10-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)
ý	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2005
OR
o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number 000-21873

BIOSITE INCORPORATED

(Exact name of registrant as specified in its charter)

Delaware	33-0288606
(State or other jurisdiction of	(I.R.S. Employer
incorporation or organization)	Identification No.)
9975 Summers Ridge Road
San Diego, California	92121
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code:  (858) 805-2000

Securities registered pursuant to Section 12(b) of the Act:

NONE

Securities registered pursuant to Section 12(g) of the Act:

Common Stock, $.01 par value

Preferred Stock Purchase Rights

(Title of Class)

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

Yes    o No   ý

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.

Yes    o No   ý

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes    ý 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 the 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 large accelerated filer, and 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 ý Accelerated filer o Non-accelerated filer o

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

The aggregate market value of the shares of Common Stock held by non-affiliates of the Company, based upon the closing price of the Common Stock on June 30, 2005 as reported on the Nasdaq National Market, was approximately $785,000,000. Shares of Common Stock held by each executive officer and director and by each person who owned 10% or more of the outstanding Common Stock have been excluded in that such persons may be deemed to be affiliates. This determination of affiliate status is not necessarily a conclusive determination for other purposes. The determination of who was a 10% stockholder and the number of shares held by such person is based on Schedule 13G filings with the Securities and Exchange Commission, or SEC, as of June 30, 2005.

As of March 10, 2006, there were 17,469,763 shares of the Registrant’s Common Stock outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Certain information from Registrant’s Proxy Statement to be filed with the SEC in connection with the solicitation of proxies for the Registrant’s 2006 Annual Meeting of Stockholders is incorporated by reference in Part III of this Form 10-K.

BIOSITE INCORPORATED

FORM 10-K

INDEX

PART I
ITEM 1.	BUSINESS
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 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
ITEM 9B.	OTHER INFORMATION
PART III
ITEM 10.	DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
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
ITEM 14.	PRINCIPAL ACCOUNTANT FEES AND SERVICES
PART IV
ITEM 15.	EXHIBITS, FINANCIAL STATEMENT SCHEDULES
SIGNATURES

Biosite^®, Triage^®, Omniclonal^® , CardioProfilER^® and New Dimensions in Diagnosis^® are registered trademarks of Biosite Incorporated. MultiMarker Index™, Triage ProfilerCP™ and the Company’s logo is a trademark of Biosite Incorporated. Beckman Coulter^® is a registered trademark of Beckman Coulter, Inc. This annual report on Form 10-K also contains trademarks and trade names of other companies.

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PART I

Item 1.Business

Forward-looking Statements

This Annual Report on Form 10-K contains forward-looking statements that involve risks and uncertainties, including: our ability to obtain regulatory approvals and complete clinical and pre-market activities needed to launch new products and gain market acceptance of any new products; the impact of competition, including products competitive with our Triage^® BNP Tests, from companies with greater capital and resources; our ability to effectively promote our products, whether directly or through distributors, including our ability to effectively promote our products in the physician office market; the extent to which our products and products under development are successfully developed and gain market acceptance; our ability to successfully expand our business through direct sales in certain European countries; the outcome of ongoing litigation between us and Roche Diagnostics Corporation and its affiliates; potential contract disputes or patent conflicts; manufacturing inefficiencies, backlog, delays or capacity constraints; the timing of significant orders or the impact of seasonality; regulatory changes, uncertainties or delays; product recalls; dependence on third-party manufacturers and suppliers; changing market conditions and the other risks and uncertainties described under Item 1A, “Risk Factors” and elsewhere in this Annual Report on Form 10-K. Actual results may differ materially from those projected. These forward-looking statements represent our judgment as of the date of the filing of this Annual Report on Form 10-K. We disclaim any intent or obligation to update these forward-looking statements.

Overview

Founded in 1988, Biosite^® Incorporated is a medical diagnostic company utilizing a biotechnology approach to create a broad and diverse portfolio of market-leading diagnostic tests. Our business model is designed to be fully integrated from discovery to customer, with a focus on patenting novel protein biomarker panels, manufacturing complex products at appreciable profit margins, employing strategic clinical studies and trials to validate our products’ diagnostic utility, and an emphasis on education when marketing our pioneering diagnostics directly to healthcare providers.

Our product development strategy is to use our expertise and capabilities in high-throughput screening and data mining techniques to validate novel blood protein biomarkers, which when measured individually or in combination with other biomarkers via our proprietary test system, we believe provide better diagnostic information than tests currently available on the market. To accomplish this we first attempt to discover or license the diagnostic rights to novel proteins on an exclusive or semi-excusive basis. We then use monoclonal antibody technology to validate blood-borne protein disease biomarkers and panels of biomarkers that can serve as the basis for new proprietary diagnostic products intended to potentially improve the quality and cost-effectiveness of medical care. We then seek to commercialize our products using our, portable, rapid testing platform, which employs a variety of technologies relating to phage display antibody expression, microfluidics sample processing, and fluorescence energy transfer signaling, for quick, accurate and simultaneous measurement of one or more blood protein biomarker concentrations.

To date our marketing and sales efforts have primarily targeted hospitals, and particularly emergency departments, or EDs, where rapid, accurate diagnosis is important for high quality, cost-effective healthcare. Recently, we also began to market our diagnostic products to physician offices. We believe that in the future our existing or potential products could be used in a variety of healthcare sites for diagnosis, and possibly for pre-emptive detection or monitoring of chronic diseases, such as heart failure.

We have been profitable since the third quarter of 1999 and intend to continue building our business with funds generated from our operations. During 2005 our revenues were $287.7 million, our pre-tax operating margin was 29% and our net income was $54.0 million. Also during 2005, our cash and marketable securities increased 83% from $72.4 million at December 31, 2004 to $132.4 million at the end of 2005. Cash flow activity during this period included cash generated from operating activities of $91.5 million and an additional $33.4 million investment in our corporate complex.

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Discovery

The recent upsurge in the understanding and utility of human biomarkers or analytes has been the catalyst for our discovery efforts. These biomarkers include proteins, peptides, enzymes, hormones and other blood-borne molecules that are the biologically active components of normal and diseased physiology. In most diseases, tissue damage and biological response mechanisms change the blood levels of analytes enabling them to be used as diagnostic “disease biomarkers.”  Most disease biomarkers currently in clinical use signal disease when their concentrations rise above a defined normal cut-off point. For example, above-normal concentrations of the following markers result in a positive disease diagnosis:

Marker	Disease
Glucose	diabetes
Prostate specific antigen	prostate cancer
Hepatitis surface antigen	hepatitis B
B-type natriuretic peptide, or BNP	heart failure

Given the low returns to date, biomarker discovery has historically been viewed as an expensive, time-consuming and risky undertaking for commercial enterprises. As a result, large diagnostic companies generally look to academic researchers for new biomarker validation or rely on clinically proven biomarkers in developing testing menus.

Over the past decade or so, one of the most exciting areas for medical research has been the field of genomics, which is the study of the human genome. This research, aimed at understanding the genetic bases of diseases, has spawned the field of “molecular diagnostics.”  Many medical diagnostic companies are pursuing opportunities in the area of molecular diagnostics with the goal of using measurements of genetic differences among patients as a way to diagnose or predict human diseases.

While most commonly associated with genes, the ultimate function of the human genome is to produce proteins, and the multitude of proteins produced by the human genome is termed the human proteome. We focus on mining the human proteome for diagnostic biomarkers for which we can obtain exclusive or semi-exclusive rights to develop, market and sell in major commercial markets. We are discovering useful correlations between blood-borne proteins and the diagnostic questions most frequently and urgently asked by caregivers. As a near term commercial target, we believe the proteome offers important clinical advantages over the genome. First, disruptions in blood levels of proteins reflect not only genetic differences, but also disease-induced abnormalities not programmed into the human genome. Second, antibody-based measurements of blood proteins are faster, simpler and cheaper to report in the clinical setting than are commercial technologies for detecting gene variations. Consequently, while we believe molecular diagnostics will play an important role in disease prediction and detection, we think the near-term commercial potential of blood protein measurement is more attractive.

We have developed our own internal program, Biosite Discovery, focused on identifying novel proteins or combinations of proteins that function as disease biomarkers and have high diagnostic utility. Key to Biosite Discovery is our proprietary Omniclonal^® phage display antibody development technology, which enables the rapid and cost-efficient development of immunoassays that can be used to evaluate up to several hundred potential disease biomarkers each year.

Our Biosite Discovery program encompasses a three-step process:

1.Through a variety of collaborations, we collect patient blood samples related to disease states in which we are interested. These samples include disease-specific samples, samples from patients with conditions that mimic the targeted disease, as well as samples from a normal, disease-free population. We seek to establish comprehensive sample banks, accumulating thousands of samples. Sample collection can be time intensive and subject to fluctuations in timing, and, as a result, our ability to establish relationships and collaborations with reliable sources of samples is essential.

2.Once samples are available, we use them for testing as we conduct “marker mining” to find biomarkers with high diagnostic utility for a targeted disease. To do this, we use immunoassays, which require tightly binding, or high-affinity, antibodies, to test potential markers against our samples bank. Our ability to efficiently develop large quantities of high-affinity antibodies for these research immunoassays allows us to screen large numbers of markers in our efforts to identify those most suitable for a diagnostic product.

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3.When data for potential biomarkers is available, we use a proprietary software system to define the priority of the biomarkers in terms of their importance in diagnosing the targeted disease. This enables us to determine the optimal markers for a diagnostic product. Once this decision is made, the product proceeds to development.

We believe that our Biosite Discovery model is significantly different from discovery methods employed by other companies in the diagnostics industry and we view this as a competitive advantage. Some of our differentiating qualities include:

Rapid Antibody Development:  We believe we enjoy a unique position in the area of phage display antibody development. We believe that our internal antibody development capabilities allow rapid identification and development of antibodies with optimal specificity, affinity and stability characteristics. Using our proprietary Omniclonal phage display antibody development technology, we can quickly create high quality antibody libraries in weeks. Following evaluation for clinical relevance, the useful antibodies can be economically produced in large reproducible quantities.

High Throughput Capacity:  Because we utilize a highly efficient antibody technology and have automated the most significant liquid handling steps, we believe we currently have a high throughput capacity to develop high affinity antibodies. With this high throughput capacity, we are able to generate antibodies to a substantial number of targets in a cost-efficient manner. This permits us to take on significant discovery endeavors to identify, evaluate and develop novel diagnostics.

Target Validation Approach: We focus on serious health problems that are in need of improved diagnosis, prognosis and monitoring. To gain access to large numbers of protein targets and clinically documented samples that can be studied for association with selected diseases, we collaborate with commercial companies and clinical institutions. We believe we have expertise in establishing sample banks that can be used for validation purposes. Combined with our ability to efficiently develop assays used to study potential biomarkers, this enables us to study high numbers of proteins thereby increasing the possibility of validating high-potential biomarkers. For instance, in developing our potential sepsis test, we have studied more than 100 proteins and peptides, as well as numerous combinations of these using hundreds of patient samples. We believe that most other diagnostic companies would have to outsource this type of work and rely on slower and more costly methods in order to replicate our processes.

Development

We have a track record of successfully moving novel diagnostics, including the Triage^® BNP Test, through the development pipeline. We commercialized the first portable fluorescence-based quantitative immunoassay platform, the Triage MeterPlus. We also developed the first rapid, quantitative point-of-care immunoassays to receive U.S. Food and Drug Administration, or FDA, clearance for the measurement of cardiac markers as an aid in the diagnosis of acute myocardial infarction, of BNP as an aid in the diagnosis of heart failure, and of overdosed and abused drug analytes as an aid in the identification of drug overdose.

Our on-going product development goal is to provide physicians with timely and relevant information upon which to base their diagnoses, prognoses and therapeutic strategies. Historically, we have made significant investments in research and development, exceeding traditional diagnostic industry standards. These investments have yielded several proprietary advances in the biological and physical sciences that serve as the basis for our diagnostic marker discovery platform and make practical the development and manufacture of rapid, accurate and cost-effective diagnostics. Our products integrate our expertise in several core scientific and engineering disciplines, including antibody development and engineering, analyte cloning and synthesis, development of highly sensitive fluorescence energy transfer dyes, signaling chemistry, microcapillary protein array technology and sample handling, each of which is described below. By combining research capabilities in each of these areas, we create novel single and multi-analyte diagnostics that overcome the limitations of traditional diagnostic technologies and seek to address the significant unmet need for effective, real-time diagnostic information. Recently, we have enhanced our expertise in the development of test panels capable of multi-marker measurements.

Antibody Development and Engineering: Traditionally, antibodies have been recognized as valuable tools for the characterization of protein targets because they can be used to localize the protein in tissues, to quantify precisely the protein in body fluids at very low concentrations and to modulate the biological activity of the protein by, for example, binding to the protein and blocking its natural function. Antibodies have traditionally been derived from immunization of animals and either the harvest of antiserum containing antibodies or the development of

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monoclonal antibodies using hybridoma technology, which was developed in the 1970s. Antisera are generally of limited utility and monoclonal antibody technology is labor intensive and not cost-effective for the validation of large numbers of protein targets.

Initially, we incorporated hybridoma technology into our research programs; however, the time consuming and resource intensive nature of this hybridoma technology limited the scope of research that could be performed. The advent of phage display of antibodies, and improvements in that approach over the past decade, has enabled the development of antibodies with much greater efficiency than the previous methods. Whereas it could take nine months or more to develop antibodies using hybridoma technology, phage display could produce antibodies within a few months at a substantially lower cost.

For more than a decade, we have been in-licensing and developing proprietary antibody development and production technology based on phage display, which creates genetically engineered, antibody-producing microorganisms. The technology enables the high throughput generation of custom Omniclonal antibody libraries containing gene encoded antibodies specific to a selected target analyte. Omniclonal antibodies produced from such libraries can contain thousands of different antibodies that bind to a target analyte with high affinity, which refers to an antibody’s ability to bind tightly to targets and is a highly desired attribute. Monoclonal antibody candidates can be rapidly selected from an Omniclonal antibody library and produced in quantities sufficient for product development. During the course of product development, unexpected antibody cross reactivities often require additional selection of antibodies to improve the assay specificity. Unlike hybridoma technology, Omniclonal antibody libraries can rapidly provide additional antibody candidates in these circumstances.

The intellectual property required for commercial development of phage display antibodies is fragmented, because important parts of the process were discovered in many laboratories around the world. As a consequence there are many issued patents that cover individual steps between antibody discovery and commercial production. Since the early years of our research programs, we have been successfully negotiating licenses to the critical pieces of technology, in addition to inventing our own processes relating to the commercialization of phage display of antibodies. In effect, we believe that our own inventions and know-how in this field combined with our portfolio of licenses, many of which are non-exclusive, provide us with a unique position. We view this as an important competitive advantage.

Analyte Cloning and Synthesis: Our molecular biology capabilities include the cloning and identification of specific proteins useful in the development of immunoassays. We developed proprietary expression vectors that enable the production and purification of these proteins for the development of antibodies and for use as calibrators and controls in our immunoassay products. In addition, our considerable expertise in synthetic organic chemistry allows the synthesis of targets and useful derivatives. We develop products where the targeted analyte is small (i.e., haptens, such as drugs) or large (i.e., proteins, such as cardiac enzymes). We believe that the ability to develop, stabilize and manufacture the target analyte or its analogues is key to the development of highly accurate immunoassays.

Highly Sensitive Fluorescence Energy Transfer Dyes: Immunoassays require the attachment of a detectable label to an antibody or target analyte. We developed a variety of labels for use in our products. For our qualitative products, a visual label that produces color is attached to antibodies or analytes through either non-covalent or covalent chemical methods to provide yes/no results. For our Triage MeterPlus platform products, we developed novel fluorescent dyes that are attached to antibodies or analytes using both noncovalent and covalent chemical means. Although fluorescence is a potentially powerful label for use in immunoassays, its potential has been limited by the lack of available dyes that are stable and have no sample interference, and by the requirement of a complex instrument for detection. We have invented our own proprietary dyes that satisfy four criteria:

•they are usable with complex biological samples such as serum, plasma and whole-blood;

•they are stable for the dating period of the product;

•they utilize fluorescence energy transfer, which results in a substantial phase shift away from background fluorescence in samples; and

•they are excited at near infrared wavelengths chosen to be compatible with inexpensive solid state components.

Microcapillary/Protein Array Technology: We developed proprietary technology to design, develop and manufacture protein arrays containing microcapillaries to control the flow of fluids in immunoassay processes. Our qualitative testing device format uses microcapillaries to draw fluids across immobilized antibody zones for the detection of specific substances.

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Our quantitative testing device format moves fluids through the microcapillaries in a controlled manner. When a sample is added to the quantitative assay device, a filter contained within the device separates blood cells from plasma. Then the plasma moves by capillary action into a chamber that contains dried fluorescent immunoassay reagents. Inside the chamber, the analytes that are to be measured bind to the fluorescent immunoassay reagents. After an incubation time that is determined by another microcapillary element of the array we call the time gate, the sample flows through a microcapillary path termed the protein array. The protein array is comprised of antibodies that are specific to the analytes and immobilized onto the surface of the device in discrete zones. The fluorescent reagents, which are bound to the analyte, bind to the respective zones on the protein array. The excess sample that was added to the device washes the unbound fluorescent reagents from the protein array. The binding of fluorescent reagents at the protein array is detected by our Triage MeterPlus and the fluorescence intensity at the discrete zone is related to the concentration of the substance or analyte being tested and measured in the sample. We also developed the engineering capability to design unique microcapillary structures in plastic parts and to fabricate them in commercial scale quantities using injection molding processes.

Sample Handling: We developed proprietary technology relating to sample handling and preparation, including technology that allows whole-blood to be passively separated into its plasma component or to be passively lysed to release the target analyte. We also developed technologies for the handling of stool samples that concentrate and purify the target analytes or organisms from solid stool materials. In addition, we developed technologies that can be used to assay urine samples.

The MultiMarker Index™: Because many acute diseases and conditions, such as chest pain, stroke, sepsis and abdominal pain, are complex and have multiple causes, we are focusing a considerable portion of our development efforts on multi-marker test panels. Through Biosite Discovery, we believe we can select the optimal markers for a targeted condition. Our research has shown that individual measurements of markers may not always provide the most accurate result. Therefore, we have developed a proprietary process for reducing multiple biomarker measurements to a single MultiMarker Index, or MMX, value that we believe can be more easily interpreted and is more accurate than single marker measurements in the clinical setting for diagnosis and prognosis.

The MMX uses a panel of protein measurements to generate a single quantitative value which reflects the probability or severity of disease. To validate each MMX algorithm we research a large number of protein targets that are potentially relevant to a disease – for instance, more than 70 in the case of stroke. We then measure blood levels for all of these proteins in a large library of patient samples for which the ultimate disease diagnoses or prognoses are known. Using our proprietary computer algorithms, we can empirically determine which protein biomarkers provide diagnostic information about the disease and select for commercial development the panel of protein biomarkers that delivers the required diagnostic utility. To our knowledge, Biosite is unique in the world for using this MMX approach to correlate multiple blood protein levels to disease diagnosis and prognosis.

We recently launched our first product incorporating MMX, the Triage Stroke Panel, in Europe and currently have several additional potential MMX products in development. The Triage Stroke Panel is not currently approved for sale or use in the United States, but a Premarket Approval Application, or PMA, for that product has been submitted to the FDA. In April 2005, we received a letter from the FDA indicating that the PMA submitted in 2004 for the Triage Stroke Panel is on hold pending submission of additional information. The letter further states that the issues raised need to be resolved before the FDA can complete its review, otherwise the PMA in its current form would be considered not approvable. In October 2005, the FDA agreed to our request for a 180-day extension to the PMA.

An important component of our product development strategy is to validate the clinical usefulness of our new products. Historically, most new products in the diagnostics arena measured biomarkers or analytes, such as glucose, cholesterol and prostate specific antigen, for which clinical validity was already established. Consequently, the pre-market validation process for these tests usually focused on showing that the new product measurements correlated with diagnostic products already on the market. Manufacturers could perform this validation in their own laboratories. Many potential Biosite products lack pre-existing diagnostic models and we will be required to demonstrate safety and effectiveness to regulatory agencies, as well as clinical value to medical thought leaders and others.

To this end, we have developed organizational and institutional relationships necessary to sponsor large clinical studies with the goal of obtaining data to support the diagnostic indications that we wish to claim for our products. We may also fund follow-on clinical studies once a product is launched to demonstrate that our products favorably affect outcomes or provide clinical value to the diagnostic process. While our clinical trial process adds considerable time and expense to our development timelines, we believe it provides us with important competitive advantages and, most importantly, can help improve patient care.

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We believe that our novel approach to discovering and developing new multi-marker diagnostic products for unmet applications will provide us with the best opportunity to establish and maintain broad patent protection, which may in turn support a favorable market position for our products. Many of the technologies that enable our products are already covered by issued patents or are the subject of patent filings. We have filed foundational patent applications covering our MMX approach to diagnosis and prognosis, which claim both the algorithm used to derive a MMX value, as well as certain combinations of proteins for specific diseases and conditions, such as stroke, sepsis, chest pain, shortness of breath, myocardial infarction, acute coronary syndrome and abdominal pain.

Commercialization

Hospital Market

Currently, our products are principally sold to acute care hospitals and are often used on patients presenting to EDs. In the United States, acute care hospitals number approximately 5,400.

According to reports published by the American Hospital Association, or AHA, U.S. hospitals are increasingly challenged in their efforts to meet the needs of their communities. Issues confronting hospitals today include workforce shortages, increases in liability insurance, higher costs associated with care accompanied by lower payments, shortages of critical care capacity and ED overcrowding resulting in patient diversions and related costs. In 2004, nearly one-third of U.S. hospitals lost money overall.

In recent years, rising demand for ED services in the United States has accompanied constrained capacity. According to statistics published by the U.S. Centers for Disease Control and Prevention, between 1993 and 2003, ED visits increased more than 26%, an estimated average of 2 million visits per year. The greatest increase was among elderly patients, many of whom have chronic medical conditions. In 2003, abdominal pain, chest pain, fever, and cough were the leading patient complaints, accounting for nearly one-fifth of all visits. While the number of ED visits continues to increase, the overall capacity of the nation’s EDs has decreased, with hundreds of emergency departments closing in the past 10 years. The resulting strain on existing EDs has been intensified by a shortage of inpatient beds, which results in backlogs in the ED as patients wait for beds to open so they can be admitted. In 2003, approximately 14% of ED visits in the U.S. resulted in hospital admission. While the problem of ED overcrowding and diversion is most evident in urban and teaching hospitals, nearly 50% of all U.S. hospitals reported capacity problems in 2005.

The supply of hospital workers is not keeping pace with the increase in demand. Many hospitals report or project shortages in nursing and laboratory personnel, areas key to diagnostic evaluation. Furthermore, the AHA reports that 41% of U.S. community hospitals have lost specialty coverage in the ED for a period of time, requiring hospitals to incur additional cost for specialist services, often placing even more burden on ED physicians and other clinicians.

In Europe, where our marketing efforts today focus primarily in western countries, the market is characterized by varying concentrations of hospitals among regions, differing reimbursement systems, pressures to reduce length of stay and declines in hospital capacities, which vary from region to region. Similar to the United States, hospitals in Europe are classified into two tiers: teaching hospitals, which are large university-affiliated institutions supported by state-of-the-art technology and thought leaders, and less advanced regional and rural hospitals that often refer more complex cases to top-tier centers. In Europe, however, there are also more sub-specialty facilities that may specialize in treatment for a particular condition. Today, many European hospitals are government-controlled.

Within hospitals worldwide, diagnosis is typically accomplished through a battery of testing methods including immunoassays. Historically, the majority of immunoassay testing has been accomplished through a centralized process using large automated analyzers housed in the central laboratory. Generally, the cost of a single high-throughput central laboratory instrument is considered to be an expensive investment and involves a multi-year commitment. These platforms are typically marketed to clinical laboratories that run tests, rather than to the physicians who order diagnostics. There are a variety of automated analyzers to choose from and menus are typically not proprietary, therefore, competition is intense and the industry suffers from low margins compared with other medical devices. Competition within the diagnostics industry has traditionally centered around improvements in cost-effectiveness, throughput and the ability to precisely measure disease markers. Industry leaders tend to be those companies with low cost positions and the marketing mass to succeed with commodity product lines.

While automated immunoassay analyzers may meet hospitals’ routine testing needs, the use of centralized

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automation can lead to lengthy turnaround times, delaying delivery of vital information to the physician. Additionally, centralized immunoassay analyzers require high volumes of sample throughput to justify the substantial investment in equipment, frequent calibration and quality control testing, training, staffing and other costs required to operate and support the systems.

Given the dynamics of today’s healthcare systems, we believe that significant market potential exists for rapid diagnostics with novel applications that are capable of precise quantitative measurement of single or multiple analytes. We view our medical diagnostic products as a means of improving and advancing medical care by enabling hospital physicians to triage or evaluate patients quickly, accurately and cost-effectively in order to make important medical decisions. Studies, including one published in the February 2004 issue of the New England Journal of Medicine, have shown that rapid testing, including point-of-care testing, may help to reduce overall healthcare delivery costs and improve patient outcomes by providing diagnosis in a reduced period of time, thereby minimizing the time to medical intervention. Patients undergoing emergency procedures can benefit from more timely and accurate testing results, both of which improve decision-making, which could limit unnecessary use of costly inpatient care. Faster diagnosis can also permit earlier and more appropriate patient management, potentially shortening the duration of illness. Furthermore, the development of new diagnostics for diseases that currently lack accurate diagnostic products could improve treatment and provide better outcomes.

Physician Office Market

In 2003, we also began to market our products to outpatient physicians, primarily for use in physician office laboratories. While all of our products are available for use in physician office laboratories, or POLs, to date, our marketing efforts in this segment have focused on the Triage BNP Test, which aids in the diagnosis and assessment of heart failure. Given the chronic nature of this disease and the concern that it may advance to highly serious stages, we believe physicians would have an interest in using the Triage BNP Test for early diagnosis of heart failure and for ongoing assessment and risk stratification.

Among physician offices, immunoassay testing typically occurs in small on-site centralized POLs that serve a physician group or clinic, or in large off-site commercial laboratories. POLs typically use small to mid-size laboratory analyzers to perform immunoassay testing. These laboratories can provide convenience and enable reasonably rapid turnaround of test results, but are typically only justified for larger group practices and clinics. Furthermore, due to space considerations, their test offerings may be limited. Commercial laboratories can provide full service utilizing very large automated analyzers, with broad menus and rapid throughput. However, since tests are performed off-site, delivery of test results may take several days and testing generally tends to be expensive. Although some blood testing does occur in physician offices, this is usually limited to testing that can be accomplished using simple one-step technology that does not require blood to be drawn from the veins in the office.

We market the BNP Test to approximately 15,000 physician office labs that are licensed to run moderately complex tests and serve physicians seeing heart failure patients.  In August 2005, the Triage BNP Test was granted a CLIA waiver by the FDA, substantially expanding healthcare professionals’ access to the 15-minute blood test to aid in the diagnosis and assessment of patients with symptoms of heart failure.  The CLIA waiver expands access to the test to additional cardiology offices, family practices and internal medicine offices that see heart failure patients which number approximately 6,000, 10,000 and 14,000 respectively, allowing more patients to benefit from rapid evaluation.

We believe that significant validation of the Triage BNP Test in physician offices will be necessary in order to achieve widespread acceptance of this diagnostic test, particularly among family practice and internal medicine physicians, who are unlikely to be familiar with BNP.

Cardiovascular Products

Our cardiovascular products are designed to aid in the rapid and accurate diagnosis of several conditions stemming from disease or dysfunction related to the heart, lungs or other areas of the vascular system. These conditions include acute coronary syndrome, heart failure, pulmonary embolism and stroke. Certain tests are also cleared to aid in the assessment or disease severity or patient risk stratification.

Acute coronary syndrome, or ACS:  A spectrum of conditions involving chest discomfort or other symptoms caused by lack of oxygen to the heart muscle. These conditions may include acute angina, silent heart attack and heart attack. The accurate diagnosis and proper management of patients with these conditions require the emergency medicine physician to consider the entire spectrum of ACS, with emphasis placed on early diagnosis and rapid treatment. Each of

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these syndromes has its own prognosis, pathophysiology and specific management strategy.

Heart failure: A chronic inability of the heart to maintain an adequate output of blood from one or both of its ventricles, resulting in congestion or swelling of certain veins or organs, and an inadequate blood supply to the body. In advanced stages heart failure can lead to severely decompensated heart pumping action. Early diagnosis is important to reducing the risk of disease advancement.

Pulmonary embolism: A pulmonary embolism, or thromboembolism, occurs when a blood clot, generally a venous thrombus, becomes dislodged from its site of formation and embolizes to the arterial blood supply of one of the lungs. Symptoms may include difficulty breathing, pain during breathing, and more rarely circulatory instability and death. Treatment is with anticoagulant medication.

Stroke: The most acute event related to cerebral ischemia, which occurs when there is a decreased supply of blood to the brain or part of the brain caused by blockage of the supplying blood vessels, resulting in damage to the brain. A similar event, transient ischemic attack, or TIA, causes short-term ischemia but does not result in permanent brain damage. However recently issued stroke guidelines recommend that TIA be treated with the same urgency as stroke. We believe that further research may lead to the definition of a spectrum of conditions associated with cerebral ischemia.

The following table sets forth information on select Biosite products commercially available in 2005 in the United States and/or Europe.

PRODUCT	LAUNCH	BIOMARKER	APPLICATION(1)	2005 REVENUES
Triage Cardiac Panel	1998	CK-MB, Troponin I,Myoglobin	•Aid in the diagnosis of myocardial infarction (injury) (MI)	$	26.2 million
Triage BNP Test products	2001	BNP	•Aid in the diagnosis and assessment of severity of heart failure •Aid in the risk stratification of patients with acute coronary syndrome (ACS) and/or heart failure	$	189.6 million
Triage CardioProfilER® Panel	2003	CK-MB, Troponin I Myoglobin and BNP	•Aid in the diagnosis of MI (injury) •Aid in the diagnosis and assessment of severity of heart failure •Aid in the risk stratification of patients with ACS	$	10.5 million
Triage Profiler Shortness of Breath Panel	2004	CK-MB, Troponin I Myoglobin, BNP and D-dimer	•Aid in the diagnosis of MI (injury) •Aid in the diagnosis and assessment of severity of heart failure •Aid in the assessment and evaluation of patients suspected of having disseminated intravascular coagulation or thromboembolic events, including pulmonary embolism (PE) •Aid in the risk stratification of patients with ACS
Triage D-Dimer Test	2005	D-dimer	•Aid in the assessment and evaluation of patients suspected of having disseminated intravascular coagulation or thromboembolic events including PE	$	2.8 million
Triage Stroke Panel (2)	Q3 2005	S-100 beta, D-dimer, BNP and MMP-9	•Aid in the assessment and diagnosis of stroke	NA

(1) These indications have received FDA clearance. Pursuit of new applications would require that we seek additional clearances for the new applications from the FDA.

(2) In December 2004, we filed a PMA with the FDA seeking approval to market our diagnostic product for stroke. In April 2005, the PMA was placed on hold pending the submission of additional data requested by the FDA. In October 2005, the FDA granted the 180-day extension for the PMA. We are on track to submit additional clinical data pertaining to our Triage Stroke Panel within the extension granted by the FDA. The data are intended to broaden and further diversify the population analyzed in Biosite’s initial clinical study. The Triage Stroke Panel was launched in several European countries during the third quarter of 2005.

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According to the 2005 U.S. National Hospital Ambulatory Medical Care Survey, millions of individuals visit EDs with complaints of shortness of breath, breathing difficulty and chest pain. All are symptoms common to serious cardiovascular diseases; however they can also be related to diseases and conditions such as pneumonia, bronchitis and flu. Because many of these patients are among the elderly, a patient population subject to multiple overlapping diseases, physicians must consider several possible diagnoses. Differentiating patients experiencing or at risk of acute events from patients with less severe conditions can be vital to saving lives or precluding disease advancement. Additionally, misdiagnosis of cardiovascular disease is a significant source of healthcare costs in the United States, with the cost of unnecessary hospitalization of chest pain patients estimated to exceed $2.5 billion annually.

All of our cardiovascular tests are available in a rapid format that measures biomarkers simultaneously and provides a quantitative result in about 15 minutes. Since January 2004, the Triage BNP Test has also been available in a format that can be run on Beckman Coulter Immunoassay Systems. Given the complexity of many cardiovascular diseases, we believe that in most cases the measurement of multiple markers, each of which can provide information on a different aspect of an event, will be superior to the measurement of a single marker in terms of achieving rapid and accurate diagnosis.

Drug Overdose Products

Drug abuse plays a significant role in emergency medicine cases, either as a primary cause or as a contributing factor. A diagnostic dilemma confronts physicians when patients present with symptoms that could be either drug related or non-drug related. For instance, a patient brought into an ED in a coma may be under the influence of narcotics or sedatives, thus requiring a certain type of treatment or intervention. Conversely, the same patient may have had a stroke or suffered some form of trauma requiring a completely different type of care. The ability to obtain a differential diagnosis in a timely manner greatly aids the course of treatment.

We introduced the first Triage Drugs of Abuse Panel in 1992 and launched the second-generation Triage TOX Drug Screen in January 2002. The Triage Drugs of Abuse Panels and Triage TOX Drug Screen are rapid, qualitative urine screens that analyze a single test sample for different illicit and prescription drugs or drug classes, and provide results in approximately 10 to 15 minutes. The Triage Drugs of Abuse Panels are configured to test for various combinations of drugs and provide a visual result in about ten minutes. The Triage TOX Drug Screen is a test device used for the simultaneous detection of parent compound and/or the major metabolites of up to eight drug classes (nine unique assays) in urine. A qualitative (positive or negative) result is available in about 15 minutes.

Illicit drugs detectable by the Triage Drugs of Abuse Panels and Triage TOX Drug Screen include:

•amphetamines/methamphetamines (ecstasy, speed, crystal);

•cocaine (crack);

•opiates (heroin);

•phencyclidine (angel dust); and

•cannabinoids/THC (pot, marijuana).

Prescription drugs tested by the Triage Drugs of Abuse Panel include:

•barbiturates (Phenobarbital);

•benzodiazepines (Valium, Librium, Halcion);

•tricyclic antidepressants (Elavil, Tofranil);

•propoxyphene (Darvon); and

•methadone.

Sales and Distribution

To market our products, we utilize a direct sales team that focuses on hospitals with more than 200 beds and smaller hospitals that are high volume users of our products. The Fisher HealthCare Division of the Fisher Scientific Company, or Fisher, distributes our products primarily in hospitals in the United States and supports our direct sales force, particularly in smaller hospitals and in U.S. physician offices. We have a distribution agreement with Fisher that extends through December 31, 2008. Sales to Fisher represented 84% and 86% of our product sales in 2005 and 2004, respectively.

Physician Sales & Services, or PSS, and Henry Schein, Inc., or Henry Schein, also distribute our product to U.S. physician offices. We may also engage other distributors and/or supplement our own small direct sales force for this

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market in the future. A field-based network of clinically experienced individuals supports the sales effort access to all of our markets by providing pre- and post- sale education and training.

In international markets, we have established direct selling efforts in several European countries and utilize a network of country-specific and regional distributors in other areas. In the future, we may transition to direct sales and distribution of our products in additional countries. Sales to international customers in 2005, 2004, and 2003 totaled $35.9 million, $26.0 million and $14.5 million, respectively.

Because our products are designed to improve the practice of medicine, rather than merely reduce the cost of testing, we invest substantially in relevant education for healthcare clinicians using our diagnostic products. While diagnostic companies traditionally market their products solely to clinical laboratories, we believe we generate demand for our products among laboratory clinicians, physicians and hospital administrators by demonstrating the medical and economic advantages of our diagnostic products. Supporting our worldwide sales team is a field-based network that includes clinically experienced individuals providing pre- and post- sale education and training and customer and technical support resources to assist with ongoing utilization of our products. As of December 31, 2005, our worldwide sales team and our supporting in-house and field-based network consisted of 94 and 75 representatives, respectively.

Products Under Development

Our strategy for potential future products, including our current products under development, is to focus our attention on large market opportunities where we can potentially achieve market leadership and/or a proprietary patent position related to disease biomarkers with novel therapeutic, diagnostic and/or prognostic applications. Our development efforts focus on new marker mining as well as on the investigation of new applications for existing markers and/or combinations of existing markers. To support our efforts, we utilize a variety of means to gain access to potential markers such as internal research, licensing and collaborations. We are currently researching many potential disease marker candidates. Additionally, we have established clinical collaborations with many leading medical institutions that provide samples for use in our research efforts. Among the products with novel diagnostic and/or prognostic applications that we are attempting to develop are diagnostic products for cerebral ischemia or stroke, cardiovascular disease, sepsis, acute kidney injury and abdominal pain.

Cardiovascular Disease

Cardiovascular disease is a primary focus area of our research and development efforts and product development is underway in a number of different areas. In addition to developing diagnostic products that can be used to detect a specific disease, we are also concentrating our efforts on the development of multi-marker panels that can be used with patients exhibiting symptoms that could be associated with a variety of diseases. These panels are intended to help physicians quickly and accurately distinguish between causes of symptoms. Together with various commercial and clinical collaborators, we are continuing to analyze other protein targets believed to be associated with ACS and other cardiovascular diseases.

We are continuing to research potential cardiac markers and combinations of cardiac markers that may further assist in evaluating and diagnosing chest pain patients. In December 2005, we submitted a 510(k) Premarket Notification to the FDA seeking clearance for the Triage MPO Test and the Triage CardioProfilER Panel with MPO. A biomarker of inflammation of the vasculature, myeloperoxidase, or MPO, has been found to be elevated in patients with an acute risk of near-term cardiac events. MPO appears to be an indicator of unstable atherosclerotic plaque and has been shown to elevate earlier than current markers of cardiac cell death. MPO is believed to be useful as an aid in the early diagnosis of myocardial infarction and could signal risk for heart disease or heart attack in patients with chest pain or ACS. We licensed certain diagnostic rights to MPO in 2004 under an agreement with The Cleveland Clinic Foundation and Prognostix, Inc.

Sepsis

Sepsis is a complex syndrome that can take on a variety of different forms. In general, it is an inflammatory reaction initiated by microorganisms, including bacteria, viruses and fungi, which can cause widespread damage to the blood vessels leading to circulatory shock, organ failure, gangrene of extremities and death. In the United States, each year approximately 750,000 patients develop sepsis and the aging population is accelerating the prevalence of the disease. Overall mortality of patients developing sepsis ranges from 30% to 60%. Total annual costs for sepsis exceed $16 billion in the United States with the average hospital cost per adult case estimated to be approximately $22,000.

The complications associated with sepsis can advance quickly. Diagnosis is complicated by a lack of effective diagnostic tools to detect the disease in its early stages. We are currently studying markers that may be useful in the

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diagnosis or risk prognosis of septic patients. We have commenced collection of approximately 7,000 patient samples to be used in studying potential biomarkers for sepsis.

Acute Kidney Injury

We have recognized that there is a medical need to make an early assessment of kidney injury in several hospital settings. At this time there is no methodology to make a timely assessment of kidney injury. Physicians currently use creatinine, which is only a functional marker, as an indicator that an injury has taken place.  Although creatinine is widely used by the medical community, its limitations are also widely acknowledged.  The use of this current method does not enable effective treatment to be provided because creatinine lags behind renal injury.   We believe there is a compelling business opportunity for a rapid and accurate diagnostic test that can aid in the early identification of kidney injury, 48-72 hours prior to a rise in creatinine. Patients with acute renal failure and complications with other organ dysfunction can have mortality rates as high as 40 percent to 70 percent, and acute renal failure is associated with various high cost medical problems, treatments, and procedures.  By rapidly assessing the likelihood and potentially the extent of kidney injury prior to the kidney undergoing irreversible damage, we believe we can give healthcare providers the opportunity to use available treatment options to avoid or reduce injury and significantly improve the outcome of the patient.

Abdominal Pain

Abdominal pain complaints represent the number one reason for visits to U.S. EDs. The diagnosis of this symptom is complicated by factors such as severity, duration and location of pain and the possibility of multiple etiologies. A complex and often expensive “rule out” diagnostic pathway used by physicians may include various laboratory tests, imaging studies and surgical interventions. We are exploring opportunities to use biomarker panels to diagnose some of the most serious conditions that cause abdominal pain and we expect to initially analyze approximately 40 protein biomarkers in 5,000 patient samples that we are in the process of collecting from our network of clinical collaborators.

Competition

The market in which we compete is intensely competitive. Our competitors include:

•manufacturers of laboratory-based tests and analyzers;

•clinical reference laboratories; and

•other rapid diagnostic product manufacturers.

Currently, the majority of diagnostic immunoassays utilized by physicians and other healthcare providers are performed by independent clinical reference laboratories and hospital-based laboratories using automated analyzers. We expect that companies offering automated laboratory analyzers will compete vigorously to maintain their dominance of the testing market. Although we now offer our Triage BNP Test for use on Beckman Coulter Immunoassay Systems, our remaining products are not currently designed for automated batch testing. In order to achieve the broadest market acceptance for our products, we will be required to demonstrate that our products provide cost-effective and time saving alternatives to certain tests performed on automated analyzers. This may require healthcare providers to change their established means of having such tests performed. Our rapid products may not be able to compete with the testing services provided by traditional laboratory services.

In addition, companies with a significant presence in the diagnostic market, such as:

•Abbott Laboratories;

•Bayer Diagnostics;

•Beckman Coulter;

•Dade Behring;

•Diagnostic Products Corp;

•Johnson & Johnson; and

•Roche Diagnostics

have developed or are developing diagnostics and/or testing systems that do or will compete with our products.

For example, our two formats of the Triage BNP Test are currently among several FDA-cleared blood tests for use as an aid in the diagnosis of heart failure. Roche Diagnostics and Dade Behring, which offer tests that measure NT-proBNP, a marker associated with heart failure, received FDA clearance for their tests in November 2002 and September 2004, respectively. Abbott Laboratories and Bayer Diagnostics, which have certain diagnostic rights to

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BNP, also recently entered the market for BNP testing. Additionally, in 2004, Abbott Laboratories acquired i-STAT Corp., which manufactures and sells a point-of-care testing platform that competes with our Triage MeterPlus platform. We believe Abbott Laboratories will launch a BNP test for use on the i-STAT point-of-care testing platform in the near future. We believe this competition is also resulting in less favorable market pricing for BNP testing in general.

Similarly, we expect competition on any MPO test that we launch in the future. For instance, Biosite is only one of three licensees of relevant intellectual property rights from The Cleveland Clinic Foundation and Prognostix, Inc. Prognostix already has a MPO test that is commercially available. The other licensees, Abbott Laboratories and Dade Behring, have not publicly announced their plans to launch a MPO test or the timing of any proposed launch, but we expect to face competition from them in this potential market as well.

All of the companies listed above that have a significant presence in the diagnostic market have substantially greater financial, technical, research and other resources and larger, more established marketing, sales, distribution and service organizations than us. Moreover, these competitors offer broader product lines and have greater name recognition than us, and offer discounts as a competitive tactic.

Employees

As of December 31, 2005, we employed 1,003 regular full-time or part-time individuals. Of these, 52 held Ph.D.s and 92 held other advanced degrees. None of our employees are covered by a collective bargaining agreement. We believe that we maintain good relations with our employees.

Research and Development

We have increased our investments in research and development in each of the last three years. As of December 31, 2005, we employed 217 employees in research and development, including 37 Ph.D.s. Our research and development organization is dedicated to the study of novel disease biomarkers or combinations of disease biomarkers, the development of new technologies that can be applied to future products and the development of new products compatible with our existing platform technologies. We also have research staff dedicated to the development and production of antibodies through a variety of techniques. Recombinant techniques are used to express proteins for use as diagnostic markers. Our staff of chemists and biochemists synthesize drug targets and compounds for diagnostic use and seek to perfect techniques for coupling these compounds to biological reagents such as antibodies or labels when necessary. We developed a proprietary process utilizing phage display antibody technology that enables the selection and production of antibodies more rapidly and efficiently than is possible using hybridoma technology. Our engineering staff is involved in the design and development of new diagnostic device technologies as well as the processes for their fabrication and interaction with biological and chemical reagents. Our product development group completes final optimization of assays and our clinical and regulatory affairs group oversees all in-house clinical studies and coordinates external clinical studies of our products and prepares applications for worldwide product licensure applications.

Manufacturing

As of December 31, 2005, we had 436 employees, and approximately 116 temporary employees, in manufacturing involved in reagent production, device assembly, engineering, quality assurance/quality control and materials management.

Except for the Triage BNP Test for the Beckman Coulter Immunoassay Systems and the Triage MeterPlus, all of our products are manufactured at our facility in San Diego, California. We have contracted with Beckman Coulter, Inc., which has a manufacturing plant located in Minnesota, to manufacture the Triage BNP Test for Beckman Coulter Immunoassay Systems. The Triage MeterPlus is manufactured by LRE Technology Partner GmbH, or LRE, which is located in Germany. We developed most of the antibodies used in the manufacture of our products, and in most cases we own or license the relevant cell lines. In addition, we maintain our own in-house antibody production capability. All other raw materials required to manufacture our products are obtained from outside suppliers.

We invest in the design and development of manufacturing systems and technologies that can produce a high quality product using controlled, cost-effective manufacturing processes and equipment. We have developed and continue to develop and improve novel and sophisticated processes and equipment for the manufacture of our Triage MeterPlus platform products. Significant additional resources, implementation of additional automated and semi-automated manufacturing equipment or changes to our manufacturing processes were, and may continue to be, required

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for the scaling-up of each new product prior to commercialization, or in order to adjust to changes in customer demand once commercialization begins, and this work may not be completed successfully or efficiently.

Our San Diego manufacturing facility is a registered medical device establishment with the FDA and a licensed medical device manufacturer with the California State Department of Health & Human Services. We have also been licensed and certified to manufacture products using controlled substances by the U.S. Drug Enforcement Agency. We received ISO 9001 re-certification in 2005.

Sales and Marketing

As of December 31, 2005, we had 216 employees, worldwide, in various sales and marketing functions. In the United States, we employ a direct sales force and utilize Fisher, PSS and Henry Schein to distribute our products to our primary markets, hospitals and physician offices. We also employ a field-based network of clinically experienced individuals that support the sales force by providing pre- and post- sales education and training. In international markets, we have established direct selling efforts in France, Germany, Belgium and Luxembourg, the United Kingdom, Italy and the Netherlands, and we utilize a network of country-specific and regional distributors in other areas.

We anticipate that we may, if appropriate, enter into additional distribution agreements with respect to our current products, products currently under development and products that we may develop in the future. We may not be able to enter into these or other distribution agreements on acceptable terms, if at all. If we elect to distribute products directly, our direct sales, marketing and distribution efforts may not be successful. A failure to enter into acceptable distribution agreements or a failure by us to successfully market our products would have a material and adverse effect on us.

Strategic and Distribution Arrangements

Our strategy for the research, development, commercialization and distribution of some of our products entails entering into various arrangements with clinical and commercial collaborators, licensors, licensees, manufacturers and others, and is dependent upon the success of these parties in performing their responsibilities. These parties might not perform their obligations as expected or we might not derive any revenue from these arrangements. Under our existing arrangements, we are not obligated to make any material capital expenditures. If we successfully develop products under some of our existing arrangements, we may be required to pay royalties on sales of products that incorporate licensed technology.

Fisher HealthCare Division of Fisher Scientific Company

We have a distribution agreement under which Fisher distributes our products primarily to hospitals within the United States. The term of our current distribution agreement with Fisher expires on December 31, 2008. Under the agreement, Fisher’s distribution rights are semi-exclusive in the U.S. hospital market and non-exclusive in the U.S. physician office market. Either party has the right to terminate the agreement in the case of an uncured breach by the other party. In addition, under certain circumstances, the distribution relationship may become non-exclusive or terminate with prior notice. For instance, if our direct sales to customers in the U.S. hospital market during a six month period exceed a specified percentage of the total sales of our products by both us and Fisher in that market segment, Fisher will have the option of converting the agreement to a mutually non-exclusive arrangement. The specified percentage of direct sales in the contract that would trigger this option far exceeds the current level of direct sales. If Fisher were to exercise the option, either party would have the ability to terminate the agreement upon prior notice to the other party. Similarly, if Fisher elects to promote and sell certain products that are competitive with our products, then we will have the option of converting the agreement to a mutually non-exclusive arrangement. If we were to exercise that option, either party would have the ability to terminate the agreement upon prior notice to the other party. Sales to Fisher represented 84%, 86% and 90% of our product sales in 2005, 2004, and 2003, respectively.

LRE Technology Partner GmbH

We have an agreement with LRE for the manufacturing and supply of the Triage MeterPlus, which is used with our rapid Triage BNP Test, as well as with the Triage Cardiac Panel, Triage CardioProfilER Panel, Triage D-Dimer test, Triage Profiler SOB Panel and the Triage TOX Drug Screen. All of our products in development are also intended to be used with the Triage MeterPlus. Under the terms of the LRE agreement, LRE manufactures the Triage MeterPlus according to specifications provided by us. LRE is our exclusive supplier of the Triage MeterPlus during the term of the current LRE agreement, which expires in February 2007. We purchase the Triage MeterPlus from LRE in Euros

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through firm purchase orders on a per meter price basis.

Beckman Coulter, Inc.

We have an agreement with Beckman Coulter under which it manufactures the Triage BNP Test for Beckman Coulter Immunoassay Systems for us, and we exclusively sell and market the product. Although this product runs on Beckman Coulter’s automated immunoassay analyzers, it is designed to provide results standardized to match our Triage BNP Test for the Triage MeterPlus. We began selling the product in Europe in December 2003 and in the United States in January 2004.

Biosite Discovery

Biosite Discovery is a collaborative research and in-licensing program dedicated to the identification and evaluation of new protein targets for acute diseases. Through Biosite Discovery, we conduct analyses on both known proteins that may be markers of disease and proteins accessed from commercial and clinical collaborators in order to determine diagnostic utility. Since 1999, we have initiated over 40 license and collaboration agreements relating to our discovery program including arrangements with Amgen Inc., Amylin Pharmaceuticals, Inc., Banyan Biomarkers, Inc., CardioPep Pharma GmbH, Cincinnati Children’s Research Foundation and Columbia University, The Cleveland Clinic Foundation and PrognostiX, Inc., Compugen, Ltd, Inc., Eli Lilly and Company, FivePrime Therapeutics, Inc., Incyte Corporation, Lexicon Genetics, Inc., Medarex, Inc., MedImmune, Inc., Molecular Staging, Inc., Neurocrine Biosciences, Inc., Novartis Pharma AG and Power3 Medical Products, Inc.   In parallel, we have initiated over 100 clinical collaboration agreements with leading universities, hospitals and health systems. Also under Biosite Discovery, we have executed several license or cross-license agreements with companies such as BioInvent International, MorphoSys AG and Dyax Corp.

Proprietary Technology and Patents

Our intellectual property portfolio includes patents, patent applications, trade secrets, know-how and trademarks. Our success will depend in part on our ability to obtain additional patents, maintain trade secrets and operate without infringing the proprietary rights of others, both in the United States and in other countries.

We periodically file patent applications to protect the technology, inventions and improvements that may be important to the development of our business. We rely on trade secrets, know-how, continuing technological innovations and licensing opportunities to develop and maintain our competitive position. We file patent applications on our own behalf as assignee and, when appropriate, have filed and expect to continue to file, applications jointly with our collaborators. These patent applications cover, among other things, devices, compositions of matter, methods of treatment, methods of discovery, use of novel compounds, and novel modes of action that are important in our research and development activities. As of March 1, 2006, we have been issued approximately 86 U.S. patents, and have been granted approximately 82 patents in other countries. These patents have expiration dates (not including any patent term extensions) ranging from 2009 to 2021. We have also licensed a significant number of other patents and patent applications from third parties. For example, we licensed technology and patents relating to our Triage BNP Tests from Scios, Inc. We also continue actively to seek patent protection in the United States and in foreign countries, and we intend to file additional patent applications relating to our technology and to specific products, as we consider appropriate.

To protect our rights to know-how and technology, we also ask our employees, technical consultants and advisors, and collaborators to enter into confidentiality agreements that prohibit the unauthorized use of, and restrict the disclosure of, confidential information and require disclosure and assignment to us of their ideas, developments, discoveries and inventions. In connection with our research and development activities, we also sponsor research at various outside institutions. Generally, under these agreements, we fund the work of investigators in exchange for the results of the specified work and the right or option to a license to any patentable inventions that may result in certain designated areas. If the sponsored work produces patentable subject matter, we generally either own the rights, or have the first right to negotiate for license rights, related to that subject matter. Any resulting license would be expected to require us to pay royalties on net sales of licensed products.

Our ability to obtain and enforce patents is uncertain and involves complex legal and factual questions, and we cannot guarantee that any patents will issue from any pending or future patent applications owned by or licensed to us. In addition, because patent applications in the United States are maintained in secrecy for eighteen months after the filing of the applications, and publication of discoveries in the scientific or patent literature often lag behind actual discoveries, we cannot be sure that the inventors of subject matter covered by our patents and patent applications were

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the first to invent or the first to file patent applications for these inventions. In the event that a third party has also filed a patent on a similar invention, we may have to participate in interference proceedings declared by the U.S. Patent and Trademark Office, and similar proceedings in foreign jurisdictions, to determine priority of invention, which could result in a loss of our patent position. Furthermore, we may not have identified all U.S. and foreign patents that pose a risk of infringement.

In November 2004, we announced that Roche Diagnostics Corporation, together with certain of its affiliates, filed a complaint in the United States District Court, Southern District of Indiana, Indianapolis Division alleging that Biosite is infringing two patents, U.S. Patent 5,366,609 and U.S. Patent 4,816,224, owned by Roche and/or its affiliates. We believe these allegations of infringement are without merit and we intend to vigorously contest these claims.

Also, in November 2004, we filed a complaint in the United States District Court, Southern District of California, alleging that Roche Diagnostics Corporation and Roche Diagnostics GmbH are infringing two patents, U.S. Patent 6,174,686 and U.S. Patent 5,795,725, owned by Biosite. In October 2005, we amended our complaint, further alleging infringement of a third Biosite patent, U.S. Patent 6,939,678. All of the Biosite patents relate to methods for the measurement of cardiac troponin forms. We believe that our claims have merit and we are vigorously pursuing their prosecution.

In December 2005, we announced that we are in discussions with Roche regarding a potential settlement of both pending cases. Biosite and Roche filed joint requests to stay the litigation in the United States District Courts in the Southern District of California and the Southern District of Indiana through April 2006, both of which have now been granted.

Government Regulation

The testing, manufacture and sale of our products are subject to regulation by numerous governmental authorities, principally the FDA and corresponding state and foreign regulatory agencies. Pursuant to the Federal Food, Drug and Cosmetic Act, the FDA regulates the pre-clinical and clinical testing, manufacture, labeling, distribution and promotion of medical devices. In the United States, we are not able to commence interstate marketing or commercial sales of new products under development until we receive clearance or approval from the FDA, which can be a lengthy, expensive and uncertain process. Clearance or approval to commercially distribute new medical devices is generally received from the FDA through clearance of a 510(k) Premarket Notification or approval of a Premarket Approval Application.

The 510(k) Premarket Notification process requires us to demonstrate substantial equivalence to a medical device first marketed in interstate commerce prior to May 1976, the enactment date of the Medical Device Amendments. We must submit data that supports our claim of substantial equivalence. For any devices that are cleared through the 510(k) process, modifications or enhancements that could significantly affect safety or effectiveness, or constitute a major change in the intended use of the device, will require new 510(k) Premarket Notification submissions. It generally takes from three to five months to obtain 510(k) clearance but can take longer or not at all.

A PMA must be filed if a new device is not substantially equivalent to a medical device first marketed in interstate commerce prior to May 1976. A PMA application must be supported by valid scientific evidence to demonstrate the safety and effectiveness of the device, typically including the results of human clinical investigations, bench tests and laboratory studies. The PMA approval process can be expensive, uncertain and lengthy, and many devices for which FDA approval of a PMA application have been sought by other companies have never been approved for marketing.

Both before and after a product is commercialized, we have ongoing responsibilities under the regulations of the FDA and other agencies. Noncompliance with applicable laws and the requirements of the FDA and other agencies can result in, among other things, fines, injunctions, civil penalties, recall or seizure of products, total or partial suspension of production, failure of the government to grant pre-market clearance or pre-market approval for devices, withdrawal of marketing clearances or approvals, and criminal prosecution. The FDA has the authority to request recall, repair, replacement or refund of the cost of any device manufactured or distributed by us. The FDA also administers certain controls over the export of medical devices from the United States.

The use of our products is affected by the Clinical Laboratory Improvement Amendments of 1988, or CLIA, and related federal and state regulations, which provide for regulation of laboratory testing. The scope of these regulations includes quality control, proficiency testing, personnel standards and federal inspections. Under CLIA quality control rules in effect from 1992 through 2002, laboratories using “unitized” test systems were in compliance

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with CLIA if they followed the manufacturers’ instructions for daily quality control, or QC, by relying on the internal controls built into unitized test systems, including our Triage products.

On January 24, 2003, the Centers for Medicare and Medicaid Services, or CMS, publicly issued a final QC rule under CLIA, which went into effect April 24, 2003. On January 12, 2004, CMS published updated Interpretive Guidelines for CLIA-regulated laboratories. We continue to work with CMS and our customers to evaluate the new Interpretive Guidelines and assist our customers in complying with any provisions, including QC requirements for “unitized” test systems that may be new. CMS has stated that the surveys of clinical laboratories will be “educational”, with respect to new QC requirements of the new Interpretive Guidelines and enforcement action will not be taken against a lab under the new CLIA QC rules if a laboratory director chooses to follow the manufacturer’s directions for QC.

While we believe the weight of scientific data and professional acceptance support the appropriateness of our internal quality controls, there can be no assurance that the application of these new Interpretive Guidelines will be favorable to our products. Moreover, future amendments of CLIA, the promulgation of additional regulations or guidelines impacting laboratory testing, and uncertainties relating to the enforcement of CLIA may have a material adverse effect on our ability to market our products, our business and financial condition, our results of operations and our customers’ access to our products.

We are also subject to the regulatory approval and compliance requirements for each foreign country to which we export our products. In the European Union, a single quality system and regulatory approval process has been created, and approval is represented as ISO certification and CE marking, respectively.

We may not be able to obtain necessary regulatory approvals or clearances for our products on a timely basis, if at all. Delays in receipt of or failure to receive such approvals or clearances, the loss of previously received approvals or clearances, limitations on intended use imposed as a condition of such approvals or clearances, or failure to comply with existing or future regulatory requirements would have a material adverse effect on us.

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WHERE YOU CAN FIND MORE INFORMATION

Our Internet address is www.biosite.com. We make available, free of charge, on our website at www.biosite.com our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to those reports, as soon as reasonably practicable after we electronically file such material with, or furnish it to, the Securities and Exchange Commission, or SEC. We also post copies on our website of our current charters for each committee of our board of directors, as well as our current Code of Business Conduct and Ethics, Corporate Governance Guidelines and Whistleblower Policy Statement. Currently, our board of directors maintains an Audit Committee, Compensation Committee, Nominating and Corporate Governance Committee and Stock Option Committee. The information found on our website shall not be deemed incorporated by reference by any general statement incorporating by reference this report into any filing under the Securities Act of 1933 or under the Securities Exchange Act of 1934, except to the extent we specifically incorporate the information found on our website by reference, and shall not otherwise be deemed filed under such Acts. All of the referenced documents are also available free of charge to any stockholder upon request. Requests should be submitted to Investor Relations, Biosite Incorporated, 9975 Summers Ridge Rd., San Diego, California 92121.

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Item 1A.Risk Factors

This Annual Report on Form 10-K includes forward-looking statements about our business and results of operations that are subject to risks and uncertainties. See “Forward-Looking Statements” above. Factors that could cause or contribute to such differences include those discussed below. In addition to the risk factors discussed below, we are also subject to additional risks and uncertainties not presently known to us or that we currently deem immaterial. If any of these known or unknown risks or uncertainties actually occur, our business could be harmed substantially.

Our quarterly and annual revenues and operating results may fluctuate. We may not maintain profitability.

We have reported consecutive quarterly operating profits since the third quarter of 1999, after incurring quarterly operating losses during the prior seven quarters. In the future, quarterly or annual operating results may fluctuate and we may not be able to maintain profitability. We believe that our future operating results may be subject to quarterly and annual fluctuations due to a variety of factors, including:

•competition, including from products competitive with our Triage BNP Tests and from companies with greater financial capital and resources;

•our ability to promote and sell products in the markets in which we compete, including the hospital market, the physician office market and international markets;

•regulatory approvals, market acceptance and sales execution of existing or new products;

•whether and when we successfully develop and introduce new products;

•changes in the mix of products sold;

•seasonal or unanticipated changes in customer demand or the timing of significant orders;

•manufacturing problems, inefficiencies, capacity constraints, backlog or delays;

•research and development efforts, including clinical studies and new product scale-up activities;

•regulatory changes, uncertainties or delays;

•effectiveness in transitioning and operating a direct sales distribution model in certain international countries and expenses associated with these transitions;

•competitive pressures on average selling prices of our products;

•changes in reimbursement policies;

•costs, timing and effectiveness of further expansion of our sales force and field support resources;

•our ability to execute, maintain and achieve performance milestones under license and collaborative agreements;

•product recalls;

•prosecution, defense and resolution of license, patent or other contract disputes;

•costs and timing associated with business development activities, including potential licensing of technologies or intellectual property rights; and

•temporary and permanent costs and timing associated with the relocation of our personnel, assets and activities to our new corporate facilities.

Our operating results would also be adversely affected by a downturn in the market for our products or slower than anticipated product sales growth, including as a result of market saturation of our products. We continue to increase our operating expenses to support our expanded sales and marketing activities, manufacturing operations and new product development. Therefore, our operating results would be adversely affected if our sales and gross profits did not correspondingly increase at the same or higher rate or if our product development efforts are unsuccessful or subject to delays. Accurate prediction of future operating results is difficult or impossible. We may not achieve revenue growth or sustain profitability on a quarterly or annual basis, and our growth or operating results may not be consistent with predictions made by us or by securities analysts.

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We are dependent on the market acceptance of our existing products and products under development for revenue growth and profitability.

We believe that our revenue growth and profitability will substantially depend upon our ability to expand market acceptance and sales of our newer products, such as the Triage BNP Tests, Triage Cardiac Panel, Triage CardioProfilER Panel, Triage Profiler Shortness of Breath Panel, Triage D-Dimer Test and, subject to obtaining appropriate regulatory approvals, our products currently under development, such as the Triage Stroke Panel, Triage MPO tests and other tests for ACS, sepsis, abdominal pain and acute kidney injury. Our revenue growth will also depend on our effectiveness in transitioning to and operating a direct sales and distribution model in certain international countries, and on our ability to appropriately manage our operating expenses and our capital expenditures to optimize our profitability. We have made and continue to make significant investments in headcount, manufacturing equipment, facilities and infrastructure to address our current and planned future revenue growth. We are also making significant investments in new market segments in the United States, such as physician office testing. These investments and commitments are predicated on assumptions of market acceptance of our products and revenue growth.

If we fail to plan, establish and maintain:

•reliable, cost-efficient, high-volume manufacturing capacity;

•a cost-effective sales force, customer education and product support resources and administrative infrastructure;

•effective marketing to customers, especially in markets where we have limited experience or significant competition;

•an effective distribution system for our products; or

•appropriate strategies or tactics to address our competitors,

sales of our products may not meet expectations and our profitability may suffer.

Our Triage BNP Tests have encountered, and may continue to encounter, significant competition from products developed and commercialized by companies with greater financial capital and resources.

Product sales of our Triage BNP Tests represented 67% of our product sales in both 2005 and 2004. Our Triage BNP Tests are currently two of several FDA-cleared tests used to aid in the diagnosis of heart failure. Bayer, Dade Behring, Roche Diagnostics and Abbott Laboratories have launched competitive tests at various times since November 2002. Shionogi & Co., Ltd. sells a BNP radioimmunoassay product for research purposes only in the United States. Scios, Inc., from which we licensed the technology and patents related to our Triage BNP Tests in 1996, was acquired by Johnson & Johnson in April 2003.

We have experienced, and continue to experience, competition from these companies and anticipate competition from others in the future. Beginning in the third quarter of 2003, we experienced significant competition, primarily from Bayer, resulting in a loss of customers who wanted to utilize an automated immunoassay system for BNP testing. After initiating sales outside of the United States in November 2003, Abbott Laboratories began selling a BNP test in the United States during the first quarter of 2004. In addition, Abbott Laboratories recently announced that it will offer a BNP test on its i-STAT meter product, which is designed for use at the point-of-care. Dade Behring began selling a NT-pro BNP diagnostic product in September 2004. These and other competitors may succeed in developing or marketing products that are more effective or commercially attractive than the Triage BNP Tests. The risk of competition may increase as other potential competitors gain access to competing technologies, such as NT-pro BNP, which Roche is offering for license. Moreover, we may not have the financial resources, technical expertise or marketing, distribution or support capabilities to successfully compete with these and other competitors in the future. In addition, as the market for BNP testing matures and more competitive products become available, the average sales price for our Triage BNP Tests may decline, which may adversely impact our product sales, gross margins and our overall financial results.

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Competition and technological change in the diagnostic testing market may make our products less attractive or obsolete.

In addition to the specific competitive risks that we face in the market for our Triage BNP Tests, we face intense competition for our other products and in the general market for diagnostic testing. Our competitors include:

•companies making laboratory-based tests and analyzers;

•clinical reference laboratories; and

•other rapid diagnostic product manufacturers.

Currently, the majority of diagnostic products used by physicians and other healthcare providers are performed by independent clinical reference laboratories and hospital-based laboratories using automated testing systems. Therefore, with the exception of our Triage BNP Test for Beckman Coulter Immunoassay Systems, in order to achieve market acceptance for our products we will be required to demonstrate that our products provide clinical, cost-effective and time saving alternatives to automated tests traditionally used by clinical reference laboratories or hospital-based laboratories. In the future, this may prove to be more difficult as heart failure testing becomes more widely available on automated testing systems.

Our competitors have developed or are developing diagnostic products and/or testing systems that do or will compete with our products. Many of our competitors have substantially greater financial, technical, research and other resources and larger, more established marketing, sales, distribution and service organizations than we do. Moreover, these competitors offer broader product lines and have greater name recognition than we do, and offer discounts as a competitive tactic. In addition, several smaller companies are currently making or developing products that compete with or will compete with our products. We utilize long-term contracts with some of our customers as a method of defending against competition. Such contracts are of varying terms and expiration dates. Expiring contracts may not be renewed and long-term contracts may not be acceptable to new customers, which could harm our competitive strategy.

Our competitors may succeed in developing or marketing technologies or products that are more effective or commercially attractive than our products, or that would render our technologies and products obsolete. The success of our competitors, many of whom have made substantial investments in competing technologies, or our failure to compete successfully, may prevent, limit or interfere with our ability to make, use or sell our products in either the United States or in international markets.

The effect of market saturation may negatively affect the sales growth of our products, including our Triage BNP Tests.

The growth in our product sales in recent periods has been driven primarily by growth in the sales volumes of our Triage BNP Tests. For example, growth in the sales volume of our Triage BNP Tests represented 69% and 85%, respectively, of our total product sales growth in 2005 and 2004. Our meter-based Triage BNP Test, launched domestically in January 2001, was the first blood test available to aid in the detection of heart failure and benefited from a first to market position in the market until the entry of the direct competition in June 2003. Today, our Triage BNP Test products are among several FDA-cleared products for the use as an aid in the diagnosis of heart failure.

As the acute care and initial diagnosis market segment for natriuretic testing in the U.S. hospital setting becomes saturated, we expect the sales growth rates for our Triage BNP Tests in future periods to be lower than the growth rates we experienced over the past several years. We have historically experienced decreases in the sales growth rates related to market saturation for our other products, such as our Triage Drugs of Abuse Panel products. Unless we are able to successfully introduce new products into the market and achieve market acceptance of those products in a timely manner, the effect of market saturation on our existing products may negatively impact our product sales, gross margins and financial results. Even if we are able to successfully commercialize any new products, we may not experience sales growth rates for those products that are similar to the sales growth rates we achieved with our Triage BNP Tests.

If we do not successfully develop new products and new manufacturing processes as currently planned, we may not recover our significant investments in those projects.

We are investing in the research and development of potential new products, including products for stroke, MPO, ACS, sepsis, abdominal pain and acute kidney injury, and in expanded uses of our existing products. In

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certain cases, the successful development of our new products will depend on the development of new technologies. We are also making significant investments in processes and equipment to improve our manufacturing efficiency and capacity, in anticipation of new products and revenue growth, as well as in the construction of our new corporate complex. Our revenue growth and profitability are impacted by these investments. We are required to undertake time consuming and costly development activities and seek regulatory approval for potential new products and for potential new uses of existing products. Products that appear promising during product development and preclinical studies, including our Triage Stroke Panel, may not demonstrate clinical study results needed to support regulatory approval, or other parties have or may have patent or other proprietary rights to our potential new products, and may not allow us to sell them on reasonable terms, or at all. We may experience difficulties that could delay or prevent the successful development, introduction or market acceptance of any such new products. We will be harmed if we are unable, for technological or other reasons, to:

•complete new product development, processes, or capital projects, including projects intended to automate portions of our manufacturing processes, in a timely manner or at all;

•complete appropriate clinical studies to validate the use of potential new products or expanded use of existing products;

•implement or effectively or efficiently scale-up manufacturing for new products; or

•obtain regulatory approval or clearance to market a new product for an intended use or an existing product for an alternative use.

Manufacturing risks and inefficiencies may adversely affect our ability to produce products and could reduce our gross margins and increase our research and development expenses.

We are subject to manufacturing risks, including our limited manufacturing experience with newer products and processes, which may hinder our ability to scale-up manufacturing. Additionally, unanticipated acceleration or deceleration of customer demand may lead to manufacturing inefficiencies. We must manufacture our products in compliance with regulatory requirements, in sufficient quantities and on a timely basis, while maintaining acceptable product quality and manufacturing costs. Significant additional resources, implementation of additional automated and semi-automated manufacturing equipment and changes in our manufacturing processes and organization have been, and may continue to be, required for the scale-up of each new product prior to commercialization or to meet increasing customer demand once commercialization begins, and this work may not be successfully or efficiently completed.

In addition, although we expect some of our newer products and products under development to share production attributes with our existing products, production of these products may require the development of new manufacturing technologies and expertise. It may not be possible for us, or any other party, to manufacture these products at a cost or in quantities to make these products commercially viable. If we are unable to develop or contract for manufacturing capabilities as needed, on acceptable terms, our ability to conduct pre-clinical and clinical testing will be adversely affected, resulting in delayed submissions for regulatory clearance or approval of products and initiation of other development programs, both of which would have a material adverse effect on us.

Manufacturing and quality problems have arisen and may arise in the future as we attempt to scale-up our manufacturing capacity and implement automated and semi-automated manufacturing methods. For instance, we have experienced problems with third-party contractors that work with us in connection with our development of automated and semi-automated manufacturing equipment and we continue to rely on third parties for the manufacture of much of our automated and semi-automated manufacturing equipment. Consequently, scale-up and implementation of automated and semi-automated manufacturing methods may not be achieved in a timely manner or at a commercially reasonable cost, or at all. In addition, we continue to make significant investments to improve our manufacturing processes and to design, develop and purchase manufacturing equipment that may not yield the improvements that we expect. Unanticipated acceleration and deceleration of customer demand for our products has resulted, and may continue to result, in inefficiencies or constraints related to our manufacturing, which has harmed and may in the future harm our gross margins and overall financial results. Such inefficiencies or constraints may also result in delays, lost potential product sales or loss of current or potential customers due to their dissatisfaction.

We are dependent on key distributors and have limited direct distribution experience.  If any of our distribution relationships are terminated, or our distributors fail to adequately perform, our operating expenses will increase and our product sales may decrease.

We primarily rely upon Fisher for distribution of our products in the U.S. hospital market and may rely upon Fisher or other distributors to distribute new products or our existing products in other markets. Fisher accounted for 84% and 86% of our product sales in 2005 and 2004, respectively. We have a distribution agreement with Fisher

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that expires on December 31, 2008. We distribute products in the United States physician office market primarily through PSS and Henry Schein. Internationally, we distribute products through country-specific and regional distributors, as well as through our direct sales force in selected countries. The loss or termination of one or more of our distributors could have a material adverse effect on our sales in the market served by that distributor.

If any of our distribution or marketing agreements are terminated or expire, and we are unable to enter into alternative agreements or if we elect to distribute our products directly, we will have to invest in additional sales, marketing and administrative resources, including additional field account executives and customer support resources, which would significantly increase our expenses. For instance, if we distribute our products directly to customers, we would need to hire additional personnel and would incur additional expenses relating to customer order processing and servicing, warehousing, shipping, billing and collections, which are costs that our distributors currently bear. We may also need to invest in additional capital equipment, third-party services and facilities in order to administer the logistics of direct distribution. Changes in the distribution of our products may also result in contract termination fees, transition-related expenses, disruption of our business, increased competition and lower product sales and operating profits. In addition, following the expiration or termination of any distribution agreement, a former distributor may attempt to compete directly with us by offering competitive products to our current customers. We have limited experience in direct sales, marketing and distribution of our products, both domestically and internationally. Our direct sales, marketing and distribution efforts may not be successful and we may not be able to successfully transition from a distributor model to a direct sales model. Further, we may not be able to enter into new distribution or marketing agreements on satisfactory terms, or at all. A failure to enter into acceptable distribution agreements, to successfully market our products or to implement the logistics associated with direct product distribution to our customers would have a material adverse effect on us.

We may be unable to accurately predict future sales through our distributors, which could harm our ability to efficiently manage our internal resources to match market demand.

A significant portion of our product sales is made to Fisher domestically and other distributors internationally. As a result, our financial results, quarterly product sales, trends and comparisons are affected by seasonal factors and fluctuations in the buying patterns of end-user customers, Fisher and our other distributors, and by the changes in inventory levels of our products held by these distributors. For example, higher utilization rates of our Triage BNP Tests may be due to a higher number of ED visits by patients exhibiting shortness of breath, a symptom of heart failure and of influenza.  However, higher utilization may also result from greater awareness, education and acceptance of the uses of our Triage BNP Tests, as well as additional users within the hospitals.

We are unable to verify the inventory levels of our international distributors and only have limited visibility over the inventory levels of our products at Fisher or our other domestic distributors. While we attempt to assist Fisher in maintaining targeted stocking levels of our products, we may not be successful. Attempting to assist Fisher in maintaining targeted stocking levels of our products involves the exercise of judgment and use of assumptions about future uncertainties including end-user customer demand and, as a result, actual results could differ from our estimates. Inventory levels of our products held by distributors may exceed or fall below the levels we consider desirable on a going-forward basis, which may harm our future financial results. This may result from unexpected buying patterns of our distributors or our inability to efficiently manage or invest in internal resources, such as manufacturing capacity, to meet the actual demand for our products. In addition, if we begin direct distribution in any territory following the expiration or termination of a distribution agreement for that territory, it is likely that our product sales in that territory will decrease as our prior distributor sells its remaining inventory of our products.

The process of obtaining clearance or approval to market new medical devices in the United States is expensive, time consuming and uncertain. We may not obtain required approvals for the commercialization of our products in the United States in a timely manner, if at all.

Our future performance depends on, among other matters, our estimates as to when and at what cost we will receive regulatory approval for new products. Regulatory approval can be a lengthy, expensive and uncertain process, making the timing and cost of obtaining approvals difficult to predict.

In the United States, clearance or approval to commercially distribute new medical devices is received from the FDA through clearance of a Premarket Notification, or 510(k), or through approval of a Premarket Approval Application, or PMA. To receive 510(k) clearance, a new product must be substantially equivalent to a medical device first marketed in interstate commerce prior to May 1976. The FDA may determine that a new product is not substantially equivalent to a device first marketed in interstate commerce prior to May 1976 or that additional information is needed before a substantial equivalence determination can be made. A “not substantially equivalent”

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determination, or a request for additional information, could prevent or delay the market introduction of new products that fall into this category. The 510(k) clearance and PMA approval processes can be expensive, uncertain and lengthy. It generally takes from three to five months from submission to obtain 510(k) clearance, and from six to eighteen months from submission to obtain PMA approval; however, it may take longer, and 510(k) clearance or PMA approval may never be obtained.

For devices that are cleared through the 510(k) process, modifications or enhancements that could significantly affect safety or effectiveness, or constitute a major change in the intended use of the device, require new 510(k) submissions. We have made modifications to some of our products since receipt of initial 510(k) clearance. With respect to several of these modifications, we filed new 510(k)s describing the modifications and have received FDA 510(k) clearance. We made other modifications to some of our products that we believe do not require the submission of new 510(k)s. The FDA may not agree with any of our determinations not to submit a new 510(k) or PMA for any of these modifications made to our products. If the FDA requires us to submit a new 510(k) or PMA for any device modification, we may be prohibited from marketing the modified products until the new submission is cleared by the FDA.

The FDA has made, and may continue to make, changes in its approval requirements and processes. We cannot predict what these changes will be, how or when they will occur or what effect they will have on the regulation of our products. Any new regulations may impose additional costs or lengthen review times of our products. Delays in receipt of or failure to receive United States regulatory approvals or clearances for our new products would have a material adverse effect on our business, financial condition and results of operations.

In October 2004, we filed a 510(k) with the FDA seeking clearances for the Triage Profiler CP™ Panel. The Triage Profiler CP Panel incorporates a proprietary MultiMarker Index algorithm which analyzes information from all four markers on the panel and presents a single composite index result. Because of the proprietary MultiMarker Index algorithm used in the calculation of the composite result, the FDA determined that the device is not substantially equivalent to devices marketed in interstate commerce prior to May 28, 1976 and therefore classified the device by statute into Class III (Premarket Approval). We believe that the FDA’s decision to request that we file a PMA in no way reflects on the quality of the data we previously submitted, or on the perceived diagnostic utility of the MultiMarker Index algorithm. Rather, we believe that the FDA’s decision was based on the fact that the Triage Profiler CP Panel has new technological characteristics that may not be generally used in medical practice today. We are working with the FDA to determine the appropriate regulatory pathway for this potential product.

We submitted a PMA for our Triage Stroke Panel in December 2004. In April 2005, we received a letter from the FDA indicating that the PMA submitted in 2004 for our Triage Stroke Panel is on hold pending submission of additional information. The letter further states that the issues raised need to be resolved before the FDA can complete its review, otherwise the PMA in its current form would be considered not approvable. In October 2005, the FDA agreed to our request for a 180-day extension to the PMA. We are on track to submit additional clinical data pertaining to our Triage Stroke Panel within the extension granted by the FDA.

Because we export our products to foreign countries, we are also subject to applicable regulatory approval requirements in those countries, which may impose additional costs upon us or prevent or delay us from marketing our products in those countries.

In addition to regulatory requirements in the United States, we are also subject to the regulatory approval requirements for each foreign country to which we export our products. In the European Union, for example, the In Vitro Diagnostic Directive Medical Device Directive, or IVDD, mandates requirements for a quality management system and technical product information. Regulatory compliance with the IVDD is represented by affixing the “CE” mark to product labeling. Depending on product classification, the IVDD requirements may entail review by an European Union Member State Notified Body or self-certification by the manufacturer. Although all of our products are currently eligible for CE marking through self-certification, this process can be lengthy and expensive. As another example, in Canada, our products require approval by Health Canada prior to commercialization along with International Standards Organization, or ISO, 13485/CMDCAS certification. It generally takes three to six months from submission to obtain a Canadian Device License. In some cases, device license approval may take longer or may not be obtained at all. Any changes in foreign approval requirements and processes may cause us to incur additional costs or lengthen review times of our products. We may not be able to obtain foreign regulatory approvals on a timely basis, if at all, and any failure to do so may cause us to incur additional costs or prevent us from marketing our products in foreign countries, which may have a material adverse effect on our business, financial condition and results of operations.

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We are subject to ongoing regulation of the products for which we have obtained regulatory clearance or approval, among other things, which may result in significant costs or in certain circumstances, the suspension or withdrawal of previously obtained clearances or approvals.

Any products for which we obtain regulatory approval or clearance continue to be extensively regulated by the FDA and other federal, state and foreign regulatory agencies. These regulations impact many aspects of our operations, including manufacturing, labeling, packaging, adverse event reporting, storage, advertising, promotion and record keeping. For example, our manufacturing facilities, including those at our new corporate complex, and those of our suppliers are, or can be, subject to periodic regulatory inspections. The FDA and foreign regulatory agencies may require post-marketing testing and surveillance to monitor the effects of approved products or place conditions on any product approvals that could restrict the commercial applications of those products. In addition, the subsequent discovery of previously unknown problems with a product may result in restrictions on the product, including withdrawal of the product from the market. We are also subject to routine inspection by the FDA and certain state agencies for compliance with Quality System Requirement and Medical Device Reporting requirements in the United States and other applicable regulations worldwide, including but not limited to ISO regulations. In addition to product-specific regulations, we are subject to numerous federal, state and local laws relating to such matters as safe working conditions, manufacturing practices, environmental protection, fire hazard control and disposal of hazardous or potentially hazardous substances. We may incur significant costs to comply with these laws and regulations. If we fail to comply with applicable regulatory requirements, we may be subject to fines, suspension or withdrawal of regulatory approvals, product recalls, seizure of products or injunctions against their distribution, disgorgement of money, operating restrictions and criminal prosecution.

Delays in the conduct or completion of our clinical studies or the analysis of the data from our clinical studies may result in delays in our planned filings for regulatory approvals, and may adversely affect our ability to commercialize our products.

We cannot predict whether we will encounter problems with any of our completed, ongoing or planned clinical studies that would cause us or regulatory authorities to delay or suspend our ongoing or planned clinical studies, or delay the analysis of data from our completed or ongoing clinical studies.

Any of the following could delay the completion of our ongoing and planned clinical studies:

•ongoing discussions with the FDA or comparable foreign authorities regarding the scope or design of ourclinical studies;

•delays in enrolling patients;

•lower than anticipated retention rate of patients in a clinical study;

•unexpected results or adverse events of clinical studies;

•insufficient supply or deficient quality of materials necessary for the performance of clinical studies; or

•difficulties in coordinating clinical study activities with third-party clinical study sites.

If the results of our ongoing or planned clinical studies for our potential products are not available when we expect or if we encounter any delay in the analysis of data from our clinical studies, we may not be able to commence marketing or commercial sales of products when we expect.

Changes in U.S. laboratory regulations for our customers may adversely affect us.

The use of our products is affected by the Clinical Laboratory Improvement Amendments of 1988, or CLIA, and related federal and state regulations, which provide for regulation of laboratory testing. The scope of these regulations includes quality control, proficiency testing, personnel standards and federal inspections.

Under CLIA quality control rules in effect from 1992 through 2002, laboratories using “unitized” test systems were in compliance with CLIA if they followed the manufacturers’ instructions for daily quality control, or QC, by relying on the internal controls built into unitized test systems, including our Triage products. On January 24, 2003, the Centers for Medicare and Medicaid Services, or CMS, publicly issued a final QC rule under CLIA, which went into effect on April 24, 2003. So long as laboratory directors, at a minimum, review manufacturers’ QC instructions, find those instructions to reasonably monitor the accuracy of the analytic process and the laboratory then follows those manufacturers’ instructions, the QC requirements contained in the 2003 modifications of the CLIA regulations will be satisfied. Future amendments of CLIA, the promulgation of additional regulations or guidelines impacting laboratory testing, and uncertainties relating to the enforcement of CLIA may have a material adverse effect on our ability to market our products, our business and financial condition, our results of operations and our customers’ access to our products.

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Diagnostic test systems are classified into one of three CLIA regulatory categories based on their potential risk to public health. Waived tests are the lowest regulated category and those most used in physician offices. In August 2005, we announced that the FDA granted a CLIA waiver to reclassify the Triage BNP Test used on our Triage MeterPlus from CLIA moderately complex to waived.

We are dependent on sole-source suppliers for our products. A supply interruption would harm us.

Sole-source vendors provide some key components and raw materials used in the manufacture of our products. Any interruption in supply of a sole-sourced component or raw material would have a material adverse effect on our ability to manufacture these products until a new source of supply is qualified or alternative manufacturing processes are implemented and, as a result, would have a material adverse effect on us. In addition, an uncorrected impurity or supplier’s variation in a raw material, either unknown to us or incompatible with the manufacturing processes of our products, could have a material adverse effect on our ability to manufacture products. We have products under development that, if developed and subject to obtaining appropriate regulatory approvals, may require us to enter into additional supplier arrangements or implement alternative manufacturing processes. We may not be able to enter into additional supplier arrangements on commercially reasonable terms, or at all. We also may not be able to implement alternative manufacturing processes that are effective and cost efficient, or at all. Failure to obtain a supplier on acceptable terms, or at all, or the implementation of alternative processes for the manufacture of our future products, if any, could increase our manufacturing costs or limit our production capacity for one or more of our products, which would have a material adverse effect on us.

For example, we rely upon LRE Technology Partner Gmbh, or LRE, for production of the fluorometer that is used with our Triage MeterPlus Platform products, which include the rapid Triage BNP Test, Triage Cardiac Panel, Triage CardioProfilER Panel, Triage Profiler Shortness of Breath Panel, Triage TOX Drug Screen and other products currently under development. In addition, we rely on Beckman Coulter to manufacture the Triage BNP Test for Beckman Coulter Immunoassay Systems and related calibrations and controls for us. If these or any other sole-source suppliers are unable or unwilling to manufacture sufficient quantities of the relevant items that meet our quality standards, we would be required to identify and qualify alternative suppliers. Although we generally maintain safety stock inventory levels of these items, which would allow us some time to identify and qualify alternative suppliers, a delay or inability to identify and qualify alternative suppliers may materially and adversely affect:

•our sales and profit margins;

•our ability to adequately service our existing customers and market our products to potential new customers;

•our ability to develop and manufacture products on a timely and competitive basis; or

•the timing of market introductions and subsequent sales of products.

Our patents and proprietary technology may not provide us with any benefit and the patents of others may prevent us from commercializing our products.

Our ability to compete effectively will depend in part on our ability to develop and maintain proprietary aspects of our technology, and to operate without infringing the proprietary rights of others or to obtain licenses to such proprietary rights. Our patent applications may not result in the issuance of any patents. Additionally, our patent applications may not have priority over others’ applications, or, if issued, our patents may not offer protection against competitors with similar technology. Any patents issued to us may be challenged, invalidated or circumvented in the future and the rights created thereunder may not provide a competitive advantage. Any of these circumstances could prevent us from selling any or all of our products. Others may have filed and in the future are likely to file patent applications that are similar or identical to ours. To determine the priority of inventions, from time to time, we participate in interference proceedings declared by the United States Patent and Trademark Office, or USPTO, and similar proceedings in foreign jurisdictions. These proceedings could result in a substantial cost to us.

Our products and activities may be covered by technologies that are the subject of patents issued to, and patent applications filed by, others. We have obtained licenses, and we may negotiate to obtain other licenses, for technologies patented by others. Some of our current licenses are subject to rights of termination and may be terminated. Our licensors may not abide by their contractual obligations and, as a result, may limit the benefits we currently derive from their licenses. We may not be able to renegotiate or obtain licenses for technology patented by others on commercially reasonable terms, or at all. We may not be able to develop alternative approaches if we are unable to obtain licenses and our current and future licenses may not be adequate for the operation of our business.

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The failure to obtain, maintain or enforce necessary licenses or to identify and implement alternative approaches would prevent us from operating some or all of our business and would have a material adverse effect on us.

We rely upon trade secrets, technical know-how and continuing invention to develop and maintain our competitive position. Others may independently develop substantially equivalent proprietary information and techniques or otherwise gain access to our trade secrets or disclose such technology. We may not be able to meaningfully protect our trade secrets, or be capable of protecting our rights to our trade secrets.

Legal proceedings to obtain patents and litigation of third-party claims of intellectual property infringement or relating to existing licenses could require us to spend substantial amounts of money and could impair our operations.

Litigation may be necessary to enforce any patents issued to us, to protect trade secrets or know-how owned by us, to determine the enforceability, scope and validity of the proprietary rights of others, or to enforce our rights under license and other intellectual property-related agreements. Litigation related to intellectual property matters has in the past, and may in the future, result in material expenses to us and be a significant diversion of effort by our technical and management personnel, regardless of the outcome. Litigation, if initiated, could seek to recover damages as a result of any sales of the products subject to the litigation and to enjoin further sales of such products. The outcome of litigation, both pending and potentially in the future, is inherently uncertain. An adverse outcome in any litigation or the failure to obtain a necessary license could subject us to significant liability and could prevent us from selling any or all of our products, which could have a material adverse effect on our business, financial condition and results of operations.

Our commercial success also depends in part on us neither infringing patents or proprietary rights of third parties nor breaching any licenses that may relate to our technologies and products. We are aware of several third-party patents that may relate to our technology. In addition, we have received and may in the future receive notices claiming infringement from third parties as well as invitations to take licenses under third-party patents. There can be no assurance that we do not or will not infringe these patents, or other patents or proprietary rights of third parties. Any legal action against us or our collaborators claiming damages and seeking to enjoin commercial activities relating to our products and processes affected by third-party rights, in addition to subjecting us to potential liability for damages, may require us or our collaborators to obtain a license in order to continue to manufacture or market the affected products and processes. There can be no assurance that our collaborators or we would prevail in any such action or that any license (including licenses proposed by third parties) required under any such patent would be made available on commercially acceptable terms, if at all. There are a significant number of U.S. and foreign patents and patent applications in our areas of interest, and we believe that there may be significant litigation in the industry regarding patent and other intellectual property rights.

In November 2004, Roche Diagnostics Corporation, together with several of its affiliates, filed a complaint in the United States District Court, Southern District of Indiana, Indianapolis Division, alleging that Biosite is infringing two patents, U.S. Patent 5,366,609 and U.S. Patent 4,816,224, owned by Roche and/or its affiliates. We believe these allegations of infringement are without merit and we are vigorously contesting these claims. Also, in November 2004, we filed a complaint in the United States District Court, Southern District of California, alleging that Roche Diagnostics Corporation and Roche Diagnostics GmbH are infringing two patents, U.S. Patent 6,174,686 and U.S. Patent 5,795,725, owned by Biosite. In October 2005, we amended our complaint, further alleging infringement of a third Biosite patent, U.S. Patent 6,939,678. All of the Biosite patents relate to methods for the measurement of cardiac troponin forms. We believe that our claims have merit and we are vigorously pursuing their prosecution.

In December 2005, we announced that we are in discussions with Roche regarding a potential settlement of both pending cases. Biosite and Roche filed joint requests to stay the litigation in the United States District Courts in the Southern District of California and the Southern District of Indiana through April 2006, both of which have now been granted. Given the stage of both actions and the current stay of the proceedings, we cannot predict the ultimate outcome of either matter at this time.

We may not be successful in transitioning from the use of distributors in international markets to directly selling our products in those markets, which may result in lower product sales and higher expenses.

Until recently, we sold all of our products internationally through independent distributors. We transitioned to a direct sales and distribution model in France and Germany in 2003, in Belgium, Luxembourg, the United Kingdom and Italy in 2004, and in the Netherlands in 2006. Over the next few years, we may transition the distribution of our products in some additional international countries to a direct sales and distribution model. In any country in which

26

we transition to a direct sales and distribution model, we will need to make investments in facilities, resources and personnel. In addition, we will assume additional administrative expenses to manage our operations in those countries. We may also incur expenses associated with the termination of our existing distribution arrangements in those countries. We possess limited experience in managing operations outside of the United States and in direct sales, marketing and distribution of our products in international markets. If our efforts to implement direct sales and distribution in countries where we elect to do so are unsuccessful, we may not achieve our projected sales objectives, and we may also incur additional expenses, or our operating profits may be lower than anticipated.

Our international sales and operations may be harmed by political, social or economic changes, or by other factors.

Export sales to international customers amounted to $35.9 million for 2005 and $26.0 million for 2004. Since 2003, we have significantly expanded our direct sales and distribution operations outside of the United States in France, Germany, Belgium, Luxembourg, the United Kingdom, Italy, and the Netherlands and we may expand these operations into additional countries in the future. Our accounts receivable balance for our international customers and distributors was $9.0 million and $7.4 million at December 31, 2005 and 2004, respectively. Sales and costs resulting from our direct sales and distribution operations in Europe are denominated primarily in local currencies, including the Euro, and are subject to fluctuations in currency exchange rates. Further, we purchase our Triage MeterPlus inventory from LRE and incur other operating expenses, including clinical trials, which are denominated in Euros and other local currencies. Significant fluctuations in the currency exchange rates may negatively impact our consolidated sales and earnings.

International sales and operations are also subject to a variety of other risks, including:

•greater risk of uncollectible accounts;

•difficulty in staffing, monitoring and managing foreign operations;

•understanding of, and compliance with local employment laws, including reduced flexibility and increased cost of staffing adjustments;

•unknown or changes in regulatory practices, including import or export license requirements, trade barriers, tariffs, employment and tax laws;

•adverse tax consequences, including imposition of withholding or other taxes on payments by subsidiaries;

•restrictions on repatriation of locally-derived revenue;

•competition from locally-produced products with cost advantages or national appeal;

•local business practices that could expose our direct sales and marketing organization to Foreign Corrupt Practices Act risks;

•political, social or economic conditions and changes in these foreign markets; and

•government spending patterns.

As a result, our operating results will fluctuate along with the currencies and general economic conditions in the countries in which we do business, which could harm our operating results.

Healthcare reform and restrictions on reimbursement may adversely affect our results.

In the United States, healthcare providers that purchase our products and other diagnostic products generally rely on third-party payors to reimburse all or part of the cost of the procedure. In international markets, reimbursement and healthcare payment systems vary significantly by country, and include both government sponsored healthcare and private insurance. Third-party payors can affect the pricing or the relative attractiveness of our products by regulating the maximum amount of reimbursement provided by such payors for laboratory testing services. Third-party payors are increasingly scrutinizing and challenging the prices charged for both existing and new medical products and services. Lower than expected or decreases in reimbursement amounts for tests performed using our products may decrease amounts physicians and other practitioners are able to charge patients, which in turn may adversely affect our ability to sell our products to the physicians at prices we target. Third-party reimbursement and coverage may not be available or adequate in either U.S. or foreign markets, current reimbursement amounts may be decreased in the future and future legislation, regulation or reimbursement policies of third-party payors may adversely affect the demand for our products or our ability to sell our products on a profitable basis.

Failure to comply with government regulations regarding our products could harm our business.

Several state and federal laws have been applied to restrict certain marketing practices in the medical device industry in recent years. These include federal and state anti-kickback statutes. The federal health care program anti-kickback statute prohibits persons from knowingly and willfully offering, paying, soliciting, or receiving

27

remuneration in return for referrals or in return for purchasing, leasing, ordering, or arranging for or recommending purchasing, leasing, or ordering any service or item payable under Medicare, Medicaid, or certain other federally funded health care programs. These provisions have been broadly interpreted to apply to certain relationships between manufacturers, purchasers of manufacturers’ products, and parties in a position to refer or recommend purchases. Under current law, federal courts and the Office of Inspector General of the United States Department of Health and Human Services have stated that the statute may be violated if one purpose (as opposed to a primary or sole purpose) of remuneration is to induce prohibited purchases, recommendations or referrals.

There are a number of statutory exceptions and regulatory safe harbors under the federal anti-kickback statute, including those for properly disclosed reductions in price, payments to bona fide employees, payments to group purchasing organizations, compensation under personal services contracts and warranties. Although a failure to satisfy all of the criteria for a particular safe harbor does not necessarily mean that an arrangement is unlawful, practices that involve remuneration intended to induce purchases or recommendations may be subject to government scrutiny if they do not qualify for a safe harbor.

The majority of states also have statutes or regulations similar to the federal health care program anti-kickback statute. Certain of these laws do not have exemptions or safe harbors. Moreover, in several states, these laws apply regardless of whether payment for the services in question may be made under Medicaid or state health programs. Sanctions under these federal and state laws may include civil money penalties, license suspension or revocation, exclusion or medical product companies, providers, or practitioners from participation in federal or state healthcare programs, and criminal fines or imprisonment. Our practices may not in all cases meet all of the criteria for safe harbor protection from anti-kickback liability. Because of the breadth of these statutes, it is possible that some of our business activities could be subject to challenge under one or more of such laws. Such a challenge could have a material adverse effect on our business and financial condition.

Changing facilities costs and other risks relating to our move to our new corporate complex may negatively impact our operating results.

In October 2003, we completed our purchase of land for the construction of our new corporate complex. We purchased a total of 26.1 usable acres for approximately $28.2 million. We expect the new complex to provide us with up to 800,000 square feet of space, to be constructed in phases as needed. The first phase will provide us with approximately 350,000 square feet of space. The total cost of the land and the construction of the first phase is estimated to be approximately $110.0 million, of which we have incurred approximately $108.6 million through December 31, 2005. We have funded the construction of the complex using our available cash. As of March 1, 2006, our research and development staff, selling, general and administrative staff and a portion of our manufacturing operations have relocated to the new corporate complex. We expect to complete the other buildings in the first phase of construction during the first half of 2006 and to relocate our remaining operations in stages once the buildings are ready for use. We expect our occupancy costs to increase primarily due to increased square footage.

Should there be a downturn in our business or the markets in which we compete, we may not have a need to expand our facilities as we have planned. As a result, we may then seek an alternative use for all or a portion of the property, or seek to sell all or a portion of the property, which may have a negative impact on our operating results. We may also incur unexpected costs and expenses in connection with our move from our existing facilities to our new corporate complex, or we may experience unanticipated decreases in productivity and other losses due to inefficiencies relating to this transition or delays in obtaining any required approvals or clearances from regulatory agencies related to the validation of the manufacturing facilities. For instance, the scale-up of manufacturing at our new corporate complex could result in lower than expected manufacturing output and higher than expected product costs. In addition, we expect to incur some duplicate facilities expenses, such as rent, as we are transferring our operations in stages to the new corporate complex.

Some of our existing office and laboratory leases in the United States will expire during the next year. In the event of any delays in the construction or completion of the other buildings at our new corporate complex, we may not be able to extend these existing leases on acceptable terms or at all and we may not be able to find acceptable alternative facilities. This and other consequences of any delay in the construction or completion of our new corporate complex may significantly disrupt our business, increase our operating expenses and reduce our productivity, which could harm our financial results.

Recently, the San Diego Airport Authority issued a draft of proposed changes to land uses, such as restrictions on maximum building heights, personnel densities and hazardous materials storage, in areas surrounding airports throughout San Diego County. Several of these changes, if approved, could potentially negatively impact our ability

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to construct our corporate complex as we currently plan. In that case, we may need to alter our development plans for the remainder of our corporate complex. However, any such regulatory changes are still in the early stages and it is not possible for us to predict whether any changes will be adopted or implemented, and whether such changes could adversely impact our corporate complex.

Long-lived and intangible assets may become impaired and result in an impairment charge.

At December 31, 2005, we had approximately $163.2 million of long-lived assets, including $29.1 million of land, $56.0 million of buildings and improvements, $22.8 million of building construction-in-progress, $98,000 of leasehold improvements, $43.1 million of equipment, furniture and fixtures and $7.9 million of capitalized license rights and other assets. Building, building improvements, leasehold improvements, equipment, intangible assets and certain other long-lived assets are amortized or depreciated over the lesser of their useful lives or the remaining lease term. In San Diego, we lease five buildings with leases that expire between March and June 2006. The carrying amounts of long-lived and intangible assets are affected whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Such events or changes might include a significant decline in market share, a significant decline in profits, rapid changes in technology, significant litigation or other matters. Adverse events or changes in circumstances may affect the estimated undiscounted future operating cash flows expected to be derived from long-lived and intangible assets. In the event impairment exists, an impairment charge would be determined by comparing the carrying amount of the asset to the applicable estimated future cash flows, discounted at a risk-adjusted interest rate. An impairment charge may result in a material adverse effect on our operating results. In addition, the remaining amortization period for the impaired asset would be reassessed and revised if necessary.

At December 31, 2005, we had approximately $7.4 million of short-term and long-term deferred tax assets, consisting primarily of temporary differences between book and tax treatment of certain items such as depreciation. No valuation allowance has been recorded to offset the deferred tax assets as we have determined that it is more likely than not that these assets will be realized. We will continue to assess the likelihood of realization of such assets; however, if future events occur which do not make the realization of such assets more likely than not, we will record a valuation allowance against all or a portion of the net deferred tax assets. Examples of future events that may occur which would make the realization of such assets unlikely would be a lack of taxable income resulting from poor operating results or rising tax deductions generated from disqualifying dispositions of shares issued under our stock plans.

We may need additional capital. If additional capital is not available, we may have to curtail or cease operations.

If cash generated from operations is insufficient to satisfy our working capital and capital expenditure requirements, we may be required to sell additional equity or debt securities or obtain additional credit facilities. Additional capital, if needed, may not be available on satisfactory terms, or at all. Furthermore, any additional equity financing may be dilutive to stockholders, and debt financing, if available, may include restrictive covenants. Our future liquidity and capital funding requirements will depend on numerous factors, including:

•the costs, timing and effectiveness of further expansion of sales, marketing and manufacturing activities and resources;

•expansion of our manufacturing capacity and our facilities expansion needs, including the construction of our new corporate complex;

•the effects of competition, including products competitive with our Triage BNP Tests, from companies with greater financial capital and resources;

•the effect on sales and cash receipts for our Triage BNP Tests due to market saturation in the hospital market for natriuretic peptide testing in the United States;

•regulatory changes, uncertainties or delays;

•the impact of the prosecution, defense and resolution of ongoing and potential future license and patent disputes;

•the extent to which our new products and products under development are successfully developed, gain regulatory approval and market acceptance and become and remain competitive;

•seasonal or unanticipated changes in customer demand;

•the scope, timing and results of research and development efforts, including clinical studies and regulatory actions regarding our potential products;

•changes in third-party reimbursement policies;

•the ability to execute, enforce and maintain license and collaborative agreements and attain the milestones under these agreements necessary to earn contract revenues;

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•the costs and timing associated with business development activities, including potential licensing of technologies patented by others; and

•the timing and amount of any repurchase of our stock or early retirement of our debt.

If we require additional capital, and if we are not able to raise capital on acceptable terms when needed, we would have to scale back our operations, reduce our work force and license or sell to others products we would otherwise seek to develop or commercialize ourselves.

We are dependent on others for the development of products. The failure of our collaborations to successfully develop products would harm our business.

Our business strategy includes entering into agreements with clinical and commercial collaborators and other third parties for the development, clinical evaluation and marketing of existing products and products under development. Many of the agreements are subject to rights of termination and may be terminated without our consent. These parties also may not abide by their contractual obligations to us and may discontinue or sell their current lines of business. Research performed under a collaboration for which we receive or provide funding may not lead to the development of products in the timeframe expected, or at all. If these agreements are terminated earlier than expected, or if third parties do not perform their obligations to us properly and on a timely basis, we may not be able to successfully develop new products as planned, or at all.

We may not be able to manage our growth, and we may experience constraints or inefficiencies caused by unanticipated acceleration and deceleration of customer demand.

We have experienced growth and anticipate continued growth in the number of our employees, the scope of our operating and financial systems and the geographic area of our operations if market acceptance of our products increases and potential new products are developed and commercialized. This growth will result in an increase in responsibilities for both existing and new management personnel. Our ability to manage growth effectively will require us to continue to implement and improve our operational, financial and management information systems and internal control, and to train, motivate and manage our employees. We may not be able to adequately manage our expansion, and a failure to do so could have a material adverse effect on us.

Unanticipated acceleration and deceleration of customer demand for our products has and may continue to result in constraints or inefficiencies related to our manufacturing, sales force, implementation resources and administrative infrastructure. Such constraints or inefficiencies may adversely affect us as a result of delays, lost potential product sales or loss of current or potential customers due to their dissatisfaction. Similarly, over-expansion or investments in anticipation of growth that does not materialize could harm our financial results and result in overcapacity. For instance, we have made non-cancelable purchase commitments for certain inventory and product components. Any such inventory or components that are not used when planned are subject to loss because of spoilage or obsolescence.

If we lose our key personnel or are unable to attract and retain additional personnel, we may not be able to manage our business, pursue collaborations or develop our own products.

Our future success depends in part on the continued service of our key technical, sales, marketing and executive personnel, and our ability to identify, hire and retain qualified personnel. Competition for such personnel is intense and involves factors such as compensation, equity incentives, work culture, organization and direction. We may not be able to retain existing personnel or identify or hire additional personnel. If we are unable to retain existing personnel or identify or hire additional personnel, we may not be able to research, develop, commercialize or market our products, and as a result, our business may be harmed.

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We may have significant clinical and product liability exposure.

The testing, manufacturing and marketing of medical diagnostic products entails an inherent risk of clinical and product liability claims. Our launch of new products, subject to obtaining appropriate regulatory approvals, to assist in the diagnosis of other indications, such as stroke, sepsis, abdominal pain and acute kidney injury, may further increase our risk of these claims. Potential clinical and 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 future, our existing insurance may not be renewed at a cost and level of coverage comparable to that presently in effect, or at all. In the event that we are held liable for a claim against which we are not indemnified or for damages exceeding the limits of our insurance coverage, our liabilities could exceed our total assets.

Future changes in financial accounting standards or practices or existing taxation rules or practices may cause adverse unexpected revenue and/or expense fluctuations and affect our reported results of operations.

A change in accounting standards or practices or a change in existing taxation rules or practices can have a significant effect on our reported results and may even affect our reporting of transactions completed before the change is effective. New accounting pronouncements and taxation rules and varying interpretations of accounting pronouncements and taxation practice have occurred and may occur in the future. Changes to existing rules or the questioning of current practices may adversely affect our reported financial results or the way we conduct our business. For example, as a result of changes approved by the Financial Accounting Standards Board, or FASB, on January 1, 2006 we began recording compensation expense in our statements of income for equity compensation instruments, including employee stock options, using the fair value method. Our reported financial results beginning for the first quarter of 2006 and for all foreseeable future periods will be negatively and materially impacted by this accounting change. Other potential changes in existing taxation rules related to stock options and other forms of equity compensation could also have a significant negative effect on our reported results.

Evolving regulation of corporate governance and public disclosure may result in additional expenses and continuing uncertainty.

Changing laws, regulations and standards relating to corporate governance and public disclosure, including the Sarbanes-Oxley Act of 2002, new SEC regulations and Nasdaq National Market rules are creating uncertainty for companies such as ours. These new or changed laws, regulations and standards are subject to varying interpretations, in many cases due to their lack of specificity, and as a result, their application in practice may evolve over time as new guidance is provided by regulatory and governing bodies. This could result in continuing uncertainty regarding compliance matters and higher costs necessitated by ongoing revisions to disclosure and governance practices. We are committed to maintaining high standards of corporate governance and public disclosure. As a result, we intend to invest resources to comply with evolving laws, regulations and standards, and this investment may result in increased general and administrative expenses and a diversion of management time and attention from revenue-generating activities to compliance activities. If our efforts to comply with new or changed laws, regulations and standards differ from the activities intended by regulatory or governing bodies due to ambiguities related to practice, regulatory authorities may initiate legal proceedings against us and we may be harmed.

Investor confidence and share value may be adversely impacted if our independent auditors are unable to provide us with the attestation of the adequacy of our internal controls over financial reporting, as required by Section 404 of the Sarbanes-Oxley Act of 2002.

Pursuant to Section 404 of the Sarbanes-Oxley Act of 2002, we are required to include in our annual reports on Form 10-K a report of management on our internal controls over financial reporting, including an assessment by management of the effectiveness of those internal controls over financial reporting. In addition, our independent auditors must attest to and report on management’s assessment of the effectiveness of our internal controls over financial reporting. How companies are implementing these new requirements including internal control reforms, if any, to comply with Section 404’s requirements, and how independent auditors are applying these new requirements and testing companies’ internal controls, remain subject to some uncertainty. We expect that our internal controls will continue to evolve as our business activities change. Although we will continue to diligently and vigorously review our internal controls over financial reporting in order to ensure compliance with the Section 404 requirements, any control system, regardless of how well designed, operated and evaluated, can provide only reasonable, not absolute, assurance that its objectives will be met. If, during any year, our independent auditors are not satisfied with our internal controls over financial reporting or the level at which these controls are documented, designed, operated, tested or assessed, or if the independent auditors interpret the applicable requirements, rules or regulations differently than we do, then they may decline to attest to management’s assessment or may issue a report

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that is qualified. This could result in an adverse reaction in the financial marketplace due to a loss of investor confidence in the reliability of our financial statements, which could negatively impact the market price of our shares.

Item 1B.Unresolved Staff Comments

Not applicable.

Item 2.         Properties

In October 2003, we completed our purchase of land for the construction of our new corporate complex. We purchased a total of 26.1 usable acres for approximately $28.2 million. We expect the new complex to provide us with up to 800,000 square feet of space, to be constructed in phases as needed. The first phase will provide us with approximately 350,000 square feet of space. The total cost of the land and the construction of the first phase is estimated to be approximately $110.0 million. We have funded the construction of the complex using our available cash. As of March 1, 2006, our research and development staff, selling, general and administrative staff and a portion of our manufacturing operations have relocated to the new corporate complex. We expect to complete the other buildings in the first phase of construction during the first half of 2006 and to relocate our remaining operations in stages once the buildings are ready for use. We expect our occupancy costs to increase primarily due to increased square footage. Should there be a downturn in our business or the markets in which we compete, we may not have a need to expand our facilities as we have planned. As a result, we may then seek an alternative use for all or a portion of the property, or seek to sell the property, which may have a negative impact on our operating results.

We lease approximately 77,000 square feet of space in five buildings in the Sorrento Valley area of San Diego, California under leases that expire between March and June 2006. These leased facilities are used for some of our research and development facilities and manufacturing operations. We also lease office space in Buc, France, Ghent, Belgium, Willich, Germany, Scorze, Italy, Madrid, Spain and Hong Kong, China for our international operations under leases that expire between July 2006 and December 2012. Certain of the leases contain the right of early termination at Biosite’s sole discretion at specific dates during the applicable lease term. We believe our facilities are adequate for our current needs and that suitable additional or alternative space, such as our new corporate complex, will be available in the future on commercially reasonable terms as needed.

Item 3.         Legal Proceedings

From time to time, we may be involved in litigation relating to claims arising out of our operations in the normal course of business. As of the date of this Annual Report on Form 10-K, we are not engaged in any legal proceedings other than those described below that may, individually or in the aggregate, have a material adverse effect on our business, financial condition or operating results.

In November 2004, Roche Diagnostics Corporation, together with certain of its affiliates, filed a complaint in the United States District Court, Southern District of Indiana, Indianapolis Division alleging that Biosite is infringing two patents, U.S. Patent 5,366,609 (the “‘609 Patent”) and U.S. Patent 4,816,224 (the “‘224 Patent”), owned by Roche and/or its affiliates (the “Indiana Case”). Biosite filed an answer and counterclaims to Roche’s complaint in February 2005. In March 2005, at the mutual request of Biosite and Roche, the Indiana Case was, for purposes of claim construction of the ‘609 Patent only, consolidated-in-part with two other cases filed by Roche against several unrelated parties and pending in the same trial court. The hearing on this subject of claim construction, which is commonly referred to as a Markman hearing, with respect to the ‘609 Patent occurred on August 1, 2005 and in October 2005 the court issued a ruling on the subjects at issue at that hearing. The parties are engaged in discovery with respect to the Indiana Case. Roche is seeking unspecified monetary damages and injunctive relief, among other remedies. We believe Roche’s allegations of infringement of the ‘609 Patent and ‘224 Patent are without merit and we are vigorously contesting these claims.

Also, in November 2004, Biosite filed a complaint in the United States District Court, Southern District of California alleging that Roche Diagnostics Corporation and Roche Diagnostics GmbH are infringing two patents, U.S. Patent 6,174,686 and U.S. Patent 5,795,725, owned by Biosite. The patents relate to methods for the measurement of cardiac troponin forms. Roche filed an answer and counterclaims to our complaint in March 2005.

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In October 2005, Biosite amended its complaint, further alleging that Roche Diagnostics Corporation and Roche Diagnostics GmbH are also infringing U.S. Patent 6,939,678, a newly issued patent assigned to Biosite that is also related to methods for the measurement of cardiac troponin forms. The parties have commenced preliminary discovery with respect to the California case. Biosite is seeking unspecified monetary damages and injunctive relief, among other remedies. We believe our claims have merit and we are vigorously pursuing their prosecution.

All parties in both lawsuits have been served. In December 2005, we announced that we are in discussions with Roche regarding a potential settlement of both pending cases. Biosite and Roche filed joint requests to stay the litigation in the United States District Courts in the Southern District of California and the Southern District of Indiana through April 2006, both of which requests have been granted. Given the stage of both actions and the current stay of the proceedings, we cannot predict the ultimate outcome of either matter at this time.

Item 4.         Submission of Matters to a Vote of Security Holders

Not applicable.

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PART II

Item 5.         Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Our common stock is traded on the Nasdaq National Market, under the symbol BSTE. The following tables set forth the high and low sale prices for our common stock as reported on the Nasdaq National Market for the periods indicated.

2004	High		Low
First Quarter	$	33.67	$	25.60
Second Quarter	$	46.82	$	31.85
Third Quarter	$	50.75	$	39.83
Fourth Quarter	$	63.64	$	45.60

2005	High		Low
First Quarter	$	64.09	$	51.76
Second Quarter	$	67.50	$	50.65
Third Quarter	$	61.98	$	51.84
Fourth Quarter	$	68.88	$	52.53

There were approximately 96 holders of record of our common stock as of March 1, 2006. We have not paid any cash dividends to date and do not anticipate any being paid in the foreseeable future.

The information required to be disclosed by Item 201(d) of Regulation S-K, “Securities Authorized for Issuance Under Equity Compensation Plans”, is incorporated by reference within Item 12 of Part III of this Annual Report on Form 10-K.

In February 2006, we announced a program to repurchase up to $30 million of our common stock. The timing of repurchases and the exact number of shares of our common stock to be repurchased will depend on prevailing market conditions and other factors. Repurchases under the program will be made using our own cash reserves and may be made in the open market, in privately negotiated transactions, or through the use of derivative securities or similar arrangements. As of March 14, 2006, we have repurchased an aggregate of 355,526 shares of our common stock at a total cost of approximately $18.7 million, including commissions. All of these purchases have been made through open market transactions pursuant to a 10b5-1 trading plan.

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Item 6.         Selected Financial Data

The following table sets forth selected consolidated financial data for each of our last five fiscal years during the period ended December 31, 2005.  You should read this data in conjunction with Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations”, as well as our consolidated financial statements and related notes appearing elsewhere in this Form 10-K.

(in thousands, except per share data)

	Year ended December 31,
	2005			2004			2003			2002			2001
Statement of Income Data:
Revenues:
Product sales	$	282,772		$	240,607		$	169,298		$	100,830		$	62,155
Contract revenues	4,927			4,335			4,066			4,396			3,485
Total revenues	287,699			244,942			173,364			105,226			65,640
Operating expenses:
Cost of product sales	85,108			79,388			58,567			31,312			17,400
Selling, general and administrative	74,758			65,394			51,944			34,208			22,845
Research and development	42,215			35,694			24,474			16,160			13,778
License and patent disputes	1,977			178			—			4,043			3,204
Total operating expenses	204,058			180,654			134,985			85,723			57,227
Operating income	83,641			64,288			38,379			19,503			8,413
Interest and other income, net	2,722			1,313			1,436			1,971			2,146
Income before provision for income taxes	86,363			65,601			39,815			21,474			10,559
Provision for income taxes	(32,334		)	(24,153		)	(15,052		)	(8,080		)	(3,833		)
Net income	$	54,029		$	41,448		$	24,763		$	13,394		$	6,726
Basic net income per share	$	3.16		$	2.61		$	1.62		$	0.91		$	0.47
Diluted net income per share	$	2.92		$	2.42		$	1.50		$	0.86		$	0.44
Common and common equivalent shares used in computing per share amounts (1)
-  Basic	17,092			15,889			15,295			14,742			14,413
-  Diluted	18,505			17,097			16,497			15,512			15,430

	December 31,
	2005		2004		2003		2002		2001
Balance Sheet Data:
Cash, cash equivalents and marketable securities	$	132,412	$	72,410	$	53,934	$	71,165	$	55,497
Working capital	165,660		114,794		90,875		80,970		65,515
Total assets	367,926		283,515		194,624		131,254		102,740
Long-term obligations, less current portion	13,457		17,105		17,593		5,253		3,542
Stockholders’ equity	315,365		220,337		152,903		107,941		90,911

(1)Computed on the basis described in Note 1 of our Notes to Consolidated Financial Statements.

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Item 7.         Management’s Discussion and Analysis of Financial Condition and Results of Operations

The matters discussed in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” contain forward-looking statements that involve risks and uncertainties. See “Forward-Looking Statements.”

Overview

Founded in 1988, Biosite^® Incorporated is a medical diagnostic company utilizing a biotechnology approach to create a broad and diverse portfolio of market-leading diagnostic tests. Our business model is designed to be fully integrated from discovery to customer, with a focus on patenting novel protein biomarker panels, manufacturing complex products at appreciable profit margins, employing strategic clinical studies and trials to validate our products’ diagnostic utility, and an emphasis on education when marketing our pioneering diagnostics directly to healthcare providers.

Our products are principally sold to acute care hospitals, which number approximately 5,400 in the United States. To market our products, we utilize a direct sales team that focuses its efforts primarily on larger centers with more than 200 beds and smaller hospitals that are high volume users of our products. We also use a network of distributors both in the United States and internationally.

The Fisher HealthCare Division of the Fisher Scientific Company, or Fisher, distributes our products primarily in hospitals in the United States and supports our direct sales force, particularly in smaller hospitals. We have a distribution agreement with Fisher that extends through December 31, 2008, subject to some limited exceptions pursuant to which a party may elect to terminate the agreement earlier. Sales to Fisher represented 84% and 86% of our product sales in 2005 and 2004, respectively. We primarily utilize distributor relationships with Physician Sales & Services, or PSS, and Henry Schein, Inc., or Henry Schein, to market our products to physician office laboratories in the United States.

In international markets, we have established direct selling efforts in several countries and utilize a network of country-specific and regional distributors in other areas. Since 2003, we have initiated direct sales and distribution operations in France, Germany, Belgium, Luxembourg, the United Kingdom, Italy and the Netherlands. In the future, we may transition to direct sales and distribution of our products in additional countries. We also employ a field-based network of clinically experienced individuals that support our direct sales force by providing pre- and post- sale education and training.

Our total revenues for 2005 were $287.7 million, representing a 17% increase over 2004. This growth resulted largely from increased sales of our Triage BNP Test products, which are primarily used to aid in the diagnosis of heart failure. Our meter-based Triage BNP Test, launched domestically in January 2001, was the first blood test available to aid in the detection of heart failure and benefited from a semi-exclusive position in the market, until the entry of direct competition in June 2003. In December 2003, we received clearance from the United States Food and Drug Administration, or FDA, to market our Triage BNP Test for Beckman Coulter Immunoassay Systems and we began selling the product in the United States in January 2004. As a result, a customer can perform b-type natriuretic peptide, or BNP, testing using either our rapid, portable Triage MeterPlus system or any of Beckman Coulter, Inc.’s automated immunoassay systems.

Today, our Triage BNP Test products are among several FDA-cleared blood products for use as an aid in the diagnosis of heart failure. These include products from Bayer Healthcare, Dade Behring, Roche Diagnostics and Abbott Laboratories, which offer products based on large, centralized automated testing platforms. In addition, Abbott Laboratories has announced that it will offer a BNP test on its i-STAT meter product, which is designed for use at the point-of-care. We have experienced, and continue to experience, competition from these companies and anticipate competition from others in the future. Our competitors may succeed in developing or marketing products that are more effective or more commercially attractive than the Triage BNP Tests. Moreover, we may not have the financial resources, technical expertise or marketing, distribution or support capabilities to compete successfully with these and other competitors in the future.

With several diagnostic products commercialized, our focus has expanded to include the search for proprietary disease markers that can potentially be applied to our testing platforms or to platforms marketed by other diagnostic companies with whom we might collaborate. To that end, in 1999 we launched Biosite Discovery. Through Biosite

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Discovery, we leverage our expertise in phage display antibody development to access protein targets via collaborations with clinical institutions or commercial companies, or via our internal research and licensing programs. Biosite Discovery has also attracted the interest of leading clinical collaborators, who provide patient samples and assist in the analysis of clinical data. The discovery of new disease markers and the extension of applications for existing products could enable us to expand our product sales into other healthcare market segments. Included in contract revenues for the year ended December 31, 2005 are annual maintenance fees on antibodies produced by Biosite that continue to be used in research and development programs of our partners.

We have reported consecutive quarterly operating profits since the third quarter of 1999, after incurring quarterly operating losses during the prior seven quarters. Our operating results may fluctuate on a quarterly or annual basis in the future and our growth or operating results may not be consistent with predictions made by us or by securities analysts. We may not be able to maintain profitability in the future. Some of the risks and uncertainties associated with our business and future operating results are discussed below under the heading “Liquidity and Capital Resources,” and in Item 1A, “Risk Factors” of this Annual Report on Form 10-K.

Critical Accounting Policies Involving Management Estimates and Assumptions

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions in certain circumstances that affect amounts reported in the accompanying financial statements and related footnotes. In preparing these financial statements, management has made its best estimates and judgments of certain amounts included in the financial statements, giving due consideration to materiality. We do not believe there is a great likelihood that materially different amounts would be reported related to the accounting policies described below. However, application of these accounting policies involves the exercise of judgment and use of assumptions as to future uncertainties and, as a result, actual results could differ from these estimates. Our senior management has discussed the development and selection of the critical accounting estimates, and related disclosures, with the Audit Committee of our Board of Directors.

Revenue Recognition. We recognize product sales upon shipment, including to Fisher and our other distributors, unless there are significant post-delivery obligations or collection is not considered probable at the time of shipment. Generally, we do not have any significant post-delivery obligations associated with our product sales. We accrue for warranty costs and other allowances at the time of shipment based on historical experience, trends and estimates.

Our collaborative development agreements generally contain specific payments for specific activities or elements of the agreements. Among the payments we might receive under the agreements are: up-front technology access fees, research funding, antibody development fees upon the delivery of antibodies, annual maintenance fees on targets for which we have produced antibodies for as long as the targets remain in development by our collaborators, milestone fees on drug targets that reach certain development milestones and royalties should products successfully be commercialized as a result of the collaboration. Up-front technology access fees are recognized over the term of the agreement or ongoing research period, as applicable, unless we have no further continuing performance obligations related to the fees. Research funding is recognized over the applicable research period on a straight-line basis, which approximates the underlying performance. Milestone payments, such as antibody development fees and clinical milestones, are recognized when earned, as the milestone events are substantive and their achievability is not reasonably assured at the inception of the agreement. Contract revenues that are based on the performance of and collection by our collaborators or their partners are deferred until such performance is complete and collection is probable. We believe that each payment element of these agreements represents the fair value of the element at the date of the agreement.

The SEC’s Staff Accounting Bulletin, or SAB, No. 104, Revenue Recognition, provides guidance on the application of generally accepted accounting principles to selected revenue recognition issues. We believe that our revenue recognition policy is appropriate and in accordance with generally accepted accounting principles and SAB No. 104.

Warranty Reserves. Our warranty reserve primarily relates to warranty coverage extended with the placement of the Triage MeterPlus. The Triage MeterPlus is manufactured by LRE Technology Partners GmbH, or LRE, who provides Biosite a contractual warranty against manufacturer’s defects and poor workmanship. Should a meter not function to specification and the cause is determined to be due to a manufacturer’s defect or poor workmanship, the malfunctioning meter would be returned to LRE for replacement or repair. LRE would incur and bear all the cost to replace or repair the meter. We have established a warranty allowance for the costs to replace or repair meters that would not be covered by LRE’s warranty. Historical experience and trends detailing returns and replacement

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activity in total and those that have been covered by LRE’s manufacturer’s warranty are used in estimating our warranty allowance.

Allowance for Doubtful Accounts. We also maintain an allowance for doubtful accounts for potential uncollectible accounts receivable arising from our customers’ inability to make required payments. Our estimate is determined by analyzing historical bad debts, customer payment history and patterns, customer creditworthiness, and economic, political or regulatory factors affecting the customer’s ability to make the required payments.

Inventories and Related Allowances. Net inventories are valued at the lower of the first-in, first-out, or FIFO, cost or market value and have been reduced by an allowance for excess, obsolete and potential scrap inventories. The estimated allowance for excess and obsolete inventories is based on inventories on hand compared to estimated future usage and sales and assumptions about the likelihood of scrap or obsolescence. During our manufacturing processes, some work-in-process inventories require additional testing or re-work. These inventories are separately tracked and reviewed on a monthly basis to determine their status and an estimated reserve for potential scrap is calculated. We utilize a standard cost system to track our inventories on a part-by-part basis. When necessary, adjustments are made to the standard materials, standard labor and standard overhead costs to approximate actual labor and actual overhead costs on a FIFO cost basis.

Intangible and Other Long-Lived Assets. At December 31, 2005, we had approximately $163.2 million of long-lived assets, including $29.1 million of land, $56.0 million of buildings and improvements, $22.8 million of building construction-in-progress, $98,000 of leasehold improvements, $43.1 million of equipment, furniture and fixtures and $7.9 million of capitalized license rights and other assets. Building, building improvements, leasehold improvements, equipment, intangible assets and certain other long-lived assets are amortized or depreciated over the lesser of their useful lives or the remaining lease term. We lease five buildings in the San Diego with leases that expire between March and June 2006. Useful lives are based on management’s estimates of the period that the assets will generate revenue directly or indirectly. License rights related to products for sale are amortized to cost of sales over the life of the license, generally not to exceed 10 years, using a systematic method based on the estimated revenues generated from products during the shorter of the license period or 10 years from the inception of the license. The estimated revenues used as the base by which we amortize the license rights include only estimated sales for products we are currently selling and do not include any estimated revenues expected to be realized during the license amortization term from products still in development today. Our intangible assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.

Income Tax Reserve. It is our policy to record tax benefits only if we conclude that it is at least probable that the deduction or credit will be sustained upon examination by tax authorities. In the period that permanent tax benefits, including research and development tax credits, are generated, we recognize the tax benefits at their estimated net realizable value. With regard to research tax credits, the determination of qualified expenses and activities involves judgment. Tax authorities have regularly examined and challenged research and development tax credits claimed by companies and have disallowed tax credit amounts based on the tax authorities’ evaluation and judgment. We reduce tax benefits to their estimated net realizable value based upon our management’s assessment of exposure associated with permanent tax differences, tax credits and interest expense applied to temporary difference adjustments. The tax benefits are analyzed periodically and adjustments are made as events occur to warrant adjustments to the estimate of the net realizable value of the tax benefits.

Valuation of Stock-based Compensation Payments. With respect to accounting for stock-based compensation payments to our employees for periods through December 31, 2005, we followed Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees, or APB 25, and related interpretations. During these periods, stock options issued to non-employees were recorded at their fair value as determined in accordance with FAS No. 123, Accounting for Stock-based Compensation, or FAS 123, and Emerging Issues Task Force, or EITF, Issue No. 96-18, Accounting for Equity Instruments that are Issued to Other than Employees for Acquiring, or in Conjunction with Selling, Goods or Services, and were periodically remeasured as the stock options vest. Beginning January 1, 2006, we will adopt FAS No. 123 (revised 2004), a revision to FASB Statement No. 123, or FAS 123(R).

Included in the footnotes to the accompanying financial statements is adjusted pro forma information regarding net income as required by FAS No. 123, which has been determined as if we had accounted for our employee stock-based compensation under the fair value method of that Statement for the periods presented. For all options granted on or after April 1, 2005, we changed our fair value option pricing model from the Black-Scholes model to a binomial model. The fair value of stock options and purchase rights granted prior to April 1, 2005 was determined using the Black-Scholes model. We believe that the binomial model considers characteristics of fair value option pricing that are not available under the Black-Scholes model. Similar to the Black-Scholes model, the binomial

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model takes into account variables such as volatility, dividend yield rate and risk free interest rate. However, in addition, the binomial model considers the contractual term of the option, the probability that the option will be exercised prior to the end of its contractual life, and the probability of termination or retirement of the option holder in computing the value of the option.

The valuation of stock-based compensation instruments is determined at the date of grant and includes assumptions with regards to:  1) expected life of stock options, which is primarily based on the historical exercise behavior of our employees, and stock purchase rights issuable under our employee stock purchase plan, or ESPP, 2) expected volatility during the expected life of the stock options and stock purchase rights using historical and implied volatility, 3) expected dividends during the expected life of the stock options and stock purchase rights and 4) the expected risk-free interest during the expected life of the stock options and stock purchase rights.

Recent Developments

Triage MPO – FDA 510(k) Filing

In December 2005, we submitted a 510(k) Premarket Notification to the FDA for diagnostic tests for myeloperoxidase, or MPO, a biomarker of inflammation in the walls of coronary arteries. MPO appears to be an indicator of unstable atherosclerotic plaque, and has been shown to elevate earlier than current markers of cell death. We licensed certain diagnostic rights to MPO in 2004 under an agreement with The Cleveland Clinic Foundation and Prognostix, Inc.

MPO is believed to be useful as an aid in the early diagnosis of myocardial infarction and could signal risk for heart disease or heart attack in patients with chest pain or ACS. Subject to obtaining appropriate regulatory approvals, we plan to offer a single Triage MPO Test and a second generation Triage CardioProfilER Panel that will include MPO.

We believe the addition of MPO to the Triage CardioProfilER Panel can advance the diagnostic and prognostic utility of the product, which is used for emergency assessment of chest pain patients. The panel currently measures the levels of troponin and its complexes, along with CK-MB, BNP and myoglobin in blood and is used as an aid in the diagnosis of myocardial infarction (heart attack), diagnosis and assessment of severity of heart failure and risk stratification of patients with ACS.

Roche Litigation

In December 2005, we announced that we are in discussions with Roche regarding a potential settlement of both cases in our pending litigation. Biosite and Roche filed joint requests to stay the litigation in the United States District Courts in the Southern District of California and the Southern District of Indiana through April 2006. Both stays have been granted.

Change in Management

In January 2006, we announced that Tom Watlington, our executive vice president and chief operating officer, will leave Biosite by the end of the first quarter of 2006. In March 2006, we entered into a Transition Agreement with Mr. Watlington under which, among other things, he will continue to provide consulting services to Biosite through the end of 2006.

Stock Repurchase Program

In February 2006, we announced a program to repurchase up to $30 million of Biosite common stock. As of March 14, 2006, we have repurchased an aggregate of 355,526 shares of our common stock at a total cost of approximately $18.7 million, including commissions.

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Results of Operations

Years ended December 31, 2005 and 2004

Product Sales. Product sales by product family were as follows (in thousands):

					$$			%
	Year ended December 31,				Increase /			Increase /
Product Family	2005		2004		(Decrease)			(Decrease)
Cardiovascular products:
Triage BNP Test products	$	189,614	$	162,012	$	27,602		17	%
Triage Cardiac Panel	26,195		24,308		1,887			8	%
Triage CardioProfilER and Profiler Shortness of Breath Panels	10,489		3,204		7,285			227	%
Triage D-Dimer Test	2,858		—		2,858			N/A
Triage MeterPlus products	2,731		2,949		(218		)	(7	)%
Total Cardiovascular products	231,887		192,473		39,414			20	%
Other products:
Triage Drugs of Abuse, TOX Drug Screen products and Triage Stroke Panel	45,067		42,451		2,616			6	%
Triage Microbiology products	5,818		5,683		135			2	%
Total Other products	50,885		48,134		2,751			6	%
Total Product Sales	$	282,772	$	240,607	$	42,165		18	%

Product sales for 2005 were $282.8 million, representing an increase of 18% compared to $240.6 million for 2004. The $42.2 million increase in total product sales consisted primarily of product sales growth resulting from an increase in sales volume of $46.7 million, partially offset by a decrease in product sales resulting from lower average selling prices of approximately $4.5 million. In 2005, growth in the sales volume of our Triage BNP Tests represented 69% of the product sales growth resulting from an increase in sales volume.

Primarily as a result of significant fluctuations in customer demand, inventory levels of our products have been and in the future may be below or above targeted stocking levels. Our product sales are also impacted by the buying patterns of our distributors. Additionally, we believe that our products are subject to some seasonality in their use. Higher utilization rates of our Triage BNP Tests may be due to a higher number of ED visits by patients exhibiting shortness of breath, a symptom of heart failure and of influenza.  However, higher utilization may also result from greater awareness, education and acceptance of the uses of our Triage BNP Test products, as well as additional users within the hospitals.  Product sales to our distributors in future periods will be impacted as we and our distributors attempt to adjust our distributors’ inventories to targeted stocking levels and as we seek continued improvement in our effectiveness and efficiency in adjusting our manufacturing output and capacity.

Product sales of our cardiovascular products, consisting of our Triage BNP Tests, Triage Cardiac Panel, Triage CardioProfilER Panel, Triage Profiler Shortness of Breath Panel, Triage D-Dimer Test, and Triage MeterPlus, totaled $231.9 million for 2005. This represented an increase of 20% as compared to $192.5 million for 2004. The product sales growth of our cardiovascular products was primarily due to growth in sales volume of our Triage BNP Tests of $32.3 million, and of our Triage Profiler Panels of $9.0 million. This increase was partially offset by a reduction in product sales due to a decline in the average sales price of our Triage BNP Tests of $4.7 million. Our product sales growth rate for our Triage BNP Tests in future periods may be lower than in the past periods because of increased competition from alternative tests and testing platforms that aid in the diagnosis of heart failure. In addition, because most U.S. hospitals are already performing some form of testing for natriuretic peptides, the sales growth for our Triage BNP Tests resulting from the addition of new hospital customers in the United States may be less than what we have experienced in the past. In addition, as the global market for BNP testing matures and more competitive products become available, the average sales price for our Triage BNP Tests may continue to decline, which would negatively impact our revenue from product sales.

Product sales of the Triage Drugs of Abuse Panel, Triage TOX Drug Screen, Triage C. difficile Panel and Triage Parasite Panel were $50.9 million for

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2005. This represented an increase of 6% as compared to $48.1 million for 2004. The increase in sales of these products for 2005 was primarily due to the growth in sales volume of our Triage TOX Drug Screen of $4.3 million. The increase was partially offset by a decrease in sales volume of the Triage Drugs of Abuse Panel of $2.6 million. We believe that domestic sales of the Triage Drugs of Abuse Panel products may decline as the available U.S. market becomes saturated and competitive pressures become more prominent in a maturing market.

Contract Revenues. Contract revenues consist of revenues associated with our research and development and licensing arrangements, including license fees, milestone revenues, royalties, research funding and antibody fees. Contract revenues for 2005 were $4.9 million, compared to $4.3 million for 2004. Contract revenues recognized during 2005 and 2004 consisted primarily of research funding. During both 2005 and 2004, we recognized $3.0 million of research funding from an alliance with Medarex Inc., which expires in 2008. The increase in contract revenues for 2005 as compared to 2004 was related to an increase of $900,000 in annual maintenance fees on antibodies produced by Biosite that are used in research and development programs of our partners. The increase was partially offset by a $250,000 decrease in research milestone payments. Biosite Discovery activities are performed and its costs are incurred by certain of our research and development teams. These Biosite Discovery research and development resources concurrently focus on programs for our partners, which generate our contract revenues, and on internal research and development programs. Costs of the research and development resources performing collaborative and internal Biosite Discovery activities were $8.0 million for 2005, compared to $6.5 million for 2004. These costs are included in research and development expenses.

Cost of Product Sales and Gross Profit From Product Sales. Gross profit from product sales for 2005 was $197.7 million, representing an increase of 23% compared to $161.2 million for 2004. The $36.5 million increase in gross profit from product sales in 2005, compared to 2004, consisted of $28.3 million attributable to product sales growth and of $8.2 million resulting from changes in the gross margins of our different products. The overall gross margin for 2005 increased to 70%, compared to 67% for 2004. The increase in the overall gross margin was primarily due to operational improvements that resulted in greater manufacturing efficiencies and lower scrap.

Although our gross profits may continue to grow, we expect our overall gross margin to fluctuate as a result of the changing mix of products sold with different gross margins, changes in our manufacturing processes or costs, and competitive pricing pressures. Any new products that we successfully develop, acquire and sell may change our future gross margins. Manufacturing inefficiencies, including inefficiencies experienced as we attempt to manufacture newer products on a larger scale, and increase or decrease our manufacturing capacity, production volumes and manufacturing output will also impact our gross margins. Our manufacturing overhead costs are spread over the changing production volumes manufactured during a quarter on a first-in, first-out basis.

We expect the cost of product sales in 2006 to be materially higher than 2005 due to the expensing of share-based compensation, such as stock options, as a result of the adoption of FAS 123(R). We also expect that our fixed occupancy costs will significantly increase as we continue to transition our manufacturing operations to our new corporate complex, in which our manufacturing operations will occupy a much larger space than in our existing facilities. We may also incur unexpected costs and expenses in connection with our move from our existing facilities to our new corporate complex, or we may experience unanticipated decreases in productivity and other losses due to inefficiencies relating to this transition or due to delays, whether due to regulatory approvals for the validation of the manufacturing facilities, or from other causes. For instance, the scale-up of manufacturing at our new corporate complex could result in lower than expected manufacturing output and higher than expected product costs. In addition, we have incurred and expect to continue to incur some duplicate facilities expenses during the period of time in which we transfer our operations to the new corporate complex as we will transfer our operations in stages. Any delays could cause us to incur these duplicate expenses for longer than we currently anticipate.

Selling, General and Administrative Expenses. Selling, general and administrative, orSG&A, expenses for 2005 were $74.8 million, representing an increase of 14%, compared to $65.4 million for 2004. At December 31, 2005, our headcount for sales, marketing and administrative functions totaled 350 employees, compared with 315 employees at December 31, 2004. The increase in SG&A expenses was primarily associated with the addition of sales, clinical education and technical service resources, and administrative support. The expansion of our direct sales, marketing and distribution operations in Europe resulted in increases in SG&A expenses of $3.6 million in 2005 as compared to 2004. We began direct sales, marketing and distribution in certain European countries at different dates from July 2003 to February 2006, and we are continuing to scale-up our direct operations in Europe. In the future, we also may transition to direct sales and distribution in additional countries, which will require additional sales, marketing and administrative resources outside the United States. Our facilities expenses related to SG&A activities increased by approximately $2.4 million in 2005, as compared to 2004, primarily due to costs related to the relocation to our new corporate complex in 2005. Also, as a result of growth in sales activities,

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marketing activities and general administrative resources for 2005, employee-related expenses in the United States increased approximately $2.2 million as compared to 2004.

We expect SG&A expenses to materially increase in 2006 as compared to 2005 due to the expensing of share-based compensation, such as stock options, as a result of the adoption of FAS 123(R) on January 1, 2006. We also expect SG&A expenses in 2006 to be higher than in 2005, as we continue to increase our sales, marketing, clinical education, technical service and general administration resources in the United States, as well as continue to build our direct sales, distribution and administrative infrastructure in Europe.  We also expect other non-employee-related costs, including sales and marketing program activities for our new products, to grow as our overall operations grow.  The timing of these increased expenditures and their magnitude are primarily dependent on the commercial success and sales growth of our products as well as the timing of any new product launches. We also expect SG&A expenses to increase due to costs associated with our continuing consolidation from our previous facilities to our new corporate complex and higher occupancy costs primarily due to increased square footage at the new corporate complex and, for a period of time, occupancy costs of both facilities.

Research and Development Expenses. Research and development, or R&D, expenses for 2005 were $42.2 million, representing an increase of approximately 18% compared to $35.7 million for 2004. The increase in R&D expenses for 2005 consisted primarily of an increase in employee expenses of $2.9 million. Additionally, for 2005, we experienced increases in consultant, clinical studies and patent-related expenses of $1.9 million and increases in facilities costs of $611,000 as compared to 2004. During 2005, our R&D resources were focused primarily on product development for potential new diagnostic products, including a new ACS panel and other diagnostic products for critical health conditions such as sepsis and abdominal pain. We also focused on the development of potential improvements to our existing products, including our Triage Cardiac Panel, manufacturing processes and research activities associated with Biosite Discovery. Expenses related to the performance of our obligations associated with earning our contract revenues were incurred by our R&D group and were primarily related to Biosite Discovery.

We expect R&D expenses in 2006 to be higher than in 2005 and to relate primarily to:

•the expensing of share-based compensation, such as stock options, due to the adoption of FAS 123(R);

•product development efforts, including the development of potential diagnostic products for ACS, stroke, MPO, sepsis, acute kidney injury and abdominal pain;

•clinical studies, including studies associated with potential diagnostic products for stroke and studies related to the exploration and validation of other potential uses for our Triage BNP Tests;

•engineering development programs intended to miniaturize the Triage MeterPlus Platform and automate and improve manufacturing processes;

•manufacturing scale-up for potential new products, including the Triage Stroke Panel;

•costs associated with FDA submissions for products under development, including the Triage Stroke Panel, and other interactions with the FDA;

•Biosite Discovery activities;

•performance-based compensation; and

•costs associated with our move from our existing facilities to our new corporate complex and higher occupancy costs primarily due to increased square footage at the new corporate complex and occupancy of both facilities for a period of time.

The timing of such increased expenditures and their magnitude are primarily dependent on the commercial success and sales growth of our products, as well as the timing and progress of our R&D efforts.

License and Patent Disputes. Expenses associated with license and patent disputes were $2.0 million in 2005, compared to $178,000 in 2004. The expenses consisted of legal costs related to two lawsuits involving Roche Diagnostics Corporation and several of its affiliates. In November 2004, Roche and certain of its affiliates filed a complaint in the United States District Court, Southern District of Indiana, Indianapolis Division alleging that Biosite is infringing two patents, U.S. Patent 5,366,609 and U.S. Patent 4,816,224, owned by Roche and/or its affiliates. We believe these allegations of infringement are without merit and we are vigorously contesting these claims. Also, in November 2004, we filed a complaint in the United States District Court, Southern District of California alleging that Roche Diagnostics Corporation and Roche Diagnostics GmbH are infringing two patents, U.S. Patent 6,174,686 and U.S. Patent 5,795,725, owned by Biosite. In October 2005, we amended our complaint, further alleging infringement of a third Biosite patent, U.S. Patent 6,939,678. All of the Biosite patents relate to methods for the measurement of cardiac troponin forms. In December 2005, we announced that we are in discussions with Roche regarding a potential settlement of both pending cases. Biosite and Roche filed joint

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requests to stay the litigation in the United States District Courts in the Southern District of California and the Southern District of Indiana through April 2006, both of which requests have now been granted.

Interest and Other Income, Net. Interest and other income, net was $2.7 million for 2005, compared to $1.3 million for 2004. The increases resulted primarily from an increase in interest income due to higher average balances of cash and marketable securities and higher interest rates in 2005 compared to 2004.

 Provision for Income Taxes. As a result of the pre-tax income and the estimated tax credits and other permanent differences between our reported and tax results in 2005, we recorded a provision for income taxes of $32.3 million for 2005, equivalent to an effective tax rate of 37.4%. For 2004, we recorded a provision for income taxes of $24.2 million, equivalent to an effective tax rate of 36.8%. The increase in the effective tax rate was due primarily to a decrease in R&D tax credits generated in 2005 as compared to 2004. The 2005 R&D tax credits were limited by the statutory restriction that limits the tax credits to research expenses as a percentage of product sales. We will continue to assess the likelihood of realization of our tax credits and other net deferred tax assets. If future events occur that do not make the realization of such assets more likely than not, a valuation allowance will be established against all or a portion of the net deferred tax assets.

Years ended December 31, 2004 and 2003

Product Sales. Product sales for 2004 were $240.6 million, representing an increase of 42% compared with $169.3 million for 2003. The $71.3 million increase in total product sales consisted of $63.1 million of product sales growth resulting from an increase in sales volume, and $8.2 million resulting from an increase in average selling prices of our products. Growth in the sales volume of our Triage BNP Tests represented 85% of the product sales growth resulting from an increase in sales volume.

Product sales of our cardiovascular products, consisting of our Triage BNP Tests, Triage Cardiac Panel, Triage Profiler Panels and Triage MeterPlus, totaled $192.5 million for 2004. This represented an increase of 51% as compared with $127.2 million for 2003. The product sales growth of our cardiovascular products for 2004 was primarily due to the growth in sales volume of our Triage BNP Tests which totaled $53.7 million. Included in the sales volume growth of our Triage BNP Tests was $13.4 million related to our Triage BNP Test for Beckman Coulter Immunoassay Systems which we began selling in January 2004 in the United States.

Product sales of the Triage Drugs of Abuse Panel, Triage TOX Drug Screen, Triage C. difficile Panel and Triage Parasite Panel were $48.1 million for 2004. This represented an increase of 14% compared with $42.1 million for 2003. The increase in sales of these products was primarily due to the $3.8 million growth in sales volume of our Triage TOX Drug Screen. There was also a $1.5 million increase in product sales resulting from an increase in our average net selling prices for these products.

Contract Revenues. Contract revenues for 2004 were $4.3 million, compared with $4.1 million for 2003. We recognized $3.0 million of research funding from our alliance with Medarex during both 2004 and 2003. Other contract revenues recognized during those periods of 2004 and 2003 included antibody fees, milestone payments and license fees. Biosite Discovery activities were performed, and its costs are incurred, by certain of our research and development teams. These Biosite Discovery research and development resources concurrently focus on programs for our partners, which generated our contract revenue, and on internal research and development programs. Costs of the research and development resources performing collaborative and internal Biosite Discovery activities were approximately $6.5 million for 2004 compared with $5.7 million for 2003. These costs are included in research and development expenses.

Cost of Product Sales and Gross Profit From Product Sales. Gross profit from product sales for 2004 was $161.2 million, representing an increase of 46% compared with $110.7 million for 2003.

The $50.5 million increase in gross profits consisted of $46.7 million that resulted from product sales growth, and $3.9 million resulting from changes in the gross margins of each of our products. For 2004 and 2003, the gross margins for our cardiovascular products were 65% and 62%, respectively, while our gross margins for our Triage Drugs of Abuse Panel and other products were 71% and 75%, respectively. Sales of our cardiovascular products represented 80% of our product sales for 2004, compared with 75% for 2003. The overall gross margin for 2004 was 67%, compared with 65% in 2003. The increase in the overall gross margin was primarily due to the changing mix of our products sold with differing gross margins, and greater manufacturing efficiencies generated primarily from higher production volumes and manufacturing output during the manufacture of products sold in 2004 compared with 2003.

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Selling, General and Administrative Expenses. SG&A expenses increased 26% to $65.4 million in 2004 from $51.9 million in 2003.  At December 31, 2004, our headcount performing sales, marketing and administrative functions totaled 315 employees, compared with 261 employees at December 31, 2003. The increase in SG&A expenses was primarily associated with the addition of sales, clinical education and technical service resources in the United States, and higher performance-based compensation, such as sales commissions and bonuses based on our financial performance.  Our employee-related expenses in the United States increased $7.3 million from 2003 to 2004.   The formation and expansion of our direct sales and distribution operations in France, Germany, Belgium, Luxembourg, Italy and the UK resulted in an increase in SG&A expenses of $2.9 million from 2003 to 2004.  Expanded sales activities related to our broader product lines and scale-up in additional markets such as physician offices, marketing activities relating to new products, and increased administrative costs to support our expanded operations resulted in an increase of $3.3 million from 2003 to 2004.

Research and Development Expenses. R&D expenses for 2004 were $35.7 million, representing an increase of 46% compared with $24.5 million for 2003. The increase in R&D expenses consisted primarily of a $3.5 million increase in employee expenses, an increase in consultant, clinical studies and patent-related expenses, including involvement in pending interference and opposition proceedings, totaling $2.9 million, and an increase in supplies used in our R&D activities of $3.3 million. During 2004, our research and development resources were focused primarily on product development for potential new diagnostic products, including the Triage Profiler CP Panel, Triage Profiler SOB Panel, Triage D-Dimer Test, Triage Stroke Panel and other diagnostic products for critical health conditions such as sepsis and abdominal pain. We also focused the development of potential improvements to our existing products, including our Triage Cardiac Panel, and manufacturing processes and research activities associated with Biosite Discovery. Expenses related to the performance of our obligations associated with earning our contract revenues were incurred by our research and development group and were primarily related to Biosite Discovery.

License and Patent Disputes. Expenses associated with license and patent disputes incurred during 2004 totaled $178,000. We did not incur any such expenses during 2003. The 2004 expenses consisted of legal costs related to our two pending litigations with Roche Diagnostics Corporation and several of its affiliates.

Interest and Other Income, Net. Interest and other income, net was $1.3 million for 2004, compared with $1.4 million for 2003. Our interest income during 2004 was $290,000 lower than interest income earned in 2003. During 2004, for liquidity purposes in anticipation of cash needs, including new corporate complex construction costs, as well as anticipation of rising interest rates, we maintained a larger portion of our cash and marketable securities in cash and cash equivalents, which yielded lower interest income than our marketable securities. The decrease in interest income was offset by an increase in realized gains primarily from the collection of intercompany receivables denominated in foreign currencies of $232,000 in 2004.

Provision for Income Taxes. We recorded a provision for income taxes of $24.2 million for 2004 compared with $15.1 million in 2003. Our annual effective tax rate for 2004 and 2003 was 36.8% and 37.8%, respectively. The decrease in the effective tax rate was due primarily to a decrease in our overall state tax rate of 0.6% as more of our product sales and income was apportioned to states with lower income tax rates.

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Liquidity and Capital Resources

Historically, our sources of cash have included:

•cash generated from operations, primarily from the collection of accounts receivable resulting from product sales;

•private and public placements of equity securities, including cash generated from the exercise of stock options and participation in our employee stock purchase plan;

•proceeds from equipment financing;

•cash received under collaborative development agreements; and

•interest income.

Our historical cash outflows have primarily been associated with:

•cash used for operating activities such as the purchase and growth of inventory, expansion of our sales and marketing and R&D activities and other working capital needs; and

•the purchase of land and construction of facilities; and

•expenditures related to equipment and leaseholds used to increase our manufacturing capacity, improve our manufacturing efficiency and expand our research and development activities.

Other factors that impact our cash inflow and outflow include the following:

•We have experienced gross margins greater than 65% and operating margins greater than 20% in each of the last three years. As our product sales have increased significantly since 2001, our gross profit and operating income have increased significantly as well, providing us with an increasing source of cash to finance the expansion of our operations; and

•Fisher, which accounted for 84% of our product sales in 2005, has historically been a timely and predictable payor of its outstanding accounts receivable. We have a distribution relationship with Fisher that expires on December 31, 2008.

As of December 31, 2005, we had cash, cash equivalents and marketable securities of $132.4 million compared with $72.4 million as of December 31, 2004. The increase in cash, cash equivalents and marketable securities during 2005 was largely attributable to $91.5 million of cash generated from operating activities, for which the sales volume growth of our Triage BNP Tests was the primary driver. Additionally, we generated $29.3 million in cash from proceeds from the issuance of shares under our stock plans during 2005. We believe the increased activity related to the exercise of stock options and participation in our employee stock purchase plan by employees was driven by increases in the market price of our common stock. Future proceeds from exercise of stock options and participation in our employee stock purchase plan will depend primarily upon the behavior, expectations and needs of the plan participants and upon our stock price. The primary non-operating cash outflows during 2005 were cash used for the construction of our new corporate complex, which totaled $33.4 million, and for equipment and other fixed asset purchases of $20.5 million.

In February 2006, we announced a program to repurchase up to $30 million of Biosite common stock. As of March 14, 2006, we have repurchased an aggregate of 355,526 shares of our common stock at a total cost of approximately $18.7 million, including commissions.

In October 2003, we completed our purchase of land for the construction of our new corporate complex. We purchased a total of 26.1 usable acres for approximately $28.2 million. Through December 31, 2005, we have expended an additional $80.4 million for the design and construction of the new corporate complex. We expect the new complex to provide us with up to 800,000 square feet of space, to be constructed in phases as needed. The first phase will provide us with approximately 350,000 square feet of space. The total cost of the land and the construction of the first phase are estimated to cost approximately $110.0 million. We plan to finance the remaining construction costs using our available cash. As of March 1, 2006, our research and development staff, selling, general and administrative staff and a portion of our manufacturing operations have relocated to the new corporate complex. We expect to complete the other buildings in the first phase of construction during the first half of 2006 and to relocate our remaining operations in stages once the buildings are ready for use. We expect our occupancy costs to increase primarily due to increased square footage. Should there be a downturn in our business or the markets in which we compete, we may not have a need to expand our facilities as we have planned. As a result, we may then seek an alternative use for all or a portion of the property, or seek to sell the property, which may have a negative impact on our operating results. We may also incur unexpected costs and expenses in connection with our

45

move from our existing facilities to our new corporate complex, or we may experience unanticipated decreases in productivity and other losses due to inefficiencies relating to this transition, or delays in obtaining any required approvals or clearances from regulatory agencies related to the validation of the manufacturing facilities. For instance, the scale-up of manufacturing at our new corporate complex could result in lower than expected manufacturing output and higher than expected product costs. In addition, we have incurred and expect to continue to incur some duplicate facilities expenses, such as rent, as we are transferring our operations to the new corporate complex in stages.

Our primary short-term needs for capital, which are subject to change, include:

•any repurchase of our common stock;

•the remaining construction costs in the first phase of our new corporate complex, as well as our other facilities expansion needs;

•support of our commercialization efforts related to our current and future products, including expansion of our direct sales force and field support resources both in the United States and abroad;

•expenditures for equipment and other fixed assets for use in our new corporate complex, and for manufacturing and research and development purposes;

•improvements in our manufacturing capacity and efficiency, new discovery and product development efforts;

•clinical studies, and the continued advancement of research and development efforts;

•the prosecution, defense and resolution of ongoing license and patent disputes; and

•potential milestone payments under licensing agreements that cover intellectual property rights of third parties.

For 2006, we plan to spend approximately $35 million in cash for capital expenditures, primarily for manufacturing and R&D equipment, furniture, fixtures and computer equipment. We intend to use our currently available cash and cash we expect to generate from operating activities to address our capital requirements. We expect that the performance of our product sales and the resulting operating income will significantly impact our cash management decisions. We have utilized, and may continue to utilize, credit arrangements with financial institutions to finance the purchase of capital equipment. Factors such as interest rates and available cash will impact our decision to continue to utilize credit arrangements as a source of cash.

We believe that our available cash, cash from operations and proceeds from the issuance of stock under our stock plans will be sufficient to satisfy our funding needs for at least the next 24 months, except in the event that we determine to accelerate the development and/or construction of the remaining phases of our corporate complex. We have used available cash balances to purchase the land for our new corporate complex and pay for the design and construction costs to date. For the remainder of the construction costs, we plan to use our available cash. If cash generated from operations is insufficient to satisfy our working capital and capital expenditure requirements, we may be required to sell additional equity or debt securities or obtain additional credit facilities. Additional capital, if needed, may not be available on satisfactory terms, if at all. Furthermore, any additional equity financing may be dilutive to stockholders, and debt financing, if available, may include restrictive covenants. Our future liquidity and capital funding requirements will depend on numerous factors, including:

•the costs, timing and effectiveness of further expansion of sales, marketing and manufacturing activities and resources;

•expansion of our manufacturing capacity and our facilities expansion needs, including the construction of our new corporate complex;

•the effects of competition, including products competitive with our Triage BNP Tests, from companies with greater financial capital and resources;

•the effect on sales and cash receipts for our Triage BNP Tests due to market saturation in the hospital market for natriuretic peptide testing in the United States;

•regulatory changes, uncertainties or delays;

•the impact of the prosecution, defense and resolution of ongoing and potential future license and patent disputes;

•the extent to which our new products and products under development are successfully developed, gain regulatory approval and market acceptance and become and remain competitive;

•seasonal or unanticipated changes in customer demand;

•the scope, timing and results of research and development efforts, including clinical studies and regulatory actions regarding our potential products;

•changes in third-party reimbursement policies;

•the ability to execute, enforce and maintain license and collaborative agreements and attain the milestones under these agreements necessary to earn contract revenues;

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•the costs and timing associated with business development activities, including potential licensing of technologies patented by others; and

•the timing and amount of any repurchase of our stock or early retirement of our debt.

Our failure to raise capital on acceptable terms, when needed, could have a material adverse effect on our business.

Contractual Obligations

The following table summarizes our contractual obligations as of December 31, 2005. This table should be read in conjunction with the remainder of this Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations”, as well as in conjunction with our consolidated financial statements and related notes appearing elsewhere in this Annual Report on Form
10-K.

	Payments due by period
Contractual obligations	Total		Less than 1 year		1-3 years		3-5 years		More than 5 years
	(in thousands)
Long-term debt obligations	$	17,034	$	6,066	$	9,662	$	1,306	$	—
Operating lease obligations	2,403		1,131		618		382		272
New corporate complex construction commitments	3,205		3,205		—		—		—
Purchase obligations (1)	22,440		22,365		75		—		—
Total	$	45,082	$	32,767	$	10,355	$	1,688	$	272

(1)  Purchase obligations include commitments to purchase components and raw materials used in the manufacture of our products, and other recurring purchases made in the normal course of business to meet operational and capital expenditure requirements.

We have executed agreements to license technologies that are covered by the intellectual property rights of third parties. The financial and commercial terms of each of these agreements vary significantly, and in virtually all cases our payment obligations under any individual agreement are not material to our business as a whole. For the most part, the license agreements call for potential cash outflows for milestone payments and future royalties based on product sales utilizing the licensed technologies. The milestone payments under these agreements are primarily dependent on achieving product development goals, commencement of clinical studies of a product utilizing the licensed technology or meeting commercialization objectives, or any combination thereof. Examples of milestones for which we would make payments would include: 1) initiation of clinical studies of a potential product that is covered by the licensed technologies, 2) FDA clearance to market a product that is covered by the licensed technologies, and 3) the first sale of a product that is covered by the licensed technologies in a specific territory. The attainment of the milestones is highly uncertain and dependent upon many contingencies. Additionally, we exercise discretion whether to continue to utilize the licensed technologies. At any time, we may, for technical or economic reasons, decide to discontinue utilizing the licensed technologies and would incur no further financial obligations beyond those payments already made. As of December 31, 2005, there were no milestones, either individually or in the aggregate, under our licensing and collaborative agreements for which we believe material payments were required to be made, and, in the future, we believe that there are approximately $812,000 in payments that are reasonably likely to be made.

Item 7A.         Quantitative and Qualitative Disclosures about Market Risk

We are exposed to changes in interest rates, primarily from our investments in available-for-sale marketable securities. Under our current policies, we do not use interest rate derivatives instruments to manage this exposure to interest rate changes. A hypothetical 1% adverse move in interest rates along the entire interest rate yield curve would not materially affect the fair value of our financial instruments that are exposed to changes in interest rates.

Since 2003, we have significantly expanded our direct sales and distribution operations in France, Germany, Belgium, Luxembourg, the United Kingdom and Italy, and we may expand into additional countries in the future. Sales and costs resulting from our direct sales and distribution operations in Europe are denominated in local currencies and are subject to fluctuations in currency exchange rates. Further, we purchase our Triage MeterPlus inventory from LRE in Euros, and we incur employee and other operating costs in foreign currencies. As a result,

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our costs will fluctuate along with the currencies and general economic conditions in the countries in which we do business, which could harm our operating results. In prior years, we have on occasion purchased forward exchange contracts to manage this exposure to exchange rate changes and may do so in the future. As of December 31, 2005, we had no outstanding forward exchange contracts. We recognized a net currency exchange loss on foreign currency denominated transactions of $207,000 for 2005 compared to a net gain of $310,000 for 2004. Significant fluctuations in currency exchange rates may negatively impact our consolidated sales and earnings.

International sales and operations are also subject to a variety of other risks, including:

•greater risk of uncollectible accounts;

•difficulty in staffing, monitoring and managing foreign operations;

•understanding of, and compliance with local employment laws, including reduced flexibility and increasedcost of staffing adjustments;

•unknown or changes in regulatory practices, including import or export license requirements, trade barriers, tariffs, employment and tax laws;

•adverse tax consequences, including imposition of withholding or other taxes on payments by subsidiaries;

•restrictions on repatriation of locally-derived revenue;

•competition from locally-produced products with cost advantages or national appeal;

•local business practices that could expose our direct sales and marketing organization to Foreign Corrupt Practices Act risks;

•political, social or economic conditions and changes in these foreign markets; and

•government spending patterns.

Item 8.         Financial Statements and Supplementary Data

Refer to the Index on Page F-l hereto.

Item 9.         Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

Not applicable.

Item 9A.       Controls and Procedures

Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures

Under the supervision and with the participation of our management, including our Chief Executive Officer (CEO) and Chief Financial Officer (CFO), we conducted an evaluation of our disclosure controls and procedures, as such term is defined under Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934, as amended, or the Exchange Act, as of the end of the period covered by this Annual Report on Form 10-K. Based on this evaluation, our CEO and CFO concluded that our disclosure controls and procedures were effective as of the end of the period covered by this Annual Report on Form 10-K.

Management’s Report on Internal Control Over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rule 13a-15(f) and 15d-15(f). Under the supervision and with the participation of our management, including our CEO and CFO, we conducted an evaluation of the effectiveness of our internal control over financial reporting as of December 31, 2005 based on the framework in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on our evaluation under the framework in Internal Control — Integrated Framework, our management concluded that our internal control over financial reporting was effective as of December 31, 2005.

Our management’s assessment of the effectiveness of our internal control over financial reporting as of December 31, 2005 has been audited by Ernst &Young LLP, an independent registered public accounting firm, as stated in their report which is included herein.

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Report of Independent Registered Public Accounting Firm on Internal Control Over Financial Reporting

The Board of Directors and Stockholders

Biosite Incorporated

We have audited management’s assessment, included in the accompanying Management’s Assessment of Internal Controls Over Financial Reporting, that Biosite Incorporated maintained effective internal control over financial reporting as of December 31, 2005, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (the COSO criteria). Biosite Incorporated’s 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 the company’s 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 operating 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.

In our opinion, management’s assessment that Biosite Incorporated maintained effective internal control over financial reporting as of December 31, 2005, is fairly stated, in all material respects, based on the COSO criteria. Also, in our opinion, Biosite Incorporated maintained, in all material respects, effective internal control over financial reporting as of December 31, 2005, based onthe COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of Biosite Incorporated as of December 31, 2005 and 2004, and the related consolidated statements of income, stockholders’ equity, and cash flows for each of the three years in the period ended December 31, 2005 of Biosite Incorporated and our report dated March 13, 2006 expressed an unqualified opinion thereon.

	/s/ Ernst & Young LLP
San Diego, California
March 13, 2006

Item 9B.         Other Information

Not applicable.

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PART III

Some information required by Part III is incorporated by reference from our definitive Proxy Statement to be filed with the Securities and Exchange Commission in connection with the solicitation of proxies for our 2005 Annual Meeting of Stockholders (the “Proxy Statement”).

Item 10.         Directors and Executive Officers of the Registrant

The information required by this item is contained in the sections entitled “Election of Directors” and “Executive Officers” in the Proxy Statement and is incorporated herein by reference.

Item 11.         Executive Compensation

The information required by this item is contained in the section entitled “Executive Compensation” in the Proxy Statement and is incorporated herein by reference.

Item 12.         Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

The information required by this item is contained in the sections entitled “Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters” and “Equity Compensation Plan Information” in the Proxy Statement and is incorporated herein by reference.

Item 13.         Certain Relationships and Related Transactions

The information required by this item is contained in the section entitled “Certain Relationships and Related Transactions” in the Proxy Statement and it incorporated herein by reference.

Item 14.         Principal Accountant Fees and Services

The information required by this item is contained in the section entitled “Ratification of Selection of Independent Auditors” in the Proxy Statement and is incorporated herein by reference.

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PART IV

Item 15. Exhibits, Financial Statement Schedules

(a)(1)  Financial Statements

Refer to the Index on page F-l hereto.

(2)  Financial Statement Schedules

Refer to Schedule II, Valuation and Qualifying Accounts, hereto.

The other financial statement schedules required by this item have been omitted since they are either not required, not applicable or the information is otherwise included herein.

(3)  Exhibits

EXHIBIT
NUMBER	DESCRIPTION OF DOCUMENT
3.(1)  (1)	Restated Certificate of Incorporation.
3.(2)  (1)	Certificate of Amendment to the Restated Certificate of Incorporation.
3.(3)  (1)	Certificate of Designation, Rights and Preferences of Series A Participating Preferred Stock.
3.(4)  (2)	Certificate of Amendment to the Restated Certificate of Incorporation.
3.(5)  (3)	Certificate of Amendment to the Restated Certificate of Incorporation.
3.(6)  (4)	Amended and Restated Bylaws.
4.1(2)	Form of Common Stock Certificate with rights legend.
10.1(5) (A)	Amended and Restated 1989 Stock Plan of Biosite Incorporated.
10.2(6) (A)	Amended and Restated 1996 Stock Incentive Plan of Biosite Incorporated (“1996 Stock Plan”).
10.3(5) (A)	Form of Incentive Stock Option Agreement under the 1996 Stock Plan.
10.4(5) (A)	Form of Nonstatutory Stock Option Agreement under the 1996 Stock Plan.
10.5(7)  (A)	Biosite Incorporated Amended and Restated Employee Stock Purchase Plan.
10.6(8) (A)	Form of Indemnity Agreement between the Company and its officers and directors.
10.7(5)	Sublease Agreement between Biosite and General Atomics, dated February 17, 1992, as amended on August 10, 1992, January 21, 1993, October 29, 1993, March 1, 1995 and October 1, 1996.
10.8(5) (+)	Development, Supply and Distribution Agreement between Biosite and Kyoto Dai-Ichi Kagaku Co., Ltd., dated as of February 14, 1995.
10.9(5) (+)	Antibody License Agreement between Biosite and Sandoz Pharma Ltd. (currently known as Novartis Pharma AG), dated September 22, 1995, and amended on July 26, 1996.
10.10(5) (+)	Easy Assay License Agreement between Biosite and Sandoz Pharma Ltd. (currently known as Novartis Pharma AG), dated September 22, 1995.
10.11(5)	Debenture Purchase Agreement between Biosite and Sandoz Pharma Ltd. (currently known as Novartis Pharma AG), dated as of September 22, 1995.
10.12(5)	Lease Agreement between Biosite and Sorrento West Limited dated September 21, 1994.
10.13(9)	Rights Agreement dated as of October 22, 1997 between Biosite (formerly Biosite Diagnostics Incorporated) and Fleet National Bank (f/k/a BankBoston, N.A.) as Rights Agent.

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10.14(10)	Amendment No. 1 to Rights Agreement dated as of December 9, 1999 between Biosite Incorporated (formerly Biosite Diagnostics Incorporated) and Fleet National Bank (f/k/a BankBoston, N.A.) as Rights Agent.
10.15(11)	Amendment No. 2 to Rights Agreement dated as of July 18, 2001 between Biosite Incorporated (formally Biosite Diagnostics Incorporated) and Fleet National Bank (f/k/a BankBoston, N.A.) and American Stock Transfer and Trust as successor Rights Agent.
10.16(12) (+)	Distribution Agreement between Biosite and Fisher Scientific Company L.L.C. effective January 1, 2004.
10.17(*)	Distribution Agreement between Biosite and Fisher Scientific Company L.L.C. effective January 1, 2006.
10.18(*)	Semi-exclusive BNP Diagnostic License Agreement between Biosite Diagnostics Incorporated and Scios, Inc. effective December 30, 1996.
10.19(*)	First Amendment to Semi-exclusive BNP Diagnostic License Agreement between Biosite Diagnostics Incorporated and Scios, Inc. effective August 1, 1997.
10.20(*)	Amendment #2 to Semi-exclusive BNP Diagnostic License Agreement between Biosite Incorporated and Scios, Inc. effective August 30, 2002.
10.21(*)	BNP Assay Development, Manufacture and Supply Agreement between Biosite Incorporated and Beckman Coulter, Inc. effective June 24, 2003.
10.22(13)  (A)	Biosite Incorporated 2002 Nonqualified Stock Incentive Plan.
10.23(14)  (A)	Biosite Incorporated Executive Bonus Plan.
10.24(15)  (A)	Biosite Incorporated Nonqualified Deferred Compensation Plan effective June 1, 2002.
10.25(16) (A)	Biosite Incorporated Change in Control Severance Benefit Plan.
10.26(16) (A)	Form of Director Fee Deferral Program under the 1996 Stock Plan.
10.27(17)  (A)	Biosite Incorporated 409A Nonqualified Deferred Compensation Plan effective January 1, 2005.
21.1	Subsidiaries of the Company.
23.1	Consent of Independent Registered Public Accounting Firm.
31.1	Section 302 Certification of Kim D. Blickenstaff, Chief Executive Officer
31.2	Section 302 Certification of Christopher J. Twomey, Chief Financial Officer
32.1	Section 906 Certification of Kim D. Blickenstaff, Chief Executive Officer
32.2	Section 906 Certification of Christopher J. Twomey, Chief Financial Officer

(1)Incorporated by reference to an exhibit to Biosite’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2001.

(2)Incorporated by reference to an exhibit to Biosite’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2003.

(3)Incorporated by reference to an exhibit to Biosite’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2005.

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(4)Incorporated by reference to Exhibit 3.(ii) to Biosite’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2003.

(5)Incorporated by reference to an exhibit to Biosite’s Registration Statement on Form S-1, No. 333-17657.

(6)Incorporated by reference to Exhibit A to Biosite’s Definitive Proxy Statement dated April 25, 2005 and filed with the Securities and Exchange Commission.

(7)Incorporated by reference to Exhibit B to Biosite’s Definitive Proxy Statement dated April 27, 2004 and filed with the Securities and Exchange Commission.

(8)Incorporated by reference to Exhibit B to Biosite’s Definitive Proxy Statement dated April 27, 2004 and filed with the Securities and Exchange Commission.

(9)Incorporated by reference to Exhibit 4.1 to Biosite’s Registration Statement on Form 8-A, filed on October 28, 1997.

(10)Incorporated by reference to Exhibit 4.2 to Amendment No. 1 to Biosite’s Registration Statement on Form 8-A, filed on July 18, 2001.

(11)Incorporated by reference to Exhibit 4.3 to Amendment No. 1 to Biosite’s Registration Statement on Form 8-A, filed on July 18, 2001.

(12)Incorporated by reference to an exhibit to Biosite’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2003.

(13)Incorporated by reference to an exhibit to Biosite’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2005.

(14)Incorporated by reference to an exhibit to Biosite’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2003.

(15)Incorporated by reference to an exhibit to Biosite’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2003.

(16)Incorporated by reference to an exhibit to Biosite’s Annual Report on Form 10-K for the year ended December 31, 2004.

(17)Incorporated by reference to an exhibit to Biosite’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2005.

(A)Indicates management contract or compensatory plan or arrangement.

(+)Confidential treatment has been granted for certain portions of these exhibits, which have been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 under the Securities Exchange Act of 1934.

(*)Confidential treatment has been requested for certain portions of these exhibits, which have been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 under the Securities Exchange Act of 1934.

b)  Exhibits

Refer to Item 15(a)(3) above.

c)  Financial Statement Schedules

Refer to Item 15(a)(2) above.

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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.

BIOSITE INCORPORATED

/s/ KIM D. BLICKENSTAFF	Date: March 14, 2006
Kim D. Blickenstaff
Chairman and Chief Executive Officer

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.

Name								Title	Date
					/s/  KIM D. BLICKENSTAFF			Chairman of the Board and Chief	March 14, 2006
Kim D. Blickenstaff								Executive Officer (Principal Executive
								Officer)
		/s/  CHRISTOPHER J. TWOMEY						Senior Vice President, Finance, Chief	March 14, 2006
Christopher J. Twomey								Financial Officer and Secretary
								(Principal Financial Officer and
								Accounting Officer)
				/s/  TIMOTHY J. WOLLAEGER				Director	March 14, 2006
Timothy J. Wollaeger
	/S/  KENNETH F. BUECHLER, PH.D.							Director, President and Chief Scientific Officer	March 14, 2006
Kenneth F. Buechler, Ph.D.
			/s/  ANTHONY DEMARIA, M.D.					Director	March 14, 2006
Anthony DeMaria, M.D.
						/s/  HOWARD E. GREENE, JR.		Director	March 14, 2006
Howard E. Greene, Jr.
							/s/  LONNIE M. SMITH	Director	March 14, 2006
Lonnie M. Smith

54

Biosite Incorporated

INDEX TO FINANCIAL STATEMENTS

F-1

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ON FINANCIAL STATEMENTS

The Board of Directors and Stockholders

Biosite Incorporated

We have audited the accompanying consolidated balance sheets of Biosite Incorporated as of December 31, 2005 and 2004, and the related consolidated statements of income, stockholders’ equity, and cash flows for each of the three years in the period ended December 31, 2005. Our audits also included the financial statement schedule listed in the Index at Item 15(a). These financial statements and schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements and schedule 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 financial statements referred to above present fairly, in all material respects, the consolidated financial position of Biosite Incorporated at December 31, 2005 and 2004, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 2005 in conformity with generally accepted accounting principles in the United States. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the effectiveness of Biosite Incorporated’s internal control over financial reporting as of December 31, 2005, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated March 13, 2006 expressed an unqualified opinion thereon.

/s/ Ernst & Young LLP

San Diego, California

March 13, 2006

F-2

BIOSITE INCORPORATED

CONSOLIDATED BALANCE SHEETS

(in thousands, except par value)

	December 31,
	2005				2004
ASSETS
Current assets:
Cash and cash equivalents	$	53,052			$	25,645
Marketable securities	79,360				46,765
Accounts receivable	30,303				36,867
Inventories	32,627				37,077
Income taxes receivable	329				—
Deferred income taxes	3,161				7,432
Prepaid expenses and other current assets	5,932				7,081
Total current assets	204,764				160,867
Property, equipment and leasehold improvements, net	151,018				111,135
Deferred income taxes	4,269				3,668
Patents and license rights, net	4,764				5,484
Deposits and other assets	3,111				2,361
Total assets	$		367,926		$		283,515
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	13,950			$	18,662
Accrued employee expenses	10,706				11,008
Current portion of equipment financing notes	6,066				5,749
Income taxes payable	—				4,401
Accrued royalties and deferred revenue	2,933				2,255
Other current liabilities	5,449				3,998
Total current liabilities	39,104				46,073
Equipment financing notes	10,968				15,292
Other long-term liabilities	2,489				1,813
Commitments and contingencies
Stockholders’ equity:
Preferred stock, $.01 par value, 5,000 shares authorized; no shares issued and outstanding at December 31, 2005 and 2004	—				—
Common stock, $.01 par value, 60,000 and 40,000 shares authorized at December 31, 2005 and 2004, respectively; 17,558 and 16,419 shares issued and outstanding at December 31, 2005 and 2004, respectively	176				164
Additional paid-in capital	167,657				125,013
Accumulated other comprehensive income (loss), net of related tax effect of $(146) and $(53) at December 31, 2005 and 2004, respectively	(571			)	1,086
Retained earnings	148,103				94,074
Total stockholders’ equity	315,365				220,337
Total liabilities and stockholders’ equity	$	367,926			$	283,515

See accompanying notes.

F-3

BIOSITE INCORPORATED

CONSOLIDATED STATEMENTS OF INCOME

(in thousands, except per share amounts)

	Years Ended December 31,
	2005			2004			2003
Revenues:
Product sales	$	282,772		$	240,607		$	169,298
Contract revenues	4,927			4,335			4,066
Total revenues	287,699			244,942			173,364
Operating expenses:
Cost of product sales	85,108			79,388			58,567
Selling, general and administrative	74,758			65,394			51,944
Research and development	42,215			35,694			24,474
License and patent disputes	1,977			178			—
Total operating expenses	204,058			180,654			134,985
Operating income	83,641			64,288			38,379
Interest and other income, net	2,722			1,313			1,436
Income before provision for income taxes	86,363			65,601			39,815
Provision for income taxes	(32,334		)	(24,153		)	(15,052		)
Net income	$	54,029		$	41,448		$	24,763
Net income per share:
Basic	$	3.16		$	2.61		$	1.62
Diluted	$	2.92		$	2.42		$	1.50
Shares used in calculating per share amounts:
Basic	17,092			15,889			15,295
Diluted	18,505			17,097			16,497

See accompanying notes.

F-4

BIOSITE INCORPORATED

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(in thousands)

	Preferred Stock			Common Stock			Additional Paid-in		Accumulated Other Comprehensive			Retained		Total Stockholders’
	Shares	Amount		Shares	Amount		Capital		Income (Loss)			Earnings		Equity
Balance at December 31, 2002	—	$	—	14,895	$	149	$	79,544	$	385		$	27,863	$	107,941
Components of comprehensive income:
Net income	—	—		—	—		—		—			24,763		24,763
Other comprehensive income:
Change in unrealized net gain (loss) on available-for-sale securities, net of $190 income tax benefit	—	—		—	—		—		(285		)	—		(285		)
Foreign currency translation gain	—	—		—	—		—		200			—		200
Total comprehensive income														24,678
Issuance of common stock under stock plans, net	—	—		723	7		12,322		—			—		12,329
Compensation related to stock options granted to non-employees	—	—		—	—		20		—			—		20
Income tax benefit from disqualifying dispositions of stock	—	—		—	—		7,935		—			—		7,935
Balance at December 31, 2003	—	$	—	15,618	$	156	$	99,821	$	300		$	52,626	$	152,903
Components of comprehensive income:
Net income	—	—		—	—		—		—			41,448		41,448
Other comprehensive income:
Change in unrealized net gain (loss) on available-for-sale securities, net of $119 income tax benefit	—	—		—	—		—		(179		)	—		(179		)
Foreign currency translation gain	—	—		—	—		—		965			—		965
Total comprehensive income														42,234
Issuance of common stock under stock plans, net	—	—		801	8		19,604		—			—		19,612
Compensation related to stock options granted to non-employees	—	—		—	—		4		—			—		4
Income tax benefit from disqualifying dispositions of stock	—	—		—	—		5,584		—			—		5,584
Balance at December 31, 2004	—	$	—	16,419	$	164	$	125,013	$	1,086		$	94,074	$	220,337
Components of comprehensive income:
Net income	—	—		—	—		—		—			54,029		54,029
Other comprehensive income:
Change in unrealized net gain (loss) on available-for-sale securities, net of $93 income tax benefit	—	—		—	—		—		(140		)	—		(140		)
Foreign currency translation gain (loss)	—	—		—	—		—		(1,517		)	—		(1,517		)
Total comprehensive income														52,372
Issuance of common stock under stock plans, net	—	—		1,139	12		29,284		—			—		29,296
Compensation related to stock options granted to non-employees	—	—		—	—		1		—			—		1
Income tax benefit from disqualifying dispositions of stock	—	—		—	—		13,359		—			—		13,359
Balance at December 31, 2005	—	$	—	17,558	$	176	$	167,657	$	(571	)	$	148,103	$	315,365

See accompanying notes.

F-5

BIOSITE INCORPORATED

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

	Years ended December 31,
	2005			2004			2003
Operating activities:
Net income	$	54,029		$	41,448		$	24,763
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	16,354			17,322			10,692
Amortization of deferred compensation and non-cash equity compensation	1			4			20
Deferred income taxes	3,670			(8,863		)	1,641
Changes in operating assets and liabilities:
Net purchases of investments classified as trading	(427		)	(429		)	(704		)
Accounts receivable	5,795			(12,616		)	(12,726		)
Inventories	4,381			(9,170		)	(15,485		)
Income taxes and other current assets	9,762			8,503			2,381
Accounts payable	(4,528		)	11,655			3,109
Accrued employee expenses	(146		)	2,431			1,468
Accrued royalties and other current liabilities	2,197			2,151			896
Long-term liabilities	503			56			1,102
Foreign currency translation	(48		)	—			—
Net cash provided by operating activities	91,543			52,492			17,157
Investing activities:
Proceeds from sales and maturities of marketable securities	65,984			31,452			40,941
Purchase of marketable securities	(98,213		)	(43,528		)	(22,867		)
Purchase of property, equipment and leasehold improvements	(53,858		)	(55,117		)	(58,673		)
Patents, license rights, deposits and other assets	(2,603		)	(1,429		)	(282		)
Net cash used in investing activities	(88,690		)	(68,622		)	(40,881		)
Financing activities:
Proceeds from issuance of equipment notes payable	2,007			7,558			14,850
Principal payments under equipment notes payable	(6,014		)	(5,338		)	(3,200		)
Proceeds from issuance of stock under stock plans, net	29,296			19,612			12,329
Net cash provided by financing activities	25,289			21,832			23,979
Effect of exchange rate changes on cash and cash equivalents	(735		)	406			169
Increase in cash and cash equivalents	27,407			6,108			424
Cash and cash equivalents at beginning of year	25,645			19,537			19,113
Cash and cash equivalents at end of year	$	53,052		$	25,645		$	19,537
Supplemental disclosures of cash flow information:
Interest paid	$	997		$	1,001		$	639
Income taxes paid	$	20,101		$	20,670		$	9,852
Income tax benefit of disqualifying dispositions of stock	$	13,359		$	5,584		$	7,935

See accompanying notes.

F-6

BIOSITE INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.Organization and Summary of Significant Policies

Organization and Business Activity

Founded in 1988, Biosite Incorporated is a leading provider of novel, rapid medical diagnostic products intended to aid physicians in the diagnosis of critical diseases and health conditions. Currently, we offer diagnostic products for drug screening, heart attack, heart failure, acute coronary syndromes, or ACS, evaluation of shortness of breath and certain bacterial and parasitic infections. Our products are principally sold to acute care hospitals, which number approximately 5,400 in the United States. To market our products, we utilize a direct sales team that focuses its efforts primarily on larger hospitals with more than 200 beds and smaller hospitals that are high volume users of our products, and we use a network of distributors both in the United States and internationally.

The Fisher HealthCare Division of the Fisher Scientific Company, or Fisher, distributes our products primarily in hospitals in the United States and supports our direct sales force, particularly in smaller hospitals. We utilize distributor relationships with Physician Sales & Services, or PSS, and Henry Schein, Inc., or Henry Schein, to market our products to physician office laboratories in the United States. In international markets, we have established direct selling efforts in several European countries and utilize a network of country-specific and regional distributors in other areas. During 2003 and 2004, we initiated direct sales and distribution operations in France, Germany, Belgium and Luxembourg, the United Kingdom and Italy. In the future, we may transition to direct sales and distribution of our products in additional countries. We also employ a field-based network of clinically experienced individuals that support our direct sales force by providing pre- and post- sale education and training. Additionally, we provide other customer and technical support resources to assist with ongoing utilization of our products.

With several diagnostic products commercialized, our focus has expanded to include the search for proprietary disease markers that can potentially be applied to our testing platforms or to platforms marketed by other diagnostic companies with whom we might collaborate. To that end, in 1999 we launched Biosite Discovery. Through Biosite Discovery, we leverage our expertise in phage display antibody development to access protein targets via collaborations with clinical institutions or commercial companies, or via our internal research and licensing programs. Biosite Discovery has also attracted the interest of leading clinical collaborators, who provide patient samples and assist in the analysis of clinical data. The discovery of new disease markers and the extension of applications for existing products could enable us to expand our product sales into other healthcare market segments.

Principles of Consolidation

The consolidated financial statements include our financial statements and those of our wholly-owned subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation.

Revenue Recognition

We recognize product sales upon shipment unless there are significant post-delivery obligations or collection is not considered probable at the time of shipment. Generally, we do not have any significant post-delivery obligations associated with our product sales. We accrue for warranty costs and other allowances at the time of shipment based on historical experience, trends and estimates.

Our collaborative development agreements generally contain specific payments for specific activities or elements of the agreements. Among the payments we might receive under the agreements are: up-front technology access fees, research funding, antibody development fees upon the delivery of antibodies, annual maintenance fees on targets for which Biosite has produced antibodies for as long as the targets remain in development by our partners, milestone fees on drug targets that reach certain pre-clinical milestones and royalties should products successfully be commercialized as a result of the collaboration. Up-front technology access fees are recognized over the term of the agreement or ongoing research period, as applicable, unless we have no further continuing performance obligations related to the fees. Research funding is recognized over the applicable research period on a straight-line basis, which approximates the underlying performance. Milestone payments, such as antibody development fees and clinical milestones, are recognized when earned, as the milestone events are substantive and their achievability is not

F-7

reasonably assured at the inception of the agreement. The achievement of milestones may not be dependent on our performance. Contract revenues that are based on the performance of and collection by our collaborative partners or their partners are deferred until such performance is complete and collection is probable. We believe that each payment element of these agreements represents the fair value of the element at the date of the agreement.

Segment Information, Major Customers and Suppliers

Financial Accounting Standards Board, or FASB, Statement No. 131, Segment Information, FAS 131, amends the requirements for public enterprises to report financial and descriptive information about their reportable operating segments. Operating segments, as defined in FAS 131, are components of an enterprise for which separate financial information is available and is evaluated regularly by us in deciding how to allocate resources and in assessing performance. FAS 131 also requires disclosures about our products and services, geographic areas and major customers.

Management of Biosite has determined that we currently operate principally in one operating segment: the discovery, development, manufacture and marketing of rapid, accurate and cost-effective diagnostics that improve the quality of patient care and simplify the practice of laboratory medicine. Our chief operating decision-making group is the Management Group, which is comprised of the Chief Executive Officer, President, Senior Vice Presidents and Vice Presidents. The Management Group primarily decides how to allocate resources based on the overall operating results and the contribution of each functional area towards achieving our business and financial goals. Our principal functional areas are:  1) Finance and Administration, 2) Sales and Marketing, 3) Research and Development and 4) Manufacturing.

We have a distribution agreement with Fisher that extends through December 31, 2008. Sales to Fisher represented 84%, 86% and 90% of our product sales in 2005, 2004 and 2003, respectively. At December 31, 2005 and 2004, receivable amounts due from Fisher represented approximately 64% and 78%, respectively, of our accounts receivable. Export sales to international customers amounted to $35.9 million, $26.0 million and $14.5 million in 2005, 2004 and 2003, respectively.

Certain components and raw materials used in the manufacture of our products are provided by single-source vendors. Any supply interruption in a sole-sourced component or raw material would affect our ability to manufacture these products until a new source of supply is qualified or alternative manufacturing processes are implemented or developed. We generally maintain safety stock inventory levels of these items, which would allow us some additional time should we need to identify and qualify alternative suppliers. LRE Technology Partner GmbH, or LRE, is the sole manufacturer of the fluorescent meters used with our Triage MeterPlus platform products, including the Triage BNP Test, Triage Cardiac Panel, Triage Profiler Shortness of Breath Panel, Triage D-Dimer Test and Triage TOX Drug Screen and others currently under development, including the Triage Stroke Panel. Beckman Coulter, Inc. is the sole manufacturer of Biosite’s Triage BNP test for Beckman Coulter Immunoassay Systems, and related calibrations and controls for that product. Other sole-source suppliers provide selected components of our products.

Use of Estimates

The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

F-8

Cash and Cash Equivalents

Cash and cash equivalents consist of cash and highly liquid investments in debt securities with maturities of 90 days or less when purchased.

Marketable Securities

Based on the nature of the assets held by us and management’s investment strategy, our investments have been classified as either available-for-sale or trading securities. Management determines the appropriate classification of securities at the time of purchase. Securities classified as available-for-sale or trading are carried at estimated fair value, as determined by quoted market prices at the balance sheet date. The net unrealized gains or losses on available-for-sale securities, net of tax, are reported as a component of comprehensive income. Unrealized gains or losses on trading securities are reported in interest income. At December 31, 2005, we had no investments that were classified as held-to-maturity. The amortized cost of debt securities classified as available-for-sale is adjusted for amortization of premiums and accretion of discounts to maturity. Such amortization is included in interest income. Realized gains and losses on sales of available-for-sale securities are computed based upon the amortized cost adjusted for any other than temporary declines in fair value and are included in interest income. The cost of securities sold is based on the specific identification method. Interest on trading securities and securities classified as available-for-sale is included in interest income.

Accounts Receivable

Accounts receivable consists of trade receivables due from customers for the sale of our products. Payment terms vary on a customer by customer basis, and generally range from cash on delivery to net, 60 days in the United States and from cash in advance to net, 120 days internationally. We also utilize various programs, including letters of credit and insurance, to reduce risks of uncollectibility. A receivable is considered past due when it has exceeded its payment terms. Accounts receivable has been reduced by an estimated allowance for doubtful accounts. We estimate our allowance for doubtful accounts based on facts, circumstances and judgments regarding each account. Our estimate is determined by analysis of items such as historical bad debts, customer payment history and patterns, customer creditworthiness, economic, political or regulatory factors affecting the customer’s ability to make the required payments and individual circumstances.

Inventories

Inventories are valued at the lower of cost (first in, first out) or market value and have been reduced by an estimated allowance for excess, obsolete and potential scrapped inventories. The estimated allowance is based on management’s review of inventories on hand compared to estimated future usage and sales, as well as, judgments, quality control testing data, and assumptions about the likelihood of scrap and obsolescence. During our manufacturing processes, some work-in-process inventories require additional testing or re-work. These inventories are separately tracked and reviewed on a monthly basis to determine their status and an estimated reserve for potential scrap is calculated. We utilize a standard cost system to track our inventories on a part-by-part basis. If necessary, adjustments are made to the standard materials, standard labor and standard overhead costs to approximate actual labor and actual overhead costs on a first-in, first-out, or FIFO, cost basis.

Warranty Reserve

Our warranty reserve primarily relates to warranty coverage that we offer with the placement of the Triage MeterPlus. The Triage MeterPlus is manufactured by LRE who provides Biosite a contractual warranty against manufacturer’s defects and poor workmanship. Should a meter not function to specification and the cause is determined to be due to a manufacturer’s defect or poor workmanship, the malfunctioning meter would be returned to LRE for replacement or repair. LRE would incur and bear all the cost to replace or repair the meter. We have

F-9

established a warranty allowance for the costs to replace or repair meters that would not be covered by LRE’s warranty. Historical experience and trends detailing returns and replacement activity in total and those that have been covered by LRE’s manufacturer’s warranty are used in estimating our warranty allowance.

Property, Equipment and Leasehold Improvements

Property, equipment and leasehold improvements are stated at historical cost.

Depreciation and Amortization

Depreciation of equipment is computed using the straight-line method over the estimated useful lives of the assets, generally three to seven years. Building and building improvements are depreciated over their estimated useful lives ranging from five to forty years. Amortization of leasehold improvements is computed using the straight-line method over the shorter of the estimated useful lives of the assets or the remaining lease term. Useful lives are based on management’s estimates of the period that the assets will generate revenue directly or indirectly.

License Rights

License rights related to products for sale are stated at cost and amortized to cost of sales over the life of the license, not to exceed ten years, using a systematic method based on the estimated revenues generated from products during generally the shorter of the license period or ten years from the inception of the license. The estimated revenues used as the base by which we amortize the license rights include only estimated sales for products we are currently selling and do not include any estimated product sales expected to be realized during the license amortization term from products still in development today.

Long-lived and Intangible Assets

Our policy is to review the carrying amounts of long-lived and intangible assets whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Such events or circumstances might include a significant decline in market share, a significant decline in profits, rapid changes in technology, significant litigation or other items. In evaluating the recoverability of intangible assets, management’s policy is to compare the carrying amounts of such assets with the estimated undiscounted future operating cash flows. In the event impairment exists, an impairment charge would be determined by comparing the carrying amount of the asset to the applicable estimated future cash flows, discounted at a risk-adjusted interest rate. In addition, the remaining amortization period for the impaired asset would be reassessed and revised if necessary. We do not believe the carrying amounts of long-lived and intangible assets are impaired at December 31, 2005.

Stock-Based Compensation

With respect to accounting for stock-based compensation payments to our employees for the periods through December 31, 2005, we followed Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees, or APB 25, and related interpretations. During these periods, stock options issued to non-employees were recorded at their fair value as determined in accordance with FAS No. 123, Accounting for Stock-based Compensation, or FAS 123, and Emerging Issues Task Force, or EITF, Issue No. 96-18, Accounting for Equity Instruments that are Issued to Other than Employees for Acquiring, or in Conjunction with Selling, Goods or Services, and were periodically remeasured as the stock options vest. Beginning January 1, 2006, we will adopt FAS No. 123 (revised 2004), a revision to FASB Statement No. 123, or FAS 123(R).

Included in the disclosures to the accompanying financial statements is adjusted pro forma information regarding net income as required by FAS 123, which has been determined as if we had accounted for our employee stock-based compensation under the fair value method of FAS 123 for the periods presented. For all options granted on or after April 1, 2005, we changed our fair value option pricing model from the Black-Scholes model to a binomial

F-10

model. The fair value of stock options and purchase rights granted prior to April 1, 2005 was determined using the Black-Scholes model. We believe that the binomial model considers characteristics of fair value option pricing that are not available under the Black-Scholes model. Similar to the Black-Scholes model, the binomial model takes into account variables such as volatility, dividend yield rate and risk free interest rate. However, in addition, the binomial model considers the contractual term of the option, the probability that the option will be exercised prior to the end of its contractual life, and the probability of termination or retirement of the option holder in computing the value of the option.

The valuation of stock-based compensation instruments is determined at the date of grant and includes assumptions with regards to:  1) expected life of stock options, which is primarily based on the historical exercise behavior of our employees, and stock purchase rights issuable under our employee stock purchase plan, or ESPP, 2) expected volatility during the expected life of the stock options and stock purchase rights using historical and implied volatility, 3) expected dividends during the expected life of the stock options and stock purchase rights and 4) the expected risk-free interest during the expected life of the stock options and stock purchase rights.

The weighted average estimated fair values of stock options granted during 2005, 2004 and 2003 were $27.29, $31.17 and $29.83, respectively. The weighted average estimated fair values of stock purchase rights granted during 2005, 2004 and 2003 were $24.76, $16.23 and $25.29, respectively. The fair value for these stock options and stock purchase rights was estimated at the date of grant with the following weighted-average assumptions for 2005, 2004 and 2003:

	Stock Options						Stock Purchase Rights
	2005		2004		2003		2005		2004		2003
Expected life	5.2 years		6.0 years		6.1 years		1.25 years		1.25 years		1.45 years
Expected volatility	56	%	81	%	85	%	64	%	83	%	86	%
Expected dividend yield	0	%	0	%	0	%	0	%	0	%	0	%
Risk-free interest rate	4.02	%	3.66	%	2.52	%	3.57	%	1.78	%	2.78	%

For purposes of adjusted pro forma disclosures, the estimated fair value of the stock-based compensation is amortized to expense over the vesting periods of the granted options. Our adjusted pro forma information is as follows (in thousands, except per share data):

(Net of tax)	2005			2004			2003
Net income, as reported	$	54,029		$	41,448		$	24,763
Pro forma FAS 123 compensation expense	(15,703		)	(20,319		)	(19,390		)
Adjusted pro forma net income	$	38,326		$	21,129		$	5,373
Adjusted pro forma basic net income per share	$	2.24		$	1.33		$	0.35
Adjusted pro forma diluted net income per share	$	2.07		$	1.24		$	0.33

The pro forma effects on net income for 2005, 2004 and 2003 may not be representative of the effects on reported net income or loss in future years. In management’s opinion, existing stock option valuation models do not provide a reliable single measure of the fair value of employee stock options that have vesting provisions and are not transferable. In addition, option valuation models require the input of highly subjective assumptions, including expected stock price volatility and the expected life of the options. Changes in the subjective input assumptions can materially affect the fair value estimate of employee stock options and ESPP.

F-11

Research and Development

Research and development costs are expensed as incurred. Such costs include personnel costs, supplies, clinical trials, allocated facilities, information systems, depreciation, amortization and other indirect costs.

Concentration of Credit Risk

We sell our products in the United States primarily to Fisher. Credit is extended based on an evaluation of the customer’s financial condition, and generally collateral is not required. We perform credit evaluations and maintain an allowance for potential credit losses. Credit losses in the United States have been minimal and within management’s expectations. In international markets, we have established direct selling efforts in several countries and utilize a network of country-specific and regional distributors in other areas. During the last half of 2003 and 2004, we significantly expanded our direct sales and distribution operations outside of the United States in France, Germany, Belgium and Luxembourg, the United Kingdom and Italy, and we may expand into additional countries in the future. We also utilize various risk management programs, including letters of credit and insurance, to reduce risks of uncollectibility.

We invest our excess cash in debt instruments of the U.S. Government, state municipalities, financial institutions and corporations with strong credit ratings. We have established guidelines relative to diversification and maturities that maintain safety and liquidity. These guidelines are periodically reviewed and modified to take advantage of trends in yields and interest rates.

Earnings Per Share

Basic earnings per share includes no dilution and is computed by dividing net income by the weighted average number of common shares outstanding for the period. Diluted earnings per share reflects the potential dilution of securities that could share in our earnings, such as common stock equivalents which may be issuable upon exercise of outstanding common stock options.

Shares used in calculating basic and diluted earnings per share were as follows (in thousands):

	Year Ended December 31,
	2005	2004	2003
Shares used in calculating per share amounts – Basic (Weighted average common shares outstanding)	17,092	15,889	15,295
Effect of common share equivalents:
Net effect of dilutive common stock options and stock purchase rights using the treasury stock method	1,413	1,208	1,202
Shares used in calculating per share amounts – Diluted	18,505	17,097	16,497

Comprehensive Income

Financial Accounting Standards Board’s Statement No. 130, Comprehensive Income, FAS 130, establishes rules for the reporting and display of comprehensive income and its components. FAS 130 requires the change in net unrealized gains or losses on marketable securities and foreign currency translation adjustments be included in comprehensive income. Comprehensive income is included in our Consolidated Statements of Stockholders’ Equity. The accumulated unrealized gain or (loss) on marketable securities, net of tax, was $(218,000) and $(79,000) as of December 31, 2005 and 2004, respectively. The accumulated foreign currency translation gain or (loss) as of December 31, 2005 and 2004 was $(353,000) and $1.2 million, respectively.

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Recent Accounting Pronouncements

Share-Based Payments

In December 2004, the Financial Accounting Standards Board, or FASB, issued FAS No. 123 (revised 2004), or Statement No. 123(R), Share-Based Payment, which is a revision of FASB Statement No. 123, Accounting for Stock-Based Compensation. Statement 123(R) supersedes APB Opinion No. 25, Accounting for Stock Issued to Employees, and amends FASB Statement No. 95, Statement of Cash Flows. Generally, the approach in Statement No. 123(R) is similar to the approach described in FAS No. 123. However, Statement No. 123(R) requires all share-based payments to employees, including grants of employee stock options, to be recognized in the income statement based on their fair values. Pro forma disclosure is no longer an alternative.

We will adopt the provisions of Statement No. 123(R) using the “modified prospective” method on January 1, 2006. Statement No. 123(R) will apply to all new awards and unvested awards that are outstanding on January 1, 2006. Compensation expense for outstanding awards for which the requisite service period has not been rendered as of January 1, 2006 will be recognized over the remaining service period using the compensation cost calculated for pro forma disclosure purposes under FASB Statement No. 123.

As permitted by FAS No. 123, through December 31, 2005 we accounted for share-based payments to employees using APB No. 25’s intrinsic value method and, as such, we recognized no compensation cost for employee stock options. Accordingly, the adoption of Statement No. 123(R)’s fair value method will have a material impact on our results of operations. The future impact of the adoption of Statement No. 123(R) will depend to a significant degree on levels of share-based payments granted in the future, our stock price volatility and the exercise behavior of our employees. Statement No. 123(R) also requires the benefits of tax deductions in excess of recognized compensation cost to be reported as a financing cash flow, rather than as an operating cash flow as required under current literature. This requirement will shift cash flows related to the tax deductions from our net operating cash flows to our net financing cash flows in periods after adoption. While we cannot estimate what those amounts will be in the future (because they depend on, among other things, the stock option exercise behavior of our employees), the amount of operating cash flows recognized in prior periods for such excess tax deductions were $13.4 million, $5.6 million and $7.9 million in 2005, 2004 and 2003, respectively.

Reclassification

Certain amounts in the 2004 and 2003 financial statements have been reclassified to conform to the presentation of the 2005 financial statements.

2.Licensing Rights and Agreements

We have entered into licensing and collaborative agreements where we utilize certain technologies licensed or owned by others in exchange for up-front, milestone or royalty payments or some combination thereof. The milestone payments under these agreements are primarily dependent on overcoming research and development hurdles, achieving product development goals or meeting commercialization objectives, or any combination thereof. Examples of milestones for which we would make payments would include: 1) initiation of clinical trials of a potential product that is covered by the licensed technology, 2) FDA clearance to market a product that is covered by the licensed technology, and 3) the first sale of product that is covered by the licensed technology in a specific territory. The attainment of the milestones is highly uncertain and dependent upon many contingencies. Additionally, we exercise discretion whether to continue to utilize the licensed technologies. At any time, we may, for technical or economic reasons, decide to discontinue utilizing the licensed technologies and would incur no further financial obligations beyond those payments already made. As of December 31, 2005, there were no milestones, either individually or in the aggregate, under our licensing and collaborative agreements for which we believe material payments are currently required to be made in the future. At December 31, 2005 and 2004, the total cost of license rights was $12.3 million and $11.8 million, respectively and accumulated amortization of the license

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rights was approximately $7.5 million and $6.3 million, respectively. Amortization expense of license rights totaled $1.2 million for each of the years ended December 31, 2005, 2004 and 2003. The estimated aggregate amortization expense related to license rights for the next five years and thereafter is as follows:  2006 - $1.4 million, 2007 - $1.5 million, 2008 - $1.1 million, 2009 - $344,000, 2010 - $267,000, thereafter - $193,000.

3.Distribution and Biosite Discovery Collaborative Agreements

Distribution Agreements

We have a distribution agreement under which Fisher distributes our products primarily to hospitals within the United States. The term of our distribution agreement with Fisher expires on December 31, 2008. Under the agreement, Fisher’s distribution rights are semi-exclusive in the U.S. hospital market and non-exclusive in the U.S. physician office market. Either party has the right to terminate the agreement in the case of an uncured breach by the other party. In addition, under certain circumstances, the distribution relationship may become non-exclusive or terminate with prior notice. For instance, if our direct sales to customers in the U.S. hospital market during a six month period exceed a specified percentage of the total sales of our products by both us and Fisher in that market segment, Fisher will have the option of converting the agreement to a mutually non-exclusive arrangement. The specified percentage of direct sales in the contract that would trigger this option far exceeds the current level of direct sales. If Fisher were to exercise the option, either party would have the ability to terminate the agreement upon prior notice to the other party. Similarly, if Fisher elects to promote and sell certain products that are competitive with our products, then we will have the option of converting the agreement to a mutually non-exclusive arrangement. If we were to exercise that option, either party would have the ability to terminate the agreement upon prior notice to the other party. Sales to Fisher represented 84%, 86% and 90% of our product sales in 2005, 2004 and 2003, respectively.

We also have distributor agreements with PSS and Henry Schein to market our products to physician office practices in the United States. Internationally, in addition to utilizing a direct sales force in certain countries, we sell our products to country-specific and regional distributors.

Biosite Discovery

In 1999, we launched Biosite Discovery, a research program dedicated to the identification of new protein targets for acute diseases. Through Biosite Discovery, we conduct analyses on both known proteins that may be markers of disease and proteins accessed from clinical and commercial collaborators in order to determine their diagnostic utility. We offer antibody development services to pharmaceutical and biotechnology companies seeking high-affinity antibodies for use in their drug research. In return, we seek diagnostic licenses to their targets, as well as other potential fees. Among the payments we might receive are: up-front technology access fees, antibody development fees upon the delivery of antibodies, annual maintenance fees on targets for which we have produced antibodies for as long as the targets remain in our collaborator’s drug development program, milestone fees on targets that reach certain clinical milestones and royalties should products successfully be commercialized as a result of the collaboration. Under Biosite Discovery, we have executed agreements with different commercial and clinical collaborators, and we have executed several license or cross-license agreements with other companies.

During 2005, 2004 and 2003, we recognized contract revenues of $4.9 million, $4.3 million and $4.1 million, respectively, related to activities performed or milestones achieved under the collaborative agreements. Under the terms of our agreement with Medarex, Inc., Medarex provides us with research funding of $3.0 million per year. Costs of the research and development resources performing collaborative and internal Biosite Discovery activities in 2005, 2004 and 2003 were approximately $8.0 million, $6.5 million and $5.7 million, respectively, and are included in research and development expenses.

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4.Cash, Cash Equivalents and Marketable Securities

The following is a summary of cash, cash equivalents and marketable securities by balance sheet classification at December 31, 2005 (in thousands):

			Gross		Gross			Estimated
	Amortized		Unrealized		Unrealized			Fair
	Cost		Gains		Losses			Value
Cash and cash equivalents:
Cash	$	22,930	$	—	$	—		$	22,930
Money market fund	30,122		—		—			30,122
	53,052		—		—			53,052
Marketable securities:
Trading securities – mutual funds held for nonqualified deferred compensation plan participants	2,177		174		—			2,351
Available-for-sale securities:
U.S. Municipalities debt securities	53,803		2		(174		)	53,631
Corporate debt securities	14,142		1		(96		)	14,047
U.S. Government debt securities	8,091		—		(83		)	8,008
Certificates of deposit	1,344		—		(21		)	1,323
	77,380		3		(374		)	77,009
Total cash, cash equivalents and marketable securities	$	132,609	$	177	$	(374	)	$	132,412

The following is a summary of cash, cash equivalents and marketable securities by balance sheet classification at December 31, 2004 (in thousands):

			Gross		Gross			Estimated
	Amortized		Unrealized		Unrealized			Fair
	Cost		Gains		Losses			Value
Cash and cash equivalents:
Cash	$	18,812	$	—	$	—		$	18,812
Money market fund	6,833		—		—			6,833
	25,645		—		—			25,645
Marketable securities:
Trading securities – mutual funds held for nonqualified deferred compensation plan participants	1,402		350		—			1,752
Available-for-sale securities:
U.S. Municipalities debt securities	22,699		—		(26		)	22,673
Corporate debt securities	11,390		18		(28		)	11,380
U.S. Government debt securities	8,032		3		(87		)	7,948
Certificates of deposit	3,030		3		(21		)	3,012
	45,151		24		(162		)	45,013
Total cash, cash equivalents and marketable securities	$	72,198	$	374	$	(162	)	$	72,410

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The amortized cost and estimated fair values of available-for-sale marketable securities at December 31, 2005, by contractual maturity, are as follows (in thousands):

	Amortized Cost		Estimated Fair Value
Marketable securities (available-for-sale):
Due in one year or less	$	49,392	$	49,236
Due after one year through two years	26,522		26,324
Due after two years	1,466		1,449
	$	77,380	$	77,009

Gross realized gains from the sale of cash equivalents and marketable securities were approximately $1,000, $14,000 and $206,000 for the years ended December 31, 2005, 2004 and 2003, respectively. Gross realized losses from the sale of cash equivalents and marketable securities were approximately $0, $6,000 and $5,000 for the years ended December 31, 2005, 2004 and 2003, respectively.

5.Balance Sheet Information

Net inventories consist of the following (in thousands):

	December 31,
	2005		2004
Raw materials	$	8,754	$	12,852
Work in process	16,098		14,242
Finished goods	7,775		9,983
	$	32,627	$	37,077

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Property, equipment and leasehold improvements consist of the following (in thousands):

	December 31,
	2005			2004
Land	$	29,081		$	28,664
Buildings and improvements	56,713			—
Construction in progress – new corporate complex	22,800			46,556
Machinery and equipment	57,759			42,129
Computer equipment	12,559			9,950
Furniture and fixtures	2,671			1,377
Leasehold improvements	15,421			16,391
Construction in progress – manufacturing equipment and other	8,844			11,970
	205,848			157,037
Less accumulated depreciation	(54,830		)	(45,902		)
	$	151,018		$	111,135

Depreciation expense was approximately $13.7 million, $15.4 million and $9.4 million for years ended December 31, 2005, 2004 and 2003, respectively. Cost of equipment under equipment financing notes was approximately $30.3 million and $30.2 million at December 31, 2005 and 2004, respectively. Accumulated depreciation of equipment under equipment financing notes at December 31, 2005 and 2004 was approximately $14.0 million and $9.8 million, respectively.

6.Debt and Commitments

Debt consisted of the following (in thousands):

	December 31,
	2005			2004
Equipment financing notes, payable $577,000 monthly including interest at 3.95% to 7.00% due February 2006 to March 2010; secured by equipment	$	17,034		$	21,041
Less current portion	(6,066		)	(5,749		)
Total long-term debt	$	10,968		$	15,292

As of December 31, 2005, approximate future principal payments of the equipment financing notes are due as follows: 2006 - $6.1 million; 2007 - $5.6 million; 2008 – $4.0 million; 2009 – $1.2 million; 2010 – $115,000 and thereafter - $0.

Interest expense was approximately $255,000 for the year ended December 31, 2003. Beginning July 1, 2003, interest incurred was capitalized as part of the costs of our new corporate complex. For the years ended December 31, 2005, 2004 and 2003, we incurred and capitalized interest totaling $913,000, $1.0 million and $384,000, respectively.

We lease certain office, manufacturing and research facilities under operating leases. The minimum annual rent on the facilities is subject to increases based on changes in the Consumer Price Index, taxes, insurance and operating costs, subject to certain minimum and maximum annual increases. We record rent expense on a straight-line basis over the term of the leases.

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Approximate annual future minimum operating lease payments as of December 31, 2005 are as follows (in thousands):

	Operating
Year	Leases
2006	$	1,131
2007	352
2008	266
2009	199
2010	183
Thereafter	272
Total minimum lease payments	$	2,403

Rent expense for the years ended December 31, 2005, 2004 and 2003 was approximately $2.5 million, $2.5 million and $2.1 million, respectively.

In October 2003, we completed our purchase of land for the construction of our new corporate complex. We purchased a total of 26.1 usable acres for approximately $28.2 million. Through December 31, 2005, we have expended an additional $80.4 million for the design and construction of the new corporate complex. We expect the new complex to provide us with up to 800,000 square feet of space and to be constructed in phases as needed. The first phase will provide us with approximately 350,000 square feet of space. The total cost of the land and the construction of the first phase is estimated to be approximately $110.0 million. As of March 1, 2006, our research and development staff, selling, general and administrative staff and a portion of our manufacturing operations have relocated to the new corporate complex. We expect to complete the other buildings in the first phase of construction during the first half of 2006 and to relocate our remaining operations in stages once the buildings are ready for use. We expect our occupancy costs to increase primarily due to increased square footage. Should there be a downturn in our business or the markets in which we compete, we may not have a need to expand our facilities as we have planned. As a result, we may then seek an alternative use for all or a portion of the property, or seek to sell the property, which may have a negative impact on our operating results. We may also incur unexpected costs and expenses in connection with our move from our existing facilities to our new corporate complex, or we may experience unanticipated decreases in productivity and other losses due to inefficiencies relating to this transition, or delays in obtaining any required approvals or clearances from regulatory agencies related to the validation of the manufacturing facilities. For instance, the scale-up of manufacturing at our new corporate complex could result in lower than expected manufacturing output and higher than expected product costs. In addition, we expect to incur some duplicate facilities expenses, such as rent, as we are transferring our operations to the new corporate complex in stages.

7.Stockholders’ Equity

Stock Plans

In December 1996, we adopted the 1996 Stock Incentive Plan (the “1996 Stock Plan”). The 1996 Stock Plan replaced our 1989 Stock Plan. Although future awards will be made under the 1996 Stock Plan, awards made under the 1989 Stock Plan will continue to be administered in accordance with the 1989 Stock Plan. The 1996 Stock Plan provides for awards in the form of restricted shares, stock units, options or stock appreciation rights or any combination thereof. The aggregate number of shares authorized for issuance under the 1996 Stock Plan as of December 31, 2005 was 7,000,000 shares. Additionally, at December 31, 2005, 142,271 unpurchased shares of common stock pursuant to unissued, expired or cancelled options under the 1989 Stock Plan are available for awards under the 1996 Stock Plan.

In November 2002, the Board of Directors adopted the Biosite Incorporated 2002 Nonqualified Stock Incentive Plan (the “2002 Stock Plan”).  The Board of Directors adopted the plan to accommodate Biosite’s continuing growth

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and expansion. The aggregate number of shares authorized for issuance under the 2002 Stock Plan as of December 31, 2005 was 1,450,000 shares, of which 900,000 shares are solely for use as inducement awards in connection with the recruitment of non-officer employees.

Options granted under the stock plans are generally subject to four-year vesting and expire ten years from the date of grant. As of December 31, 2005, no shares were available for future issuance under the 1989 Stock Plan, 332,497 shares were available for future issuance under the 1996 Stock Plan and 275,633 shares were available for future issuance under the 2002 Stock Plan.

Information with respect to option activity under our stock plans is as follows:

			Weighted average exercise
	Shares		price
	(in thousands)
Balance at December 31, 2002	4,400		$	24.67
Granted at fair value	1,456		$	40.86
Exercised	(618	)	$	17.00
Cancelled	(140	)	$	33.85
Balance at December 31, 2003	5,098		$	29.97
Granted at fair value	845		$	43.85
Exercised	(659	)	$	24.42
Cancelled	(228	)	$	35.35
Balance at December 31, 2004	5,056		$	32.75
Granted at fair value	996		$	55.93
Exercised	(1,014	)	$	25.38
Cancelled	(233	)	$	42.48
Balance at December 31, 2005	4,805		$	38.68

The following is a further breakdown of the options outstanding under the 1989 Stock Plan, 1996 Stock Plan and 2002 Stock Plan as of December 31, 2005:

Range of exercise price	Options outstanding (in thousands)	Weighted average remaining contractual life in years	Weighted average exercise price		Options exercisable (in thousands)	Weighted average exercise price of options exercisable
$ 3.25 - $25.00	988	4.95	$	18.37	922	$	17.98
$ 25.05 - $40.00	1,045	5.86	$	31.27	811	$	31.61
$ 40.44 - $50.00	1,750	7.24	$	44.59	1,068	$	43.78
$ 50.93 - $70.00	1,022	9.32	$	55.75	146	$	55.86
$ 3.25 - $70.00	4,805	6.91	$	38.68	2,947	$	32.91

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Employee Stock Purchase Plan

In December 1996, we adopted an Employee Stock Purchase Plan (“ESPP”), which provides all qualifying employees the opportunity to purchase common stock at a discount and pay for such purchases through payroll deductions, subject to certain limitations. As of December 31, 2005, a pool of 900,000 shares of common stock has been reserved for issuance under the ESPP (subject to anti-dilution provisions). The ESPP includes an evergreen provision under which, for a period of ten years beginning on January 1, 2005, an increase in the pool of shares of common stock available for issuance under the ESPP occurs annually equal to the lesser of 1) one and one-half percent of the common shares outstanding at the end of the prior year; or 2) 1,500,000 shares of stock; provided, however, that in no event shall the annual increase cause the shares available for purchase under the ESPP to exceed 5% of the outstanding common shares of Biosite at the end of the prior year. In December 2005, the Compensation Committee of our Board of Directors limited the increase in the pool of shares of common stock available for issuance under the ESPP on January 1, 2006 to 200,000 shares. During the years ended December 31, 2005, 2004 and 2003, 125,285, 141,631 and 106,669 shares, respectively, were issued under the ESPP. As of December 31, 2005, 274,090 shares of common stock were available for issuance under the ESPP.

At December 31, 2005, a total of 882,220 shares of our common stock were reserved for future issuances under all of our stock plans and the ESPP.

Stockholder Rights Plan

In October 1997, our Board of Directors declared a dividend distribution of one preferred stock purchase right (a “Right”) for each outstanding share of common stock of Biosite held of record at the close of business on November 3, 1997. Each Right represents a contingent right to purchase, under certain circumstances, one-one-thousandth of a share of a new series of Biosite preferred stock at a price of $100.00 per one one-thousandth of a share, subject to adjustment. The Rights would be traded independently from Biosite’s common stock and become exercisable under certain circumstances involving the acquisition or a tender or exchange offer by a person or group for 15% or more of Biosite’s common stock. The Rights expire on June 1, 2011, unless redeemed by our Board of Directors. The Rights can be redeemed by the Board at a price of $0.01 per Right at any time before the Rights become exercisable, and in limited circumstances thereafter.

8.Income Taxes

Significant components of the income tax provision are as follows (in thousands):

	Year Ended December 31,
	2005			2004			2003
Current:
Federal	$	24,248		$	28,544		$	10,492
State	4,037			4,220			2,856
Foreign	379			252			63
	28,664			33,016			13,411
Deferred:
Federal	3,051			(7,931		)	2,236
State	896			(353		)	(595		)
Foreign	(277		)	(579		)	—
	3,670			(8,863		)	1,641
	$	32,334		$	24,153		$	15,052

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Significant components of our net deferred tax assets as of December 31, 2005 and 2004 are as follows (in thousands):

	December 31,
	2005		2004
Net deferred tax assets:
Tax credits	$	703	$	996
Reserves and accruals	3,722		4,719
Depreciation and amortization	2,062		2,078
Net operating loss carryovers	856		579
Other, net	87		2,728
Net deferred tax assets	$	7,430	$	11,100

As of December 31, 2005, we had California research and development tax credits of approximately $1.1 million. These tax credits do not expire. We also had foreign net operating loss carryovers of approximately $2.1 million. These carryovers begin to expire in 2010.

No valuation allowance has been recorded to offset the deferred tax assets as we have determined that it is more likely than not that such assets will be realized. We will continue to assess the likelihood of realization of such assets; however, if future events occur which do not make the realization of such assets more likely than not, we will record a valuation allowance against all or a portion of the net deferred tax assets.

The reconciliation of the federal statutory tax rate to our effective tax rate is as follows:

	December 31,
	2005		2004		2003
Tax at federal statutory rate	35.0	%	35.0	%	35.0	%
State income taxes, net of federal tax benefit	4.5		5.2		5.8
Tax credits	(1.5	)	(3.0	)	(3.4	)
Other	(0.6	)	(0.4	)	0.4
Effective rate	37.4	%	36.8	%	37.8	%

It is our policy to record tax benefits only if we conclude that it is at least probable that the deduction or credit will be sustained upon examination by tax authorities. In the period that permanent tax benefits, including research and development tax credits, are generated, we recognize the tax benefits at their estimated net realizable value. With regard to research tax credits, the determination of qualified expenses and activities involves judgment. Tax authorities have regularly examined and challenged research and development tax credits claimed by companies and have disallowed tax credit amounts based on the tax authorities’ evaluation and judgment. We reduce tax benefits to their estimated net realizable value based upon management’s assessment of exposure associated with permanent tax differences, tax credits and interest expense applied to temporary difference adjustments. The tax benefits are analyzed periodically and adjustments are made as events occur to warrant adjustments to the estimate of the net realizable value of the tax benefits.

As of December 31, 2005, we had approximately $1.7 million of undistributed earnings related to our foreign subsidiaries. We believe that these earnings will be indefinitely reinvested. Accordingly, we have not provided for U.S. Federal income taxes related to these earnings. However, upon distribution of these earnings in the form of dividends or otherwise, we would be subject to both U.S. income taxes and withholding taxes payable to the various foreign countries.

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9.Employee Savings Plans

Employee 401(k) Plan

In 1991, we implemented a 401(k) program that allows all qualifying employees to contribute up to a maximum of 20% of their annual salary, subject to annual limits. The Board of Directors may, at its sole discretion, approve contributions by Biosite. No such contributions have been approved or made.

Nonqualified Deferred Compensation Plan

In March 2005, we completed the implementation of a 409A Nonqualified Deferred Compensation Plan, or the Plan, for the benefit of a select group of our management or highly compensated employees, including our executive officers.  The Plan is intended to comply with Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”).  The Plan is an unfunded arrangement and is intended to be exempt from the requirements of the Employee Retirement Income Security Act of 1974, as amended, or ERISA.

A participant in the Plan may annually elect to defer up to 25% of their base salary, 100% of bonuses and/or commissions.  The deferred compensation is contributed to either a retirement account or an in-service account established by the participant at the time the deferral election is made.  These marketable securities investments are classified as trading securities We may also make discretionary contributions to participants’ accounts in the future, although we do not currently do so.  Amounts contributed to participants’ accounts through participant deferrals or through our discretionary contributions are generally not subject to income tax until they are distributed from the accounts.  All contributions made by participants are vested immediately.  Any discretionary contributions made by us in the future, if any, are subject to such vesting arrangements as we may determine.

Amounts credited to a retirement account are distributed upon the retirement of a participant, in a lump sum or in annual installments during a specified number of years after retirement.  Amounts credited to an in-service account are distributed at the beginning of a year selected by the participant that is no sooner than a specified number of years after the year the deferral election is made, in a lump sum or in annual installments during a specified number of years after the initial distribution.  In the event of a participant’s disability, death or, subject to certain limitations set forth in the Plan, a participant’s termination of employment, all amounts credited to his or her account are distributed immediately in a lump sum.  Early distributions may be permitted in the event of unforeseeable emergencies.  A participant may from time to time designate one or more persons as his or her beneficiaries entitled to receive distributions under the Plan.

The Plan may be amended or terminated by our Board of Directors at any time, although no such amendment or termination may deprive a participant of any rights accrued under the Plan prior to the date of the amendment or termination.  Other amendments may be made to conform the Plan to the provisions of applicable law, including the Code and ERISA.

10. License and Patent Disputes

Expenses associated with license and patent disputes incurred during the years ended December 31, 2005, 2004 and 2003 totaled $2.0 million, $178,000 and $0, respectively. The 2005 and 2004 expenses consisted of legal costs related to our ongoing litigation with Roche Diagnostics Corporation and its affiliates, or Roche. In November 2004, Roche filed a complaint in the United States District Court, Southern District of Indiana, Indianapolis Division alleging that Biosite is infringing two patents, U.S. Patent 5,366,609 and U.S. Patent 4,816,224, owned by Roche. Roche seeks to recover damages of an unspecified amount and to enjoin our manufacture, use or sale of the allegedly infringing products and our contribution to and/or inducement of such alleged infringement. We believe these allegations of infringement are without merit and intend to vigorously contest these claims.

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Also, in November 2004, Biosite filed a complaint in the United States District Court, Southern District of California alleging that Roche Diagnostics Corporation and Roche Diagnostics GmbH are infringing two patents, U.S. Patent 6,174,686 and U.S. Patent 5,795,725, owned by Biosite. The patents relate to methods for the measurement of cardiac troponin forms. Roche filed an answer and counterclaims to our complaint in March 2005. In October 2005, Biosite amended its complaint, further alleging that Roche Diagnostics Corporation and Roche Diagnostics GmbH are also infringing U.S. Patent 6,939,678, a newly issued patent assigned to Biosite that is also related to methods for the measurement of cardiac troponin forms. The parties have commenced preliminary discovery with respect to the California case. Biosite is seeking unspecified monetary damages and injunctive relief, among other remedies. We believe our claims have merit and we are vigorously pursuing their prosecution.

In December 2005, we announced that we are in discussions with Roche regarding a potential settlement of both pending cases. Biosite and Roche filed joint requests to stay the litigation in the United States District Courts in the Southern District of California and the Southern District of Indiana through April 2006, both of which requests have been granted. Given the stage of both actions and the current stay of the proceedings, we cannot predict the ultimate outcome of either matter at this time.

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11. Quarterly Information (Unaudited)

The following quarterly information includes all adjustments which management considers necessary for a fair statement of such information. For interim quarterly financial statements, the provision for income taxes is estimated using the best available information for projected results for the entire year.

	2005
	First  Quarter		Second Quarter		Third Quarter		Fourth Quarter
	(in thousands, except per share data)
Product sales	$	70,496	$	71,898	$	68,888	$	71,490
Contract revenues	1,350		1,866		780		931
Gross profit – product sales	50,256		48,883		47,988		50,537
Operating income	22,072		21,699		19,573		20,297
Income before income taxes	22,131		22,214		20,668		21,350
Net income	13,792		13,972		12,569		13,696
Net income per share
- Basic	$	0.83	$	0.82	$	0.73	$	0.79
- Diluted	$	0.76	$	0.76	$	0.68	$	0.73
Shares used in calculating per share amounts
- Basic	16,687		16,966		17,268		17,436
- Diluted	18,226		18,343		18,596		18,773

	2004
	First Quarter		Second Quarter		Third Quarter		Fourth Quarter
	(in thousands, except per share data)
Product sales	$	56,698	$	58,761	$	60,392	$	64,756
Contract revenues	979		1,101		791		1,464
Gross profit – product sales	36,956		39,166		41,809		43,288
Operating income	14,564		16,258		16,904		16,562
Income before income taxes	14,758		16,444		17,023		17,376
Net income	8,945		9,976		10,381		12,146
Net income per share
- Basic	$	0.57	$	0.64	$	0.65	$	0.75
- Diluted	$	0.55	$	0.59	$	0.60	$	0.68
Shares used in calculating per share amounts
- Basic	15,628		15,699		15,979		16,244
- Diluted	16,366		16,880		17,311		17,824

F-24

Schedule II

Biosite Incorporated

Valuation and Qualifying Accounts

Years ended December 31, 2005, 2004 and 2003

	Additions
Description	Balance at Beginning of Year		Charged to Costs and Expenses		Charged to Other Accounts		Deductions			Balance atEnd of Year
Year ended December 31, 2005
Allowance for doubtful accounts	$	1,189,024	$	675,428	$	—	$	515,782	(1)	$	1,348,670
Inventory reserve	$	2,946,759	$	382,493	$	—	$	2,710,664	(2)	$	618,588
Warranty reserve	$	631,674	$	1,435,619	$	—	$	1,274,789	(3)	$	792,504
Year ended December 31, 2004
Allowance for doubtful accounts	$	849,477	$	1,251,234	$	—	$	911,687	(1)	$	1,189,024
Inventory reserve	$	639,116	$	3,637,525	$	—	$	1,329,882	(2)	$	2,946,759
Warranty reserve	$	657,360	$	1,348,659	$	—	$	1,374,345 (3	(3)	$	631,674
Year ended December 31, 2003
Allowance for doubtful accounts	$	478,470	$	958,952	$	—	$	587,945	(1)	$	849,477
Inventory reserve	$	614,780	$	1,007,930	$	—	$	983,594	(2)	$	639,116
Warranty reserve	$	358,807	$	1,772,762	$	—	$	1,474,209	(3)	$	657,360

(1)Uncollectible accounts written off, net of recoveries

(2)Write off of obsolete, excess or impaired inventory

(3)Cost incurred associated with the replacement and repair of the Triage Meters and devices

EX-10.17

Exhibit 10.17

*** Text omitted and filed separately

with the Securities and Exchange Commission

Confidential Treatment Requested

Under 17 C.F.R. §§ 200.80 (b) (4)

And 240.24b-2

DISTRIBUTION AGREEMENT

THIS DISTRIBUTION AGREEMENT (this “Agreement”) effective as of January 1, 2006 (the “Effective Date”), is entered into between BIOSITE INCORPORATED, a corporation under the laws of the State of Delaware (“Biosite”), having a place of business at 9975 Summers Ridge Road, San Diego, California 92121, and FISHER SCIENTIFIC COMPANY L.L.C., a Delaware Limited Liability Company represented by its FISHER HEALTHCARE division, (“FHC”), having a place of business at 9999 Veterans Memorial Drive, Houston, Texas 77038.

WITNESSETH

WHEREAS, Biosite and Curtin Matheson Scientific (predecessor in interest to FHC) entered into a Distribution Agreement dated as of November 11, 1991 (as amended, the “1991 Distribution Agreement”), which terminated on December 31, 1997.

WHEREAS, Biosite and FHC entered into a new Distribution Agreement effective as of January 1, 1998 (as amended, the “1998 Distribution Agreement”), which terminated on December 31, 2000.

WHEREAS, Biosite and FHC entered into a Distribution Agreement effective as of January 1, 2001 (as amended, the “2001 Distribution Agreement”), which terminated on December 31, 2003.

WHEREAS Biosite and FHC entered into a new Distribution Agreement effective as of January 1, 2004, which was amended by Amendment No. 1 to Distribution Agreement, Amendment No. 2 to Distribution Agreement, Amendment No. 3 to Distribution Agreement, Amendment No. 4 to Distribution Agreement, Amendment No. 5 to Distribution Agreement and that certain Letter from Thomas Watlington to [***] dated March 31, 2004 (as amended, the “2004 Distribution Agreement”). The 1991 Distribution Agreement, the 1998 Distribution Agreement, the 2001 Distribution Agreement and the 2004 Distribution Agreement, collectively, are referred to as the “Previous Distribution Agreements”.

WHEREAS, the parties desire to terminate the 2004 Agreement, and to enter into this Agreement setting forth the terms of their business relationship, effective as of the Effective Date.

NOW, THEREFORE, in consideration of the foregoing premises and the respective covenants of the parties herein set forth, the parties hereby agree as follows:

1.Products.

(a)For purposes of this Agreement, the “Products” shall mean, collectively, [***], [***], [***], [***], [***] and [***].

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(b)For purposes of this Agreement, the “[***]” shall mean the Biosite products described in Schedule N.

(c)For purposes of this Agreement, the “[***]” shall mean the Biosite products described in Schedule B.

(d)For purposes of this Agreement, the “[***]” shall mean the Biosite products described in Schedule C.

(e)For purposes of this Agreement, the “[***]” shall mean the Biosite products described in Schedule D.

(f)For purposes of this Agreement, the “[***]” shall mean the Biosite products described in Schedule E-1 and Schedule E-2.

(g)For purposes of this Agreement, the [***] shall mean the new [***] products which FHC exercises its right under Section 1(k) to add to this Agreement.

(h)For purposes of this Agreement, [***] shall mean [***] that either (i) comprise a new line of products launched after the Effective Date, or (ii) are added after the Effective Date to a line of products (e.g., the [***] line, [***] line, and [***] line) existing as of the Effective Date (other than products that merely add, remove or substitute one or more new markers to an existing product, or products that merely add one or more new features (e.g., a multi-marker index) to an existing product). [***], without limitation, will include (pending completion of clinical development and regulatory approval) the [***], [***].

(i)For purposes of this Agreement, “Improved Products” shall mean all New Products other than Uniquely New Products. Improved Products, without limitation, will include (pending completion of clinical development and regulatory approval) the [***] with [***] and [***] products currently under development by Biosite.

(j)For purposes of this Agreement, [***] shall mean [***], [***] and those [***] that Biosite classifies (in its sole and absolute discretion, as evidenced by express written notice to FHC) as [***]. Following [***] and [***], the [***] by Biosite shall be classified by Biosite as an [***]. If a [***] merely [***] one or more [***] to a previously launched [***], or a product that merely [***] (e.g., a [***]) to a previously launched [***], then following [***], such [***] also shall be an [***]; provided, however, for purposes of calculating the GSMR for such [***] under Section 5(f), the first sale of such [***] by Biosite to FHC hereunder shall be deemed to be either (i) the [***] of the [***] of such [***] by Biosite to FHC hereunder, or (ii) the date of the [***] of such previously launched [***] by Biosite to

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FHC hereunder, in each case as determined by Biosite in its sole discretion and set forth in a written notice to FHC.

(k)If Biosite desires to offer for sale in the Territory or Physician Office Practices any new Biosite immunoassay diagnostic product (including any product improvements, updates or product line extensions) (i) for which Biosite or the applicable third party manufacturer has received all applicable governmental approvals to sell and use in the Territory and Physician Office Practices after the date of this Agreement, (ii) which Biosite is not prohibited by law or contract from selling to FHC hereunder, and (iii) which Biosite offers for sale, then Biosite shall offer to FHC in writing the opportunity to add such new Biosite immunoassay diagnostic product to this Agreement; provided, however, that (A) if at such time FHC has the right to sell or distribute any product of a third party in the Territory which is competitive with such new Biosite immunoassay diagnostic product (excluding any product that meets one or more of the exceptions described in Section 3(b)(i)(i-vi), then Biosite shall have no obligation to offer to FHC the opportunity to add such new Biosite immunoassay diagnostic product (or to any improved or updated versions thereof) to this Agreement, and (B) if either party has [***] under [***], then Biosite thereafter shall have no obligation to offer to FHC the opportunity to add any new Biosite immunoassay diagnostic product to this Agreement. Notwithstanding the preceding, in the event that Biosite desires to offer for sale in the Territory or Physician Office Practices any such new Biosite immunoassay diagnostic product as described above, and at such time, FHC has the right to sell or distribute any product of a third party in the Territory which is competitive with such new Biosite immunoassay diagnostic product (excluding any product that meets one or more of the exceptions described in Section 3(b)(i)(i-vi)), the parties shall negotiate in good faith the terms under which Biosite would offer to FHC the opportunity to add such new Biosite immunoassay diagnostic product (including any improved or updated version or product line extension thereof) to this Agreement. If the parties are unable to reach a mutually acceptable agreement for the distribution of the applicable product after such good faith negotiations, Biosite, at its sole option, shall have no obligation to offer such product to FHC for distribution (or the product improvements, updates or product line extensions thereof). Without limiting the generality of the foregoing, if as part of the negotiations described in the preceding sentence FHC agrees to discontinue the distribution of such competitive product as a condition precedent to adding such new Biosite immunoassay diagnostic product to this Agreement, Biosite shall be obligated to offer such new Biosite immunoassay diagnostic product to Fisher under the terms of this Section 1(k). If FHC gives Biosite express written notice of FHC’s acceptance of such offer for such new Biosite immunoassay diagnostic product within [***] days after FHC receives Biosite’s written offer to add such new Biosite immunoassay diagnostic product to this Agreement, then such new Biosite immunoassay diagnostic product shall be added to this Agreement (subject to Fisher’s discontinuation of the distribution of such competitive product, if applicable, as a condition precedent). If FHC fails to give Biosite express written notice of FHC’s acceptance of such offer for such new Biosite immunoassay diagnostic product within [***] days after FHC receives Biosite’s written offer to add such new Biosite immunoassay diagnostic product to this Agreement, then FHC shall have no rights in or to such new Biosite immunoassay diagnostic product (or to any improved or updated versions thereof) under this Agreement or otherwise.

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(l)Biosite shall provide all required Material Safety Data Sheets, if any, for any Product containing hazardous chemicals or otherwise as required by federal, state or local law.

2.Grant of Distributorship.

(a)Upon the terms and subject to the conditions set forth in this Agreement, Biosite hereby appoints FHC, and FHC accepts such appointment, as the [***] distributor of the Products in the Territory during the Term. For purposes of this Agreement, “[***]” shall mean, with respect to any Product, that Biosite (under the terms and conditions of Section 2(e)) and FHC (on the terms and conditions in this Agreement) and [***] other third party (to be determined by Biosite, [***], [***] or [***], or any of [***] or [***], and which [***], [***] or [***], or any of [***] or [***], as a [***]), shall have the right to promote, market, sell and distribute the Products in each segment of the Territory. During the Term, Biosite shall not use [***], [***] or [***], or any of [***] or [***], as a third party logistics provider for the Products in the Territory. Any agreement between Biosite and such third party distributor allowed under this Section 2(a) shall contain language that prohibits during the Term the provision at any point in the distribution chain other than for end-use, of Product to [***], [***] or [***], or any of [***] or [***]. Biosite shall inform FHC of any such appointment in writing not less than [***] days prior to initiating distribution with any such third party. FHC may distribute the Products hereunder only through FHC or its subdistributors existing as of the Effective Date, which are listed in Schedule G. FHC shall not appoint subdistributors hereunder, other than those listed in Schedule G without Biosite’s prior express written consent, which shall not be unreasonably withheld. Notwithstanding the foregoing, Biosite reserves the rights described in Section 2(e).

(b)Notwithstanding anything to the contrary set forth in this Agreement, upon the terms and subject to the conditions set forth in this Agreement, Biosite hereby appoints FHC, and FHC accepts such appointment, as the [***] distributor of the Products in the [***] (as defined below) during this Agreement. FHC may distribute the Products hereunder only through FHC or its subdistributors existing as of the Effective Date, which are listed in Schedule G. FHC shall not appoint subdistributors hereunder, other than those listed in Schedule G without Biosite’s prior express written consent, which shall not be unreasonably withheld.

(c)The “Territory” consists of [***] in the United States and its territories (including without limitation, Puerto Rico): (1) the “[***]”, and (2) the “[***].” The [***] shall mean:[***]. The [***] shall mean those [***] of [***] or more [***] that have [***] from [***] any Product at any time [***], through [***], as evidenced by

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written notice provided by FHC to Biosite in accordance with the 2004 Distribution Agreement. The Territory shall not include any areas or any market segment not described in this Section 2(c) without the prior written consent of Biosite, which consent may be withheld at Biosite’s sole discretion. Other than as expressly set forth in Section 2(i) regarding [***], FHC shall not be permitted to sell the Products in any areas or to any market segment not described in this Section 2(c) without the prior written consent of Biosite, which consent may be withheld at Biosite’s sole discretion. FHC shall take reasonable steps to limit the likelihood that FHC’s customers in the Territory and [***] purchase Products for resale in the [***] (as defined below but not including the [***] of [***] or more [***]).

(d)All areas and market segments not included in the definition of the Territory and [***] shall be hereinafter referred to as the “[***].” Biosite shall retain all rights to promote, market, sell and distribute (either directly or through others) the Products in the [***] and [***]. Except as otherwise set forth in this Agreement, Biosite shall not be permitted to sell the Products in the Territory and shall take reasonable steps to limit the likelihood that Biosite’s customers in the [***] and [***] purchase Products for resale into the Territory. Included in the [***], without limitation, are all market segments in countries outside of the United States and its territories (including without limitation, Puerto Rico) and the following customer groups in the United States and its territories (including without limitation, Puerto Rico): physician group practices of [***] or more physicians other than the [***]; probation and parole programs; public and private sector workplace testing; industrial laboratories; non-hospital military on-site testing programs (i.e., ADCO, recruiting centers); high school, college, university and professional sports programs; government agencies; public carriers; and veterinary clinics and animal testing. For the sake of clarity, physician group practices of [***] or more physicians other than the [***] shall be included in both the definitions of [***] and [***].

(e)Nothing herein shall prohibit Biosite from:

(i)promoting, marketing, distributing and selling the [***] to [***] (or its affiliates) without restriction;

(ii)distributing (but not selling) Products within the Territory only for purposes of pre-market clinical testing or evaluation of Products or testing of Product improvements or enhancements prior to market introduction or distributing (but not selling) Products within the Territory for post-market research or educational purposes;

(iii)promoting, marketing, soliciting and receiving orders for the sale by FHC, its subdistributors listed on Schedule G (with FHC’s consent), and its co-exclusive distributor of Products within the Territory as allowed under the terms and conditions of this Agreement;

(iv)promoting, marketing, selling and distributing any Product directly to a customer (A) listed on Schedule 2(e)(iv) (B) which states in writing to FHC (either directly

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or through Biosite but that nevertheless is a writing on customer letterhead) prior to Biosite’s first sale to such customer that such customer will only buy such Product directly from Biosite (or any other Biosite distributor properly appointed under the terms and conditions of this Agreement), but only after Biosite identifies the customer to FHC’s Vice President of Marketing (or his or her designee) and specifies the reason such customer refuses to buy from FHC, or (C) who purchases not more than [***] of Products during any [***] period, but only to the extent that the aggregate amount of Products purchased by all such customers during such same twelve month period is less than [***]; and

(v)promoting, marketing, selling and distributing, or permitting any third party to promote, market, sell or distribute, any Product (A) in the [***], (B) in any territory or market segment during the Extended Term (if applicable as described in Section 6(a) of this Agreement), or (C) in the event that FHC exercises the opt out right described in Section 3(b); provided, however, that the [***] shall remain a [***] Product as defined in Section 2(a) above for the Term.

(f)FHC shall not negotiate or execute an agreement with a group purchasing organization (integrated delivery network or similar entity) with respect to [***] customers without the written consent of Biosite, which shall not be unreasonable withheld. FHC shall pay any group purchasing organization’s administrative fees applicable to FHC’s national contracts. Biosite shall pay any group purchasing organization’s administrative fees applicable to Biosite’s national contracts. Each of FHC and Biosite shall pay [***] of the administrative fees imposed by [***], [***] regarding the purchase of the Products through FHC, provided that neither party can amend the amount of administrative fee imposed by [***] without the other party’s prior written consent. The language contained in this Section 2(f) shall control over any conflicting language contained in this Agreement.

(g)(i)If FHC in good faith enters into a written agreement (excluding a purchase order or Multi-product Agreement (as defined below)) with a Contract Customer (as defined below) relating to the purchase and sale of Products, such written agreement shall be substantially in the form of Biosite’s then-current form written agreement for the applicable transaction (the “Form Agreement”), provided that FHC may (1) remove the Biosite logo and insert the FHC logo, (2) delete “Biosite” as the signatory, (3) insert terms concerning shipment and payment as exist between FHC and the Contract Customer, (4) expressly provide that Biosite and not FHC shall be responsible for all warranty services (in accordance with Biosite’s standard warranty terms and conditions), and product liability issues and third party intellectual property claims to the extent caused by Biosite’s negligence or intentional misconduct, and (5) insert terms and conditions limiting FHC’s liability to the applicable customer to the extent permitted by applicable law (provided that such terms and conditions shall in no event provide that Biosite shall have additional obligations or liability to the applicable customer). Subject to the immediately preceding sentence, FHC shall not revise the terms or conditions of a Form Agreement without obtaining Biosite’s prior written approval.

(ii)Subject to Section 5(e) below, Biosite shall have the right to enter into written agreements with Contract Customers of FHC for distribution of Products by FHC to such Contract Customers, provided that Biosite shall not obligate FHC to: (i) provide warranty

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services or indemnity to Contract Customers regarding the Products (and each such written agreement shall contain language substantially similar to the language set forth in paragraphs A and B of Schedule J attached to this Agreement); or (ii) deliver the Products other than in accordance with FHC’s standard delivery terms and conditions unless (a) FHC fails to reject, within three (3) business days after delivery of a written request by Biosite to FHC’s Controller, Biosite’s request to include in the Contract Customer agreement delivery terms that are inconsistent with FHC’s standard delivery terms or (b) [***] agrees to be [***] for all additional [***] to the extent resulting from the [***] being [***] terms. Subject to the foregoing, the following shall apply: (1) Biosite shall use reasonable efforts to include language substantially similar to the language set forth in paragraphs A and B of Schedule J attached hereto in any agreement with a Contract Customer as described in the preceding sentence; and (2) Biosite shall provide written notice to FHC’s Legal Department in the event that Biosite desires to enter into an agreement with a Contract Customer that does not contain language substantially similar to the language set forth in paragraph B of Schedule J and Biosite shall not enter into such an agreement with such Contract Customer in the event that FHC’s Legal Department provides, within three (3) business days after delivery of a written request by Biosite, reasonable notice and reasons for rejecting such request by Biosite.

(iii)The parties shall cooperate in good faith to facilitate the execution by Contract Customers of any such written agreement based on the applicable Form Agreement and as provided in this Section 2(g). Provided that the purpose of the agreement is not primarily for the distribution of Products by FHC, FHC may in good faith enter into written agreements with FHC customers relating to the distribution by FHC to such FHC customers of multiple products including Products and multiple products of third party manufacturers (a “Multi-product Agreement”).

(iv)FHC shall not obligate or give the right to any FHC customer to purchase any Products beyond the Term, without the prior written consent of Biosite.

(v)“Contract Customer” shall mean a [***] that purchases a Product from [***] pursuant to a [***] (excluding a [***]) between FHC and such customer whether [***] or [***]; provided, however, “Contract Customer” shall not include [***] with which [***] has entered into its [***].

(vi)Notwithstanding anything to the contrary herein, if a Contract Customer’s agreement with FHC has a term that extends beyond the Term for any reason, then such Contract Customer’s agreement with FHC shall be assignable to Biosite following the termination of this Agreement, provided that Biosite provides FHC with a letter from the Contract Customer to FHC requesting the assignment of such Contract Customer’s agreement to Biosite. If any Contract Customer does not so direct FHC to assign its agreement to Biosite, FHC shall be responsible for servicing such Contract Customer for the term of the Contract Customer’s agreement, if that agreement should extend past the date of termination of this Agreement. Any request for assignment of a FHC Contract Customer’s agreement shall be subject to the provisions of Section 6(c) of this Agreement with respect to mutual agreement of the Message. In order to allow FHC to service non-assigning Contract Customers following the

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termination of this Agreement, Biosite shall, if FHC so elects, sell Products to FHC upon the terms and conditions set forth herein following the termination of this Agreement for distribution to the non-assigning Contract Customers, and the terms and conditions of this Agreement shall survive to the extent applicable to the sale by Biosite to FHC, and the subsequent distribution by FHC to the non-assigning Contract Customers (and not to any other customer), of such Products. For the avoidance of doubt, it is understood that during any such period, the relationship between FHC and Biosite shall be non-exclusive.

(h)Notwithstanding anything to the contrary, upon [***] advance written notice to FHC (the “Event Notice”), Biosite may, in its sole discretion, (i) discontinue the manufacture, sale or supply of [***] into the general commercial market (but not to FHC only), and (ii) sell or transfer its [***] line of products (or such portion of Biosite’s business that pertains to the [***]). [***] days after receipt of an Event Notice, (i) FHC shall no longer have the right to distribute, and shall cease distributing, the [***] other than such [***] that are already in FHC’s inventory, and (ii) this Agreement shall terminate with respect to [***] only, subject to Section 6(c) and other than for purposes of Sections 5(g) and 5(h).

(i)Notwithstanding anything to the contrary set forth in the Agreement, upon the terms and subject to the conditions set forth in this Agreement and clauses (i) through (vi) of this Section 2(i), Biosite appoints FHC, and FHC accepts such appointment, as a non-exclusive distributor of the Products in the [***].

(i)At Biosite’s request, Fisher shall submit to Biosite such reports as are customarily provided by FHC to suppliers similarly situated with Biosite. All such sales reports are, and shall remain the property of FHC, and shall be subject to Section 9 of this Agreement, but may be used by Biosite solely for the purposes of performance of its obligations and the exercise of its rights under the Agreement.

(ii)FHC may distribute the Products hereunder only through FHC or its subdistributors existing as of the Effective Date, which are listed in Schedule G of this Agreement. FHC shall not appoint subdistributors hereunder, other than those listed in Schedule G without Biosite’s prior express written consent, which shall not be unreasonably withheld.

(iii)With respect to sales to [***], each party shall perform its obligations as set forth in Schedule M.

(j)“[***]” means [***] the premises of the foregoing [***], but specifically excluding (i) the [***], (ii) [***] (including [***]), including, but not limited to the [***], (iii) [***] that are not specified above, (and (iv) the [***]. “[***]” means those [***] and [***] located within the premises of the foregoing

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[***], who prior to [***], received a [***] from or through an [***] to the customer.

3.Conduct of FHC.

(a)During the Term, FHC shall use its good faith commercial efforts and facilities (i) to promote, market, distribute and sell the Products within the Territory and [***], and (ii) to take no action which would interfere with Biosite’s efforts to develop and maintain the reputation of and goodwill with respect to the Products, provided that the parties acknowledge that FHC’s actions allowed by the second sentence of Section 3(b)(i) shall not constitute a breach of the foregoing obligation. During such period after the Term that FHC continues to have the right hereunder to sell Products to any customers, FHC shall use its good faith commercial efforts and facilities (i) to promote, market, distribute and sell the Products to such customers, and (ii) to take no action which would interfere with Biosite’s efforts to develop and maintain the reputation of and goodwill with respect to the Products, provided that the parties acknowledge that FHC’s promoting, marketing, distributing and selling products that are competitive with the Products during the Period after the Term shall not constitute interference with Biosite’s efforts to develop and maintain the reputation and goodwill with respect to the Products. During the Term, FHC shall provide not less than an aggregate of [***] full pages of advertising for available Products in all of FHC’s General Catalogs. With respect to each [***] and [***], FHC shall permit Biosite access to its sales representatives for at least one full day per Product for the purpose of providing training of FHC’s sales representatives in the demonstration and use of the Products on such dates (which shall be not later than [***] months following the launch of such Product in the Territory and [***]) and in such locations as mutually acceptable to the parties. FHC shall provide Biosite with samples of any such Product advertising and sales literature prior to printing and distribution of same, and Biosite shall have the right to approve the Product advertisement(s), which approval shall not be unreasonably withheld or delayed. FHC shall use its good faith commercial efforts to inform customers and potential customers of the availability and desirability of the Products; to handle promptly all inquiries, quotations, correspondence and orders; and to assist customers in the proper use of the Products and the referral of customers to Biosite for the solution of technical application problems.

(b)Non-Compete.

(i)Except as otherwise set forth in this Section 3(b), and except with respect to the [***], provided that Biosite supplies sufficient Products to FHC to satisfy FHC’s purchase of the Products from Biosite within FHC’s reasonable forecasted amounts pursuant to Section 3(c), FHC shall not promote, market, advertise, sell, or distribute any products in the Territory that are directly competitive with the Products, other than the [***], to which this section shall be inapplicable. Notwithstanding the foregoing, FHC shall have the right to promote, market, advertise, distribute and sell (i) products of a third party, competitive with the Products, which third party products FHC sells or distributes as of the Effective Date, as listed on Schedule H; (ii) any products of such third party which are subsequently added by such third party to its line of products listed on Schedule H, which are competitive with the Products, except those products in the same or equivalent testing format of the Products that read visually or read on a point of care instrument; (iii) any instruments that

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may include competitive assays to the Products which are instruments that are based on an automated random access instrument platform (with the exception of those instruments manufactured by or on behalf of [***], [***], [***], [***], [***] or [***] or their successors or assigns and which have a [***]) with a broad based menu of analytes such as chemistries, fertility, thyroid function, oncology, infectious disease, TDM, DOA, allergy, etc.; provided that all of the products referred to in Sections 3(b)(i)(iii) have a [***]; (iv) products of a third party which FHC sells or distributes as of the date that Biosite offers a new product to FHC under Section 1(k) of this Agreement, which products are competitive with the new product; provided, however, in each case that FHC immediately shall notify Biosite in writing of such products and if the parties mutually agree to terms under which FHC may distribute the new Biosite product, then such competitive product shall be added to Schedule H; (v) any products of such third party which are subsequently added by such third party to its line of products described in clause (iv) above, which are competitive with the Products, except those products in the same or equivalent testing format of the Products that read visually or read on a point of care instrument; provided, however, in each case that FHC immediately shall notify Biosite in writing of such products and if FHC elects to carry the new product then such competitive product shall be added to Schedule H; (vi) products (including instruments) of [***] or [***] (and any improvements, updates or extensions thereof)) marketed as of the Effective Date by [***] or [***] regardless of the list price of such instruments; and (vii) subject to Section 6(a)(i) products that are manufactured by an affiliate of FHC that are competitive with the Products. For the avoidance of doubt, notwithstanding the foregoing, except as may be permitted under Subsections (A) and (B) below and as may be permitted under Section 6(a)(ii), FHC shall not promote, market, advertise, sell, or distribute any products in the Territory for [***] other than (A) products (including instruments) of [***] or [***] (and any improvements, updates or extensions thereof)) marketed as of the Effective Date by [***] or [***] regardless of the list price of such instruments, and (B) Products. Additionally, nothing contained in this Agreement shall restrict the activities of FHC outside the Territory with respect to competing products. FHC may opt out of the requirements of this Section 3(b) at any time during the Extended Term by providing express written notice thereof to Biosite.

(A)In addition to the activities specifically allowed in Subsections (i) – (vii) of this Section 3(b)(i), with respect to any new Biosite product that is [***] that Biosite intends to sell as a [***] product ([***]), if Biosite is prohibited by contract from offering the [***] to FHC, then FHC shall have the right to promote, market, advertise, distribute and sell any product that [***] the same [***] but does not [***] any other of the [***] that [***] any Products.

(B)In addition to the activities specifically allowed in Subsections (i) – (vii) of this Section 3(b)(i), with respect to a Biosite product that is [***] of more

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than [***] (“[***]”), if Biosite is prohibited by contract from offering the [***] to FHC for distribution under this Agreement, then FHC shall have the right to promote, market, advertise, distribute and sell any product that measures any [***] that [***] the [***] other than a [***] that [***] any Products.

(ii)No later than the earlier of [***] days after Biosite’s quarterly public disclosure of its financial results (“Financial Results”) or [***] days after the end of each calendar quarter (provided that Biosite has received from FHC on a timely basis any information reasonably necessary for Biosite to perform such calculation), Biosite shall calculate and provide FHC with a reasonably detailed written report calculating with respect to the applicable [***] period evidenced (or to be evidenced) in the Financial Results: (A) the sales of [***] and its affiliates [***] unaffiliated [***] in the [***] (“[***]”) and (B) the sale of [***] and its affiliates [***] unaffiliated [***] in the [***] plus [***] sales in the [***] less the applicable [***], or other similar adjustments between Biosite and FHC, for such Product sales (the sum of which shall be referred to as “[***]”), in each case net of all [***] and other [***] by [***] or its affiliates to any such [***]. If the [***] for such period exceeds [***] of the [***] for such period, then upon written notice by FHC (at the option of FHC in its sole discretion) delivered to Biosite within [***] days after the receipt from Biosite of Biosite’s written report, the provisions of Section 3(b)(i) immediately shall terminate and FHC shall have the right to sell any products that compete with the Products at its sole discretion. If FHC makes such election, then without any action by either party, (1) FHC’s distributorship shall become [***] and Biosite shall have the right to promote, market, advertise, distribute and sell Products direct to any customer or to enter into one or more distribution agreements with any third party (without restriction or obligation to FHC), and (2) either party thereafter shall have the right to terminate this Agreement on [***] days prior written notice to the other party. The provisions of Section 3(j) shall be applicable to any data necessary to verify the calculations as provided hereunder.

(iii)FHC represents to Biosite that, as of October 19, 2005, , there are no products manufactured by affiliates of FHC that are competitive with the Products, except as set forth on Schedule 3(b)(iii). FHC shall immediately notify Biosite in writing if, after the Effective Date, an affiliate of FHC or FHC elects to distribute or sell any product described in clause (vii) of Section 3(b)(i). Concurrently with the execution of this Agreement, FHC shall provide Biosite a list of affiliates that manufacture, distribute or sell products in the United States as of the date of October 19, 2005. Such list shall be deemed FHC Confidential Information and subject to the provisions of Section 9.

(c)FHC shall provide Biosite, on a monthly basis, with a written forecast of FHC’s estimated purchase requirements for each month in the ensuing three-month period for theProducts (other than [***]), and in the ensuing six month period for [***]. Forecasted quantities for Products for the first and second month of each forecast period shall be

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binding, subject however to a variance of plus or minus [***] for the second month of each forecast and provided that in the first [***] months following the date of first Product shipment for any new Product, the second month forecast shall be subject to a variance of plus or minus [***]. Biosite shall use its good faith commercial efforts to sell such quantities to FHC. FHC shall include in each monthly forecast a good faith estimated allocation of FHC’s estimated purchase requirements for each month set forth in such report between the Territory and [***]; provided, however, that such estimated allocation is solely for informational purposes, shall not be binding on the parties and shall be used by Biosite solely for planning and administrative purposes.

(d)FHC may return, for full credit or replacement, any Product for which FHC is required to give a customer a credit or replacement Product due to a claimed defect or deficiency in the Product, provided that FHC first obtains from Biosite a returned goods authorization which shall not be unreasonably withheld or delayed by Biosite.

(e)Biosite shall review and advise FHC on compliance with all FDA requirements regarding the Products contained in FHC’s advertising and sales literature.

(f)FHC hereby represents and warrants that neither FHC nor its agents or employees will make any representations or claims with respect to the Products which are not authorized in writing by Biosite. Subject to the provisions of Section 6(c) hereof, FHC agrees to and shall indemnify Biosite against, and hold Biosite harmless from, all claims, actions, costs, expenses and damages (including without limitation reasonable attorneys’ fees and expenses) arising out of: (i) representations or claims by FHC with respect to the Products which are not authorized by Biosite; (ii) willful act or omission by or on behalf of FHC in connection with the sale, marketing, promotion or distribution of the Products; (iii) failure by FHC to comply in any material respect with governmental regulatory requirements relating to the Products which are applicable to distributors of products; or (iv) material breach of this Agreement by FHC. Such indemnity shall be provided in accordance with the procedures set forth in Section 4(l) of this Agreement.

(g)Each shipment from Biosite shall contain numbers identifying the manufacturing lot or lots for control purposes. FHC shall keep accurate records that will enable FHC to determine the Product lots received by specific customers of the Product. FHC shall make such information available to Biosite in the event of a Product recall or Product corrective action requested by Biosite or required by any governmental agency as soon as reasonably practicable but in no event later than ten (10) days after such request by Biosite. FHC shall provide Biosite with information regarding the prior month’s sales including the [***], and shall provide Biosite with such information in no event later than the last day of the month, during the Term and during any time thereafter that FHC sells any Product as permitted hereunder. Additionally, within ten (10) days after each of the Effective Date, not less than [***], and not more than [***], days prior to the commencement of the [***] and the [***] (if any), and within [***] days after the termination of this Agreement, FHC shall provide to Biosite [***].

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(h)FHC shall comply with Biosite’s reasonable instructions regarding the storage and handling of the Products, and except as otherwise provided in this Agreement, FHC shall be solely responsible for the cost thereof.

(i)At Biosite’s request, FHC shall submit to Biosite such other reports as are customarily provided by FHC to suppliers similarly situated with Biosite.

(j)Both parties shall keep accurate records [***] of [***] for the [***]. Upon [***] and upon [***] during [***], each party shall [***] an [***] reasonably acceptable [***] being [***] or other [***] of the [***] being [***] to [***] such records in order to [***] any [***] or [***] reasonably required by the provisions of this Agreement, provided that [***] such [***] shall be permitted and the parties shall not be required to [***] such [***] for [***]. All information received as a [***] such [***] shall be subject to Section 9 of this Agreement.

(k)FHC shall promptly advise Biosite of any changes in FHC’s organization or personnel which may materially, adversely affect FHC’s ability to perform under this Agreement, as well as any material changes affecting ownership or control of FHC.

(l)At all times during the Term and during any time thereafter that FHC sells any Product as permitted hereunder, FHC shall maintain inventory of each Product sufficient to satisfy not less than FHC’s requirements for its reasonably forecasted sales of such Product for the immediately following [***].

(m)FHC shall treat each [***] Product as [***], “[***]” or [***] status for [***] purposes for not less than the first [***] full calendar quarters during which such Product is an [***] Product hereunder. The [***] Products shall also be included in the portfolio of products handled by FHC’s product specialists.

(n)To the extent otherwise permitted under this Agreement, if Biosite in good faith enters into a bona fide written agreement (a “Biosite/GPO Agreement”) with a group purchasing organization, integrated delivery network or similar entity (collectively, a “GPO”) pursuant to which (i) the facilities in the Territory having the right to purchase products under such GPO shall be obligated to purchase one or more Products at a purchase price (the “GPO Price”) specified in, or calculated under, such Biosite/GPO Agreement, the effective price to FHC, for Products sold to FHC for resale under such Agreement hereunder solely for resale to such facilities, shall be not greater than [***]. If Fisher objects to such pricing then the parties shall exercise good faith efforts to negotiate mutually agreeable pricing for a period of not less than fifteen (15) days. If the parties are unable to reach agreement on other pricing arrangements, then during the term of the GPO Agreement, Biosite shall have the right to promote, market, sell and distribute such Products to such GPO under the GPO Agreement, if Fisher refuses to sell the Products to the GPO member(s) at the GPO Price.

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(o)To the extent that Section 952 of the Omnibus Reconciliation Act of 1980 (the “Act”) and the regulations promulgated thereunder are applicable to the distribution or delivery of Products to a customer, during the term of any written agreement with such customer and until the expiration of four (4) years after the last sale of a Product by FHC pursuant to such customer agreement, FHC will make available, to the same extent that Biosite is required to do so under the customer agreement, upon written request of the Secretary of Health and Human Services or the Comptroller General of the United States or any of their duly authorized representatives, copies of any books, documents, records and other data of FHC that are necessary to verify the nature and extent of the costs incurred by the applicable customer in purchasing the Products.

4.Conduct of Biosite.

(a)Biosite shall ship promptly FHC’s orders for Products, but in any event not later than [***] days from receipt of each order for a Product, (other than [***]). Biosite shall use its reasonable efforts to ship FHC’s orders for [***] not later than [***] from receipt of each order for [***]. Subject to the provisions of Section 11 hereof, Biosite shall ship FHC orders for Products [***] (at which point title and risk of loss shall pass from Biosite to FHC), [***] or to such [***] as [***] may [***]. Biosite shall cooperate with FHC in arranging drop shipments of Products to customers on a case by case basis to include Products designated by Biosite as drop ship Products. [***]. [***].

(b)Biosite shall notify FHC immediately in writing should Biosite become aware of any defect or condition which may render any Product in violation of any statute or regulation, or which in any way materially alters the specifications or quality of such Product.

(c)Biosite shall provide to FHC’s sales personnel, at FHC’s premises or such other location as the parties may agree, at mutually convenient times, such training in the demonstration and use of the Products as may be reasonably requested by FHC. During such training, Biosite shall also address, in a reasonable manner, market information, strategies, and tactics to assist FHC’s performance of its obligations under this Agreement. All training material, instructors, demonstration/training products and other training costs and expenses therefor shall be borne by Biosite; provided, however, that FHC shall, at its expense, provide transportation and lodging for FHC personnel attending such training.

(d)Biosite shall provide technical support to FHC’s sales personnel and customers and promptly provide to FHC such additional technical information developed or acquired by Biosite from time to time as may reasonably be expected to be of assistance to FHC in fulfilling its obligations hereunder. Biosite will provide, at its own expense, a toll free long distance telephone service for technical support for FHC customers and sales representatives.

(e)Biosite shall provide at its expense reasonable quantities of such instruction manuals and point of sale literature as may from time to time be requested by FHC

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for use in connection with the distribution of the Products. Subject to FHC’s and Biosite’s prior written approval, the FHC name will be incorporated in Biosite’s advertising and literature intended for distribution in the Territory by FHC sales representatives, at FHC’s expense. If requested to do so by FHC, Biosite shall furnish FHC with suitable copy and photographs and other materials which the parties reasonably agree for use by FHC in cataloging the Products.

(f)During the Term, Biosite shall provide FHC, upon request, with up to the number of Samples (as defined below) of each Product set forth on Schedule F, at the [***] set forth in Schedule F, to be used by FHC solely in connection with the promotion and marketing of such Product. A “Sample” shall mean, with respect to a Product, a sample unit of such Product [***] solely for the purpose of marketing and promoting such Product, and not for the purpose of commercial resale. Such Samples may not be sold by FHC and shall be marked by Biosite with the following legend: “FOR EVALUATION PURPOSES ONLY - NOT FOR RESALE.”

(g)Any Products owned by FHC and rendered unsalable, in FHC’s reasonable commercial judgment, due to a change in any Product specification, discontinuation or elimination by Biosite of any Product from its product offering, release by Biosite of any materially improved or updated version of any Product, or any other material change in the Product outside of FHC’s control shall be repurchased from FHC by Biosite within thirty (30) days following FHC’s request therefor at the price paid for such Product(s) by FHC. Biosite shall additionally pay for return freight and related transportation and insurance charges for all such Products. Biosite’s release of a Product which has a longer shelf life shall not be deemed a material improvement under this Section 4(g).

(h)Biosite shall promptly provide FHC with leads concerning prospective purchasers of the Products within the Territory in a format to be mutually agreed upon between the parties.

(i)Biosite shall provide full and accurate written instructions on the Bill of Lading regarding the storage and handling of the Products.

(j)Biosite shall ship the Products so that at least [***] of the shelf life of the Products will be remaining at the time of receipt at FHC’s facility, or at FHC’s customer’s facility, if drop shipped. Biosite shall take back for full credit plus shipping charges any dated Products shipped contrary to this provision, unless shipment of such short-dated Products was pre-approved in writing by FHC.

(k)Biosite shall indemnify and hold FHC harmless from and against all losses, liabilities, damages and expenses (including reasonable attorneys’ fees and costs) resulting from all claims, demands, actions and other proceedings to the extent resulting from (i) representations or claims by or on behalf of Biosite with respect to the Products that are untrue or materially misleading when made; (ii) willful act or omission by or on behalf of Biosite in the sale, marketing, promotion or distribution of the Products hereunder; (iii) failure by Biosite to comply in any material respect with governmental regulatory requirements relating to the Products; (iv) infringement of any of the Products on any intellectual property rights of third parties; or (v) material breach of this Agreement by Biosite.

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(l)A party (the “Indemnitee”) that intends to claim indemnification under Section 3(f) or Section 4(k) shall promptly notify the other party (the “Indemnitor”) of any claim, demand, action or other proceeding for which the Indemnitee intends to claim such indemnification. The Indemnitor shall have the right to participate in, and to the extent the Indemnitor so desires jointly with any other indemnitor similarly noticed, to assume the defense thereof with counsel selected by the Indemnitor; provided, however, that the Indemnitee shall have the right to retain its own counsel, with the fees and expenses to be paid by the Indemnitor, if representation of the Indemnitee by the counsel retained by the Indemnitor would be inappropriate due to actual or potential differing interests between the Indemnitee and any other party represented by such counsel in such proceedings. The indemnity obligations under Section 3(f) and Section 4(k) shall not apply to amounts paid in settlement of any claim, demand, action or other proceeding if such settlement is effected without the prior express written consent of the Indemnitor, which consent shall not be unreasonably withheld or delayed. The Indemnitor may not settle or otherwise consent to an adverse judgment in any such claim, demand, action or other proceeding, that diminishes the rights or interests of the Indemnitee without the prior express written consent of the Indemnitee, which consent shall not be unreasonably withheld or delayed. The Indemnitee, its employees and agents, shall reasonably cooperate with the Indemnitor and its legal representatives in the investigation of any claim, demand, action or other proceeding covered by Section 3(f) or Section 4(k), as applicable.

5.Price and Payment Terms.

(a)Biosite shall charge FHC a Transfer Price for each [***] equal to the [***] Price (as defined below) for such [***] in effect on the date of FHC’s purchase order therefor.

(b)Subject to Sections 5(k) and 5(l), Biosite shall charge FHC a Transfer Price per unit for each Product (other than Samples), equal to the List Price, as defined below in Section 5(f) for such Product, less the following discount:

(i)[***] for [***], except for the [***] (Catalog No. [***]) and the [***] (Catalog No. [***]) which shall be discounted [***].

(ii)[***] for [***] sales.

(iii)[***] for [***] sales, except for [***] (Catalog No. [***]), [***] (Catalog No. [***]) and [***] (Catalog No. [***]) which shall be discounted [***].

(iv)[***] for [***] set forth on Schedule E-1.

(v)[***] for [***] set forth on Schedule E-2 and [***] sales.

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(vi)Notwithstanding any provision of Section 5(b) to the contrary, the Transfer Price for the [***] Products shall equal the applicable List Price, less [***].

(vii)Notwithstanding any provision of Section 5(b) to the contrary, the Transfer Price for each Product listed on Schedule K shall be as set forth on Schedule K.

The parties shall meet not less than yearly and attempt to reach mutually acceptable agreement on any necessary or desirable revisions to the applicable discounts from List Price per Product category (including those necessary or desirable to reflect an attempt to minimize additional payments from FHC to Biosite and/or rebates from Biosite to FHC).

(c)[***] and the [***] set forth on Schedules B, C, D, E-1, E-2 and N [***]; provided, however, that [***] shall give at least [***]. [***] shall honor [***] at the [***] in effect immediately [***] the [***] of [***].

(d)FHC shall pay for [***] and Products purchased pursuant to this Agreement [***] after the date of Biosite’s invoice.

(e)FHC shall be entitled to resell the Products on such terms as it may, in its sole discretion, determine, including, without limitation, price, returns, credit, discounts, and promotions.

(f)For purposes of this Section 5, the following definitions shall apply:

“Actual Selling Margin” shall mean Actual Selling Price - Transfer Price.

“Actual Selling Margin Rate” or “ASMR” shall mean:

[Actual Selling Price - Transfer Price]

Actual Selling Price

“Actual Selling Price” shall mean, with respect to any Product (other than [***]), the invoiced sales price, net of any discounts actually taken, which FHC or its affiliate charges to an unaffiliated customer for purchase of such Product.

“Guaranteed Selling Margin Rate” or “GSMR” shall mean, with respect to any Product (other than Samples), the margin rate that is set forth below for such Product.

“List Price” shall mean Biosite’s then-current list price for a Product, which list price may be adjusted only as provided in Section 5(c) above. The List Price for each Product as of the Effective Date of this Agreement (but subject to adjustment thereafter in accordance with Section 5(c)) is as set forth in the applicable exhibit attached hereto.

“[***] Price” shall mean, with respect to any [***], the price therefor set forth on Schedule F, as amended from time to time pursuant to Section 5(c).

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“Transfer Price” shall mean, with respect to any Product (other than [***]), the price calculated pursuant to Section 5(b) above which FHC is obligated to pay to Biosite for purchase of such Product.

Subject to the provisions of Section 5(i) below, FHC shall receive the “Guaranteed Selling Margin Rate” on Products as set forth below.

(i)The GSMR for sales of each [***] to hospitals with [***] (excluding sales for evaluation or sample purposes) shall be as follows:

Through the end of the [***] after the first sale of such Product by Biosite to FHC hereunder	[***]
From the [***] after the first sale of such Product by Biosite to FHC hereunder	[***]
From the [***] after the first sale of such Product by Biosite to FHC hereunder	[***]
After the end of the [***] after the first sale of such Product by Biosite to FHC hereunder	[***]

(ii)The GSMR for sales of each [***] to hospitals with [***] (excluding sales for evaluation or sample purposes) shall be as follows:

Through the end of the [***] after the first sale of such Product by Biosite to FHC hereunder	[***]
From the [***] after the first sale of such Product by Biosite to FHC hereunder	[***]
From the [***] after the first sale of such Product by Biosite to FHC hereunder	[***]
After the end of the [***] after the first sale of such Product by Biosite to FHC hereunder	[***]

(iii)For the purposes of this Agreement, with respect to the [***], the “first sale of such Product by Biosite to FHC hereunder” as provided in Sections 5(f)(i) and (ii) immediately above shall be deemed to have occurred on the Effective Date. The GSMR for sales of all Products (other than [***]) to all hospitals shall be [***].

For the purpose of determining the applicable Guaranteed Selling Margin Rate a “hospital” shall mean a building or real estate improvement and not a group of affiliated entities.

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(g)In accordance with the payment terms set forth in Section 5(d) above, Biosite shall receive payment of the Transfer Price for Products shipped to FHC. Subject to the provisions of Section 5(i) below, should the Actual Selling Margin Rate be less than the GSMR for a Product unit, FHC is entitled to a rebate from Biosite for such Product unit. The rebate is calculated as follows:

[***]

(h)Subject to the provisions of Section 5(i) below, should the ASMR exceed the GSMR for a Product unit, FHC will make an additional payment to Biosite for such Product unit. The additional payment is calculated as follows:

[***]

(i)Within [***] after the end of each calendar month, FHC shall prepare and provide Biosite with a reasonably detailed written sales report which shall (i) set forth on a Product-by-Product basis the sales of Products by FHC and its affiliates to unaffiliated customers, and (ii) calculate on a Product-by-Product basis the Actual Selling Price, the ASMR and the GSMR therefor, and the net amount (if any) of the additional payments from FHC to Biosite and/or the rebates from Biosite to FHC owing under Section 5(g) for such calendar month. Such sales reports are, and shall remain the property of FHC, and shall be subject to Section 9 of this Agreement, but may be used by Biosite solely for the purposes of performance of its obligations and the exercise of its rights under this Agreement. Such report shall be based on sales by FHC and its affiliates, as reflected on FHC’s Key Supplier Report, on each Product during each calendar month. FHC shall pay to Biosite any such additional payment, and Biosite shall pay to FHC any such rebate, owing under Section 5(g) for each calendar month on or before the later of the fifteenth (15th) day of the following calendar month or ten (10) days after Biosite’s receipt of the applicable sales report for such calendar month. Biosite and its agents shall have the right, through an independent auditor chosen by Biosite and reasonably acceptable to FHC, on reasonable notice and not more than twice in each calendar year, to inspect and audit the relevant books and records of FHC and any of its relevant affiliates to verify the accuracy of such sales reports. Biosite shall pay the fees and expenses of such audit.

(j)Except as set forth below in this Section 5(j) or as the parties otherwise mutually agree, if the Actual Selling Price of any Product unit is less than the List Price of such Product less [***], then for purposes of calculating ASMR and GSMR, and the amount of any rebate or additional payments under Section 5(g), the Actual Selling Price of such Product unit shall be deemed to be List Price of such Product less [***]. The foregoing limitation on the calculation of Actual Sales Price shall not apply to (i) to continuation of the discount rate or net price to existing customers during the Term and during any time thereafter that FHC sells any Product as permitted hereunder, (ii) any sales made pursuant to binding agreements between FHC and unaffiliated customers entered into prior to the Effective Date, or (iii) to discounts beyond such levels approved by Biosite.

(k)Notwithstanding anything to the contrary contained in this Agreement, but subject to Section 5(l), in the case where the [***] described in Schedule D (the “[***]”) is not purchased but is instead leased by a FHC or Biosite customer over the term of the

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customer’s written agreement (a “Reagent Rental Agreement”), the following shall apply: (1) the Transfer Price paid to Biosite by FHC for the [***] shall at all times during the course of this Agreement be [***]; (2) there shall be no GSMR with respect to such [***]; and (3) the provisions of Sections 5(f)-(h) shall not apply.

(l)Notwithstanding anything to the contrary contained in this Agreement, in the case where the [***] (as described in Schedule D) is not purchased but is instead leased by a FHC or Biosite customer over the term of the customer’s written agreement (a “Reagent Rental Agreement”), the following shall apply: (1) the Transfer Price paid to Biosite by FHC for the [***] shall at all times during the course of this Agreement be [***]; (2) there shall be no GSMR with respect to such [***]; and (3) the provisions of Sections 5(f)-(h) shall not apply.

(m)Notwithstanding anything to the contrary contained in this Agreement, upon the expiration or termination of this Agreement, Biosite shall pay to FHC the [***] for any [***] or [***] under any and all Reagent Rental Agreements (as more particularly described in Sections 5(k) and 5(l) above) obtained pursuant to this Agreement or the Previous Distribution Agreements. For example, if a [***] is amortized at a rate of [***] per month over a [***] Reagent Rental Agreement and the customer pays this amount monthly together with (or as a part of) its purchase of reagents or controls, if the Agreement expires or is terminated with [***] remaining under the term of the Reagent Rental Agreement, then Biosite shall pay to FHC [***].

(n)No later than [***] following the reduction of the GSMR of an [***] as provided in Section 5(f)(i) or 5(f)(ii), FHC shall multiply the percentage difference in the amount of the new and old GSMR by the [***] (as defined below) and the resulting amount shall be split evenly between the parties. FHC shall determine the [***] for each [***] by using the following formula:

(Actual Selling Price of such [***] invoiced by FHC in the [***] calendar month of the period with the new GSMR/number of units of such [***] invoiced by FHC in such month) X Number of units of such [***] in FHC inventory as of the date immediately prior to the change in GSMR causing this calculation

This calculation shall be done for each [***] individually. For example, if such [***] is first sold to FHC by Biosite on April 15, 2006, then no later than August 15, 2007, FHC shall calculate the [***] as follows:

(Actual Selling Price of such [***] Product invoiced by FHC in July 2007/number of units of such [***] Product invoiced by FHC in July 2007) X Number of units of such [***] Product in FHC inventory as of June 30, 2007

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For the sake of this example, FHC shall then multiply the [***] by [***] (the difference in the GSMR between the [***] after the first sale of such Product by Biosite to FHC and the [***]).

These provisions shall be in addition to, and not in lieu of, Sections 5(g) and (h).

(o)Biosite shall provide FHC copies of each reagent rental agreement executed by Biosite with a Contract Customer in accordance with the terms of Section 2(g) of this Agreement as soon as practicable after execution by both Biosite and the applicable Contract Customer.

(p)Notwithstanding anything to the contrary in this Agreement, the provisions of Sections 5(f)-(o) shall apply exclusively to sales of Products [***], and the following provisions shall apply exclusively to sales of Products in [***]. For the sake of clarity, there shall be no GSMR for Products [***].

(i)In accordance with the payment terms set forth in Section 5(d) above, Biosite shall receive payment of the [***] for Products shipped to FHC. Subject to the provisions of Section 5(p)(iii) below, for each unit of Product sold by FHC and its affiliates to unaffiliated customers in [***], should the [***] set forth in Schedule L be [***] than the [***] for such Product unit, FHC is entitled to a rebate from Biosite for such Product unit equal to the positive remainder of the [***] set forth in Schedule L, for such Product unit.

(ii)Subject to the provisions of Section 5(p)(iii) below, for each unit of Product sold by FHC and its affiliates to unaffiliated customers in [***], should the [***] be less than the [***] Price set forth in Schedule L for such Product unit, FHC will make an additional payment to Biosite for such Product unit equal to the [***] set forth in Schedule L, less the [***], for such Product unit.

(iii)Within [***] after the end of each calendar month, FHC shall prepare and provide Biosite with a reasonably detailed written sales report which shall (i) set forth on a Product-by-Product basis the sales of Products by FHC and its affiliates to unaffiliated customers in [***], and (ii) calculate on a Product-by-Product basis the net amount (if any) of the additional payments from FHC to Biosite and/or other rebates from Biosite to FHC owing under Sections 5(p)(i) and 5(p)(ii) for such calendar month. Such sales reports are, and shall remain the property of FHC, and shall be subject to Section 9 of this Agreement, but may be used by Biosite solely for the purposes of performance of its obligations and the exercise of its rights under this Agreement. Such report shall be based on sales by FHC and its affiliates, as reflected on FHC’s Key Supplier Report, on each Product during each calendar month. FHC shall pay to Biosite any such additional payment, and Biosite shall pay to FHC any such rebate, owing under Sections 5(p)(i) and 5(p)(ii) for each calendar month on or before the later of the [***] day of the following calendar month or [***] days after Biosite’s receipt of the applicable sales report for such calendar month. Biosite and its agents

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shall have the right, through an independent auditor chosen by Biosite and reasonably acceptable to FHC, on reasonable notice and not more than twice in each calendar year, to inspect and audit the relevant books and records of FHC and any of its relevant affiliates to verify the accuracy of such sales reports. Biosite shall pay the fees and expenses of such audit.

(iv)[***] set forth in Schedule L shall be [***] on [***].

(q)Current [***] or [***] Customers. The following provisions apply to customers who have purchased the [***] Products, other than the [***] (Catalog Number [***]) (the “[***]”), or the [***] Products in the last six months of [***]. In addition to the calculation set forth in Section 5(i) of the Agreement, within [***] after the end of each calendar month, FHC shall prepare and provide Biosite with a reasonably detailed written report which shall calculate the [***] for the [***] Products and the [***] Products, for such calendar month, per customer. On or before the due date for the payment described in Section 5(i) (if any) for such calendar month, FHC shall pay Biosite [***] the increase in the [***] of the [***] Products and the [***] Products from the [***], for such calendar month, per customer calculated as follows:

(([***] – [***] Price) x number of units of such Product sold to such customer) / 2

“[***]” shall be cumulative [***] Price for each such Product sold to a customer in the last [***] months of [***]/ number of units sold to such customer in the last [***] months of [***].

“[***]” shall be as follows:

(1)for each [***] Product: for each customer, the cumulative [***] Price for each [***] Product sold to such customer during the specified period / number of such Products sold to such customer during the specified period.

(2)for each [***] Product: for each customer, the cumulative [***] Price for each [***] Product sold to such customer during the specified period / number of Products sold to such customer during the specified period.

The calculations shall be done on customer-by-customer and product-by-product basis with each customer having its own [***] Price and [***] Price. Notwithstanding anything to the contrary contained in this Agreement, through the remainder of the Term and during any time thereafter that FHC sells any Product as permitted hereunder, for [***] Products and [***] Products only, for the purposes of calculating the [***] of the Agreement, the [***] Price for any customer shall be deemed to be the lower of (i) the [***] Price for such customer, and (ii) the [***] Price for such customer. This provision shall survive the expiration or termination of the Agreement to allow for the calculation regarding the final month of the Agreement.

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(r)New [***] or [***] Customers. The following provisions apply to customers who have not purchased [***] Products or [***] Products in the last [***] months of [***] (“[***] or [***] Customers”). In addition to the calculation set forth in Section 5(i) of the Agreement, within [***] after the end of each calendar month, FHC shall prepare and provide Biosite with a reasonably detailed written report which shall calculate the [***] Price for the [***] and the [***] Products for such calendar month, per customer. On or before the due date for the payment described in Section 5(i) (if any) for such calendar month, FHC shall pay Biosite [***] of the [***] Price, for such calendar month, per customer calculated as follows:

([***] Price x [***]%) / [***]

“[***] Price” shall be as follows:

(1)for each [***] Product: for each customer, the cumulative [***] Price for each [***] Product sold to such customer during the specified period.

(2)for each [***] Products: for each customer, the cumulative [***] Price for each [***] Product sold to such customer during the specified period.

A customer may be a New [***] or [***] Customer for the purposes of only one category of Products ([***] Products or [***] Products). The calculations shall be done on a customer-by-customer and product-by-product basis with each customer having its own [***] Price. Notwithstanding anything to the contrary contained in this Agreement, through the remainder of the Term and during any time thereafter that FHC sells any Product as permitted hereunder, for New [***] Products or [***] Products Customers, for the purposes of calculating the [***] of the Agreement, the [***] Price for any customer shall be deemed to be [***] of the [***] Price for such customer. This provision shall survive the expiration or termination of the Agreement to allow for the calculation regarding the final month of the Agreement.

(s)Notwithstanding anything to the contrary, Biosite shall be responsible for all rebates that it offers or otherwise provides to any customers, including Contract Customers, through its contracts, directly or indirectly, including GPO arrangements.

6.Term and Termination.

(a)This Agreement shall commence on the Effective Date and shall terminate on December 31, 2008 (the “Initial Term”). Except as otherwise set forth in this Agreement, (i) unless either party (in such party’s sole discretion) gives to the other party notice of non-renewal not less than [***] prior to the expiration of the Initial Term, this Agreement automatically shall be extended for a period of one (1) year following the expiration of the Initial Term (the “First Extended Term”), and (ii) unless either party (in such party’s sole discretion) gives to the other party notice of non-renewal not less than [***] prior to the expiration of the First Extended Term, this Agreement automatically shall be extended for a period of one

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(1) year following the expiration of the First Extended Term (the “Second Extended Term”); provided, however, if FHC exercises its right to opt out of the requirements of Section 3(b)(i), then this Agreement thereafter may not be further extended (subject to Section 2(g)(vi)). The First Extended Term and the Second Extended Term (if any), collectively, shall be referred to as the “Extended Term”. The Initial Term and the Extended Term, collectively, shall be referred to as the “Term”. Notwithstanding anything to the contrary contained in this Agreement, FHC may terminate this Agreement upon written notice to Biosite in the event that, in the case of Roche Diagnostics Corporation, et al., v. Biosite Incorporated, Case No: 1:04-CV-01848-LJM-VSS (or any ancillary or related litigation), Roche Diagnostics Corporation (or any other plaintiff in any ancillary or related litigation) is issued a preliminary or permanent injunction against Biosite with respect to the distribution of one or more of the Products, which injunction remains undismissed or unstayed for a period of not less than thirty (30) days, and in the event of such termination FHC shall cooperate with Biosite, and take such action as reasonably requested by Biosite, to facilitate a prompt and orderly transition to Biosite (or its designee) of all customer accounts regarding sales of Products to the extent possible, provided that the foregoing shall in no way limit FHC’s ability to promote, market, advertise, distribute or sell products (including products competitive to the Products) to all such customers following such termination.

(i)In the event that Fisher Scientific International Inc., or one of its subsidiaries (either direct or indirect subsidiaries) acquires, whether through merger, asset purchase or otherwise, an entity or business operation that manufactures, promotes, markets, advertises, distributes or sells one or more products that compete with one or more of the Products, then FHC shall provide notice to Biosite of such transaction (a) within five (5) business days of the public disclosure of such transaction or (b) if there is no public disclosure, within ten (10) business days from the execution of a definitive agreement for the applicable transaction. The parties shall then promptly discuss the implications of such transaction. At such meeting, the parties shall discuss FHC’s intentions with respect to the distribution of the competitive product(s). In the event that FHC intends to distribute one or more of the competitive products in the Territory or in the event that FHC provides Biosite with a notice pursuant to Section 3(b)(iii) of its intention to promote, market, advertise, distribute or sell a competitive product that is manufactured by an affiliate, then upon written notice by Biosite (at the option of Biosite in its sole discretion) delivered to FHC within fifteen (15) days after such meeting, Biosite may, in its sole discretion, elect to (a) make no change with respect to the Agreement, or (b) have the distributorship immediately become non-exclusive and Biosite shall have the right to promote, market, advertise, distribute and sell Products direct to any customer or to enter into one or more distribution agreements with any third party (without restriction or obligation to FHC). In the event that Biosite elects to make the distributorship non-exclusive, at any time thereafter either party shall have the right to terminate this Agreement on [***] prior written notice to the other party.

(ii)  For the sake of clarity, in the event that Biosite elects to (a) have the distributorship become non-exclusive as provided in Section 6(a)(i) above or (b) terminate the Agreement as provided in Section 6(a)(i) above, during such [***] period, FHC shall have the right to promote, market, advertise, distribute and sell products that are competitive with the Products, including without limitation the products that are manufactured by an affiliate of FHC that are competitive with the Products.

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(b)This Agreement may be terminated by a party, in the event the other party materially breaches its obligations hereunder and should fail to remedy such material breach within thirty (30) calendar days after receiving written notice of such material breach.

(c)The rights and duties of each party under Sections 2(g)(vi), 3(a) to the extent such section provides for obligations after the Term, 3(d), 3(f), 3(g), 4(k), 4(l), 6(c), 7, 8, 9, 10, 14, 15, 19, 24 and 25 of this Agreement and Biosite’s obligations under the Continuing Guaranty as referred to in Section 10(a) hereof and attached hereto as Schedule A, shall survive termination of this Agreement and be enforceable in accordance with their terms. Upon any termination of this Agreement, the parties shall mutually agree upon a message (the “Message”) to be conveyed to all third parties concerning such termination of this Agreement and neither party shall make any statement (oral or written) relating to the parties’ relationship under this Agreement or pertaining to the termination of this Agreement inconsistent with such mutually agreed Message, except as otherwise required by law, regulation or court order (provided that the party making such statement shall give the other party reasonable notice of any such required statement and shall give the other party an opportunity to object to any such statement or to request confidential treatment therefor) or as necessary to enforce its rights under this Agreement. Additionally, FHC shall not make any statement regarding any Product after the termination of this Agreement that is not expressly permitted in the Message. Notwithstanding the preceding provisions of this Section 6(c), at all times after termination or expiration of this Agreement, (i) FHC shall have the right to create marketing materials that describe the attributes of the Products versus the attributes of third party products (provided that such information regarding the Products shall be based solely on publicly available information regarding the Products and not based on information obtained by FHC, or based on the parties’ relationship, under this Agreement or any prior written agreement between the parties), provided that FHC shall not take any action that would interfere with Biosite’s efforts to develop and maintain the reputation of and goodwill with respect to the Products, and (ii) Biosite shall have the right to communicate with Contract Customers for purposes of ordinary course of business customer support and regarding the status of delivery of their purchase commitments or agreements after the termination of this Agreement, provided that Biosite shall not take any action that would interfere with FHC’s efforts to develop and maintain its reputation and goodwill. The parties acknowledge that Biosite’s comparisons of its products (including the Products) to any other products shall not constitute interference with FHC’s efforts to develop and maintain its reputation and goodwill.

(d)IN NO EVENT SHALL EITHER PARTY BE LIABLE TO THE OTHER FOR ANY CONTINGENT, INCIDENTAL, OR CONSEQUENTIAL DAMAGES OF THE OTHER PARTY, OR ANY LOSS OF PROFITS OR REVENUE OF THE OTHER PARTY, WHETHER ARISING IN CONTRACT, TORT (INCLUDING NEGLIGENCE), WARRANTY, STRICT LIABILITY OR OTHERWISE.

(e)Subject to the following sentence, in no event shall either party, directly or indirectly, initiate or prosecute, or assist or induce any third party to initiate or prosecute (other than as required under court order or legal process such as a subpoena), any claim, demand, suit, action, cause of action or other adversary proceeding relating to or arising out of this Agreement

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or the subject matter of this Agreement, other than a claim, demand, suit, action, cause of action or other adversary proceeding to the extent alleging (1) a material breach of express contract under this Agreement (provided that if the alleged material breach is curable, (i) the non-breaching party has given written notice of such material breach and the breaching party has failed to remedy such material breach within thirty (30) days and (ii) during such thirty (30) day cure period, at the request of the party allegedly in breach, the parties shall meet and confer in good faith to discuss the grounds of the alleged breach), or (2) defamation through a statement made with “knowledge that it was false or with reckless disregard of whether it was false or not” by one party of the other. Nothing in this Section 6(e) shall in any way limit any claim, demand, suit, action, cause of action or other proceeding (i) that a party (“Asserting Party”) may have against the other party to the extent relating to or arising as a result of a third party claim, demand, suit, action, cause of action or other proceeding against the Asserting Party, provided that the Asserting Party can provide written evidence of such claim, demand, suit, action, cause of action or other proceeding by such third party or (ii) that a party may have against a third party relating to a Product.

7.Trademarks.

(a)Subject to the terms and conditions of this Agreement, Biosite hereby grants to FHC a nonexclusive, nontransferable, license during the Term and during any time thereafter that FHC sells any Product as permitted hereunder, without the right to sublicense, to use the trademarks (including, but not limited to the trademark “Triage”) and tradenames (including, but not limited to “Biosite Incorporated” and “Biosite”) relating to the Products (collectively, the “Biosite Marks”) solely for the purpose of promoting, marketing, selling, and distributing the Products.

(b)All right, title, and interest in and to the Biosite Marks shall remain with Biosite. During the Term and thereafter, FHC will not contest Biosite’s exclusive right, title and interest in and to, or the validity of, the Biosite Marks. In addition, FHC will not in any manner represent that it has any interest in the Biosite Marks, except for the limited license provided herein. Use of the Biosite Marks by FHC shall inure to the sole benefit of and be on behalf of Biosite.

(c)All Product units sold by Biosite to FHC will bear one or more of the Biosite Marks, and FHC shall not alter, remove or modify the Biosite Marks, nor affix any other trademark to the Product, without the prior express written consent of Biosite. FHC shall not utilize any of the Biosite Marks in connection with any promotional brochures or advertising materials relating to the Products without the prior express written consent of Biosite, which consent shall not be unreasonably withheld, delayed or conditioned. Biosite’s consent to the use of the Biosite Marks shall be conditioned upon such brochure or advertising materials clearly indicating Biosite’s ownership of the Biosite Marks.

(d)All Product units purchased by FHC hereunder shall be marketed by it in the original packages under the original labels provided by Biosite, and FHC shall make no modifications, or alterations to such Product units or labels; provided, however, that FHC may affix labels or other indices which serve to identify FHC as a distributor of the Product, so long as they do not cover and are not inconsistent with any of Biosite’s Product labels or markings.

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(e)Nothing in this Agreement shall be construed as granting FHC any ownership interest in the Biosite Marks, and FHC acknowledges that it has been advised by Biosite of Biosite’s claim of ownership of the Biosite Marks. FHC agrees that it will do nothing inconsistent with such ownership. Specifically, FHC agrees that: it will not challenge the validity of, or Biosite’s ownership of, any of the Biosite Marks; it will not take any action that is inconsistent with, or may impair, Biosite’s right, title and interest to the Biosite Marks; it will not represent to any third party that it has any ownership interest in the Biosite Marks; and it will execute and deliver to Biosite any and all documents which Biosite may request to confirm in Biosite all right, title and interest in the Biosite Marks.

(f)FHC shall make no statement to the press relating or referring to the Products without the prior express written approval of Biosite, which shall not be unreasonably withheld. Notwithstanding the foregoing, solely to the extent required by applicable law, FHC shall have the right to make a statement to the press relating or referring to the Products without the prior express written approval of Biosite, provided that FHC gives Biosite prompt written notice and together with a copy of such statement.

(g)Either party shall promptly notify the other in writing of any challenges to the validity, infringement on or unauthorized use of any of the Biosite Marks, actual or threatened, that may come to such party’s attention. Biosite shall be responsible for and shall assume all expenses of the enforcement of the Biosite Marks.

(h)Biosite recognizes that FHC is the owner of the trademarks and trade names denoting FHC or FHC products (collectively, the “FHC Marks”), which FHC may elect to use in the promotion and sale of the Products, and that Biosite has no right or interest in such FHC Marks; provided, however, that except as otherwise set forth in Section 7(b) hereof, no FHC labels, package inserts or other material shall accompany the Products without the prior express written approval of Biosite.

(i)Biosite shall not utilize any FHC Marks in connection with any promotional brochures or advertising materials relating to the Products, or otherwise, without the prior express written consent of FHC. FHC’s consent to the use of the FHC Marks shall be conditioned upon such brochure or advertising materials clearly indicating FHC’s ownership of the FHC Marks. Nothing in this Agreement shall be construed as granting Biosite any license or ownership or other interest in the FHC Marks, and Biosite acknowledges that it has been advised by FHC of FHC’s claim of ownership of FHC’s Marks. Biosite agrees that it will do nothing inconsistent with such ownership and that all use of the FHC Marks will inure to the benefit of and be on behalf of FHC. Specifically, Biosite agrees that: it will not challenge the validity of, or FHC’s ownership of, any of the FHC Marks; it will not take any action that is inconsistent with, or may impair, FHC’s right, title and interest to the FHC Marks; it will not represent to any third party that it has any ownership interest in the FHC Marks; and it will execute and deliver to FHC any and all documents which FHC may request to confirm in FHC all right, title and interest in the FHC Marks.

(j)Upon termination of this Agreement, FHC shall continue to be entitled to utilize the Biosite Marks on the terms agreed to previously by the parties in connection with FHC’s promotion, marketing, distribution and sale of units of Products as provided in this

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Agreement, or remaining in FHC’s inventory and not repurchased by Biosite. Thereafter, except as herein provided, FHC shall terminate all use of Biosite Marks, and shall at Biosite’s request and at Biosite’s expense, destroy or return to Biosite all literature and other advertising and promotional materials bearing only the Biosite Marks. Notwithstanding the foregoing, FHC shall not be required to destroy its inventory of catalogs and other materials that include a reference to Biosite Products among other FHC distributed products and FHC shall be allowed to use all such materials in its business until same are depleted or revised. In the event of termination or expiration of this Agreement, FHC agrees to cooperate with Biosite and to execute any and all documents requested by Biosite for the purpose of canceling any registered user or other rights with respect to Biosite’s name and the Biosite Marks that FHC may have acquired in operating hereunder, or, at Biosite’s election, in transferring such rights to Biosite or its FHC designee. FHC also agrees to cooperate with Biosite in transferring any appropriate rights in connection with the Biosite Marks to Biosite and/or Biosite’s designee, at Biosite’s sole cost and expense, if Biosite desires to sell or have sold products in the Territory and Physician Office Practices (other than the Products) other than by FHC.

8.Copyrights.

(a)FHC hereby acknowledges that Biosite may claim copyright protection with respect to its package inserts and other supporting materials which it includes with each of the Product units, and FHC further acknowledges the validity of Biosite’s right to claim the copyright protection to such materials. FHC further acknowledges that Biosite has advised FHC that it has the sole and exclusive right to claim the copyright protection with respect to all of its package inserts and other supporting materials included with the Products, and FHC shall take no action which is in any way inconsistent with Biosite’s claim of copyright protection that it expects to make with respect to such materials.

(b)In order to protect against infringement of Biosite’s copyright through unauthorized reproduction or duplication of its copyrighted materials, such materials included with the units of Products sold by Biosite to FHC shall bear appropriate copyright markings. Nothing contained in this Section 8 shall prohibit FHC from copying and distributing to its sales representatives Product advertising, literature and other materials prepared by or on behalf of Biosite for the purpose of fulfilling FHC’s obligations under this Agreement.

(c)Either party shall promptly notify the other in writing of any infringements, whether within or without the Territory and Physician Office Practices, of any of Biosite’s copyrights which come to the attention of such party. FHC shall, at the request of Biosite, provide Biosite with all reasonable assistance in initiating and prosecuting any legal action against any infringer of Biosite’s copyrights within the Territory and Physician Office Practices; provided, however, that all costs incurred in connection with any such copyright infringement action shall be borne solely by Biosite.

9.Trade Secrets and Confidential Information.

(a)FHC may receive various trade secrets of Biosite and other information of Biosite (and in each such instance, at the time of disclosure to FHC, Biosite shall provide FHC with written notice that Biosite considers such information to be a trade secret or otherwise

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confidential) of a confidential nature (including but not limited to specific technical information concerning the Products). FHC agrees that it will not disclose to anyone, directly or indirectly, any of such confidential information, or use such confidential information other than as reasonably required in the course of its performance of its obligations and the exercise of its rights under this Agreement. Notwithstanding the foregoing, FHC may disclose such confidential information to the extent required by applicable law, regulation or court order, provided that FHC shall give Biosite reasonable notice of any such required disclosure and shall give Biosite an opportunity to object to any such disclosure or to request confidential treatment thereof. FHC shall, at Biosite’s option, return such information to Biosite or destroy all such data having physical form and all copies thereof. The obligations set forth in this Section 9(a) shall survive any termination of this Agreement for a period of [***].

(b)Biosite may receive various trade secrets of FHC and other information of FHC of a confidential nature. Biosite agrees that it will not disclose to anyone, directly or indirectly, any of such trade secrets or other confidential information, or use such trade secrets or other confidential information other than as reasonably required in the course of its performance of its obligations and the exercise of its rights under this Agreement. Notwithstanding the foregoing, Biosite may disclose such trade secrets or other confidential information to the extent required by applicable law, regulation or court order, provided that Biosite shall give FHC reasonable notice of any such required disclosure and shall give FHC an opportunity to object to any such disclosure or to request confidential treatment thereof. Biosite shall, at FHC’s option, return such information to FHC or destroy all such data having physical form and all copies thereof. The obligations set forth in this Section 9(b) shall survive any termination of this Agreement for a period of [***].

(c)Notwithstanding any provision set forth in this Section 9 to the contrary, the parties’ obligations under this Section 9 shall not apply to the extent that: (i) the confidential information, or any relevant part of it, can be shown to be in the public domain prior to the date of this Agreement; (ii) the confidential information, or any relevant part of it, becomes part of the public domain, other than by some unauthorized act or omission, after the date hereof; (iii) the confidential information, or any relevant part of it, is disclosed to such party by a third party who has the right to make such disclosure; (iv) express written permission to disclose the confidential information, or any relevant part of it, or to make use of same, is obtained from the non-disclosing party by the disclosing party; or (v) the information is developed independently of the confidential information by the other party based on written records maintained in the ordinary course.

(d)Notwithstanding anything to the contrary, [***] and [***] provided to Biosite by FHC (whether under this Agreement or a prior agreement between the parties), including but not limited to the information provided to Biosite under [***], shall be jointly owned by both parties and shall not be subject to the terms and conditions set forth in Sections 9(a) or 9(b). Such [***] and [***] information may be used by either party for any lawful purpose, subject to the following restrictions: (i) Biosite shall not disclose sales [***] or [***] information disclosed to Biosite by FHC under this Agreement (or calculated by Biosite using information disclosed to Biosite by FHC under this Agreement) to any third party (excluding Biosite’s attorneys, accountants, or as may be required by applicable law, regulation or court order or as permitted

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under clauses (i) through (v) under Section 9(c) above); and (ii) Biosite shall not disclose any [***] or [***] disclosed to Biosite by FHC under this Agreement to [***], [***] or [***] (unless so required by applicable law, regulation or court order or as permitted under clauses (i) through (v) under Section 9(c) above). The terms and conditions of this Section 9(d) shall supersede any inconsistent terms and conditions that may appear in a prior agreement between the parties if the terms and conditions of any such prior agreement survive termination of such prior agreement.

10.Biosite’s Warranties: Disclaimer of Warranties.

(a)Biosite agrees that it shall execute and warrants that it shall abide by the terms of FHC’s Continuing Guaranty, a copy of which is attached hereto as Schedule A and which guaranty is incorporated herein by reference. The terms and provisions of the Continuing Guaranty shall survive the termination of this Agreement. Prior to the first shipment of Product to FHC, Biosite shall provide FHC with certificates of insurance which meet the requirements of paragraph D of the Continuing Guaranty. Biosite’s insurance carriers shall at all times during the Term be rated by Best’s as B+ or superior. Biosite is not aware after due inquiry of any circumstance which would prevent the issuance of such policy.

(b)In addition to the warranties of Biosite set forth in this Agreement and in the Continuing Guaranty, Biosite warrants that each of the Products will conform to the specifications set forth in Product literature prepared by or on behalf of Biosite and that the Products will comply and be manufactured, packaged, sterilized (if applicable), labeled and shipped in compliance with all applicable federal, state and local laws, orders, regulations and standards. Biosite further warrants that the Products do not infringe upon the intellectual property rights of any third party.

(c)Biosite and FHC shall extend to customers only the Product Warranty embodied in Schedule I hereto; provided that Biosite may modify such Product Warranty with FHC’s consent, which consent shall not be unreasonably withheld. Biosite shall not modify or amend the warranty during the Term without providing FHC with sixty (60) days, prior written notice. Biosite warrants and represents that the Products will perform in accordance with Biosite’s warranty.

(d)Except for the warranties described in Sections 10 (a)-(c) hereof, all of which shall inure to the benefit of, and shall be enforceable by, FHC’s customers, Biosite MAKES NO WARRANTIES TO CUSTOMERS AND FHC SHALL NOT MAKE ANY OTHER WARRANTIES TO CUSTOMERS AS TO THE MERCHANTABILITY OR FITNESS OF THE PRODUCT FOR A PARTICULAR USE.

11.Force Majeure.

The obligations of either party to perform under this Agreement shall be excused during each period of delay to the extent caused by such matters as strikes, shortages of power or raw materials, government orders or acts of God, which are reasonably beyond the control of the party obligated to perform. The affected party shall make all commercially reasonable efforts to remedy the effects of such force majeure. Any force majeure event shall not excuse performance

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by the party but shall delay performance, unless such force majeure continues for a period in excess of ninety (90) days. In such event, the party seeking performance may cancel its obligations hereunder.

12.Notices.

Any notice required by this Agreement shall be in writing, and may be delivered in person, by nationally recognized overnight delivery service or by any lawful means to the party for whom intended at its address set forth below, and shall be effective on receipt.

If to Biosite:	Biosite Incorporated
	9975 Summers Ridge Road
	San Diego, California 92121
	Telecopy: (858) 695-9853
	Attn: Tom Watlington
with a copy to:	Morrison & Foerster LLP
	3811Valley Centre Drive, Suite 500
	San Diego, California 92130
	Telecopy: (858) 523-2827
	Attn: Mark R. Wicker, Esq.
If to FHC:	Fisher HealthCare
	9999 Veterans Memorial Drive
	Houston, Texas 77038
	Telecopy: (281) 878-2293
	Attn: General Counsel
with a copy to:	Fisher Scientific International Inc.
	Liberty Lane
	Hampton, New Hampshire 03842
	Telecopy: (603) 929-2703
	Attn: General Counsel

or such other address as provided in writing in the manner provided by this Section 12.

13.Entire Agreement.

This Agreement, including Schedules and Exhibits, constitutes the entire agreement between the parties relating to the subject matter hereof and supersedes all prior agreements, understandings and representations, whether written or oral, between the parties with respect to such subject matter. In ordering and delivery of the Products, the parties may employ their standard forms, but nothing in those forms shall be construed to modify or amend the terms of this Agreement.

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14.Attorneys’ Fees.

In the event any claim or counterclaim is asserted or action is commenced to enforce any of the rights or obligations of the parties under this Agreement, the prevailing party shall be entitled to collect from the other party, as part of the judgment rendered with respect to such claim or action, reasonable attorneys’ fees, expenses and court costs.

15.Governing Law.

THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF CALIFORNIA WITHOUT REGARD TO CALIFORNIA CHOICE OF LAW PROVISIONS.

16.Compliance With Applicable Laws.

In connection with the sale of the Products hereunder, Biosite and FHC shall comply with all applicable laws, regulations and orders of governmental bodies having jurisdiction in respect of activities contemplated by or covered under this Agreement, including without limitation, obtaining all necessary permits, licenses and regulations. FHC shall cooperate fully with Biosite, at Biosite’s sole cost and expense, in connection with securing and maintaining any governmental registration or other governmental permits required with respect to marketing the Products in the Territory and Physician Office Practices and FHC will notify Biosite of any local laws affecting the Products which may come to its attention.

17.Assignment.

(a)Subject to Sections 2(h) and 17(b), neither party shall assign or transfer this Agreement, by operation of law or otherwise, in whole or in part without the prior written consent of the other party in each and every instance, which consent may not be unreasonably withheld. If either party wishes to assign or otherwise transfer this Agreement, as aforesaid, in each instance the party seeking to assign or otherwise transfer this Agreement shall submit to the other party for such party’s review and approval as soon as practicable such information as the other party may reasonably request concerning the assignee or transferee and the party from which consent is sought shall have thirty (30) days following receipt of the fully responsive materials in which to review the same and approve or reject the assignment or transfer. In any event in which the party from which consent is sought reasonably rejects the assignment or transfer, this Agreement shall terminate [***] following the date on which the rejection is received by the party seeking to assign or transfer. The parties shall make best efforts to promptly and amicably wind up all outstanding matters concerning the subject matter of this Agreement.

(b)Notwithstanding Section 17(a) above: (i) a merger, reorganization, recapitalization, sale or transfer of all or substantially all of the assets, change of control, or similar transaction of a party shall not be deemed an assignment or transfer of this Agreement subject to the provisions of Section 17(a) above, and (ii) FHC shall be entitled to assign this Agreement to an entity with which it is affiliated (by reason of greater than fifty percent (50%) ownership of the voting securities thereof), without the prior written consent of Biosite, but upon prior written notice to Biosite.

***Confidential Treatment Requested

32

18.Amendments.

No amendment or modification of the terms of this Agreement shall be binding on either party unless reduced to writing and signed by an authorized officer of the party to be bound.

19.Existing Obligations.

Each party represents and warrants that the terms of this Agreement do not violate any existing obligations or contracts of it. Each party shall defend, indemnify and hold harmless the other party from and against any and all claims, demands, liabilities and causes of action that are hereafter made or brought against the other party that allege any such violation.

20.Relationship of the Parties.

(a)For the purposes of this Agreement, FHC and Biosite are deemed to be independent contractors and not the agent or employee of the other. Neither FHC nor Biosite shall have the authority to make any statements, representations or commitments of any kind, or take any action, which shall be binding on the other, except as provided for herein or authorized in writing by the party to be bound.

(b)This Agreement does not grant any license from Biosite to FHC or from FHC to Biosite except as expressly provided herein.

21.Successors and Assigns.

This Agreement shall inure to the benefit of and be binding upon the parties hereto and their respective successors and permitted assigns.

22.Counterparts.

This Agreement may be executed in one or more counterparts, each of which shall be deemed an original for all purposes.

23.Approvals and Consents.

Each of the parties represents to the other that all necessary approvals of any third persons, the granting of which are necessary for the consummation of the transactions contemplated hereby, or for preventing the termination of any right, privilege, license or agreement or any right granted hereunder have been received by both parties to this Agreement.

24.Miscellaneous.

Any payment obligation under this Agreement which shall be due from Biosite to FHC and for which no date of payment is specified in this Agreement shall be payable on the thirtieth (30th) day following the day on which the event occurs which triggers Biosite’s obligation to make any such payment.

33

25.Further Assurances.

Biosite and FHC each shall perform any and all further acts and execute and deliver any and all further documents and instruments that may be reasonably necessary to carry out the provisions of this Agreement.

26.Non-Solicitation.

During the term of this Agreement and for a one year period thereafter, neither party shall solicit for employment, or hire, the other party’s employees without the prior written consent of the other party.

27.Relationship Summits.

Twice per year during the Term (or more or less frequently as the parties mutually determine), duly authorized representatives of each party shall meet and in good faith discuss the relationship of the parties. Discussions at such “relationship summits” may include but not be limited to marketing tactics and strategies and business growth plans for the Products.

28.2004 Distribution Agreement.

The parties acknowledge and agree that the 2004 Distribution Agreement shall terminate simultaneously with the effectiveness of this Agreement and that all rights and obligations of the parties during the term of the 2004 Distribution Agreement shall be governed by the terms thereof.

IN WITNESS WHEREOF, the parties have, by their duly authorized officers, executed this Agreement on the date first set forth above.

BIOSITE INCORPORATED			FISHER SCIENTIFIC COMPANY L.L.C.
By:	/s/ Tom Watlington		By:	/s/  Kirk Kimler
Title:		Executive VP/ COO	Title:		President and GM

34

SCHEDULE 2(e)(iv)

Customers who have made at least one purchase directly from Biosite in 2005.

Cust #	Cust Name	City	State
[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]

***Confidential Treatment Requested

35

Cust #	Cust Name	City	State
[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]

***Confidential Treatment Requested

36

SCHEDULE 3(b)(iii)

Product	[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]	[***]

Product	[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]	[***]

[***]

Product	[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]	[***]

[***]

***Confidential Treatment Requested

37

SCHEDULE A

CONTINUING GUARANTY

A.Biosite Incorporated (hereinafter referred to as “Seller”), having its principal office and place of business at 11030 Roselle, Ste. D, San Diego, California 92121, hereby guarantees that all Products (including their packaging, labeling and shipping) comprising each shipment or other delivery hereinafter made by Seller (hereinafter referred to as “Products”) to or on the order of Fisher Scientific Company L.L.C., a Delaware limited liability company, having its principal place of business at 2000 Park Lane, Pittsburgh, Pennsylvania 15275, or to any of its branches, divisions, subsidiaries, affiliates, or any of their customers (hereinafter collectively referred to as “Fisher”), pursuant to that certain Distribution Agreement effective as of July __, 2005 (the “Distribution Agreement”), between Seller and Fisher Scientific Company L.L.C., a Delaware limited liability company represented by its Fisher HealthCare division, are, as of the date of such shipment or delivery, in compliance with applicable federal, state and local laws, and any regulations, rules, declarations, interpretations and orders issued thereunder, including, without limitation, the Federal Food, Drug and Cosmetic Act, as amended, and conform to representations and warranties made by Seller in its advertising, product labeling and literature.

B.Further, with respect to any Product that is privately labeled for Fisher, if any, Seller agrees to make no change in such Products or the Fisher artwork on the labeling or packaging relating thereto without first obtaining the written consent of Fisher. Seller recognizes that Fisher is the owner of the trademarks and trade names connoting Fisher which it may elect to use in the promotion and sale of such private label Products and that Seller has no right or interest in such trademarks or trade names. Seller shall periodically analyze and review packaging and labeling for any Products which are private labeled for Fisher to ensure conformity with the provisions of paragraph A hereof and the adequacy of Product warnings and instructions.

C.Seller hereby agrees that it will reimburse Fisher Scientific Company L.L.C., a Delaware limited liability company, for all reasonable out-of-pocket costs and expenses incurred in connection with any product corrective action or recall relating to the Products which is requested by Seller or required by any governmental entity.

D.Seller agrees to procure and maintain product liability insurance with respect to the Products and contractual liability coverage relating to this Guaranty, with insurer(s) having Best’s rating(s) of A- or better, naming Fisher as an additional insured (Broad Form Vendors Endorsement), with minimum limits in each case of [***]. Seller shall promptly furnish to Fisher Scientific Company L.L.C., a Delaware limited liability company, a certificate of insurance and renewal certificates of insurance evidencing the foregoing coverages and limits. The insurance shall not be canceled, reduced or otherwise changed without providing Fisher with at least ten (10) days prior written notice.

E.Subject to the provisions of Section 4(l) of the Distribution Agreement, Seller agrees to and shall protect, defend, indemnify and hold harmless Fisher Scientific Company L.L.C., a Delaware limited liability company, (and with respect to Subparagraph E.(i) below, the customers of Fisher Scientific Company L.L.C., a Delaware limited liability company) from any and all claims, actions, costs, expenses and damages, including reasonable attorney’s fees and expenses arising out of: (i) any actual or alleged patent, trademark or copyright infringement in the design, composition, use, sale, advertising or packaging of the Products; (ii) any breach of the representations or warranties set forth in this Guaranty; (iii) the sale or use of the Products where such liability results from the act or omission of Seller (whether for breach of warranty, strict liability in tort, negligence or otherwise). In each such case, Fisher shall give Seller prompt written notice of any such claim, shall permit Seller to assume sole control of the defense thereof and shall provide all reasonable assistance in connection with the defense of such claim. Fisher shall have the right to retain its own counsel and to participate in such defense, with the fees and expenses of such counsel to be paid by Seller, if representation of Fisher by counsel retained by Seller would be inappropriate due to actual differing interests between Fisher and any other party represented by such counsel in such proceeding.

F.Seller agrees to and shall provide to Fisher Material Safety Data Sheets and other information concerning any Product as required by then applicable federal, state or local law.

***Confidential Treatment Requested

38

G.Seller agrees to and shall accept, at its facility, all of Fisher’s unsold or expired Products containing hazardous chemicals, materials or substances for disposal, recycling or use. Fisher shall be responsible for packing and transportation costs to Seller. Seller shall be responsible for all other costs, including, without limitation, any costs associated with Seller’s disposal, recycling or use.

H.If the Products to be furnished by Seller are to be used in the performance of a U.S. government contract or subcontract, those clauses of the applicable U.S. Government procurement regulation which are mandatorily required by Federal Statute to be included in U.S. Government subcontracts shall be incorporated herein by reference including, without limitation, the Fair Labor Standards Act of 1938, as amended.

I.The representations and obligations set forth herein shall be continuing and shall be binding upon the Seller and his or its heirs, executors, administrators, successors and/or assigns, whichever the case may be, and shall inure to the benefit of Fisher Scientific Company L.L.C., a Delaware limited liability company, its successors and assigns and to the benefit of its officers, directors, agents and employees and their heirs, executors, administrators, and assigns.

J.The agreements and obligations of Seller set forth in this Guaranty are in consideration of purchases made by Fisher from Seller and said obligations are in addition to (and supersede to the extent of any conflict) any obligations of Seller to Fisher or Fisher to Seller. This Guaranty shall be effective upon the first sale to Fisher of any Product by Seller, and the obligations of Seller under this

Guaranty shall survive and be enforceable in accordance with its terms.

SELLER

BIOSITE INCORPORATED

Name Under Which Seller’s Business is Conducted

/s/  Tom Watlington

Signature of Authorized Representative

Executive Vice President and COO

Title

October 19, 2005

Date

FISHER SCIENTIFIC COMPANY L.L.C., a
Delaware limited liability company

/s/ Kirk Kimler

Signature of Authorized Representative

President and GM

Title

October 19, 2005

Date

39

SCHEDULE B

[***]

Catalog Number	Product	Size	List Price
[***]	[***]	25 tests	[***]
[***]	[***]	25 tests	[***]
[***]	[***]	300 tests	[***]
[***]	[***]	25 tests	[***]
[***]	[***]	300 tests	[***]
[***]	[***]	25 tests	[***]
[***]	[***]	300 tests	[***]
[***]	[***]	25 tests	[***]
[***]	[***]	25 tests	[***]
[***]	[***]	25 tests	[***]
[***]	[***]	25 tests	[***]
[***]	[***]	25 test	[***]
[***]	[***]	6x5 mL vials	[***]
[***]	[***]	6x5 mL vials	[***]
[***]	[***]	6x5 mL vials	[***]
[***]	[***]	2x2 vials	[***]
[***]	[***]		[***]
[***]	[***]		[***]
[***]	[***]	25 each	[***]
[***]	[***]	25/pkg	[***]
[***]	[***]	25/pkg	[***]

***Confidential Treatment Requested

40

SCHEDULE C

[***]

Catalog Number	Product	Size	List Price
[***]	[***]	20 tests	[***]
[***]	[***]	20 tests	[***]

***Confidential Treatment Requested

41

SCHEDULE D

[***]

Catalog Number	Product	Size	List Price
[***]	[***]	25 test	[***]
[***]	[***]	2 x 2 vials	[***]
[***]	[***]	3 vials	[***]
[***]	[***]	2 x 2 vials	[***]
[***]	[***]	3 vials	[***]
[***]	[***]	25 Test	[***]
[***]	[***]	1 unit	[***]
[***]	[***]	1 unit	[***]
[***]	[***]		[***]
[***]	[***]	25 kits	[***]
[***]	[***]		[***]
[***]	[***]		[***]
[***]	[***]		[***]

***Confidential Treatment Requested

42

SCHEDULE E-1

[***]

Catalog Number	Product	Size	List Price
[***]	[***]	25 tests	[***]

***Confidential Treatment Requested

43

SCHEDULE E-2

[***]

Catalog Number	Product	Size	List Price
[***]	[***]	2x2 vials	[***]
[***]	[***]		[***]
[***]	[***]		[***]
[***]	[***]		[***]
[***]	[***]	100 test	[***]
[***]	[***]		[***]
[***]	[***]		[***]

***Confidential Treatment Requested

44

SCHEDULE F

[***] PRICES

[***]
	[***]	[***]	[***]
Year
[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]
[***]
	[***]	[***]	[***]
Year
[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]
[***]
	[***]	[***]	[***]
Year
[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]
[***]
	[***]	[***]	[***]
Year
[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]

***Confidential Treatment Requested

45

[***]
	[***]	[***]	[***]
Year
[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]
[***]
	[***]	[***]	[***]
Year
[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]
[***]
	[***]	[***]	[***]
Year
[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]

***Confidential Treatment Requested

46

SCHEDULE G

FHC SUBDISTRIBUTORS

[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]

***Confidential Treatment Requested

47

[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]

***Confidential Treatment Requested

48

[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
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[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]

***Confidential Treatment Requested

49

[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
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[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
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[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
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[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
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[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]

***Confidential Treatment Requested

50

[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
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[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
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[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
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[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
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[***]	[***]	[***]	[***]	[***]
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[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]

***Confidential Treatment Requested

51

[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
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[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
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[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
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[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]

***Confidential Treatment Requested

52

[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
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[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
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[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
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[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]

***Confidential Treatment Requested

53

[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
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[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
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[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
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[***]	[***]	[***]	[***]	[***]
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[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
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[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]

***Confidential Treatment Requested

54

[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]

***Confidential Treatment Requested

55

[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]

***Confidential Treatment Requested

56

[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]

***Confidential Treatment Requested

57

[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]

***Confidential Treatment Requested

58

SCHEDULE H

[***]

[***]	[***]	Cardiac	Micro	DOA
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]		[***]	[***]	[***]
[***]		[***]	[***]	[***]
[***]		[***]	[***]	[***]
[***]		[***]	[***]	[***]
[***]		[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]

[***]

[***]

***Confidential Treatment Requested

59

SCHEDULE I

PRODUCT WARRANTY

Biosite’s express and implied warranties (including implied warranties of merchantability and fitness) are conditioned upon observance of Biosite’s published directions with respect to the use of Biosite’s diagnostic products. Remedies against Biosite for breach of warranty or other duty are limited solely to replacement or return of the purchase price of the affected products. Any such claim against Biosite must be made in writing and promptly pursued within one year from the date of delivery of goods. UNDER NO CIRCUMSTANCES WHATSOEVER SHALL BIOSITE BE LIABLE FOR ANY INDIRECT OR CONSEQUENTIAL DAMAGES.

60

SCHEDULE J

CONTRACT CUSTOMER INSERT

A.“The terms and conditions contained in any invoice, sales acknowledgment, bill of lading, or other document supplied by Distributor to Customer shall (a) govern the relationship between Distributor and the Customer and (b) supersede any inconsistent terms and conditions of this Agreement and any exhibits attached hereto with respect to the terms of shipment and payment terms for Products delivered to Customer by the Distributor (which terms include, without limitation, acceptance, damage or loss in transit, credit terms, payment terms, and shipping terms, but exclude any warranty terms (which warranty terms shall be solely as expressly set forth in this Agreement)).”

B.“Notwithstanding anything to the contrary contained in this Agreement, Customer acknowledges and agrees that it shall look only to Biosite (in accordance with the terms of this Agreement) and not to Distributor with respect to (i) warranty issues associated with the Products, (ii) product liability issues associated with the Products (unless to the extent caused by Distributor’s negligence or willful misconduct), (iii) third party intellectual property claims related to the Products, and (iv) indemnity obligations of Biosite set forth in this Agreement.”

Biosite and FHC agree that clause (iv) set forth in paragraph (B) above shall only be included in Contract Customer contracts in the event that Biosite has agreed to provide indemnity to the applicable Contract Customer.

61

SCHEDULE K

TRANSFER PRICES

Biosite	Fisher	Product Description	Transfer
Part#	Catalog#	Description	Price
[***]
[***]	[***]	[***]	$	[***]
[***]	[***]	[***]	$	[***]
[***]	[***]	[***]	$	[***]
[***]	[***]	[***]	$	[***]
[***]	[***]	[***]	$	[***]
[***]	[***]	[***]	$	[***]
[***]	[***]	[***]	$	[***]
[***]	[***]	[***]	$	[***]
[***]	[***]	[***]	$	[***]
[***]	[***]	[***]	$	[***]
[***]	[***]	[***]	$	[***]
[***]	[***]	[***]	$	[***]
[***]	[***]	[***]	$	[***]
[***]
[***]	[***]	[***]	$	[***]
[***]	[***]	[***]	$	[***]

***Confidential Treatment Requested

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SCHEDULE L

[***]

Catalog Number	Product	Size	Price
[***]	[***]	25 tests	[***]
[***]	[***]	2 x 2 vials	[***]
[***]	[***]	5 x 1 vials	[***]
[***]	[***]	1 x 5 vials	[***]
[***]	[***]	2 packs, 50 tests/pack	[***]
[***]	[***]	1 Unit	[***]
[***]	[***]	1 Unit	[***]
[***]	[***]	1 Unit	[***]
[***]	[***]	1 CD	[***]
[***]	[***]	1 set	[***]
[***]	[***]	1 Unit	[***]
[***]	[***]	25 tests	[***]
[***]	[***]	2 x 2 vials	[***]
[***]	[***]	1 x 5 vials	[***]
[***]	[***]	25 tests	[***]
[***]	[***]	2 x 2 vials	[***]
[***]	[***]	25 tests	[***]
[***]	[***]	25 tests	[***]
[***]	[***]	25 tests	[***]
[***]	[***]	25 tests	[***]
[***]	[***]	25 tests	[***]

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[***]	[***]	25 tests	[***]
[***]	[***]	25 tests	[***]
[***]	[***]	6 x 5 vials	[***]
[***]	[***]	6 x 5 vials	[***]
[***]	[***]	6 x 5 vials	[***]
[***]	[***]	20 tests	[***]
[***]	[***]	20 tests	[***]
[***]	[***]		[***]
[***]	[***]	10 test kit size	[***]
[***]	[***]	3 vials	[***]
[***]	[***]	25 tests	[***]
[***]	[***]		[***]
[***]	[***]		[***]
[***]	[***]		[***]
[***]	[***]		[***]
[***]	[***]		[***]
[***]	[***]		[***]
[***]	[***]		[***]
[***]	[***]		[***]
[***]	[***]		[***]
[***]	[***]		[***]

***Confidential Treatment Requested

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SCHEDULE M

OBLIGATIONS FOR [***]

With respect to [***], Biosite shall perform the obligations set forth below for the remainder of the Term.

[***]

With respect to [***], FHC shall perform the obligations set forth below for the remainder of the Term.

[***]

[***]

***Confidential Treatment Requested

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SCHEDULE N

[***]

Catalog Number	Product	Size	List Price
[***]	[***]	25 tests	[***]
[***]	[***]	5x.25 ml	[***]
[***]	[***]	5x.25 ml	[***]
[***]	[***]	10x.25ml	[***]

***Confidential Treatment Requested

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EX-10.18

Exhibit 10.18

***Text omitted and filed separately

Confidential Treatment Requested

Under 17 C.F.R.§§ 200.80 (b) (4)

And 240.24b-2

SEMI-EXCLUSIVE BNP DIAGNOSTIC LICENSE AGREEMENT
between
BIOSITE DIAGNOSTICS INCORPORATED and SCIOS INC.

THIS LICENSE AGREEMENT (the “Agreement”) is made effective the 30th day of December, 1996 (the “Effective Date”), by and between BIOSITE DIAGNOSTICS INCORPORATED, a corporation organized under the laws of Delaware with its principal place of business at 11030 Roselle Street, San Diego, California 92121 (“Biosite”), and SCIOS INC., a corporation organized under the laws of the State of Delaware with a principal place of business at 2450 Bayshore Parkway, Mountain View, California 94043 (“Scios”).

BACKGROUND

A.Scios owns or controls certain Patent Rights and Know-how related to the human protein known as B-type natriuretic peptide (“BNP”) and to reagents and methods useful in assaying levels of BNP in human biological fluids; and

B.Biosite is in the business of developing, manufacturing and selling diagnostic products and related equipment and is desirous of developing a diagnostic product for assaying levels of BNP and marketing the product worldwide outside of Japan, where the Patent Rights and Know-how have been previously licensed to [***]; and

C.Scios is willing, subject to the terms and conditions set forth herein, to grant Biosite a semi-exclusive license under the Patent Rights and Know-how to make, have made, use, offer for sale, sell and import such a diagnostic product;

***Confidential Treatment Requested

NOW, THEREFORE, Scios and Biosite agree as follows:

1. DEFINITIONS

1.1“Affiliate” means, as to a party to this Agreement, any corporation, company, partnership, joint venture or other entity which controls, is controlled by, or is under common control with, such party. For purposes of this Section 1.1, control shall mean, without limitation: (a) in the case of corporate entities, the direct or indirect ownership of at least fifty percent (50%) of the stock or participating shares entitled to vote for the election of directors; and (b) in the case of a partnership, the power customarily held by a general partner to direct the management and policies of such partnership.

1.2“Expanded Field” means the testing of biological samples to determine BNP levels, which testing is carried out using [***], including without limitation [***] for use on [***] and [***], excluding the Field.

1.3“Field” means the testing of biological samples to determine BNP levels, which testing is carried out using [***] or [***] and [***], [***], and whether [***].

1.4“Know-how” means information and data of any type whatsoever, which is not generally known, including but not limited to formulae, processes, protocols, techniques, results of experimentation, amino acid and DNA sequences and testing and biological materials, reagents and organisms (including monoclonal antibodies and hybridoma cells) in the possession or control of Scios which relate to BNP and/or assays for determining BNP levels in biological materials and which are necessary or useful for the development, manufacture, use, regulatory approval or sale of Licensed Product.

***Confidential Treatment Requested

2

1.5“Licensed Product” means any diagnostic test, reagent(s) or kit that (a) is useful for carrying out [***] to determine levels of BNP in biological materials, which assay [***] or a [***] of the [***] within the Territory, if [***]; and (b) (i) if made, used, offered for sale, sold or imported, absent the license granted hereby, would infringe the valid claims of the Patent Rights (if in an issued patent), or (ii) contains, incorporates, uses or was developed using the Know how. As used herein, a “valid claim” is a claim which has not been dedicated to the public or held invalid or unenforceable by a non-appealed or non-appealable decision of a court of competent jurisdiction.

1.6“Net Sales” means the sum (without duplication) of:

(a)invoiced sales price of Licensed Products sold by Biosite and its sublicensees, if any, to independent customers who are not Affiliates, less the following to the extent paid or accrued by Biosite or its sublicensees, if any, and not reimbursed (separate from the invoiced sales price) by or credited to the independent customer: (i) credits, allowances, discounts and rebates to, and chargebacks from the account of, such independent customers for spoiled, damaged, out-dated, rejected or returned Licensed Products; (ii) actual freight and insurance costs incurred in transporting Licensed Products to such independent customers; (iii) reasonable and customary cash, quantity and trade discounts, and other price reduction programs, actually given to the independent customer; (iv) sales, use, value-added and other direct taxes, and (v) customs duties, surcharges and other governmental charges incurred in connection with the exportation or importation of Licensed Products;

(b)any other monetary consideration received by Biosite and its sublicensees, if any, from independent customers for the use of Licensed Product where such consideration is based upon the number of diagnostic tests carried out by the independent customer to determine BNP levels in samples, including without limitation charges designated as use, rental or installment purchase payments for

***Confidential Treatment Requested

3

automated diagnostic testing equipment provided to the independent customer by Biosite or its sublicensees or Affiliates; and

(c)any amounts received by Biosite and its sublicensees from independent customers who are not Affiliates as fees for carrying out diagnostic tests to determine levels of BNP in samples using Licensed Product, less the following to the extent paid or accrued by Biosite or its sublicensees, if any, and not reimbursed (separate from the invoiced sales price) by or credited to the independent customers (i) reasonable and customary cash, quantity and trade discounts, and other price reduction programs, actually given to the independent customer, and (ii) sales, use, value-added and other direct taxes.

1.7“Patent Rights” means, collectively, (a) those existing patents and patent applications listed on Appendix A attached hereto, (b) any patents which have issued or in the future issue therefrom, (c) all substitutions, extensions, reissues, renewals, divisions, continuations, or continuations-in-part for or of the foregoing, (d) all foreign counterparts of the foregoing, and (e) any additional patent applications or patents in the Territory that Scios owns during the term of this Agreement and that claim compositions of matter or methods useful in developing, making or using Licensed Products.

1.8“PMA” means an application to the United States Food and Drug Administration (“FDA”) for premarketing approval of diagnostic product filed pursuant to 21 U.S.C. §513(f).

1.9“510K” means an application to the FDA seeking approval to market a Licensed Product that is filed pursuant to 21 U.S.C. §510(k).

1.10“Territory” means all countries of the world except Japan.

1.11“Third Party” means a party other than Scios, its other licensees under the Know-how and Patent Rights, Biosite and its sublicensees.

4

2. RIGHTS GRANTED

2.1Grant. Scios hereby grants to Biosite, subject to the terms and conditions set forth herein, the semi-exclusive right and license under the Patent Rights and Know-how to develop and seek regulatory approval for any diagnostic test, reagent(s) or kit that is useful for carrying out [***] to determine levels of BNP in [***] materials, and to [***] Licensed Products in the Field within the Territory. Specifically excluded is any product containing BNP which is used or intended for use or administered for therapeutic purposes, as to which Scios shall have complete freedom to develop such therapeutic product itself or with others in any manner.

2.2Option for Expanded Field. Scios hereby grants to Biosite, subject to the terms and conditions set forth herein, an option, which may be exercised by Biosite upon notice to Scios and payment of the option fee set forth in Section 3.3, to modify the semi-exclusive right and license granted in Section 2.1 to additionally include the Expanded Field. Such modification shall apply prospectively from the date of notice and payment of the option fee by Biosite. The modified semi-exclusive right and license shall be subject to all other terms and conditions of this Agreement.

2.3Sublicenses. In any country within the Territory, Biosite may grant [***] under the rights granted in Section 2.1 and Section 2.2 to [***] (which may, but need not be, [***] Biosite), provided [***] or [***]. Any sublicense shall be consistent in all respects with the license provisions of this Agreement. A copy of each sublicense (with any financial, technical or other confidential information redacted) shall be sent to Scios within [***] days of signature. [***]  Upon any termination of this Agreement between Biosite and Scios prior to its full term, all sublicenses shall terminate; provided

***Confidential Treatment Requested

5

that, if Biosite has granted any sublicense in the [***], Scios agrees to allow the sublicensee to continue its activity as [***] under this Agreement in the territory of its sublicense from Biosite.

2.4Additional Licenses. Scios reserves the right to grant as to the Territory additional licenses under the Patent Rights and Know-how permitting the creation of competing diagnostic products; provided, however, that Scios agrees that a maximum of three entities (inclusive of Biosite [***]) shall be authorized at any time under licenses granted by Scios under the Patent Rights and Know-how within the Territory to [***] Licensed Products in any country.

3. PAYMENTS AND ROYALTIES

3.1Initial Payment. In consideration of the license rights set forth herein, Biosite shall pay to Scios an initial payment of [***] ($[***]) upon execution of this Agreement. The foregoing amount shall not be refundable or creditable against any other amount payable hereunder.

3.2Milestone Payments. Biosite shall make the following payments to Scios, [***] shall be [***] against any other amount payable hereunder, within [***] of the date or event indicated:

(a)[***] ($[***]) upon [***] of a Licensed Product or [***] from the Effective Date, whichever occurs first;

(b)[***] ($[***]) upon the first commercial sale of a Licensed Product in any country within the Territory,

(c)[***] ($[***]) upon approval by the FDA to market a Licensed Product for [***].

***Confidential Treatment Requested

6

3.3Option Payment. In the event that Biosite exercises the option to modify the semi-exclusive right and license to additionally include the Expanded Field, as provided for in Section 2.2, Biosite shall pay Scios an option exercise fee of [***] ($[***]) [***] notifies Scios that it is exercising the option. Such option exercise fee shall [***] against any other amount payable hereunder.

3.4Royalties. Within [***] following the end of each calendar quarter during the term of this Agreement, Biosite shall pay to Scios earned royalties based on Net Sales of Licensed Products during the previous calendar quarter. Royalties shall be paid at the following rate, [***]:

(a)	[***]	[***]%
(b)	[***]	[***]%
(c)	[***]	[***]%

3.5Term of Royalty Obligation. Subject to the termination provisions of Sections 11.2 and 11.3 below, Biosite’s obligation to pay royalties will expire, on a country-by-country basis, on [***] (a) the date when the last Patent Right in such country expires, lapses or is invalidated, or (b) [***] on which sales of Licensed Product [***], unless applicable law requires that the obligation expire sooner, in which case the obligation shall continue for the maximum period allowed by law.

3.6Most Favored Licensee. In the event that Scios grants a license to a Third Party to sell Licensed Product under the Patent Rights and Know-how having a more favorable royalty rate than that set forth in Section 3.4 of this Agreement, this Agreement shall be modified by replacing the royalty rates in Section 3.4 with the royalty rates in such Third Party agreement. Biosite shall not have the right to require modification of any other financial terms of this Agreement to conform to any terms of any agreement between Scios and a Third Party relating to the subject matter of this Agreement.

***Confidential Treatment Requested

7

3.7Place of Payment; Currency Conversion. All royalty payments due Scios shall be payable in United States dollars at Scios’ office in Mountain View, California, or such other place as may be designated by Scios from time to time. For sales made in a currency other than United States dollars, royalties payable under this Agreement shall be determined by converting the total royalty on Net Sales computed in the currency of sale for a calendar quarter into United States dollars using the closing spot exchange rate between the two currencies quoted in The Wall Street Journal (United States edition) on the last day of the applicable calendar quarter.

3.8Taxation of Royalties.

(a)Scios shall be solely responsible for and shall bear all withholding, value-added or other taxes, levies or charges (other than United States taxes) with respect to any royalties owing to Scios hereunder which are required by any governmental authority to be paid or withheld by Biosite or its sublicensees. Scios hereby authorizes Biosite to withhold such taxes from the payments which are payable to Scios in accordance with this Agreement if Biosite is either required to do so under the tax laws of the country of sale or the United States or directed to do so by an agency of either such government. Whenever Biosite deducts such tax from any payments due Scios, then Biosite shall furnish Scios with an original or copy of tax certificate, as required by the United States Internal Revenue Service, showing the payment of such tax.

(b)In the event any royalty payments which are due to Scios under this Agreement are subject to any tax other than specified in Section 3.8(a), Biosite shall bear such tax.

3.9Restrictions on Remittance. lf, at any time, legal restrictions prevent the prompt remittance of part or all royalties with respect to any country in the Territory where Licensed Product is sold, Biosite shall have the right to make such payments by depositing the amount thereof in local currency to Scios’ account in a bank or other depository institution in such country.

8

3.10[***]. Without the prior consent of Scios, Biosite shall not [***] any [***] in [***] for the [***] other than as would be [***] of such [***] at the [***] thereof.

4. REPORTS

4.1Milestones. Biosite shall report to Scios within [***] of its occurrence (a) the date on which any event listed in Section 3.2 occurred and (b) the date of [***] of each Licensed Product in each country.

4.2Quarterly Sales Reports. With each quarterly payment made under Section 3.4, Biosite shall deliver a full and accurate accounting of all [***] of Licensed Products by Biosite for the quarterly calendar period. Each such report shall include at least the following information: (a) gross invoiced [***] from sales of Licensed Products and [***]; (b) any [***] from gross [***] used to arrive at [***] as defined in Section 1.6; and (c) Biosite’s computation of the aggregate [***] payable to Scios.

5. DILIGENCE

5.1Responsibility of Biosite. Biosite shall have the full responsibility for the development of Licensed Products, including all testing and filings required to seek regulatory approval to market such Licensed Products, the manufacture of Licensed Product (subject to Scios’ right to supply BNP for use in Licensed Product as set forth in Section 8.1) and distribution of Licensed Product. Biosite shall bear the expense for all such activities.

5.2Diligence Milestones. Biosite shall use commercially reasonable efforts consistent with sound business judgment to develop and market Licensed Products within

***Confidential Treatment Requested

9

the Territory and to accomplish each of the following objectives [***]:

(a)[***] with a [***] or [***] from [***]

(b)[***] from the [***].

(c)[***] Licensed Product in [***], other than [***], [***] from the [***];

(d)[***] (if a [***] for [***] in the [***]) or a [***] (if a [***] for [***] in the [***]) [***] from the [***].

If Biosite does not achieve either of the objectives stated in (a) or (b) [***], then Scios shall have the right to terminate this Agreement effective upon [***] prior written notice to Biosite; provided, however, if during such [***] period, Biosite provides Scios with reasonably satisfactory evidence that the delay in achieving the objective was not due to a lack of diligence on the part of Biosite and was due to [***] beyond the reasonable control of Biosite, then [***] of such objectives shall be extended for such [***] as the parties mutually agree, which shall not be [***]. If, at the end of such additional period, Biosite shall not have achieved the objective(s) due to be completed, or Scios and Biosite have not agreed on a [***] for completion of such objectives, Scios shall have the right to terminate the Agreement, which termination shall take effect upon [***] prior written notice from Scios to Biosite. Scios’ right to terminate this Agreement shall be its sole and exclusive remedy for any breach by Biosite of the diligence obligations under this Section 5.2.

***Confidential Treatment Requested

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5.3Diligence Reports. Within [***] after each anniversary of the Effective Date until the [***], Biosite shall provide Scios with a written report summarizing Biosite’s development activities during the [***] period preceding the anniversary date. Such reports shall constitute confidential information which shall be treated as provided in Section 10.1. In addition, if requested by Scios, Biosite shall meet with Scios annually to review progress in the development of Licensed Products.

6. BOOKS AND RECORDS

6.1Books and Records; Audits. Biosite shall keep full and accurate accounting records containing all particulars that may be necessary for the purpose of calculating all royalties accrued to Scios. Upon the written request of Scios and not more than once in each calendar year, Biosite shall permit an independent certified public accounting firm of nationally recognized standing, selected by Scios and reasonably acceptable to Biosite, to have access during normal business hours to such of the records of Biosite as may be reasonably necessary to verify the accuracy of the royalty reports hereunder for any year ending not more than thirty-six (36) months prior to the date of such request. The accounting firm shall disclose to Scios only whether the reports are correct or not and the specific details concerning any discrepancies. No other information shall be shared. An adjusting payment shall be made upon accurate demonstration of any underpayment.

6.2Cost of Audits. The fees and expenses of Scios or Scios’ designee performing an examination pursuant to Section 6.1 shall be borne by Scios; provided, however, that if any audit accurately shall show that Biosite underpaid the royalties due to Scios under this Agreement as to the period being audited by more than [***] of the amount that was payable for such period, then Biosite shall, in addition to immediately paying to Scios any such deficiency, reimburse Scios for the cost of such audit.

***Confidential Treatment Requested

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6.3Period to be Kept. Books and records required to be maintained by Biosite hereunder shall be preserved for at least [***] from the date of the royalty payment to which they pertain.

7. TRANSFER OF KNOW-HOW

7.1Development, Use and Sale of Licensed Product. Biosite acknowledges that certain information relating to [***] for [***] and [***] on its [***] for [***], which constitute Know-how hereunder, has been transferred to it by Scios prior to the Effective Date pursuant to a certain Confidential Disclosure Agreement between the parties dated October 15, 1996. All Know-how transferred prior to the Effective Date shall be considered Know-how subject to the provisions of this Agreement. Scios shall deliver to Biosite, within [***] of the Effective Date the [***] listed on [***] and upon the request of Biosite, any additional Know-how that is needed by Biosite to develop a prototype Licensed Product from the [***] received from Scios. The manner in which such Know-how is transferred shall be [***]. Scios shall devote up to [***], as needed, to accomplish the initial transfer of such Know-how at no cost to Biosite. Any additional time provided shall be [***] at a [***] (which is [***] as of [***]) upon receipt of an [***]. Except to the extent necessary to enable Biosite to obtain marketing approval within the Territory, Know-how related to the manufacture of BNP shall not be transferred unless Biosite undertakes the recombinant manufacture of BNP pursuant to the provisions of Section 8.4.

7.2Manufacture of BNP. In the event that Biosite or a [***] of Biosite undertakes the manufacture of BNP pursuant to Section 8.4, upon request by Biosite or its [***] Scios shall, at no cost to Biosite or its [***], transfer to Biosite or its [***] the [***] Scios used to produce BNP [***] and other Know-how related to the [***] manufacture of BNP. Because of the highly

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proprietary nature and great competitive value of the [***], Biosite specifically (a) acknowledges that all information concerning the [***] provided by Scios to Biosite or its [***] shall be subject to the confidentiality provisions of Section 10.1 and (b) agrees that Biosite or its [***] shall use such [***] and related information (and each part thereof) solely for its own manufacture of BNP for use in Licensed Products and not for the manufacture of any other biological material or product and shall not transfer such [***] to any Third Party except as otherwise provided herein.

8. SUPPLY

8.1Supply by Scios. Prior to the first commercial sale of Licensed Product, Scios agrees to supply Biosite with BNP for development of Licensed Product upon placement of purchase orders, at a cost of [***] ($[***]) per milligram, not to exceed [***] ([***]) mg in each calendar year. Biosite shall notify Scios not less than [***] in advance of its intention to file [***] for [***] of a Licensed Product [***]. Scios shall have an option, exercisable within [***] business [***] of its receipt of such notice, to [***] with respect to BNP on the terms described in Section 8.3.

8.2Specifications. BNP supplied by Scios to Biosite shall conform to the specifications set forth on Appendix C, attached hereto. Scios shall have the right to alter such specifications on [***] ([***]) days prior notice to Biosite, to the extent reasonably necessary to [***] of [***].

8.3Supply Agreement. Any supply agreement negotiated [***] shall be on terms and conditions mutually acceptable to both parties and shall provide for (a) Biosite to purchase from Scios, and Scios to supply, all their requirements of BNP for use in Licensed Products, (b) the price of BNP not to exceed the lesser of [***]

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dollars ($[***]) per milligram and [***] ([***]) of [***] of [***], (c) Biosite to have a reasonable time period (not to exceed [***]) after delivery of any shipment of BNP by Scios within which to accept or reject such shipment for conformity with specifications, which acceptance shall release Scios from any on-going responsibility to Biosite with respect to Biosite’s use of the BNP in the shipment or sale of Licensed Product containing such BNP, (d) Biosite to have a right of termination if it can establish to Scios’ reasonable satisfaction that [***] (i.e., [***]) manufactured BNP is more suitable than [***] manufactured BNP for use in Licensed Product or if Scios notifies Biosite that Scios is altering the specifications of BNP pursuant to its right to do so under Section 8.2 and Biosite does not desire to incorporate such modifications into Licensed Products, and (e) other reasonable and customary terms, including appropriate assurances of inventory and future supply and the right on the part of Scios to terminate supply on terms consistent with Section 8.4. Acceptance by Biosite of any alteration of the specifications of BNP shall be reflected in an amendment to Appendix C and such acceptance by Biosite shall be deemed to be Biosite’s agreement that, for purposes of this Section 8.3, Biosite can incorporate the modified specifications into Licensed Product and Biosite has foregone the right to assume manufacturing of BNP triggered by such modification.

8.4Manufacture of BNP by Biosite and Sublicensees. In the event that Scios is or becomes unable or unwilling to supply BNP to Biosite, or in the event that Biosite exercises a right of termination of the supply agreement as described in Section 8.3(d), Biosite’s license and any sublicense hereunder shall be deemed to include the right to manufacture or have manufactured BNP solely for use by Biosite and its sublicensees, if any, in Licensed Product.

8.5Recombinant Manufacture by Third Party. If the supply agreement is not entered into or is terminated and Biosite or a sublicensee of Biosite elects to have BNP manufactured [***] by a Third Party, Biosite or a sublicensee of Biosite may transfer the manufacturing Know-how, including the [***] and other Know-how

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related to the manufacture of BNP, to such Third Party solely for use in manufacturing BNP for the uses permitted under this Agreement provided Biosite or a sublicensee of Biosite shall have entered into an agreement with such Third Party imposing upon such Third Party obligations of non-disclosure and non-use at least as stringent as those set forth in Article 10 with respect to the Know-how, including the [***]. Additionally, such agreement shall provide that it shall terminate upon termination of this Agreement between Scios and Biosite and that, upon termination, the Third Party will return to Scios or destroy any Know-how in tangible form and that the obligations of non-disclosure and non-use shall survive termination of such agreement for a period of at least [***]. Biosite shall notify Scios prior to it or any of its sublicensees entering into a BNP manufacturing agreement with a Third Party at least [***] prior to executing such agreement. Such notice shall include the identity of the Third Party manufacturer.

9. PATENTS

9.1Patent Procurement and Maintenance. Scios shall be responsible for endeavoring to secure and maintain the Patent Rights throughout the Territory in such countries and in such manner as Scios shall elect after considering the views of Biosite and Scios’ other licensees of the Patent Rights. Scios shall notify Biosite of any change in status of patents and/or patent applications listed in Appendix A and of the filing of any new patent applications within the Patent Rights and Appendix A shall be amended from time to time to reflect such changes. In the event Biosite, alone or jointly with Scios, shall make any additional invention related to a Licensed Product, then Biosite shall be responsible and pay for the prosecution and maintenance of all applications and patents related to such invention including the costs of reexamination, reissue, opposition or interference proceedings. Any patents issuing from joint inventions shall be owned jointly by Biosite and Scios. Unless otherwise specifically agreed to herein and subject to the licenses granted under Article 2, as a joint owner, each party shall have the right to assign, transfer, license or exploit its interest in such joint inventions or joint patent rights without accounting or payment to the other Party. In the event any of the Patent Rights

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shall become involved in an opposition or interference proceeding, Scios shall manage the proceeding and Biosite [***] of the [***] of such proceeding. Scios agrees to keep Biosite reasonably informed concerning the proceeding and take its views into account in setting Scios’ strategy in the proceeding.

9.2Third Party Infringement. If, during the term of this Agreement, Biosite notifies Scios that any unlicensed Third Party is infringing any of the Patent Rights by selling, distributing, marketing or using any Licensed Product in a country within the Territory, and Scios does not, within [***] ([***]) [***], either (a) establish that infringement is not occurring in such country, (b) establish by [***] or data from another reliable source that [***] by all [***] in such country [***] ([***]) of the [***] for Licensed Product in such country, (c) cause such infringement to abate or (d) institute a suit to enjoin such infringement, then Biosite shall have the right, subject to Section 9.5 and so long as such infringement continues, to pay royalties for sales of Licensed Product in any country in which such infringement is occurring, at [***] specified in Section 3.3; provided, however, that Scios shall not be required to maintain suits for infringement against more than [***] [***] at a time in any country in order to continue receiving royalties at the rate specified in Section 3.4. Scios shall bear the expense of any infringement suit and [***] any reward of monetary damages.

9.3Infringement of Third-Party Patents. It is understood by the parties that Scios makes no representation or warranty that the [***] of Licensed Product will not infringe the patent rights of any Third Party. In the event any claim is made by any Third Party against Biosite or a sublicensee of Biosite alleging that the [***] of a Licensed Product by Biosite or a sublicensee of Biosite infringes any patent of a Third Party, Biosite shall promptly notify Scios in writing. Biosite shall be responsible for the defense of such suit except for any suit [***] to [***] or [***] in any country within the Territory

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[***] (a “[***]”). Subject to the provisions of Section 9.5, Biosite shall have the right to deduct [***] of such suit or any [***] Biosite in such suit from amounts due to Scios under this Agreement. Scios shall be responsible at its own cost, for the defense of any suit claiming that the [***] of Licensed Product by Biosite or a sublicensee of Biosite [***]. The Party conducting the defense of any infringement suit shall have control of the suit and shall use counsel if its choice is reasonably acceptable to the other party, provided the party in control shall have the right to confer with the other party on matters of strategy and shall not enter into any settlement agreement which adversely affects the economic interest of the other party [***] to this Agreement without that party’s consent.

9.4License of Third-Party Patents. If, as a result of infringement litigation or agreement between Scios and Biosite, it is determined that it is necessary to obtain a license from a Third Party under any patent [***] BNP, the [***] of BNP, the [***] of Licensed Product or the [***] of Licensed Product, Biosite shall pay [***] and, subject to section 9.5, shall have the right to deduct [***] in any [***] from the [***] payable to Scios [***] under this Agreement. [***] paid by Biosite to any Third Party for license rights to patents covering [***] generally useful in [***], but not [***] to Licensed Product, shall not be deductible from royalties payable to Scios under this Agreement.

9.5Limitation on Royalty Reduction. In no event shall the aggregate of reductions in royalties under Sections 9.2, 9.3 and 9.4 reduce the amount of royalties due to Scios in any royalty reporting period to less than [***] percent ([***]%).

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10. CONFIDENTIALITY

10.1Confidentiality. During the term of this Agreement, and for five (5) years thereafter (but in no event less than ten (10) years following the Effective Date), each party shall keep confidential and shall not disclose or provide to any Third Party (except as expressly permitted under this Agreement) or use for any purpose (except as expressly permitted by this Agreement) any information (specifically including, but not limited to, Know-how, biological samples and materials derived or reproduced therefrom) furnished to it by the other party pursuant to this Agreement other than to directors, officers, employees and consultants, except to the extent that it can be shown by the receiving party that such information:

(a)was already known to the receiving party, other than under an obligation of confidentiality, at the time of disclosure by the other party;

(b)was generally available to the public or otherwise part of the public domain at the time of its disclosure to the receiving party;

(c)became generally available to the public or otherwise part of the public domain after its disclosure, other than through an act or omission on the part of the receiving party in breach of this Agreement; or

(d)is subsequently lawfully disclosed to the receiving party by a Third Party. Notwithstanding the foregoing, a party may disclose the other party’s confidential information to the extent reasonably necessary in filing or prosecuting patent applications, prosecuting or defending litigation, negotiating a merger or acquisition (under appropriate assurances of confidentiality), complying with applicable laws, government regulations or court orders, or conducting clinical trials; provided, however, that a party making such disclosure shall provide notice of, and opportunity to object to, such disclosure to the other

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party, which notice shall be in advance of disclosure to the extent reasonably possible.

10.2Survival of Obligation. The obligation of confidentiality set forth in Section 10.1 shall survive the expiration or termination of this Agreement.

11. TERM AND TERMINATION

11.1Term. This Agreement shall be in full force and effect from the Effective Date and, unless otherwise terminated by operation of law or by acts of the parties in accordance with the terms of this Agreement, shall remain in effect for the term of any royalty obligation under Section 3.4

11.2Early Termination. In case Biosite breaches a material obligation under the Agreement, Scios may notify Biosite of the particular default and its intention to terminate this Agreement. Unless such default is cured, or Biosite has provided evidence reasonably acceptable to Scios that such default is in the process of being cured, within [***] of the receipt of Biosite of written notice of the particular default, Scios shall have the option of terminating the Agreement on notice to Biosite. Failure of Scios to provide notice to Biosite of any default shall not be deemed a waiver of such default.

11.3Early Termination by Biosite. Biosite may terminate this Agreement at any time by giving [***] ([***]) [***] written notice to Scios of its intent to do so.

11.4Accrued Rights and Obligations. Unless otherwise specifically provided, all rights and obligations of Scios and Biosite hereunder shall remain in effect throughout the term of this Agreement and it is understood and agreed that expiration or other termination of this Agreement shall not relieve either party of any obligation arising under this Agreement which shall have accrued prior to such expiration or termination.

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Termination shall have no effect on Biosite’s obligation to report and pay all payments provided herein for any Licensed Products sold during the period prior to termination.

11.5Effect of Expiration or Termination.

(a)Upon expiration of this Agreement pursuant to Section 11.1, Biosite and its sublicensees, if any, shall have a fully paid-up non-exclusive license to use the Know-how for the purposes set forth herein.

(b)In the event of early termination pursuant to Section 2.4, Section 5.2, Section 11.2 or Section 11.3, each party to this Agreement (including, if any, each sublicensee) shall return all information it has received in tangible form that is subject to the confidentiality provisions of Article 10 to the party that provided such information, or at the request of the providing party, destroy such information, including all copies of documents and all materials, such as [***] materials, embodying the Know-how; provided that each party may retain one copy of such information for its legal files.

12. WARRANTIES AND DISCLAIMERS

12.1Warranty of Licensor. Scios warrants that it is the owner of the entire right, title and interest in the Patent Rights and Know-how and that it has the right to grant the license herein granted.

12.2Warranty of Biosite. Biosite warrants that it has the skills necessary to develop a Licensed Product and that it intends to do so.

12.3Exclusion by Both Parties. Except as expressly set forth in this Agreement, the parties expressly disclaim all warranties, express or implied, including without limitation warranties of merchantability, fitness for a particular purpose, or non-infringement.

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12.4Product Liability Disclaimer. Since Biosite shall have full control over the design and development of Licensed Products and determine what testing or evaluation each Licensed Product shall be subject to prior to use, neither Scios nor any of its officers, employees or agents assumes any responsibility for the manufacture or product specifications or end-use of any products which are manufactured by or sold by Biosite under any of the Patent Rights and Know-how. All warranties in connection with such products shall be made by Biosite as manufacturer and/or seller and shall not directly or by implication obligate Scios or any of its officers, employees or agents.

13. INDEMNITY

13.1Indemnity. Biosite hereby agrees to indemnify, hold harmless and defend Scios, its directors, officers, employees and agents, against any and all losses, liabilities, damages and expenses (including reasonable attorneys’ fees and costs) incurred by Scios as a result of any claims, demands, actions or other proceedings by any third party arising out of:

(a)The gross negligence of willful misconduct of Biosite and/or its sublicensees; or

(b)The manufacture, packaging, use, sale, or other distribution of Licensed Products by Biosite and/or its sublicensees; or

(c)Any representation made or warranty expressly or impliedly given by Biosite or its sublicensees with respect to any Licensed Product;

except in each case to the extent that such losses, liabilities, damages and expenses arise out of the gross negligence of willful misconduct of Scios and/or its Affiliates.

13.2Procedures. If Scios intends to claim indemnification under Section 13.1 above, Scios shall promptly notify Biosite of any claim, demand, action or other proceeding for which Scios intends to claim such indemnification. Biosite shall have the right to participate in, and, to the extent Biosite so desires, jointly with any other indemnitor similarly noticed, to assume the defense thereof with counsel selected by Biosite. The

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indemnity obligations under Section 13.1 above shall not apply to amounts paid in settlement of any claim, demand, action or other proceeding if such settlement is effected without the prior express written consent of Biosite, which consent shall not be withheld unreasonably. The failure to deliver notice to Biosite within a reasonable time after the commencement of any such action, if prejudicial to its ability to defend such action, shall relieve such Biosite of any liability to Scios under Section 13.1 above, but the omission so to deliver notice to Biosite will not relieve it of any liability that it may have to any Scios otherwise than under Section 13.1. Biosite may not settle any such claim, demand, action or other proceeding, or otherwise consent to an adverse judgment in any such action, that diminishes the rights or interests of Scios without the express written consent of Scios. Scios, its employees and agents, shall cooperate fully with Biosite and its legal representatives in the investigation of any action, claim or liability covered by this indemnification.

14. TRADENAMES AND TRADEMARKS

14.1Tradenames and Trademarks. Nothing contained in this Agreement shall be construed as conferring any right of one party to use in advertising, publicity, or other promotional activities, any names, tradename, trademark, or other designation of the other party without such other party’s prior written consent and approval as to form. Each party hereto further agrees not to use or refer to this Agreement or the license granted hereunder in any promotional activity associated with the Licensed Products without the express written approval of the other party.

15. MISCELLANEOUS

15.1Waiver. No waiver by either party hereof of any breach or default of any of the covenants or agreements herein set forth shall be deemed a waiver as to any subsequent or similar breach or default.

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15.2Assignment. Upon written notice to Scios, Biosite may assign this Agreement [***] with the [***] of [***] of its [***], or in the event of its [***] or [***]. Upon [***] prior written notice to Biosite, Scios may assign or transfer this Agreement [***]. Any permitted assignee shall assume all obligations of its assignor under this Agreement. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their permitted successors and assigns.

15.3Notices. Any notice or other communication required or permitted to be given to either party hereto shall be in writing and shall be effective on the date of receipt if delivered in person or by telex or ten (10) days after mailing by registered or certified mail, postage paid, or any other lawful means, to the other party at the following address:

In the case of Scios:Scios Inc.
2450 Bayshore Parkway
Mountain View, Ca 94043, USA
Attention: General Counsel
Facsimile: 415-962-5816

with a copy to the attention of: Vice President of Business Development

In the case of Biosite:Biosite Diagnostics Incorporated
11030 Roselle Street, Suite D
San Diego, California 92121
Attention: President
Facsimile: (619) 455-4815

with a copy to:Pillsbury Madison & Sutro
235 Montgomery Street, 15th Floor
San Francisco, California 94104
Attention: Thomas E. Sparks, Jr.

Either party may change its address or facsimile number for communications by a notice to the other party in accordance with this Section 15.3.

15.4Governing Law and Jurisdiction. This Agreement shall be interpreted and construed in accordance with the laws of the state of California. Each party submits to

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the jurisdiction and venue of the California state courts and the federal courts for the Northern District of California for any action hereunder. Each party agrees that service of process may be effected against it by certified or registered mail with respect to legal actions commenced by the other party in any such jurisdiction.

15.5Headings. The heading of the several sections are inserted for convenience of reference only and are not intended to be a part of or to affect the meaning or interpretation of this Agreement.

15.6Amendment. No amendment or modification hereof shall be valid or binding upon the parties unless made in writing and signed by both parties.

15.7Force Majeure. Any delay in performance by any party under this Agreement shall not be considered a breach of this Agreement if and to the extent caused by occurrences beyond the reasonable control of the party affected, including but not limited to acts of God, embargoes, governmental restrictions, strikes or other concerted acts of workers, fire, flood, explosion, riots, wars, civil disorder, rebellion or sabotage. The party suffering such occurrence shall promptly notify the other party and the time for performance of any obligation hereunder shall be extended by the actual time of delay caused by the occurrence.

15.8Independent Contractors. In making and performing this Agreement, Biosite and Scios act and shall act at all times as independent contractors and nothing contained in this Agreement shall be construed or implied to create an agency, partnership or employer and employee relationship between Scios and Biosite. At no time shall one party make commitments or incur any charges or expenses for or in the name of the other party except as specifically provided herein.

15.9Severability. If any term, condition or provision of this Agreement is held to be unenforceable for any reasons, it shall if possible, be interpreted rather than voided, in

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order to achieve the intent of the parties to this Agreement to the extent possible. In any event, all other terms, conditions and provisions of this Agreement shall remain valid and enforceable to the full extent.

15.10Additional Documents. Each party to execute such further papers or agreements as may be necessary to effect the purpose of this Agreement.

15.11Entire Agreement. This Agreement embodies the entire understanding of the parties and shall supersede all previous communications, representations or understandings, either oral or written, between the parties relating to the subject matter hereof.

IN WITNESS HEREOF, both Scios and Biosite have executed this Agreement, in duplicate originals, by their respective officers hereunto duly authorized, as of the day and year hereabove written.

SCIOS:	SCIOS INC.
	By:	/s/ Richard L. Casey
	Name:			Richard L. Casey
	Title:		Chairman and CEO
BIOSITE:	BIOSITE DIAGNOSTICS, INCORPORATED
	By:	/s/ Kim D. Blickenstaff
	Name:			Kim D. Blickenstaff
	Title:		President & CEO

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Appendices:

Appendix A	-	List of Patent Rights
Appendix B	-	List of [***] to be delivered by Scios
Appendix C	-	Specifications for BNP

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APPENDIX A

PATENT RIGHTS

I.[***]

ISSUED PATENTS:

Jurisdiction	Date Filed	Date Issued	Patent Number
[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]
[***]
[***]	[***]	[***]	[***]

PATENT APPLICATIONS:

Jurisdiction	Date Filed	Date Issued	Patent Number
[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]

II.[***]

PATENT APPLICATIONS:

Jurisdiction	Date Filed	Date Issued	Patent Number
[***]	[***]	[***]	[***]

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APPENDIX B

LIST OF [***] TO BE DELIVERED BY SCIOS

[***]

•	-	[***]
•	-	[***]
•	-	[***]

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APPENDIX C

SPECIFICATIONS FOR BNP

[***]

SOP	Test Procedure / Specification	Result
[***]	[***]	[***]
[***]	[***]	[***]
[***]	[***]	[***]
[***]	[***]	[***]
[***]	[***]	[***]
[***]	[***]	[***]

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EX-10.19

Exhibit 10.19

***Text omitted and filed separately

Confidential Treatment Requested

Under 17 C.F.R.§§ 200.80 (b) (4)

And 240.24b-2

FIRST AMENDMENT TO SEMI-EXCLUSIVE BNP DIAGNOSTIC AGREEMENT

between

BIOSITE DIAGNOSTICS INCORPORATED and SCIOS INC.

THIS FIRST AMENDMENT TO SEMI-EXCLUSIVE BNP DIAGNOSTIC AGREEMENT is entered into as of August 1, 1997 between BIOSITE DIAGNOSTICS INCORPORATED, a corporation organized under the laws of Delaware with its principal place of business at 11030 Roselle Street, San Diego, California 92121 (“Biosite”), and SCIOS INC., a corporation organized under the laws of Delaware with a principal place of business at 2450 Bayshore Parkway, Mountain View, California 94043 (“Scios”);

WHEREAS, Biosite and Scios entered into a Semi-Exclusive BNP Diagnostic Agreement having an effective date of December 30, 1996 (the “Agreement”); and

WHEREAS, Scios and Biosite wish to amend the Agreement;

NOW, THEREFORE, the Agreement is amended, effective August 1, 1997 (the “Effective Date of First Amendment”), as follows.

Section 2.4 of the Agreement shall be amended to read, in its entirety, as follows:

“2.4Additional Licenses. Scios reserves the right to grant the following additional licenses in the Territory under the Patent Rights and Know-how:

(a)Licenses allowing the manufacture, use, importation, offer for sale, or sale of the [***] in any country of the Territory other than the United States; and

(b)Up to two (2) licenses in addition to any licenses described in (a) above and the license granted to Biosite under this Agreement, to make, have made, use, sell, offer for sale and import Licensed Products in the Territory.

Any additional license granted under Section 2.4(b) may allow the licensee to [***] a [***] to [***] in each country of the Territory, provided that, in each

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country, the licensee [***] [***] Licensed Product in the [***],”

All other terms and conditions of the Agreement shall remain in full force and effect.

IN WITNESS WHEREOF, both Scios and Biosite have executed this First Agreement to Semi-Exclusive BNP Diagnostic Agreement, in duplicate originals, by their respective officers hereunto duly authorized, as of the Effective Date of First Amendment.

SCIOS INC.
By:	/s/ Robert Rosenkranz, Ph.D.
Name:					Robert Rosenkranz, Ph.D.
Title:			President and COO
BIOSITE DIAGNOSTICS INCORPORATED
By:	/s/ Kim D. Blickenstaff
Name:				Kim D. Blickenstaff
Title:		President

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EX-10.20

Exhibit 10.20

***Text omitted and filed separately

Confidential Treatment Requested

Under 17 C.F.R.§§ 200.80 (b) (4)

And 240.24b-2

AMENDMENT NO. 2 TO SEMI-EXCLUSIVE BNP DIAGNOSTIC LICENSE AGREEMENT

THIS AMENDMENT NO. 2 TO SEMI-EXCLUSIVE BNP DIAGNOSTIC LICENSE AGREEMENT (this “Amendment”), dated as of August 30, 2002 (the “Amendment Date”), is entered into between BIOSITE INCORPORATED, a Delaware corporation (“Biosite”), having a place of business located at 11030 Roselle Street, Suite D, San Diego, California 92121, and SCIOS INC., a Delaware corporation (“Scios”), having a place of business at 2450 Bay Shore Parkway, Mountain View, California 94043.

W I T N E S S E T H:

WHEREAS, the parties entered into a Semi-Exclusive BNP Diagnostic License effective as of December 30, 1996 (as amended, the “Agreement”).

WHEREAS, the parties desire to amend the Agreement in certain respects as set forth below, in order to clarify the parties mutual understanding regarding the calculation of milestones and royalties payable to Scios under the Agreement.

NOW, THEREFORE, in consideration of the foregoing premises and the mutual covenants set forth below, the parties amend the Agreement and agree as follows:

1.Amendments.

1.1Section 3.2 of the Agreement is amended to add the following sentence at the end thereof:

The parties acknowledge and agree that the payments described in each of subsections (a), (b) and (c) above shall be payable only once during the term of this Agreement, regardless of the number of Licensed Products developed or sold by Biosite.

1.2Section 3.4 of the Agreement is restated in its entirety to read as follows:

Royalties. Within [***] following the end of each calendar quarter during the term of this Agreement, Biosite shall pay to Scios earned royalties based on [***] of Licensed Products during the previous calendar quarter. If a Licensed Product [***] or [***] BNP and [***] or more other analytes in the sample biological material tested, then Net Sales, for purposes of royalty payments for such Licensed Product, shall be adjusted by multiplying the Net Sales of such Licensed Product by the fraction 1/X, where X equals [***]. Royalties shall be paid at the following rate, [***]:

(a) [***]	[***]%
(b) [***]	[***]%
(c) [***]	[***]%

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2.Miscellaneous.

2.1Defined Terms. All terms used, but not defined, herein shall have the respective meanings set forth in the Agreement.

2.2Continuing Effect. This Amendment shall be effective for all purposes as of the Amendment Date. Except as otherwise expressly modified by this Amendment, the Agreement shall remain in full force and effect in accordance with its terms.

2.3Governing Laws. This Amendment shall be governed by, interpreted and construed in accordance with the laws of the State of California, without regard to conflicts of law principles.

2.4Counterparts. This Amendment may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.

IN WITNESS WHEREOF, the parties have executed this Amendment effective as of the Amendment Date.

BIOSITE INCORPORATED
By	/s/ Chris R. Hibberd
			Chris R. Hibberd
Title		V.P. Business Development
SCIOS INC.
By	/s/ Matthew R. Hooper
			Matthew R. Hooper
Title		Vice President & General Counsel

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EX-10.21

Exhibit 10.21

*** Text omitted and filed separately

with the Securities and Exchange Commission

Confidential Treatment Requested

Under 17 C.F.R §§ 200.80 (b) (4)

And 240.24b-2

BNP ASSAY DEVELOPMENT, MANUFACTURE AND SUPPLY AGREEMENT

THIS BNP ASSAY DEVELOPMENT, MANUFACTURE AND SUPPLY AGREEMENT (this “Agreement”) effective as of June 24, 2003 (the “Effective Date”), is entered into by and between BIOSITE INCORPORATED, a Delaware corporation (“Biosite”), having a place of business at 11030 Roselle Street, Suite D, San Diego, California 92121, and BECKMAN COULTER, INC., a Delaware corporation (“Beckman”), having a place of business at 4300 N. Harbor Boulevard, Fullerton, California 92834-3100.

WHEREAS, Biosite owns or has rights relating to BNP (as defined below) and to reagents and methods useful in assaying levels of BNP in human biological materials.

WHEREAS, Beckman has expertise in the development and manufacture of automated laboratory immunoassay instrumentation and tests, and owns or has rights relating to a platform for the measurement of analytes in human biological materials.

WHEREAS, Biosite desires to engage Beckman to develop and manufacture for the benefit of Biosite, and to sell exclusively to Biosite (for resale by Biosite and Biosite’s authorized distributors), a test for use in the diagnosis of cardiac diseases in humans on the Beckman Analyzers (as defined below), on the terms and conditions of this Agreement.

WHEREAS, Beckman desires to accept such engagement on the terms and conditions of this Agreement.

NOW, THEREFORE, in consideration of the foregoing premises and the mutual covenants set forth below, the parties hereby agree as follows:

1.DEFINITIONS

For purposes of this Agreement, the terms defined in this Section 1 shall have the respective meanings set forth below:

1.1“Affiliate” shall mean, with respect to any Person, any other Person which directly or indirectly controls, is controlled by, or is under common control with, such Person. A Person shall be regarded as in control of another Person if it owns, or directly or indirectly controls, at least fifty percent (50%) of the voting stock or other ownership interest of the other Person, or if it directly or indirectly possesses the power to direct or cause the direction of the management and policies of the other Person by any means whatsoever.

1.2“Beckman Analyzers” shall mean any automated immunoassay (or combination chemistry/immunoassay) laboratory instruments capable of performing the measurement of analytes in human biological materials, together with all improvements

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and replacements thereto, that are developed and/or marketed by or on behalf of Beckman or its Affiliates.

1.3“Biosite Antibodies” shall mean the [***] antibodies binding to BNP that are described more specifically in the Design Inputs and/or specified under the provisions of Section 3.1 (Biosite Materials).

1.4“Biosite/Scios Agreement” shall mean the Semi-Exclusive BNP Diagnostic License Agreement between Biosite and Scios Inc. dated December 30, 1996 as amended or restated from time to time.

1.5“BNP” shall mean the human protein known as B-type natriuretic peptide.

1.6“BNP Assay” shall mean a diagnostic BNP assay for use in the diagnosis of cardiac diseases in humans [***] or [***] pursuant to this Agreement and the Design Inputs, which assay is designed for use on the Beckman Analyzers.

1.7“BNP Calibrator and Controls” shall mean the BNP calibrator and controls [***] or on [***] or [***] pursuant to this Agreement and the Design Inputs, which calibrator and controls are for use with the BNP Assay.

1.8“Clinical Plan” shall mean a plan and schedule for any external or internal evaluations to be carried out during validation and U.S. clinical trials for the purpose of regulatory approval.

1.9“Confidential Information” shall mean, with respect to a party, all information of any kind whatsoever, and all tangible and intangible embodiments thereof of any kind whatsoever, that is disclosed by such party to the other party and is marked as confidential at the time of disclosure to the other party or if not marked as confidential at the time of the initial disclosure is so marked and disclosed again to the other party within thirty (30) days of the initial disclosure. Biosite’s Confidential Information includes, without limitation, all non-public information relating to the Biosite Antibodies. Notwithstanding the foregoing, Confidential Information of a party shall not include information which the other party can establish by written documentation (a) to have been publicly known prior to disclosure of such information by the disclosing party to the other party, (b) to have become publicly known, without fault on the part of the other party, subsequent to disclosure of such information by the disclosing party to the other party, (c) to have been received by the other party at any time from a source, other than the disclosing party, rightfully having possession of and the right to disclose such information, (d) to have been otherwise known by the other party prior to disclosure of such information by the disclosing party to the other party, or (e) to have been independently developed by employees or agents or Affiliates of the other party without access to or use of such information disclosed by the disclosing party to the other party.

1.10“Design Inputs” shall mean the detailed product requirements, functional specifications and testing methodologies set forth in Exhibit A.

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1.11“FDA” shall mean the United States Food and Drug Administration or the successor thereto.

1.12“First Commercial Sale” shall mean the first sale anywhere in the world of a BNP Assay by Biosite or any Affiliate or authorized distributor of Biosite to customers who are not affiliates in any country after all applicable marketing and pricing approvals (if any) have been granted by the applicable governing health authority of such country. As used in this definition, “authorized distributor” includes [***] of Biosite in any country under the [***].

1.13“Foreign Purchase Price” means the price equal to (a) for the first Pricing Period, [***] per [***] of the BNP Assays, and (b) for each subsequent Pricing Period, the price per [***] of the BNP Assays for the previous Pricing Period adjusted (in accordance with Section 6.1.7) by the [***] or [***] of the [***] for the applicable Measurement Period as compared to the [***] for the immediately preceding Measurement Period.

1.14“GMP” shall mean current Good Manufacturing Practices as prescribed from time to time by the FDA.

1.15“Guidelines” shall mean the guidelines and requirements for the parties’ obligations regarding the [***] of BNP Assay and BNP Calibrator and Controls attached hereto as Exhibit B (as modified from time to time by the Joint Committee in accordance with Section 5.7).

1.16“Joint Committee” shall mean the joint committee described in Section 5.7.

1.17“Marker” shall mean (a) [***], with or without the [***] sequence, or (b) any [***] thereof (however derived), including without limitation the [***] commonly known as [***] and the [***] commonly known as [***].

1.18“Measurement Period” means, for the current Pricing Period, the most recent [***], prior to the date [***] before the start of the current Pricing Period, for which data (as determined by [***] or such other party mutually acceptable to the parties and agreed to in writing) is available for sales to [***] of assays [***] that measure or detect the presence or absence of the Marker. If the most recent such data provided by [***] (or such other party agreed to by the parties then providing such data) is only available for a period ending more than [***] prior to the start of the current Pricing Period, the parties shall agree upon a different, mutually acceptable party to provide such data or data substantially similar to that described in this Section.

1.19“Person” shall mean an individual, corporation, partnership, limited liability company, trust, business trust, association, joint stock company, joint

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venture, pool, syndicate, sole proprietorship, unincorporated organization, governmental authority or any other form of entity not specifically listed herein.

1.20“Pricing Period” means each [***] period ending on each [***] and [***] following the First Commercial Sale.

1.21“Product Risk Analysis” shall mean a formal risk assessment of BNP Assay, using failure modes and effects analysis (FMEA), risk analysis, or other approved tool.

1.22“Project” shall have the meaning as defined in Section 3.2.1.

1.23“Prototype Acceptance” shall have the meaning as defined in Section 3.3.

1.24“Prototypes” shall mean development prototypes of the BNP Assay and BNP Calibrator and Controls.

1.25“Release Specifications” shall mean the detailed product requirements, functional specifications and testing methodologies for the final BNP Assay or BNP Calibrator and Control, as such requirements, specifications and methodologies shall be developed by the parties in accordance with Section 3.5 and as may be modified from time to time upon mutual written agreement of the parties.

1.26“Technical Validation Report” shall mean a summary report for all testing conducted as part of the manufacturing validation plan, including pilot build results, demonstrating conformance of the Prototypes to the Design Inputs.

1.27“Technical Verification Report” shall mean a summary of all testing results conducted as part of a verification plan, including Prototype build results and conformance of the Prototypes to the Design Inputs.

1.28“US Purchase Price” means the price equal to (a) for the first Pricing Period, [***] [***] of the BNP Assays, and (b) for each subsequent Pricing Period, the price [***] [***] of the BNP Assays for the previous Pricing Period adjusted (in accordance with Section 6.1.7) by the [***] or [***] of the [***] for the applicable Measurement Period as compared to the [***] for the immediately preceding Measurement Period.

1.29“Validation Plan” shall mean a description of all validation activities, including manufacturing and materials plan for product pilot lots (number and scale of test lots), identified suppliers, testing methods (protocols and procedures), shipping conditions and specifications to confirm conformance of the Prototypes to Design Inputs.

1.30[***] shall mean, for any Measurement Period, and for [***] in [***] that measure or detect the presence or absence of

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the Marker sold during such Measurement Period to [***], the [***] (as determined by [***] or such other party mutually acceptable to the parties and agreed to in writing) of each such [***] by the [***] of such [***] to calculate a [***] [***] for all sales of [***].

1.31“Worldwide Purchase Price” shall mean, for the current Pricing Period commencing after the first anniversary of the First Commercial Sale, the amount (calculated in accordance with Section 6.1.7) equal to the sum of (a) the product of (i)  the [***] during the applicable Measurement Period of [***] of BNP Assays sold to [***] located within the [***] ([***]), divided by the [***] during the applicable Measurement Period of [***] of BNP Assays sold to [***] ([***]), times (ii) the US Purchase Price for the current Pricing Period, plus (b) the product of (i) [***] minus [***] ([***]), divided by [***], times (ii) the Foreign Purchase Price for the current Pricing Period. The foregoing calculation is set forth as a formula as follows:

Worldwide Purchase Price =

[***] x US Purchase Price

+

[***] x Foreign Purchase Price

2.REPRESENTATIONS AND WARRANTIES

Each party hereby represents and warrants to the other party as follows:

2.1Corporate Existence. Such party is a corporation duly organized, validly existing and in good standing under the laws of the state in which it is incorporated.

2.2Authorization and Enforcement of Obligations. Such party (a) has the corporate power and authority and the legal right to enter into this Agreement and to perform its obligations hereunder, and (b) has taken all necessary corporate action on its part to authorize the execution and delivery of this Agreement and the performance of its obligations hereunder. This Agreement has been duly executed and delivered on behalf of such party, and constitutes a legal, valid, binding obligation, enforceable against such party in accordance with its terms.

2.3Consents. All necessary consents, approvals and authorizations of all governmental authorities and other third parties required to be obtained by such party in connection with this Agreement have been obtained.

2.4No Conflict. The execution and delivery of this Agreement and the performance of such party’s obligations hereunder (a) do not conflict with or violate any requirement of applicable laws or regulations, and (b) do not conflict with, or to its knowledge constitute a default under, any contractual obligation of such party.

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3.DEVELOPMENT

3.1Biosite Materials. From time to time during the development and manufacture of the BNP Assay and the BNP Calibrator and Controls, Biosite shall deliver to Beckman such quantity of [***] as may be reasonably required by Beckman and ordered by Beckman under this Section, and any other materials the parties agree to in writing, if any, (the [***] and such other materials individually and collectively the “Biosite Materials”) solely for use by Beckman to [***]. Biosite shall acknowledge each such order in the form of a written order confirmation. Prior to delivery of any such Biosite Materials, the parties shall agree in good faith upon mutually acceptable terms regarding specifications and delivery schedules for such Biosite Materials. Biosite shall use commercially reasonable efforts to deliver to Beckman Biosite Materials that conform to such specifications and in accordance with such schedules. If Beckman determines in good faith that the Biosite Materials do not materially conform to such specifications, Beckman shall so notify Biosite in writing and include with such notification a reasonable description of such non-conformance. Subject to Section 10, as Beckman’s sole and exclusive remedy hereunder, Biosite shall use commercially reasonable efforts to promptly replace any such non-conforming Biosite Materials. Beckman shall use the Biosite Materials delivered by Biosite solely for purposes of [***] pursuant to the terms of this Agreement. In consideration for the sale of the Biosite Materials to Beckman under this Section 3.1, Beckman shall pay to Biosite an amount equal to [***] to [***] such [***]. Biosite shall invoice Beckman for such amount at the time of each delivery of such Biosite Materials, and Beckman shall pay to Biosite the amount of each such invoice within [***] after receipt by Beckman of such invoice. If Beckman’s obligation to perform under this Agreement is substantially prevented or materially hindered by Biosite’s failure to supply conforming Biosite Materials according to the delivery schedule for such Biosite Materials, Beckman shall have the right to provide written notice thereof to Biosite. Beckman’s future [***] to perform under this Agreement, and any other related obligations (including related indemnity obligations) affected by such failure, shall be suspended, relieved and/or discharged solely to the extent that and for so long as Beckman’s performance is or was substantially prevented or materially hindered by such failure. Except as required by Beckman quality systems, Beckman shall destroy all unused quantities of the Biosite Materials immediately upon the expiration or termination of this Agreement. [***] for [***] by Biosite [***] the Biosite Materials or any [***] of the [***] or the [***].

3.2[***]

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3.2.1Beckman shall use its reasonable commercial efforts to [***] the [***] and [***] in accordance with the Design Inputs (the “Project”) all under and according to Beckman’s [***] and [***] for other projects of similar scientific and commercial [***].

3.2.2Beckman shall perform the Project under the Beckman quality system as applied to other projects of similar scientific and commercial [***]. Beckman shall maintain its quality system such that the quality system meets and maintains regulatory approval and conformity assessment requirements. Beckman shall comply with all FDA regulatory and quality system requirements and all other U.S. and international regulatory and quality system requirements regarding [***] and [***], including but not limited to 21 CFR 820 and be certified as conforming to ISO 13485 and to the requirements of the In Vitro Diagnostic Directive or equivalent international standard.

3.2.3Other than as provided in Section 3.3, Beckman shall provide Project personnel, materials, equipment and other resources required under the Project at its own expense, without contribution or offset from Biosite.

3.3Biosite Assistance.

3.3.1Biosite shall provide reasonable assistance to Beckman in connection with the Project.

3.3.2Biosite shall provide to Beckman [***] for Beckman’s use during the Project, all at no cost to Beckman. Beckman shall use the [***] solely to conduct the Project and not for any other purpose. Beckman hereby acknowledges that, as between the parties, Biosite is the sole owner or licensee of the [***] and the transfer of physical possession thereof by Biosite to Beckman shall not be (nor construed as) a sale, lease, offer to sell or lease, or other transfer of title. The [***] are, and shall remain at all times, the personal property of Biosite, regardless of how they are or may become attached or installed. Beckman shall not transfer the [***] to any third party without the prior express written consent of Biosite. Beckman shall not damage or destroy the [***]. Upon the earlier of the expiration or termination of the Project or this Agreement, Beckman shall promptly return the [***] to Biosite. Beckman shall use [***] provided by Biosite, if any, solely in accordance with the [***] accompanying such [***]. If Beckman’s obligation to perform under this Agreement is substantially prevented or materially hindered by Biosite’s failure to supply [***], Beckman shall have the right to provide written notice thereof to Biosite. Beckman’s future [***] obligations to perform under this Agreement, and any other related obligations (including related indemnity obligations) affected by such failure, shall be suspended, relieved and/or discharged solely to the extent that and for so long as Beckman’s performance is or was substantially prevented or materially hindered by such failure.

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3.3.3BECKMAN ACKNOWLEDGES THAT THE [***] ARE PROVIDED “AS IS,” AND WITHOUT WARRANTY OF ANY KIND. BIOSITE MAKES NO REPRESENTATIONS OR WARRANTIES, EXPRESS OR IMPLIED, WITH RESPECT TO THE [***] OR THE USE THEREOF. BIOSITE DISCLAIMS ALL IMPLIED WARRANTIES, INCLUDING WITHOUT LIMITATION ANY WARRANTY OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE OR NONINFRINGEMENT. BECKMAN’S USE OF THE [***] SHALL BE AT ITS OWN RISK.

3.4Prototypes. Upon completion of the verification phase of the Project, Beckman shall deliver Prototypes and a Technical Verification Report, a Validation Plan, Technical Validation Report, and a Product Risk Analysis for the Project to Biosite for Biosite’s testing, evaluation, and acceptance or rejection. If Biosite rejects any such Prototype for failure to meet the Design Inputs, Biosite shall provide to Beckman a written report of the reasons for such rejection and Beckman shall have [***] to cure such non-conformance and redeliver to Biosite a replacement Prototype (BNP Assay and/or BNP Calibrator and Controls, as applicable). If Biosite rejects any resubmitted Prototype, Biosite shall again provide to Beckman a written report outlining the reasons for such rejection and Biosite may at its option, and as its sole and exclusive remedy under this Agreement, either (a) request that Beckman resubmit conforming Prototype (BNP Assay and/or BNP Calibrator and Controls, as applicable) at Beckman’s expense, or (b) terminate this Agreement in accordance with Section 9.2.2 below. For purposes of clarity, the parties acknowledge and agree that Biosite may reject a Prototype on the basis of (i) a non-conformance of the Prototype (BNP Assay and/or BNP Calibrator and Controls, as applicable) to a key Design Input (as reasonably designated by Biosite), or (ii) a material non-conformance of the Prototype (BNP Assay and/or BNP Calibrator and Controls, as applicable) to any other Design Input. Biosite shall indicate its acceptance of the Prototype (both BNP Assay and BNP Calibrator and Controls) and the Technical Validation Report (collectively “Prototype Acceptance”) by delivering to Beckman a written acceptance under this Section 3.4 (Prototypes).

3.5Release Specifications. With respect to each production lot of BNP Assay and BNP Calibrator and Control, upon Prototype Acceptance for such BNP Assay or BNP Calibrator and Control in accordance with Section 3.4 above, the parties shall agree in good faith upon a set of mutually acceptable Release Specifications for such BNP Assay or BNP Calibrator and Control.

3.6Clinical Plan. Promptly following the Effective Date, [***] shall [***] a Clinical Plan on [***].

3.7Clinical Testing; Regulatory Approval. Upon Prototype Acceptance, Biosite and Beckman shall conduct clinical testing in accordance to roles and responsibilities listed in the Clinical Plan, and each shall perform its respective obligations under the Clinical Plan at its own expense. Each party shall provide reasonable assistance to the other party at no cost to the other party in connection with the performance of the clinical testing. Biosite shall seek and use reasonable efforts to obtain

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regulatory approval as necessary to sell the BNP Assays and the BNP Calibrator and Controls in the United States and such other countries as Biosite reasonably determines. Biosite is responsible for paying all regulatory filing costs worldwide incurred by Biosite in connection with obtaining such regulatory approval. Biosite and Beckman shall provide the personnel, materials, equipment and other resources required to perform the clinical testing at their respective own expense. Biosite and Beckman shall perform such activities in accordance with their commercially reasonable efforts and standards, and in compliance in all material respects within the requirements of applicable laws and regulations.

3.8Design Input Changes. The Design Inputs may not be modified other than by a mutually acceptable written agreement executed by the parties.

4.MANUFACTURE

4.1Release Specifications. Upon Prototype Acceptance and once Biosite has obtained regulatory approval from the FDA or its foreign equivalent to sell the BNP Assay in the United States or other country, respectively, Beckman shall begin commercial manufacture of the BNP Assays and the BNP Calibrator and Controls on behalf of Biosite. Beckman shall manufacture the BNP Assays and the BNP Calibrator and Controls in strict conformance with the Release Specifications.

4.2GMP. Beckman shall manufacture all BNP Assays in accordance with GMP and all applicable laws and regulations. Biosite shall have the right, at its sole expense, to audit Beckman for compliance with GMP under the provisions of Section 4.5 (Facility Audits) below.

4.3Certificates of Analysis. Beckman shall provide certificates of analysis to Biosite for all BNP Assays manufactured and supplied hereunder based upon a reference standard established by Beckman and reasonably acceptable to Biosite.

4.4Quality Control Information. Upon the reasonable request of Biosite, Beckman shall provide Biosite with such information, including analytical and manufacturing documentation, requested by Biosite regarding quality control of the BNP Assays supplied under this Agreement. Biosite shall treat all such information disclosed pursuant to this Section 4.4 as confidential information of Beckman subject to the provisions of Section 7 (Confidentiality).

4.5Facility Audits. Biosite shall have the right, during normal business hours and upon reasonable notice, and not more than [***] per calendar year unless required or mandated by a governmental or regulatory authority, to audit the facilities of Beckman at which the BNP Assays are [***] (a) for compliance with GMP, (b) for compliance with all laws and regulations reasonably applicable to the [***] of the BNP Assay or BNP Calibrator and Controls, and/or (c) for compliance with the Release Specifications. To the extent reasonably possible to do so, Beckman shall give Biosite prior written notice of any FDA inspection of the facilities of Beckman at which the BNP Assays or BNP Calibrator and

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Controls are [***] but only to the extent that such inspection is related to the [***] of BNP Assays or BNP Calibrator and Controls. Beckman promptly shall provide Biosite with copies of all notices, correspondence, findings, responses, resolutions and other materials delivered to or received from the FDA regarding the BNP Assays or BNP Calibrator and Controls.

5.SUPPLY OF BNP ASSAYS, CALIBRATORS AND CONTROLS

5.1Requirements. Upon Prototype Acceptance and once Biosite has obtained regulatory approval from the FDA or its foreign equivalent to sell the BNP Assay in the United States or other country, respectively, Biosite shall purchase from Beckman, and Beckman shall physically transfer and sell to Biosite, [***] of the BNP Assays and the BNP Calibrator and Controls for sale and/or use directly by Biosite or indirectly by Biosite’s authorized distributors throughout the world.

5.2Exclusivity.

5.2.1Beckman shall manufacture, offer for sale, and sell the BNP Assays exclusively to Biosite, and shall not [***]. Beckman and Biosite acknowledge and agree that Beckman is not [***] of the BNP Assays and [***]. Biosite and Beckman acknowledge and agree that Biosite is not, by reason of this Agreement or otherwise, [***] of the Beckman Analyzers or any Beckman labeled assay, component, supply or spare part for use in the Beckman Analyzers or any other Beckman labeled product (other than BNP Assays or BNP Calibrator and Controls that the parties agree may bear a [***]).

5.2.2Prior to the date [***] following First Commercial Sale, Biosite shall not engage more than [***] unaffiliated third party (in addition to Beckman) to have manufactured for Biosite a diagnostic BNP assay for use in the diagnosis of cardiac diseases in humans developed by such third party designed for use on such third party’s automated immunoassay laboratory instrument. During such [***] period (a) if, and for so long as, Biosite purchases such BNP assays for resale in the U.S. from such unaffiliated third party at a purchase price [***] that is greater than [***] U.S. Purchase Price, then the purchase price [***] under Section 6.1.1 shall be increased to [***] for such BNP assay for resale in the U.S. from such unaffiliated third party, (b) if, and for so long as, Biosite purchases such BNP assays for resale outside the U.S. from such unaffiliated third party at a purchase price [***] that is greater than [***] Foreign Purchase Price, then the purchase price [***] under Section 6.1.2 shall be increased to such greater purchase price for such BNP assay for resale outside the U.S. from such unaffiliated third party, and (c) Biosite shall use commercially reasonable efforts to promote the BNP Assay.

5.2.3For a period commencing on the Effective Date and expiring [***] before the termination or expiration of the Biosite/Scios

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Agreement, (a) Beckman shall not research or develop, and shall cause its Affiliates not to research or develop, any assay for use in the diagnosis of cardiac diseases in humans that measures or detects the presence or absence of the Marker (other than BNP Assays sold to Biosite hereunder) and (b) Beckman shall not authorize or assist any third party (other than Biosite) to research or develop any assay for use in the diagnosis of cardiac diseases in humans that measures or detects the presence or absence of the Marker for use on an analyzer developed and/or marketed by Beckman or its Affiliates. As a further limitation, during the term of this Agreement (i) Beckman shall not manufacture or sell, and shall cause its Affiliates not to manufacture or sell, any assay for use in the diagnosis of cardiac diseases in humans that measures or detects the presence or absence of the Marker (other than BNP Assays sold to Biosite hereunder), and (ii) Beckman shall not authorize or assist any third party (other than Biosite) to manufacture or sell any assay for use in the diagnosis of cardiac diseases in humans that measures or detects the presence or absence of the Marker for use on an analyzer developed and/or marketed by Beckman or its Affiliates.

5.3Forecasts and Orders.

5.3.1Development Forecast. Within [***] after the Effective Date, Biosite shall prepare and provide Beckman with a written forecast of the estimated requirements for the BNP Assays and BNP Calibrator and Controls for Biosite’s [***] of commercial sale thereof. The forecast shall not be binding on either party and shall be used for creating plans and specifications during the development phase.

5.3.2Initial Forecast. Upon Prototype Acceptance, Biosite shall promptly prepare and provide Beckman with a written forecast of the estimated requirements for the BNP Assays and BNP Calibrator and Controls for each of the subsequent [***] (the “Initial Forecast”). The Initial Forecast shall specify Biosite’s good faith estimated requirements of BNP Assays to be sold or otherwise transferred to end user customers located within the U.S. or otherwise used or disposed of by Biosite, its Affiliates or authorized distributors within the U.S. and the estimated requirements of BNP Assays to be sold or otherwise transferred to end user customers located outside the U.S. or otherwise used or disposed of by Biosite, its Affiliates or authorized distributors outside the U.S.. The forecast shall [***] on [***] and shall [***].

5.3.3Revised Forecasts. Following delivery of the Initial Forecast in accordance with Section 5.3.2 above, Biosite shall, within [***] after the beginning of each [***] thereafter during the term of this Agreement, send Beckman a revised [***] forecast (a “Revised Forecast”) of the estimated requirements for the BNP Assays and BNP Calibrator and Controls and shall include Biosite’s good faith estimated requirements for the BNP Assays to be sold or otherwise transferred to end user customers located within the U.S. or otherwise used or disposed of by Biosite, its Affiliates or authorized distributors within the U.S. and the estimated requirements of BNP Assays to be sold or otherwise transferred to end user customers located outside the U.S. or otherwise used or disposed of by Biosite, its Affiliates or

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authorized distributors outside the U.S.. The Revised Forecasts shall [***] on [***] and shall [***].

5.3.4Purchase Orders. Biosite shall make all purchases of the BNP Assays and BNP Calibrator and Controls by submitting purchase orders to Beckman. Each such purchase order shall be in writing and shall specify the quantity of BNP Assays and BNP Calibrator and Controls ordered, for the quantity of BNP Assays ordered Biosite’s estimate of the portion of such quantity that will be sold or otherwise transferred to end user customers located within the U.S. or otherwise used or disposed of by Biosite, its Affiliates or authorized distributors within the U.S. and the remainder of such quantity shall be presumed as estimated to be sold or otherwise transferred to end user customers located outside the U.S. or otherwise used or disposed of by Biosite, its Affiliates or authorized distributors outside the U.S., the place of delivery and the required delivery date thereof. Biosite shall provide with the Initial Forecast a purchase order for the total quantity, if any, of the BNP Assays and BNP Calibrator and Controls specified for the first [***] of the Initial Forecast, provided that all deliveries in such initial purchase order are scheduled at least [***] after the date of the initial purchase order. Biosite shall include with each Revised Forecast a purchase order, if any, of BNP Assays and BNP Calibrators and Controls specified in the [***] of such Revised Forecast. Beckman shall acknowledge each purchase order in the form of a written order confirmation.

5.3.5Adjustments. If, with respect to any such forecast or purchase order, Biosite requests a quantity of BNP Assays greater or less than the amount set forth therein, Beckman shall use commercially reasonable efforts to increase or decrease production to accommodate such request.

5.3.6Acknowledgement. The parties acknowledge that neither party knows what the market for the BNP Assays and BNP Calibrator and Controls will be and, subject to the binding purchase orders under Section 5.3.4, Biosite makes no representations regarding the quantities of BNP Assays and BNP Calibrator and Controls that Biosite will purchase hereunder.

5.4Delivery and Acceptance.

5.4.1Delivery. Beckman shall ship the BNP Assays and BNP Calibrator and Controls [***] to [***] as designated by Biosite in its purchase order and, subject to Section 5.3.4, in accordance with the delivery schedule in such purchase order. Title and risk of loss and damages to the BNP Assays and BNP Calibrator and Controls purchased by Biosite hereunder shall pass to Biosite upon receipt by Biosite of the BNP Assays and BNP Calibrator and Controls at Biosite’s designated receiving point.

5.4.2Packaging, Labeling, Freight and Insurance. Beckman shall package the BNP Assays and BNP Calibrator and Controls into kit configurations mutually acceptable to the parties and in packaging [***] for assays, calibrators and controls for use on the Beckman Analyzers.

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Beckman shall label the BNP Assays and BNP Calibrator and Controls with such labels and including such Biosite tradenames and trademarks as reasonably determined by Biosite; provided, however, that Beckman may identify itself (as mutually agreed by the parties) on the label as the authorized manufacturer of the BNP Assays and BNP Calibrator and Controls. Beckman shall pay all freight, insurance charges, taxes, import and export duties, inspection fees and other charges applicable to the sale and transport of the BNP Assays and BNP Calibrator and Controls purchased by Biosite.

5.4.3Rejection and Cure. If a shipment of the BNP Assays or BNP Calibrator and Controls or any portion thereof is damaged or does not conform to the Release Specifications, then Biosite shall have the right to reject the portion of such shipment of the BNP Assays or BNP Calibrator and Controls that is damaged or fails to so conform within thirty (30) days after Biosite’s receipt of such shipment by providing written notice to Beckman and specifying in such notice the grounds for such rejection. Beckman shall, at its cost and expense, cure such rejection by replacing such damaged or non-conforming shipment or portion thereof with quantities of BNP Assays or BNP Calibrator and Controls (a) in Beckman’s current inventory within ten (10) business days after receipt of notice of Biosite’s rejection thereof, and/or (b) if Beckman does not have sufficient current inventory to replace such damaged or non-conforming shipment or portion thereof, by increasing its next production run sufficient to satisfy Biosite’s current orders and forecast and to replace such damaged or non-conforming shipment or portion thereof that was not replaced under clause (a) above. Beckman shall promptly investigate any such damaged or non-conforming shipment to determine the cause of such damage or nonconformance and shall provide Biosite with a reasonably detailed report of Beckman’s investigations and its remedies therefor.

5.5Warranty. Beckman warrants that all the BNP Assays and BNP Calibrator and Controls delivered to Biosite pursuant to this Agreement shall conform to the Release Specifications, shall be free from defects in material and workmanship and shall be manufactured in accordance with GMP and in compliance with applicable laws and regulations. Subject to Section 10, Biosite’s sole and exclusive remedy under this warranty is the rejection by Biosite and cure by Beckman under Section 5.4.3 above.

5.6[***] Beckman. The parties acknowledge that Beckman is the manufacturer [***] of the BNP Assays and BNP Calibrator and Controls, and the manufacturer and distributor of Beckman Analyzers. In such capacities, Beckman shall [***] for [***] of the [***] and [***] and Beckman shall have the express right to engage in the promotion of the Beckman Analyzer, all in accordance with the Guidelines. Beckman shall not conduct any activities directly or indirectly [***] [***] of the [***] and [***] except in accordance with the Guidelines. Notwithstanding anything to the contrary in this Agreement or the Guidelines, Biosite shall be solely responsible for the commercialization of the BNP Assays and BNP Calibrator and Controls.

5.7Joint Committee. The Joint Committee shall comprise an equal number of representatives from Biosite and Beckman. Each party shall appoint its

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representatives to the Joint Committee from time to time, and may substitute one or more of its representatives, in its sole discretion, effective upon written notice to the other party of such change. The purpose of the Joint Committee is to oversee and implement the Guidelines. No modification of the Guidelines, or implementation thereof, shall be effective unless and until unanimously approved by the Joint Committee and set forth in a written document evidencing such modification signed by a duly authorized signatory of each party.

6.PAYMENT TERMS

6.1Purchase Price.

6.1.1Subject to the provisions of Section 5.2.2, for units of BNP Assays purchased by Biosite from Beckman during a Pricing Period commencing prior to the first anniversary of the First Commercial Sale, within [***] after receiving a shipment of BNP Assays from Beckman, Biosite shall pay to Beckman a purchase price equal to the US Purchase Price for the portion of the quantity of such BNP Assays in such shipment that corresponds to Biosite’s estimate in its purchase order that would be sold or otherwise transferred to end user customers located within the U.S. or otherwise used or disposed of by Biosite, its Affiliates or authorized distributors within the U.S.. Biosite is not responsible for royalty payments (if any) owed by Beckman for the sale of such BNP Assays to Biosite or any subsequent resale.

6.1.2Subject to the provisions of Section 5.2.2, for units of BNP Assays purchased by Biosite from Beckman during a Pricing Period commencing prior to the first anniversary of the First Commercial Sale, within [***] after receiving a shipment of BNP Assays from Beckman, Biosite shall pay to Beckman a purchase price equal to the Foreign Purchase Price for the portion of the quantity of such BNP Assays in such shipment that corresponds to Biosite’s estimate in its purchase order that would be sold or otherwise transferred to end user customers located outside the U.S. or otherwise used or disposed of by Biosite, its Affiliates or authorized distributors outside the U.S.. [***] for [***] by Beckman [***] of such [***] to Biosite or any [***].

6.1.3Subject to the provisions of Section 5.2.2, for units of BNP Assays purchased by Biosite from Beckman during a Pricing Period commencing after the first anniversary of the First Commercial Sale, within [***] after receiving a shipment of BNP Assays from Beckman, Biosite shall pay to Beckman a purchase price equal to the Worldwide Purchase Price for the quantity of such BNP Assays in such shipment. [***] for [***] by Beckman [***] of such [***] to Biosite or any [***].

6.1.4In consideration for the sale of the BNP Calibrator and Controls to Biosite under Article 5, Biosite shall pay to Beckman an amount equal to the [***] to Beckman [***] and [***] such BNP Calibrator and Controls to Biosite. [***] for [***] by Beckman [***] of such [***] to Biosite or any [***].

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Beckman shall invoice Biosite for such amount at the time of each delivery of such BNP Calibrator and Controls, and Biosite shall pay to Beckman the amount of each such invoice within [***] after receipt by Biosite of such invoice.

6.1.5Prior to the first Pricing Period commencing after the first anniversary of the First Commercial Sale, within [***] after the end of each [***] beginning with the first [***] in which Biosite orders BNP Assays from Beckman hereunder, Biosite shall furnish to Beckman a written report setting forth for the previous [***] (i) the [***] sold or otherwise transferred to end user customers worldwide or otherwise used or disposed of by Biosite, its Affiliates or authorized distributors worldwide, (ii) whether each such [***] was sold or otherwise transferred to end user customers [***] or otherwise used or disposed of by Biosite, its Affiliates or authorized distributors [***], or sold or otherwise transferred to end user customers located [***] or otherwise used or disposed of by Biosite, its Affiliates or authorized distributors [***] (in each case to the extent such information is within Biosite’s reasonable control, provided that any [***] for which Biosite can not reasonably determine [***] such assay was sold or transferred or disposed of shall be presumed to be sold or otherwise transferred to end user customers [***] or otherwise used or disposed of by Biosite, its Affiliates or authorized distributors [***]), (iii) the portion of the quantities of [***] estimated in Biosite’s purchase orders that would be sold or otherwise transferred to end user customers located [***] or otherwise used or disposed of by Biosite, its Affiliates or authorized distributors [***] and the remainder presumed as estimated to be sold or otherwise disposed of [***], and (iv) the difference between what Biosite [***] Beckman on [***] during such [***] based on the estimated portions and what would otherwise [***] to Beckman based on portions during such [***]. If the result of clause (iv) above is an [***] to Beckman, then Biosite shall [***] to Beckman such [***] concurrently with making the report. If the result is an [***] to Biosite, then Biosite shall have the right to [***] against [***] then currently [***] Beckman hereunder, or if there are no such [***] currently [***] and/or after such [***] currently [***] have been fully [***] against [***] [***] Beckman hereunder until all such [***] Biosite are fully [***].

6.1.6Prior to the start of each Pricing Period following the First Commercial Sale, Biosite shall provide Beckman with a written report in such detail and with such supporting data that is reasonably satisfactory to Beckman setting forth the [***] of the [***], [***], and, commencing after the first anniversary of the First Commercial Sale, the [***] for such Pricing Period.

6.1.7Biosite shall calculate [***], [***] and [***] using such data and information as is within Biosite’s reasonable control at the time of such calculation and which is reasonably satisfactory to Beckman. Notwithstanding anything to the contrary in this Agreement, (a) neither the [***] nor [***] shall be [***]

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for any Pricing Period by more than [***] from the [***] or [***], as applicable, for the immediately preceding Pricing Period; (b) the [***] shall never be less than [***] of the BNP Assays; and (c) the [***] shall never be less than [***] of the BNP Assays.

6.2Taxes. Biosite shall pay all federal, state, county or municipal sales or use tax, excise or similar charge, or other tax assessment (other than that assessed against income), assessed or charged on the sale of the BNP Assays sold to and accepted by Biosite pursuant to this Agreement.

6.3Payment Method. All payments by a party to the other party under this Agreement shall be paid in United States dollars and made by check or bank wire transfer in immediately available funds to such account as the payee shall designate before such payment is due.

6.4BNP Assay Audits.

6.4.1Procedure. Upon the written request of Beckman and not more than once in each calendar year, Biosite shall permit an independent certified accounting firm of nationally recognized standing, selected by Beckman and reasonably acceptable to Biosite, at Beckman’s expense, to have access during normal business hours to such of the records of Biosite as may be reasonably necessary to verify the accuracy of the reports described in Section 6.1.5 for any year ending not more than thirty-six (36) months prior to the date of such request. The accounting firm shall disclose to Beckman only whether the reports are correct or not and the specific details concerning any discrepancies. No other information shall be shared.

6.4.2Results of Audit.

(a)If such accounting firm concludes that during a Pricing Period commencing prior to the first anniversary of the First Commercial Sale, quantities of BNP Assays were purchased at the Foreign Purchase Price but were sold or otherwise transferred to end user customers located within the U.S. or otherwise used or disposed of by Biosite, its Affiliates or authorized distributors within the U.S., or if such accounting firm is unable to reasonably determine where BNP Assays purchased at the Foreign Purchase Price were sold or transferred or disposed of, Biosite shall pay the difference between the applicable U.S. Purchase Price and Foreign Purchase Price for all such quantities [***] within[***] of the date Beckman delivers to Biosite such accounting firm’s written report so concluding.

(b)If such accounting firm concludes that during a Pricing Period commencing prior to the first anniversary of the First Commercial Sale, quantities of BNP Assays were purchased at the U.S. Purchase Price but were sold or otherwise transferred to end user customers located outside the U.S. or otherwise used or disposed of by Biosite, its Affiliates or authorized distributors outside the U.S., following

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the date of such accounting firm’s written report so concluding, Biosite shall have the right to offset such amount against amounts then currently due Beckman hereunder, or if there are no such amounts currently due and/or after such amounts currently due have been fully offset, against future amounts due Beckman hereunder until all such amounts described in such report are fully offset.

(c)If such accounting firm concludes that during a Pricing Period commencing after the first anniversary of the First Commercial Sale, additional amounts were owed by Biosite to Beckman due to the actual Worldwide Purchase Price being greater than the Worldwide Purchase Price Biosite provided to Beckman under Section 6.1.6 for such Pricing Period, Biosite shall pay such additional amounts [***] within [***] of the date Beckman delivers to Biosite such accounting firm’s written report so concluding.

(d)If such accounting firm concludes that during a Pricing Period commencing after the first anniversary of the First Commercial Sale, Biosite paid to Beckman amounts in excess of that owing to Beckman due to the actual Worldwide Purchase Price being less than the Worldwide Purchase Price Biosite provided to Beckman under Section 6.1.6 for such Pricing Period, following the date of such accounting firm’s written report so concluding, Biosite shall have the right to offset such amount against amounts then currently due Beckman hereunder, or if there are no such amounts currently due and/or after such amounts currently due have been fully offset, against future amounts due Beckman hereunder until all such amounts described in such report are fully offset.

(e)The fees charged by such accounting firm shall be paid by Beckman; provided, however, if the audit discloses that the aggregate amounts owing by Biosite to Beckman for BNP Assays purchased during the applicable Pricing Period are more than [***] of the aggregate invoiced amounts during such period, then Biosite shall pay the reasonable fees and expenses charged by such accounting firm.

6.4.3Information. Beckman shall treat all information subject to review under this Section 6.4 as confidential, and shall cause its accounting firm to retain all such information in confidence.

6.5Audits of Fully-Burdened Costs.

6.5.1Procedure. Upon the written request of a party (the “Payor”) and not more than once in each calendar year, the other party (the “Payee”) shall permit an independent certified accounting firm of nationally recognized standing, selected by the Payor and reasonably acceptable to the Payee, at the Payor’s expense, to have access during normal business hours to such of the records of the Payee as may be reasonably necessary to verify the accuracy of (a) with respect to Biosite as the Payee, the [***] of the Biosite Materials described in Section 3.1, and (b) with respect to Beckman as Payee, the [***] of the BNP Calibrator and Controls as described in Section 6.1.4 for any year ending not more than

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thirty-six (36) months prior to the date of such request. The accounting firm shall disclose to the Payor only whether the amounts invoiced by the Payor for [***] are correct or not and the specific details concerning any discrepancies. No other information shall be shared.

6.5.2Results of Audit. If such accounting firm concludes that during the audited period the Payee invoiced the Payor amounts greater than the applicable [***], the Payee shall refund to the Payor the difference between the amounts actually received by Payee and the applicable reasonable fully-burdened cost within [***] of the date the Payor delivers to the Payee such accounting firm’s written report so concluding. The fees charged by such accounting firm shall be paid by the Payor; provided, however, if the audit discloses that such difference payable by the Payee for such period are more than [***] of the amounts actually paid by the Payor for such period, then the Payee shall pay the reasonable fees and expenses charged by such accounting firm.

6.5.3Information. The Payor shall treat all financial information subject to review under this Section 6.5.3 as confidential, and shall cause its accounting firm to retain all such financial information in confidence.

7.CONFIDENTIALITY

7.1Confidential Information.

7.1.1Each party shall maintain in confidence all Confidential Information disclosed by the other party (including all Confidential Information disclosed prior to the term of this Agreement pursuant to a written confidentiality agreement between the parties), and shall not use, disclose or grant the use of the Confidential Information except on a need-to-know basis to those directors, officers, employees, consultants, distributors or permitted assignees, to the extent such disclosure is reasonably necessary in connection with such party’s activities as expressly authorized by this Agreement.

7.1.2Without limiting the generality of Section 7.1.1, and except to the extent authorized hereunder, Beckman shall not use Biosite’s Confidential Information for the purpose of researching, developing, manufacturing or commercializing an assay that measures or detects the presence or absence of the Marker (other than BNP Assays sold Biosite hereunder). For purposes of clarity, [***] [***] and [***] information developed by Beckman in the course of the [***] the BNP Assays and BNP Calibrator and Controls in accordance with the terms of this Agreement and that [***] to [***] for [***] shall not be considered Biosite’s Confidential Information after the expiration or termination of this Agreement.

7.1.3To the extent that disclosure is authorized by this Agreement, prior to disclosure, each party hereto shall obtain agreement of any such third party to hold in confidence and not make use of the Confidential Information of the other

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party for any purpose other than those permitted by this Agreement. Each party shall notify the other promptly upon discovery of any unauthorized use or disclosure of the other party’s Confidential Information.

7.2Terms of this Agreement. Except as otherwise provided in Section 7.1 (Confidential Information), during the term of this Agreement and for a period of five (5) years thereafter, neither party shall disclose any terms or conditions of this Agreement to any third party without the prior consent of the other party. Notwithstanding the foregoing, prior to execution of this Agreement, the parties have agreed in writing upon the substance of information that can be used to describe the terms of this transaction, and each party may disclose such information, as modified by mutual agreement from time to time, without the other party’s consent.

7.3Permitted Disclosures. The confidentiality obligations contained in this Section 7 shall not apply to the extent that such disclosure is reasonably necessary in the following instances: (a) complying with an applicable law, regulation of a governmental agency or a court of competent jurisdiction, provided that the receiving party shall first give notice thereof to the disclosing party such that the disclosing party shall have an opportunity to seek a protective order limiting any such disclosure; and (b) disclosure to investment bankers, investors and potential investors, each of whom prior to disclosure must be bound by similar obligations of confidentiality and non-use at least equivalent in scope to those set forth in this Section 7 and further provided in each case that the disclosing party shall provide written notice thereof to the other party and reasonable opportunity to object to any such disclosure or to request confidential treatment thereof.

8.INTELLECTUAL PROPERTY RIGHTS. Under no circumstances shall a party, as a result of this Agreement, obtain any ownership interest or other right in any invention, discovery, composition or other technology, or in any patent right or other intellectual property right, of the other party (including without limitation those owned, controlled or developed by the other party at any time pursuant to this Agreement).

9.TERM AND TERMINATION

9.1Term. The term of this Agreement shall commence on the Effective Date, and unless earlier terminated in accordance with its terms, shall terminate upon the termination or expiration of the Biosite/Scios Agreement.

9.2Termination.

9.2.1A party may terminate this Agreement by written notice to the other party upon or after the breach of any material provision of this Agreement by the other party, if the other party has not cured such breach within [***] after written notice thereof from the non-breaching party.

9.2.2A party may terminate this Agreement by written notice to the other party if, after good faith negotiations in accordance with Section 3.5, the parties

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are unable to reach agreement upon a mutually acceptable set of Release Specifications for a BNP Assay or BNP Calibrator and Control, and the parties have not reached agreement upon a mutually acceptable set of Release Specifications within [***] days after such written notice.

9.2.3Biosite may immediately terminate this Agreement by written notice to Beckman (a) upon or after a breach by Beckman of Sections 5.2.3 or 7.1.2, (b) if within [***] following the Effective Date, [***] is [***] to, or [***], [***] the BNP Assays in accordance with the Design Inputs, or (c) if at any time [***] of the BNP Assay in accordance with the Release Specifications Beckman is unable to manufacture or have manufactured and sell to Biosite quantities of the BNP Assay sufficient to meet the reasonably foreseeable demand therefor.

9.2.4The parties acknowledge that neither party knows if additional third party intellectual property rights must be obtained for the [***], [***] and [***] of the BNP Assay or BNP Calibrator and Controls hereunder. Either party (the “Terminating Party”) may terminate this Agreement by written notice to the other party if (a) a [***] or [***] is [***] the Terminating Party [***] that the [***] in accordance with, or [***] of, this Agreement [***] to any [***] in such [***], (b) the Terminating Party [***] from a [***] [***] that the [***] in accordance with, or [***] [***] of, this Agreement may [***] to any [***] or [***] and the Terminating Party’s [***] has [***], [***], that in its [***] such [***] appears to be [***] by such [***], or (c) whether or not there is a [***] or [***] described in clause (a), or the Terminating Party has [***] described in clause (b), the Terminating Party becomes aware of [***] that the Terminating Party [***] in [***], and based on the [***] of [***], must be [***] by [***] of the [***] for the [***] and [***] of the BNP Assay or BNP Calibrator and Controls hereunder; provided however that any such written notice shall not be given earlier than [***] after representatives of the executive management of both parties meet in good faith to assess any such event described in clauses (a) – (c) above and attempt in good faith to reach an agreement relative to an appropriate response thereto, and any such meeting shall be held not less than [***] after the Terminating Party’s request to the other party for such meeting.

9.3Effect of Termination. All rights and obligations under this Agreement shall terminate immediately upon any termination of this Agreement. Notwithstanding the foregoing, the following sections shall survive any termination of this Agreement:  Sections 5.4.3 (Rejection and Cure), 5.5 (Warranty), 7 (Confidentiality), 8 (Intellectual Property Rights), 9.3 (Effect of Termination), 10 (Indemnity), 11 (Limitation of Liability) and 12 (Miscellaneous).

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10.INDEMNITY

10.1Indemnity.

10.1.1By Biosite. Biosite shall defend, indemnify and hold Beckman harmless from and against all losses, liabilities, damages and expenses (including reasonable attorneys’ fees and costs) resulting from all claims, demands, actions and other proceedings by any third party to the extent arising from (a) the breach of any representation, warranty or covenant of Biosite under this Agreement, or (b) the gross negligence or willful misconduct of Biosite in the performance of its obligations under this Agreement.

10.1.2By Beckman. Beckman shall defend, indemnify and hold Biosite harmless from and against all losses, liabilities, damages and expenses (including reasonable attorneys’ fees and costs) resulting from all claims, demands, actions and other proceedings by any third party to the extent arising from (a) the breach of any representation, warranty or covenant of Beckman under this Agreement, or (b) the gross negligence or willful misconduct of Beckman in the performance of its obligations under this Agreement.

10.2Procedure. A party (the “Indemnitee”) that intends to claim indemnification under this Section 10 shall promptly notify the other party (the “Indemnitor”) of any claim, demand, action or other proceeding for which the Indemnitee intends to claim such indemnification. The Indemnitor shall have the right to assume and control the defense thereof with counsel selected by the Indemnitor; provided, however, that the Indemnitee shall have the right to retain its own counsel to participate in the defense, subject to Indemnitor’s right to control the defense. The indemnity obligations under this Section 10 shall not apply to amounts paid in settlement of any claim, demand, action or other proceeding if such settlement is effected without the prior express written consent of the Indemnitor, which consent shall not be unreasonably withheld or delayed. The failure to deliver notice to the Indemnitor within a reasonable time after notice of any such claim or demand, or the commencement of any such action or other proceeding, if prejudicial to its ability to defend such claim, demand, action or other proceeding, shall relieve such Indemnitor of any liability to the Indemnitee under this Section 10 with respect thereto, but the omission so to deliver notice to the Indemnitor shall not relieve it of any liability that it may have to the Indemnitee otherwise than under this Section 10. The Indemnitor may not settle or otherwise consent to an adverse judgment in any such claim, demand, action or other proceeding, that diminishes the rights or interests of the Indemnitee without the prior express written consent of the Indemnitee, which consent shall not be unreasonably withheld or delayed. The Indemnitee, its employees and agents, shall reasonably cooperate with the Indemnitor and its legal representatives in the investigation of any claim, demand, action or other proceeding covered by this Section 10.

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11.LIMITATION OF LIABILITY. EXCEPT FOR A PARTY’S INDEMNITY OBLIGATIONS UNDER THIS AGREEMENT AND EXCEPT FOR A BREACH OF SECTION 7 (CONFIDENTIALITY), IN NO EVENT SHALL EITHER PARTY BE LIABLE OR OBLIGATED TO THE OTHER PARTY IN ANY MANNER FOR ANY SPECIAL, NON-COMPENSATORY, CONSEQUENTIAL, INDIRECT, INCIDENTAL, STATUTORY OR PUNITIVE DAMAGES OF ANY KIND, INCLUDING, WITHOUT LIMITATION, LOST PROFITS AND LOST REVENUE, REGARDLESS OF THE FORM OF ACTION, WHETHER IN CONTRACT, TORT, NEGLIGENCE, STRICT PRODUCT LIABILITY, OR OTHERWISE, EVEN IF INFORMED OF OR AWARE OF THE POSSIBILITY OF ANY SUCH DAMAGES IN ADVANCE. THE LIMITATIONS SET FORTH ABOVE SHALL BE DEEMED TO APPLY TO THE MAXIMUM EXTENT PERMITTED BY APPLICABLE LAW AND NOTWITHSTANDING THE FAILURE OF THE ESSENTIAL PURPOSE OF ANY LIMITED REMEDIES. THE PARTIES ACKNOWLEDGE AND AGREE THAT THEY HAVE FULLY CONSIDERED THE FOREGOING ALLOCATION OF RISK AND FIND IT REASONABLE, AND THAT THE FOREGOING LIMITATIONS ARE AN ESSENTIAL BASIS OF THE BARGAIN BETWEEN THE PARTIES.

12.MISCELLANEOUS

12.1Notices. Any consent, notice or report required or permitted to be given or made under this Agreement by one of the parties to the other shall be in writing and addressed to such other party at its address indicated below, or to such other address as the addressee shall have last furnished in writing to the addressor, and shall be effective upon receipt by the addressee.

If to Biosite:	Biosite Incorporated
	11030 Roselle Street, Suite D
	San Diego, California 92121
	Attention: President
with a copy to:	Gray Cary Ware & Freidenrich LLP
	4365 Executive Drive, Suite 1100
	San Diego, California 92121
	Attention: Mark R. Wicker, Esq.
If to Beckman:	Beckman Coulter, Inc.
	Clinical Diagnostics Division
	200 South Kraemer Boulevard
	Brea, California 92821
	Attention: President

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with a copy to:	Beckman Coulter, Inc.
	4300 N. Harbor Boulevard
	Fullerton, California 92834-3100
	Attention: General Counsel

12.2Assignment. Except as otherwise expressly provided under this Agreement, neither this Agreement nor any right or obligation hereunder may be assigned or otherwise transferred (whether voluntarily, by operation of law or otherwise), without the prior express written consent of the other party; provided, however, that either party may, without such consent, assign this Agreement and its rights and obligations hereunder in connection with the transfer or sale of all or substantially all of its business related to the subject matter of this Agreement, or in the event of its merger, consolidation, change in control or other similar transaction. Any permitted assignee shall assume all obligations of its assignor under this Agreement. Any purported assignment or transfer in violation of this Section 12.2 shall be void.

12.3Applicable Law. This Agreement shall be governed by and construed in accordance with the laws of the State of California, without regard to the conflicts of law principles thereof. The parties hereby submit to the exclusive jurisdiction of, and venue in, the state and federal courts located in San Diego County, California.

12.4No Subcontracting. Beckman shall not subcontract any portion of the manufacture of the BNP Assays without the prior express written consent of Biosite.

12.5Construction. This Agreement will be fairly interpreted in accordance with its terms and without any strict construction in favor of or against any party.

12.6Severability. Whenever possible, each provision of this Agreement, shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement is held to be prohibited by or invalid under applicable law, such provision shall be ineffective only to the extent of such prohibition or invalidity, without invalidating the remainder of such provisions or the remaining provisions of this Agreement.

12.7Counterparts. This Agreement may be executed in counterparts, all of which together shall constitute one and the same instrument.

12.8Headings. The captions to the sections hereof are not a part of this Agreement, but are merely guides or labels to assist in locating and reading the sections hereof.

12.9Independent Contractors. Each party hereby acknowledges that the parties shall be independent contractors and that the relationship between the parties shall not constitute a partnership, joint venture or agency. Neither party shall have the authority to make any statements, representations or commitments of any kind, or to take

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any action, which shall be binding on the other party, without the prior consent of the other party to do so.

12.10Waiver. The waiver by a party of any right hereunder, or of any failure to perform or breach by the other party hereunder, shall not be deemed a waiver of any other right hereunder or of any other breach or failure by the other party hereunder whether of a similar nature or otherwise.

12.11Entire Agreement. This Agreement contains the entire understanding of the parties with respect to the subject matter hereof. All express or implied representations, agreements and understandings with respect to the subject matter hereof, either oral or written, heretofore made are expressly superseded by this Agreement. This Agreement may be amended, or any term hereof modified, only by a written instrument duly executed by both parties.

IN WITNESS WHEREOF, the parties have executed this Agreement as of the Effective Date.

BIOSITE INCORPORATED
By:	/s/ Chris Twomey
Title		V.P Finance, CFO
BECKMAN COULTER, INC.
By:	G. R. Bell
Title		V.P. Strategy & Business
		Development

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EXHIBIT A

Design Inputs

Design CharacteristicClinical Utility

Requirement[***]

Design Category, Attribute or	Customer Inputs (Note customer	Other Considerations		Design Input Goals
Characteristic	type & sources)	(Note sources)	Verification Methods	Min. Essential	Target
[***]	[***]	[***]	[***]	[***]	[***]

Design CharacteristicAntibodies

Requirement[***]

Design CharacteristicStandards and Regulatory Requirements

Requirement[***]

Design Category, Attribute or	Customer Inputs (Note customer	Other Considerations		Design Input Goals
Characteristic	type & sources)	(Note sources)	Verification Methods	Min. Essential	Target
[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	•[***]	•[***]
			•[***]	•[***]

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Design CharacteristicAssay Attributes

Validation Method[***]

Design Category, Attribute or	Customer Inputs (Note customer	Other Considerations		Design Input Goals
Characteristic	type & sources)	(Note sources)	Verification Methods	Min. Essential	Target
[***]	[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]	[***]
[***]	•[***]	•[***]	[***]	[***]	[***]
	•[***]	•[***]			•[***]
	•[***]	•[***]			•[***]

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Design CharacteristicCalibration

Requirement[***]

Design Category, Attribute or	Customer Inputs (Note customer	Other Considerations		Design Input Goals
Characteristic	type & sources)	(Note sources)	Verification Methods	Min. Essential	Target
[***]	[***]	N/A	[***]	[***]	[***]
[***]	N/A	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	TBD	TBD

***Confidential Treatment Requested

27

Design CharacteristicAssay Performance

Validation Method[***]

Design Category, Attribute or	Customer Inputs (Note customer	Other Considerations		Design Input Goals
Characteristic	type & sources)	(Note sources)	Verification Methods	Min. Essential	Target
[***]	[***]	[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]	[***]	[***]
[***]	•[***]	•[***]	[***]	•[***]	•[***]
	•[***]	•[***]		•[***]	•[***]
		•[***]
[***]	[***]	[***]	[***]	[***]	[***]
[***]
[***]
[***]	[***]	•[***]	[***]	•[***]	•[***]
		•[***]		•[***]	•[***]

***Confidential Treatment Requested

28

Design CharacteristicComponent Stability

Validation Method[***]

Design Category, Attribute or	Customer Inputs (Note customer	Other Considerations		Design Input Goals
Characteristic	type & sources)	(Note sources)	Verification Methods	Min. Essential	Target
[***]
[***]	[***]	N/A	[***]	[***]
[***]	[***]	•[***]	[***]	[***]	[***]
		•[***]
[***]
[***]	[***]	•[***]	[***]	[***]	[***]
		•[***]
[***]	[***]	•[***]	[***]	[***]	[***]
		•[***]

***Confidential Treatment Requested

29

EXHIBIT B

Guidelines

1.[***]

1.1[***]

1.2[***]

1.3[***]

2.[***]

2.1[***]

2.2[***]

3.[***]

3.1[***]

***Confidential Treatment Requested

30

3.2[***]

3.3[***]

3.4[***]

3.5[***]

4.[***]

4.1[***]

4.2[***]

4.3[***]

4.4[***]

4.5[***]

4.6[***]

4.7[***]

4.8[***]

4.9[***]

***Confidential Treatment Requested

31

4.10[***]

5.[***]

5.1[***]

5.2[***]

5.3[***]

5.4[***]

***Confidential Treatment Requested

32

EX-21.1

EXHIBIT 21.1

Subsidiaries of Biosite Incorporated

Subsidiary corporation	Place of incorporation
Biosite GmbH	Germany
Biosite France S.A.S.	France
Biosite Ltd	United Kingdom
Biosite BVBA	Belgium
Biosite S.r.l.	Italy
Biosite B.V.	Netherlands
Biosite sarl	Switzerland

EX-23.1

EXHIBIT 23.1

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We consent to the incorporation by reference in the Registration Statements on Forms S-8 Nos. 333-129670, 333-116904, 333-111075, 333-106565, 333-101477, 333-91200, 333-63682, 333-63684, 333-83429, 333-59701, 333-59705, 333-26763, 333-21537 and our reports dated March 13, 2006, with respect to: (1) the consolidated financial statements and schedule of Biosite Incorporated, and (2) Biosite Incorporated management’s assessment of the effectiveness of internal control over financial reporting and the effectiveness of internal control over financial reporting of Biosite Incorporated included in the Annual Report (Form 10-K) for the year ended December 31, 2005.

	/s/ Ernst & Young LLP
San Diego, California
March 13, 2006

EX-31.1

EXHIBIT 31.1

BIOSITE INCORPORATED

CHIEF EXECUTIVE OFFICER CERTIFICATIONS

I, Kim D. Blickenstaff, certify that:

1. I have reviewed this report on Form 10-K of Biosite Incorporated;

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 we 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 principles;

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 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 most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) 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 the registrant’s board of directors (or persons performing the equivalent functions):

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 14, 2006
	/s/ Kim D. Blickenstaff
	Kim D. Blickenstaff
	Chairman of the Board and
	Chief Executive Officer

EX-31.2

EXHIBIT 31.2

BIOSITE INCORPORATED

CHIEF FINANCIAL OFFICER CERTIFICATIONS

I, Christopher J. Twomey, certify that:

1. I have reviewed this report on Form 10-K of Biosite Incorporated;

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 we 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 principles;

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 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 most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) 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 the registrant’s board of directors (or persons performing the equivalent functions):

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 14, 2006
	/s/ Christopher J. Twomey
	Christopher J. Twomey
	Senior Vice President, Finance,
	Chief Financial Officer and Secretary

EX-32.1

EXHIBIT 32.1

CERTIFICATION PURSUANT TO

SECTION 1350 OF CHAPTER 63 OF 18 U.S.C.

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of Biosite Incorporated (the “Company”) on Form 10-K for the year ending December 31, 2005 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Kim D. Blickenstaff, Chief Executive Officer of the Company, certify pursuant to Rule 13a-14(b) or Rule 15d-14(b) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and § 1350 of Chapter 63 of 18 U.S.C., as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:

(1)The Report fully complies with the requirements of section 13(a) or 15(d) of the Exchange Act; and

(2)The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company for the period covered by the Report.

/s/ Kim D. Blickenstaff

Kim D. Blickenstaff

Chief Executive Officer

March 14, 2006

A signed original of this written statement required by Section 906 has been provided to Biosite Incorporated and will be retained by Biosite Incorporated and furnished to the Securities and Exchange Commission or its staff upon request.

This certification accompanies this Report pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not, except to the extent required by the Sarbanes-Oxley Act of 2002, be deemed filed by the Company for purposes of Section 18 of the Exchange Act, or deemed to be incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act, except to the extent that the Company specifically incorporates it by reference.

EX-32.2

EXHIBIT 32.2

CERTIFICATION PURSUANT TO

SECTION 1350 OF CHAPTER 63 OF 18 U.S.C.

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of Biosite Incorporated (the “Company”) on Form 10-K for the year ending December 31, 2005 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Christopher J. Twomey, Chief Financial Officer of the Company, certify pursuant to Rule 13a-14(b) or Rule 15d-14(b) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and § 1350 of Chapter 63 of 18 U.S.C., as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:

(1)The Report fully complies with the requirements of section 13(a) or 15(d) of the Exchange Act; and

(2)The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company for the period covered by the Report.

/s/ Christopher J. Twomey

Christopher J. Twomey

Chief Financial Officer

March 14, 2006

A signed original of this written statement required by Section 906 has been provided to Biosite Incorporated and will be retained by Biosite Incorporated and furnished to the Securities and Exchange Commission or its staff upon request.

This certification accompanies this Report pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not, except to the extent required by the Sarbanes-Oxley Act of 2002, be deemed filed by the Company for purposes of Section 18 of the Exchange Act, or deemed to be incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act, except to the extent that the Company specifically incorporates it by reference.