Applied Biosystems forms new business to distribute Celera Discovery System.

Foster City, CA, Rockville, MD and Norwalk, CT 4/22/02--Applera announced that it will be the exclusive marketer and distributor of Celera Genomics' Celera Discovery System (CDS), and that it is forming a new Knowledge Business, which will integrate CDS with Applied Biosystems (ABI) products. The Knowledge Business will include genomic assays and related content, and information products, services and analytical tools, which will be marketed in part on an expanded information portal. Deborah A. Smeltzer, currently vice president of finance for ABI, will become vice president of the Knowledge Business. Under a 10-year agreement, starting July 1, 2002, Celera will receive low- to mid-single digit royalties on new Knowledge Business revenues, with the royalty rate progressing with sales through fiscal year 2008 and declining thereafter. Applera believes the cumulative cash flow to Celera will be $200-$300 million. EBITDA from Celera current subscriptions is expected to total approximately $62.5 million from fiscal years 2003-2006. If changes made to CDS by ABI result in lower EBITDA, ABI will reimburse Celera for the shortfall. Celera Genomics executives will fully concentrate on therapeutic discovery under new president, Kathy Ordonez, who will also continue to serve as president of Celera Diagnostics (see IBO 7/31/01).

Applera seems to have found a solution for its information business (see IBO 3/15/02). By integrating its databases with Applied Bio's products, Celera frees up staff for its drug discovery business, and receives revenues through Applied Bio sales, whose marketing and distribution muscle will help CDS sales. How Applied Bio will fare under this agreement is less clear as it must adapt part of its business to this new product. However, its Assays by Design and Assays on Demand services seem to provide a good place to start.