Transcript No Slide Title

Joseph Sorge, M.D.
Chairman and CEO
Steve Martin
Vice President and CFO
Thomas Weisel Partners
Healthcare Conference
September 8, 2006
A contender in life science research products and diagnostics
NASDAQ: STGN
Forward Looking Statement
Disclosure
Certain statements in this news release that are not historical fact constitute "forward-looking
statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Stockholders
and other readers are cautioned not to place undue reliance on these forward-looking statements.
Stratagene generally identifies forward-looking statements by using words like "believe," "intend,"
"target," "expect," "estimate," "may," "should," "plan," "project," "contemplate," "anticipate," "predict"
or similar expressions. You can also identify forward-looking statements by discussions of
strategies, plans or intentions. Such forward-looking statements involve known and unknown risks,
uncertainties and other factors, which may cause the actual results of Stratagene to be materially
different from historical results or from any results expressed or implied by such forward-looking
statements. Among the important factors that could cause actual results to differ materially from
those contained in or implied by the forward-looking statements are risks associated with the
company's inability to sufficiently anticipate market needs and develop products and product
enhancements that achieve market acceptance, the company's ability to compete effectively in the
diagnostics and life sciences research markets, variability of the company's quarterly revenues and
operating results, the failure of the company to retain key employees, the company's ability to obtain
additional debt or equity financing, the possibility of declining sales due in part to a reduction in
research and development budgets or government funding, the company's ongoing ability to protect
its own intellectual property rights and to avoid violating the intellectual property rights of third
parties, extended manufacturing difficulties and currency fluctuations. For more information about
these and other factors that could cause actual results to differ materially from those contained in or
implied by the forward-looking statements please see "Factors that May Affect Future Results"
included in Stratagene's Annual Report on Form 10-K for the year ended December 31, 2005 and in
other reports filed by Stratagene from time to time with the Securities and Exchange Commission,
including Quarterly Reports on Form 10-Q.
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Stratagene is…
a growing developer,
manufacturer, and
marketer of
advanced life
science research
and diagnostic
products for
academic, biopharm,
government and
clinical laboratories
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Investment Considerations
Profitable core business
– Specialized life sciences tools leadership
– Diagnostic product and technology expertise
High margin product growth opportunities
–
–
–
–
Molecular diagnostics – instruments and chemistries
Cutting edge DNA and RNA detection technology
Nucleic acid purification instrument and consumables
Software – high density array analysis
–
–
–
–
Bayer Healthcare
Focus Diagnostics / Quest Diagnostics
Merck / Rosetta Inpharmatics
Beckman Coulter
Strong R&D pipeline and history of innovation
Strategic relationships with life science and diagnostic industry leaders
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20+ Years of Success
• Stratagene founded in 1984
• History of positive cash flow and profits
• Started with gene cloning, then nucleic acid
amplification, now nucleic acid function and detection
• Expanded world wide
• Currently 460 employees worldwide
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Life Science Products
Proprietary biological reagents
and instruments used by
researchers to:
– identify genes and
proteins to study their
impact on cell regulation
– determine the molecular
mechanisms of health
and disease
– search for new drug
therapies
– develop diagnostic tests
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Recent Product Launches
StrataClone ™ PCR Cloning Kit
SideStep™ lysis and stabilization products
StrataScript® QPCR cDNA Synthesis Kit
miRACLE ™ miRNA Purification Kit
Absolutely RNA® FFPE Kit
PfuUltra™ II Fusion DNA Polymerase
Herculase® II Fusion DNA Polymerase
PathwayArchitect™ Software
– Strand Partnership
ArrayAssist® Expression, Exon Software
– Strand Partnership
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Clinical Diagnostics Products
•ALLERGY TESTING
 More than 1,000 different allergens
 More quantitative than “scratch” test
 Physicians can test for allergies using a single
sample of the patient’s blood
 Sales to ENT specialists for office testing
•AUTOIMMUNE TESTING
 37 autoimmune products to test for disorders such as
rheumatoid arthritis and systemic lupus
 Replaces subjective, labor intensive test
 Eliminates the use of expensive manual
immunofluorescent microscopy
•URINALYSIS – Kova® & Glasstic brand names
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Clinical Diagnostics Growth
Opportunity
 Diagnostic leaders integrating Stratagene autoimmune tests to
their clinical workstations – 7,000 unit installed base
 Bayer Diagnostics agreement
 Beckman Coulter agreement
 2006/2007 FDA approvals expected
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Product Mix Overview
Stratagene consolidated
Product Group
% of Product Sales
QPCR Systems
High Fidelity PCR Enzymes
Urinalysis Standards/Slides
Allergy
Mutagenesis
Competent Cells
22%
15%
11%
11%
9%
8%
Top 6 Product Lines
76%
Est. Market Share*
7%
60%
40%
4%
95%
25%
* Based on management estimates
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Strengths/Strategy
Continuous Innovation
Strong focus on product innovation
Approximately 50% of product
revenues protected by patents
Over 30% of revenues from
products launched since 2002
17 significant new products
launched in the last quarter of
2005
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Strengths/Strategy
Sales & Marketing Network
Extensive distribution network in over 30 countries
Transitioned to direct sales in Japan in 2004
Customers
–
60% North America
–
25% Europe
–
15% ROW
Customer Mix – 50% Academic and Government and 50% Commercial
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Molecular Diagnostics Opportunity
Stratagene’s QPCR Technology
Quantitative PCR is the most widely used technology for
molecular diagnostics
Roche is market leader with TaqMan® technology in $1.5 B
growing marketplace
Companies have paid Roche significant upfront fees and
high royalty rates for license to TaqMan technology
Key Roche patents expired in March 2005 in U.S. and in
March 2006 overseas
Stratagene has a new solution: FullVelocity™ technology –
faster, more sensitive, cost competitive
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TaqMan®
= polymerase with 5’ exo function
fluorescent light
primer
F
probe
Q
DNA or RNA Target
TaqMan® Reaction
Roche
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TM
FullVelocity Technology
5’ endo
fluorescent light
Q
primer
F
DNA or RNA Target
FullVelocityTM Reaction
Stratagene
U.S. Patent Nos. 6,350,580; 6,528,254; 6,548,250; 6,589,743; 6,893,819
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Measuring
Signal
Strength Over
1.5 hours
FullVelocity
vs. TaqMan
HIV Assay
with 5,000
copies of HIV
RNA
Signal Strength
HIV RNA Detection – 1.5 Hours
Brilliant
Taq Ct=30.0
FullVelocityTM
Ct=28.3
Leading
Competitor
TaqMan
Ct=35.5
Time
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Ultra Fast DNA Amplification
GUS gene from 5 ng cDNA
FV II
FV I
Taqman


17 seconds per cycle
Signal appears
With FV II in 8 minutes
With FV I – no signal
With Taqman no signal
Molecular Diagnostics Strategy
Reagents and Assays
License and sell FullVelocity™ technology directly to reference and
university clinical laboratories
– Co-developed 4-plex infectious disease detection kits with Focus
Diagnostics, additional kits under development
Establish relationships with marketing partners for hospital laboratories
Acquire target IP in newer areas to develop proprietary tests
– Cancer (relationship with the Sidney Kimmel Cancer Center)
– Biomarkers / companion diagnostics
– Pharmacogenomics
Instruments
Signed Development and Supply Agreement with Bayer Diagnostics for
Mx3005P™. Currently customizing system for clinical needs.
Co-developing nucleic acid purification instrument with Merck/Rosetta
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Real-Time PCR Instrument
Mx3000P™& Mx3005P™
QPCR Instruments
•small
•fast
•economical
•approximately 2,000 sold
in research market
•Bayer Healthcare
partnership
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Q2 2006 Financial Review
Q2 2006 Revenues of $23.4 million
Product gross margin rate of 64.6%
Q2 2006 EPS of $0.05, excluding a $0.22 litigation
charge
Total cash of $33.5 million at June 30, 2006
Total debt of $3.8 million in the form of an industrial
revenue bond with interest at 3.3% due 2022
$9 million line of credit available, no borrowings
outstanding
Total assets of $121 million
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Full year 2006 Guidance
Focus on Consistent Profitability
Revenue to be between $94 million and $98 million
Gross margin to range from 63% to 65% of total
revenues
Research and development expenses to range from
13% to 15% of revenues
GAAP earnings per share to range from $0.0 to $0.03
per share after $0.22 per share litigation charge
2006 GAAP earnings include stock option comp charges
from implementation of FAS 123R of $1.0 million ($0.03
per diluted share)
Fully diluted share count of 22.4 million
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Investment Opportunity
Profitable core businesses in life sciences and
clinical diagnostics
History of innovation
Growth opportunities in 2007 and beyond
– Partnership with Bayer Diagnostics for Mx3005P™
– Partnership with Focus Diagnostics for diagnostic tests and
reagents
– Co-development with Merck in Nucleic Acid Purification
– Bayer and Beckman-Coulter clinical diagnostics agreements
– Entry into molecular diagnostics market
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NASDAQ: STGN
www.stratagene.com
A contender in life science research products and diagnostics