10-Q

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

(Mark One)

ýQUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2005

OR

oTRANSITION 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)	(Zip Code)

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

May 5, 2005 was 16,894,488.

BIOSITE INCORPORATED

FORM 10-Q

INDEX

PART I.		FINANCIAL INFORMATION
ITEM 1.	FINANCIAL STATEMENTS.
		Condensed Consolidated Balance Sheets
		Condensed Consolidated Statements of Income (Unaudited)
		Condensed Consolidated Statements of Cash Flows (Unaudited)
		Notes to Condensed Consolidated Financial Statements (Unaudited)
ITEM 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
ITEM 4.	CONTROLS AND PROCEDURES.
PART II.  OTHER INFORMATION
ITEM 1.	LEGAL PROCEEDINGS
ITEM 6.	EXHIBITS
SIGNATURES

Biosite^®, Triage^®, and New Dimensions in Diagnosis^® are registered trademarks of Biosite Incorporated.  Cardio ProfilER™, Profiler CP™, Profiler Shortness Of Breath™, MultiMarker Index™ and the Company’s logos are trademarks of Biosite Incorporated.  Beckman Coulter^® is a registered trademark of Beckman Coulter, Inc.  This quarterly report on Form 10-Q also contains trademarks and trade names of other companies.

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Part I.             Financial Information

ITEM 1.          FINANCIAL STATEMENTS.

BIOSITE INCORPORATED

Condensed Consolidated Balance Sheets

(in thousands, except par value)

	March 31, 2005		December 31, 2004
	(Unaudited)		(Note)
Assets
Current assets:
Cash and cash equivalents	$	32,065	$	25,645
Marketable securities	63,789		46,765
Accounts receivable, net	31,052		36,867
Inventories, net	36,402		37,077
Deferred income taxes	7,432		7,432
Other current assets	5,935		7,081
Total current assets	176,675		160,867
Property, equipment and leasehold improvements, net	123,067		111,135
Patents and license rights, net	5,261		5,484
Deferred income taxes	3,668		3,668
Deposits and other assets	2,990		2,361
	$	311,661	$	283,515
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable	$	15,437	$	18,662
Accrued employee expenses	10,200		11,008
Current portion of equipment financing notes	6,062		5,749
Income taxes payable	6,315		4,401
Other current liabilities	8,855		6,253
Total current liabilities	46,869		46,073
Equipment financing notes	15,518		15,292
Other long-term liabilities	1,995		1,813
Commitments and contingencies
Stockholders’ equity:
Preferred stock, $.01 par value, 5,000 shares authorized, none issued and outstanding at March 31, 2005 and December 31, 2004	—		—
Common stock, $.01 par value, 40,000 shares authorized; 16,822 and 16,419 shares issued and outstanding at March 31, 2005 and  December 31, 2004, respectively	168		164
Additional paid-in capital	138,616		125,013
Accumulated other comprehensive income, net of related tax effect of $(90) and $(53) at March 31, 2005 and December 31, 2004, respectively	629		1,086
Retained earnings	107,866		94,074
Total stockholders’ equity	247,279		220,337
	$	311,661	$	283,515

Note:The condensed consolidated balance sheet at December 31, 2004 has been derived from the audited financial statements at that date but does not include all of the information and disclosures required by U.S. generally accepted accounting principles for complete financial statements.

See accompanying notes.

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BIOSITE INCORPORATED

Condensed Consolidated Statements of Income (Unaudited)

(in thousands, except per share amounts)

	Three Months Ended March 31,
	2005			2004
Revenues:
Product sales	$	70,496		$	56,698
Contract revenues	1,350			979
Total revenues	71,846			57,677
Operating expenses:
Cost of product sales	20,240			19,742
Selling, general and administrative	18,557			15,883
Research and development	10,768			7,488
License and patent disputes	209			—
Total operating expenses	49,774			43,113
Operating income	22,072			14,564
Interest and other income, net	59			194
Income before provision for income taxes	22,131			14,758
Provision for income taxes	(8,339		)	(5,813		)
Net income	$	13,792		$	8,945
Net income per share:
- Basic	$	0.83		$	0.57
- Diluted	$	0.76		$	0.55
Shares used in calculating per share amounts:
- Basic	16,687			15,628
- Diluted	18,226			16,366

See accompanying notes.

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BIOSITE INCORPORATED

Condensed Consolidated Statements of Cash Flows (Unaudited)

(in thousands)

	Three Months Ended March 31,
	2005			2004
OPERATING ACTIVITIES
Net income	$	13,792		$	8,945
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	4,030			3,079
Changes in operating assets and liabilities:
Net purchases of investments classified as trading	(171		)	(156		)
Accounts receivable	5,815			(1,446		)
Inventory	675			345
Other current assets	1,185			(549		)
Income taxes	7,825			5,533
Accounts payable	(3,225		)	4,765
Other current liabilities	1,794			(490		)
Long-term liabilities	239			377
Foreign currency translation	(401		)	(574		)
Net cash provided by operating activities	31,558			19,829
INVESTING ACTIVITIES
Proceeds from sales and maturities of marketable securities	9,889			3,750
Purchase of marketable securities	(26,892		)	(3,527		)
Purchase of property, equipment and leasehold improvements	(15,601		)	(10,430		)
Patents, license rights, deposits and other assets	(763		)	(11		)
Net cash used in investing activities	(33,367		)	(10,218		)
FINANCING ACTIVITIES
Proceeds from issuance of financing obligations	2,007			2,546
Principal payments under financing obligations	(1,468		)	(1,184		)
Proceeds from issuance of stock under stock plans, net	7,690			263
Net cash provided by financing activities	8,229			1,625
Increase in cash and cash equivalents	6,420			11,236
Cash and cash equivalents at beginning of period	25,645			19,537
Cash and cash equivalents at end of period	$	32,065		$	30,773
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Interest paid	$	253		$	229
Income taxes paid	$	446		$	262
Income tax benefit of disqualifying dispositions of stock	$	5,911		$	54

See accompanying notes.

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BIOSITE INCORPORATED

Notes to Condensed Consolidated Financial Statements (Unaudited)

1.BASIS OF PRESENTATION

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with both U.S. 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 U.S. 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 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, as amended, for the year ended December 31, 2004.

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

2.EARNINGS PER SHARE

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

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

	Three Months Ended March 31,
	2005	2004
	(in thousands)
Shares used in calculating per share amounts – Basic (Weighted average common shares outstanding)	16,687	15,628
Net effect of dilutive common share equivalents using the treasury stock method	1,539	738
Shares used in calculating per share amounts – Diluted	18,226	16,366

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3.STOCK-BASED COMPENSATION

We have elected to follow Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees, or APB No. 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 Statement of Financial Accounting Standards, or FAS, Statement 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 remeasured as the stock options vest.

Adjusted pro forma information regarding net income is required by Statement 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 weighted average fair value of options granted during the three months ended March 31, 2005 and 2004 were $41.78 and $21.34, respectively.  The fair value for these options was estimated at the date of grant using the Black-Scholes method for the three months ended March 31, 2005 and 2004:

For purposes of adjusted pro forma disclosures, the estimated fair value of the stock-based compensation is amortized to expense over the vesting periods of the granted options.  Our adjusted pro forma information is as follows:

	Three Months Ended March 31,
	2005			2004
	(in thousands, except per share data)
Net income, as reported	$	13,792		$	8,945
Pro forma FAS 123 compensation expense (net of tax)	(4,738		)	(5,031		)
Adjusted pro forma net income	$	9,054		$	3,914
Adjusted pro forma basic net income per share	$	0.54		$	0.25
Adjusted pro forma diluted net income per share	$	0.50		$	0.24

The pro forma effects on net income for the three months ended March 31, 2005 and 2004 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.

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4.   BALANCE SHEET INFORMATION

Net inventories consist of the following:

	March 31, 2005		December 31, 2004
	(in thousands)
Raw materials	$	11,861	$	12,852
Work-in-process	13,749		14,242
Finished goods	10,792		9,983
	$	36,402	$	37,077

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 that the change in net unrealized gains or losses on marketable securities and foreign currency translation adjustments be included in comprehensive income.  As adjusted, our comprehensive income is as follows:

	Three Months Ended March 31,
	2005			2004
	(in thousands)
Net income	$	13,792		$	8,945
Change in unrealized net gain (loss) on marketable securities, net of tax	(56		)	(4		)
Foreign currency translation gain (loss)	(401		)	(574		)
Comprehensive income	$	13,335		$	8,367

6.EFFECT OF NEW ACCOUNTING STANDARDS

Share-based Payments

On December 16, 2004, the Financial Accounting Standards Board, or FASB, issued FASB Statement No. 123 (revised 2004), or Statement 123(R), Share-Based Payment, which is a revision of FASB Statement No. 123, Accounting for Stock-Based Compensation.  Statement 123(R) supersedes APB Opinion No. 25, Accounting for Stock Issued to Employees, and amends FASB Statement No. 95, Statement of Cash Flows.  Generally, the approach in Statement No 123(R) is similar to the approach described in Statement No 123.  However, Statement No 123(R) requires all share-based payments to employees, including grants of employee stock options, to be recognized in the income statement based on their fair values. Pro forma disclosure is no longer an alternative.

Statement No 123(R) must be adopted no later than January 1, 2006.  Early adoption will be permitted in periods in which financial statements have not yet been issued.  We expect to adopt Statement No 123(R) on January 1, 2006.  Statement No 123(R) permits public companies to adopt its requirements using one of two methods:

1.A “modified prospective” method in which compensation cost is recognized beginning with the effective date (a) based on the requirements of Statement No 123(R) for all share-based payments granted after the effective date and (b) based on the requirements of Statement No 123 for all awards granted to employees prior to the effective date of Statement No 123(R) that remain unvested on the effective date.

2.A “modified retrospective” method which includes the requirements of the modified prospective method described above, but also permits entities to restate based on the amounts previously recognized under Statement No 123 for purposes of pro forma disclosures either (a) all prior periods presented or (b) prior interim periods of the year of adoption.

We are currently evaluating the two different methods for the adoption of Statement No 123(R) and have not determined which of the two methods we will adopt.

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As permitted by Statement No 123, we currently account for share-based payments to employees using APB No. 25’s intrinsic value method and, as such, we generally recognize no compensation cost for employee stock options.  Accordingly, the adoption of Statement No 123(R)’s fair value method will have a material impact on our result of operations, although it will have no impact on our overall financial position.  The impact of adoption of Statement No 123(R) cannot be predicted at this time because it will depend on levels of share-based payments granted in the future.  However, had we adopted Statement No 123(R) in prior periods using the Black-Scholes valuation model, the impact of that standard would have approximated the impact of Statement No 123 as described in the disclosure of pro forma net income and earnings per share in Note 3 above.  Statement No 123(R) also requires the benefits of tax deductions in excess of recognized compensation cost to be reported as a financing cash flow, rather than as an operating cash flow as required under current literature.  This requirement will reduce net operating cash flows and increase net financing cash flows in periods after adoption.  While we cannot estimate what those amounts will be in the future (because they depend on, among other things, when employees exercise stock options), the amount of operating cash flows recognized in prior periods for such excess tax deductions were $5.6 million, $7.9 million, and $600,000 in 2004, 2003 and 2002, respectively.

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ITEM 2.          MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

Forward-looking Statements

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 impact of competition, including products competitive with our Triage^® BNP Tests, from companies with greater capital and resources; our ability to effectively promote our products, whether directly or through distributors, including our ability to effectively promote our products in the physician office market; our ability to successfully expand our business through direct sales in certain European countries; the outcome of ongoing litigation between us and Roche Diagnostics Corporation and others; potential contract disputes or patent conflicts; the extent to which our products and products under development are successfully developed and gain market acceptance; our ability to obtain regulatory approvals and complete other clinical and pre-market activities needed to launch new products and gain market acceptance of any new products; manufacturing inefficiencies, backlog, delays or capacity constraints; the timing of significant orders or the impact of seasonality; regulatory changes, uncertainties or delays; product recalls; dependence on third-party manufacturers and suppliers; changing market conditions and the other risks and uncertainties described under “Risk Factors” and throughout our Annual Report on Form 10-K, as amended, for the year ended December 31, 2004.  Actual results may differ materially from those projected.  These forward-looking statements represent our judgment as of the date of the filing of this Quarterly Report on Form 10-Q.  We disclaim any intent or obligation to update these forward-looking statements.

Overview

Founded in 1988, Biosite^® Incorporated is a leading bio-medical company commercializing proteomics discoveries for the advancement of medical diagnosis.  We believe that our novel, rapid medical diagnostic products, largely evolved from an intensive study of protein biomarkers of disease, can contribute to improvements in medical care by aiding physicians in the diagnosis of critical diseases and health conditions.  In selecting market opportunities, we primarily target highly prevalent diseases that are poorly diagnosed by existing technologies.  Currently, we offer diagnostic products for drug screening, heart attack, congestive heart failure, or CHF, acute coronary syndromes, or ACS, evaluation of shortness of breath and certain bacterial and parasitic infections.

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

The Fisher HealthCare Division of the Fisher Scientific Company, or Fisher, distributes our products primarily in hospitals in the United States and supports our direct sales force, particularly in smaller hospitals.  We have a distribution agreement with Fisher that extends through December 31, 2005.  Sales to Fisher represented 84% of our product sales in the first quarter of 2005 and 86% of our product sales for the full year 2004.  We primarily utilize distributor relationships with Physician Sales & Services, or PSS, and Henry Schein, Inc., or Henry Schein, to market our products to physician office laboratories in the United States.

In international markets, we have established direct selling efforts in several countries and utilize a network of country-specific and regional distributors in other areas.  During 2003 and 2004, we initiated direct sales and distribution operations in France, Germany, Belgium, Luxembourg, the United Kingdom and Italy.  In the future, we may transition to direct sales and distribution of our products in additional countries.  We also employ a field-based network of clinically experienced individuals that support our direct sales force by providing pre- and post- sale education and training.

Our total revenues for the first quarter of 2005 were $71.8 million, representing a 25% increase over the same period of 2004.  This growth resulted largely from increased sales of our Triage BNP Test products, which are primarily used to aid in the diagnosis of CHF.  Our meter-based Triage BNP Test, launched domestically in January

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2001, was the first blood test available to aid in the detection of CHF and benefited from a semi-exclusive position in the market, until the entry of direct competition in June 2003.  In December 2003, we received clearance from the United States Food and Drug Administration, or FDA, to market our Triage BNP Test for Beckman Coulter^® Immunoassay Systems and began selling the product in the United States in January 2004.  As a result, a customer can perform b-type natriuretic peptide, or BNP, testing using either our rapid, portable Triage MeterPlus system or any of Beckman Coulter Inc.’s automated immunoassay systems.

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

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

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.  We may not be able to maintain profitability in the future.  Some of the risks and uncertainties associated with our business and future operating results are discussed below in the sections entitled “Risk Factors” and “Liquidity and Capital Resources.”

Recent Developments

Triage Stroke Panel

In December 2004, we filed a Premarket Approval Application, or PMA, with the FDA for the approval of our Triage Stroke Panel.  In April 2005, we received a letter from the FDA indicating that the PMA for our Triage Stroke Panel is on hold pending submission of additional information.  The letter further states that the issues raised need to be resolved before the FDA can complete its review, otherwise the PMA in its current form would be considered not approvable.

New Products

During the first quarter of 2005, we launched two new products: the Triage D-Dimer Test and the Triage TOX Drug Screen with Acetaminophen.  The Triage D-Dimer Test aids in the assessment and evaluation of patients suspected of having thromboembolic events, including pulmonary embolism and deep vein thrombosis, which are common and potentially lethal conditions.  The Triage TOX Drug Screen with Acetaminophen is the first rapid, point-of-care drug screen to test for the qualitative detection of acetaminophen in urine.

Critical Accounting Policies Involving Management Estimates and Assumptions

There were no significant changes in our critical accounting policies or estimation methods from those at December 31, 2004.

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Results of Operations

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

Product Family	Three Months Ended March 31,				$$ Increase/ (Decrease)			% Increase/ (Decrease)
	2005		2004
Cardiovascular products:
Triage BNP Test products	$	49,771	$	39,152	$	10,619		27	%
Triage Cardiac Panel	5,985		5,490		495			9	%
Triage Cardio ProfilER and Profiler SOB	1,946		460		1,486			323	%
Triage D-Dimer	131		—		131			N/A
Triage MeterPlus products	776		905		(129		)	(14	)%
Other products:
Triage Drugs of Abuse Panel and TOX Drug Screen products	10,283		9,315		968			10	%
Triage Microbiology products	1,604		1,376		228			17	%
Total Product Sales	$	70,496	$	56,698	$	13,798		24	%

Product sales for the three months ended March 31, 2005 were $70.5 million, representing an increase of 24%, compared with $56.7 million for the same period of 2004.  The $13.8 million increase in total product sales consisted primarily of $13.7 million of product sales growth resulting from an increase in sales volume.  Growth in the sales volume of our Triage BNP Tests represented 82% of the product sales growth resulting from an increase in sales volume.

As a result of significant fluctuations in customer demand, manufacturing inefficiencies, product improvement efforts and new product scale-up activities, inventory levels of our products have been and in the future may be below or above targeted stocking levels.  We adjust our manufacturing capacity by both adjusting our production activities and the number of production shifts we operate, as well as through the implementation of additional manufacturing equipment.  This allows us to modify our production volumes and manufacturing throughput to meet expected customer demand and targeted stocking levels.  Product sales to our distributors in future periods will be impacted as we and our distributors attempt to adjust distributors’ inventories to targeted stocking levels and as we seek to improve our effectiveness and efficiency in adjusting our manufacturing output and capacity.  Our product sales are also impacted by the buying patterns of our distributors and other customers.  Additionally, we believe that our products are subject to some seasonality in their use.  Higher utilization rates of our Triage BNP Tests may be due to a higher number of emergency department, or ED, visits by patients exhibiting shortness of breath, a symptom of congestive heart failure and the flu.  However, higher utilization may also result from greater awareness, education and acceptance of the uses of our Triage BNP Test products, as well as additional users within the hospitals.

Product sales of our cardiovascular products, consisting of our Triage BNP Tests, Triage Cardiac Panel, Triage Cardio ProfilER™ Panel, Triage Profiler Shortness of Breath™, Triage D-Dimer Test, and Triage MeterPlus, totaled $58.6 million for the three months ended March 31, 2005, as compared with $46.0 million for the same period of 2004.  The product sales growth of our cardiovascular products of 27% was primarily due to growth in sales volume of our Triage BNP Tests, partially offset by a decline in the average sales price.  Our product sales growth rate for our Triage BNP Tests in future periods may be lower than in the past periods because of increased competition from alternative tests and testing platforms that aid in the diagnosis of CHF.  In addition, as the market for BNP testing matures and more competitive products become available, our average sales price for our Triage BNP Tests may continue to decline.

Product sales of the Triage Drugs of Abuse Panel, Triage TOX Drug Screen, Triage C. difficile Panel and Triage Parasite Panel were $11.9 million for the three months ended March 31, 2005, as compared to $10.7 million for the same period of 2004.  The increase in sales of these products was primarily due to the $1.2 million growth in sales volume of our Triage TOX Drug Screen, which was partially offset by a decrease in sales volume of the Triage

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Drugs of Abuse Panel.  We believe that domestic sales of the Triage Drugs of Abuse Panel products may decline as the available U.S. market becomes saturated and competitive pressures become more prominent in a maturing market.

Contract Revenues.  Contract revenues consist of revenues associated with our research and development and licensing arrangements, including license fees, milestone revenues, royalties, research funding and antibody fees.  Contract revenues for the three months ended March 31, 2005 were $1,350,000, compared with $979,000 for the same period of 2004.  Contract revenues recognized during the first quarters of 2005 and 2004 consisted primarily of research funding. During each of the first quarters of 2005 and 2004, we recognized $750,000 of research funding from an alliance with Medarex Inc., which expires in 2008.  Biosite Discovery activities are performed and its costs are incurred by certain of our research and development teams.  These Biosite Discovery research and development resources concurrently focus on programs for our partners, which generate our contract revenue, and on internal research and development programs.  Costs of the research and development resources performing collaborative and internal Biosite Discovery activities were approximately $2.4 million for the first quarter of 2005, compared with $1.4 million for the same period of 2004. These costs are included in research and development expenses.

Cost of Product Sales and Gross Profit From Product Sales.  Gross profit from product sales increased 36% to $50.3 million for the three months ended March 31, 2005 from $37.0 million for the same period of 2004.

The $13.3 million increase in gross profit from product sales consisted of $9.0 million attributable to product sales growth, and $4.3 million resulting from changes in the gross margins of our products.  For the first quarter of 2005 and 2004, the gross margins for our cardiovascular products were 70% and 65%, respectively, while our gross margins for our Triage Drugs of Abuse Panel, Triage TOX Drug Screen and other products were 78% and 65%, respectively.  Sales of our cardiovascular products represented 83% and 81% of our product sales for the three months ended March 31, 2005 and 2004, respectively.  Our overall gross margin for the three months ended March 31, 2005 was 71%, as compared to 65% for the same period of 2004.  The increase in the overall gross margin was primarily due to greater manufacturing efficiencies generated primarily from higher production volumes and manufacturing output for products sold in the first quarter of 2005 compared with the same period of 2004.

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

We also expect that our fixed occupancy costs will significantly increase as we transition our manufacturing operations to our new corporate complex, which has a much larger manufacturing space than our existing facilities.  We may also incur unexpected costs and expenses in connection with our move from our existing facilities to our new corporate complex, or we may experience unanticipated decreases in productivity and other losses due to inefficiencies relating to this transition, or delays in obtaining any required approvals or clearances from regulatory agencies related to the validation of the manufacturing facilities.  For instance, the scale-up of manufacturing at our new corporate complex could result in lower than expected manufacturing output and higher than expected product costs.  In addition, we expect to incur some duplicate facilities expenses during the period of time we transfer our operations to the new corporate complex as we will transfer our operations in stages over a three to six month period.

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Selling, General and Administrative Expenses.  Selling, general and administrative, orSG&A, expenses increased 17% to $18.6 million for the three months ended March 31, 2005 from $15.9 million for the same period of 2004.  At March 31, 2005, our headcount for sales, marketing and administrative functions totaled 331 employees, compared with 275 at March 31, 2004.  The increase in SG&A expenses was primarily associated with the addition of sales, clinical education and technical service resources, and administrative support.  The expansion of our direct sales, marketing and distribution operations in Europe resulted in an increase in SG&A expenses of $1.4 million in first quarter of 2005 compared to the same period of 2004.  We began direct sales, marketing and distribution in certain European countries at different dates from July 2003 to June 2004, and we are continuing to scale-up our direct operations in Europe.  In the United States, employee-related expenses increased approximately $400,000 and travel and entertainment expenses increased approximately $685,000, compared to the same period of 2004, as a result of growth in sales activities, marketing activities and general administrative resources.

We expect SG&A expenses in 2005 to be higher than in 2004, as we continue to increase our sales, marketing, clinical education, technical service and general administration resources in the United States, as well as continue to build our direct sales, distribution and administrative infrastructure in Europe.  We also expect other non-personnel-related costs, including sales and marketing program activities for our new products, to grow as our overall operations grow.  The timing of these increased expenditures and their magnitude are primarily dependent on the commercial success and sales growth of our products.  SG&A expenses are also expected to increase due to costs associated with our move from our existing facilities to our new corporate complex and higher occupancy costs primarily due to increased square footage at the new corporate complex and, for a period of time, occupancy costs of both facilities.

Research and Development Expenses.  Research and development, or R&D, expenses increased 44% to $10.8 million for the three months ended March 31, 2005 from $7.5 million for the same period of 2004.  The increase in R&D expenses consisted primarily of a $1.1 million increase in employee expenses, an increase in consultant, clinical studies and patent-related expenses, including involvement in pending interference and opposition proceedings, totaling approximately $700,000, an increase in license fees of $640,000, and an increase in expenses for supplies used in our R&D activities of $475,000.  During the first quarter of 2005, our R&D resources were focused primarily on product development for potential new diagnostic products, including a new ACS panel and other diagnostic products for critical health conditions such as sepsis and abdominal pain.  We also focused on the development of potential improvements to our existing products, including our Triage Cardiac Panel, manufacturing processes and research activities associated with Biosite Discovery.  Expenses related to the performance of our obligations associated with earning our contract revenues were incurred by our R&D group and were primarily related to Biosite Discovery.

We expect R&D expenses in 2005 to be higher than in 2004 and to relate primarily to:

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

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

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

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

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

•Biosite Discovery activities;

•performance-based compensation; and

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

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

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License and Patent Disputes.  Expenses associated with license and patent disputes incurred for the three months ended March 31, 2005 totaled $209,000.  We did not incur any such expenses during the same period in 2004.  The expenses consisted of legal costs related to two lawsuits involving Roche Diagnostics Corporation and several of its affiliates.  In November 2004, Roche Diagnostics Corporation and certain of its affiliates filed a complaint in the United States District Court, Southern District of Indiana, Indianapolis Division alleging that Biosite is infringing two patents, U.S. Patent 5,366,609 and U.S. Patent 4,816,224, owned by Roche and/or its affiliates.  We believe these allegations of infringement are without merit and we intend to vigorously contest these claims.  Also, in November 2004, we filed a complaint in the United States District Court, Southern District of California alleging that Roche Diagnostics Corporation and Roche Diagnostics GmbH are infringing two patents, U.S. Patent 6,174,686 and U.S. Patent 5,795,725, owned by Biosite. The patents relate to methods for the measurement of cardiac troponin forms.  We believe that our claims have merit and we intend to vigorously pursue their prosecution.  We expect expenses for license and patent disputes to be significantly higher in 2005 than in 2004 due to the ongoing costs associated with both lawsuits.

Interest and Other Income, Net.  Interest and other income, net was $59,000 and $194,000 for the three months ended March 31, 2005 and 2004, respectively.  The decrease resulted primarily from net losses on receivables and payables denominated in foreign currencies of $147,000 during the three months ended March 31, 2005 compared with net gains of $12,000 in the same period of 2004.

Provision for Income Taxes.  As a result of the pre-tax income and the estimated tax credits and other permanent differences between our reported and tax results in 2005, we recorded a provision for income taxes of $8.3 million for the first three months of 2005, or an effective tax rate of 37.7%.  For the same period in 2004, we recorded a provision for income taxes of $5.8 million, or an effective tax rate of 39.4%.  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

Historically, our sources of cash have included:

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

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

•proceeds from equipment financing;

•cash received under collaborative development agreements; and

•interest income.

Our historical cash outflows have primarily been associated with:

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

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

Other factors that impact our cash inflow and outflow include:

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

•Fisher, which represented 86% of our product sales in 2004, has historically been a timely and predictable payor of its outstanding accounts receivable.  Our current distribution agreement with Fisher will expire December 31, 2005.

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As of March 31, 2005, we had cash, cash equivalents and marketable securities of $95.9 million compared with $72.4 million as of December 31, 2004.  The increase in cash, cash equivalents and marketable securities during the first quarter of 2005 was largely attributable to cash generated from operating activities, for which the sales volume growth of our Triage BNP Tests was the primary driver.  Additionally, we generated $7.7 million in cash from proceeds from the issuance of shares under our stock plans as well as tax deductions related to disqualifying dispositions of shares by employees during the first quarter of 2005.  We believe the increased activity related to the exercise of stock options and participation in our employee stock purchase plan by employees was driven by increases in the market price of our common stock.  Future proceeds from exercise of stock options and our employee stock purchase plan will depend primarily upon the behavior, expectations and needs of the stock option holders and our stock price.  The primary cash outflow during the three months ended March 31, 2005 was cash used for the construction of our new corporate complex.

In October 2003, we completed a two-part escrow closing to purchase land for the construction of our new corporate complex.  We purchased a total of 26.1 usable acres for approximately $28.2 million.  Through March 31, 2005, we have expended an additional $57.9 million for the design and construction of the new corporate complex.  We expect the new complex to provide us with up to 800,000 square feet of space, to be constructed in phases as needed.  The first phase will provide us with approximately 350,000 square feet of space.  The total cost of the land and the construction of the first phase is estimated to be approximately $107 million.  We plan to finance the construction of the complex using available cash balances and utilize debt financing, if necessary.  We may not be able to obtain financing on commercially reasonable terms or at all.  We expect the buildings in the first phase of construction to be completed during the second and third quarters of 2005 and do not anticipate expanding our operations to the new facility prior to that time.  We expect our occupancy costs to increase primarily due to increased square footage.  Should there be a downturn in our business or the markets in which we compete, we may not have a need to expand our facilities as we have planned.  As a result, we may then seek an alternative use for all or a portion of the property, or seek to sell the property, which may have a negative impact on our operating results.  We may also incur unexpected costs and expenses in connection with our move from our existing facilities to our new corporate complex, or we may experience unanticipated decreases in productivity and other losses due to inefficiencies relating to this transition, or delays in obtaining any required approvals or clearances from regulatory agencies related to the validation of the manufacturing facilities.  For instance, the scale-up of manufacturing at our new corporate complex could result in lower than expected manufacturing output and higher than expected product costs.  In addition, we expect to incur some duplicate facilities expenses, such as rent, during the period in which we transfer our operations to the new corporate complex as we will transfer our operations in stages.

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

•the remaining construction costs in the first phase of the new corporate complex, which we estimate to be approximately $21 million payable in the second and third quarters of 2005;

•support of our commercialization efforts related to our current and future products, including expansion of our direct sales force and field support resources;

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

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

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

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

For 2005, we plan to spend approximately $38.4 million in cash for capital expenditures primarily for manufacturing and R&D equipment, furniture, fixtures and computer equipment.  We intend to use our currently available cash and cash expected to be generated from operating activities to address our capital requirements.  We expect that the performance of our product sales and the resulting gross profits will significantly impact our cash management decisions.  If our product sales and gross margins exceed our expectations, we may choose to invest the additional cash in the above projects and other activities we believe appropriate.  We have utilized, and may continue to utilize, credit arrangements with financial institutions to finance the purchase of capital equipment.  Factors such as interest rates and available cash will impact our decision to continue to utilize credit arrangements as a source of cash.  As of March 31, 2005, we had an equipment financing line of credit with a financial institution for $10.0 million, of which $7.6 million was available for future borrowings.  The line of credit expires on September 30, 2005.

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

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

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

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

•regulatory changes, uncertainties or delays;

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

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

•seasonal or unanticipated changes in customer demand;

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

•changes in third-party reimbursement policies;

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

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

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

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Risk Factors

This Quarterly Report on Form 10-Q includes forward-looking statements about our business and results of operations that are subject to risks and uncertainties.  See “Forward-looking Statements” above.  Factors that could cause or contribute to such differences include those discussed below, as well as those discussed elsewhere in this Quarterly Report on Form 10-Q and in our Annual Report on Form 10-K, as amended, for the year ended December 31, 2004.  In addition to the risk factors discussed below, we are also subject to additional risks and uncertainties not presently known to us or that we currently deem immaterial.  If any of these known or unknown risks or uncertainties actually occur, our business could be harmed substantially.

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

We have reported consecutive quarterly operating profits since the third quarter of 1999, after incurring quarterly operating losses during the prior seven quarters.  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:

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

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

•changes in the mix of products sold;

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

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

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

•regulatory changes, uncertainties or delays;

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

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

•competitive pressures on average selling prices of our products;

•changes in reimbursement policies;

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

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

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

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

•product recalls;

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

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

Our operating results would also be adversely affected by a downturn in the market for our products or a slower than anticipated sales growth trend 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 at the same or higher rate 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 achieve revenue growth or sustain profitability on a quarterly or annual basis and our growth or operating results may not be consistent with predictions made by us or by securities analysts.

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

We believe that our revenue growth and profitability will substantially depend upon our ability to continue to achieve a growing level of market acceptance and sales of our newer products, such as the Triage BNP Tests, Triage Cardiac Panel, Triage Cardio ProfilER Panel, Triage Profiler Shortness of Breath Panel, Triage D-Dimer Test and subject to obtaining appropriate regulatory approvals, our products currently under development, such as our Triage Stroke Panel and our Triage Cardiac CP Panel.  Our revenues will also depend on our effectiveness in transitioning to and operating a direct sales and distribution model in certain international countries, 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 growth.  We are also making significant investments in developing and penetrating new markets in the United States such as the physician office segment.  These investments and commitments are predicated on assumptions of market acceptance of our products and revenue growth.

If we fail to plan, establish and maintain:

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

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

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

•an effective distribution system for our products; or

•appropriate strategies or tactics to address our competitors,

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

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

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

•complete new product development, processes, or capital projects in a timely manner or at all;

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

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

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

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

Product sales of our Triage BNP Tests represented 71% of our product sales in the first quarter of 2005 and 69% in the same period in 2004.  Our Triage BNP Tests are currently two of several FDA-cleared tests used to aid in the diagnosis of CHF.  Bayer, Dade Behring, Roche Diagnostics and Abbott Laboratories have launched competitive tests at various times since November 2002.  Shionogi & Co., Ltd. sells a BNP radioimmunoassay product for research purposes only in the United States.  Scios, Inc., from which we licensed the technology and patents related to our Triage BNP Tests in 1996, was acquired by Johnson & Johnson in April 2003.

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

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

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

•companies making laboratory-based tests and analyzers;

•clinical reference laboratories; and

•other rapid diagnostic product manufacturers.

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

Our competitors have developed or are developing diagnostic products and/or testing systems that do or will compete with our products.  Many of our competitors have substantially greater financial, technical, research and other resources and larger, more established marketing, sales, distribution and service organizations than 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.  The success of our competitors, many of whom have made substantial investments in competing technologies, or our failure to compete successfully, may prevent, limit or interfere with our ability to make, use or sell our products in either the United States or in international markets.

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We are subject to manufacturing risks, including our limited manufacturing experience with newer products and processes, which may lead to our inability to scale-up manufacturing.  Additionally, unanticipated acceleration or deceleration of customer demand may lead to manufacturing inefficiencies.  These manufacturing risks and inefficiencies may adversely affect our ability to produce products and could reduce our gross margins and increase our research and development expenses.

We must manufacture our products in compliance with regulatory requirements, in sufficient quantities and on a timely basis, while maintaining acceptable product quality and manufacturing costs.  Significant additional resources, implementation of additional automated and semi-automated manufacturing equipment and changes in our manufacturing processes and organization have been, and may continue to be, required for the 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 successfully or efficiently completed.

In addition, although we expect some of our newer products and products under development to share production attributes with our existing products, production of these products may require the development of new manufacturing technologies and expertise.  It may not be possible for us, or any other party, to manufacture these products at a cost or in quantities to make these products commercially viable.  If we are unable to develop or contract for manufacturing capabilities on acceptable terms for our products under development, our ability to conduct pre-clinical and clinical testing will be adversely affected, resulting in the delay of submission of products for regulatory clearance or approval and initiation of other 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 and deceleration of customer demand for our products has resulted, and may continue to result, in inefficiencies or constraints related to our manufacturing, which has harmed and may in the future harm our gross margins and overall financial results.  Such inefficiencies or constraints may also result in delays, lost potential product sales or loss of current or potential customers due to their dissatisfaction.

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

We primarily rely upon Fisher for distribution of our products in the U.S. hospital market and may rely upon Fisher or other distributors to distribute new products or our existing products in other markets.  Fisher accounted for 84% of our product sales in the first quarter of 2005 and 86% for the full year 2004.  We have a distribution agreement with Fisher that expires on December 31, 2005, and automatically renews for an additional one year term unless a notice of non-renewal is delivered by either party.  We distribute products in the United States physician office market primarily through PSS and Henry Schein.  Internationally, we distribute products through country-specific and regional distributors, as well as through our direct sales force in selected countries.  The loss or termination of one or more of our distributors could have a material adverse effect on our sales in that market.

If any of our distribution or marketing agreements are terminated or expire, and we are unable to enter into alternative agreements or if we elect to distribute our products directly, we will have to invest in additional sales, marketing and administrative resources, including additional field account executives and customer support resources, which would significantly increase our future expenses.  For instance, if we distribute our products directly to customers, we will need additional headcount and incur additional expenses relating to customer order processing and servicing, warehousing, shipping, billing and collections that our distributors currently bear.  We may also need to invest in additional capital equipment, third-party services and facilities in order to administer the logistics of direct distribution.  Changes in the distribution of our products may also result in contract termination fees, transition related expenses, disruption of our business, increased competition and lower product sales and operating profits.  In addition, following the expiration or termination of any distribution agreement, a former distributor may attempt to compete

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directly with us by offering our end-user customers other competitive products.  We have limited experience in direct sales, marketing and distribution of our products, both domestically and internationally.  Our direct sales, marketing and distribution efforts may not be successful and we may not be able to successfully transition from a distributor model to a direct sales model.  Further, we may not be able to enter into new distribution or marketing agreements on satisfactory terms, or at all.  A failure to enter into acceptable distribution agreements or our failure to successfully market our products or implement the logistics associated with direct product distribution to our customers would have a material adverse effect on us.

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

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

We are unable to verify the inventory levels of our international distributors and only have limited visibility over the inventory levels of our products at Fisher or our other domestic distributors.  While we attempt to assist Fisher in maintaining targeted stocking level of our products, we may not consistently be accurate or successful.  Attempting to assist Fisher in maintaining targeted stocking levels of our products 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, which may harm our future financial results due to unexpected buying patterns of our distributors or our inability to efficiently manage or invest in internal resources, such as manufacturing capacity, to meet the actual demand for our products.  In addition, if we assume direct distribution in any territory following the expiration or termination of a distribution agreement for that territory, it is likely that our product sales in that territory will decrease as our prior distributor sells its remaining inventory of our products.

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

The testing, manufacture and sale of our products are subject to regulation by numerous governmental authorities worldwide, principally the FDA in the United States and corresponding foreign regulatory agencies.  Our future performance depends on, among other matters, our estimates as to when and at what cost we will receive regulatory approval for new products.  Regulatory approval can be a lengthy, expensive and uncertain process, making the timing and cost of obtaining approvals difficult to predict.

In the United States, clearance or approval to commercially distribute new medical devices is received from the FDA through clearance of a Premarket Notification, or 510(k), or through approval of a PMA.  The 510(k) clearance process requires us to demonstrate that our new product is substantially equivalent to a medical device first marketed in interstate commerce prior to May 1976, the enactment date of the Medical Device Amendments.  It generally takes from three to six months from submission to obtain 510(k) clearance, but it may take longer or 501(k) clearance may not be obtained at all.  The FDA may determine that a new proposed device is not substantially equivalent to a device first marketed in interstate commerce prior to May 1976 or that additional information is needed before a substantial equivalence determination can be made.  A “not substantially equivalent” determination, or a request for additional information, could prevent or delay the market introduction of new products that fall into this category.  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.  It generally takes from six to eighteen months from submission to obtain PMA approval, but it may take longer or PMA approval may not be obtained at all.

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

For devices that are cleared through the 510(k) Premarket Notification 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 submissions.  We have made modifications to some of our products since receipt of initial 510(k) clearance.  With respect to several of these modifications, we filed new 510(k)s describing the modifications and have received FDA 510(k) clearance. We made other modifications to some of our products that we believe do not require the submission of new 510(k)s. 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) or PMA for any of these modifications made to our products.  If the FDA requires us to submit a new 510(k) for any device modification, we may be prohibited from marketing the modified products until the new submission is cleared by the FDA.

We submitted a PMA application for our Triage Stroke Panel in December 2004.  In April 2005, we received a letter from the FDA indicating that the PMA submitted in 2004 for our Triage Stroke Panel is on hold pending submission of additional information.  The letter further states that the issues raised need to be resolved before the FDA can complete its review, otherwise the PMA in its current form would be considered not approvable.

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

Both before and after a product is commercialized, we have ongoing responsibilities under the regulations of the FDA and other agencies.  Our manufacturing facilities and those of our contract manufacturers are, or can be, subject to periodic regulatory inspections by the FDA and other federal, state and other regulatory agencies.  Noncompliance with applicable laws and requirements 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 clearance or 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 that is deemed to be unsafe.  The FDA also administers certain controls over the export of medical devices from the United States.  We are also subject to routine inspection by the FDA and certain state agencies for compliance with Quality System Requirement and Medical Device Reporting requirements in the United States and other applicable regulations worldwide, including but not limited to ISO regulations.  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.

Regulatory agencies have made, and continue to make, changes in their approval and compliance requirements and processes.  We cannot predict what, how or when these changes will occur or what effect the changes will have on the regulation of our products.  Any new regulations may impose additional costs or lengthen review times of our products.  We may not be able to obtain necessary worldwide 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,

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financial condition and results of operations.

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

Sole-source vendors provide some key components and raw materials used in the manufacture of our products.  Any 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 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 products under development that, if developed and subject to obtaining appropriate regulatory approvals, may require us to enter into additional supplier arrangements or implement alternative manufacturing processes.  We may not be able to enter into additional supplier arrangements on commercially reasonable terms, or at all.  We also may not be able to implement alternative manufacturing processes that are effective and cost efficient, or at all.  Failure to obtain a supplier on acceptable terms, or at all, or the implementation of alternative processes for the manufacture of our future products, if any, could increase our manufacturing costs or limit our production capacity for one or more of our products, which would have a material adverse effect on us.

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

•        our sales and profit margins;

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

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

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

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

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

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

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

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

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

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

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

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

Until recently, we sold all of our products internationally through independent distributors.  We transitioned to a direct sales and distribution model in France and Germany in 2003 and in Belgium, Luxembourg, the United Kingdom and Italy in 2004.  Over the next few years, we may transition the distribution of our products in some additional international countries to a direct sales and distribution model.  In any country in which we transition to a direct sales and distribution model, we will need to make investments in facilities, resources and personnel.  In addition, we will assume additional administrative expenses to manage our operations in those countries.  We may also incur expenses associated with the termination of our existing distribution arrangements in those countries.  We have limited experience in managing operations outside of the United States and in direct sales, marketing and distribution of our products in international markets.  If we are not successful in implementing direct sales and distribution in countries where we elect to do so, we may not achieve our projected sales objectives, and we may also incur additional expenses, or our operating profits may be lower than anticipated.

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

Export sales to international customers amounted to $9.3 million for the first quarter of 2005 and $26.0 million for the full year 2004.  Since 2003, we have significantly expanded our direct sales and distribution operations outside of the United States in France, Germany, Belgium, Luxembourg, the United Kingdom and Italy, and we may expand these operations into additional countries in the future.  Sales and costs resulting from our direct sales and distribution operations in Europe are denominated primarily in local currencies, including the Euro, and are subject to fluctuations in currency exchange rates.  Further, we purchase our Triage MeterPlus inventory from LRE and incur other operating expenses, including clinical trials, which are denominated in Euros and other local currencies.  Significant fluctuations in the currency exchange rates may negatively impact our consolidated sales and earnings.

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

•difficulty in staffing, monitoring and managing foreign operations;

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

•longer collection cycles;

•greater risk of uncollectible accounts;

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

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

•restrictions on repatriation of locally-derived revenue;

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

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

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

•government spending patterns.

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

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

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

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

Under CLIA quality control rules in effect from 1992 through 2002, laboratories using “unitized” test systems were in compliance with CLIA if they followed the manufacturers’ instructions for daily quality control, or QC, by relying on the internal controls built into unitized test systems, including our Triage products.

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On January 24, 2003, the Centers for Medicare and Medicaid Services, or CMS, publicly issued a final QC rule under CLIA, which went into effect on April 24, 2003.  On January 12, 2004, CMS published updated Interpretive Guidelines for CLIA-regulated laboratories.  We are working with CMS and our customers to evaluate the new Interpretive Guidelines and assist our customers in complying with any provisions, including QC requirements, that may be new.  CMS has stated that the first two-year survey cycle of clinical laboratories will be an “educational” one, especially with respect to new requirements of the new Interpretive Guidelines.

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

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

In October 2003, we completed a two-part escrow closing to purchase land for the construction of our new corporate complex.  We purchased a total of 26.1 usable acres for approximately $28.2 million.  We expect the new complex to provide us with up to 800,000 square feet of space, to be constructed in phases as needed.  The first phase will provide us with approximately 350,000 square feet of space.  The total cost of the land and the construction of the first phase is estimated to be approximately $107 million, of which we have incurred approximately $86 million through March 31, 2005.  We have funded and currently plan to continue to finance the construction of the complex using available cash balances, and may utilize debt financing, if necessary.  We may not be able to obtain financing on commercially reasonable terms or at all.  We expect the buildings in the first phase of construction to be completed in the second and third quarters of 2005 and do not anticipate expanding our operations to the new facility prior to that time.  We expect our occupancy costs to increase primarily due to increased square footage.

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

Recently, the San Diego Airport Authority issued a draft of proposed changes to land uses, such as restrictions on maximum building heights, personnel densities and hazardous materials storage, in areas surrounding airports throughout San Diego County.  Several of these changes, if approved, could potentially negatively impact our ability to construct our corporate complex as we currently plan.  In that case, we may need to alter our development plans for the remainder of our corporate complex.  However, any such regulatory changes are still in the early stages and it is not possible for us to predict whether any changes will be adopted or implemented, and whether such changes could adversely impact our corporate complex.

All of our existing office and laboratory leases in the United States will expire during 2005.  In the event of any delays in the construction or completion of our new corporate complex, we may not be able to extend these existing leases on acceptable terms or at all and we may not be able to find acceptable alternative facilities.  This and other consequences of any delay in the construction or completion of our new corporate complex may significantly disrupt our business, increase our operating expenses and reduce our productivity, which could harm our financial results.

Additionally, in order to meet the increase in customer demand for our products, we have made, and continue to make, 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 complex.  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, which may harm our

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financial results.

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

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

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

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

•delays in enrolling patients;

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

•unexpected results or adverse events of clinical studies;

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

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

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

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

At March 31, 2005, we had approximately $135.0 million of long-lived assets, including $30.5 million of land, $55.7 million of building construction-in-progress, $1.5 million of leasehold improvements, $35.5 million of equipment, furniture and fixtures, $3.7 million of deferred taxes and $8.3 million of capitalized license rights and other assets.  Leasehold improvements, equipment, intangible assets and certain other long-lived assets are amortized or depreciated over the lesser of their useful lives or the remaining lease term.  In San Diego, we lease 10 buildings with leases that expire between June 2005 and December 2005.  The carrying amounts of long-lived and intangible assets are affected whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Such events or changes might include a significant decline in market share, a significant decline in profits, rapid changes in technology, significant litigation or other matters. Additionally, we may determine that certain equipment, furniture and fixtures will not be used at our new corporate complex.  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 March 31, 2005, we had approximately $11.1 million of short-term and long-term deferred tax assets, consisting primarily of temporary differences between book and tax treatment of certain items such as depreciation.  No valuation allowance has been recorded to offset the deferred tax assets as we have determined that it is more likely than not that these assets will be realized.  We will continue to assess the likelihood of realization of such assets; however, if future events occur which do not make the realization of such assets more likely than not, we will record a valuation allowance against all or a portion of the net deferred tax assets.  Examples of future events that may occur which would make the realization of such assets unlikely would be a lack of taxable income resulting from poor operating results or rising tax deductions generated from disqualifying dispositions of shares issued under our stock plans.

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

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

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

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

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

•regulatory changes, uncertainties or delays;

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

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

•seasonal or unanticipated changes in customer demand;

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

•changes in third-party reimbursement policies;

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

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

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

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

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

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

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

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

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

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

We may have significant clinical and product liability exposure.

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

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

A change in accounting standards or practices or a change in existing taxation rules or practices can have a significant effect on our reported results and may even affect our reporting of transactions completed before the change is effective.  New accounting pronouncements and taxation rules and varying interpretations of accounting pronouncements and taxation practice have occurred and may occur in the future.  Changes to existing rules or the questioning of current practices may adversely affect our reported financial results or the way we conduct our business.  For example, changes have been approved by the Financial Accounting Standards Board, or FASB, that require that, beginning January 1, 2006, we record compensation expense in our statements of income for equity compensation instruments, including employee stock options, using the fair value method.  Although there will be no change in our total cash flows, our reported financial results beginning in the first quarter of 2006 will be negatively and materially impacted by this accounting change.  Other potential changes in existing taxation rules related to stock options and other forms of equity compensation could also have a significant negative effect on our reported results.

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

Changing laws, regulations and standards relating to corporate governance and public disclosure, including the Sarbanes-Oxley Act of 2002, new Securities and Exchange Commission, or 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

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and attention from revenue-generating activities to compliance activities. If our efforts to comply with new or changed laws, regulations and standards differ from the activities intended by regulatory or governing bodies due to ambiguities related to practice, regulatory authorities may initiate legal proceedings against us and we may be harmed.

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

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

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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.

Since 2003, we have significantly expanded our direct sales and distribution operations in France, Germany, Belgium, Luxembourg, the United Kingdom and Italy, and we may expand into additional countries in the future.  Sales and costs resulting from our direct sales and distribution operations in Europe are denominated in local currencies and are subject to fluctuations in currency exchange rates.  Further, we purchase our Triage MeterPlus inventory from LRE in Euros, and we incur employee and other operating costs in foreign currencies.  As a result, our costs will fluctuate along with the currencies and general economic conditions in the countries in which we do business, which could harm our operating results.  In prior years, we have on occasion purchased forward exchange contracts to manage this exposure to exchange rate changes.  As of March 31, 2005, we had no outstanding forward exchange contracts.  We recognized a net currency exchange loss on foreign currency denominated transactions of $147,000 for the three months ended March 31, 2005 compared to a net gain of $12,000 for the same period of 2004. Significant fluctuations in currency exchange rates may negatively impact our consolidated sales and earnings.

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

•difficulty in staffing, monitoring and managing foreign operations;

•reduced flexibility and increased cost of staffing adjustments;

•longer collection cycles;

•greater risk of uncollectible accounts;

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

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

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

•government spending patterns.

ITEM 4.  CONTROLS AND PROCEDURES.

Under the supervision and with the participation of our management, including our Chief Executive Officer (CEO) and Chief Financial Officer (CFO), we conducted an evaluation of our disclosure controls and procedures (as defined in Rule 13a-15(e) 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 as of the end of the period covered by this quarterly report.  There was no change in our internal controls that occurred during the period covered by this report that has materially affected, or is reasonably likely to materially affect, our internal controls over financial reporting.

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Part II.  Other Information

ITEM 1.  LEGAL PROCEEDINGS

In November 2004, Roche Diagnostics Corporation, together with certain of its affiliates, filed a complaint in the United States District Court, Southern District of Indiana, Indianapolis Division alleging that Biosite is infringing two patents, U.S. Patent 5,366,609 (the “‘609 Patent”) and U.S. Patent 4,816,224 (the “‘224 Patent”), owned by Roche and/or its affiliates (the “Indiana Case”).  Biosite filed an answer and counterclaims to Roche’s complaint in February 2005.  In March 2005, at the mutual request of Biosite and Roche, the Indiana Case was, for purposes of claim construction of the ‘609 Patent only, consolidated-in-part with two other cases filed by Roche against several unrelated parties and pending in the same trial court.  The hearing on this subject of claim construction, which is commonly referred to as a Markman hearing, with respect to the ‘609 Patent is currently scheduled for August 2, 2005.  A Markman hearing with respect to the ‘224 Patent has not been scheduled.  The parties have commenced preliminary discovery with respect to the Indiana Case.  Roche is seeking unspecified monetary damages and injunctive relief, among other remedies.  We believe Roche’s allegations of infringement of the ‘609 Patent and ‘224 Patent are without merit and we intend to vigorously contest these claims.

Also, in November 2004, we filed a complaint in the United States District Court, Southern District of California alleging that Roche Diagnostics Corporation and Roche Diagnostics GmbH are infringing two patents, U.S. Patent 6,174,686 and U.S. Patent 5,795,725, owned by Biosite.  The patents relate to methods for the measurement of cardiac troponin forms.  Roche filed an answer and counterclaims to our complaint in March 2005.  Biosite is seeking unspecified monetary damages and injunctive relief, among other remedies.  We believe our claims have merit and we intend to vigorously pursue their prosecution.

ITEM 6.  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) (2)   Certificate of Amendment to the Restated Certificate of Incorporation.

3.(iii)(3)   Amended and Restated Bylaws.

  4.1(2)      Form of Common Stock Certificate with rights legend.

10.47 (A)  Biosite Incorporated 409A Nonqualified Deferred Compensation Plan.

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 the exhibit of the same number to Biosite’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2003.

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

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

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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:  May 9, 2005	BIOSITE INCORPORATED
	By:	/s/ CHRISTOPHER J. TWOMEY
		Christopher J. Twomey
		Senior Vice President, Finance, Chief Financial Officer and Secretary
		(Principal Financial Officer and Accounting Officer)

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EX-10.47

Exhibit 10.47

BIOSITE INCORPORATED

409A NONQUALIFIED DEFERRED COMPENSATION PLAN

Table of Contents

	Article 1 - Definitions
1.1	Account.
1.2	Administrator.
1.3	Board.
1.4	Bonus.
1.5	Code.
1.6	Commission.
1.7	Compensation.
1.8	Deferrals.
1.9	Deferral Election.
1.10	Disability.
1.11	Effective Date.
1.12	Eligible Employee.
1.13	Employee.
1.14	Employer Discretionary Contribution.
1.15	Investment Fund or Funds.
1.16	Participant.
1.17	Plan Year.
1.18	Performance-based Compensation.
1.19	Retirement.
1.20	Salary.
1.21	Trust.
1.22	Trustee.
1.23	Years of Service.
	Article 2 - Participation
2.1	Commencement of Participation.
2.2	Loss of Eligible Employee Status.
	Article 3 - Contributions
3.1	Deferrals.
3.2	Employer Discretionary Contributions.
3.3	Time of Contributions.
3.4	Form of Contributions.

	Article 4 - Vesting
4.1	Vesting of Deferrals.
4.2	Vesting of Employer Discretionary Contributions.
4.3	Vesting in Event of Retirement, Disability, Death or Change in Control.
4.4	Change in Control.
4.5	Amounts Not Vested.
	Article 5 - Accounts
5.1	Accounts.
5.2	Investments, Gains and Losses.
5.3	Forfeitures.
	Article 6 - Distributions
6.1	Distribution Election.
6.2	Payment Options.
6.3	Changes to Distribution Elections.
6.4	Commencement of Payment upon Death, Disability or Termination.
6.5	Distributions to Specified Employee.
6.6	Minimum Distribution.
6.7	Unforeseeable Emergency
	Article 7 - Beneficiaries
7.1	Beneficiaries.
7.2	Lost Beneficiary.
	Article 8 - Funding
8.1	Prohibition Against Funding.
8.2	Deposits in Trust.
8.3	Indemnification of Trustee.
8.4	Withholding of Employee Contributions.
	Article 9 - Claims Administration
9.1	General.
9.2	Claims Procedure.
9.3	Right of Appeal.
9.4	Review of Appeal.
9.5	Designation.

	Article 10 - General Provisions
10.1	Administrator.
10.2	No Assignment.
10.3	No Employment Rights.
10.4	Incompetence.
10.5	Identity.
10.6	Other Benefits.
10.7	No Liability.
10.8	Expenses.
10.9	Insolvency.
10.10	Plan Amendment.
10.11	Plan Termination.
10.12	Employer Determinations.
10.13	Construction.
10.14	Governing Law.
10.15	Severability.
10.16	Headings.
10.17	Terms.

BIOSITE INCORPORATED

409A NONQUALIFIED DEFERRED COMPENSATION PLAN

Biosite Incorporated, a Delaware corporation, and its affiliates and subsidiaries (the “Employer”), hereby adopts this Biosite Incorporated 409A Nonqualified Deferred Compensation Plan (the “Plan”) for the benefit of a select group of management or highly compensated employees.  This plan is an unfunded arrangement and is intended to be exempt from the participation, vesting, funding, and fiduciary requirements set forth in Title I of the Employee Retirement Income Security Act of 1974, as amended (ERISA).  It is intended to comply with Internal Revenue Code Section 409A.  This Plan is effective January 1, 2005.

Article 1 - Definitions

1.1Account.

The bookkeeping account established for each Participant as provided in section 5.1 hereof.

1.2Administrator.

An administrative committee appointed by the Board of Directors.

1.3Board.

The Board of Directors of the Employer.

1.4Bonus.

Remuneration which is designated as such by the Employer and which relates to services performed during an incentive period by an Eligible Employee, including any pretax elective deferrals from said Bonus to any Employer sponsored plan that includes amounts deferred under a Deferral Election or a qualified cash or deferred arrangement under Code Section 401(k) or cafeteria plan under Code Section 125.

1.5Code.

The Internal Revenue Code of 1986, as amended.

1.6Commission.

Remuneration which is designated as such by the Employer and which relates to services performed during an incentive period by an Eligible Employee, including any pretax elective deferrals from said Commission to any Employer sponsored plan that includes amounts deferred under a Deferral Election or a qualified cash or deferred arrangement under Code Section 401(k) or cafeteria plan under Code Section 125.

1.7Compensation.

The Participant’s earned income, including Salary, Bonus, Commission, and Performance-based Compensation, if any, and other remuneration from the Employer.

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1.8Deferrals.

The portion of Compensation that a Participant elects to defer in accordance with section 3.1 hereof.

1.9Deferral Election.

The separate written agreement, submitted to the Administrator, by which an Eligible Employee agrees to participate in the Plan and make Deferrals thereto.

1.10Disability.

Provided that such definition does not fail to comply with Code Section 409A(a)(1)(C) and regulations, a participant shall be considered disabled if the participant is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for continuous period of not less than 12 months.

1.11Effective Date.

January 1, 2005.

1.12Eligible Employee.

An Employee shall be considered an Eligible Employee if such Employee is designated as an Eligible Employee by the Administrator

1.13Employee.

Any person employed by the Employer.

1.14Employer Discretionary Contribution.

A discretionary contribution made by the Employer to the Trust and that is credited to one or more Participant’s Accounts in accordance with the terms of section 3.2 hereof.

1.15Investment Fund or Funds.

Each investment(s) which serves as a means to measure value, increases or decreases with respect to a Participant’s Accounts.

1.16Participant.

An Eligible Employee who is a Participant as provided in Article 2.

1.17Plan Year.

The calendar year.

1.18Performance-based Compensation.

Remuneration which meets the requirements of “performance-based compensation” as defined by Code Section 409A(a)(4)(B)(iii) and related regulations, and is designated as such by the Employer and which relates to services performed during an incentive period by an Eligible Employee, including any pretax elective deferrals from said Performance-based Compensation to any Employer sponsored plan that includes amounts deferred under a Deferral Election or a

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qualified cash or deferred arrangement under Code Section 401(k) or cafeteria plan under Code Section 125.

1.19Retirement.

Retirement means the Participant has separated service from the Employer, and the Participant has completed at least five (5) Years of Service with the Employer, and a combination of the Participant’s age and Years of Service equals at least fifty-five (55).

1.20Salary.

An Eligible Employee’s base salary rate or rates in effect at any time during a Plan Year, including any pretax elective deferrals from said Salary to any Employer sponsored plan that includes amounts deferred under a Deferral Election or a qualified cash or deferred arrangement under Code Section 401(k) or cafeteria plan under Code Section 125.

1.21Trust.

The agreement between the Employer and the Trustee under which the assets of the Plan are held, administered and managed, which shall conform to the terms of Rev. Proc. 92-64.

1.22Trustee.

Investors Bank and Trust Company or such other successor that shall become trustee pursuant to the terms of the Biosite Incorporated 409A Nonqualified Deferred Compensation Plan.

1.23Years of Service.

A Participant’s “Years of Service” shall be measured by employment during a twelve (12) month period commencing with the Participant’s date of hire and anniversaries thereof.

Article 2 - Participation

2.1Commencement of Participation.

Each Eligible Employee shall become a Participant at the earlier of the date on which his or her Deferral Election first becomes effective or the date on which an Employer Discretionary Contribution is first credited to his or her Account.

2.2Loss of Eligible Employee Status.

(a)A Participant who is no longer an Eligible Employee shall not be permitted to submit a Deferral Election and all Deferrals for such Participant shall cease as of the end of the Plan Year in which such Participant is determined to no longer be an Eligible Employee.

(b)Amounts credited to the Account of a Participant described in subsection (a) shall continue to be held, pursuant to the terms of the Plan and shall be distributed as provided in Article 6.

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Article 3 - Contributions

3.1Deferrals.

(a)The Employer shall credit to the Account of a Participant an amount equal to the amount designated in the Participant’s Deferral Election for that Plan Year.  Such amounts shall not be made available to such Participant, except as provided in Article 6, and shall reduce such Participant’s Compensation from the Employer in accordance with the provisions of the applicable Deferral Election; provided, however, that all such amounts shall be subject to the rights of the general creditors of the Employer as provided in Article 8.

(b)Each Eligible Employee shall deliver a Deferral Election to the Employer before any Deferrals can become effective.  Such Deferral Election shall be void with respect to: (i) any Deferral Election associated with Salary, Bonus or Commission unless submitted before the beginning of the calendar year during which the amount to be deferred will be earned, (ii) any Deferral Election associated with Performance-based Compensation unless submitted at least 6 months prior to the end of the 12 month period over which the services for such Performance-based Compensation are performed; provided, however, that in the year in which the Plan is first adopted or an Employee is first eligible to participate, such Deferral Election shall be filed within thirty (30) days after the date on which the Plan is adopted or the date on which an Employee is first eligible to participate, respectively, with respect to Compensation to be earned during the remainder of the calendar year.

(c)The Deferral Election shall, subject to the limitation set forth in Section 3.1(g), below, designate the amount of Compensation deferred by each Participant, the subaccount, if any, as set forth in subsection (e), below, the beneficiary or beneficiaries of the Participant and such other items as the Administrator may prescribe.  Such designations shall remain effective unless amended as provided in subsection (d), below.

(d)A Participant may amend his or her Deferral Election from time to time; provided, however, that the timing of, and the effective date of any such amendment to the amount of a Participant’s Deferrals shall comply with the provisions of subsection (b), above and the provisions of Code Section 409A and the regulations promulgated thereunder.

(e)A Participant may direct his or her Deferral to be credited to one or more subaccounts as may be established, as provided in Article 5, by the Participant at the time of the Deferral Election.

(f)The minimum amount that may be deferred each Plan Year is the greater of one thousand dollars ($1,000) or one percent (1%) of the Participant’s Compensation.

(g)The maximum amount that may be deferred each Plan Year is twenty-five percent (25%) of the Participant’s Salary, one hundred percent (100%) of the Participant’s Bonus, net of applicable taxes, and one hundred percent (100%) of the Participant’s Commission, net of applicable taxes.

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3.2Employer Discretionary Contributions.

The Employer reserves the right to make Employer Discretionary Contributions to Participants’ Accounts in such amount and in such manner as may be determined by the Employer.

3.3Time of Contributions.

(a)Deferrals shall be credited to the Accounts of Participants as soon as administratively feasible following each payroll period.  The Employer shall also transmit to the recordkeeper or trust, in the event of trust usage, at that time any necessary instructions regarding the allocation of such amounts among the Accounts of Participants.

(b)Employer Discretionary Contributions shall be credited to the Accounts of Participants at such time as the Employer shall determine.  The Employer shall also transmit to the recordkeeper or trust, in the event of trust usage, at that time any necessary instructions regarding the allocation of such amounts among the Accounts of Participants.

3.4Form of Contributions.

All Deferrals and Employer Discretionary Contributions, if any, to the Trust shall be made in the form of cash or cash equivalents of US currency.

Article 4 - Vesting

4.1Vesting of Deferrals.

A Participant shall have a vested right to the portion of his or her Account attributable to Deferrals.

4.2Vesting of Employer Discretionary Contributions.

A Participant shall have a vested right to the portion of his or her Account attributable to Employer Discretionary Contribution(s) and any earnings or losses on the investment of such Employer Discretionary Contribution(s) according to such vesting schedule as the Employer shall determine at the time an Employer Discretionary Contribution is made.

4.3Vesting in Event of Retirement, Disability, Death or Change in Control.

(a)A Participant who terminates employment due to Retirement shall be fully vested in the amounts credited to his or her Account.

(b)A Participant who terminates employment due to Disability shall be fully vested in the amounts credited to his or her Account.

(c)A Participant who terminates employment due to death shall be fully vested in the amounts credited to his or her Account.

(d)Upon a Change in Control, as defined in Section 4.4, all Participants shall be fully vested in the amounts credited to their Accounts.

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4.4Change in Control.

Provided that such definition does not fail to comply with Code Section 409A and related regulations, a “Change in Control” of the Employer means the first occurrence of any of the following events:

(a)The date that any one person or persons acting as a group acquires ownership of Employer stock constituting more than fifty percent (50%) of the total fair market value or total voting power of the Employer;

(b)The date that any one person or persons acting as a group acquires (or has acquired during the 12-month period ending on the date of the most recent acquisition by such person or persons) ownership of the stock of the Employer possessing thirty-five percent (35%) or more of the total voting power of the stock of the Employer;

(c)The date that any one person or persons acting as a group acquires assets from the Employer that have a total gross fair market value equal to or more than forty percent (40%) of the total gross fair market value of all of the assets of the Employer immediately prior to such acquisition; or

(d)The date that a majority of members of the Employer’s Board is replaced during any 12-month period by directors whose appointment or election is not endorsed by a majority of the members of the Board prior to the date of the appointment or elections.

4.5Amounts Not Vested.

Any amounts credited to a Participant’s Account that are not vested at the time of his or her termination of employment with the Employer shall be forfeited.

Article 5 - Accounts

5.1Accounts.

The Administrator shall establish and maintain a bookkeeping account in the name of each Participant.  The Administrator shall also establish subaccounts, as provided in subsection (a) and (b), below, as elected by the Participant pursuant to Article 3.  A Participant may have a maximum of ten (10) subaccounts at any time.

(a)A Participant may establish a Retirement Account by so designating in such Participant’s Deferral election.  Each Participant’s Retirement Account shall be credited with Deferrals (as specified in the Participant’s Deferral Election), Employer Discretionary Contributions, if any (as specified in the Participant’s Deferral Election), and the Participant’s allocable share of any earnings or losses on the foregoing.  Each Participant’s Account shall be reduced by any distributions made plus any federal and state tax withholding and any social security withholding tax as may be required by law.  Distributions from a Retirement Account to a Specified Employee, as defined in Section 6.5, shall be subject to the requirements of Section 6.5.

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(b)A Participant may elect to establish one or more In-Service Accounts by designating in such Participant’s Deferral Election the year in which payment shall be made at the time the account is initially established.  The minimum initial deferral period for an In-Service Account shall be three (3) years.  Each Participant’s In-Service Account shall be credited with Deferrals, Employer Discretionary Contributions (as specified in the Participant’s Deferral Election), and the Participant’s allocable share of any deemed earnings or losses on the foregoing.  Each Participant’s In-Service Account shall be reduced by any distributions made plus any federal and state tax withholding and any social security withholding tax as may be required by law.

5.2Investments, Gains and Losses.

(a)Trust assets shall be invested in the discretion of the Trustee.  The Trustee may consider any investment suggestions received by the Employer or by a Participant with respect to his or her own Account.

(b)The Administrator shall adjust the amounts credited to each Participant’s Account to reflect Deferrals, Employer Discretionary Contributions, investment experience, distributions and any other appropriate adjustments.  Such adjustments shall be made as frequently as is administratively feasible.

(c)A Participant may direct that his or her Retirement Account and or In-Service Account(s) established pursuant to Section 5.1 may be valued as if they were invested in one or more Investment Funds multiples of one percent (1%) of the balance in an Account.  A Participant may change his or her selection of Investment Funds no more than six (6) times each Plan Year.  An election shall be effective as soon as administratively feasible following the date of the change as indicated in writing by the Participant.

5.3Forfeitures.

Any forfeitures from a Participant’s Account shall continue to be held in the Trust, shall be separately invested as directed by the Administrator and shall be used to reduce succeeding Employer Discretionary Contributions until such forfeitures have been entirely so applied.  If no further Employer Discretionary Contributions will be made, then such forfeitures shall be returned to the Employer.

Article 6 - Distributions

6.1Distribution Election.

Each Participant shall designate on his or her initial Deferral Election the form and timing of his or her distribution by indicating the type of account as described under Section 5.1, and by designating the manner in which payments shall be made from the choices available under Section 6.2 hereof.  In the event a Participant fails to make a timely distribution election, distributions shall be made in the lump-sum form.

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6.2Payment Options.

(a)Retirement Account payouts shall commence as soon as administratively feasible immediately after the Participant’s Retirement and are payable in one of the following forms: (i) in a lump-sum payment; or (ii) in annual installments over a period of up to ten (10) years (as elected by Participant on a form provided by the Administrator).

(b)In-Service Account payouts shall begin as soon as administratively feasible following January 1 of the calendar year designated by the Participant, on a properly submitted Deferral Election and in accordance with the requirements of Code Section 409A, and are payable in either a lump sum or substantially equal annual installments over a period of five (5) years (as elected by Participant on a form a provided by the Administrator).

(c)The amount of the substantially equal payments described in subsections (a) and (b) above shall be determined by multiplying the Participant’s Retirement or In-Service Account by a fraction, the denominator of which in the first year of payment equals the number of years over which benefits are to be paid, and the numerator of which is one (1).  The amounts of the payments for each succeeding year shall be determined by multiplying the Participant’s Retirement or In-Service Account as of the applicable anniversary of the payout by a fraction, the denominator of which equals the number of remaining years over which benefits are to be paid, and the numerator of which is one (1).

(d)Payments under this Section 6.2 are subject to the requirements of Section 6.5.

6.3Changes to Distribution Elections.

(a)In the event Participant desires to modify his or her elected form of distribution, i.e., lump-sum payment or annual installments, Participant’s election to change must be submitted to the Employer at least twelve (12) months prior to the distribution commencement date and shall not take effect until twelve (12) months after the election is made, provided however that any change may not accelerate benefit payments as provided under Code Section 409A and related regulations promulgated thereunder.

(b)In the event Participant desires to postpone the distribution commencement date for his or her Retirement Account or In-Service Accounts, Participant’s election to postpone said distribution commencement date must be submitted to the Employer at least twelve (12) months prior to the distribution commencement date and shall not take effect until twelve (12) months after the election is made and the new distribution commencement date must be at least five (5) years subsequent to the date when distributions would otherwise commence.  Moreover, any election to change a Participant’s distribution commencement date, pursuant to this section, shall only be permitted to extend the deferral period.

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6.4Commencement of Payment upon Death, Disability or Termination.

(a)Upon the death of a Participant, all amounts credited to his or her Account(s) shall be paid, as soon as administratively feasible, to his or her beneficiary or beneficiaries, as determined under Article 7 hereof, in a lump sum.

(b)Upon the Disability of a Participant, all amounts credited to his or her Account(s) shall be paid to the Participant in a lump-sum payment, as soon as administratively feasible.

(c)Upon the termination of employment of a Participant, all amounts credited to his or her Account(s) shall be paid to the Participant in a lump-sum payment, as soon as administratively feasible subject to Section 6.5 below.

6.5Distributions to Specified Employee.

(a)If any employee is a “Specified Employee,” as defined in subsection (b) below, upon a termination of employment for any reason other than Disability or death, a distribution may not be made before the date which is six (6) months after the date of separation from service (or, if earlier, the date of death of the employee).

(b)Pursuant to Code Section 409A, a “Specified Employee” means a key employee (as defined in Code Section 416(i) without regard to paragraph (5) thereof) of a corporation any stock in which is publicly traded on an established securities market or otherwise.

6.6Minimum Distribution.

Notwithstanding any provision to the contrary, and subject to Section 6.5, above, if the balance of a Participant’s Account at the time of a termination due to Retirement is $10,000 or less, then the Participant shall be paid his or her benefits as a single lump sum as soon as administratively feasible following said termination.

Notwithstanding any provision to the contrary, if the balance of a Participant’s In-Service subaccount at the time of a scheduled In-Service Account distribution is $10,000 or less, then the Participant shall be paid his or her benefits as a single lump sum.

6.7Unforeseeable Emergency

The Administrator may permit an early distribution of part or all of any deferred amounts; provided, however, that such distribution shall be made only if the Administrator, in its sole discretion, determines that the Participant has experienced an unforeseeable emergency.  An unforeseeable emergency is defined as a severe financial hardship resulting from an illness or accident of the Participant, the Participant’s spouse, or a dependent (as defined in Code Section 152(a)) of the Participant, loss of the Participant’s property due to casualty or other similar extraordinary and unforeseeable circumstances arising as a result of events beyond the control of the Participant.  If an unforeseeable emergency is determined to exist, a distribution may not exceed the amounts necessary to satisfy such emergency plus amounts necessary to pay taxes

9

reasonably anticipated as a result of the distribution, after taking into account the extent to which such hardship is or may be relieved through reimbursement or compensation by insurance or otherwise or by liquidation of the Participant’s assets (to the extent the liquidation of such assets would not itself cause severe financial hardship).

Article 7 - Beneficiaries

7.1Beneficiaries.

Each Participant may from time to time designate one or more persons (who may be any one or more members of such person’s family or other persons, administrators, trusts, foundations or other entities) as his or her beneficiary under the Plan.  Such designation shall be made on a form prescribed by the Administrator.  Each Participant may at any time and from time to time, change any previous beneficiary designation, without notice to or consent of any previously designated beneficiary, by amending his or her previous designation on a form prescribed by the Administrator.  If the beneficiary does not survive the Participant (or is otherwise unavailable to receive payment) or if no beneficiary is validly designated, then the amounts payable under this Plan shall be paid to the Participant’s estate.  If more than one person is the beneficiary of a deceased Participant, each such person shall receive a pro rata share of any death benefit payable unless otherwise designated on the applicable form.  If a beneficiary who is receiving benefits dies, all benefits that were payable to such beneficiary shall then be payable to the estate of that beneficiary.

7.2Lost Beneficiary.

(a)All Participants and beneficiaries shall have the obligation to keep the Administrator informed of their current address until such time as all benefits due have been paid.

(b)If a Participant or beneficiary cannot be located by the Administrator exercising due diligence, then, in its sole discretion, the Administrator may presume that the Participant or beneficiary is deceased for purposes of the Plan and all unpaid amounts (net of due diligence expenses) owed to the Participant or beneficiary shall be paid accordingly or, if a beneficiary cannot be so located, then such amounts may be forfeited.  Any such presumption of death shall be final, conclusive and binding on all parties.

Article 8 - Funding

8.1Prohibition Against Funding.

Should any investment be acquired in connection with the liabilities assumed under this Plan, it is expressly understood and agreed that the Participants and beneficiaries shall not have any right with respect to, or claim against, such assets nor shall any such purchase be construed to create a trust of any kind or a fiduciary relationship between the Employer and the Participants, their beneficiaries or any other person.  Any such assets shall be and remain a part of the general, unpledged, unrestricted assets of the Employer, subject to the claims of its general creditors.  It is the express intention of the parties hereto that this arrangement shall be unfunded for tax purposes and for purposes of Title I of the ERISA.  Each Participant and beneficiary shall

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be required to look to the provisions of this Plan and to the Employer itself for enforcement of any and all benefits due under this Plan, and to the extent any such person acquires a right to receive payment under this Plan, such right shall be no greater than the right of any unsecured general creditor of the Employer.  The Employer or the Trust shall be designated the owner and beneficiary of any investment acquired in connection with its obligation under this Plan.

8.2Deposits in Trust.

Notwithstanding Section 8.1, or any other provision of this Plan to the contrary, the Employer may deposit into the Trust any amounts it deems appropriate to pay the benefits under this Plan.  The amounts so deposited may, but need not, include all contributions made pursuant to a Deferral Election by a Participant, and any Employer Discretionary Contributions.

8.3Indemnification of Trustee.

(a)The Trustee shall not be liable for the making, retention, or sale of any investment or reinvestment made by it, as herein provided, nor for any loss to, or diminution of, the Trust assets, unless due to its own negligence, willful misconduct or lack of good faith.

(b)Such Trustee shall be indemnified and saved harmless by the Employer from and against all personal liability to which it may be subject by reason of any act done or omitted to be done in its official capacity as Trustee in good faith in the administration of the Plan and Trust, including all expenses reasonably incurred in its defense in the event the Employer fails to provide such defense upon the request of the Trustee.  The Trustee is relieved of all responsibility in connection with its duties hereunder to the fullest extent permitted by law, short of breach of duty to the beneficiaries.

8.4Withholding of Employee Contributions.

The Administrator is authorized to make any and all necessary arrangements with the Employer in order to withhold the Participant’s Deferrals under Section 3.1 hereof from his or her Compensation.  The Administrator shall determine the amount and timing of such withholding.

Article 9 - Claims Administration

9.1General.

If a Participant, Beneficiary or his or her representative is denied all or a portion of an expected Plan benefit for any reason and the Participant, Beneficiary or his or her representative desires to dispute the decision of the Administrator, he or she must file a written notification of his or her claim with the Administrator.

9.2Claims Procedure.

Upon receipt of any written claim for benefits, the Administrator shall be notified and shall give due consideration to the claim presented.  If any Participant or Beneficiary claims to be entitled to benefits under the Plan and the Administrator determines that the claim should be denied in whole or in part, the Administrator shall, in writing, notify such claimant within ninety (90) days following receipt of the claim that the claim has been denied.  The Administrator may

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extend the period of time for making a determination with respect to any claim for a period of up to ninety (90) days, provided that the Administrator determines that such an extension is necessary because of special circumstances and notifies the claimant, prior to the expiration of the initial ninety (90) day period, of the circumstances requiring the extension of time and the date by which the Plan expects to render a decision.  If the claim is denied to any extent by the Administrator, the Administrator shall furnish the claimant with a written notice setting forth:

(a)the specific reason or reasons for denial of the claim;

(b)a specific reference to the Plan provisions on which the denial is based;

(c)a description of any additional material or information necessary for the claimant to perfect the claim and an explanation of why such material or information is necessary; and

(d)an explanation of the provisions of this Article.

9.3Right of Appeal.

A claimant who has a claim denied wholly or partially under Section 9.2 may appeal to the Administrator for reconsideration of that claim.  A request for reconsideration under this section must be filed by written notice within sixty (60) days after receipt by the claimant of the notice of denial under Section 9.2.

9.4Review of Appeal.

Upon receipt of an appeal the Administrator shall promptly take action to give due consideration to the appeal.  Such consideration may include a hearing of the parties involved, if the Administrator feels such a hearing is necessary.  In preparing for this appeal the claimant shall be given the right to review pertinent documents and the right to submit in writing a statement of issues and comments.  After consideration of the merits of the appeal the Administrator shall issue a written decision which shall be binding on all parties.  The decision shall specifically state its reasons and pertinent Plan provisions on which it relies.  The Administrator’s decision shall be issued within sixty (60) days after the appeal is filed, except that the Administrator may extend the period of time for making a determination with respect to any claim for a period of up to sixty (60) days, provided that the Administrator determines that such an extension is necessary because of special circumstances and notifies the claimant, prior to the expiration of the initial sixty (60) day period, of the circumstances requiring the extension of time and the date by which the Plan expects to render a decision.

9.5Designation.

The Administrator may designate any other person of its choosing to make any determination otherwise required under this Article.  Any person so designated shall have the same authority and discretion granted to the Administrator hereunder.

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Article 10 - General Provisions

10.1Administrator.

(a)The Administrator is expressly empowered to limit the amount of compensation that may be deferred; to deposit amounts into trust in accordance with Section 8.2 hereof; to interpret the Plan, and to determine all questions arising in the administration, interpretation and application of the Plan; to employ actuaries, accountants, counsel, and other persons it deems necessary in connection with the administration of the Plan; to request any information from the Employer it deems necessary to determine whether the Employer would be considered insolvent or subject to a proceeding in bankruptcy; and to take all other necessary and proper actions to fulfill its duties as Administrator.

(b)The Administrator shall not be liable for any actions by it hereunder, unless due to its own negligence, willful misconduct or lack of good faith.

(c)The Administrator shall be indemnified and saved harmless by the Employer from and against all personal liability to which it may be subject by reason of any act done or omitted to be done in its official capacity as Administrator in good faith in the administration of the Plan and Trust, including all expenses reasonably incurred in its defense in the event the Employer fails to provide such defense upon the request of the Administrator.  The Administrator is relieved of all responsibility in connection with its duties hereunder to the fullest extent permitted by law, short of breach of duty to the beneficiaries.

10.2No Assignment.

Benefits or payments under this Plan shall not be subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, attachment, or garnishment by creditors of the Participant or the Participant’s beneficiary, whether voluntary or involuntary, and any attempt to so anticipate, alienate, sell, transfer, assign, pledge, encumber, attach or garnish the same shall not be valid, nor shall any such benefit or payment be in any way liable for or subject to the debts, contracts, liabilities, engagement or torts of any Participant or beneficiary, or any other person entitled to such benefit or payment pursuant to the terms of this Plan, except to such extent as may be required by law.  If any Participant or beneficiary or any other person entitled to a benefit or payment pursuant to the terms of this Plan becomes bankrupt or attempts to anticipate, alienate, sell, transfer, assign, pledge, encumber, attach or garnish any benefit or payment under this Plan, in whole or in part, or if any attempt is made to subject any such benefit or payment, in whole or in part, to the debts, contracts, liabilities, engagements or torts of the Participant or beneficiary or any other person entitled to any such benefit or payment pursuant to the terms of this Plan, then such benefit or payment, in the discretion of the Administrator, shall cease and terminate with respect to such Participant or beneficiary, or any other such person.

10.3No Employment Rights.

Participation in this Plan shall not be construed to confer upon any Participant the legal right to be retained in the employ of the Employer, or give a Participant or beneficiary, or any other person, any right to any payment whatsoever, except to the extent of the benefits provided

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for hereunder.  Each Participant shall remain subject to discharge to the same extent as if this Plan had never been adopted.

10.4Incompetence.

If the Administrator determines that any person to whom a benefit is payable under this Plan is incompetent by reason of physical or mental disability, the Administrator shall have the power to cause the payments becoming due to such person to be made to another for his or her benefit without responsibility of the Administrator or the Employer to see to the application of such payments.  Any payment made pursuant to such power shall, as to such payment, operate as a complete discharge of the Employer, the Administrator and the Trustee.

10.5Identity.

If, at any time, any doubt exists as to the identity of any person entitled to any payment hereunder or the amount or time of such payment, the Administrator shall be entitled to hold such sum until such identity or amount or time is determined or until an order of a court of competent jurisdiction is obtained.  The Administrator shall also be entitled to pay such sum into court in accordance with the appropriate rules of law.  Any expenses incurred by the Employer, Administrator, and Trust incident to such proceeding or litigation shall be charged against the Account of the affected Participant.

10.6Other Benefits.

The benefits of each Participant or beneficiary hereunder shall be in addition to any benefits paid or payable to or on account of the Participant or beneficiary under any other pension, disability, annuity or retirement plan or policy whatsoever.

10.7No Liability.

No liability shall attach to or be incurred by any manager of the Employer, Trustee or any Administrator under or by reason of the terms, conditions and provisions contained in this Plan, or for the acts or decisions taken or made thereunder or in connection therewith; and as a condition precedent to the establishment of this Plan or the receipt of benefits thereunder, or both, such liability, if any, is expressly waived and released by each Participant and by any and all persons claiming under or through any Participant or any other person.  Such waiver and release shall be conclusively evidenced by any act or participation in or the acceptance of benefits or the making of any election under this Plan.

10.8Expenses.

All expenses incurred in the administration of the Plan, whether incurred by the Employer or the Plan, shall be paid by the Employer.

10.9Insolvency.

Should the Employer be considered insolvent (as defined by the Trust), the Employer, through its Board and chief executive officer, shall give immediate written notice of such to the Administrator of the Plan and the Trustee.  Upon receipt of such notice, the Administrator or Trustee shall cease to make any payments to Participants who were Employees of the Employer or their beneficiaries and shall hold any and all assets attributable to the Employer for the benefit of the general creditors of the Employer.

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10.10Plan Amendment.

(a)Right to Amend.  The Board of the Employer and any authorized committee by written instrument, shall have the right to amend the Plan at any time and with respect to any provisions hereof, and all parties hereto or claiming any interest hereunder shall be bound by such amendment; provided, however, that no such amendment shall deprive the Participant or any Beneficiary(s) of any rights accrued hereunder prior to the date of the amendment, including the right to receive the payment of his or her benefit upon a benefit entitlement event, or earlier as provided herein.

(b)Amendment Required by Law.  Notwithstanding anything to the contrary, the Plan may be amended at any time, retroactively if required, if found necessary, in the opinion of the Board of the Employer, in order to ensure that the Plan is characterized as a non-tax-qualified plan of deferred supplemental retirement compensation maintained for members of a select group of management or highly compensated employees as described under Code Sections 451 and 409A, ERISA Sections 201(2), 301(a) (3) and 401 and to conform the Plan to the provisions and requirements of any applicable law (including ERISA) and the Code.

10.11Plan Termination.

(a)Employer’s Right to Terminate Plan.  Subject to applicable law, the Board of the Employer reserves the right, at any time, to terminate the Plan; provided however, that no such termination shall deprive the Participant or any Beneficiary of a right accrued hereunder prior to the date of termination and provided that, upon termination, the Participant shall become fully and immediately vested in his or her Account and such Account shall be held in the Plan until an appropriate distribution event as provided by this Plan and Code Section 409A.

(b)Termination of Plan Upon Dissolution.  Subject to applicable law, the Plan shall terminate automatically upon the dissolution of the Employer.  No such termination shall deprive the Participant or Beneficiary(s) of a right accrued hereunder prior to the date of termination and provided that, upon termination, the Participant shall become fully and immediately vested in his or her Account and such Account shall be held in the Plan until an appropriate distribution event as provided by this Plan and Code Section 409A.

(c)Termination of Plan Due to Change in Control.  The Employer may decide in its discretion to terminate the Plan in the event a Change in Control (as defined in Section 4.4) and distribute all Participants Accounts within twelve (12) months of the effective date of the Change in Control as allowed by law.  Any corporation or other business organization that is a successor to the Employer by reason of a Change in Control shall have the right to become a party to the Plan by adopting the same by resolution of the entity’s board of directors or other appropriate governing body.  If within thirty (30) days from the effective date of the Change in Control such new entity does not become a party hereto, as above provided, the full amount of the Participant’s Account shall become immediately distributable to the Participant.

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10.12Employer Determinations.

Any determinations, actions or decisions of the Employer (including but not limited to, Plan amendments and Plan termination) shall be made by the Board in accordance with its established procedures or by such other individuals, groups or organizations that have been properly delegated by the Board to make such determination or decision.

10.13Construction.

All questions of interpretation, construction or application arising under or concerning the terms of this Plan shall be decided by the Administrator, in its sole and final discretion, whose decision shall be final, binding and conclusive upon all persons.

10.14Governing Law.

This Plan shall be governed by, construed and administered in accordance with the applicable provisions of ERISA, and any other applicable federal law, provided, however, that to the extent not preempted by federal law this Plan shall be governed by, construed and administered under the laws of the state of Delaware, other than its laws respecting choice of law.

10.15Severability.

If any provision of this Plan is held invalid or unenforceable, its invalidity or unenforceability shall not affect any other provision of this Plan and this Plan shall be construed and enforced as if such provision had not been included therein.  If the inclusion of any Employee (or Employees) as a Participant under this Plan would cause the Plan to fail to comply with the requirements of sections 201(2), 301(a)(3) and 401(a)(1) of ERISA, or Code Section 409A, then the Plan shall be severed with respect to such Employee or Employees, who shall be considered to be participating in a separate arrangement.

10.16Headings.

The Article headings contained herein are inserted only as a matter of convenience and for reference and in no way define, limit, enlarge or describe the scope or intent of this Plan nor in any way shall they affect this Plan or the construction of any provision thereof.

Remainder of page intentionally blank

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10.17Terms.

Capitalized terms shall have meanings as defined herein.  Singular nouns shall be read as plural, masculine pronouns shall be read as feminine, and vice versa, as appropriate.

IN WITNESS WHEREOF, Biosite Incorporated has caused this instrument to be executed by its duly authorized officer, effective as of this                 day of                         , 20     .

	Biosite Incorporated
	By:
	Title:
ATTEST:
By:
Title:

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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)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and we have:

a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;

b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 9, 2005

/s/ Kim D. Blickenstaff

Kim D. Blickenstaff

Chairman of the Board and

Chief Executive Officer

EX-31.2

EXHIBIT 31.2

BIOSITE INCORPORATED

CHIEF FINANCIAL OFFICER CERTIFICATIONS

I, Christopher J. Twomey, certify that:

1. I have reviewed this 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)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and we have:

a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;

b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 9, 2005

/s/ Christopher J. Twomey

Christopher J. Twomey

Senior Vice President, Finance,

Chief Financial Officer and Secretary

EX-32.1

EXHIBIT 32.1

CERTIFICATION PURSUANT TO

SECTION 1350 OF CHAPTER 63 OF 18 U.S.C.

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Biosite Incorporated (the “Company”) on Form 10-Q for the period ending March 31, 2005 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Kim D. Blickenstaff, Chief Executive Officer of the Company, certify pursuant to Rule 13a-14(b) or Rule 15d-14(b) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and § 1350 of Chapter 63 of 18 U.S.C., as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:

(1)The Report fully complies with the requirements of section 13(a) or 15(d) of the Exchange Act; and

(2)The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company for the period covered by the Report.

/s/ Kim D. Blickenstaff

Kim D. Blickenstaff

Chief Executive Officer

May 9, 2005

A signed original of this written statement required by Section 906 has been provided to Biosite Incorporated and will be retained by Biosite Incorporated and furnished to the Securities and Exchange Commission or its staff upon request.

This certification accompanies this Report pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not, except to the extent required by the Sarbanes-Oxley Act of 2002, be deemed filed by the Company for purposes of Section 18 of the Exchange Act, or deemed to be incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act, except to the extent that the Company specifically incorporates it by reference.

EX-32.2

EXHIBIT 32.2

CERTIFICATION PURSUANT TO

SECTION 1350 OF CHAPTER 63 OF 18 U.S.C.

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Biosite Incorporated (the “Company”) on Form 10-Q for the period ending March 31, 2005 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Christopher J. Twomey, Chief Financial Officer of the Company, certify pursuant to Rule 13a-14(b) or Rule 15d-14(b) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and § 1350 of Chapter 63 of 18 U.S.C., as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:

(1)The Report fully complies with the requirements of section 13(a) or 15(d) of the Exchange Act; and

(2)The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company for the period  covered by the Report.

/s/ Christopher J. Twomey

Christopher J. Twomey

Chief Financial Officer

May 9, 2005

A signed original of this written statement required by Section 906 has been provided to Biosite Incorporated and will be retained by Biosite Incorporated and furnished to the Securities and Exchange Commission or its staff upon request.

This certification accompanies this Report pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not, except to the extent required by the Sarbanes-Oxley Act of 2002, be deemed filed by the Company for purposes of Section 18 of the Exchange Act, or deemed to be incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act, except to the extent that the Company specifically incorporates it by reference.