in a conspicuous position on the Premises (but not
     so as to obscure or obstruct any windows or doors) a notice board for such
     reletting or sale of the same and not to take down or obscure the said
     notice board

5.19.2 At all times during the Term to permit any person authorised by order in
     writing of the Landlord or its agents on reasonable prior notice to view
     and take measurements of the Premises at reasonable hours in the daytime

5.19 Defective premises

     To give notice to the Landlord, Superior Landlord and Head Landlord of any
     defect in the Premises which might give rise to an obligation on the
     Landlord and/or Superior Landlord and/or the Head Landlord to do or refrain
     from doing any act or thing in order to comply with the provisions of this
     lease or the duty of care imposed on the Landlord pursuant to the Defective
     Premises Act 1972 or otherwise and at all times to display and maintain all
     notices which the Landlord may from time to time reasonably require to be
     displayed at the Premises in connection therewith

5.20 Landlord's rights

     To permit the Landlord at all times during the Term to exercise without
     interruption or interference in accordance with the First Schedule any of
     the rights granted or reserved to it by virtue of the provisions of this
     lease



                                       14


5.22 The User Covenants Regulations and Service Charge

5.22.1 To observe and perform the User Covenants and the covenants on the part
     of the lessee contained in Clauses 3.5 and 3.9 of the Headlease

5.22.2 To comply with the regulations in the Fourth Schedule to the Headlease
     and to use reasonable endeavours to ensure that other occupiers of the
     Premises or any part thereof do so

5.22.3 To pay the service charge (pursuant to the terms of the Third Schedule to
     the Headlease) to the Landlord or if the Landlord shall direct to the
     Superior Landlord or Head Landlord within 10 days of receipt from the
     Landlord of a service charge statement compiled by the Head Landlord in
     accordance with the Third Schedule to the Headlease

5.23 Headlease Covenants

     To indemnify the Landlord against any costs claims or expenses in respect
     of any breach of the terms of the Headlease resulting from any breach on
     the part of the Tenant of any of its covenants or obligations or conditions
     contained in this lease

5.24 Superior Lease Covenants

     To perform and observe all the covenants (excepting obligations on the
     lessee to make payments to the lessor under the Superior Lease) on the part
     of the lessee contained in the Superior Lease, and to indemnify the
     Landlord against any costs claims or expenses resulting from any breach on
     the part of the Tenant of this covenant.

6.   THE LANDLORD'S COVENANTS

     The Landlord covenants with the Tenant:

6.1  Quiet enjoyment

     To permit the Tenant peaceably and quietly to hold and enjoy the Premises
     without any interruption or disturbance from or by the Landlord or any
     person claiming through under or in trust for the Landlord or by title
     paramount

6.2  Superior Lease

6.2.1 Promptly to pay the basic rent reserved by and to observe and perform and
     indemnify of any breach of the covenants on the part of the lessee
     contained in the Superior Lease or to procure that this is done except to
     the extent that such covenants are within the scope of the covenants on the
     part of the Tenant contained in this lease

6.2.2 To pay the service charge to the Superior Landlord and produce a copy of
     the receipted account to the Tenant or to procure that this is done

6.2.3 Subject to the Tenant indemnifying the Landlord against the reasonable and
     proper costs incurred by the Landlord, at the reasonable request of the
     Tenant:



                                       15


6.2.3.1 to take such action as the Tenant reasonably deems appropriate to
     enforce the obligations on the part of the Superior Landlord contained in
     the Superior Lease and

6.2.3.2 to use its best endeavours to obtain the consent of the Superior
     Landlord to any matter for which the Tenant reasonably requires such
     consent or to procure that this is done

7.   INSURANCE

7.1  Landlord to insure

     The Landlord covenants with the Tenant to:

7.1.1 insure the Premises save insofar as such insurance shall be vitiated by
     any act of the Tenant or by anyone at the Premises expressly or by
     implication with the Tenant's authority and under the Tenant's control and

7.1.2 produce to the Tenant on reasonable demand (and not more than once in any
     12 month period) reasonable evidence of the terms of the policy and the
     fact that the last premium has been paid and

7.1.3 notify the Tenant of any material change in the risks covered by the
     policy from time to time

     or to procure that this is done

7.2  Details of the Insurance

     The Landlord shall procure that insurance shall be effected:

7.2.1 in such substantial and reputable insurance office or with such
     underwriters and through such agency as the Landlord may from time to time
     decide

7.2.2 for the following sums:

7.2.2.1 such sum as shall be the full cost of rebuilding and reinstatement
     including architects' surveyors' and other professional fees payable upon
     any application for planning permission or other permits or consents that
     may be required in relation to the rebuilding or reinstatement of the
     Premises the cost of debris removal demolition site clearance and any works
     that may be required by statute and incidental expenses and

7.2.2.2 the loss of Rent and Service Charge payable under this lease from time
     to time (having regard to any review of rent which may become due under
     this lease) for 3 years

7.2.3 against damage or destruction by the Insured Risks upon reasonable terms
     and at reasonable rates with an insurer of repute and subject to such
     excesses exclusions or limitations as are normal for premises similar to
     the Premises and within the same locality



                                       16


7.3  Payment of Insurance Rent

7.3.1 The Tenant shall pay the Insurance Rent on the date of this lease for the
     period from and including the date hereof to the day before the next policy
     renewal date and subsequently the Tenant shall pay the Insurance Rent on
     demand and (if so demanded) in advance but not more than one month in
     advance of the policy renewal date

7.3.2 The Landlord will if practicable give to the Tenant reasonable notice of
     the amount of the premium for each year and if at any renewal the Tenant
     notifies the Landlord in writing that the Tenant believes that the premium
     is excessive the Landlord will pass to the insurers or the brokers through
     which any such insurance is arranged any representations which the Tenant
     may make and if the Tenant so requests will take reasonable steps (at the
     cost of the Tenant) to secure a reduction in the premium for the ensuing
     year or procure that this is done

7.4  Suspension of Rent

7.4.1 If and whenever during the Term the Premises or any part are damaged or
     destroyed by any of the Insured Risks so that the Premises or any part of
     them are unfit for occupation or use then to the extent that payment of the
     insurance money is not refused in whole or in part by reason of any act or
     default of the Tenant or anyone at the Premises expressly or by implication
     with the Tenant's authority and under the Tenant's control the provisions
     of clause 7.4.2 shall have effect

7.4.2 When the circumstances contemplated in clause 7.4.1 arise the Rent or a
     fair proportion of the Rent according to the nature and the extent of the
     damage sustained shall cease to be payable until the Premises or the
     damaged parts shall have been rebuilt or reinstated so that the Premises or
     the affected part are made fit for occupation or use (any dispute as to
     such proportion or the period during which the Rent shall cease to be
     payable to be determined in accordance with the Arbitration Acts 1950 to
     1979 by an arbitrator to be appointed by agreement between the parties or
     in default by the President for the time being of the Royal Institution of
     Chartered Surveyors upon the application of either party)

7.5  Reinstatement and termination if prevented

7.5.1 If and whenever during the Term the Premises or any part are damaged or
     destroyed by any of the Insured Risks then to the extent that the payment
     of the insurance money is not refused in whole or in part by reason of any
     act or default of the Tenant or anyone at the Premises expressly or by
     implication with the Tenant's authority and under the Tenant's control the
     Landlord shall use its best endeavours to obtain all planning permissions
     or other permits and consents that may be required under the Planning Acts
     or other statutes (if any) or under the Headlease or procure that this is
     done to enable the Landlord to rebuild and reinstate or to procure the
     rebuilding or reinstatement of the Premises or such part or parts so
     damaged or destroyed ("Permissions") and the Tenant shall give the Landlord
     such assistance and support in that regard as the Landlord requires

7.5.2 Subject to the provisions of clauses 7.5.3 and 7.5.4 and only to the
     extent specified in clause 7.5.1 the Landlord shall as soon as the
     Permissions have been obtained or as



                                       17


     soon as reasonably practicable where no Permissions are required apply all
     money received in respect of such insurance (except sums in respect of loss
     of Rent) in rebuilding or reinstating or procuring that such monies are
     applied to rebuild or reinstate the Premises so destroyed or damaged making
     up any difference between the cost of rebuilding and reinstating and the
     money received out of the Landlord's own money PROVIDED THAT the Landlord
     shall be entitled to rebuild or reinstate or to procure the rebuilding or
     reinstatement of the Premises either in the form in which they were
     immediately before the occurrence of the destruction or damage or in that
     form with such modifications as:

7.5.2.1 may be required by any competent authority as a condition of the grant
     of any of the Permissions and/or

7.5.2.2 the Landlord may reasonably make to reflect then current good building
     practice

     but so that the Landlord shall in any event provide in the Premises as
     rebuilt and reinstated accommodation for the Tenant no less convenient and
     commodious and ancillary facilities no less convenient than those which
     existed immediately before the occurrence of the destruction or damage

7.5.3 For the purposes of clause 7.5.4 the expression "Supervening Events"
     means:

7.5.3.1 the Landlord has failed despite using its best endeavours to obtain the
     Permissions

7.5.3.2 any of the Permissions have been granted subject to a lawful condition
     with which it would in all the circumstances be unreasonable to expect the
     Landlord to comply

7.5.3.3 the rebuilding or reinstating is prevented by war act of God Government
     action strike lock-out or

7.5.3.4 any other circumstances beyond the control of the Landlord

7.5.4 The Landlord shall not be liable to rebuild or reinstate the Premises or
     to procure the same if and for so long as such rebuilding or reinstating is
     prevented by Supervening Events

7.5.5 If upon the expiry of a period of 3 years commencing on the date of the
     damage or destruction the Premises (or a substantial part thereof) have not
     been rebuilt or reinstated so that the Premises are fit for the Tenant's
     occupation and use either the Landlord or the Tenant may by notice served
     on the other at any time within 6 months after the expiry of such period of
     3 years (but before the Premises have been rendered fit for occupation and
     use) invoke the provisions of clause 7.5.6 PROVIDED THAT the Landlord shall
     only be entitled to invoke the provisions of clause 7.5.6 in the
     circumstances referred to in clause 7.5.4 and the Tenant shall not be
     entitled to invoke the provisions of clause 7.5.6 if any insurance money is
     wholly or substantially irrecoverable by reason of any act or default of
     the Tenant or anyone at the Premises expressly or by implication with the
     Tenant's authority

7.5.6 Upon service of a notice in accordance with clause 7.5.5:



                                       18


7.5.6.1 the Term will absolutely cease but without prejudice to any rights or
     remedies that may have accrued to either party against the other

7.5.6.2 all money received in respect of the insurance effected by the Landlord
     pursuant to this clause 7 shall belong to the Landlord

7.6  Tenant's insurance covenants

     The Tenant covenants with the Landlord:

7.6.1 to comply with all the requirements of the insurers but if the Tenant
     shall notify the Landlord that the Tenant considers any such requirements
     unreasonable the Landlord shall so inform the insurers or the brokers
     through which the insurance is arranged and if the Tenant's objections are
     reasonable the Landlord shall use reasonable endeavours to persuade the
     insurers to drop the requirement to which the Tenant objects

7.6.2 not to do or omit anything that could cause any policy of insurance on or
     in relation to the Premises to become void or voidable wholly or in part
     nor (unless the Tenant shall pay the increased premium) anything by which
     additional insurance premiums may become payable

7.6.3 to keep the Premises supplied with adequate fire fighting equipment
     (including any which the fire authority may require or which the insurers
     or the Landlord may reasonably require) and to maintain such equipment to
     their satisfaction and in efficient working order and at least once in
     every 6 months to cause any sprinkler system and other fire fighting
     equipment to be inspected by a competent person

7.6.4 not to store or bring onto the Premises any article substance or liquid of
     a specially combustible inflammable or explosive nature (save in respect of
     the Permitted User and then only to the extent that such substances are
     properly stored displayed and maintained to the reasonable satisfaction of
     the Landlord and Superior Landlord) and to comply with the requirements of
     the fire authority and the reasonable requirements of the Landlord as to
     fire precautions relating to the Premises

7.6.5 not to obstruct the access to any fire equipment or the means of escape
     from the Premises nor to lock any fire door while the Premises are occupied

7.6.6 to give notice to the Landlord immediately upon the Tenant becoming aware
     of the happening of any event which might affect any insurance policy on or
     relating to the Premises or upon the happening of any event against which
     the Landlord may have insured under this lease

7.6.7 if at any time the Tenant shall be entitled to the benefit of any
     insurance on the Premises (which is not effected or maintained in pursuance
     of any obligation contained in this lease) to apply all money received by
     virtue of such insurance in making good the loss or damage in respect of
     which such money shall have been received

7.6.8 if and whenever during the Term the Premises or any part of them are
     damaged or destroyed by an Insured Risk and the insurance money under the
     policy of insurance effected by the Landlord pursuant to its obligations
     contained in this lease is by reason



                                       19


     of any act or default of the Tenant or anyone at the Premises expressly or
     by implication with the Tenant's authority and under the Tenant's control
     wholly or partially irrecoverable immediately in every such case (at the
     option of the Landlord) either:

7.6.8.1 to rebuild and reinstate at its own expense the Premises or the part
     destroyed or damaged to the reasonable satisfaction and under the
     supervision of the Surveyor the Tenant being allowed towards the expenses
     of so doing upon such rebuilding and reinstatement being completed the
     amount (if any) actually received in respect of such destruction or damage
     under any such insurance policy or

7.6.8.2 to pay to the Landlord on demand the amount of such insurance money so
     irrecoverable together with Interest on such irrecoverable money from the
     date when the same would otherwise have been received by the Landlord to
     the date of payment by the Tenant

8.   VAT

     It is agreed that all rents and other payments whatsoever due from the
     Tenant hereunder shall be exclusive of Value Added Tax and the Tenant
     covenants with the Landlord that the Tenant shall in addition (upon receipt
     of a valid Value Added Tax invoice addressed to the Tenant) pay the full
     amount of any Value Added Tax or other similar tax for which the Landlord
     or other the person entitled to such rents or other payments shall from
     time to time be accountable in respect thereof

9.   PROVISOS

9.1  Re-entry

     If and whenever during the Term:

9.1.1 the rents (or any of them or any part of them) under this lease are
     outstanding for 21 days after becoming due whether (in the case of Rent)
     formally demanded or not or

9.1.2 there is a breach by the Tenant or any Guarantor for the time being of any
     covenant or other term of this lease or any document expressed to be
     supplemental to this lease or

9.1.3 an individual Tenant or any Guarantor for the time being becomes bankrupt
     or

9.1.4 a company Tenant or company Guarantor:

9.1.4.1 enters into liquidation whether compulsory or voluntary (but not if the
     liquidation is for amalgamation or reconstruction of a solvent company) or

9.1.4.2 has a receiver or administrative receiver appointed or

9.1.4.3 summons a meeting of its creditors or any of them under Part 1 of the
     Insolvency Act 1986 ("the 1986 Act") or

9.1.4.4 suffers a petition for an administration order or winding-up order in
     respect of it to be filed in Court or has an administration order or
     winding-up order made in respect of it



                                       20


9.1.4.5 summons a meeting of its creditors under Section 98 of the 1986 Act; or

9.1.5 the Tenant or any Guarantor for the time being enters into an arrangement
     for the benefit of its creditors

     then the Landlord may re-enter the Premises (or any part of them in the
     name of the whole) at any time (and even if any previous right of re-entry
     has been waived) and then the Term will absolutely cease but without
     prejudice to any rights or remedies which may have accrued to the Landlord
     against the Tenant or to the Tenant against the Landlord in respect of any
     breach of covenant or other term of this lease (including the breach in
     respect of which the re-entry is made)

9.2  Rights easements etc

     The operation of the Law of Property Act 1925 Section 62 shall be excluded
     from this lease and the only rights granted to the Tenant are those
     expressly set out in this lease and the Tenant shall not by virtue of this
     lease be deemed to have acquired or become entitled by any means whatever
     to any easement from or over or affecting the Estate or any other land or
     premises now or at any time after the date of this lease belonging to the
     Landlord, the Superior Landlord or the Head Landlord and not comprised in
     this lease

9.3  Accidents

     The Landlord, Superior Landlord and the Head Landlord shall not be
     responsible to the Tenant or to anyone at the Premises or using the Estate
     Roads expressly or by implication with the Tenant's authority for any
     accident happening or injury suffered or for any damage to or loss of any
     chattel sustained in the Premises or the Estate unless due to the act
     neglect or default of the Landlord or covered by the Landlord's insurance

9.4  Perpetuity period

     The perpetuity period applicable to this lease shall be 80 years from the
     commencement of the Contractual Term and whenever in this lease either
     party is granted a future interest in property there shall be deemed to be
     included in respect of every such grant a provision requiring that future
     interest to vest within the stated period and for it to be void for
     remoteness if it shall not have so vested

9.5  Exclusion of use warranty

     Nothing in this lease or in any consent granted by the Landlord under this
     lease shall imply or warrant that the Premises may lawfully be used under
     the Planning Acts for the purpose authorised in this lease (or any purpose
     subsequently authorised)

9.6  Entire understanding

     This lease embodies the entire understanding of the parties relating to the
     Premises and to all the matters dealt with by any of the provisions of this
     lease



                                       21


9.7  Licences etc under hand

     Whilst the Landlord is a limited company or other corporation all licences
     consents approvals and notices required to be given by the Landlord shall
     be sufficiently given if given under the hand of a director the secretary
     or other duly authorised officer of the Landlord

9.8  Service of notices

     The provisions of the Law of Property Act 1925 Section 196 as amended by
     the Recorded Delivery Service Act 1962 shall apply to the giving and
     service of all notices and documents under or in connection with this lease
     except that Section 196 shall be deemed to be amended as follows:

9.8.1 the final words of Section 196 (4) ____ and that service ____________ be
     delivered shall be deleted and there shall be substituted ____ and that
     service shall be deemed to be made on the second Working Day after the
     registered letter has been posted ("Working Day" meaning any day from
     Monday to Friday (inclusive) other than Christmas Day Good Friday and any
     statutory bank or public holiday)

9.8.2 any notice or document shall also be sufficiently served if sent by telex
     facsimile transmission to the party to be served and that service shall be
     deemed to be made on the day of transmission if transmitted before 4 pm on
     a Working Day but otherwise on the next following Working Day (as defined
     above)

     and in this clause 9.8 "party" includes any Guarantor.

10.  RIGHT TO BREAK

10.1 Subject to the condition specified in Clause 10.2 below the Tenant may
     terminate this Lease on 29th September, 2011 ("the Break Date") by giving
     to the Landlord no less than 14 months' prior written notice ("a Notice to
     Break") expiring on the Break Date (time to be of the essence) and (subject
     to that condition) if a Notice to Break is given this lease shall on the
     Break Date forthwith cease and determine without prejudice to any right and
     remedy of either party against the other in respect of any antecedent
     breach and without prejudice to the provisions of Clauses 10.3 and 10.4
     below

10.2 The condition specified in Clause 10.1 above is that either:

10.2.1 The Tenant gives vacant possession of the whole of the Premises to the
     Landlord or

10.2.2 The Tenant has taken all reasonable steps to obtain such vacant
     possession and the Tenant is entitled to such vacant possession and upon
     the termination of the Lease on the Break Date the Landlord will
     immediately be entitled to vacant possession

10.3 If this lease is determined on the Break Date the Tenant shall pay to the
     Landlord on the Break Date a sum equal to 1.5 years' Rent (which for this
     purpose shall mean Rent at the yearly rate at which it was payable
     immediately before the Break Date) plus VAT



                                       22


10.4 If the Tenant having given a Notice to Break does not give vacant
     possession of the whole of the Premises at the Break Date the Tenant will
     indemnify the Landlord against all costs and expenses properly incurred by
     the Landlord in obtaining vacant possession.

11.  SURETY'S COVENANTS

11.1 Payment

     The Surety covenants with the Landlord in respect of the period ending on
     the date on which Unipath Limited is released by virtue of the Landlord and
     Tenant (Covenants) Act 1995 that:

          (i)  the Tenant will throughout the term as well after as before any
               disclaimer of this lease pay the rents reserved by this lease as
               from time to time reviewed and will observe and perform the
               Tenant's covenants in this lease;

          (ii) in case of default or delay on the part of the Tenant the Surety
               will by way of primary obligation and not merely as a guarantor
               or as collateral to the Tenant's obligation pay to the Landlord
               any sum which ought to be paid and make good any breaches of the
               Tenant's covenants in this lease including all losses, damages,
               costs and expenses arising or incurred by the Landlord; and

          (iii) the Surety will indemnify the Landlord against all costs arising
               from or in contemplation of the enforcement of the Surety's
               covenants in this lease.

11.2 New lease

     (A)  The Surety further covenants with the Landlord that in the event of
          forfeiture of this lease or if the Tenant is dissolved or enters into
          liquidation and the Crown or the liquidator disclaims this lease, then
          the Surety or such of the persons for the time being comprising the
          Surety as the Landlord may choose shall within three months of the
          forfeiture or disclaimer upon being required so to do by the Landlord
          by written notice given at any time take up a new lease of the demised
          premises and deliver a duly executed counterpart to the Landlord upon
          the same terms as this lease save that:

          (i)  such lease will be subject to and with the benefit of this lease
               if and so far as it is subsisting;

          (ii) the term will commence on the date of such notice and expire on
               the date the Term specified in the Particulars of this lease is
               due to expire or would have expired but for its having already
               ended; and

          (iii) so far as there are outstanding breaches of the Tenant's
               covenants in this lease, the Landlord may require without
               prejudice to its other



                                       23


               remedies that such lease contains a covenant that they will be
               remedied promptly at the cost of the Surety to the satisfaction
               of the Landlord.

     (B)  The Surety will:

          (i)  join in any consent, approval or licence required by any other
               person interested in the demised premises in connection with the
               grant of the lease; and

          (ii) on completion of such lease indemnify the Landlord against its
               costs in connection with the obtaining of any such consent,
               approval or licence and the grant of the lease.

11.3 Ranking of claims

     (A)  The Surety will only be entitled to enforce its rights in respect of
          any sums it pays or liabilities it incurs under the Surety's covenants
          in this lease or in any new lease it is required to take up under this
          schedule after the Surety's obligations under all such covenants have
          been observed, performed and discharged in full and the Surety shall
          not:

          (i)  seek to recover from the Tenant in competition with the Landlord
               whether directly or by way of set-off, lien, counter-claim or
               otherwise or accept any money or other property or security or
               exercise any rights in respect of any sum which may be or become
               due to the Surety on account of failure by the Tenant to observe,
               perform or discharge the Tenant's covenants in this lease;

          (ii) claim, prove for or accept any payment in any composition by or
               winding up or liquidation of the Tenant or any third party in
               competition with the Landlord for any amount owing to the Surety
               on any account.

     (B)  The Surety warrants to the Landlord that it has not taken and will not
          take any security from the Tenant or any third party in connection
          with the Surety's covenants in this lease or in any new lease it is
          required to take up under this schedule and any such security so taken
          shall be held in trust for the Landlord as security for the respective
          liabilities of the Surety and the Tenant.

11.4 Sole or principal debtor

     Without prejudice to the rights of the Landlord against the Tenant as
     principal the Surety as a separate and independent stipulation agrees that
     any liability mentioned in this schedule which may not be recoverable on
     the footing of a guarantee whether by reason of any legal limitation,
     disability or incapacity on or of the Tenant or any other fact or
     circumstance and whether known to the Landlord or not will nevertheless be
     recoverable from the Surety as though it had been incurred by the Surety
     and the Surety was the sole or principal debtor in respect of it and will
     be paid by the Surety on demand together with interest (as well after as
     before any judgment) at the rate of four per centum per annum above the
     base rate of National Westminster Bank Plc from time to time from the date
     of demand until payment.



                                       24


11.5 Immediate recourse

     The provisions of this schedule are in addition to and not in substitution
     for any other rights which the Landlord may have and may be enforced
     against the Surety whether or not recourse has been had to any such rights
     and whether or not any steps or proceedings have been taken against the
     Tenant.

11.6 Obligations to subsist

     The rights of the Landlord and the obligations of the Surety will continue
     to subsist notwithstanding:

          (i)  the neglect or forbearance of the Landlord in endeavouring to
               obtain payment of the rents reserved by this lease or enforcing
               the observance and performance of the Tenant's covenants in this
               lease whether from or by the Tenant, the Surety or any other
               person;

          (ii) any time which may be given by the Landlord for the payment of
               the rents reserved by this lease or the observance and
               performance of the Tenant's covenants in this lease whether from
               or by the Tenant, the Surety or any other person;

          (iii) the demand or acceptance of sums at a time when the Landlord has
               notice of a breach of the Tenant's covenants in this lease;

          (iv) the refusal by the Landlord to accept rent tendered by or on
               behalf of the Tenant, the Surety or any other person;

          (v)  the grant of any licence, consent or approval by the Landlord;

          (vi) any variation of this lease agreed between the Landlord and the
               Tenant for the time being save as provided in Section 18 of the
               Landlord and Tenant (Covenants) Act 1995;

          (vii) the disposition of the Landlord's reversion or any part of it;

          (viii) the release of any one or more persons for the time being
               constituting the Tenant or the Surety; or

          (ix) any other act omission, matter or thing by which (but for this
               provision) the Tenant or the Surety would be exonerated either
               wholly or in part from its obligations to the Landlord other than
               a release under seal given by the Landlord.

11.7 Supplemental

     If so reasonably required by the Landlord the Surety will join in any
     instrument made under or supplemental to this lease for the purpose of
     acknowledging it is bound by it and that the obligations in this clause
     extend to it.



                                       25


11.8 Statutory avoidance

     No assurance, security or payment which may be avoided under any Statute
     nor any release, settlement or discharge of the Surety which may have been
     given or made on the faith of any such assurance, security or payment shall
     prejudice or affect the right of the Landlord to recover from the Surety to
     the full extent of this clause as if such release, settlement or discharge
     had not occurred.

11.9 Agent for Service

     (A)  The Surety irrevocably appoints General Counsel, with a copy to the
          Managing Director of Unipath Limited, both of of Stannard Way, Priory
          Business Park, Bedford MK44 3UP to be its agent for the receipt of
          Service Documents. It agrees that any Service Document may be
          effectively served on it in connection with Proceedings in England and
          Wales by service on its agent effected in any manner permitted by the
          Civil Procedure Rules.

     (B)  If the agent at any time ceases for any reason to act as such, the
          Surety shall appoint a replacement agent having an address for service
          in England or Wales and shall notify the Landlord of the name and
          address of the replacement agent. Failing such appointment and
          notification, the Landlord shall be entitled by notice to the Surety
          to appoint a replacement agent to act on behalf of the Surety. The
          provisions of this clause applying to service on an agent apply
          equally to service on a replacement agent.

     (C)  A copy of any Service Document served on an agent shall be sent by
          post to the Surety. Failure or delay in so doing shall not prejudice
          the effectiveness of service of the Service Document.

     (D)  "SERVICE DOCUMENT" means a claim form, application notice, order,
          judgment or other document relating to any Proceedings.

12.  GOVERNING LAW

     This lease is to be governed by and construed in accordance with English
     Law.

13.  JURISDICTION

13.1 The courts of England are to have exclusive jurisdiction to settle any
     dispute arising out of or in connection with this lease. Any proceeding,
     suit or action arising out of or in connection with this lease
     (PROCEEDINGS) shall be brought only in the courts of England. This clause
     is not concluded for the benefit of any party or parties to this lease.

13.2 Each party waives (and agrees not to raise) any objection, on the ground of
     forum non conveniens or on any other ground, to the taking of proceedings
     in the courts of England. Each party also agrees that a judgment against it
     in Proceedings brought in England shall be conclusive and binding upon it
     and may be enforced in any other jurisdiction.



                                       26


13.3 Each party irrevocably submits and agrees to submit to the jurisdiction of
     the courts of England.

14.  AGREEMENT

     This lease has been entered into pursuant to an agreement dated 20th
     December 2001.

IN WITNESS of which the parties hereto have executed this instrument as their
Deed and it is the parties' intention that this Deed be delivered and is hereby
delivered on the date first above written



                                       27


                                 FIRST SCHEDULE

                                 RIGHTS RESERVED

1    The right at reasonable times and upon reasonable prior written notice
     (except in cases of emergency) to enter the Premises:

1.1  to inspect the condition and the state of repair of the Premises

1.2  to take schedules or inventories of fixtures and other items to be yielded
     up on the expiry of the Term and

1.3  to exercise any of the rights granted to the Landlord by this lease

2    The right with the Surveyor and any person acting as the third party
     determining the Rent in default of agreement between the parties under the
     provisions for rent review contained in this lease at convenient hours and
     on reasonable prior notice to enter and to inspect and measure the Premises
     for all purposes connected with any pending or intended step under the 1954
     Act or the implementation of the above provisions

PROVIDED THAT (in the case of all the rights reserved in this Schedule) the
Landlord shall procure that as little inconvenience and damage as possible is
caused in the exercise of such rights and shall forthwith make good all damage
caused



                                       28


                                 SECOND SCHEDULE

                                   RENT REVIEW

                      PART I - RENT REVIEW UNDER THIS LEASE

1    DEFINITIONS

     In this Schedule the following expressions shall have the following
     meanings:

1.1  "ACTUAL BUILDING RENT" means in respect of any Review Date an amount
     representing whichever shall be the greater of either:

     (i)  the annual rent or

     (ii) the aggregate annual rents

     which (in either case) (after the expiry of such rent free or concessionary
     rent period as would in the then state of the market normally be allowed to
     a willing tenant of the Premises or the relevant part thereof (not however
     exceeding the period which it would be reasonable to expect him to need to
     fit out and equip the Premises to meet his particular requirements)) could
     on that Review Date reasonably be expected to be obtained in the open
     market for the Premises if they were then vacant on the grant of a lease of
     the whole or separate leases of (i) the Office Building and (ii) the
     Production Building by a willing landlord to a willing tenant or tenants
     for a term of fifteen years commencing on the relevant Review Date and
     having regard to the terms of any licences granted by the Landlord at the
     request of the Tenant and any waiver or variation by the parties of any of
     the covenants and conditions contained in this lease and otherwise making
     the Assumptions but disregarding the Disregarded Matters

1.2  "APPLICABLE NOTIONAL OFFICE RENT" means (i) in respect of any Review Date
     except the first and second the Notional Office Rent in relation to
     whatever is the Selected Town in respect of that Review Date and (ii) in
     respect of the first and second Review Dates whichever is the highest at
     that Review Date of:

1.2.1 the Notional Office Rent in relation to Luton or

1.2.2 the Notional Office Rent in relation to Milton Keynes or

1.2.3 the Notional Office Rent in relation to Northampton or

1.2.4 the Notional Office Rent in relation to Wellingborough

1.3  "APPLICABLE NOTIONAL PRODUCTION RENT" means (i) in respect of any Review
     Date except the first and second the Notional Production Rent in relation
     to whatever is the Selected Town in respect of that Review Date and (ii) in
     respect of the first and second Review Dates whichever is the highest at
     that Review Date of:

1.3.1 the Notional Production Rent in relation to Luton or



                                       29


1.3.2 the Notional Production Rent in relation to Milton Keynes or

1.3.3 the Notional Production Rent in relation to Northampton or

1.3.4 the Notional Production Rent in relation to Wellingborough

1.4  "ASSUMPTIONS" means the following assumptions (if not facts) at the
     relevant Review Date:

1.4.1 That the Premises or the Qualifying Premises (as the case may be) are
     fitted out for immediate occupation and use

1.4.2 That in the case of the Office Building the Net Internal Area excludes the
     area shown hatched black on the "Net Internal Area" drawings attached
     hereto and that in the case of the Office Building or the Qualifying Office
     Premises they have the benefit of good natural lighting throughout and that
     it or they are fitted equipped and finished in the manner and to the
     standards and using materials of the quality specified in the Notional
     Office Building Specification attached to this lease

1.4.3 That in the case of the Production Building the Gross Internal Area is 682
     square feet less than the actual Gross Internal Area and that in the case
     of the Production Building or the Qualifying Production Premises they have
     clear regular space with a clear height at ground floor level of 8 metres,
     eight loading doors (in the case of the Production Building) and one
     loading door for every 10,000 square feet of the Gross Internal Area of the
     building (in the case of the Qualifying Production Premises), and (in
     either case) the site of the building is such that the gross external
     ground floor area of the building is in the range 40%-45% of the gross site
     area and includes a service yard as appropriate to the size of the
     premises, and that it or they are fitted, equipped and finished in the
     manner and to the standards and using materials of the quality specified in
     the Notional Production Building Specification attached to this lease

1.4.4 That the premises being let are suitable for use, as to the Office
     Building or the Qualifying Office Premises within Class B1 (a) and/or Class
     B1 (b) (with ancillary uses), and as to the Production Building or the
     Qualifying Production Premises within Classes Bl(c) and/or B8 (with
     ancillary uses), or (in either case) any other use permitted by any licence
     given by the Landlord at the request of the Tenant and have planning
     permission for such uses

1.4.5 That no work has been carried out to the Premises by the Tenant any
     undertenant or their respective predecessors in title during the Term or
     during any period of occupation prior thereto which has diminished the
     rental value of the Premises

1.4.6 That if the Premises or any part or parts thereof have been destroyed or
     damaged they have been fully rebuilt and reinstated

1.4.7 That the Premises or the Qualifying Premises (as the case may be) are in a
     good state of repair and decorative condition

1.4.8 That all the covenants contained in this lease have been fully performed
     and observed



                                       30


1.4.9 That the Qualifying Premises have and will have throughout the term
     required to be calculated for the purposes of such lease the benefit of all
     rights easements quasi-easements permissions approvals services facilities
     and amenities (whether the same be required from the Landlord or from any
     other person or authority) which are necessary or appropriate so as to
     enable the willing tenant properly and beneficially to occupy use and enjoy
     the Qualifying Premises

1.4.10 That otherwise such lease shall be upon the same terms and conditions as
     those of this lease (except as to the initial amount of the Rent first
     hereby reserved and except also that (i) the rent reviews shall be at
     five-yearly intervals from the commencement of the hypothetical term and
     (ii) the Second Schedule to such lease (containing the provisions for the
     review of rent) shall be in the form set out in Part II of this Schedule in
     substitution for this Schedule (with the appropriate alternative wording in
     the case of paragraph 1.1.2))

1.5  "CLASS B1(A)", "CLASS B1(B)", "CLASS B1(C)" AND "CLASS B8" mean
     respectively those Classes in the Schedule to the Town and Country Planning
     (Use Classes) Order 1987

1.6  "DISREGARDED MATTERS"' means:

1.6.1 Any effect on rent of the fact that the Tenant any permitted undertenant
     or their respective predecessors in title have been in occupation of the
     Premises or any part thereof

1.6.2 Any goodwill attached to the Premises by reason of the business then
     carried on at the Premises by the Tenant or any permitted undertenant

1.6.3 Any value attributable to the existence of any tenant's trade fixtures and
     fittings or any other equipment or property of the Tenant in the Premises

1.6.4 Any increase in rental value of the Premises attributable to the existence
     at the relevant Review Date of any improvement to the Premises or any part
     thereof carried out during the Term or during any period of occupation
     prior thereto arising out of an agreement to grant this lease by the Tenant
     or any permitted undertenant or their respective predecessors in title
     otherwise than in pursuance of an obligation to the Landlord or its
     predecessors in title

1.6.5 Any effect on rent of any obligation of the Tenant arising under this
     lease or any deed licence consent or other instrument granted by the
     Landlord at the request of the Tenant to reinstate the Premises to the same
     condition or design as they were before the carrying out of any works to
     the Premises or to comply with the provisions of Clause 5.16.2

1.6.6 In relation to the Qualifying Premises such of the matters referred to in
     this paragraph 1.6 as would be expected to be disregarded had the Tenant
     been in occupation of the Qualifying Premises

1.7  "GROSS INTERNAL AREA" AND "NET INTERNAL AREA" mean respectively a floor
     area expressed in square feet measured in accordance with the corresponding
     definition contained in the Fourth Edition of the Code of Measuring
     Practice published in



                                       31


     November 1993 by Surveyors Holdings Limited on behalf of the Royal
     Institution of Chartered Surveyors and the Incorporated Society of Valuers
     and Auctioneers ("the Current Code") or such later edition of that Code as
     may be current at the Relevant Review Date or in accordance with such other
     normally accepted method of measuring premises of the relevant type as may
     at the Relevant Review Date have superseded the Current Code (any such
     later edition or other method being referred to in this Schedule as a "New
     Code")

1.8  "NOTIONAL LEASE" means a lease of the relevant Qualifying Premises on the
     following terms:

1.8.1 The permitted user shall be Class B1(a) and/or Class B1(b) in the case of
     Qualifying Office Premises and Class B1(c) and/or Class B8 in the case of
     Qualifying Production Premises (in each case with ancillary uses)

1.8.2 The lease shall permit the Tenant to underlet such parts of the relevant
     Qualifying Premises (as well as the whole) as shall correspond more or less
     with the size of parts of the Premises as may be underlet under the terms
     of this lease and to create such number of underlettings as shall be
     appropriate to the size of the premises (having regard to the number of
     underlettings permitted under this lease)

1.8.3 Otherwise such lease shall be upon the same terms and conditions (mutatis
     mutandis) as those of this lease (except as to the initial amount of the
     Rent first hereby reserved and except also that (i) the rent reviews shall
     be at five-yearly intervals from the commencement of the hypothetical term
     and (ii) the Second Schedule to such lease (containing the provisions for
     the review of rent) shall be in the form set out in Part II of this
     Schedule in substitution for this Schedule (with the appropriate
     alternative wording in the case of paragraph 1.1.2))

1.9  "NOTIONAL OFFICE RENT" means in relation to any Specified Town the annual
     rent per square foot of Net Internal Area which (after the expiry of such
     rent free or concessionary rent period as would in the then state of the
     market normally be allowed to a willing tenant of Qualifying Office
     Premises (not however exceeding the period which it would be reasonable to
     expect him to need to fit out and equip those premises to meet his
     particular requirements)) could on that Review Date reasonably be expected
     to be obtained in the open market for Qualifying Office Premises in that
     Specified Town if they were then vacant on the grant of a Notional Lease of
     them by a willing landlord to a willing tenant for a term of fifteen years
     commencing on the relevant Review Date and otherwise making the Assumptions
     applicable to Qualifying Office Premises but disregarding the Disregarded
     Matters applicable to Qualifying Office Premises

1.10 "NOTIONAL PRODUCTION RENT" means in relation to any Specified Town the
     annual rent per square foot of Gross Internal Area which (after the expiry
     of such rent free or concessionary rent period as would in the then state
     of the market normally be allowed to a willing tenant of Qualifying
     Production Premises (not however exceeding the period which it would be
     reasonable to expect him to need to fit out and equip those premises to
     meet his particular requirements)) could on that Review Date reasonably be
     expected to be obtained in the open market for Qualifying Production
     Premises in that Specified Town if they were then vacant on the grant of a
     Notional Lease of them by a willing landlord to a willing tenant for a term
     of fifteen years commencing on the relevant



                                       32


     Review Date and otherwise making the Assumptions applicable to Qualifying
     Production Premises but disregarding the Disregarded Matters applicable to
     Qualifying Production Premises

1.11 "NOTIONAL RENT" means the aggregate of:

1.11.1 the Applicable Notional Office Rent multiplied by fifty-three thousand
     seven hundred and eighty-six (53,786) and

1.11.2 the Applicable Notional Production Rent multiplied by eighty-six thousand
     and twenty-one (86,021)

     PROVIDED THAT it is agreed that the multipliers referred to in paragraphs
     1.11.1 and 1.11.2 represent respectively the Net Internal Area of the
     Office Building and the Gross Internal Area (less 682 square feet) of the
     Production Building as measured in accordance with the Current Code and
     that if at the Relevant Review Date the Current Code shall have been
     superseded by a New Code under which the basis of measurement of buildings
     of the same type as the relevant building is different from the basis of
     measurement of such buildings under the Current Code then the multiplier
     for each building shall instead be the Net Internal Area (in the case of
     the Office Building) or the Gross Internal Area less an amount equivalent
     to 682 square feet under the Current Code (in the case of the Production
     Building) of the relevant building measured in accordance with the New Code

     PROVIDED FURTHER that if at the Relevant Review Date the expression "Net
     Internal Area" and/or "Gross Internal Area" shall have been replaced by a
     different expression then that different expression shall be substituted
     for "Net Internal Area" and/or "Gross Internal Area" (as appropriate) in
     this paragraph 1.11 and in paragraphs 1.9 and 1.10 above

1.12 "PRESIDENT" means the President for the time being of the Royal Institution
     of Chartered Surveyors and includes the duly appointed deputy of the
     President or any person authorised by the President to make appointments on
     his behalf

1.13 "QUALIFYING PREMISES" means Qualifying Office Premises or Qualifying
     Production Premises (as appropriate)

1.14 "QUALIFYING OFFICE PREMISES" means office premises having a Net Internal
     Area of fifty thousand (50,000) square feet (or if it proves impossible to
     find comparable evidence in order to value a building of that size then
     thirty thousand (30,000) square feet) which is located in what is (at the
     time of the relevant Review Date) a good out of town business park
     location:

1.14.1 In Wellingborough or Northampton or Luton or

1.14.2 In Milton Keynes outside the central business district shown edged red on
     the attached plan showing Central Milton Keynes

1.15 "QUALIFYING PRODUCTION PREMISES" means production and/or warehouse premises
     having a Gross Internal Area of eighty thousand (80,000) square feet:



                                       33


1.15.1 In the case of Wellingborough Northampton or Luton in a location outside
     the relevant town centre

1.15.2 In the case of Milton Keynes in a location outside the central business
     district shown edged red on the attached plan showing Central Milton Keynes

1.16 "REVISED RENT" means in respect of any Review Date the greatest of:

1.16.1 The Actual Building Rent in respect of that Review Date and

1.16.2 The Notional Rent in respect of that Review Date and

1.16.3 The Rent payable under this lease immediately before the relevant Review
     Date (or which would have been payable but for the operation of the cesser
     of rent provision (if applicable))

1.17 "THE SELECTED TOWN" means in respect of any Review Date other than the
     first and second Review Dates (in relation to which this expression is of
     no relevance) the Specified Town selected by the Landlord for the purposes
     of the rent review at that Review Date and it is agreed that in respect of
     any such Review Date:

1.17.1 Only one town may be selected (so that the same town shall be the
     Selected Town in relation to both the Applicable Notional Office Rent and
     the Applicable Notional Production Rent)

1.17.2 The town selected need not be (but may be) the town which was selected in
     respect of the previous Review Date.

1.17.3 The selection may be made after the Notional Office Rent and Notional
     Production Rent in relation to all the Specified Towns has been ascertained

1.18 "SPECIFIED TOWNS" are Luton, Milton Keynes, Northampton and Wellingborough
     and a "Specified Town" means any of them

1.19 "SURVEYOR" means an independent chartered surveyor of not less than ten
     (10) years standing who is experienced in the valuation and leasing of
     commercial property appointed from time to time to determine either or both
     of the Actual Building Rent and the Notional Rent pursuant to the
     provisions of this Schedule

2    UPWARDS ONLY RENT REVIEW

2.1  The Rent first reserved by this lease shall be reviewed at each Review Date
     in accordance with the provisions of this Schedule and from and including
     each Review Date the Rent shall subject to paragraph 2.2 below be the
     Revised Rent in respect of that Review Date as agreed or determined
     pursuant to the provisions of this Schedule

2.2  Following the first Review Date the Rent shall not be less than the Initial
     Rent multiplied by 1.2167 (one-decimal point-two-one-six-seven) and
     following the second Review Date the Rent shall not be less than the
     Initial Rent multiplied by 1.4802 (one decimal point-four-eight-nought-two)



                                       34


3    AGREEMENT OR DETERMINATION OF THE REVIEWED RENT

     The Actual Building Rent and the Notional Rent at any Review Date may be
     agreed in writing at any time between the Landlord and the Tenant but if
     for any reason (whether through failure or omission to agree or negotiate
     or to initiate any negotiation) the Landlord and the Tenant have not so
     agreed either or both of the Actual Building Rent and the Notional Rent
     then either the Landlord or the Tenant may (whether before or after the
     relevant Review Date) by notice in writing to the other party require
     whichever of the Actual Building Rent and the Notional Rent has not then
     been so agreed to be determined by the Surveyor

4    APPOINTMENT OF SURVEYOR

     In default of agreement between the Landlord and the Tenant on the
     appointment jointly of the Surveyor the Surveyor shall be appointed by the
     President on the written application of either the Landlord or the Tenant
     who shall be at liberty to make such application not earlier than three (3)
     months before or at any such time after the relevant Review Date

5    FUNCTIONS OF THE SURVEYOR

     The Surveyor shall:

5.1  act as an arbitrator in accordance with the Arbitration Acts 1950 to 1979

5.2  within sixty (60) days of his appointment or within such extended period as
     the Landlord and the Tenant shall jointly agree in writing give to each of
     them written notice of the amount of either or both of the Actual Building
     Rent and the Notional Rent (as the case may be) as determined by him

6    COSTS OF REFERENCE TO SURVEYOR

     The costs of any reference to the Surveyor shall be in the award of the
     Surveyor and whatever the award of the Surveyor his costs may be paid in
     full by either party in order to secure the release of his award or
     determination and in that event the other party shall reimburse to the
     paying party the share of those costs payable by him

7    INTERIM PAYMENTS PENDING DETERMINATION

7.1  In the event that by any Review Date the amount of the Revised Rent has not
     been agreed or determined as aforesaid (the date of agreement or
     determination being herein called "the Determination Date") then in respect
     of the period of time (herein called "the Interim Period") beginning with
     that Review Date and ending on the day before the quarter day following the
     Determination Date the Tenant shall pay to the Landlord rent at the yearly
     rate payable immediately before the relevant Review Date and on the
     Determination Date the Tenant shall pay to the Landlord on demand the
     amount by which the Revised Rent exceeds the Rent actually paid during the
     Interim Period together with interest thereon at 3% below the Interest Rate
     from the relevant Review Date to the date of actual payment



                                       35


7.2  In the case of the rent reviews at the first and second Review Dates, where
     paragraph 7.1. above applies the payment in respect of the Interim Period
     shall be at the rate of the minimum Rent payable after the relevant Review
     Date pursuant to paragraph 2.2

8    MEMORANDA OF REVISED RENT

     As soon as the amount of any Revised Rent has been agreed or determined
     memoranda thereof or where applicable of the Rent payable pursuant to
     paragraph 2.2 above shall be prepared by the Landlord or its solicitors and
     thereupon shall be signed by or on behalf of the Landlord and the Tenant
     and annexed to this lease and the counterpart thereof and the parties shall
     bear their own costs in respect thereof

9    TIME NOT OF THE ESSENCE

For the purpose of this Schedule time shall not be of the essence



                                       36


                 PART II - NOTIONAL LEASE RENT REVIEW PROVISIONS
              [REFERRED TO IN PARAGRAPHS 1.4.10 AND 1.8 OF PART I]

1    DEFINITIONS

     In this Schedule the following expressions shall have the following
     meanings:

1.1  "ASSUMPTIONS" means the following assumptions (if not facts) at the
     relevant Review Date:

1.1.1 That the Premises are fitted out for immediate occupation and use

1.1.2 [IN CASE OF ASSUMED LETTING OF PREMISES AS A WHOLE FOR THE PURPOSES OF
     DETERMINING THE ACTUAL BUILDING RENT]

     That the Premises are suitable for use as to the Office Building within
     Class B1(a) and/or Class B1(b) (with ancillary uses) and as to the
     Production Building within Classes B1 (c) and/or B8 (with ancillary uses)
     or (in either case) any other use permitted by any licence given by the
     Landlord at the request of the Tenant and have planning permission for such
     uses

     [IN CASE OF ASSUMED LETTING OF THE OFFICE BUILDING OR QUALIFYING OFFICE
     PREMISES]

     That the premises being let are suitable for use within Class B1 (a) and/or
     Class B1(b) (with ancillary uses) or any other use permitted by any licence
     given by the Landlord at the request of the Tenant and have planning
     permission for such uses

     [IN CASE OF ASSUMED LETTING OF THE PRODUCTION BUILDING OR QUALIFYING
     PRODUCTION PREMISES]

     That the premises being let are suitable for use within Class B1(c) and/or
     Class B8 (with ancillary uses) or any other use permitted by any licence
     given by the Landlord at the request of the Tenant and have planning
     permission for such uses

1.1.3 That no work has been carried out to the Premises by the Tenant any
     undertenant or their respective predecessors in title during the Term or
     during any period of occupation prior thereto which has diminished the
     rental value of the Premises

1.1.4 That if the Premises or any part or parts thereof have been destroyed or
     damaged they have been fully rebuilt and reinstated

1.1.5 That the Premises are in a good state of repair and decorative condition

1.1.6 That all the covenants contained in this lease have been fully performed
     and observed

1.1.7 That otherwise such lease shall be upon the same terms and conditions as
     those of this lease (except as to the initial amount of the Rent first
     hereby reserved and except also that the rent reviews shall be at
     five-yearly intervals from the commencement of the hypothetical term)

1.2  "CLASS B1(A)", "CLASS B1(B)", "CLASS B1(C)" AND "CLASS B8" mean
     respectively those Classes in the Schedule to the Town and Country Planning
     (Use Classes) Order 1987



                                       37


1.3  "DISREGARDED MATTERS" means:

1.3.1 Any effect on rent of the fact that the Tenant, any permitted undertenant
     or their respective predecessors in title have been in occupation of the
     Premises or any part thereof

1.3.2 Any goodwill attached to the Premises by reason of the business then
     carried on at the Premises by the Tenant or any permitted undertenant

1.3.3 Any value attributable to the existence of any tenant's trade fixtures and
     fittings or any other equipment or property of the Tenant in the Premises

1.3.4 Any increase in rental value of the Premises attributable to the existence
     at the relevant Review Date of any improvement to the Premises or any part
     thereof carried out during the Term or during any period of occupation
     prior thereto arising out of an agreement to grant this lease by the Tenant
     or any permitted undertenant or their respective predecessors in title
     otherwise than in pursuance of an obligation to the Landlord or its
     predecessors in title

1.3.5 Any effect on rent of any obligation of the Tenant arising under this
     lease or any deed licence consent or other instrument granted by the
     Landlord at the request of the Tenant to reinstate the Premises to the same
     condition or design as they were before the carrying out of any works to
     the Premises

1.4  "MARKET RENT" means in respect of any Review Date an amount representing
     the annual rent which (after the expiry of such rent free or concessionary
     rent period as would in the then state of the market normally be allowed to
     a willing tenant of the Premises (not however exceeding the period which it
     would be reasonable to expect him to need to fit out and equip the Premises
     to meet his particular requirements)) could on that Review Date reasonably
     be expected to be obtained in the open market for the Premises if they were
     then vacant on the grant of a lease of them by a willing landlord to a
     willing tenant for a term of fifteen years commencing on the relevant
     Review Date and having regard to the terms of any licences granted by the
     Landlord at the request of the Tenant and any waiver or variation by the
     parties of any of the covenants and conditions contained in this lease and
     otherwise making the Assumptions but disregarding the Disregarded Matters

1.5  "PRESIDENT" means the President for the time being of the Royal Institution
     of Chartered Surveyors and includes the duly appointed deputy of the
     President or any person authorised by the President to make appointments on
     his behalf

1.6  "REVISED RENT" means in respect of any Review Date the greater of:

1.6.1 The Market Rent in respect of that Review Date and

1.6.2 The Rent payable under this lease immediately before the relevant Review
     Date (or which would have been payable but for the operation of the cesser
     of rent provision (if applicable))



                                       38


1.7  "SURVEYOR" means an independent chartered surveyor of not less than ten
     (10) years standing who is experienced in the valuation and leasing of
     commercial property appointed from time to time to determine the Market
     Rent pursuant to the provisions of this Schedule

2    UPWARDS ONLY RENT REVIEW

     The Rent first reserved by this lease shall be reviewed at each Review Date
     in accordance with the provisions of this Schedule and from and including
     each Review Date the Rent shall be the Revised Rent in respect of that
     Review Date as agreed or determined pursuant to the provisions of this
     Schedule

3    AGREEMENT OR DETERMINATION OF THE REVIEWED RENT

     The Market Rent at any Review Date may be agreed in writing at any time
     between the Landlord and the Tenant but if for any reason (whether through
     failure or omission to agree or negotiate or to initiate any negotiation)
     the Landlord and the Tenant have not so agreed the Market Rent then either
     the Landlord or the Tenant may (whether before or after the relevant Review
     Date) by notice in writing to the other party require the Market Rent to be
     determined by the Surveyor

4    APPOINTMENT OF SURVEYOR

     In default of agreement between the Landlord and the Tenant on the
     appointment jointly of the Surveyor the Surveyor shall be appointed by the
     President on the written application of either the Landlord or the Tenant
     who shall be at liberty to make such application not earlier than three (3)
     months before or at any such time after the relevant Review Date

5    FUNCTIONS OF THE SURVEYOR

     The Surveyor shall:

5.1  act as an arbitrator in accordance with the Arbitration Acts 1950 to 1979

5.2  within sixty (60) days of his appointment or within such extended period as
     the Landlord and the Tenant shall jointly agree in writing give to each of
     them written notice of the amount of the Market Rent as determined by him

6    COSTS OF REFERENCE TO SURVEYOR

     The costs of any reference to the Surveyor shall be in the award of the
     Surveyor and whatever the award of the Surveyor his costs may be paid in
     full by either party in order to secure the release of his award or
     determination and in that event the other party shall reimburse to the
     paying party the share of those costs payable by him

7    INTERIM PAYMENTS PENDING DETERMINATION

     In the event that by any Review Date the amount of the Revised Rent has not
     been agreed or determined as aforesaid (the date of agreement or
     determination being herein



                                       39


     called "the Determination Date") then in respect of the period of time
     (herein called "the Interim Period") beginning with that Review Date and
     ending on the day before the quarter day following the Determination Date
     the Tenant shall pay to the Landlord rent at the yearly rate payable
     immediately before the relevant Review Date and on the Determination Date
     the Tenant shall pay to the Landlord on demand the amount by which the
     Revised Rent exceeds the Rent actually paid during the Interim Period
     together with interest thereon at 3% below the Interest Rate from the
     relevant Review Date to the date of actual payment

8    MEMORANDA OF REVISED RENT

     As soon as the amount of any Revised Rent has been agreed or determined
     memoranda thereof shall be prepared by the Landlord or its solicitors and
     thereupon shall be signed by or on behalf of the Landlord and the Tenant
     and annexed to this lease and the counterpart thereof and the parties shall
     bear their own costs in respect thereof

9    TIME NOT OF THE ESSENCE

     For the purpose of this Schedule time shall not be of the essence



                                       40


                                 THIRD SCHEDULE

                               THE USER COVENANTS

1    USER

1.1  Not to use the Premises other than for the Permitted User

1.2  Not to discharge into any of the Pipes serving the Premises or any other
     property any oil grease or other deleterious matter or any substance which
     might be or become a source of danger or injury to the drainage system of
     the Premises

1.3  Not to install or use in or upon the Premises any machinery or apparatus
     which causes noise or vibration which can be excessively heard or felt in
     nearby premises or outside the Premises or which may cause damage

1.4  Not to play or use any musical instrument loudspeaker tape recorder
     gramophone radio or other equipment or apparatus that produces sound in the
     Premises so as to be heard in nearby premises or outside the Premises

1.5  Not to display any flashing lights in the Premises that can be seen from
     outside the Premises

2    ALTERATIONS

2.1  Not to make any structural alteration or addition to the Premises without
     the prior written consent of the Landlord (such consent not to be
     unreasonably withheld or delayed)

2.2  To make connection with any Pipes serving the Premises only if consent to
     make such connection has previously been obtained from the competent
     statutory authority or undertaker (if applicable)

3    SIGNS AND ADVERTISEMENTS

     Not to place or display on the exterior of the Premises any notice sign
     placard or advertisement other than:

3.1  directional signs or

3.2  suitable signs of a size and kind first approved in writing by the Landlord
     (such approval not to be unreasonably withheld or delayed)

4    OPEN AREAS

4.1  To keep any landscaped areas within the Premises well maintained in
     accordance with the rules of good husbandry

4.2  Not to allow any material manufactured or part manufactured goods tools
     machinery unroadworthy vehicles pallets packaging waste or rubbish to be
     stored in or left on any open areas within the Premises (but for the
     avoidance of doubt this does not include



                                       41


     any areas within the Premises which are screened for such purposes or
     within any service yard/area with a perimeter wall or close-boarded fence
     of no less than 2 metres in height

4.3  To keep all open areas within the Premises clean and tidy

5    CEILING AND FLOOR LOADING

     Not to bring or permit to remain upon the Premises any safes machinery
     goods or other articles which shall or may strain or damage the Premises or
     any part of them

6    ESTATE ROADS

6.1  Not to permit any vehicles belonging to the Tenant or any persons calling
     on the Premises expressly or by implication with the authority of the
     Tenant to stand on the Estate Roads or the pavements and to use its
     reasonable endeavours to ensure that such persons calling on the Premises
     do not permit any vehicle to stand on any such road or pavement

6.2  Pending adoption as public highway maintainable at public expense, not to
     bring for the use upon the Estate Roads any vehicle or machine not suitable
     for use upon a public highway or which, although suitable, are overloaded
     or used in an improper manner and to indemnify the Landlord and Superior
     Landlord in respect of any damage caused to the surface of the Estate Roads
     as the result of a breach of this covenant



                                       42


                                 FOURTH SCHEDULE

                              GUARANTOR'S COVENANTS

The Guarantor covenants with the Landlord and without the need for any express
assignment with all its successors in title that:

1    TO PAY OBSERVE AND PERFORM

     During the Term the Assignee (which expression in this and the following
     covenants shall include its successors in title) shall punctually pay the
     rents and observe and perform the covenants and other terms of the lease
     and if at any time during the Term the Assignee shall make any default in
     payment of the rents or in observing or performing any of the covenants or
     other terms of the lease the Guarantor will pay the rents and observe or
     perform the covenants or terms in respect of which the Assignee shall be in
     default and make good to the Landlord on demand and indemnify the Landlord
     against all losses damages costs and expenses arising or incurred by the
     Landlord as a result of such non-payment non-performance or non-observance
     (including but without limitation any costs and expenses properly incurred
     by the Landlord in obtaining payment of any monies due from the Guarantor
     pursuant to this covenant) notwithstanding:

1.1  any time or indulgence granted by the Landlord to the Assignee or any
     neglect or forbearance of the Landlord in enforcing the payment of the
     rents or the observance or performance of the covenants or other terms of
     the lease or any refusal by the Landlord to accept rents tendered by or on
     behalf of the Assignee at a time when the Landlord was entitled (or would
     after the service of a notice under the Law of Property Act 1925 Section
     146 have been entitled) to re-enter the Premises

1.2  that the terms of the lease may have been varied by agreement between the
     parties

1.3  that the Assignee shall have surrendered part of the Premises in which
     event the liability of the Guarantor under the lease shall continue in
     respect of the part of the Premises not so surrendered after making any
     necessary apportionments under the Law of Property Act 1925 Section 140 and

1.4  any other act or thing (other than a release by deed) by which but for this
     provision the Guarantor would have been released

2    TO TAKE LEASE FOLLOWING DISCLAIMER

     If at any time during the Term the Assignee (being an individual) shall
     become bankrupt or (being a company) shall enter into liquidation and the
     trustee in bankruptcy or liquidator shall disclaim the lease or if (being a
     company) the Assignee shall be struck off the register of companies or
     shall be dissolved the Guarantor shall if the Landlord shall by notice
     within 6 months after such disclaimer or other event so require take from
     the Landlord a lease of the Premises for the residue of the Contractual
     Term which would have remained had there been no disclaimer or other event
     at the rents payable under the lease immediately before such disclaimer or
     other event and subject to the same covenants and terms as in the lease
     (except that the Guarantor shall not be



                                       43


     required to procure that any other person is made a party to that lease as
     guarantor) such new lease to take effect from the date of such disclaimer
     and in such case the Guarantor shall pay the reasonable and proper costs of
     such new lease and execute and deliver to the Landlord a counterpart of it

3    TO MAKE PAYMENTS FOLLOWING DISCLAIMER

     If the lease shall be disclaimed and for any reason the Landlord does not
     require the Guarantor to accept a new lease of the Premises in accordance
     with paragraph 2 of this Schedule the Guarantor shall pay to the Landlord
     on demand an amount equal to the difference between any money received by
     the Landlord for the use or occupation of the Premises and the rents
     payable or which would (but for such disclaimer or other event) have been
     payable under the lease for the period commencing with the date of such
     disclaimer and ending on whichever is the earlier of the following dates:

3.1  the date 6 months after such disclaimer and

3.2  the date (if any) upon which the Premises are relet



                                                                   Exhibit 10.40

THE COMMON SEAL OF UNILEVER     )
UK CENTRAL RESOURCES LIMITED    )
was affixed in the presence of: )   /s/ ILLEGIBLE
                                    --------------------------------------------
Director

Secretary                           /s/ ILLEGIBLE
                                    --------------------------------------------

EXECUTED AS A DEED by UNIPATH   )
LIMITED acting by:              )   /s/ Kevin Stearn
                                    --------------------------------------------
                                    Kevin Stearn, Managing Director

Director


Director/Secretary                  /s/ Rod Whitaker
                                    --------------------------------------------
                                    Rod Whitaker, Company Secretary


EXECUTED AS A DEED by           )
INVERNESS MEDICAL               )
INNOVATIONS INC acting by its   )
assistant secretary:            )


Assistant Secretary                 /s/ Jay McNamara
                                    --------------------------------------------
                                    Jay McNamara, Assistant Secretary



                                       45


ANNEXURES: PLAN A

           PLAN B

           PLAN C

           A COPY OF THE SUPERIOR LEASE (INCLUDES A COPY OF THE HEADLEASE)

EX-10.41

                                                                   EXHIBIT 10.41

                                 AMENDMENT NO. 4

                                       TO

                       INVERNESS MEDICAL INNOVATIONS, INC.

                      2001 STOCK OPTION AND INCENTIVE PLAN

     The Inverness Medical Innovations, Inc. 2001 Stock Option and Incentive
Plan (the "Plan") is hereby amended as follows, effective as of the date
approved by the Board as set forth below.

1. Section 2(a) is hereby deleted in its entirety and replaced with the
following:

     "Committee. The Plan shall be administered by either the Board or a
     committee of not less than two Independent Directors (in either case, the
     "Administrator"), as determined by the Board from time to time; provided
     that, for purposes of Awards to Directors or Section 16 officers of the
     Company, the Administrator shall be deemed to include only Directors who
     are Independent Directors and no director who is not an Independent
     Director shall be entitled to vote or take action in connection with any
     such proposed Award."

2. Section 2(b)(iv) is hereby deleted in its entirety and replaced with the
following:

     "to determine and modify from time to time the terms and conditions,
     including restrictions, not inconsistent with the terms of the Plan, of any
     Award, which terms and conditions may differ among individual Awards and
     grantees, and to approve the form of written instruments evidencing the
     Awards; provided that, other than by reason of death, disability,
     retirement or Change of Control, the Administrator shall not accelerate or
     waive any restriction period applicable to any outstanding Restricted Stock
     Award or any Deferred Stock Award beyond the minimum restriction periods
     set forth in Section 6(e) and Section 7(d), respectively, nor shall the
     Administrator accelerate or amend the aggregate period over which any
     Performance Share Award is measured to less than one (1) year;"

3. The first sentence of Section 5(a)(i) is hereby amended by deleting the
phrase "(other than options granted in lieu of cash compensation)."

4. Section 7(d) is hereby deleted in its entirety and replaced with the
following:

     "Restrictions. Deferred Stock Awards vesting upon the attainment of
     performance goals or objectives shall vest after a restriction period of
     not less than one (1) year. All other Deferred Stock Awards shall vest
     after a restriction period of not less than three (3) years.



     A Deferred Stock Award may not be sold, assigned, transferred, pledged or
     otherwise encumbered or disposed of during the deferral period."

5. Section 8(a) is hereby amended by adding the following sentence to the end of
the current provision:

     "The aggregate number of shares of Stock issuable pursuant to this Section
     8 is limited to ten percent (10%) of the maximum number of shares of Stock
     reserved and available for issuance under the Plan pursuant to Section
     3(a), as amended."

6. Section 9(a) is hereby amended by deleting the last sentence of the current
provision and replacing it with the following sentence:

     "The Administrator in its sole discretion shall determine whether and to
     whom Performance Share Awards shall be made, the performance goals, the
     periods during which performance is to be measured (which in the aggregate
     shall not be less than one (1) year), and all other limitations and
     conditions."

7. Section 9(e) entitled "Acceleration, Waiver, Etc." is hereby deleted in its
entirety.

8. Section 13 is hereby amended by deleting the first sentence of the current
provision and replacing with the following sentence:

     "Subject to requirements of law or any stock exchange or other similar
     rules which would require a vote of the Company's shareholders, the Board
     may, at any time, amend or discontinue the Plan and the Administrator may,
     at any time, amend or cancel any outstanding Award for the purpose of
     satisfying changes in law or for any other lawful purpose, but no such
     action shall adversely affect rights under any outstanding Award without
     the holder's consent."

9. Section 16(a) is hereby amended by adding the following paragraph directly
after the last paragraph of the current provision:

     "No Award under the Plan shall be a nonqualified deferred compensation
     plan, as defined in Code Section 409A, unless such Award meets in form and
     in operation the requirements of Code Section 409A(a) (2), (3), and (4)."

10. Except as herein expressly amended, the provisions of the Plan shall remain
in full force and effect.

AS APPROVED BY THE BOARD OF DIRECTORS: November 7, 2006

EX-10.42

                                                                   Exhibit 10.42

                                 AMENDMENT NO. 5

                                       TO

                       INVERNESS MEDICAL INNOVATIONS, INC.

                      2001 STOCK OPTION AND INCENTIVE PLAN

     The Inverness Medical Innovations, Inc. 2001 Stock Option and Incentive
Plan (the "Plan") is hereby amended by deleting the first sentence of Section
3(a) of the Plan and replacing it with the following:

     "The maximum number of shares of Stock reserved and available for issuance
     under the Plan shall be 8,074,081 shares, subject to adjustment as provided
     in Section 3(b)."

     Except as herein amended, the provisions of the Plan shall remain in full
force and effect.

AS APPROVED BY THE BOARD OF DIRECTORS: October 30, 2006

AS APPROVED BY THE STOCKHOLDERS: December 15, 2006

EX-14.50

                                                                   Exhibit 14.50

            INVERNESS MEDICAL INNOVATIONS BUSINESS CONDUCT GUIDELINES


                                                                               .
                                                                               .
                                                                               .

            INVERNESS MEDICAL INNOVATIONS BUSINESS CONDUCT GUIDELINES

TABLE OF CONTENTS

                                                                           
I.   Introduction..........................................................    1
II.  Administration of the Guidelines......................................    2
III. Ethics  Hotline.......................................................    3
IV.  Our  Standards........................................................    3
     1.  Commitment to Employees...........................................    3
     2.  Conflicts of Interest.............................................    4
     3.  Compliance with the Law and This Policy...........................    5
         a. Employment Laws................................................    5
         b. Antitrust/Competition Laws.....................................    5
         c. Fair Dealing...................................................    6
         d. Dealing in Securities and Confidential Information.............    6
         e. Copyrights and Computer Software...............................    7
         f. Unauthorized Payments to Obtain Business.......................    7
         g. Export Control Laws............................................    9
         h. Customs, Embargo and Boycotts..................................    9
         i. Anti-Money Laundering Laws.....................................    9
         j. Environmental Laws.............................................    9
         k. Safety and Health..............................................    9
         l. Contributions..................................................   10
         m. Questions on Laws..............................................   10
         n. Quality of Products............................................   10
         o. U.S. Food and Drug Administration Laws and Regulations.........   10
     4.  Dealings with Government Officials and Payment Practice...........   11
     5.  Protecting Company Assets.........................................   11
     6.  Media Contact and Public Discussion...............................   12
     7.  Unauthorized Use of Company Property or Services..................   12
     8.  Business and Accounting Practices.................................   12
     9.  Financial Records.................................................   12
     10. Disparagement.....................................................   13
     11. Drug Free Workplace...............................................   13
     12. Certifications....................................................   13
V.   Index.................................................................   14





I.   INTRODUCTION

     These Business Conduct Guidelines (the "Guidelines") are designed to help
     you make the right choices/decisions when/if confronted with difficult
     situations. The intention is to remind us of the legal and ethical
     obligations which are in many ways good judgment and common sense. They
     reaffirm our commitment to integrity as the cornerstone of our business
     behavior. All employees, directors, contract workers, consultants and
     others who act on behalf of the Company, including all members of
     management and employees of our non-U.S. subsidiaries are expected to abide
     by and uphold these guidelines.

     We have a firmly established policy of conducting our affairs in compliance
     with the letter and spirit of the law and adhering to the principles of
     business ethics. By utilizing the Guidelines, you will help ensure that the
     Company conducts its business for the benefit of all our stakeholders - our
     fellow Colleagues, customers, our shareholders, suppliers, and host
     communities.

     However, the Guidelines are only a guide, and cannot answer all legal or
     ethical questions that may arise. You are always free to consult your
     supervisor or, if additional guidance is needed, the Human Resources or
     Legal Departments, the Ethics Officer, or the Ethics Hotline at the number
     that is listed below for your geographical region.

     US            866-398-0010
     AUSTRALIA     1800-987-636
     CANADA        888-789-6627
     CHINA-NORTH   10-800-713-0906
     CHINA-SOUTH   10-800-130-0879
     FRANCE        0800-909-260
     GERMANY       0800-182-4524
     ISRAEL        180-942-9050
     JAPAN         0053-113-0898
     SPAIN         900-977-663
     SWEDEN        020-793-185
     UK            0800-032-5546

     There may be times however, where you are left to depend on your own
     individual judgment in deciding on the correct course of action. As you
     consider a particular situation, contemplating the following factors may
     help you arrive at a satisfactory answer:

     -    Is my action consistent with approved Company practices?

     -    Does my action give the appearance of impropriety?

     -    Will the action bring discredit to me or the Company if disclosed?

     -    Can I defend my action to my supervisor, other Colleagues and to the
          public?

     -    Does my action meet my personal code of behavior?

     -    Does my action conform to the spirit of the Guidelines?


                                     Page 1



     The willingness of each of us to raise ethical concerns is important. Any
     Colleague who becomes aware of acts contrary to the Guidelines should
     inform their supervisor, the Human Resources or Legal Departments, the
     Ethics Officer or the Ethics Hotline. It is our policy that no person will
     suffer any adverse effects to their job or career as a result of raising an
     ethical concern. The section of the Guidelines entitled "Administration"
     provides instructions on how to act in this situation.


                                     Page 2



II.  ADMINISTRATION OF THE GUIDELINES

     Our goal is to integrate the Guidelines into our daily business activities.

     As a Colleague of the Company, you have a responsibility to understand and
     comply with the Guidelines.

- -    All Colleagues who become aware of any acts contrary to the Guidelines
     should give this information to his or her supervisor, the Human Resources
     or Legal Departments, the Ethics Officer, or the Ethics Hotline at the
     number that is listed below for your geographical region.

     US            866-398-0010
     AUSTRALIA     1800-987-636
     CANADA        888-789-6627
     CHINA-NORTH   10-800-713-0906
     CHINA-SOUTH   10-800-130-0879
     FRANCE        0800-909-260
     GERMANY       0800-182-4524
     ISRAEL        180-942-9050
     JAPAN         0053-113-0898
     SPAIN         900-977-663
     SWEDEN        020-793-185
     UK            0800-032-5546

     If for any reason you feel uncomfortable reporting such incidents or issues
     to your supervisor, the Human Resources or Legal Departments, you may
     inform any member of Executive Management. You may also submit your report
     anonymously through the Ethics Hotline.

- -    The Company will investigate all reports made as set forth above. In any
     such investigation, the Company will respect the rights of all parties
     concerned and principles of fairness and dignity will be applied.

- -    If a violation of the expressed terms or spirit of this policy is found,
     the Company will take appropriate disciplinary action. Such action could
     include immediate termination and filing of criminal charges. In addition,
     disciplinary action will be taken against any supervisor or other Colleague
     who retaliates, directly or indirectly, or encourages others to do so,
     against a Colleague who reports a violation of the Guidelines. A Colleague
     has the right to raise concerns or to report misconduct without fear of
     retribution.

- -    In the event a Colleague is uncertain about whether or not an action is
     permitted by this policy, that issue should be raised with the Colleague's
     supervisor, the Human Resource or the Legal Departments, the Ethics Officer
     or the Ethics Hotline. The Company encourages inquiries and will make no
     negative implications because of them.

- -    In the event that any Colleague, including a member of management or a
     director, feels that it is appropriate to receive a waiver from one or more
     of the standards set out in this policy, that Colleague must present a
     written request for a waiver to the Board of Directors. This policy


                                     Page 3



     has been prepared and adopted by the Board of Directors and, except as
     expressly set out in this policy, only the Board of Directors has authority
     to waive provisions of it.

- -    The Board of Directors has designated Paul Hempel as the Company's Ethics
     Officer. You may reach the Ethics Officer by telephone, +1-781-314-4028, or
     by electronic mail, paul.hempel@invmed.com. In addition, the Board of
     Directors has established an Ethics Committee consisting of the Ethics
     Officer, the Chief Financial Officer, and the Company's Internal Auditor.
     The Ethics Committee's principal functions are to provide guidance to the
     Ethics Officer as and when requested by the Ethics Officer.


                                     Page 4



III. ETHICS HOTLINE

     The Ethics Hotline is a toll-free number that is available to you
     twenty-four hours a day, seven days a week, to report any concerns about
     violations of the Company's Business Conduct Guidelines.

     The Ethics Hotline is operated by specially trained third-party
     representatives. Calls to the Hotline will not be traced or recorded, and
     callers can choose to remain anonymous if they wish. Ethics Hotline
     representatives will listen to your concerns, ask questions, and review the
     information provided. They will then forward your concerns to the Company's
     Ethics Officer, who will take appropriate action.

     You may also contact the Ethics Hotline through:

     Website:

     WWW.LISTENUPREPORTS.COM

     By phone:

     US            866-398-0010
     AUSTRALIA     1800-987-636
     CANADA        888-789-6627
     CHINA-NORTH   10-800-713-0906
     CHINA-SOUTH   10-800-130-0879
     FRANCE        0800-909-260
     GERMANY       0800-182-4524
     ISRAEL        180-942-9050
     JAPAN         0053-113-0898
     SPAIN         900-977-663
     SWEDEN        020-793-185
     UK            0800-032-5546

IV.  OUR STANDARDS

     1.   COMMITMENT TO EMPLOYEES. Inverness Medical Innovations is committed to
          maintaining an environment that respects the dignity of each person.
          Gambling, fighting, assault, disorderly conduct, or behavior that
          violates common decency or morality will not be tolerated.
          Discriminatory harassment in any form will not be tolerated. This also
          includes sexual harassment and any other harassment based on an
          individual's race, color, religion, sex, sexual orientation, national
          origin, age, physical or mental disability or status as a special
          veteran, military service, or application for military services or
          membership in any other category protected under the law.


                                     Page 5



          We will maintain a strict policy to deal with offenders. If you feel
          you are a victim of discriminatory harassment, you should report the
          incident. Any employee found to have harassed or discriminated against
          another company employee or an employee of a supplier, contractor,
          customer, competitor, or regulator will be subject to disciplinary
          action, including termination. If you suspect or know that another
          company employee is harassing someone, talk with your supervisor, the
          Human Resources or Legal Departments, Ethics Officer, Ethics Hotline,
          or any member of the Executive Management team immediately. We will
          ensure that any allegations reported under this policy will be handled
          with the utmost professionalism and confidentiality. Retaliation is a
          serious violation of this policy and should be reported immediately.
          Any employee found to have retaliated against another individual for
          reporting discriminatory harassment or participating in an
          investigation of allegations of such conduct would be subject to
          appropriate disciplinary action.

     2.   CONFLICTS OF INTEREST. You should avoid situations where the private
          interests of you, your relatives, or your friends conflict with the
          interests of the Company. Both the fact and the appearance of a
          conflict of interest should be avoided. This applies in a business
          sense, as described throughout this document, and is not meant to and
          does not apply to work/family issues.

          For purposes of this policy, a "relative" is any person who is related
          by blood or marriage or whose relationship is similar to that of
          persons who are related by blood or marriage (including but not
          limited to members of an employee's household). "Members of an
          employee's household" include an employee's spouse, children, parents,
          and any other persons who reside with such employee. While certain of
          the provisions below are made expressly applicable to members of an
          employee's household, the provisions also apply to relatives or
          friends where the nature of the relationship is such that divided
          loyalties are likely to result from the conduct in question.

          Note that this policy does not attempt to describe all possible
          conflicts of interest that could develop, although some of the more
          common considerations and conflicts from which employees must refrain
          are set out below:

               -    You should not have any business or financial relationship
                    with customers, suppliers, contractors, regulators, or
                    competitors that could influence or appear to influence you
                    in carrying out your responsibilities. This would include
                    the ownership of stock in these companies. However,
                    ownership of a nominal amount of stock in a publicly owned
                    company would not be considered a conflict unless the amount
                    was large enough to influence you.

          -    You may not engage in any conduct or activity that is
               inconsistent with the Company's best interests or that in any
               manner disrupts, undermines, or impairs the Company's
               relationships with any person or entity with which the Company
               has or proposes to enter into an arrangement, agreement, or
               contractual relationship of any kind.


                                     Page 6



               -    While employed by the Company, you may not market products
                    or services that compete with or whose interests may
                    conflict with ours. Nor may you work for a customer,
                    supplier, contractor, regulator, or competitor, or member of
                    its board of directors without approval.

               -    While employed by the Company, you are prohibited from
                    taking, or directing to a third party, a business
                    opportunity that is discovered through the use of Company
                    property, information or position, unless the Company has
                    determined not to pursue such business opportunity, such
                    business opportunity does not otherwise violate these
                    Guidelines or any other policy of, or agreement with, the
                    Company, and the Ethics Officer, or the Audit Committee of
                    the Board of Directors, in the case of executive officers to
                    the Company, has authorized you to pursue such business
                    opportunity on your own time and at your expense.

          -    You must disclose any potential conflict of interest to your
               supervisor, the Human Resources or Legal Departments or the
               Ethics Officer so that it may be resolved.

          -    If you are unsure if your situation or relationship with another
               organization might conflict with your job performance or our
               Company's interests, you should discuss it with your supervisor,
               Human Resources or Legal Departments or the Ethics Officer. Most
               potential conflict situations are resolved and it is always best
               for you to raise your concern.

     3.   COMPLIANCE WITH THE LAW AND THIS POLICY. Inverness Medical
          Innovations' policy is to comply with all laws and regulations of each
          state and country in which Inverness Medical Innovations conducts
          business, whether or not specifically mentioned above. Each of
          Inverness Medical Innovations' employees, contract workers,
          consultants or other persons acting on behalf of Inverness Medical
          Innovations shall comply with such laws and this policy. If you have
          any questions concerning the legality or propriety of any course of
          conduct, you must seek guidance from the Human Resources or Legal
          Departments, Executive Management or the Ethics Officer. If you become
          aware of any illegal or improper conduct, you must report it to your
          Supervisor or to the Human Resources or Legal Departments, Executive
          Management, the Ethics Officer or the Ethics Hotline. If the illegal
          or improper conduct involves Executive Management or if Executive
          Management fails to respond appropriately to any report of illegal or
          improper conduct, you must report it to a member of Inverness Medical
          Innovations' Board of Directors.

               a)   Employment Laws. The employment laws make it unlawful to
                    discriminate in the hiring or discharge of employees, or
                    with respect to their compensation, conditions or privileges
                    of employment, on the basis of race, color, religion, sex,
                    sexual orientation, national origin, age, physical or mental
                    disability or status as a special veteran, military service
                    or application for military services or membership in any
                    other category protected under the law. It is our policy to
                    provide equal employment opportunity for all employees and
                    applicants for employment in accordance with the employment
                    laws without regard to race, color, religion, sex, sexual
                    orientation, national origin, age, physical or mental
                    disability or status as a special veteran military


                                     Page 7




                    service or application for military services or membership
                    in any other category protected under the law.

               b)   Antitrust/Competition Laws. The antitrust/competition laws
                    are intended to preserve competition by prohibiting actions
                    that could unreasonably restrain the functioning of a free
                    and competitive marketplace. Violations of these laws (which
                    can result in severe penalties to both the Company and to
                    the persons participating in the violation) can occur:

               -    If you have communications or agreements with competitors on
                    prices, terms, services, sales policies or customer
                    selection or classification (except for usual credit
                    information);

                         -    If you attempt to suggest or agree with a
                              competitor, supplier or customer on how he or she
                              should deal with others;

                         -    In any arrangements or understandings with
                              particular competitors or customers so as not to
                              deal with a particular customer or supplier;

                         -    In any joint ventures or projects among
                              competitive organizations where discussions are
                              not strictly limited to the joint transactions
                              involved;

                         -    In any participation in trade associations,
                              seminars, or other groups where there is even the
                              appearance of being an occasion for discussion of
                              competitive policies and practices.

               c)   Fair Dealing. We endeavor to obtain advantages over our
                    competitors through superior products and services, not
                    through unethical or illegal business practices. To further
                    this aim, you are expected to deal fairly with our
                    customers, suppliers, competitors, employees of the Company
                    and anyone else with whom you have contact in the course of
                    performing your job.

               d)   Dealing in Securities and Confidential Information. In the
                    course of your employment, you may become aware of sensitive
                    information that is confidential, private, or proprietary
                    and which is valuable and material to the Company and has
                    not been made public. The use of such non-public material
                    information about Inverness Medical Innovations or another
                    company (that you may obtain information about due to a
                    proposed or actual transaction or relationship with
                    Inverness Medical Innovations) for your own financial
                    benefit not only is unethical, but also may be a violation
                    of law. We are all responsible for protecting the
                    confidentiality of all such information. Both U.S. and
                    international laws prohibit insider trading and deceptive
                    practices in stocks and securities. The Company will not
                    tolerate the improper use of inside information.

                         -    Use or disclosure of Company sensitive information
                              will be for company purposes only.


                                     Page 8



                         -    To preserve confidentiality, the disclosure of
                              such Company information within the Company should
                              be limited to those who have a need to know.

                         -    Your responsibility to keep Company information
                              confidential continues after you discontinue your
                              employment with the Company.

                         -    Giving the Company pass or other Company
                              identification material to any unauthorized person
                              is prohibited.

                    If you have received confidential information from those we
                    do business with, you must protect the confidentiality of
                    any such information in accordance with any written
                    agreement which may apply to such information, or if none
                    exists, in accordance with the protection given to our own
                    information.

               e)   Copyrights and Computer Software. The unlawful duplication
                    or removal or attempting to remove from the Company's
                    premises or restricted areas copyrighted materials,
                    including periodicals, magazines, trade journals, designs,
                    computer software, tools, and equipment is a violation of
                    copyright laws and is strictly prohibited. See Electronic
                    Communication Media Use Policy and Nondisclosure,
                    Noncompetition and Developments Agreement. (hyperlink)

               f)   Unauthorized Payments to Obtain Business. The policy of the
                    Company is to not, directly or indirectly, offer, solicit or
                    accept any kind of payment, gift, bribe, kickback, or
                    contribution for personal gain of the employee or members of
                    an employee's household for the purposes of:

                         -    Influencing customers, suppliers, or governmental
                              entities including their officials or employees.

                         -    Obtaining, giving, or keeping business.

                         -    Persuading any officials or employees of another
                              company to fail to perform, or to improperly
                              perform their duties.

                         -    Employees and members of an employee's household
                              may not accept money, personal gifts, trips,
                              services, entertainment, or anything of value free
                              or at a discounted rate from any person or entity
                              that is an actual or potential competitor of
                              Inverness Medical Innovations.

                         -    Employees may not offer, provide or accept money,
                              personal gifts, trips, services, entertainment, or
                              anything of value, free or at a discounted rate to
                              any actual or potential purchaser, actual or
                              potential supplier or actual or potential customer
                              of Inverness Medical Innovations, except as
                              approved by Executive Management. In all instances
                              when an offering is made, the offering, providing
                              or acceptance of such gifts or services must be
                              confirmed by Executive Management to be in
                              compliance with the business policies of the
                              recipient's or donor's employer or the person or
                              entity that the recipient represents and must be
                              within the normal business practices of the
                              industry as a whole. This section does not
                              preclude


                                     Page 9



                              payment or acceptance of small costs (e.g., taxi
                              fares, reasonable business meals, parking
                              validations, etc.), Company emblem paraphernalia
                              (mugs, shirts, etc.) provided in the ordinary
                              course of business, gifts valued at less than $100
                              or up to one (1) ticket per year from any actual
                              or potential purchaser, actual or potential
                              supplier or actual or potential customer of
                              Inverness Medical Innovations to sports events,
                              concerts, theatre or similar functions between
                              business persons dealing at arm's length where
                              such items are within the normal business
                              practices of the industry of the party making the
                              gift. If an employee receives a gift from a
                              business partner which is not permitted by this
                              section, the employee must report that gift to the
                              Legal Department and either a) return the gift to
                              the donor or b) donate the gift to a charitable
                              cause and, in either case, advise the donor in
                              writing of the Company's policy.

                         Violation of this policy will be grounds for immediate
                         dismissal. However, except when dealing with
                         representatives of a government (including government
                         agencies), you may receive or give customary business
                         amenities such as meals, provided they are associated
                         with a business purpose, reasonable in cost,
                         appropriate as to time and place and are such as not to
                         influence or give the appearance of influencing the
                         recipient. If you feel that it would be detrimental to
                         Inverness Medical Innovations to turn down such a gift,
                         you should discuss the matter with Executive
                         Management, who may authorize exceptions to this
                         prohibition. Excessive business related gifts and
                         entertainment are inherently compromising and do not
                         belong in our business relationships, whether giving or
                         receiving. See Dealings with Government Officials and
                         Payments Practice section (hyperlink).

                         Any employee who is unsure whether a certain
                         transaction, activity, or relationship constitutes a
                         conflict of interest must discuss such issue with the
                         Legal Department or Executive Management to obtain
                         clarification. Exceptions to this policy may only be
                         approved by Legal Counsel or Executive Management.
                         Inverness Medical Innovations reserves the right to
                         determine, in its sole discretion, whether
                         circumstances not listed above represent actual or
                         potential conflicts of interest. See Conflicts of
                         Interest Policy (hyperlink).

               g)   Export Control Laws. Export control laws govern all exports
                    of commodities and technical data, including items that are
                    hand-carried as samples. Failure to comply with such laws
                    could result in the loss or restriction of the Company's
                    export privileges. As a result, no Colleague will cause the
                    Company to export or re-export any goods or intellectual
                    property unless the Company has received the appropriate
                    express or implied export license. Colleagues should note
                    that this also applies to Colleagues of the Company's
                    foreign subsidiaries.


                                     Page 10



               h)   Customs, Embargo and Boycotts. The United States and other
                    countries where our Company does business have laws that
                    restrict or prohibit transactions in goods, funds, services
                    or technology with certain persons, companies, and countries
                    based on national security and policy interests. You must
                    comply with all applicable customs, antiboycott and embargo
                    laws while importing and exporting products, funds,
                    services, information or technology. In addition, the U.S.
                    has laws that regulate how companies must respond to
                    boycotts enforced by one set of countries against another.
                    No Colleague will cause the Company or its affiliates to
                    participate in any international economic boycott in which
                    the United States does not participate. Employees
                    responsible for our Company's international operations must
                    be aware of these laws, and direct questions to the Legal
                    Department.

               i)   Anti-Money Laundering Laws. Anti-money laundering laws
                    prohibit you from engaging in a transaction if you know that
                    the funds involved were derived from illegal activities. If
                    you believe that the funds in a transaction may be derived
                    from illegal activity you must contact the Legal Department.

               j)   Environmental Laws. As a good corporate citizen of the
                    communities in which we operate, the Company is committed to
                    a safe environment and sound environmental actions. We will
                    comply fully with all applicable environmental laws and
                    regulations. Intentional violation of environmental laws
                    will be a breach of this policy.

               k)   Safety and Health. The Company is committed to maintaining a
                    safe and healthful work environment. We will comply fully
                    with all applicable safety and health laws and regulations.

                         -    Bringing or attempting to bring into Company
                              premises, or into any Company gathering off of
                              Company premises, any firearm, dangerous weapon,
                              explosive material, or instrument designed to
                              inflict bodily injury is forbidden and a violation
                              of this policy.

                         -    Creation of fire, safety or health hazards,
                              failure to use safety devices, or failure to
                              comply with procedures provided for employee and
                              public protection is forbidden and a violation of
                              this policy.

               l)   Contributions to Political, Religious and Other
                    Organizations. Any financial support, time commitments, and
                    any other contributions and involvements with political,
                    religious or other group or activity that is not related to
                    the Company's business should be made on the employee's time
                    and at the employee's own expense and must in no way
                    indicate Inverness Medical Innovations' endorsement of such
                    activity.


                                     Page 11



               m)   Questions on Laws. If you have questions on specific laws or
                    regulations, contact the Company's Legal Department.

               n)   Quality. The Company is committed to providing the highest
                    quality goods and services to our customers to meet and
                    exceed their expectations. We will strive to continuously
                    monitor our progress and improve our processes to achieve
                    this goal within the spirit and letter of all applicable
                    laws. The knowing and intentional provision to our customers
                    of goods which are of a material inferior quality to the
                    goods as described in the specifications and/or product
                    literature for those goods is a violation of this policy.

               o)   U.S. Food & Drug Administration (FDA) Laws and Regulations.
                    The laws and regulations enforced by the FDA are intended to
                    ensure that medical devices are safe and effective and that
                    these products are honestly, accurately and informatively
                    represented to the public. The FDA laws and regulations
                    cover, among other things, premarket approval of new medical
                    devices, manufacturing and performance standards, and
                    tracking of reports of device malfunctioning and serious
                    adverse reactions. Failure to comply with all such laws and
                    regulations could result in serious consequences for the
                    Company, including product recall. We will comply fully with
                    all applicable FDA laws and regulations, and with all
                    internal procedures designed for compliance purposes.

     4.   DEALINGS WITH GOVERNMENT OFFICIALS AND PAYMENTS PRACTICE. The laws,
          rules and regulations that govern the professional relationships
          between Inverness Medical Innovations' employees and government
          officials are complicated and numerous. Inverness Medical Innovations'
          employees are obligated to contact the Legal Department or Executive
          Management with any questions, issues, complaints, or concerns about
          all matters concerning relationships and interactions with government
          officials.

          With the exception of certain regulatory fees set by governments and
          lawful "expediting payments" in foreign countries, all payments,
          promises to pay and offers of payment or anything of value to any
          government official, political party, or official thereof either from
          Inverness Medical Innovations or in furtherance of Inverness Medical
          Innovations' business are strictly prohibited. In some countries
          outside the U.S., tips and gratuities of a minor nature are
          customarily required by low-level governmental representatives
          performing routine governmental action (e.g., processing visas,
          permits to do business, providing of police protection or phone
          service). Where payments of this nature are lawful and unavoidable,
          they are permitted only to facilitate the correct performance of the
          foreign government representative's routine duties. Such "expediting
          payments" may not be made to induce foreign officials to fail to
          perform their duties or perform them in an incorrect manner. Executive
          Management of Inverness Medical Innovations shall be responsible for
          determining the propriety, need, and amount of such expediting
          payments, which may be


                                     Page 12



          made only with their prior approval and only after consultation with
          Legal Counsel of Inverness Medical Innovations.

     5.   PROTECTING COMPANY ASSETS. Each of us is responsible for protecting
          Company assets, which include the Company's investment in trade
          secrets, technology and other proprietary property as well as physical
          property of guests, visitors, vendors, customers and employee
          property.

               -    You should be alert to any situations or incidents that
                    could lead to the loss, misuse, or theft of Company
                    property. In addition, you should report all such situations
                    to your supervisor, the Human Resources or Legal
                    Departments, Executive Management, the Ethics Officer, or
                    the Ethics Hotline at the number that is listed below for
                    your geographical region.

     US            866-398-0010
     AUSTRALIA     1800-987-636
     CANADA        888-789-6627
     CHINA-NORTH   10-800-713-0906
     CHINA-SOUTH   10-800-130-0879
     FRANCE        0800-909-260
     GERMANY       0800-182-4524
     ISRAEL        180-942-9050
     JAPAN         0053-113-0898
     SPAIN         900-977-663
     SWEDEN        020-793-185
     UK            0800-032-5546

               -    Each employee is required to enter into an obligation of
                    confidentiality to protect the Company's trade secrets and
                    confidential information. Depending on the particular
                    country and practice, this obligation may be fulfilled by a
                    written undertaking, a contract or, in the case of certain
                    executive officers, by a fiduciary duty imposed by law in
                    countries where this may be applicable.

     6.   MEDIA CONTACT AND PUBLIC DISCUSSION. News media contact, responses,
          and public discussion of Company business should only be made through
          authorized spokespersons of the Company.

          -    Compliance with Public Disclosure Laws: The Company will comply
               with all laws governing the public disclosure of business
               information. These laws are generally designed to assure that
               material business information about the Company is disseminated
               fairly and in clear, accurate and non-misleading terms without
               material omissions. As a result, all public statements disclosing
               material Company business information, including to individual
               investors or analysts, whether oral or written, must be
               disseminated through a means which assures broad dissemination of
               the information to the public in a fair


                                     Page 13



               manor and in terms that are accurate and clear with no material
               omissions. Colleagues should consult with the Legal Department
               before making any such statements. In the event that a Colleague
               makes such a statement inadvertently, the Colleague should
               immediately contact the Legal Department to determine how best to
               comply with the law in such a situation.

          -    If you are questioned by news reporters, you should refer them to
               an appropriate Company representative--the CEO, COO, CFO, or
               General Counsel.

          -    We must exercise particular care when considering release of
               information of a sensitive nature.

          -    Failure to observe this policy can cause tremendous harm to the
               Company and spread misinformation. We are all responsible for
               protecting all such information

     7.   UNAUTHORIZED USE OF COMPANY PROPERTY OR SERVICES. You or your
          relatives many not use Inverness Medical Innovations assets, services
          or labor for personal use unless the use has been properly approved.

     8.   BUSINESS AND ACCOUNTING PRACTICES. Compliance with accepted accounting
          rules and controls, as established by the FASB, U.S. and other taxing
          authorities as well as accounting controls established by the Audit
          Committee, independent auditors and Chief Financial Officer is
          necessary at all times. The Company has established a separate set of
          accounting policies and guidelines. Intentional failure to comply with
          these policies and guidelines is a violation of this policy.

     9.   FINANCIAL RECORDS. All financial records of the Company must
          accurately reflect and properly describe the transactions they record.
          All financial transactions are to be recorded in a timely fashion.

     10.  DISPARAGEMENT. No one should ever make false, misleading, or
          disparaging remarks about individuals, organizations or their products
          or services.

          -    Do not disparage our competitors or their products or employees.
               We should sell our products and services on their merits.

          -    Always check with our General Counsel before you make comparisons
               between our products and those of a competitor in written
               materials or advertising. In some countries this is illegal and
               in many others, including the United States, it may be grounds
               for a competitor to bring an unfair competition suit against the
               Company.


                                     Page 14



     11.  DRUGS. The use, sale, possession, manufacture, dispensation, or
          distribution of any unauthorized drugs or controlled substances at any
          time on Company premises or at Company gatherings is prohibited. Being
          under the influence of intoxicants or drugs is prohibited by law and
          by the Company. See our Policy to Maintain a Drug Free Workplace
          (hyperlink).

     12.  CERTIFICATIONS. The Company may require Colleagues to certify
          compliance with the Policy on an annual basis. Failure or Refusal of a
          Colleague to certify compliance may be grounds for discipline up to
          and including dismissal.


/s/ RON ZWANZIGER                       /s/ PAUL HEMPEL
- -------------------------------------   ----------------------------------------
Ron Zwanziger,                          Paul Hempel,
President and CEO                       Senior Vice President Leadership
                                        Development & Legal Affairs


                                     Page 15



                                      INDEX

A
Accepted accounting rules, 12
Administration of the guidelines, 2
Advertising, 13
Antitrust laws, 5
Assets, company, 11

B
Boycott, 9
Bribe, 7
Business meals, 8
Business opportunity, 5

C
Certifications, 13
Commitment to employees, 3
Computer software, 7
Confidential information, 6, 7, 11
Conflicts of Interest, 4, 8
Contributions, 10
Copyright, 7
Customs, 9

D
Discriminatory harassment, 3, 4
Disparagement, 13
Drugs, 13

E
Embargo, 9
Employment laws, 5
Entertainment, 7, 8
Ethics Officer, 1, 2, 3, 4, 11
Ethics Hotline, 1, 2, 3, 4, 5, 11
Expediting payments, 11
Export, 9

F
Fair dealing, 6
FDA, 10
Financial records, 12
Foreign government, 11

G
Gifts, 7, 8
Government officials, 8, 11

H
Harassment, 3, 4
Hotline, 1, 2, 3, 5, 11

I
Illegal drugs, 13
Information,
   business, 12
   company, 7
   confidential, 6, 7, 11
   credit, 6
   inside, 6
   material, 6
   non-public, 6
Inside Information, 7
Insider trading, 6, 7
Intoxicants, 13

M
Material omission, 12
Media contact and public discussion, 12
Money laundering, 9

P
Political, 10, 11
Public disclosure, 12

Q
Quality of products, 10

R
Retaliation, 4

S
Securities, 6

T
Technology, 9, 11
Tickets, 8

W
Waiver, 2


                                     Page 16

EX-21.1

                                                                               .
                                                                               .
                                                                               .

                                                                    Exhibit 21.1

                              LIST OF SUBSIDIARIES
                              AS OF March 1, 2007



                                                          State or
                                                        Jurisdiction           % of
Name of Subsidiary                                    of Incorporation      ownership
- ------------------                                 ----------------------   ---------
                                                                      
Advantage Diagnostics Corporation                  State of Delaware           100%
Applied Biotech, Inc.                              State of California         100%
Binax, Inc.                                        Delaware                    100%
CLONDIAG Chip Technologies GmbH                    Germany                     100%
DMD - GmbH                                         Germany                     100%
First Check Diagnostics Corp.                      State of Delaware           100%
Forefront Diagnostics, Inc.                        State of California         100%
IMG Holding GmbH                                   Germany                     100%
IMJV GmbH                                          Switzerland                  50%
Innovacon, Inc.                                    State of Delaware           100%
Innovations Research, LLC                          State of Delaware           100%
Instant Technologies, Inc.                         State of Virginia            75%
Inverness Medical - Biostar Inc.                   Delaware                    100%
Inverness Medical (Shanghai), Ltd.                 China                        60%
Inverness Medical (UK) Holdings, Ltd.              United Kingdom              100%
Inverness Medical Australia Pty, Ltd.              Australia                   100%
Inverness Medical Benelux Bvba (4)                 Belgium                     100%
Inverness Medical Canada Inc.                      Canada                      100%
Inverness Medical Deutschland GmbH                 Germany                     100%
Inverness Medical Eurasia, Ltd.                    Ireland                     100%
Inverness Medical France SAS                       France                      100%
Inverness Medical Iberica, S.A.U.                  Spain                       100%
Inverness Medical International Holding Corp. II   State of Delaware           100%
Inverness Medical International Holding Corp.      State of Delaware           100%
Inverness Medical Investments LLC                  State of Delaware           100%
Inverness Medical Japan, Ltd.                      Japan                       100%
Inverness Medical Professional Diagnostics
   - Australia Pty. Ltd.                           Australia                   100%
Inverness Medical Spain, S.L.                      Spain                       100%
Inverness Medical Switzerland GmbH ("IMS")         Germany                     100%
Inverness Medical, Inc. ("IMI")                    State of Delaware           100%
Ischemia Technologies, Inc.                        Delaware                    100%
IVC Industries, Inc.                               State of Delaware           100%
IVD Limited                                        Ireland                      95%
Med-Ox Chemicals Limited                           Canada                      100%
Orgenics International Holdings B.V.               The Netherlands             100%
Orgenics, Ltd. (1)                                 Israel                      100%
Ostex International, Inc.                          State of Washington         100%
Pregymed GmbH                                      Germany                     100%
Promesan S.r.L.                                    Italy                       100%
Scandanavian Micro Biodevices, ApS                 Denmark                     100%
Selfcare Technology, Inc.                          State of Delaware           100%
Stirling Medical Innovations Ltd.                  Scotland                    100%
Unipath Diagnostics Gmbh                           Germany                     100%
Unipath Diagnostics Limited                        United Kingdom              100%
Unipath Management, Ltd.                           United Kingdom              100%
Unipath Online, Inc.                               State of Massachusetts      100%
Unipath Scandinavia AB                             Sweden                      100%
Unipath, Ltd.                                      United Kingdom              100%
Wampole Laboratories, LLC                          State of Delaware           100%


(1)  Orgenics, Ltd. has six (6) wholly owned subsidiaries and one majority
     controlled joint ventures, all operating outside of the United States.

EX-23.1

                                                                    EXHIBIT 23.1

            CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Inverness Medical Innovations, Inc. and subsidiaries
Waltham, Massachusetts

We hereby consent to the incorporation by reference in the Registration
Statements on Form S-3 (Nos. 333-85658, 333-87180, 333-102577, 333-107288,
333-110715, 333-116659, 333-124461, 333-128017, 333-134412, 333-134574,
333-138889 and 333-138919), and Form S-8 (Nos. 333-67392, 333-74032, 333-85402,
333-90530, 333-106996, 333-106994, 333-128937 and 333-139878) of Inverness
Medical Innovations, Inc. and subsidiaries of our reports dated March 1,
2007, relating to the consolidated financial statements and the effectiveness of
Inverness Medical Innovations, Inc. and subsidiaries' internal control over
financial reporting, which is incorporated in this Annual Report on Form 10-K
for the fiscal year ended December 31, 2006.


/s/ BDO Seidman, LLP
- -------------------------------------
Boston, Massachusetts
March 1, 2007

EX-31.1

                                                                    EXHIBIT 31.1

                                  CERTIFICATION

     I, Ron Zwanziger, certify that:

     1. I have reviewed this annual report on Form 10-K of Inverness Medical
Innovations, Inc.;

     2. Based on my knowledge, this report does not contain any untrue statement
of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements were
made, not misleading with respect to the period covered by this report;

     3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the registrant as
of, and for, the periods presented in this report;

     4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial
reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the
registrant and have:

     a) Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our supervision, to
ensure that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those entities,
particularly during the period in which this report is being prepared;

     b) Designed such internal control over financial reporting, or caused such
internal control over financial reporting to be designed under our supervision,
to provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principals;

     c) Evaluated the effectiveness of the registrant's disclosure controls and
procedures and presented in this report our conclusions about the effectiveness
of the disclosure controls and procedures, as of the end of the period covered
by this annual report based on such evaluation; and

     d) Disclosed in this report any change in the registrant's internal control
over financial reporting that occurred during the registrant's fourth fiscal
quarter that has materially affected, or is reasonably likely to materially
affect, the registrant's internal control over financial reporting; and

     5. The registrant's other certifying officer and I have disclosed, based on
our most recent evaluation of internal control over financial reporting, to the
registrant's auditors and the audit committee of registrant's board of
directors:

     a) All significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are reasonably
likely to adversely affect the registrant's ability to record, process,
summarize and report financial information; and

     b) Any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal control over
financial reporting.


Date: March 1, 2007                 /s/ Ron Zwanziger
                                        ----------------------------------------
                                        Ron Zwanziger
                                        Chairman, President and
                                        Chief Executive Officer

EX-31.2

                                                                    EXHIBIT 31.2

                                  CERTIFICATION

     I, David Teitel, certify that:

     1. I have reviewed this annual report on Form 10-K of Inverness Medical
Innovations, Inc.;

     2. Based on my knowledge, this report does not contain any untrue statement
of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements were
made, not misleading with respect to the period covered by this report;

     3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the registrant as
of, and for, the periods presented in this report;

     4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial
reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the
registrant and have:

     a) Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our supervision, to
ensure that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those entities,
particularly during the period in which this report is being prepared;

     b) Designed such internal control over financial reporting, or caused such
internal control over financial reporting to be designed under our supervision,
to provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principals;

     c) Evaluated the effectiveness of the registrant's disclosure controls and
procedures and presented in this report our conclusions about the effectiveness
of the disclosure controls and procedures, as of the end of the period covered
by this annual report based on such evaluation; and

     d) Disclosed in this report any change in the registrant's internal control
over financial reporting that occurred during the registrant's fourth fiscal
quarter that has materially affected, or is reasonably likely to materially
affect, the registrant's internal control over financial reporting; and

     5. The registrant's other certifying officer and I have disclosed, based on
our most recent evaluation of internal control over financial reporting, to the
registrant's auditors and the audit committee of registrant's board of
directors:

     a) All significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are reasonably
likely to adversely affect the registrant's ability to record, process,
summarize and report financial information; and

     b) Any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal control over
financial reporting.


Date: March 1, 2007                 /s/ David Teitel
                                        ----------------------------------------
                                        David Teitel
                                        Chief Financial Officer

EX-32.1

                                                                    EXHIBIT 32.1

                            CERTIFICATION PURSUANT TO
                             18 U.S.C. SECTION 1350,
                             AS ADOPTED PURSUANT TO
                  SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

     Each of the undersigned officers of Inverness Medical Innovations, Inc.
(the "Company") hereby certifies, to his knowledge, that the Company's Annual
Report on Form 10-K for the fiscal year ended December 31, 2006 (the "Report"),
as filed with the Securities and Exchange Commission on the date hereof, fully
complies with the requirements of Section 13(a) or 15(d), as applicable, of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and that the
information contained in the Report fairly presents, in all material respects,
the financial condition and results of operations of the Company. This
certification is being furnished as an exhibit to the Report pursuant to 18
U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002, and shall not be deemed "filed" for purposes of Section 18 of the
Exchange Act, or otherwise subject to the liability of that section. This
certification will not be deemed to be incorporated by reference into any filing
under the Securities Act of 1933, as amended, or the Exchange Act, regardless of
any general incorporation language in such filing, except to the extent that the
Company specifically incorporates this certification by reference.


Date: March 1, 2007                     /s/ Ron Zwanziger
                                        ----------------------------------------
                                        Ron Zwanziger
                                        Chief Executive Officer


Date: March 1, 2007                     /s/ David Teitel
                                        ----------------------------------------
                                        David Teitel
                                        Chief Financial Officer

A signed original of this written statement required by Section 906, or other
document authenticating, acknowledging, or otherwise adopting the signatures
that appear in typed form within the electronic version of this written
statement required by Section 906, has been provided to the Company and will be
retained by the Company and furnished to the Securities and Exchange Commission
or its staff upon request.