10-Q

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

(Mark One)
ý	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2003
OR
o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from               to
Commission file number 000-21873

BIOSITE INCORPORATED

(Exact name of Registrant as specified in its charter)

Delaware	33-0288606
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
11030 Roselle Street San Diego, California 92121
(Address of principal executive offices)
Registrant’s telephone number, including area code: (858) 455-4808

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 whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).  Yes  ý      No  o

The number of shares of the Registrant’s Common Stock, $0.01 par value, outstanding at July 25, 2003 was 15,480,084.

BIOSITE INCORPORATED

FORM 10-Q

INDEX

Biosite® and Triage® are registered trademarks of Biosite Incorporated.  New Dimensions in Diagnosis ™, Cardio ProfilER™ and the Company’s logos are trademarks of Biosite Incorporated.

i

Part I.Financial Information

ITEM 1.FINANCIAL STATEMENTS

BIOSITE INCORPORATED

Condensed Balance Sheets

(in thousands, except par value)

	June 30, 2003		December 31, 2002
	(Unaudited)		(Note)
Assets
Current assets:
Cash and cash equivalents	$	21,205	$	19,113
Marketable securities, available-for-sale	35,376		51,783
Accounts receivable, net	12,331		10,996
Inventories, net	24,196		12,295
Other current assets	8,356		4,574
Total current assets	101,464		98,761
Property, plant and equipment, net	48,894		19,864
Patents and license rights, net	7,211		7,899
Other assets	6,141		4,730
	$	163,710	$	131,254
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable	$	5,130	$	3,789
Accrued employee expenses	6,756		6,992
Income taxes and other current liabilities	3,878		5,055
Current portion of long-term obligations	3,239		2,224
Total current liabilities	19,003		18,060
Long-term obligations	9,899		5,253
Commitments and contingencies
Stockholders’ equity:
Preferred stock, $.01 par value, 5,000 shares authorized, none issued and outstanding at June 30, 2003 and December 31, 2002	—		—
Common stock, $.01 par value, 40,000 shares authorized; 15,411 and 14,895 shares issued and outstanding at June 30, 2003 and December 31, 2002, respectively	154		149
Additional paid-in capital	93,369		79,544
Unrealized net gain on marketable securities, net of related tax effect	253		385
Retained earnings	41,032		27,863
Total stockholders’ equity	134,808		107,941
	$	163,710	$	131,254

Note:The balance sheet at December 31, 2002 has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements.

See accompanying notes.

1

BIOSITE INCORPORATED

Condensed Statements of Income (Unaudited)

(in thousands, except per share amounts)

	Three months ended June 30,						Six months ended June 30,
	2003			2002			2003			2002
Revenues:
Product sales	$	43,776		$	23,117		$	82,871		$	40,911
Contract revenue	922			1,838			1,768			2,692
Total revenues	44,698			24,955			84,639			43,603
Operating expenses:
Cost of product sales	13,638			7,107			27,472			12,754
Selling, general and administrative	13,563			7,844			25,003			13,903
Research and development	6,256			3,820			11,470			7,358
License and patent disputes	—			1,498			—			2,815
Total operating expenses	33,457			20,269			63,945			36,830
Operating income	11,241			4,686			20,694			6,773
Interest and other income, net	531			496			841			1,021
Income before provision for income taxes	11,772			5,182			21,535			7,794
Provision for income taxes	(4,570		)	(2,058		)	(8,367		)	(3,036		)
Net income	$	7,202		$	3,124		$	13,168		$	4,758
Net income per share:
• Basic	$	0.47		$	0.21		$	0.87		$	0.32
• Diluted	$	0.43		$	0.20		$	0.80		$	0.31
Shares used in calculating per share amounts:
• Basic	15,172			14,701			15,050			14,686
• Diluted	16,694			15,570			16,412			15,408

See accompanying notes.

2

BIOSITE INCORPORATED

Condensed Statements of Cash Flows (Unaudited)

(in thousands)

	Six Months Ended June 30,
	2003			2002
OPERATING ACTIVITIES
Net income	$	13,168		$	4,758
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	4,635			2,150
Changes in operating assets and liabilities:
Accounts receivable	(1,335		)	221
Inventory	(11,900		)	(1,738		)
Other current assets	(311		)	(263		)
Income taxes	(519		)	1,650
Accounts payable	1,342			(269		)
Other current liabilities	737			2,262
Net cash provided by operating activities	5,817			8,771
INVESTING ACTIVITIES
Proceeds from sales and maturities of marketable securities	31,548			9,928
Purchase of marketable securities	(15,360		)	(15,480		)
Purchase of property, equipment and leasehold improvements	(32,288		)	(3,321		)
Patents, license rights, deposits and other assets	(1,821		)	(904		)
Net cash used in investing activities	(17,921		)	(9,777		)
FINANCING ACTIVITIES
Proceeds from issuance of financing obligations	6,375			2,824
Principal payments under financing obligations	(715		)	(1,179		)
Proceeds from issuance of stock under stock plans, net	8,536			1,304
Net cash provided by financing activities	14,196			2,949
Increase in cash and cash equivalents	2,092			1,943
Cash and cash equivalents at beginning of period	19,113			13,011
Cash and cash equivalents at end of period	$	21,205		$	14,954
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Interest paid	$	254		$	220
Income taxes paid	$	8,886		$	1,386
Income tax benefit of disqualifying dispositions of stock	$	5,283		$	135

See accompanying notes.

3

BIOSITE INCORPORATED

Notes to Condensed Financial Statements (Unaudited)

1.BASIS OF PRESENTATION

The accompanying unaudited condensed financial statements have been prepared in accordance with both generally accepted accounting principles for interim financial information, and the instructions to Form 10-Q and Article 10 of Regulation S-X.  Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements.  The accompanying financial statements reflect all adjustments (consisting of normal recurring accruals) that are, in the opinion of management, considered necessary for a fair presentation of the results for the interim periods presented.  Interim results are not necessarily indicative of results for a full year.  We have experienced significant quarterly fluctuations in our operating results and we expect that these fluctuations in sales, expenses and operating results may continue.

The financial statements and related disclosures have been prepared with the presumption that users of the interim financial information have read or have access to our audited financial statements for the preceding fiscal year.  Accordingly, these financial statements should be read in conjunction with the audited financial statements and the related notes thereto contained in our Annual Report on Form 10-K for the year ended December 31, 2002.

Certain amounts in the financial statements for the three and six months ended June 30, 2002 have been reclassified to conform to the presentation of the financial statements for the three and six months ended June 30, 2003.

2.EARNINGS PER SHARE

Earnings per share, EPS, is computed in accordance with the Financial Accounting Standards Board’s Statement, or FAS, No. 128, Earnings Per Share.  FAS No. 128 requires dual presentation of basic and diluted earnings per share.  Basic EPS includes no dilution and is computed by dividing net income by the weighted average number of common shares outstanding for the period.  Diluted EPS reflects the potential dilution of securities that could share in our earnings, such as common stock equivalents that 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):

	Three months ended June 30,		Six months ended June 30,
	2003	2002	2003	2002
Weighted average common shares outstanding – Shares used in calculating per share amounts - Basic	15,172	14,701	15,050	14,686
Net effect of dilutive common share equivalents using the treasury stock method	1,522	869	1,362	722
Shares used in calculating per share amounts – Diluted	16,694	15,570	16,412	15,408

3.EMPLOYEE STOCK PLANS

We have elected to follow Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees, or APB 25, and related interpretations in accounting for our stock-based compensation.  Stock options issued to non-employees are recorded at their fair value as determined in accordance with FAS No. 123, Accounting for Stock-based Compensation, 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 are periodically re-measured as the stock options vest.

Adjusted pro forma information regarding net income is required by FAS No. 123, and has been determined as if we had accounted for our employee stock-based compensation under the fair value method of that Statement.  The

4

weighted average fair value of options granted during the three months ended June 30, 2003 and 2002 were $33.42 and $18.58, respectively.  The weighted average fair value of options granted during the six months ended June 30, 2003 and 2002 were $31.72 and $17.53, respectively.  The fair value for these options was estimated at the date of grant using the Black-Scholes method for option pricing with the following weighted-average assumptions for the three and six months ended June 30, 2003 and 2002:

	Three months ended June 30,				Six months ended June 30,
	2003		2002		2003		2002
Risk-free interest rate	2.24	%	3.02	%	2.37	%	3.02	%
Volatility	85	%	87	%	86	%	87	%
Dividend yield	0	%	0	%	0	%	0	%
Expected life of options	6.2 years		5.9 years		6.1 years		5.9 years

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

	Three months ended June 30,						Six months ended June 30,
	2003			2002			2003			2002
Net income, as reported	$	7,202		$	3,124		$	13,168		$	4,758
Pro forma FAS 123 compensation expense	(5,981		)	(4,422		)	(11,280		)	(8,784		)
Adjusted pro forma net income (loss)	$	1,221		$	(1,298	)	$	1,888		$	(4,026	)
Adjusted pro forma basic net income (loss) per share	$	0.08		$	(0.09	)	$	0.13		$	(0.27	)
Adjusted pro forma diluted net income (loss) per share	$	0.07		$	(0.09	)	$	0.12		$	(0.27	)

The pro forma effects on net income for the three and six months ended June 30, 2003 and 2002 are not likely to be representative of the effects on reported net income or loss in future quarters or 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.  Changes in such subjective input assumptions can materially affect the fair value estimate of employee stock options.

4.BALANCE SHEET INFORMATION

Net inventories consist of the following:

	June 30, 2003		December 31, 2002
	(in thousands)
Raw materials	$	8,238	$	4,474
Work-in-process	9,379		6,027
Finished goods	6,579		1,794
	$	24,196	$	12,295

5

5.COMPREHENSIVE INCOME

FAS No. 130, Comprehensive Income, establishes rules for the reporting and display of comprehensive income and its components.  FAS No. 130 requires the change in net unrealized gains or losses on marketable securities to be included in comprehensive income.  As adjusted, our comprehensive income is as follows (in thousands):

	Three months ended June 30,					Six months ended June 30,
	2003			2002		2003			2002
Net income	$	7,202		$	3,124	$	13,168		$	4,758
Change in unrealized net gain (loss) on marketable securities, net of tax	(106		)	148		(132		)	(83		)
Comprehensive income	$	7,096		$	3,272	$	13,036		$	4,675

6.RECENT ACCOUNTING PRONOUNCEMENTS

In November 2002, the EITF reached a consensus on Issue No. 00-21, Revenue Arrangements with Multiple Deliverables.  EITF Issue No. 00-21 provides guidance on how to account for arrangements that involve the delivery or performance of multiple products, services and/or rights to use assets.  We are required to adopt this provision for revenue arrangements entered into in fiscal periods beginning after June 15, 2003.  Management is currently evaluating the effect that the adoption of EITF Issue No. 00-21 will have on the Company’s results of operations and financial condition.

In December 2002, FAS No. 148, Accounting for Stock-Based Compensation, Transition and Disclosure, was issued.  FAS No. 148 provides alternative methods of transition for a voluntary change to the fair value based method of accounting for stock-based employee compensation.  FAS No. 148 also requires that disclosures of the pro forma effect of using the fair value method of accounting for stock-based employee compensation be displayed more prominently and in a tabular format.  Additionally, FAS No. 148 requires disclosure of the pro forma effect in interim financial statements.  The transition and annual disclosure requirements of FAS No. 148 are effective immediately. The interim disclosure requirements are currently effective.  The adoption of FAS No. 148 did not have a material effect on our results of operations or financial condition.

In January 2003, the FASB issued FASB Interpretation No. 46, or FIN 46, Consolidation of Variable Interest Entities.  FIN 46 requires a variable interest entity to be consolidated by a company if that company is subject to a majority of the risk of loss from the variable interest entity’s activities or entitled to receive a majority of the entity’s residual returns or both.  A variable interest entity either (a) does not have equity investors with voting rights, or (b) has equity investors that do not provide sufficient financial resources to the entity to support its activities.  FIN 46 is effective immediately for all new variable interest entities created or acquired after January 31, 2003.  For variable interest entities created or acquired prior to February 1, 2003, the provisions of FIN 46 must be applied for the first interim or annual period beginning after June 15, 2003.  The adoption of FIN 46 did not have a material impact on our results of operations or financial condition.

In April 2003, FAS No. 149, Amendment of Statement 133 on Derivative Instruments and Hedging Activities, was issued.  FAS No. 149 amends and clarifies accounting for derivative instruments, including certain derivative instruments embedded in other contracts, and for hedging activities under FAS No. 133.  FAS No. 149 clarifies under what circumstances a contract with an initial net investment meets the characteristic of a derivative as discussed in FAS No. 133 and when a derivative contains a financing component that warrants special reporting in the statement of cash flows.  FAS No. 149 is effective for contracts entered into or modified after June 30, 2003, for hedging relationships designated after June 30, 2003, and to certain pre-existing contracts.  The adoption of FAS No. 149 did not have a material impact on our results of operations or financial condition.

6

ITEM 2. 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, including the extent to which our products and products under development are successfully developed and gain market acceptance; the impact of competition, including products competitive with our Triage® BNP Test, from diagnostic companies with greater capital and resources; manufacturing inefficiencies, capacity constraints, backlog or delays; regulatory changes, uncertainties or delays; changing market conditions and the other risks and uncertainties described in “Risk Factors” below and throughout our Annual Report on Form 10-K for the year ended December  31, 2002.  Actual results may differ materially from those projected.  These forward-looking statements represent our judgment as of the date of the filing of this Form 10-Q.  We disclaim any intent or obligation to update these forward-looking statements.

Overview

Founded in 1988, Biosite Incorporated is a leading provider of novel, rapid medical diagnostics that improve a physician’s ability to diagnose critical diseases and conditions.  We believe that improvements in diagnosis of high-acuity diseases and conditions can positively impact medical decisions, improve the quality of patient care and contribute to cost-effective medical treatment.  We focus on large, poorly met medical needs for clinical tests that diagnose acute symptoms associated with serious health problems.

Our products are principally sold to hospitals, which number approximately 5,000 in the United States.  To market our products we utilize a clinically astute direct sales team that focuses its efforts on larger centers with more than 200 beds.  The Fisher HealthCare Division of the Fisher Scientific Company, or Fisher, distributes all of our products in U.S. hospitals and supports our direct sales force, particularly in smaller hospitals.  In July 2003, we signed a two-year distribution agreement with Fisher that extends the existing distribution relationship through December 31, 2005.  Sales to Fisher represented 91% of our product sales in the first half of 2003 and 87% of our product sales for the full year 2002. A direct field-based network of clinically experienced individuals supports the sales effort by providing pre- and post- sale education and training.  In international markets, we utilize a network of country-specific and regional distributors, as well as a small direct sales force.  In July 2003, we initiated a direct sales and distribution effort in France and over the next few years, we expect to transition the distribution of our products in some additional European countries to a direct sales and distribution basis.

Product sales for the first half of 2003 grew 103% over the same period of 2002.  This growth resulted largely from sales of our Triage BNP Test, which aids in the diagnosis of congestive heart failure, or CHF.  Sales of our Triage BNP Test represented 60% of our product sales in the first half of 2003, compared to 30% for the same period of 2002.  The test, which was launched domestically in 2001, was the first blood test available to aid in the detection of CHF and has benefited from a semi-exclusive position in the market.  We believe that the combination of innovation, medical relevance and semi-exclusivity has contributed to the commercial success of the Triage BNP Test and we seek to replicate this model for future products that we hope to commercialize.

In 1999, we launched Biosite Discovery, a program dedicated to the validation of targets with novel therapeutic and/or diagnostic applications.  Through Biosite Discovery, we leverage our expertise in phage display antibody development to access protein targets via internal research, licensing or collaborations with clinical institutions or commercial companies.  Once promising targets are selected, we develop immunoassays for these targets and then conduct high throughput screening using patient samples procured from clinical collaborators, often leading medical institutions.  This process, which we refer to as marker mining, enables us to determine diagnostic utility and explore interrelations among multiple markers.  If the diagnostic utility of a marker or panel of markers is established, the marker or panel is then assessed for commercialization potential, with high-value markers or panels added to our product development pipeline.

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 securities analysts.

7

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 in the section entitled “Risk Factors” below.

Recent Developments

Physician Office Practices Distributor

In May 2003, we entered into a distribution relationship with PSS World Medical, Inc. to market our products to physician office practices.  Under the terms of the multi-year agreement, PSS World Medical’s physician business, Physician Sales & Service, or PSS, will be a distributor of the Triage BNP Test and other Biosite products to physician office practices in the United States.  In marketing our products, PSS is expected to use its 700 sales representatives, who serve physician offices in all 50 states.

Beckman Coulter BNP Test Agreement

In June 2003, we entered into an agreement with Beckman Coulter, Inc., or Beckman, under which Beckman would make and we would sell a b-type natriuretic peptide, or BNP, test for use on Beckman’s immunoassay systems.  The product is under development and is expected to be available in the first quarter of 2004, the BNP test will be sold worldwide through a combination of our direct and distributor sales forces.

New Corporate Headquarters Land Purchase

In June 2003, we completed the purchase of 17.7 usable acres of land, which will serve as the location for our new corporate headquarters.  The purchase price was $19.1 million.  We plan to complete the purchase of an additional 8.4 usable acres of adjacent land for $9.1 million in September 2003.

Fisher Distribution Agreement

In July 2003, we extended our distributorship relationship with Fisher, signing a distribution agreement that maintains our distribution relationship with them through the end of 2005.  The agreement provides Fisher with the right to continue distribution of our products into the U.S. hospital market. Additionally, Fisher will distribute our BNP test for use on Beckman’s immunoassay systems.

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 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

8

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 Securities and Exchange Commission’s Staff Accounting Bulletin, or SAB, No. 101, 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. 101.

Inventories and Related Allowance for Obsolete and Excess Inventory.   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 and obsolete inventories.  We utilize a standard cost system to track our inventories on a part-by-part, full absorption cost basis.   Adjustments are made to the standard labor and standard overhead costs to approximate actual labor and actual overhead costs on a FIFO cost basis.  The estimated allowance for excess and obsolete inventories is based on management’s review of inventories on hand compared to estimated future usage and sales and assumptions about the likelihood of obsolescence.

Intangible and Other Long-Lived Assets.  At June 30, 2003, we had approximately $62.2 million of long-lived assets, including $19.1 million of land, $5.8 million of leasehold improvements, $24.0 million of equipment and $7.2 million of capitalized license rights.  Leasehold improvements, equipment, intangible assets and certain other long-lived assets are amortized over the lesser of their useful lives or the remaining lease term.  We lease nine buildings with leases that expire between December 2004 through December 2005.  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, not to exceed ten years, using a systematic method based on the estimated revenues generated from products during 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 only includes estimated sales for products we are currently selling and does not include any estimated product sales 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.

  Results of Operations

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

	Three months ended June 30,				Six months ended June 30,
Product Family	2003		2002		2003		2002
Cardiovascular products:
Triage BNP Test products	$	27,801	$	8,143	$	49,983	$	12,266
Triage Cardiac Panel and Cardio ProfilER products	5,014		4,193		10,385		7,620
Triage MeterPlus products	491		948		1,799		1,464
Other products:
Triage Drugs of Abuse and TOX Drug Screen products	9,035		8,707		18,217		17,295
Triage Microbiology products	1,435		1,126		2,487		2,266
Total Product Sales	$	43,776	$	23,117	$	82,871	$	40,911

Product Sales. Product sales for the three and six months ended June 30, 2003 were $43.8 million and $82.9 million, respectively, representing increases of 89% and 103%, respectively, compared to $23.1 million and $40.9

9

million for the same periods of 2002. The increases in total product sales, as compared to the same periods in 2002, were primarily attributable to the growth in sales of our Triage BNP Test, one of our cardiovascular diagnostic products, of $19.7 million and $37.7 million, for the three and six months ended June 30, 2003, respectively.

Product sales in future quarters are subject to increase or decrease as we and our distributors attempt to adjust distributor inventories to targeted stocking levels.

Product sales of our cardiovascular products, consisting of our Triage Cardiac Panel, Triage BNP Test, Triage Cardio ProfilER and Triage MeterPlus, totaled $33.3 million and $62.2 million, respectively, for the three and six months ended June 30, 2003.  This represented increases of 151% and 191%, respectively, as compared to $13.3 million and $21.4 million, respectively, for same periods of 2002.  The cardiovascular product sales growth was primarily due to growth in sales volume of our Triage BNP Test.

The Triage BNP Test is currently one of three FDA-approved tests used as an aid in the diagnosis of congestive heart failure.  Bayer Diagnostics received FDA clearance to market its competitive product in June 2003 and Roche Diagnostics received FDA clearance in November 2002.  Shionogi  & Co., Ltd. sells a BNP radioimmunoassay product for research purposes only in the United States.  Abbott Laboratories has certain diagnostic rights to the BNP protein and we anticipate competition from this company and others in the future.  Competitors may succeed in developing or marketing products that are more effective or commercially attractive than the Triage BNP Test.  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.  Scios, Inc., the licensor of the BNP technology and patents, was acquired by Johnson & Johnson in April 2003.

Product sales of the Triage Drugs of Abuse Panel, Triage TOX Drug Screen, and Triage Microbiology products (i.e., Triage C. difficile Panel and Triage Parasite Panel) were $10.5 million and $20.7 million, respectively, for the three and six months ended June 30, 2003, as compared to $9.8 million and $19.6 million for same periods of 2002.  The increase in sales of these products was primarily due to an increase in sales volume of our Triage Drugs of Abuse Panel and Triage TOX Drug Screen.  We believe that the 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.  The Triage TOX Drug Screen was launched in the United States in February 2002.

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 the three and six months ended June 30, 2003 were $922,000 and $1.8 million, respectively, as compared to $1.8 million and $2.7 million, respectively, for the same periods of 2002.  Contract revenues recognized during the three and six months ended June 30, 2003 and 2002 consisted primarily of research funding.  We recognized $750,000 of research funding from our alliance with Medarex during each of the first two quarters of both 2003 and 2002.  Other contract revenues recognized during those periods of 2003 and 2002 included antibody fees, milestone payments and license fees.  The decrease in contract revenues for both the three and six months ended June 30, 2003 compared to the same periods of 2002 was due primarily to the grant of a non-exclusive license to a company for certain proprietary technology during the second quarter of 2002.  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 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 $1.5 million and $2.9 million for the three and six months ended June 30, 2003, respectively, compared to $1.3 million and $2.5 million, respectively, for the same periods of 2002.  These costs are included in research and development expenses.

Cost of Sales and Gross Profit From Product Sales. Gross profit from product sales for the three and six months ended June 30, 2003 were $30.1 million and $55.4 million, respectively, representing increases of 88% and 97%, respectively, compared to $16.0 million and $28.2 million for the same periods of 2002.  Gross profits increased primarily due to an overall increase in product sales.  The overall gross margin for the three and six months ended June 30, 2003 was 69% and 67%, respectively, compared to 69% for the same periods of 2002.  The decrease in the overall gross margin primarily resulted from the changing mix of our sales of products that have different gross margins and from inefficiencies experienced as we attempt to increase our manufacturing capacity by adding production shifts and implementing semi-automated and automated manufacturing equipment into the manufacturing processes.  Our cardiovascular products have lower gross margins than our Triage Drugs of Abuse

10

Panel.  Sales of our cardiovascular products represented 76% and 75%, respectively, of our product sales for the three and six months ended June 30, 2003, compared to 57% and 52% for the same periods in 2002.

Although our gross profits may continue to grow, we expect that our overall gross margins may continue to decrease as a result of competitive pricing pressures and the changing mix of sales of products with different gross margins.  Our cardiovascular products are expected to continue to realize lower gross margins than the Triage Drugs of Abuse Panel due to the differences in the net sales prices of the products and as production efficiency issues are addressed.

Selling, General and Administrative Expenses. Selling, general and administrative, orSG&A, expenses for the three and six months ended June 30, 2003 were $13.6 million and $25.0 million, respectively, representing increases of 73% and 80%, respectively, compared to $7.9 million and $13.9 million for the same periods of 2002.  The increases in SG&A expenses were primarily associated with the addition of sales, marketing, clinical education and technical service resources, expanded sales activities related to our broader product lines, additional marketing activities relating to new products, increased administrative resources and costs to support our expanded operations and higher performance-based compensation, such as sales commissions and bonuses based on financial performance.

We expect SG&A expenses in 2003 to continue to be higher than in 2002, as we have increased our sales, marketing, clinical education and technical service resources.  A significant portion of the 2002 increase in sales and field support resources occurred during the latter half of the year and is expected to contribute to the growth in 2003.  We also expect to expand our overall operations, including sales and marketing program activities for our new products and administrative support functions and infrastructure.  The timing of such increased expenditures and their magnitude are primarily dependent on the commercial success and sales growth of our products.

Research and Development Expenses. Research and development, or R&D, expenses for the three and six months ended June 30, 2003 were $6.3 million and $11.5 million, respectively, representing increases of 64% and 56%, respectively, compared to $3.8 million and $7.4 million for the same periods of 2002.  The increases in R&D expenses for the three and six months ended June 30, 2003 compared to the same periods of 2002 were primarily associated with increased employee expenses and supplies used in our R&D activities.  During the three and six months ended June 30, 2003 and 2002, our research and development resources were focused primarily on product development for potential new diagnostics for critical health conditions such as stroke, sepsis and acute coronary syndrome, the development of potential improvements to our existing products 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, primarily Biosite Discovery.

We expect R&D expenses in 2003 to continue to be higher than in 2002.  The increased expenditures will relate primarily to:

•product development efforts, including the potential development of diagnostic products for stroke, acute coronary syndrome and sepsis;

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

•scale-up for potential new products;

•Biosite Discovery activities; and

•performance-based compensation resulting from the Company’s and employees’ performance versus its beginning of the year goals.

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 incurred during the three and six months ended June 30, 2002 totaled $1.5 million and $2.8 million, respectively.  The expenses consisted primarily of legal costs related to our litigation with XOMA.  In September 2002, we announced that we resolved all outstanding disputes regarding patent and licensing issues with XOMA so as to permit each the freedom to operate its business.

11

Interest and Other Income, net. Interest and other income, net was $531,000 and $841,000, respectively, for the three and six months ended June 30, 2003, compared to $496,000 and $1.0 million for the same periods of 2002.  Interest and other income, net, for the first half of 2003, compared to the same period of 2002, decreased primarily due to lower interest income from our cash equivalents and marketable securities resulting from an overall decline in interest rates, offset by additional interest income from higher average balance of cash and marketable securities.  We may experience lower interest income in future periods due to lower average cash equivalents and marketable securities balances than prior periods and lower overall interest rates.

Provision for Income Taxes. As a result of the pre-tax income and the estimated tax credits to be generated in 2003, we recorded a provision for income taxes of $8.4 million for the first half of 2003.  For the same period in 2002, we recorded a provision for income taxes of $3.0 million. 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.

Liquidity and Capital Resources

We have financed our operations through cash from operations, private and public placements of equity securities, debt and capital lease financing, cash received under collaborative agreements and interest income.  As of June 30, 2003, we had cash, cash equivalents and marketable securities of approximately $56.6 million compared to $70.9 million as of December 31, 2002.

The decrease in cash, cash equivalents and marketable securities during the first half of 2003 was largely attributable to the use of $18.4 million of cash to purchase the first portion of land to be used for our new corporate headquarters.  A previously paid escrow deposit of $677,000 was applied to the purchase price.  We intend to complete the purchase of an additional 8.4 acres of adjacent land later this year for $9.1 million, including the application of our remaining escrow deposit of $322,000. Other significant uses of cash include expenditures for leasehold improvements and capital equipment of $13.9 million.  Sources of cash during the first half of 2003 included cash generated from operating activities of $5.8 million, proceeds from the issuance of common stock under our stock plans of $8.5 million and proceeds from equipment financing of $6.4 million.  The primary contributor to cash generated from operating activities was our net income for the six months ended June 30, 2003 of $13.2 million.  Cash generated from operating activities also included increases in current liabilities totaling approximately $2.1 million and non-cash expenses such as depreciation and amortization of $4.6 million, offset by increases in accounts receivable of $1.3 million and inventory of $11.9 million.  During the three months ended June 30, 2003, we were able to increase our manufacturing capacity by utilizing additional manufacturing areas and equipment and by working extended shifts.  This enabled us to increase our Triage BNP Test inventory at Fisher to the levels agreed to under our new distribution agreement with Fisher.  In addition, we were able to internally establish an appropriate level of devices and subassemblies necessary to allow for short-term increases in demand and to allow for manufacturing downtime over the next year to accommodate installation, testing and validation of automated and semi-automated manufacturing equipment in our production processes.  As a result of these changes in inventory, we were able to reduce our extended shifts during the month of July.  In addition, we have increased our inventories of Triage meters in anticipation of increased demand in the physician office market.

The increase in cash, cash equivalents and marketable securities during the first half of 2002 was largely attributable to cash generated from operating activities of $8.8 million.  The cash generated from operating activities included net income of $4.8 million,  increases in income taxes payable, account payable and accrued liabilities totaling approximately $3.6 million and non-cash expenses such as depreciation and amortization of $2.1 million offset by increases in inventory of $1.7 million.   Other sources of cash included the receipt of $2.8 million in proceeds from equipment financing and proceeds from the issuance of stock under our employee stock plans of $1.3 million.  Significant uses of cash during the first half of 2002 included expenditures for leasehold improvements and capital equipment of $3.3 million and principal payments under equipment financing debt arrangements of $1.2 million.

Our primary short-term needs for capital, which are subject to change, are for the payment related to the second closing of escrow to purchase land to construct our new corporate facility, support of our commercialization efforts related to our products, including expansion of our direct sales force and field support resources, improvements in our manufacturing capacity and efficiency, facility expansion, new product development, clinical trials, and the continued advancement of research and development efforts.  We executed agreements to license technologies patented by others that call for milestone payments and future royalties based on product sales utilizing the licensed technologies.  We may enter into additional licensing agreements that may include up-front and annual cash

12

payments, milestone payments and future royalties based on product sales utilizing the licensed technologies. We utilized and may continue to utilize credit arrangements with financial institutions to finance the purchase of capital equipment. Additionally, we may utilize cash generated from operating activities, if any, to meet our capital requirements.

We are also addressing our future facilities expansion needs. In June 2003, we completed the first of a two-part escrow closing to purchase land for the construction and relocation of our new corporate headquarters.  In the first escrow closing, we purchased 17.7 usable acres for approximately $19.1 million.  The second escrow closing for the remaining 8.4 usable acres of adjacent land is scheduled to occur on September 30, 2003, and will require that we pay an additional $8.7 million.  We are pursuing financing for a portion of the land purchase price and the subsequent building construction costs.  We may not be able to obtain financing on commercially reasonable terms or at all.  The new headquarters will provide us with up to 800,000 square feet and will be constructed in phases as needed.  The first phase is expected to commence in August and will provide us with approximately 350,000 square feet of space.  The total land and construction cost of the first phase is estimated to be approximately $95 million.  We expect the first phase of construction to be completed in the fourth quarter of 2004 and do not anticipate expanding our operations to the new facility prior to then.  We may decide to seek additional capital to fund the purchase and construction of this new facility.  Expanding into a new facility has, and will continue to, result in both cash expenditures, for the purchase of the land and construction costs, that would be partially reimbursed from loan proceeds if we are successful in obtaining financing, and an increase in occupancy costs.  We believe that the occupancy and financing costs of the new facility should impact our net income and earnings per share more favorably than other facilities expansion options such as leasing additional space adjacent to our current corporate headquarters.

We believe that our available cash, cash from operations and funds from existing credit arrangements will be sufficient to satisfy our funding needs for at least the next 24 months, except for the potential funding requirement of a portion of the cost of our facility expansion plan.

13

RISK FACTORS

This report includes forward-looking statements about our business and results of operations that are subject to risks and uncertainties that could cause our actual results to vary materially from that indicated from such forward-looking statements. Factors that could cause or contribute to such differences include those discussed below, as well as those discussed elsewhere in this Form 10-Q and in our Annual Report on Form 10-K for the year ended December 31, 2002.  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.

We have only a limited history of profitability and we may not maintain profitability.  In addition, our quarterly and annual results may fluctuate.

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.  We may not be able to maintain profitability in the future.  We believe that our future operating results may be subject to quarterly and annual fluctuations due to a variety of factors, including:

•market acceptance of current or new products

•competition, including the introduction of products competitive with our Triage BNP Test, from diagnostic companies with greater financial capital and resources

•changes in the mix of products sold

•seasonal or unanticipated changes in customer demand

•the timing and variability of significant orders

•manufacturing inefficiencies, capacity constraints, backlog or delays

•competitive pressures on average selling prices of our products

•regulatory changes, uncertainties or delays

•changes in reimbursement policies

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

•whether and when new products are successfully developed and introduced by us

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

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

•product recalls

•shipment problems

•enforcement, defense and resolution of license and patent disputes; and

•costs and timing associated with business development activities, including potential licensing of technologies.

Our operating results would also be adversely affected by a downturn in the market for our products.  Because we continue to increase our operating expenses to support our expanded sales and marketing activities, manufacturing operations and new product development, our operating results would be adversely affected if our sales and gross profits did not correspondingly increase or if our product development efforts are unsuccessful or subject to delays.  Our limited operating history makes accurate prediction of future operating results difficult or impossible. We may not sustain 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 securities analysts.

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 continue to achieve a growing level of market acceptance of our newer products such as the Triage Cardiac Panel, Triage Cardio ProfilER and the Triage BNP Test, as well as our ability to appropriately manage our operating expenses and our capital expenditures to optimize our profitability.  We have made and continue to make significant additions in headcount, manufacturing equipment, facilities and infrastructure to address our current and planned future revenue

14

growth.  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, implementation and customer support resources and administrative infrastructure;

•an effective product distribution system for our products; or

•appropriate strategies or tactics to address competitors of our products,

market acceptance of our products may not meet our expectations and our profitability may suffer.  Unanticipated acceleration of customer demand for our products has and may result in inefficiencies or constraints related to our manufacturing, sales force, implementation resources and administrative infrastructure.  Such inefficiencies or constraints may adversely affect us as a result of delays, lost potential product sales or loss of current or potential customers due to their dissatisfaction.

In June 2003, we entered into an agreement with Beckman under which Beckman would make and we would sell a BNP test for use on Beckman’s immunoassay systems.  We may experience difficulties that could delay or prevent the successful development, introduction or market acceptance of this product.  Additionally, we may not be effective in marketing and selling this new product to users of Beckman’s systems.

Additionally, we are making significant investments in research and development of potential new products, including the development of a diagnostic products for stroke and sepsis, and expanded uses of our existing products.  We are also making significant investments in processes, leasehold improvements and equipment to improve our manufacturing efficiency and capacity.  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 the potential new uses of existing products.  We may experience difficulties that could delay or prevent the successful development, introduction or market acceptance of any such new products.  Additionally, we may not be effective in marketing and selling new products to users, especially those in markets where we have limited experience.  We will be harmed if we are unable, for technological or other reasons, to:

•complete development of new products, processes, leasehold improvements or equipment 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 scale-up manufacturing effectively or efficiently;

•receive approval or clearance for marketing a new product for an intended use or an existing product for an alternative use; or

•gain a significant level of market acceptance for a new product or expanded uses of existing products.

The successful development of some of these new products will depend on the development of new technologies.  Also, products that appear promising during product development and preclinical studies may not demonstrate acceptable clinical trial results, or other companies or people have or may have patent or other proprietary rights to our potential new products, and may not allow us to sell it on reasonable terms, or at all.

The Triage BNP Test may encounter significant competition from products developed and commercialized by companies with greater financial capital and resources.

Product sales of our Triage BNP Test represented 60% of our product sales in the first half of 2003 and 38% of our product sales during the full year 2002.  The Triage BNP Test is currently one of three United States Food & Drug Administration, or FDA, cleared tests for use as an aid in the diagnosis of congestive heart failure.  Bayer Diagnostics received FDA clearance to market its competitive product in June 2003 and Roche Diagnostics received FDA clearance in November 2002.  Shionogi  & Co., Ltd. sells a BNP radioimmunoassay product for research purposes only in the United States.  Abbott Laboratories has certain diagnostic rights to the BNP protein and we anticipate competition from this company and others in the future.  These competitors may succeed in developing or marketing products that are more effective or commercially attractive than the Triage BNP Test.  Moreover, we may

15

not have the financial resources, technical expertise or marketing, distribution or support capabilities to compete successfully against these companies and other competitors in the future.  Scios, Inc., the licensor of the BNP technology and patents, was acquired by Johnson & Johnson in April 2003.

Competition and technological change may make our products less attractive or obsolete.

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

•companies making laboratory-based tests and analyzers

•clinical reference laboratories; and

•other rapid diagnostic test manufacturers.

Currently, the majority of diagnostic tests used by physicians and other health care providers are performed by independent clinical reference laboratories and hospital-based laboratories.  We expect that these laboratories will compete vigorously to maintain their dominance of the testing market. In order to achieve market acceptance for our products, we will be required to demonstrate that our products provide cost-effective and time saving alternatives to tests performed by clinical reference laboratories or traditional hospital-based laboratory procedures.  This will require many physicians to change their established means of having such tests performed.  Our 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;

•Dade Behring;

•Roche Diagnostics; and

•Bayer Diagnostics,

have developed or are developing diagnostic products that do or will compete with our products.  These competitors 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.  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.  Moreover, we may not have the financial resources, technical expertise or marketing, distribution or support capabilities to compete successfully in the future.  The success of our competitors, many of which 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 either in the United States or in international markets.

Our limited manufacturing experience and our potential inability to scale-up manufacturing may adversely affect our ability to produce products and increase our research and development expenses

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 or changes in our manufacturing processes have been, and may continue to be, required for the scaling-up of each new product prior to commercialization or in order to meet increasing customer demand once commercialization begins, and this work may not be completed successfully or efficiently.

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.  These products may not be able to be manufactured by us or any other party at a cost or in quantities to make these products commercially viable.  If we are unable to develop or contract for manufacturing capabilities on acceptable terms for our products under development, our ability to conduct pre-

16

clinical and clinical testing will be adversely affected, resulting in the delay of submission of products for regulatory clearance or approval and initiation of new development programs, which would have a material adverse effect on us.

Manufacturing and quality problems have arisen and may continue to arise 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 purchase manufacturing equipment that may not yield the improvements that we expect.  Unanticipated acceleration or deceleration in customer demand for our products has and may continue to result in production inefficiencies or manufacturing constraints.  Our manufacturing facilities and those of our contract manufacturers are, or will be, subject to periodic regulatory inspections by the FDA and other federal and state regulatory agencies and these facilities are also subject to Quality System Regulations requirements of the FDA.  We, or our contractors, may not satisfy such regulatory requirements, and any failure to do so would have a material adverse effect on us.

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

We rely upon a key distributor alliance with Fisher for distribution of our products in the U.S. hospital market segment and may rely upon Fisher or other distributors to distribute products under development or our products in other market segments. All of our products are currently marketed pursuant to distribution agreements in the U.S. hospital market segment by Fisher (which accounted for 91% of our product sales in the first half of 2003 and 87% of product sales in the full year 2002), in U.S. physician office practices by PSS and internationally by country-specific and regional distributors, as well as by our direct sales force.  The loss or termination of one or more of these distributors could have a material adverse effect on our sales.  In July 2003, we signed a two-year distribution agreement with Fisher that extends our distribution relationship through December 31, 2005.  In July 2003, we initiated a direct sales and distribution effort in France and over the next few years, we anticipate transitioning the distribution of our products in some additional European countries to a direct sales and distribution basis.

If any of our distribution or marketing agreements are terminated and we are unable to enter into alternative agreements or if we elect to distribute our products directly, we would have to invest in additional sales and marketing resources, including additional field account executives and field support resources, which would significantly increase future SG&A expenses.  Changes in the distribution of our products may also result in contract termination fees, disruption of our business, increased competition and lower product sales and operating profits.  We have limited experience in direct sales, marketing and distribution of our products.  Our direct sales, marketing and distribution efforts may not be successful.  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 or our failure to successfully market our products would have a material adverse effect on us.

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 fluctuations in the buying patterns of end-user customers, Fisher and our other distributors, and by the changes in inventory levels of our product held by these distributors.  We are unable to verify the inventory levels of our international distributors.  We only have limited visibility over the inventory levels of our products at Fisher.  While we attempt to assist Fisher in maintaining targeted stocking level of our products, we may not consistently be accurate or successful.  This process involves the exercise of judgment and use of assumptions as to 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.

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

Key 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 have a material adverse effect on our ability to manufacture these products until a new source of supply is qualified or alternative manufacturing

17

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 our manufacturing processes of our products, could have a material adverse effect on our ability to manufacture products.  We have under development products that, if developed, 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 or the implementation of alternative processes for the manufacture of our future products, if any, would have a material adverse effect on us.

For example, we rely upon LRE Technology Partners GmbH, or LRE, for production of the fluorometer that is used with our Triage MeterPlus platform products, which includes the Triage Cardiac Panel, Triage BNP Test and Triage TOX Drug Screen and other products currently under development.  If LRE is unable or unwilling to manufacture sufficient quantities of quality Triage MeterPlus units, this may adversely affect:

•  our sales and profit margins

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

•  the timing of market introductions and subsequent sales of products incorporating the Triage MeterPlus.

Health care reform and restrictions on reimbursement may adversely affect our results.

In the United States, health care 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.  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 testing services.  In addition, the tests performed by public health departments, corporate wellness programs and other large volume users in the drug screening market are generally not subject to reimbursement.  Further, some health care providers utilize a managed care system in which providers contract to provide comprehensive health care for a fixed cost per patient.  We are unable to predict what changes will be made in the reimbursement methods utilized by third-party payors.  We could be adversely affected by changes in reimbursement policies of governmental or private health care payors, particularly to the extent any such changes affect reimbursement for procedures in which our products are used.

Third-party payors are increasingly scrutinizing and challenging the prices charged for medical products and services. 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 on a profitable basis.  Failure by physicians and other users to obtain reimbursement from third-party payors, or changes in government and private third-party payors’ policies toward reimbursement of tests utilizing our products could have a material adverse effect on us.  Given the efforts to control and reduce health care costs in the United States in recent years, there can be no assurance that currently available levels of reimbursement will continue to be available in the future for our existing products or products under development.

In addition, market acceptance of our products in international markets is dependent, in part, upon the availability of reimbursement within prevailing health care payment systems. Reimbursement and health care payment systems in international markets vary significantly by country, and include both government sponsored health care and private insurance.

We believe that the overall escalating cost of medical products and services has led to and will continue to lead to increased pressures on the health care industry, both foreign and domestic, to reduce the cost of products and services, including products offered by us.  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.

Changes in 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 that provide for regulation of laboratory testing. The scope of these regulations includes quality control, proficiency testing, personnel standards and federal inspections.

18

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 April 24, 2003, a new CLIA rule regarding quality assessment and quality control requirements for clinical laboratories was implemented by the Centers for Medicare and Medicaid Services, or CMS.  In an April 25, 2003 notification of Department of Health & Human Service Regional Offices, CMS CLIA program management directed CLIA surveyors to not enforce the new, general quality control provisions of the rule that increase regulatory burden until final Interpretive Guidelines are published.   In the interim, CLIA surveyors are to inspect laboratories using the quality control guidelines in force from 1992 through 2002.

Future amendment 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.

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.  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, that could result in substantial cost to us.  We may also participate in similar proceedings in foreign jurisdictions.  No assurance can be given that any patent application of others will not have priority over patent applications filed by us, which could prevent us from selling any or all of our products.

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.  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.

The legal proceedings to obtain patents and litigation of third-party claims of intellectual property infringement 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 or to determine the enforceability, scope and validity of the proprietary rights of others.  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 is inherently uncertain.  An adverse outcome in 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.

19

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.  There can be no assurance that we do not or will not infringe these patents, or other patents or proprietary rights of third parties.  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. 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 collaborative partner to obtain a license in order to continue to manufacture or market the affected products and processes.  There can be no assurance that we or our collaborators 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.

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

At June 30, 2003, we had approximately $62.2 million of long-lived assets, including $19.1 million of land, $29.8 million of leasehold improvements and equipment and $7.2 million of capitalized license rights.  The carrying amounts of these 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 circumstances 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.

As of June 30, 2003, we had approximately $3.9 million of 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 not likely would be a lack of taxable income resulting from poor operating results or rising tax deductions generated from disqualifying dispositions of stock 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 extent to which our new products and products under development are successfully developed, gain market acceptance and become and remain competitive

•the timing and variability of significant orders

•seasonal or unanticipated changes in customer demand

•regulatory changes, uncertainties or delays

•the costs, timing and effectiveness of further expansion of sales, marketing and manufacturing activities and resources, expansion of our manufacturing capacity and Biosite Discovery activities and our facilities expansion needs, including the construction of our new corporate headquarters

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

20

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

•the enforcement, defense and resolution of license and patent disputes

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

•changes in third-party reimbursement policies; and

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

The failure by us to raise capital on acceptable terms when needed would cause us to have to scale back our operations, reduce our work force and license to others products we would otherwise seek to develop or commercialize ourselves.  See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources.”

Changing facilities costs may negatively impact our operating results.

In June 2003, we completed the first of a two-part escrow closing to purchase land for the construction and relocation of our new corporate headquarters.  In the first escrow closing, we purchased 17.7 usable acres for approximately $19.1 million.  The second escrow closing for the remaining 8.4 acres of usable land is scheduled to occur on September 30, 2003, and will require us to make an additional payment of $8.7 million.  We expect the new headquarters will provide us with up to 800,000 square feet and will 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 construction costs of the first phase is estimated to be approximately $95 million.  We are pursuing financing for a portion of the land purchase price and the subsequent building construction costs.  We may not be able to obtain financing on commercially reasonable terms or at all.  We expect the first phase of construction to be completed in the fourth quarter of 2004 and do not anticipate expanding our operations to the new facility prior to then.  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.

Additionally, in order to meet the increasing customer demand for our products, short-term investments in additional facility space and related leasehold improvements have been, and continue to be, made in order to increase our manufacturing capacity prior to our relocation to the new corporate headquarters.  Because of their short-term nature, these investments in additional facility space and related leasehold improvements may not be done as efficiently or cost effectively as longer-term investments or improvements.

Delays in the conduct or completion of our clinical trials or the analysis of the data from our clinical trials 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 will cause us or regulatory authorities to delay or suspend our ongoing clinical studies, delay or suspend planned clinical studies, or delay the analysis of data from our completed or ongoing clinical studies. 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.

21

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 our clinical trials;

•delays in enrolling volunteers;

•lower than anticipated retention rate of volunteers in a clinical trial;

•unexpected results of clinical studies;

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

•difficulties in coordinating clinical trial activities with third party clinical trial sites.

The regulatory approval and compliance process is expensive, time consuming and uncertain.  As a result, we may not obtain required approvals or previously acquired approvals for the commercialization of our products may be rescinded.

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, or the FD&C Act, the FDA regulates the pre-clinical and clinical testing, manufacture, labeling, distribution and promotion of medical devices.  We are not able to commence marketing or commercial sales in the United States 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 would generally be received in one of two ways.  We must obtain the FDA’s authorization through either clearance of a 510(k) notification or approval of a pre-market approval, or PMA, application.

The 510(k) clearance process requires us to demonstrate that our new product is substantially equivalent to a medical device first marketed prior to May 1976.  We must submit data that supports our claim of substantial equivalence.  The FDA recently has been requiring more rigorous demonstration of substantial equivalence than in the past, including in some cases requiring submission of clinical data and other performance data. It generally takes from four to twelve months from submission to obtain 510(k) pre-market clearance but may take longer. The FDA may determine that a proposed device is not substantially equivalent to a device first marketed prior to May 1976 or that additional information is needed before a substantial equivalence determination can be made.  A “not substantially equivalent” determination, or a request for additional information, could prevent or delay the market introduction of new products that fall into this category. The FDA may determine we must adhere to the more costly, lengthy and uncertain PMA application process.

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) submissions.  We have made modifications to our products since receipt of initial 510(k) clearance. With respect to several of these modifications, we filed new 510(k) notices describing the modifications and have received FDA clearance of those 510(k) notices. We made other modifications to some of our products that we believe do not require the submission of new 510(k) notices. There can be no assurance, however, that the FDA would agree with any of our determinations not to submit, or would not require us to submit, a new 510(k) notice for any of these modifications made to our products.  If the FDA requires us to submit a new 510(k) notice for any device modification, we may be prohibited from marketing the modified products until the 510(k) notice is cleared by the FDA.

A PMA application must be filed if a proposed device is not substantially equivalent to a medical device first marketed 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, laboratory and animal studies. The PMA application must also contain a complete description of the device and its components and a detailed description of the methods, facilities and controls used to manufacture the device. In addition, the submission must include the proposed labeling, advertising literature and any training materials. The PMA approval process can be expensive, uncertain and lengthy, and a number of devices for which FDA approval of a PMA application has been sought by other companies have never been approved for marketing.

22

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 regulatory approval process has been created, and approval is represented by the CE Mark.

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.

We are subject to routine inspection by the FDA and certain state agencies for compliance with Quality System Requirement, or QSR, and Medical Device Reporting requirements and other applicable regulations. Changes in existing requirements or adoption of new laws or requirements could have a material adverse effect on our business, financial condition and results of operation. We may incur significant costs to comply with laws and regulations.

We are also 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 laws and regulations or such laws or regulations in the future may have a material adverse effect upon our business, financial condition and results of operations.

The Food and Drug Administration Modernization Act of 1997 makes changes to the device provisions of the FD&C Act and other provisions in the FD&C Act affecting the regulation of devices.  Among other things, the changes will affect the Investigational Device Exemption, 510(k) and PMA processes, and also will affect device standards and data requirements, procedures relating to humanitarian and breakthrough devices, tracking and post-market surveillance, accredited third-party review, and the dissemination of off-label information.  We cannot predict how or when these changes will be implemented or what effect the changes will have on the regulation of our products.  Any new legislation may impose additional costs or lengthen review times of our products.

We are uncertain of the regulatory approval path that the FDA will ultimately apply to our products currently in development.  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 our business, financial condition and results of operations.

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

Our strategy for the research, development, commercialization and distribution of some of our products entails entering into various arrangements with third parties.  We are or will be dependent upon the success of these parties in performing their responsibilities. These parties may not perform their obligations as expected and no revenue may be derived from these arrangements.

We entered into agreements with clinical and commercial collaborators for the development, clinical evaluation and marketing of products. The agreements are subject to rights of termination and may be terminated.  Our collaborators may not abide by their contractual obligations and may discontinue or sell their current lines of business.  The research for which we receive or provide funding may not lead to the development of products.  We intend to enter into additional development and marketing agreements.  We may not be able to enter into agreements on acceptable terms, or at all.

We may not be able to manage our growth.

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

23

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 to train, motivate and manage our employees.  We may not be able to manage our expansion, and a failure to do so could have a material adverse effect on us.

Unanticipated acceleration 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.

If we lose our key personnel or are unable to attract and retain additional personnel, we may not be able to 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.

We may have significant product liability exposure.

The testing, manufacturing and marketing of medical diagnostic devices entails an inherent risk of product liability claims.  Potential product liability claims may exceed the amount of our insurance coverage or may be excluded from coverage under the terms of the policy.  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.

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.

ITEM 3.  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.

Additionally, our purchases of Triage MeterPlus from LREare denominated in Euros and sales of some products to some international customers are denominated in the local currency of customers.  We have on occasion purchased forward exchange contracts to manage this exposure to exchange rate changes.  As of June 30, 2003, we had no outstanding forward exchange contracts.  Total receivables and payables denominated in foreign currencies as of June 30, 2003 were not material.

24

ITEM 4.  CONTROLS AND PROCEDURES

Under the supervision and with the participation of our management, including the Chief Executive Officer, or CEO, and Chief Financial Officer, or CFO, an evaluation was performed of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-14(c) under the Securities Exchange Act of 1934) as of the end of the period covered by this quarterly report.  Based upon that evaluation, the CEO and CFO concluded that, as of the end of such period, our disclosure controls and procedures were effective in timely alerting them to material information relating to us required to be disclosed in our periodic SEC filings.  There was no change in our internal controls over financial reporting that occurred during the period covered by this quarterly report that has materially affected, or is reasonably likely to materially affect, our internal controls over financial reporting.

25

Part II.  Other Information

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

On June 18, 2003, the Company held its Annual Meeting of Stockholders.  As of April 25, 2003, the record date, 14,986,006 shares were entitled to vote at the Annual Meeting.  Of these 14,986,006 shares, 74,296 were not voted.  The following actions were taken at the annual meeting.

1.The following Class III Directors were elected:

a.Kim D. Blickenstaff.  14,807,262 shares voted in favor of the nominee, 104,448 shares withheld their vote;

b.Kenneth F. Buechler, Ph.D.  14,807,262 shares voted in favor of the nominee, 104,448 shares withheld their vote;

c.The following directors continue in office for their existing terms:

Lonnie M. Smith

Timothy J. Wollaeger

Anthony DeMaria, M.D.

Howard E. Greene Jr.

2.A proposal was approved to amend the Company’s Restated Certificate of Incorporation, as amended, to (i) increase the total number of shares authorized for issuance from 30,000,000 to 45,000,000 and (ii) increase the number of shares of Common Stock authorized for issuance from 25,000,000 to 40,000,000.  14,447,372 shares were voted in favor of the proposal, 444,281 shares were voted against the proposal and 20,057 shares abstained;

3.A proposal was approved to amend and restate the 1996 Stock Incentive Plan of Biosite Incorporated to, among other things, increase the number of shares of Common Stock authorized for issuance thereunder by 700,000 shares.  5,418,821 shares were voted in favor of the proposal, 4,542,891 shares were voted against the proposal, 45,543 shares abstained and 4,978,751 shares were not voted (includes broker non-votes);

4.A proposal was approved to amend and restate the Employee Stock Purchase Plan of Biosite Incorporated to, among other things, increase the number of shares of Common Stock authorized for issuance thereunder by 250,000 shares.  9,520,601 shares were voted in favor of the proposal, 444,013 shares were voted against the proposal, 42,641 shares abstained and 4,978,751 shares were not voted (includes broker non-votes);

5.The selection of Ernst & Young LLP as the Company’s independent auditors for the fiscal year ended December 31, 2003 was ratified.  14,645,810 shares were voted in favor of the proposal, 244,799 shares were voted against the proposal and 21,101 shares abstained.

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

(a)	Exhibits
	3.(i)(1)	Restated Certificate of Incorporation.
	3.(i)(1)	Certificate of Amendment to the Restated Certificate of Incorporation.
	3.(i)(1)	Certificate of Designation of Rights and Preferences of Series A Participating Preferred Stock.
	3.(ii)	Certificate of Amendment to the Restated Certificate of Incorporation.
	3.(iii)(2)	Amended and Restated Bylaws.
	4.1	Form of Common Stock Certificate with rights legend.
	10.2(3) (A)	Amended and Restated 1996 Stock Incentive Plan of Biosite Incorporated.
	10.5(4) (A)	Biosite Incorporated Amended and Restated Employee Stock Purchase Plan.
	10.34	Third Amendment to Purchase Agreement and Escrow Instructions between Biosite and H.G. Fenton Company dated June 10, 2002.

26

10.35	Fourth Amendment to Purchase Agreement and Escrow Instructions between Biosite and H.G. Fenton Company dated January 24, 2003.
10.36	Fifth Amendment to Purchase Agreement and Escrow Instructions between Biosite and H.G. Fenton Company dated April 25, 2003.
10.37	Sixth Amendment to Purchase Agreement and Escrow Instructions between Biosite and H.G. Fenton Company dated May 27, 2003.
10.38	Seventh Amendment to Purchase Agreement and Escrow Instructions between Biosite and H.G. Fenton Company dated June 16, 2003.
10.39*	Distribution Agreement between Biosite and PSS World Medical, Inc. dated May 13, 2003.
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 the exhibit of the same number to Biosite’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2001.
	(2)	Incorporated by reference to exhibit 3.(ii) to Biosite’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2003.
	(3)	Incorporated by reference to Exhibit 10.1 to Biosite’s Registration Statement on Form S-8, (No. 333-106565) filed June 27, 2003.
	(4)	Incorporated by reference to Exhibit C to Biosite’s Definitive Proxy Statement filed on April 30, 2003.
	(A)	Indicates management contract or compensatory plan or arrangement
	*	Confidential treatment has been requested for certain portions of this exhibit.
(b)	Reports on Form 8-K

On May 1, 2003, we filed a current report on Form 8-K, furnishing under Item 12. “Results of Operations and Financial Condition,” information relating to our financial results for the first quarter ended March 31, 2003.

27

SIGNATURES

Pursuant to the requirements 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.

Dated:  August 4, 2003	BIOSITE INCORPORATED
	By:	/s/ CHRISTOPHER J. TWOMEY
		Christopher J. Twomey
		Vice President, Finance and Chief Financial Officer (Principal Financial and Accounting Officer)

28

EX-3.II

Exhibit 3.ii

CERTIFICATE OF AMENDMENT TO THE

RESTATED CERTIFICATE OF INCORPORATION

OF

BIOSITE INCORPORATED

Biosite Incorporated, a corporation organized and existing under the laws of the State of Delaware, hereby certifies as follows:

FIRST:            The name of the corporation is Biosite Incorporated.

SECOND:       The date of filing of its original Certificate of Incorporation with the Secretary of State of Delaware was March 30, 1988.  The corporation was initially incorporated under the name Biosite Diagnostics Incorporated.

THIRD:          At a meeting of the Board of Directors of Biosite Incorporated, resolutions were duly adopted providing that it was advisable and in the best interests of the corporation that the first sentence of Paragraph A of Article IV of the Restated Certificate of Incorporation of Biosite Incorporated, as amended, shall be amended and restated to read in its entirety as follows:

“Classes of Stock.        The total number of shares of all classes of capital stock which the corporation shall have authority to issue is forty five million (45,000,000), of which forty million (40,000,000) shares of the par value of one cent ($0.01) each shall be Common Stock (the “Common Stock”) and five million (5,000,000) shares of the par value of one cent ($0.01) each shall be Preferred Stock (the “Preferred Stock”).”

FOURTH:      This Certificate of Amendment to the Restated Certificate of Incorporation was duly adopted at the annual meeting of the stockholders, which was duly called and held, upon notice in accordance with Section 222 of the General Corporation Law of the State of Delaware, by at least a majority of the holders of outstanding stock in accordance with section 242 of the General Corporation Law of the State of Delaware.

IN WITNESS THEREOF, Biosite Incorporated has caused this certificate to be signed by the undersigned officer, thereunto duly authorized, this 18^th day of June, 2003.

BIOSITE INCORPORATED
By:	/s/ Kim D. Blickenstaff
	Kim D. Blickenstaff
	President and Chief Executive Officer

EX-4.1

Exhibit 4.1

[FACE OF CERTIFICATE]

[LOGO]

NUMBER
BST

SHARES

INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE

THIS CERTIFICATE IS TRANSFERABLE IN THE CITY OF BOSTON, MA OR NEW YORK, NY

SEE REVERSE FOR CERTAIN DEFINITIONS AND A STATEMENT AS TO RIGHTS, PREFERENCES, PRIVILEGES AND RESTRICTIONS, IF ANY

CUSIP 090945 10 6

This Certifies that

is the record holder of

FULLY PAID AND NONASSESSABLE SHARES OF COMMON STOCK, $.01 PAR VALUE PER SHARE, OF

BIOSITE INCORPORATED

transferable on the books of the Corporation by the holder hereof in person or by duly authorized Attorney upon surrender of this certificate properly endorsed. This certificate is not valid until countersigned by the Transfer Agent and registered by the Registrar. WITNESS the facsimile seal of the Corporation and the facsimile signatures of its duly authorized officers.

Dated

VICE PRESIDENT, FINANCE AND CHIEF FINANCIAL OFFICER

PRESIDENT AND CHIEF EXECUTIVE OFFICER

COUNTERSIGNED AND REGISTERED: AMERICAN STOCK TRANSFER & TRUST COMPANY TRANSFER AGENT AND REGISTRAR

BY

AUTHORIZED SIGNATURE

[BACK OF CERTIFICATE]

A statement of the powers, designations, preferences and relative, participating, optional or other special rights of each class of stock or series thereof and the qualifications, limitations or restrictions of such preferences and/or rights as established, from time to time, by the Certificate of Incorporation of the Corporation and by any certificate of determination, the number of shares constituting each class and series, and the designations thereof, may be obtained by the holder hereof upon request and without charge at the principal office of the Corporation.

This certificate also evidences and entitles the holder hereof to certain Rights as set forth in a Rights Agreement between Biosite Incorporated (the “Company”) and American Stock Transfer & Trust Company (the “Rights Agent”) dated as of March 1, 2000, as amended from time to time (the “Rights Agreement”), the terms of which are hereby incorporated herein by reference and a copy of which is on file at the principal offices of the Company. Under certain circumstances, as set forth in the Rights Agreement, such Rights may be redeemed, may expire or may be evidenced by separate Certificates and will no longer be evidenced by this Certificate. The Company will mail to the holder of this certificate a copy of the Rights Agreement without charge within five days after receipt of a written request therefor. Under certain circumstances, Rights issued to Acquiring Person (as defined in the Rights Agreement) or certain related Persons and any subsequent holder of such Rights may become null and void.

The following abbreviations, when used in the inscription on the face of this certificate, shall be construed as though they were written out in full according to applicable laws or regulations:

TEN COM — as tenants in common TEN ENT — as tenants by the entireties JT TEN — as joint tenants with right of survivorship and not as tenants in common

UNIF GIFT MIN ACT —                                Custodian

                                                   (Cust) (Minor) under Uniform Gifts to Minors Act
(State)
UNIF TRF MIN ACT —                  Custodian (until age                 )
(Cust)
under Uniform Transfers (Minor) to Minors Act
(State)

Additional abbreviations may also be used though not in the above list.

FOR VALUE RECEIVED, hereby sell, assign and transfer unto

2

PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER OF ASSIGNEE

(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE, OF ASSIGNEE)

Shares of the common stock represented by the within Certificate, and do hereby irrevocably constitute and appoint                               

Attorney to transfer the said stock on the books of the within named Corporation with full power of substitution in the premises. Dated

NOTICE: THE SIGNATURE(S) TO THIS ASSIGNMENT MUST CORRESPOND WITH THE NAME(S) AS WRITTEN UPON THE FACE OF THE CERTIFICATE IN EVERY PARTICULAR, WITHOUT ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATEVER.

Signature (s) Guaranteed

By

THE SIGNATURE(S) SHOULD BE GUARANTEED BY AN ELIGIBLE GUARANTOR INSTITUTION (BANKS, STOCKBROKERS, SAVINGS AND LOAN ASSOCIATIONS AND CREDIT UNIONS WITH MEMBERSHIP IN AN APPROVED SIGNATURE GUARANTEE MEDALLION PROGRAM), PURSUANT TO S.E.C. RULE 17Ad-15.

3

EX-10.34

Exhibit 10.34

THIRD AMENDMENT TO
PURCHASE AGREEMENT AND ESCROW INSTRUCTIONS

THIS THIRD AMENDMENT TO PURCHASE AGREEMENT AND ESCROW INSTRUCTIONS (“Amendment”) is entered into at San Diego, California as of June 10, 2002, between H. G. FENTON COMPANY, a California corporation which acquired title as H. G. Fenton Material Company (“Seller”), and BIOSITE INCORPORATED, a Delaware corporation (“Buyer”), with reference to the following

R E C I T A L S:

A.Seller and Buyer are the parties to a Purchase Agreement and Escrow Instructions dated as of December 7, 2001 and previously amended as of February 12 and February 14, 2002 (“Agreement”), relating to certain real property in the Carroll Canyon area of San Diego, California as depicted on Exhibit A to the Agreement (“Land”). Initially capitalized terms not otherwise defined in this Amendment have the same meanings as in the Agreement, as previously amended. Pursuant to the Agreement, the parties have established Escrow No. 51943-PM with Stewart Title of California, Inc. as Escrow Holder.

B.The Agreement establishes the Purchase Price as $24.50 per square foot of Net Salable Area of the Land. At the time the Agreement was entered into, the parties anticipated that the Net Salable Area would be 25.8 acres or 1,123,848 square feet, with the Purchase Price thus expected to be $27,534,276.The Grading Certifications described below have now been delivered and approved by Buyer, with the civil engineer certifying that the Net Salable Area is in fact 1,148,879.05 square feet, or 26.37 acres. The parties wish to modify the Agreement to reflect the actual Purchase Price of $28,147,537.

THE PARTIES AGREE:

1.Grading Certifications. Buyer acknowledges that it has received and approved each of the following Grading Certifications, and agrees that the special condition of Paragraph 6.1.5 of the Agreement has been satisfied:

(a)Determination of Net Salable Acres, dated April 15, 2002, prepared by Stuart Engineering (with Area Exhibit);

(b)As-Built Elevations, dated April 15, 2002, prepared by Stuart Engineering (with Elevation Exhibit), and

(c)Final Report of Testing and Observation Services During Grading, Biosite Project Fenton Carroll Canyon Technology Center, Lots 1 through 10, Tentative Map No. 98-1199, San Diego, California, dated April 17, 2002, prepared by Geocon Incorporated.

2.Purchase Price. Based on the Net Salable Area as certified by the civil engineer’s Grading Certification described in Paragraph 1(a), the parties acknowledge and agree that the Purchase

1

Price shall be Twenty-Eight Million One Hundred Forty-Seven Thousand Five Hundred Thirty-Seven Dollars ($28,147,537).

3.Other Matters of Agreement.

(a)This Amendment may be executed in any number of counterparts, each of which will be deemed to be an original, but all of which together will constitute one instrument.

(b)Except to the extent modified hereby, all provisions of the Agreement as previously amended shall remain in full force and effect.

Seller:		Buyer:
H. G. FENTON COMPANY, a California corporation		BIOSITE INCORPORATED, a Delaware corporation
By	/s/ Henry F. Hunte	By	/s/ Christopher J. Twomey
Its	Chairman and CEO	Its	V.P, Finance and Chief Financial Officer
By	/s/ Michael P. Neal	By
Its	President and C.O.O.	Its

2

EX-10.35

Exhibit 10.35

FOURTH AMENDMENT TO
PURCHASE AGREEMENT AND ESCROW INSTRUCTIONS

THIS FOURTH AMENDMENT TO PURCHASE AGREEMENT AND ESCROW INSTRUCTIONS (“Amendment”) is entered into at San Diego, California as of January 24, 2003, between H. G. FENTON COMPANY, a California corporation which acquired title as H. G. Fenton Material Company (“Seller”), and BIOSITE INCORPORATED, a Delaware corporation (“Buyer”), with reference to the following

R E C I T A L S:

A.Seller and Buyer are the parties to a Purchase Agreement and Escrow Instructions dated as of December 7, 2001 and previously amended as of February 12, February 14, and June 10, 2002 (“Agreement”), relating to certain real property in the Carroll Canyon area of San Diego, California as depicted on Exhibit A to the Agreement (“Land”). Initially capitalized terms not otherwise defined in this Amendment have the same meanings as in the Agreement, as previously amended. Pursuant to the Agreement, the parties have established Escrow No. 51943-PM with Stewart Title of California, Inc. as Escrow Holder.

B.The Latest Closing Date under the Agreement as previously amended is currently March 31, 2003. The parties wish to extend the Latest Closing Date by one month.

THE PARTIES AGREE:

1.Extension of Latest Closing Date. The parties agree that the definition of Latest Closing Date shall be modified to read as follows:

“Latest Closing Date” means April 30, 2003, which shall be extended day-for-day, to a maximum extension of six (6) months, for each day of Unavoidable Delay that is caused by restrictions on grading or other Pre-Closing Improvements incident to storm-water runoff requirements.

2.Other Matters of Agreement.

(a)This Amendment may be executed in any number of counterparts, each of which will be deemed to be an original, but all of which together will constitute one instrument.

(b)Except to the extent modified hereby, all provisions of the Agreement as previously amended shall remain in full force and effect.

1

Seller:		Buyer:
H. G. FENTON COMPANY, a California corporation		BIOSITE INCORPORATED, a Delaware corporation
By	/s/ Michael P. Neal	By	/s/ Christopher J. Twomey
Its	President and CEO	Its	V.P. Finance and CFO
By	/s/ Allen Jones	By
Its	Vice President	Its

2

EX-10.36

Exhibit 10.36

FIFTH AMENDMENT TO
PURCHASE AGREEMENT AND ESCROW INSTRUCTIONS

THIS FIFTH AMENDMENT TO PURCHASE AGREEMENT AND ESCROW INSTRUCTIONS (“Amendment”) is entered into at San Diego, California as of April 25, 2003, between H. G. FENTON COMPANY, a California corporation which acquired title as H. G. Fenton Material Company (“Seller”), and BIOSITE INCORPORATED, a Delaware corporation (“Buyer”), with reference to the following

R E C I T A L S:

A.Seller and Buyer are the parties to a Purchase Agreement and Escrow Instructions dated as of December 7, 2001 and previously amended as of February 12, February 14, June 10, 2002 and January 24, 2003 (“Agreement”), relating to certain real property in the Carroll Canyon area of San Diego, California as depicted on Exhibit A to the Agreement (“Land”). Initially capitalized terms not otherwise defined in this Amendment have the same meanings as in the Agreement, as previously amended. Pursuant to the Agreement, the parties have established Escrow No. 51943-PM with Stewart Title of California, Inc. as Escrow Holder.

B.The Final Map has been recorded, and the parties wish to reflect that the legal description of the Land shall now be:

Lots 7, 8 and 9 of FENTON CARROLL CANYON, in the City of San Diego, County of San Diego, State of California, according to Map thereof No. 14555, filed in the Office of the County Recorder of San Diego County, March 10, 2003.

C.The parties also wish to provide for a two-stage acquisition of the Land, with Buyer to close on Lots 7 and 8 of Map No. 14555 (“Recorded Final Map”) by May 29, 2003 (i.e., the current Latest Closing Date), and on Lot 9 of the Recorded Final Map by September 30, 2003.

THE PARTIES AGREE:

1.Satisfaction of Special Conditions.  The parties acknowledge and agree that the special conditions of Paragraphs 6.1.1 through 6.1.6 of the Agreement have all been satisfied.

2.Two-Stage Acquisition.  Instead of a single Closing as contemplated in Paragraph 8.1 of the Agreement, the Escrow shall close, and the Land shall be conveyed by Seller to Buyer, in two stages, as follows:

(a)The first stage (“First Closing”) shall take place on or before May 29, 2003, without the need for further notice from Seller, and shall relate to that portion of the Land described as:

Lots 7 and 8 of FENTON CARROLL CANYON, in the City of San Diego, County of San Diego, State of California, according to Map thereof No. 14555, filed in the Office of the County Recorder of San Diego County, March 10, 2003

(“Lots 7 & 8”).  The portion of the Purchase Price applicable to Lots 7 & 8 shall be $19,076,167 (“Lots 7 & 8 Purchase Price”), or 67.77% of the total Purchase Price, and $677,700 of the Deposits shall be applicable to the Lots 7 & 8 Purchase Price. Except for the description of the real property conveyed (i.e., Lots 7 & 8 instead of all of the Land) and amount of the Purchase Price and

1

applicable portion of the Deposits, the First Closing shall in all other respects be governed by Articles 4, 5, 8, 9 and 10 of the Agreement.

(b)The second stage (“Second Closing”) shall take place on or before September 30, 2003, upon not less than ten (10) business days prior written notice to Buyer and Escrow Holder (although if the Second Closing is to occur on September 30, 2003, no such additional notice shall be required), and shall relate to the remainder of the Land, i.e., that portion described as:

Lot 9 of FENTON CARROLL CANYON, in the City of San Diego, County of San Diego, State of California, according to Map thereof No. 14555, filed in the Office of the County Recorder of San Diego County, March 10, 2003

(“Lot 9”). The portion of the Purchase Price applicable to Lot 9 shall be $9,071,370 (“Lot 9 Purchase Price”), or 32.23% of the total Purchase Price, and $322,300 of the Deposits shall be retained in Escrow following the First Closing for application to the Lot 9 Purchase Price. Except for the description of the real property conveyed (i.e., Lot 9 instead of all of the Land) and amount of the Purchase Price and applicable portion of the Deposits, the Second Closing shall in all other respects be governed by Articles 4, 5, 8, 9 and 10 of the Agreement.

(c)Paragraph 14.3 of the Agreement is amended and restated in its entirety to read as follows:

14.3Liquidated Damages. THE PARTIES AGREE THAT THE PURCHASE PRICE HAS BEEN DETERMINED NOT ONLY BY A CONSIDERATION OF THE VALUE OF THE LAND PER SE BUT ALSO BY A CONSIDERATION OF THE VALUE OF THE VARIOUS COVENANTS, CONDITIONS AND WARRANTIES OF THIS AGREEMENT AS THEY RELATE TO THE LAND. THE IMPLICATIONS OF SUCH VALUES, SOMETIMES MEASURABLE IN RELATION TO KNOWN EXTERNAL STANDARDS AND SOMETIMES DETERMINED ONLY BY SUBJECTIVE BUSINESS JUDGMENTS OF THE PARTIES, ARE ALL INTERRELATED AND AFFECTED BY THE PARTIES’ ULTIMATE AGREEMENT UPON THE PURCHASE PRICE. THE PARTIES HAVE DISCUSSED AND NEGOTIATED IN GOOD FAITH UPON THE QUESTION OF THE DAMAGES THAT WOULD BE SUFFERED BY SELLER IN THE EVENT BUYER BREACHES THIS AGREEMENT. THE PARTIES HAVE ENDEAVORED TO REASONABLY ESTIMATE SUCH DAMAGES AND THEY HEREBY AGREE THAT, BY REASON OF THE AFORESAID CONSIDERATIONS, (I) SUCH DAMAGES ARE AND WILL BE IMPRACTICABLE OR EXTREMELY DIFFICULT TO FIX, (II) LIQUIDATED DAMAGES IN THE AMOUNT OF THE ESCROW OPENING DEPOSIT (AND, AFTER DELIVERY THEREOF, EACH OF THE ADDITIONAL DEPOSITS)ARE AND WILL BE REASONABLE IF BUYER FAILS TO CLOSE ON LOTS 7 & 8, (III) IN THE EVENT OF SUCH BREACH, SELLER SHALL RECEIVE THE ESCROW OPENING DEPOSIT AND (IF DELIVERED) THE ADDITIONAL DEPOSITS AS SUCH LIQUIDATED DAMAGES, (IV) IF BUYER FAILS TO CLOSE ON LOT 9 AFTER THE FIRST CLOSING, LIQUIDATED DAMAGES IN THE AMOUNT OF ALL REMAINING DEPOSITS NOT APPLIED TO THE LOTS 7 & 8 PURCHASE PRICE ARE AND WILL BE REASONABLE IF BUYER FAILS TO CLOSE ON LOT 9 AFTER THE FIRST CLOSING, AND (V) IN CONSIDERATION OF THE PAYMENT OF SUCH LIQUIDATED DAMAGES, SELLER SHALL BE DEEMED TO HAVE WAIVED ANY AND ALL CLAIMS AT LAW OR IN EQUITY, INCLUDING ANY CLAIM FOR DAMAGES OR FOR SPECIFIC PERFORMANCE, EXCEPT FOR: (A) CLAIMS

2

FOR INDEMNITY PURSUANT TO PARAGRAPH 11.2; (B)ACTIONS FOR THE RECOVERY OF THE DEPOSITS FROM ESCROW HOLDER AS LIQUIDATED DAMAGES OR FOR THE RETURN OF DOCUMENTS PURSUANT TO PARAGRAPH 14.2; (C) ACTIONS TO EXPUNGE A LIS PENDENS OR OTHERWISE TO CLEAR TITLE OF ANY LIEN WRONGFULLY FILED OR WRONGFULLY IMPOSED BY BUYER; AND (D) REASONABLE ATTORNEYS’ FEES AND COSTS INCURRED BY SELLER INCIDENT TO CLAUSES (A) THROUGH (C).

Seller’s Initials Buyer’s Initials

3.Additional Expenses Incurred by Buyer.

(a)The parties acknowledge the possibility that the two-stage closing described in Paragraph 1 may cause Buyer to incur additional improvement costs in the course of Buyer’s Project - e.g., Buyer may have to enter into separate design and improvement contracts for Lot 9, with higher unit costs than would have been available had Buyer used a single contract covering design and development of all of the Land, or as a result of Buyer’s mobilizing for the development of Lots 7 & 8 following the First Closing and having to mobilize again for the development of Lot 9 following the Second Closing. Any such additional improvement costs that would not have been incurred by Buyer had there been a single Closing for all of the Land are referred to herein as “Additional Improvement Costs.”  Additional Improvement Costs shall be determined net of any savings that are actually realized by Buyer as a result of the two-stage closing.

(b)The parties have agreed that the first $100,000 of any such Additional Improvement Costs shall be borne by Buyer at its sole expense (“Buyer’s Share”), and that Seller bear any excess above $100,000, according to the following procedure:

(i)Within ninety (90) days after the earlier to occur of (i) completion of Buyer’s Project or (ii) twenty-four (24) months after the Second Closing, Buyer shall calculate and report to Seller the amount of any Additional Improvement Costs incurred by Buyer in excess of Buyer’s Share. The report shall be accompanied by reasonable supporting detail that documents why costs actually incurred were higher than would have been the case had there been a single Closing. Within thirty (30) days after receipt of Buyer’s report and accompanying supporting documentation, Seller shall either approve the determination or provide Buyer a detailed statement of Seller’s grounds for objection thereto.

(ii)If Seller does agree with Buyer’s determination of the Additional Improvement Costs, Seller shall reimburse all Additional Improvement Costs in excess of Buyer’s Share within thirty (30) days thereafter.

(iii)If Seller does not agree with Buyer’s determination of the Additional Improvement Costs, the parties shall meet and confer to see if they are able to resolve the disagreement within thirty (30) days of Seller’s objection thereto. Thereafter, within ten (10) days after the written request of either party, each party shall appoint a qualified engineer who shall have not less than ten (10) years prior experience in land development practices and costs in the general vicinity of the Property similar in size and scope to Buyer’s Project. The two engineers so appointed shall within ten (10) days thereafter appoint a third qualified engineer (who shall be neutral), and the matter shall be finally decided within thirty (30) days after appointment of the third engineer by a majority vote of the three engineers. If one party fails to timely appoint an engineer, the matter shall

3

be finally decided by the single engineer appointed by the other party. All costs and expenses incurred for the engineers shall be borne by the parties equally.

4.Use of Lot 9 for Staging Area Following First Closing.  Following the First Closing, Buyer may, during the term of this Escrow following the First Closing, reasonably go upon Lot 9 for purposes of storing and staging construction materials and equipment, but not for any improvement or construction activities. Buyer shall hold Seller and Lot 9 harmless from any claim, cost, lien, action or judgment (including, without limitation, Seller’s attorneys’ fees and defense costs) incurred by Seller as a result of Buyer’s use of Lot 9 for this purpose, and for personal injury and property damage caused by Buyer or any of its employees, agents or independent contractors except to the extent arising from pre-existing conditions or the negligence or misconduct of Seller or its agents, employees or contractors. Before storing or staging any construction materials and equipment on Lot 9, Buyer shall secure and maintain, at Buyer’s sole cost, a commercial general liability and property damage insurance policy covering Buyer’s activities on the Land, with combined limits of $5,000,000 for personal injury or death, $5,000,000 for property damage, and $5,000,000 policy limit for aggregate operations on an occurrence basis, which shall name Seller as an additional insured. If this Agreement is terminated for any reason prior to the Second Closing, Buyer shall, as soon as practicable after such termination, at Buyer’s sole cost, remove its materials and equipment from Lot 9 and repair any physical damage resulting from its activities thereon and restore Lot 9 to substantially the same condition it was in prior to Buyer’s entry thereon.

5.Other Matters of Agreement.

(a)Brokerage Commission.  Seller shall indemnify, defend and hold Buyer harmless from claims made by the brokers identified in Section 12.8 of the Agreement to the extent arising from the bifurcation of the Closing.

(b)Completion of Infrastructure Improvements.  For purposes of Seller’s obligations under Section 13.2.1 of the Agreement, the term “Close of Escrow” used therein shall be deemed to refer to the First Closing.

(c)Counterparts.  This Amendment may be executed in any number of counterparts, each of which will be deemed to be an original, but all of which together will constitute one instrument.

(d)Effect of Amendment.  Except to the extent modified hereby, all provisions of the Agreement as previously amended shall remain in full force and effect.

Seller:		Buyer:
H. G. FENTON COMPANY, a California corporation		BIOSITE INCORPORATED, a Delaware corporation
By:	/s/ Michael P. Neal	By:	/s/ Christopher J. Twomey
Its:	President and CEO	Its:	V.P., Finance and CFO
By:	/s/ Allen Jones	By:
Its:	Vice President	Its:

4

EX-10.37

Exhibit 10.37

SIXTH AMENDMENT TO
PURCHASE AGREEMENT AND ESCROW INSTRUCTIONS

THIS SIXTH AMENDMENT TO PURCHASE AGREEMENT AND ESCROW INSTRUCTIONS (“Amendment”) is entered into at San Diego, California as of May 27, 2003 between H. G. FENTON COMPANY, a California corporation which acquired title as H. G. Fenton Material Company (“Seller”), and BIOSITE INCORPORATED, a Delaware corporation (“Buyer”), with reference to the following

R E C I T A L S:

A.Seller and Buyer are the parties to a Purchase Agreement and Escrow Instructions dated as of December 7, 2001 and previously amended as of February 12, February 14, June 10, 2002, and January 24 and April 25, 2003 (“Agreement”), relating to certain real property in the Carroll Canyon area of San Diego, California as depicted on Exhibit A to the Agreement (“Land”). Initially capitalized terms not otherwise defined in this Amendment have the same meanings as in the Agreement, as previously amended. Pursuant to the Agreement, the parties have established Escrow No. 51943-PM with Stewart Title of California, Inc. as Escrow Holder.

B.The parties wish to extend the date for the First Closing from May 29 to June 17, 2003.

THE PARTIES AGREE:

1.First Closing.  The First Closing, i.e., the closing for Lots 7 & 8, shall take place on or before June 17, 2003, without the need for further notice from Seller.

2.Other Matters of Agreement.

(a)This Amendment may be executed in any number of counterparts, each of which will be deemed to be an original, but all of which together will constitute one instrument.

(b)Except to the extent modified hereby, all provisions of the Agreement as previously amended shall remain in full force and effect.

Seller:		Buyer:
H. G. FENTON COMPANY, a California corporation		BIOSITE INCORPORATED, a Delaware corporation
By:	/s/ Michael P. Neal	By:	/s/ Michael Dunbar
Its:	President and CEO	Its:	Director of Facilities
By:	/s/ Allen Jones	By:
Its:	Vice President	Its:

EX-10.38

Exhibit 10.38

SEVENTH AMENDMENT TO
PURCHASE AGREEMENT AND ESCROW INSTRUCTIONS

THIS SEVENTH AMENDMENT TO PURCHASE AGREEMENT AND ESCROW INSTRUCTIONS (“Amendment”) is entered into at San Diego, California as of June 16, 2003, between H. G. FENTON COMPANY, a California corporation which acquired title as H. G. Fenton Material Company (“Seller”), and BIOSITE INCORPORATED, a Delaware corporation (“Buyer”), with reference to the following

R E C I T A L S:

A.Seller and Buyer are the parties to a Purchase Agreement and Escrow Instructions dated as of December 7, 2001 and previously amended as of February 12, February 14, and June 10, 2002, and as of January 24, April 25 and May 27, 2003 (“Agreement”), relating to certain real property in the Carroll Canyon area of San Diego, California as depicted on Exhibit A to the Agreement (“Land”). Initially capitalized terms not otherwise defined in this Amendment have the same meanings as in the Agreement, as previously amended. Pursuant to the Agreement, the parties have established Escrow No. 51943-PM with Stewart Title of California, Inc. as Escrow Holder.

B.Since parties’ entry into the Agreement, there have been recorded two agreements between Seller and Hanson Aggregates Pacific Southwest, Inc., a Delaware corporation (“Hanson”), the owner of real property (“Hanson Property”) that is located east of the Land and the other Carroll Canyon holdings of Seller (collectively, the “Fenton Property”): (i) an Agreement Between Adjacent Landowners re Payment of Costs of Camino Santa Fe Improvements, which was recorded in the Office of the County Recorder of San Diego County on April 7, 2003 as Document No. 2003-0384334 (“CSF Agreement”); and a Drainage Facilities Deed Restriction and Agreement Between Adjacent Landowners, which was recorded April 7, 2003 as Document No. 2003-0384335 (“Drainage Agreement”; referred to with the CSF Agreement as the “Hanson Agreements”).

C.The Hanson Agreements burden the Hanson Property and benefit the Fenton Property. The CSF Agreement obligates Hanson to share in certain costs associated with the Camino Santa Fe Improvements component of the Seller Improvements that Fenton is obligated to build pursuant to Paragraphs 7.4 and 13.2 of the Agreement. The Drainage Agreement restricts any future development of the Hanson Property that would require connection to the sewer and storm drainage facilities that are also being constructed by Fenton as part of the Camino Santa Fe Improvements.

D.Because the Hanson Agreements are now of record, the parties wish to modify the Agreement to clarify that as between Seller and Buyer, all obligation and liability arising out of the Hanson Agreements, if any, shall be Seller’s.

THE PARTIES AGREE:

1.The Hanson Agreements.

(a)The parties agree that the Hanson Agreements shall be Permitted Exceptions for all purposes of the Agreement.

1

(b)As between Seller and Buyer, all obligation and liability arising out of the Hanson Agreements, if any, shall belong to Seller, and Buyer shall have no obligation or liability with respect to either of the Hanson Agreements.

(c)To the extent not already encompassed with Seller’s indemnity set forth in Paragraph 13.2.3 of the Agreement, Seller also agrees to indemnify, defend and hold Buyer harmless from liability for any losses, costs (including reasonable attorneys’ fees), claims, liabilities, expenses and demands arising out of any claim by Hanson or any successor of Hanson arising out of or connected with the Hanson Agreements.

(d)Seller acknowledges that the existence of the Hanson Agreements may give rise to certain concerns or requirements of Buyer’s lender, and Seller agrees to use commercially reasonable efforts, not involving the posting of security or the holdback or expenditure of funds, to assist Buyer in satisfying any lender-imposed conditions. Without limiting the generality of the foregoing, Seller agrees that upon request of Buyer or Buyer’s lender, it will (i) seek Hanson’s acknowledgment that the Hanson Agreements will not give rise to any liability on the part of Buyer or the Land after the Close of Escrow, and/or (ii) seek Hanson’s signature on any estoppel or subordination that may reasonably be requested by Buyer’s lender. Nothing in the foregoing shall constitute any representation or warranty by Seller that Hanson will in fact sign any documents or instruments or otherwise cooperate as contemplated herein, and Seller shall not be in default if its efforts in this regard are not successful.

2.Other Matters of Agreement.

(a)This Amendment may be executed in any number of counterparts, each of which will be deemed to be an original, but all of which together will constitute one instrument.

(b)Except to the extent modified hereby, all provisions of the Agreement as previously amended shall remain in full force and effect.

Seller:		Buyer:
H. G. FENTON COMPANY, a California corporation		BIOSITE INCORPORATED, a Delaware corporation
By	/s/ Henry F. Hunte	By	/s/ Christopher J. Twomey
Its	Chairman	Its	V.P., Finance and CFO
By	/s/ Robert Gottlieb	By
Its	CFO	Its

2

EX-10.39

Exhibit 10.39

*** Text omitted and filed separately

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 May 13, 2003 (the “Effective Date”) is entered into between BIOSITE INCORPORATED, a Delaware corporation (“Biosite”), with a place of business at 11030 Roselle Street, Suite D, San Diego, California 92121, and PSS WORLD MEDICAL, INC. (“PSS”), with a place of business at 4345 Southpoint Boulevard, Jacksonville, Florida 32216.  The parties hereby agree as follows:

1.APPOINTMENT AND SCOPE

1.1Appointment.  Subject to the terms and conditions of this Agreement, including but not limited to the restrictions set forth in Sections 1.2 and 1.3, Biosite hereby appoints PSS as a distributor of the products listed in Schedule A (the “Products”) in the territory described in Schedule B (the “Territory”), and PSS hereby accepts such appointment, as set forth in clauses (a) through (d) of this Section 1.1.

(a)From the Effective Date until December 31, 2003, the appointment for Products described in Part 1 of Schedule A (the “[***]”) shall be (i) [***] for Physician Office Practices (as defined in Schedule B) of less than [***] physicians, and (ii) [***] (with [***] or its assignee) for Physician Office Practices of [***] or more physicians;

(b)Effective as of [***] until [***], the appointment for [***] shall be (i) [***] (with [***] or its assignee) for Physician Office Practices of [***] or more physicians to which [***] or its assignee has distributed [***] prior to [***], and (ii) [***] for all other Physician Office Practices;

(c)Effective as of [***] until [***], the appointment for [***] shall be [***](as described below) for all Physician Office Practices.  For purposes of this Section 1.1(c), “[***]” means that Biosite has the right to sell and distribute [***] directly and to appoint a limited number of other distributors to sell and distribute [***]; and

(d)From the Effective Date until [***], the appointment (i) for the [***] described in Part 2 of Schedule A (the “[***]”) shall be [***] for all Physician Office Practices, and (ii) for all other Products described in Part 2 of Schedule A shall be [***] for Physician Office Practices of less than [***] physicians.

1.2Performance Criteria.  Subject to Section 1.2(a), if PSS fails to achieve the applicable minimum sales objectives set forth in Schedule C for [***] or [***] for any measurement period set forth in Schedule C, then (a) the parties shall meet no later than sixty (60) days after the end of the applicable measurement period to discuss PSS’ efforts to meet such minimum sales objectives, and (b) Biosite shall have the right (in its sole discretion) as of the end of such sixty (60) day period to [***]of this Agreement, effective upon written notice to PSS.  The parties expressly agree that Biosite may not terminate this Agreement solely due to PSS failing to achieve such minimum sales objectives.

(a)PSS shall not be responsible for failing to achieve the applicable minimum sales objectives set forth in Schedule C to the extent caused by (i) Biosite’s breach of its obligations under this Agreement with respect to the delivery of the applicable Products by Biosite to PSS, or (ii) Biosite recalling the applicable Products and not replacing such recalled Products in a prompt manner.

* Confidential Treatment Requested

1.3Appointment Restrictions.

(a)Notwithstanding anything to the contrary in this Agreement, PSS shall not have the right to distribute Products to any customer which, as of the Effective Date, has purchased Products from Biosite or [***](but not any other distributor of Biosite) other than a customer that [***](provided that prior to making any sale of a Product to any such customer, (i) PSS shall provide the customer’s written statement to Biosite and (ii) PSS shall first allow Biosite, for thirty (30) days after Biosite receives such written statement from PSS, to contact the customer to discuss the customer’s statement).

(b)PSS shall refrain from directly or indirectly (i) seeking customers for, establishing any branch for, or maintaining any distribution depot or network for the sale of, the Products outside of the Territory, or (ii) selling the Products to any person or entity other than Physician Office Practices in the market segments as expressly described above.

(c)The Territory shall not include, and PSS shall not be permitted to sell the Products in, any territory or to any market segment not expressly described in the Agreement.  PSS shall take reasonable steps to limit the likelihood that PSS’s customers in the Territory purchase Products for resale outside of the Territory.

(d)PSS shall not have the right to appoint sub-distributors, except as approved by Biosite in advance writing.  Any permitted sub-distributors shall be subject to the provisions of this Agreement.

1.4Products.  PSS only has a right to sell and distribute the Products pursuant to the terms and conditions of this Agreement.  PSS has no right to sell or distribute any other Biosite product unless subject to a separate written agreement by the parties on a product by product basis.

1.5Noncompetition.  PSS shall not, during the period of the [***] appointment for [***] under Sections 1.1(a) and 1.1(b) (the “[***] Period”), directly or indirectly sell, offer for sale, or act as sales agent for the solicitation of orders for any product that measures or detects the presence or absence of any [***], with or without the [***], including without limitation [***].

1.6Independent Purchaser Status.  PSS is an independent purchaser and seller of the Products.  PSS shall not act as an agent or legal representative of Biosite, nor shall PSS have any right or power to act for or bind Biosite in any respect or to pledge its credit.  PSS shall be free to resell Products to Customers in the Territory on such terms as it may, in its sole discretion, determine, including, without limitation, price, returns, credits and discounts.

1.7Perishable Products.  PSS acknowledges that the Products are perishable, and shall manage its inventory such that products are shipped throughout the Territory on a first-in-first-out basis.  PSS shall be responsible for and shall bear the full risk with respect to any unsold quantities of the Products remaining in PSS’s inventory beyond the stated shelf-life thereof; however, if PSS received from Biosite any such unsold perishable [***] that had a posted expiration date of [***] or less from the date of shipment of such [***] from Biosite to PSS, then Biosite shall replace such expired [***](provided that Biosite may first require PSS to provide reasonable evidence of PSS’s compliance with this Section 1.7).

2.TERMS AND CONDITIONS OF SALE

2.1Price.  PSS shall purchase the Products from Biosite at the applicable prices set forth in Schedule A.  Prices shall be subject to change by Biosite on [***] prior written notice to PSS.  PSS shall pay Biosite for purchases of the Products within [***] from PSS’s receipt of invoice.  PSS shall make all such payments in United States dollars to such account as Biosite designates for such purpose.

2

2.2Any late payment shall be a material breach of this Agreement by PSS, provided however, and notwithstanding the provisions of Section 8.2, Biosite shall not have the right to terminate this Agreement for a late payment unless Biosite has first provided written notice to PSS that Biosite intends to terminate the Agreement if PSS does not remedy such breach within [***] after PSS’s receipt of such notice (such notice from Biosite shall not be required if PSS has made a late payment for the third time or more).  From time to time during the term of this Agreement, the parties shall meet and discuss in good faith whether market conditions warrant an adjustment to the applicable prices set forth in Schedule A.  For any past due amounts due by PSS to Biosite under this Agreement, PSS shall pay to Biosite (i) a late charge of [***] per month or the maximum rate permitted by law, whichever is less, on the past due amounts until paid in full and (ii) any costs (including reasonable attorneys’ fees) incurred by Biosite in collecting or enforcing any payment obligations under this Agreement.

2.3Taxes.  PSS shall pay all sales, use and transfer taxes and other charges arising out of the purchase and sale of the Products, including any state and local personal property taxes and all inspection fees and duties, applicable to the sale and transport of the Products by PSS in the Territory which are applicable thereto.  Biosite shall not be responsible for any business, occupation, withholding or similar tax, or any taxes of any kind, relating to the purchase and sale of the Products.

2.4Terms of Sales.  Products shall be shipped F.O.B. Biosite’s facility in San Diego, California, with freight and insurance paid by PSS.  Risk of loss shall pass to PSS upon delivery to PSS’s designated carrier or another common carrier at Biosite’s facility in San Diego, California.  Biosite shall notify PSS of scheduled delivery dates by written acknowledgement of PSS’s order.  Biosite shall use its reasonable commercial efforts to meet requested delivery dates, provided that Biosite shall have no liability for any late delivery.  Unless Biosite otherwise expressly agrees in writing, the lead time for shipping of Products shall be not more than [***] after receipt of PSS’s order by Biosite.  Notwithstanding the foregoing, Biosite may defer shipment of Products if and while PSS is in default of any of its obligations owing to Biosite under this Agreement, including PSS’s obligations to pay any amounts when due.  If PSS requests drop shipment for a customer, the entire cost of the transportation designated by PSS shall be borne by PSS.

2.5Orders.  PSS shall make all purchases hereunder by submitting firm written purchase orders to Biosite.  Such purchase orders shall be in writing and in a form reasonably acceptable to Biosite.  In the event of any inconsistency between the terms and conditions of any purchase order and this Agreement, the terms and conditions of this Agreement shall prevail.  Purchase orders shall not be binding upon Biosite unless and until accepted by Biosite.  Within [***] after receipt of a purchase order, Biosite shall notify PSS in writing of its acceptance or rejection of such purchase order and of the scheduled delivery dates if the purchase order is accepted.  Biosite shall be deemed to have accepted a purchase order in the event it does not provide written rejection of such purchase order within the foregoing timeframe.

2.6Returned Goods.  If Products fail to conform with the specifications established by Biosite therefor, PSS shall, within [***] after receipt of the Products, return such nonconforming Products to Biosite or dispose locally, as Biosite so directs, after obtaining return authorization from Biosite.  In both cases all reasonable out-of-pocket expenses (including shipping of returned Products and replacement Product) shall be borne by Biosite provided that PSS follows Biosite’s return instructions.  Should any Product be properly returned as provided above, Biosite shall replace the returned Product as soon as reasonably practicable.  Such replacement Product shall be at no additional cost to PSS if PSS had previously paid Biosite for the returned Product.  Notwithstanding the foregoing, Biosite shall not be responsible for any Products which fail to pass PSS’s quality control as a result of improper storage and handling during or after shipment to PSS.  EXCLUDING BIOSITE’S INDEMNIFICATION OBLIGATIONS UNDER SECTIONS 2.7(d) AND 6, THE REPLACEMENT OF THE RETURNED GOODS BY BIOSITE UNDER THIS SECTION 2.6 SHALL BE PSS’S SOLE AND EXCLUSIVE REMEDY FOR THE FAILURE OF THE PRODUCTS TO CONFORM WITH THE SPECIFICATIONS ESTABLISHED BY BIOSITE THEREFOR.

2.7Warranty, Restrictions and Limitations.

(a)Biosite warrants that the Products shall perform as stated in the written specifications established by Biosite therefor as set forth in the then current Product insert or other written specifications provided or made available by Biosite with respect to the Products.  Biosite’s Product

3

specifications are subject to change upon thirty (30) days’ notice to PSS; provided, however, that Products shall perform substantially as described in the specifications and Product insert or other written specifications provided or made available by Biosite with respect to the Products as of the date of this Agreement.  The remedy and limitations applicable to such warranty shall be as set forth in the Product insert.

(b)OTHER THAN AS EXPRESSLY SET FORTH IN SECTION 2.7(a) ABOVE, BIOSITE DISCLAIMS ALL WARRANTIES, WHETHER EXPRESS, IMPLIED OR STATUTORY, INCLUDING, WITHOUT LIMITATION, NON-INFRINGEMENT OF THIRD PARTY RIGHTS, MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE.

(c)PSS shall distribute Products labeled by Biosite to customers in the Territory so as to include all warnings and instructions necessary for the proper use of the Products.  PSS hereby represents and warrants that neither PSS 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 6.2 hereof, PSS shall defend, indemnify and hold Biosite harmless from all losses, liabilities, damages and expenses (including reasonable attorneys’ fees and costs) resulting from any claims, demands, actions and other proceedings by any third party to the extent resulting from (i) representations or claims by PSS with respect to the Products which are not authorized by Biosite; (ii) PSS’s willful act or omission in connection with the sale, marketing, promotion or distribution of the Products; or (iii) any claim or failure by PSS to comply with governmental regulatory requirements relating to the Products which are applicable to distributors of products.

(d)Subject to the provisions of Section 6.2 hereof, Biosite shall defend, indemnify and hold PSS harmless from all losses, liabilities, damages and expenses (including reasonable attorneys’ fees and costs) resulting from any claims, demands, actions and other proceedings by any third party to the extent resulting from or alleging that any Product infringes any patent, trademark, copyright, trade secret or other intellectual property right of a third party, provided that such infringement is not a result of (i) any modification to a Product not expressly permitted by Biosite in writing or (ii) any use of a Product other than pursuant to Product specifications and documentation.

2.8Administrative Fees.  [***]

3.COVENANTS OF PSS

3.1Sales Promotion.  PSS shall use its best efforts to promote, market and sell the Products to Physician Office Practices in the Territory in the market segments expressly described above.  PSS shall provide complete training of PSS’s sales representatives in the use of the Products.  PSS shall provide to each potential customer of Products a full functional demonstration of such Products.

3.2Expenses.  PSS shall be responsible for all of its and its employees expenses.  PSS agrees that it shall incur no expense chargeable to Biosite, except as may be specifically authorized in advance writing in each case by Biosite.

3.3Promotional Materials; Package Inserts.  PSS shall ensure that all advertising, promotional literature, packaging and package inserts comply with applicable laws and regulations.  PSS shall submit each of the foregoing to Biosite for review.  PSS shall not use any advertising or promotional materials to promote the Products or any packaging or package inserts that have not been approved in advance writing by Biosite, which approval shall not be unreasonably withheld.  PSS shall prepare any necessary translations of Biosite’s sales literature, package inserts and labeling. 

3.4Sales and Marketing Support and Training.  PSS shall provide Biosite [***] for all [***] as often as PSS [***] to its other suppliers.  During the period of the [***] under [***], PSS shall also provide the [***] described in [***].

4

3.5Customer and Sales Information.  PSS shall provide Biosite, [***] during the term hereof, with [***] regarding [***] in the [***] that have [***] from [***].   Such [***] include, without limitation, [***].  Notwithstanding [***] of such information, nothing herein shall preclude [***] from the right or ability to use such information for its lawful business purposes.

3.6Product Storage and Handling.  PSS shall comply with Biosite’s reasonable instructions regarding the storage and handling of the Products, and except as otherwise provided in this Agreement, PSS shall be solely responsible for the cost thereof.

3.7Reports.  At Biosite’s request, PSS shall submit to Biosite such other reports as are customarily provided by PSS to suppliers similarly situated with Biosite.

3.8Inventory.  At all times during the term of this Agreement, PSS shall maintain inventory of each Product sufficient to satisfy not less than PSS’s requirements for its reasonably forecasted sales of such Product.

3.9Product Information.  During the term of this Agreement, PSS shall keep complete and accurate records tracking each [***] on a customer by customer basis, by product serial number, sufficient to enable Biosite to conduct product recalls, product investigations, software updates, customer support and the like.  Additionally, by no later than twelve (12) months after the Effective Date of the Agreement and for the remaining term of the Agreement, PSS shall keep complete and accurate records tracking each other Product, on a customer by customer basis, by whatever means Biosite identifies each individual item of Product (whether by product serial number, lot number, or otherwise), sufficient to enable Biosite to conduct product recalls, product investigations, software updates, customer support and the like.  PSS shall maintain all records obtained during the term of the Agreement for a period of three (3) years after termination of the Agreement.  PSS shall provide all such information to Biosite as soon as reasonably practicable after Biosite’s written request therefor.

4.COVENANTS OF BIOSITE

4.1Sales and Marketing Support.  Biosite shall provide to PSS literature and technical information relating to the Products and their proper use, in such reasonable quantities as to be agreed upon by the parties.  Unless otherwise expressly agreed by both parties, all such information and materials shall be furnished [***] to PSS.  During the Exclusive Period, subject to PSS complying with its obligations under this Agreement, Biosite will provide the marketing support described in Schedule E.

4.2Assistance.  Biosite shall provide PSS with reasonable access to and assistance of its technical, sales, and service personnel in San Diego, California as Biosite deems appropriate.  Such assistance shall be without charge to PSS except as may be otherwise mutually agreed.

4.3Price Incentive.

(a)If [***] has (i) [***] of the [***] for [***] set forth in [***] for [***], and (ii) [***] for [***] set forth in [***] for [***], then following the [***], Biosite shall [***] an [***] of the [***] by [***] for the [***]

(b)If [***] has (i) [***] of the [***] for [***] set forth in [***] for [***], and (ii) [***] for [***] set forth in [***] for [***], then following the end of [***], Biosite shall [***] an [***] of the [***] by [***] for the [***].

5

4.4Technical Support.  Biosite shall provide 24 hour, 7-day/week telephone based technical support for customers in accordance with Biosite’s customer service policies and practices.

5.CONFIDENTIALITY

5.1Confidential Information.  “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 (including without limitation, customer information, financial information, documents, drawings, machinery, patent applications, records, reports), which is disclosed by such party (the “Disclosing Party”) to the other party (the “Receiving Party”).  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 Receiving Party, (b) to have become publicly known, without fault on the part of the Receiving Party, subsequent to disclosure of such information by the Disclosing Party to the Receiving Party, (c) to have been received by the Receiving 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 Receiving Party prior to disclosure of such information by the Disclosing Party to the Receiving Party, or (e) to have been independently developed by employees or agents of the Receiving Party without access to or use of such information disclosed by the Disclosing Party to the Receiving Party.  Notwithstanding anything to the contrary set forth above, “Confidential Information” shall not include any information provided to Biosite under Sections 3.5, 3.9, or 8.3(d).

5.2Confidentiality Obligations.  During the term of this Agreement, and for a period of [***] following the expiration or earlier termination hereof, the Receiving Party shall maintain in confidence and not use, disclose or grant the use of the Confidential Information except on a need-to-know basis of those of its directors, officers and employees to the extent such disclosure is reasonably necessary in connection with the Receiving Party’s activities as expressly authorized by this Agreement.  To the extent that disclosure is authorized by this Agreement, prior to disclosure, the Receiving Party shall obtain agreement of any such person or entity to hold in confidence and not make use of the Confidential Information for any purpose other than those permitted by this Agreement.  The Receiving Party shall notify the Disclosing Party promptly upon discovery of any unauthorized use or disclosure of the Confidential Information.

5.3Permitted Disclosures.  The confidentiality obligations contained in this Section 5 shall not apply to the extent that the Receiving Party is required to disclose information by law, order or regulation of a governmental agency or a court of competent jurisdiction, provided that the Receiving Party shall provide written notice thereof to the Disclosing Party and sufficient opportunity to object to any such disclosure or to request confidential treatment thereof.

6.INDEMNIFICATION

6.1Mutual Indemnity.  In addition to the indemnification obligations set forth in Section 2.7, each party (the “Indemnitor”) shall defend, indemnify and hold the other party (the “Indemnitee”) harmless from all losses, liabilities, damages and expenses (including reasonable attorneys’ fees and costs) resulting from any claims, demands, actions and other proceedings by any third party to the extent resulting from (a) any material breach of this Agreement by the Indemnitor, (b) any recklessness or intentional act or omission by or on behalf of the Indemnitor in the performance of its activities under this Agreement, (c) any misrepresentations by the Indemnitor, or (d) any violation by the Indemnitor (or any of its employees or agents) of, or failure to adhere to, any applicable law, regulation or order in any country, in each case other than those certain losses, liabilities, damages and expenses arising out of the gross negligence or willful misconduct of the Indemnitee.  The obligations of the parties under this Section 6.1 shall survive expiration or termination of this Agreement.

6.2Procedure.  If the Indemnitee intends to claim indemnification under this Section 6, it shall promptly notify the Indemnitor in writing of any claim, demand, action or other proceeding for which the Indemnitee intends to claim such indemnification, and the Indemnitor shall have the right to participate in, and, to the extent the Indemnitor so desires, to assume the defense thereof with counsel mutually satisfactory to the

6

parties.  The obligations under this Section 6 shall not apply to amounts paid in settlement of any claim, demand, action or other proceeding if such settlement is effected without the consent of the Indemnitor, which consent shall not be withheld or delayed unreasonably.  The failure to deliver written notice to the Indemnitor within a reasonable time after the commencement of any such action, if prejudicial to its ability to defend such action, shall relieve the Indemnitor of any obligation to the Indemnitee under this Section 6, but the omission so to deliver written notice to the Indemnitor shall not relieve it of any obligation that it may have to any party claiming indemnification otherwise than under this Section 6.  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 6.

6.3Insurance.  Each party shall maintain comprehensive commercial general liability insurance, including contractual liability insurance and product liability insurance against claims regarding its activities contemplated by this Agreement, in such amounts as it customarily maintains for similar products and activities, which with respect to Biosite shall not be less than [***] Combined Single Limit Bodily Injury  & Property Damage Each Occurrence [***] Aggregate including coverage for products and completed operations, contractual liability insuring the obligations assumed by Biosite under this Agreement, independent contractors, and personal and advertising injury coverages. Each party shall maintain such insurance during the term of this Agreement and thereafter for so long as it maintains insurance for itself covering such activities.  Coverage shall be written on a Standard ISO Occurrence Form CG00010196 or its equivalent.  Upon execution of the contract, and annually for the term of this Agreement, the parties will provide a renewal certificate of insurance reflecting such policies and coverages as outlined above.  Such certificate shall reflect that the underlying policies have been endorsed to provide at least 30 days prior written notice to the other party of the cancellation, non-renewal, reduction or material change of any such insurance coverage.

7.TRADEMARKS, PATENTS AND COPYRIGHTS.

7.1Trademarks and Trade Names.  PSS shall not use or register any of Biosite’s trademarks, or any mark or name confusingly similar thereto, as part of its corporate or business name or in any manner, except that (a) PSS may identify itself as an authorized distributor of Biosite; and (b) PSS may use Biosite’s trademarks relating to the Products for display purpose in connection with solicitation of orders for Products.  The use by PSS of Biosite’s trademarks and all goodwill associated therewith shall inure to the benefit of Biosite.  PSS shall prior to use provide to Biosite examples of its use of Biosite’s trademarks and shall modify such use if requested by Biosite.  PSS shall not do or cause to be done any act or anything contesting or in any way impairing or reducing Biosite’s right, title or interest in Biosite’s trademarks.

7.2Product Markings.  PSS shall not alter, remove or modify any Biosite trademarks, labels or markings, nor affix any other trademarks, labels or markings to the Products without Biosite’s consent; provided that PSS may affix labels or other indices on Products it distributes to identify it as the distributor of Products so long as such labels to not cover and are not inconsistent with Biosite’s trademarks, labels or markings.  No other PSS labels, package inserts or other material shall accompany the Products without the approval of Biosite.

7.3Trademarks and Patents Protection.  PSS shall inform Biosite as soon as reasonably practicable after becoming aware of any infringements or risk of infringements (a) by a third party of Biosite’s intellectual property (including but not limited to brands, trademarks, copyrights, and patents), or (b) by Biosite’s products of third party’s intellectual property or claims of such by a third party.  PSS agrees to assist Biosite to the best of its ability to defend Biosite’s interest particularly to follow instructions and to take any reasonable measures as will be asked by Biosite in such matters.  Biosite will assume the cost of any legal actions in the defense of its intellectual property.

7.4Copyrights.  PSS hereby acknowledges that Biosite has claimed, or may claim, copyright protection with respect to certain parts of the Products and the labels, inserts and other materials regarding the Products.  PSS further acknowledges the validity of Biosite’s right to claim copyright protection with respect to such items.  PSS further acknowledges that Biosite has advised PSS that it has the sole and exclusive right to claim the copyright protection with respect to all such items.  PSS shall take no action or make no omission which is any way inconsistent with Biosite’s claim of copyright protection with respect to such items.

7

8.TERM AND TERMINATION

8.1Term.  This Agreement shall be effective as of the Effective Date and shall terminate on [***], unless terminated earlier pursuant to the provisions set forth below.  The parties shall meet on approximately [***], to discuss whether the parties desire to extend the term of this Agreement for an additional period of [***], provided that neither party shall be obligated to agree to extend the term of this Agreement.  If the parties agree to extend the term of this Agreement, such agreement and extended term shall be set forth in a separate written document.

8.2Termination.  This Agreement may be terminated by either party, in the event the other party shall fail to perform any of its material obligations hereunder and should fail to remedy such non-performance within thirty (30) calendar days after receiving written demand therefor.

8.3Rights of Parties on Expiration or Termination.  The following provisions shall apply on the expiration or termination of this Agreement.

(a)Subject to PSS’s right to sell Products remaining in inventory as set forth below, PSS shall cease all sales and other activities on behalf of Biosite and shall return to Biosite and immediately cease all use of any Confidential Information of Biosite then in PSS’s possession.

(b)Upon any termination of this Agreement, for a period of [***] after such termination (the “Initial Sell-Off Period”), PSS shall have the right to sell off its remaining inventory of Products (and to exercise such rights provided for under this Agreement as reasonably required for PSS to sell such remaining stock).  Within five (5) business days after the conclusion of the Initial Sell-Off Period, PSS shall provide to Biosite in writing a list of PSS’s remaining inventory of the Products (the “Inventory Notice”).  Biosite may, at its option, by providing written notice to PSS within five (5) business days after receipt of the Inventory Notice, repurchase PSS’s inventory of Products (as set forth in the Inventory Notice) at the purchase price paid by PSS to Biosite therefor, plus reasonable freight, insurance and duties.  In case Biosite is not willing to repurchase such inventory of PSS, for a period of [***] after Biosite provides written notice to PSS that Biosite is electing not to repurchase PSS’s inventory of the Products (the “Final Sell-Off Period”), PSS shall have the right to sell off the remaining inventory of Products as set forth in the Inventory Notice (and to exercise such rights provided for under this Agreement as reasonably required for PSS to sell such remaining stock).  Within five (5) business days after the conclusion of the Final Sell-Off Period, PSS shall destroy its remaining inventory of the Products and shall provide written confirmation thereof to Biosite.

(c)Subject to PSS’s right to sell Products remaining in inventory as set forth above, PSS shall remove from its property and immediately discontinue all use, directly or indirectly, of trademarks, designs, and markings owned or licensed exclusively by Biosite, or any word, title, expression, trademark, design, or marking that is confusingly similar thereto.

(d)PSS shall provide to Biosite, within three (3) business days after the conclusion of the Initial Sell-Off Period, complete and up-to-date information regarding customers in the Territory that have purchased the Products from PSS.  Such information shall include, without limitation, customer name, address, telephone number, and unit sales by each customer sorted by zip code.  In the event that this Agreement is terminated due to breach by PSS, or in the event that this Agreement is not extended, due to PSS’s election, for an additional period of [***] after [***] pursuant to the terms and conditions of Section 8.1, then such information to be provided by PSS shall also include Product price and revenue by each customer sorted by zip code.  All such information provided by PSS under this Section (d) shall be solely owned by Biosite.  Notwithstanding Biosite’s ownership of such information, nothing herein shall preclude PSS from the right or ability to use such information for its lawful business purposes.

8.4Sole Remedy.  Other than due to a breach of this Agreement by Biosite, provisions pursuant to Section 8.3(b) shall constitute PSS’s sole remedy for the termination or non-renewal of this Agreement.  NOTWITHSTANDING ANY OF THE PROVISIONS OF THIS AGREEMENT, OTHER THAN A

8

PARTY’S LIABILITY IN CONNECTION WITH ANY BREACH OF SECTION 5, AND OTHER THAN A PARTY’S INDEMNITY OBLIGATIONS UNDER SECTIONS 2.7 OR 6, NEITHER PARTY SHALL, BY REASON OF THE TERMINATION OF THIS AGREEMENT OR OTHERWISE, BE LIABLE TO THE OTHER PARTY FOR ANY SPECIAL, INCIDENTAL, PUNITIVE, INDIRECT OR CONSEQUENTIAL DAMAGES SUCH AS, BUT NOT LIMITED TO, COMPENSATION OR DAMAGES FOR LOSS OF PRESENT OR PROSPECTIVE PROFITS OR REVENUES, LOSS OF ACTUAL OR ANTICIPATED REVENUE ON SALES OR ANTICIPATED SALES, OR EXPENDITURES, INVESTMENTS OR COMMITMENTS MADE IN CONNECTION WITH THE ESTABLISHMENT, DEVELOPMENT OR MAINTENANCE OF THE DISTRIBUTORSHIP CREATED BY THIS AGREEMENT OR IN CONNECTION WITH THE PERFORMANCE OF OBLIGATIONS HEREUNDER, WHETHER OR NOT THE OTHER PARTY HAS BEEN NOTIFIED OF THE POSSIBILITY OF SUCH DAMAGES.  NOTWITHSTANDING ANY OF THE PROVISIONS OF THIS AGREEMENT, OTHER THAN A PARTY’S LIABILITY IN CONNECTION WITH ANY BREACH OF SECTION 5, AND OTHER THAN A PARTY’S INDEMNITY OBLIGATIONS UNDER SECTION 2.7 OR 6, NEITHER PARTY SHALL BE LIABLE TO THE OTHER PARTY FOR ANY AND ALL CLAIMS UNDER THIS AGREEMENT IN AN AMOUNT IN THE AGGREGATE GREATER THAN THE AMOUNTS PAID OR PAYABLE BY PSS TO BIOSITE ON SALES OF BIOSITE’S PRODUCTS DURING THE TERM OF THIS AGREEMENT.  THE LIMITATIONS SET FORTH HEREIN SHALL APPLY NOTWITHSTANDING THE FAILURE OF THE ESSENTIAL PURPOSE OF ANY LIMITED WARRANTIES OR REMEDIES SET FORTH IN THIS AGREEMENT.

9.GENERAL PROVISIONS

9.1Entire Agreement.  This Agreement represents the entire Agreement between the parties on the subject matter hereof and supersedes all prior discussions, agreements, and understandings of every kind and nature between them.  No modification or amendment of this Agreement shall be effective unless in writing and signed by both parties.

9.2Notices.  All notices under this Agreement shall be in writing and addressed to the parties at the following addresses:

If to Biosite		With copy to:
	Biosite Incorporated	Gray Cary Ware & Freidenrich LLP
	11030 Roselle Street, Suite D	4365 Executive Drive, Suite 1100
	San Diego, California 92121	San Diego, California 92121-2133
	Attention: President	Attention: Mark R. Wicker, Esq.
If to PSS:
	PSS World Medical, Inc.
	4345 Southpoint Boulevard
	Jacksonville, FL 32216
	Attention: President

or to such other address of which either party may advise the other in writing.  Notices shall be effective on receipt.

9.3Force Majeure.  Each party shall be excused from any delay or failure in performance of any obligation hereunder (other than an obligation for the payment of money) caused by reason of any occurrence or contingency beyond its reasonable control, including, but not limited to an act of God, earthquake, labor disputes, riots, government requirements, regulatory and environmental requirements, inability to secure materials and transportation difficulties.  The obligations and rights of the party so excused shall be extended on a day-to-day basis for the time period equal to the period of such excusable delay.

9.4Assignments.  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

9

substantially all of its business, or in the event of its merger, consolidation, change in control or 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 9.4 shall be void.

9.5Applicable Law.  This Agreement shall be construed and enforced in accordance with the laws of the State of California, without regard to its conflict of laws provisions.

9.6Waiver.  No term or provision hereof will be considered waived by either party, and no breach excused by either party, unless such waiver or consent is in writing signed on behalf of the party against whom the waiver is asserted.  No consent by either party to, or waiver of, a breach by either party, whether express or implied, will constitute a consent to, waiver of, or excuse of any other, different, or subsequent breach by either party.

IN WITNESS WHEREOF, Biosite and PSS have caused this Agreement to be executed by their duly authorized representatives, as of the date year first above written.

BIOSITE INCORPORATED			PSS WORLD MEDICAL, INC.
By:	/s/ Christopher J. Twomey		By:	/s/ Gary A. Corless
Title:		Vice President Finance, CFO	Title:			President
			By:		/s/ John F.  Sasen, Sr.
			Title:			EVP and Chief Marketing Officer

10

SCHEDULE A

PRODUCTS AND PRICING

Part 1

Catalog Number	Product	Size	Transfer Price
[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]

Part 2

Catalog Number	Product	Size	Transfer Price
[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]

11

[***]

12

SCHEDULE B

PHYSICIAN OFFICE PRACTICE AND TERRITORY

Physician Office Practice means [***]

Territory means the United States and Puerto Rico.

13

SCHEDULE C

PERFORMANCE CRITERIA

Minimum Sales Objectives:

Measurement Period	End User [***]	End User [***]
[***]	[***]	[***]
[***]	[***]	[***]

14

SCHEDULE D

SUPPORT FROM PSS

PSS shall perform the following activities at no charge to Biosite:

1.             [***]

2.             [***]

3.             [***]

4.             [***]

5.             [***]

6.             [***]

7.             [***]

15

SCHEDULE E

SUPPORT FROM BIOSITE

Biosite shall provide Product marketing support to PSS in the Territory for the Physician Office Practices as follows:

1.[***]

	[***]	[***]	[***]	[***]	[***]	[***]	[***]	[***]	[***]
[***]		[***]	[***]		[***]	[***]		[***]
[***]	[***]	[***]		[***]	[***]		[***]	[***]

2.[***]

3.[***]

4.[***]

5.[***]

6.[***]

7.[***]

8.[***]

9.[***]

10.[*** ]

11.[***]

16

SCHEDULE F

PRICE INCENTIVE OBJECTIVES FOR CALENDAR YEAR 2003

[***]	[***]
[***]	[***]

17

EX-31.1

EXHIBIT 31.1

BIOSITE INCORPORATED

CHIEF EXECUTIVE OFFICER CERTIFICATIONS

I, Kim D. Blickenstaff, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Biosite Incorporated;

2. Based on my knowledge, this quarterly 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 quarterly report;

3. Based on my knowledge, the financial statements, and other financial information included in this quarterly 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 quarterly 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)) 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 quarterly report is being prepared;

b) 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

c) 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 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 controls 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: August 4, 2003
	/s/ Kim D. Blickenstaff
	Kim D. Blickenstaff
	President, Chief Executive Officer,
	Secretary and Treasurer

EX-31.2

EXHIBIT 31.2

BIOSITE INCORPORATED

CHIEF FINANCIAL OFFICER CERTIFICATIONS

I, Christopher J. Twomey, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Biosite Incorporated;

2. Based on my knowledge, this quarterly 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 quarterly report;

3. Based on my knowledge, the financial statements, and other financial information included in this quarterly 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 quarterly 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)) 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 quarterly report is being prepared;

b) 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

c) 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 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 controls 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: August 4, 2003
	/s/ Christopher J. Twomey
	Christopher J. Twomey
	Vice President, Finance and
	Chief Financial Officer

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 Quarterly Report of Biosite Incorporated (the “Company”) on Form 10-Q for the period ending June 30, 2003 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 § 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 Securities Exchange Act of 1934; 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

August 4, 2003

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 Securities Exchange Act of 1934, as amended.

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 Quarterly Report of Biosite Incorporated (the “Company”) on Form 10-Q for the period ending June 30, 2003 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 § 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 Securities Exchange Act of 1934; 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

August 4, 2003

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 Securities Exchange Act of 1934, as amended.