aTyr Pharma 10Q 2001 Q3 Quarterly report

QuickLinks -- Click here to rapidly navigate through this document

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

/x/	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2001
OR
/ /	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number: 0-25317

INVITROGEN CORPORATION
(Exact name of registrant as specified in its charter)

Delaware (State or other jurisdiction of incorporation or organization)		33-0373077 (I.R.S. Employer Identification No.)

1600 Faraday Avenue, Carlsbad, CA (Address of principal executive offices)		92008 (Zip Code)

Registrant's telephone number, including area code:(760) 603-7200

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 /x/ No / /

As of November 6, 2001 there were 52,961,228 shares of the registrant's Common Stock, par value $.01 per share, outstanding.

PART 1 FINANCIAL INFORMATION
Item 1. Financial Statements

INVITROGEN CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except par value data)

			September 30, 2001			December 31, 2000
			(Unaudited)
ASSETS
Current Assets:
	Cash and cash equivalents		$	563,118		$	418,899
	Restricted cash and investments			9,785			11,757
	Trade accounts receivable, net of allowance for doubtful accounts of $5,790 and $5,535			102,568			87,195
	Inventories			86,737			91,664
	Deferred income taxes			39,466			28,567
	Prepaid expenses and other current assets			13,491			33,667

		Total current assets		815,165			671,749
Property, plant and equipment, net				115,329			171,521
Intangible assets, net				1,241,213			1,473,903
Deferred income taxes				5,565			1,810
Other assets				48,629			50,232

		Total assets	$	2,225,901		$	2,369,215

LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
	Notes payable to banks		$	4,080		$	1,311
	Current portion of long-term obligations			306			843
	Accounts payable			22,130			24,728
	Accrued expenses and other current liabilities			81,647			79,211
	Income taxes			34,968			46,935

		Total current liabilities		143,131			153,028
Long-term obligations and reserves				14,313			15,798
Pension liabilities				12,836			12,614
Deferred income taxes				177,458			231,939
5¹/2% Convertible Subordinated Notes due 2007				172,500			172,500

		Total liabilities		520,238			585,879

Minority interest				2,455			4,939

Commitments and contingencies				—			—
Stockholders' Equity:
	Preferred stock; $0.01 par value, 6,405,884 shares authorized; no shares issued or outstanding			—			—
	Common stock; $0.01 par value, 125,000,000 shares authorized; 52,872,814 and 51,914,031 shares issued and outstanding			529			519
	Additional paid-in-capital			1,857,475			1,818,123
	Deferred compensation			(452	)		(4,209	)
	Accumulated other comprehensive income			2,365			8,589
	Retained deficit			(156,709	)		(44,625	)

		Total stockholders' equity		1,703,208			1,778,397

		Total liabilities and stockholders' equity	$	2,225,901		$	2,369,215

The accompanying notes are an integral part of these consolidated balance sheets.

INVITROGEN CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Amounts in thousands, except per share data)

				For the Three Months Ended September 30,						For the Nine Months Ended September 30,
				2001			2000			2001			2000
				(Unaudited)						(Unaudited)
Revenues				$	156,005		$	47,989		$	476,034		$	102,972
Cost of revenues					68,382			23,852			216,419			41,845

	Gross margin				87,623			24,137			259,615			61,127

Operating expenses:
	Sales and marketing				27,393			8,816			83,282			19,125
	General and administrative				19,416			5,078			49,717			12,106
	Research and development				9,081			5,329			29,095			12,695
	Goodwill and other purchased intangibles amortization				66,015			11,761			204,753			11,777
	Merger costs				4,013			385			9,004			6,965

		Total operating expenses			125,918			31,369			375,851			62,668

			Loss from operations		(38,295	)		(7,232	)		(116,236	)		(1,541	)

Other income (expense):
	Interest income				5,228			5,322			16,024			11,177
	Interest expense				(2,625	)		(2,632	)		(7,953	)		(6,317	)
	Other income, net				426			316			3,298			(19	)

		Total other income, net			3,029			2,374			11,369			4,841

Income (loss) before provision for income taxes and minority interest					(35,266	)		(4,858	)		(104,867	)		3,300
Provision for income taxes					1,930			694			6,237			5,893
Minority interest					225			60			980			60

			Net loss	$	(37,421	)	$	(5,612	)	$	(112,084	)	$	(2,653	)

Loss per common share				$	(0.71	)	$	(0.24	)	$	(2.14	)	$	(0.11	)

Weighted average shares used in per share calculation					52,749			23,828			52,420			23,459

The accompanying notes are an integral part of these consolidated financial statements.

INVITROGEN CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)

					For the Nine Months Ended September 30,
					2001			2000
					(Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
	Net loss				$	(112,084	)	$	(2,653	)
	Adjustments to reconcile net loss to net cash provided by operating activities, net of effects of business divested:
		Depreciation				13,745			4,114
		Amortization of intangible assets				205,194			12,320
		Amortization of deferred compensation				1,996			506
		Deferred income taxes				(14,398	)		7,564
		Non-cash merger related costs				781			2,390
		Minority interest				590			60
		Other non-cash adjustments				(653	)		4,615
		Changes in operating assets and liabilities:
			Trade accounts receivable			(18,793	)		(4,491	)
			Inventories			(452	)		(1,776	)
			Prepaid expenses and other current assets			3,629			826
			Other assets			6,142			(27	)
			Accounts payable			(1,576	)		(6,659	)
			Accrued expenses and other current liabilities			(32,152	)		3,715
			Income taxes			27,898			(796	)

				Net cash provided by operating activities		79,867			19,708

CASH FLOWS FROM INVESTING ACTIVITIES:
	Proceeds from sale of business, net of cash sold					11,616			—
	Net cash acquired from business combinations					2,978			223,024
	Purchases of held-to-maturity securities					(1,705	)		(99,523	)
	Sales of held-to-maturity securities					—			69,633
	Maturities of held-to-maturity securities					—			5,000
	Net payments received on note receivable					—			159
	Proceeds from sales of property, plant and equipment					55,810			21
	Purchases of property and equipment					(25,147	)		(11,434	)
	Payments for intangible assets					(5,696	)		(1,226	)

				Net cash provided by investing activities		37,856			185,654

CASH FLOWS FROM FINANCING ACTIVITIES:
	Net principal proceeds from (payments on) lines of credit					2,645			(1,417	)
	Proceeds from long-term obligations					4			166,999
	Principal payments on long-term obligations					(1,023	)		(10,778	)
	Proceeds from sale of common stock					25,887			7,178

				Net cash provided by financing activities		27,513			161,982
	Effect of exchange rate changes on cash					(1,017	)		3,657

				Net increase in cash and cash equivalents		144,219			371,001
	Cash and cash equivalents, beginning of period					418,899			102,238

	Cash and cash equivalents, end of period				$	563,118		$	473,239

The accompanying notes are an integral part of these consolidated financial statements.

INVITROGEN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

GENERAL

The consolidated financial statements include the accounts of Invitrogen Corporation and its majority owned or controlled subsidiaries (collectively the "Company" or "Invitrogen"). All significant intercompany accounts and transactions have been eliminated in consolidation. The interim financial statements have been prepared by Invitrogen, without audit, according to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States have been condensed or omitted pursuant to such rules and regulations. In the opinion of management, the accompanying unaudited financial statements contain all adjustments, which include only normal recurring adjustments, necessary to state fairly the financial position, results of operations and cash flows as of and for the periods indicated.

These financial statements should be read in conjunction with the audited financial statements and the notes thereto included in our Annual Report on Form 10-K, filed with the Securities and Exchange Commission on March 21, 2001.

On September 14, 2000, we completed our mergers with Life Technologies and Dexter Corporation. Substantially all of the businesses and operations of Dexter were sold prior to the closing of the mergers. Invitrogen retained responsibility for administration of various benefit plans as well as for some legal and environmental matters of Dexter. Both transactions have been accounted for as purchases and, accordingly, the results of operations have been included in the accompanying consolidated financial statements from the date of acquisition, which significantly affects the comparability of the financial information presented.

Certain reclassifications have been made to conform prior period financial information to the current presentation. These reclassifications had no effect on reported income or losses.

1. Business Combination

On June 29, 2001, the Company purchased the remaining 20% interest in its Japanese subsidiary, Invitrogen K.K., for $7.3 million. The excess of purchase price over the acquired net assets was $4.9 million and has been recorded as goodwill in the consolidated balance sheet. The asset is being amortized over a weighted average life of 5.5 years.

2. Business Divestiture

On July 31, 2001, the Company sold its BioSepra chromatography business for $13.2 million in cash, including $1.6 million in cash sold, to Ciphergen Biosystems, Inc., subject to the finalization of the closing balance sheet amounts. The Company did not recognize any gain or loss on this sale as the net assets sold were acquired in the Life Technologies merger and, in accordance with purchase accounting rules, the cost of the net assets in the consolidated balance sheet were adjusted to this fair market value. The adjustment, net of applicable taxes, was allocated to goodwill.

3. Segment Information

Prior to the merger with Life Technologies, the Company operated in one business segment dedicated to molecular biology research. Beginning in the first quarter of 2001, the Company completed its reorganization into two lines of business, a Molecular Biology division and a Cell Culture division. Segment financial information for Molecular Biology and Cell Culture prior to 2001 has not been provided, as it would be impracticable to do so.

Unaudited segment information for the three months ended September 30, 2001 is as follows:

(in thousands)(unaudited)		Molecular Biology			Cell Culture			Corporate And Unallocated(1)			Total
Revenues from external customers		$	101,612		$	54,393		$	—		$	156,005
Income (loss) from operations		$	23,048		$	13,841		$	(75,184	)	$	(38,295	)

Unaudited segment information for the nine months ended September 30, 2001 is as follows:

(in thousands)(unaudited)		Molecular Biology			Cell Culture			Corporate And Unallocated(1)			Total
Revenues from external customers		$	312,017		$	164,017		$	—		$	476,034
Income (loss) from operations		$	73,735		$	39,511		$	(229,482	)	$	(116,236	)

(1): Unallocated items for the three and nine months ended September 30, 2001, include costs for purchase accounting inventory revaluations of $0 and $2.6 million, amortization of deferred compensation of $0.7 million and $2.0 million and amortization of purchased intangibles of $66.0 million and $204.8 million, respectively, which are not allocated by management for purposes of analyzing the operations since they are non-cash items resulting primarily from purchase accounting.

The Company has no intersegment revenues. Also, the Company does not currently segregate assets by segment as a significant portion of the Company's total assets are intangible assets and cash and cash equivalents which the Company does not assign to its two operating segments. The Company is evaluating the feasibility and usefulness of assigning its other assets to its Molecular Biology and Cell Culture segments and may report assets by segment in the future.

4. Inventories

Inventories include material, labor and overhead costs and consist of the following:

(in thousands)	September 30, 2001		December 31, 2000
	(Unaudited)
Raw materials and components	$	16,649	$	13,901
Work in process		16,966		17,225
Finished goods		53,122		60,538

	$	86,737	$	91,664

5. Accumulated Depreciation and Amortization

Accumulated depreciation and amortization of property, plant and equipment was $31.7 million and $22.4 million at September 30, 2001 and December 31, 2000, respectively. Accumulated amortization of intangible assets was $259.7 million and $83.1 million at September 30, 2001 and December 31, 2000, respectively.

6. Computation of Loss Per Common Share

Loss per common share was computed by dividing the net loss by the weighted average number of common shares outstanding during the period. Potentially dilutive securities are not considered in the calculation of net loss per share as their impact would be antidilutive.

7. Comprehensive Income (Loss)

Total comprehensive income (loss) is determined as follows:

		For the Three Months Ended September 30,						For the Nine Months Ended September 30,
(in thousands)(unaudited)		For the Three Months Ended September 30,						For the Nine Months Ended September 30,
(in thousands)(unaudited)		2001			2000			2001			2000
Net loss		$	(37,421	)	$	(5,612	)	$	(112,084	)	$	(2,653	)
Net unrealized losses on investments			—			—			(13	)		—
Foreign currency translation adjustments			5,746			4,555			(6,211	)		4,543

	Total comprehensive income (loss)	$	(31,675	)	$	1,057		$	(118,308	)	$	1,890

8. Commitments and Contingencies

The Company had outstanding letters of credit at September 30, 2001, totaling $7.6 million to support liabilities associated with the Company's self-insurance program and a note payable, which are already reflected in long-term obligations in the consolidated balance sheet at September 30, 2001.

In September 1999, Life Technologies, Inc., which has now been merged into Invitrogen, submitted a report in connection with a voluntary disclosure to the Department of Veterans Affairs ("VA") regarding matters involving the management of Life Technologies' Federal Supply Schedule contract with the VA that had been in effect since April 1992. As part of the disclosure, Life Technologies offered to provide a refund to the government in the amount of $3.9 million. Life Technologies expensed this amount in September 1999. Life Technologies has made a cash payment of $1.1 million to the VA and the Company assumed an accrued liability of $2.8 million at September 14, 2000. In July 2001 the VA Office of Inspector General advised the Company of its position that an additional refund of $10.8 million should be paid by the Company to the government. The Company disagrees with this assessment, and has expressed its position to the Office of Inspector General, requesting that the disagreement be resolved through the standard contract dispute resolution mechanisms of the VA. There can be no assurance that the Company will prevail in contesting the government's determination. The Company has adjusted its accrued liability to reflect the full amount claimed by the VA, which has been recorded as an adjustment to goodwill and included in intangible assets in the accompanying consolidated balance sheets.

Apart from the matters above, the Company is subject to other potential liabilities under government regulations and various claims and legal actions which are pending or may be asserted. These matters have arisen in the ordinary course and conduct of the Company's business, as well as through acquisitions, and some are expected to be covered, at least partly, by insurance. Estimated amounts for claims that are probable and can be reasonably estimated are reflected as liabilities of the Company. The ultimate resolution of these matters is subject to many uncertainties. It is reasonably possible that some of the matters which are pending or may be asserted could be decided unfavorably to the Company. Although the amount of liability at September 30, 2001, with respect to these matters cannot be ascertained, the Company believes that any resulting liability should not materially affect the Company's consolidated financial statements.

9. Supplemental Cash Flow Information

		For the Nine Months Ended September 30,
(in thousands)(unaudited)		For the Nine Months Ended September 30,
(in thousands)(unaudited)		2001		2000
Supplemental Disclosure of Cash Flow Information:
	Cash paid for interest	$	9,811	$	4,902

	Cash paid for income taxes	$	21,843	$	3,425

Noncash Investing and Financing Activities:
	Stock issued for business combinations	$	—	$	15,079

	Stock issued for merger costs	$	—	$	2,208

Detail of Business Combinations:
	Fair value of shares issued in exchange	$	—	$	1,596,262
	Fair value of unvested stock options assumed		—		30,838
	Fair value of net assets acquired, other than cash		2,978		(1,404,076	)

	Net cash acquired from business combinations	$	2,978	$	223,024

10. Derivative Financial Instruments

The Company uses forward sale agreements to manage exposure to currency exchange rate risk on existing and anticipated transactions. On January 1, 2001, the Company adopted SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities," as amended by SFAS No. 138, "Accounting for Certain Derivative Instruments and Certain Hedging Activities," and various related implementation pronouncements. SFAS No. 133, as amended, establishes accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts, and for hedging instruments. SFAS No. 133, as amended, requires an entity to recognize all derivatives as either assets or liabilities in the balance sheet and measure those instruments at fair value. Derivatives that do not qualify for hedge accounting must be adjusted to fair value through the statement of operations. If the derivative qualifies for hedge accounting, depending on the nature of the hedge, changes in fair value of the hedged assets, liabilities or firm commitments are recognized in other comprehensive income until the hedged item is recognized in earnings. The ineffective portion of a derivative's change in fair value will be immediately recognized in earnings. The Company does not enter into financial instruments for speculation or trading purposes. The implementation of SFAS No. 133, as amended, did not have a material impact on the Company's consolidated financial statements for the periods presented in this Form 10-Q.

11. Preferred Stock Purchase Rights Plan

On February 27, 2001, the Board of Directors of Invitrogen adopted a Preferred Stock Purchase Rights Plan. Under the plan, stockholders received one "right" to purchase one one-hundredth of a share of preferred stock for each outstanding share of common stock held of record at the close of business on March 30, 2001. The rights, which will initially trade with the common stock, become exercisable to purchase one one-hundredth of a share of preferred stock, at $250.00 per right, when someone acquires 15% or more of Invitrogen's common stock or announces a tender offer which could result in such person owning 15% or more of the common stock. Each one one-hundredth of a share of preferred stock has terms designed to make it substantially the economic equivalent of one share of common stock. Prior to someone acquiring 15%, the rights can be redeemed for $0.001 each by action of the Board of Directors. Under certain circumstances, if someone acquires 15% or more of the common stock, the rights permit Invitrogen stockholders other than the acquiror to purchase Invitrogen

common stock having a market value of twice the exercise price of the rights, in lieu of the preferred stock. In addition, in the event of certain business combinations, the rights permit purchase of the common stock of an acquiror at a 50% discount. Rights held by the acquiror will become null and void in both cases. The rights expire on April 1, 2011. The rights distribution will not be taxable to stockholders.

12. Recent Accounting Pronouncements

On July 20, 2001, the Financial Accounting Standards Board issued Statement No. 141 ("SFAS No. 141"), "Business Combinations," and Statement No. 142 ("SFAS No. 142"), "Goodwill and Other Intangible Assets." SFAS No. 141 addresses the accounting for acquisitions of businesses and is effective for acquisitions occurring on or after July 1, 2001. SFAS No. 142 addresses the method of identifying and measuring goodwill and other intangible assets acquired in a business combination, eliminates further amortization of goodwill, and requires periodic evaluations of impairment of goodwill balances. In addition, the useful lives of recognized intangible assets acquired in transactions completed before July 1, 2001 will be reassessed and the remaining amortization periods adjusted accordingly. SFAS No. 142 is effective January 1, 2002.

Based on the current values assigned to goodwill and assembled workforce, we expect that the elimination of goodwill amortization would have a positive impact on reported net income for the year ended December 31, 2002 of approximately $194 million. We are currently assessing the impacts of adoption of SFAS No. 141 and SFAS No. 142 on other intangible assets and the respective impact on the consolidated results of operations, financial position and cash flows.

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

CAUTIONS REGARDING FORWARD-LOOKING STATMENTS

Any statements in this Quarterly Report on Form 10-Q concerning the Company's business outlook or future economic performance; anticipated profitability, revenues, expenses or other financial items; together with other statements that are not historical facts, are "forward-looking statements" as that term is defined under the Federal Securities Laws. You can identify these statements by forward-looking words such as "may," "will," "expect," "anticipate," "believe," "should," "intend," "plan," "positioned," "strategy," "outlook," "estimate," "project," and "continue" or similar words. You should read statements that contain these types of words carefully. Such forward-looking statements are subject to a number of risks, uncertainties and other factors that could cause actual results to differ materially from what is expressed or implied in such forward-looking statements. There may be events in the future that we are not able to predict accurately or over which we have no control. Potential risks and uncertainties include, but are not limited to, those discussed below under "Risk Factors That May Affect Future Results" and elsewhere in this Quarterly Report as well as other risks and uncertainties detailed in our Annual Report on Form 10-K, filed with the Securities and Exchange Commission on March 21, 2001. The Company does not undertake any obligations to release publicly any revisions to such forward-looking statements to reflect events or uncertainties after the date hereof or to reflect the occurrence of unanticipated events.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

OVERVIEW

We develop, manufacture, and market products for the life sciences markets. Our products are principally research tools in reagent and kit form, biochemicals, sera, media and other products and services we sell to corporate, academic, and government entities. We focus our business on two principal segments:

•: Molecular Biology. We are a leading supplier of research kits that simplify and improve gene cloning, gene expression, and gene analysis techniques. We also supply a full range of related molecular biology products including enzymes, nucleic acids and other biochemicals and reagents.
•: Cell Culture. We are also a leading supplier of sera, cell and tissue culture media and reagents used in both life sciences research and in processes to grow cells in the laboratory and to produce pharmaceuticals and other materials made by cultured cells.

Our Molecular Biology and Cell Culture products are used for research purposes, and, their use by our customers is not regulated by the United States Food and Drug Administration (FDA) or by any comparable international organization, with several limited exceptions. Some of our Cell Culture Products and manufacturing sites are subject to FDA regulation and oversight and are required to comply with the Quality System Regulations (formerly known as current good manufacturing practice, or "GMP") described in 21 CFR part 820. Additionally, some of these same sites and products are intended to comply with certain voluntary quality programs such as ISO 9001.

We manufacture the majority of our products in our manufacturing facilities in Carlsbad and San Diego, California; Frederick, Maryland; Grand Island, New York; Inchinnan, Scotland; and Huntsville, Alabama. In addition, we purchase products from third-party manufacturers for resale. We also have manufacturing facilities in Germany, New Zealand, Japan, Brazil, and Israel.

We sell our products throughout the world via subsidiaries and distributors in a number of foreign countries. The majority of our sales activities are conducted through a dedicated direct sales organization located in the United States and a number of foreign countries. We also conduct

marketing and distribution activities through our subsidiaries. Additionally, we sell through international distributors who resell Invitrogen kits and products. These distributors are located primarily in selected territories in Europe, the Middle East, South America and Asia. We may choose in the future to establish a direct sales organization in these and additional territories.

We conduct research activities in the United States and New Zealand and business development activities around the world. As part of these activities we actively seek to license intellectual property from academic, government, and commercial institutions.

Our revenues have increased significantly since our inception. The increase in our revenues has been due to several factors, including acquisitions, the continued growth of the market for gene identification, cloning, expression, and analysis kits, other products and related services; increasing market acceptance of these kits and products; our introduction of new research kits and products for gene identification, cloning, expression, and analysis; and the expansion of our direct sales and marketing efforts. We plan to continue to introduce new research kits, as we believe continued new product development and rapid product introduction is a critical competitive factor in the market for molecular biology research kits. To support increased levels of sales and to augment our long-term competitive position, we may increase expenditures in sales and marketing, manufacturing and research and development, although in each area we are continuing to streamline our operations and identify redundancies following the Life Technologies merger that will allow us to realize cost savings.

We currently manufacture products for inventory and ship products shortly after the receipt of orders, and anticipate that we will do so in the future. Accordingly, we do not currently have a significant backlog and do not anticipate we will develop a material backlog in the future.

We have acquired a significant number of patent rights from third parties as part of our business activities. We use these patent rights as a basis for the development of many of our research kits and other products. We pay royalties to such third parties relating to sales of these research kits, other products and selected services. Royalty expense is recognized as a cost of revenue as the related royalties are incurred.

On September 14, 2000, we completed our mergers with Life Technologies and Dexter. Substantially all of the businesses and operations of Dexter were sold prior to the closing of the mergers. Both transactions have been accounted for as purchases and, accordingly, the results of operations have been included in the accompanying consolidated financial statements from the date of acquisition, which significantly affects the comparability of the financial information presented.

On February 2, 2000, and September 21, 2000, we completed our mergers with Research Genetics and Ethrog, respectively. Both transactions have been accounted for as pooling of interests, and the consolidated financial statements reflect the combined financial and operating results of Invitrogen, Research Genetics and Ethrog.

Effective in the first quarter of 2001, we reorganized into two lines of business, a Molecular Biology division and a Cell Culture division and are reporting results by segment for 2001. Segment financial information for Molecular Biology and Cell Culture prior to 2001 has not been provided, as it would be impracticable to do so.

We anticipate that our results of operations may fluctuate from quarter to quarter and will be difficult to predict. The timing and degree of fluctuation will depend upon several factors, including those discussed under "Risk Factors That May Affect Future Results." In addition, our results of operations could be affected by the timing of orders from distributors and the mix of sales among distributors and our direct sales force. Although we have experienced growth in recent years, we cannot assure you that we will be able to sustain revenue growth or become profitable on a quarterly or annual basis or that our growth will be consistent with predictions made by securities analysts.

RESULTS OF OPERATIONS

Business Segment Highlights for the Three Months Ended September 30, 2001.

(in thousands)(unaudited)		Molecular Biology			Cell Culture			Corporate And Unallocated(1)			Total
Revenues from external customers		$	101,612		$	54,393		$	—		$	156,005
Gross margin			62,859			24,772			(8	)		87,623
Gross margin as a percentage of revenues			62	%		46	%					56	%
Selling, administrative and R&D			39,811			10,931			5,148			55,890
Amortization and merger costs			—			—			70,028			70,028

	Income (loss) from operations	$	23,048		$	13,841		$	(75,184	)	$	(38,295	)

Business Segment Highlights for the Nine Months Ended September 30, 2001.

(in thousands)(unaudited)		Molecular Biology			Cell Culture			Corporate And Unallocated(1)			Total
Revenues from external customers		$	312,017		$	164,017		$	—		$	476,034
Gross margin			189,309			72,982			(2,676	)		259,615
Gross margin as a percentage of revenues			61	%		45	%					55	%
Selling, administrative and R&D			115,574			33,471			13,049			162,094
Amortization and merger costs			—			—			213,757			213,757

	Income (loss) from operations	$	73,735		$	39,511		$	(229,482	)	$	(116,236	)

(1): Unallocated items for the three and nine months ended September 30, 2001, include costs for purchase accounting inventory revaluations of $0 and $2.6 million, amortization of deferred compensation of $0.7 million and $2.0 million and amortization of purchased intangibles of $66.0 million and $204.8 million, respectively, which are not allocated by management for purposes of analyzing the operations since they are non-cash items resulting primarily from purchase accounting.

Revenues. Revenues for the three months ended September 30, 2001, increased $108.0 million, or 225%, from $48.0 million in 2000 to $156.0 million for 2001. Revenues for the nine months ended September 30, 2001 increased $373.0 million, or 362%, from $103.0 million in 2000 to $476.0 million for 2001. The acquisition of Life Technologies accounted for a significant portion of the increase in revenues. Due to the integration of our operations that began during the fourth quarter of 2000, the precise amount of the increase in revenues due to Life Technologies is not determinable.

Pro Forma and Segment Revenues. Pro forma and segment revenues for the three months and nine months ended September 30, 2000, are provided on an unaudited, pro forma basis, assuming that the merger with Life Technologies occurred on January 1, 2000.

Revenues for the three months ended September 30, 2001, increased $15.1 million, or 11%, from pro forma revenues of $141.0 million in 2000 to $156.0 million in 2001. Changes in foreign exchange rates when comparing the second quarter of 2001 with the pro forma second quarter of 2000 reduced dollar-denominated revenues by $3.4 million. Holding foreign exchange rates constant with those during the second quarter of 2000, revenues during the second quarter of 2001 would have been $159.4 million, an increase of 13% from pro forma 2000 revenues.

Revenues for the nine months ended September 30, 2001, increased $52.3 million, or 12%, from pro forma revenues of $423.8 million in 2000 to $476.0 million in 2001. Changes in foreign exchange rates when comparing the nine months ended September 30, 2001, with the pro forma nine months of 2000 reduced dollar-denominated revenues by $14.9 million. Holding foreign exchange rates constant with those during the nine months ended September 30, 2000 revenues during the first nine months of 2001 would have been $490.9 million, an increase of 16% from pro forma 2000 revenues.

Molecular Biology Segment Revenues. Revenues for the Molecular Biology segment increased $10.1 million, or 11%, from pro forma segment revenues of $91.5 million for the three months ended September 30, 2000, to $101.6 million in 2001. The $101.6 million of Molecular Biology revenues in 2001 is comprised of $100.0 million of continuing products and $1.6 million of products that were recently discontinued or that we plan to discontinue in the near future. On a pro forma basis, changes in foreign exchange rates reduced dollar-denominated Molecular Biology revenues by $2.3 million when comparing the second quarter of 2001 with pro forma revenues in the second quarter of 2000. Sales of continuing Molecular Biology products would have increased 20% from pro forma 2000 revenues if foreign exchange rates had remained constant.

Revenues for the Molecular Biology segment increased $39.1 million, or 14%, from pro forma segment revenues of $272.9 million for the nine months ended September 30, 2000, to $312.0 million in 2001. The $312.0 million of Molecular Biology revenues in 2001 is comprised of $301.7 million of continuing products and $10.3 million of discontinued products. On a pro forma basis, changes in foreign exchange rates reduced dollar-denominated Molecular Biology revenues by $8.8 million when comparing the first nine months of 2001 with pro forma revenues in the first nine months of 2000. Sales of continuing Molecular Biology products would have increased 24% from pro forma 2000 revenues if foreign exchange rates had remained constant.

Cell Culture Segment Revenues. Revenues for the Cell Culture segment for the three months ended September 30 increased $4.9 million, or 10%, from pro forma segment revenues of $49.5 million in 2000 to $54.4 million in 2001. The $54.4 million of Cell Culture revenues in 2001 is comprised of $47.6 million of continuing products and $6.8 million of products that were recently discontinued or that we plan to discontinue in the near future. Revenues from our BioSepra chromatography business, which was sold on July 31, 2001, are included in the discontinued products revenues classification. On a pro forma basis, changes in foreign exchange rates during the second quarter of 2001 reduced dollar-denominated revenues by $1.1 million. Sales of continuing Cell Culture products would have increased 19% from pro forma 2000 revenues if foreign exchange rates had remained constant.

Revenues for the Cell Culture segment for the nine months ended September 30 increased $13.2 million, or 9%, from pro forma segment revenues of $150.8 million in 2000 to $164.0 million in 2001. The $164.0 million of Cell Culture revenues in 2001 is comprised of $139.0 million of continuing products and $25.0 million of products that were recently discontinued or that we plan to discontinue in the near future. On a pro forma basis, changes in foreign exchange rates during 2001 reduced dollar-denominated revenues by $6.1 million. Sales of continuing Cell Culture products would have increased 16% from pro forma 2000 revenues if foreign exchange rates had remained constant.

These unaudited pro forma results have been prepared for comparative purposes only and do not purport to be indicative of the results of operations that would have actually resulted had the combinations been in effect on January 1, 2000, or of future results of operations.

We expect that future revenues will be affected by the continuing integration of Life Technologies in addition to new product introductions, competitive conditions, customer research budgets, the rate of expansion of our customer base, product discontinuations, the sale of our BioSepra business and foreign currency rates.

Gross Margin. The Company's gross margin for the three months and nine months ended September 30, 2001, was 56% and 55% compared with 50% and 59% for the same periods in 2000, respectively. Consolidated gross margins for the periods after the merger with Life Technologies have been lower than Invitrogen's consolidated gross margins before the merger principally because of the inclusion of lower margin products from the Life Technologies acquisition. The company has instituted various programs to improve gross margins since the merger, including cost reductions, price adjustments and the discontinuation or sale of lower-margin product lines. Gross margins have improved in each quarter since the fourth quarter of 2000, which was the first full quarter of combined company results. Gross margins in the third quarter of 2001 were 56% compared with 55% in the second quarter of 2001.

Gross margins for the Molecular Biology segment for the three months and nine months ended September 30, 2001, were 62% and 61%, respectively, and for the Cell Culture segment were 46% and 45%, respectively.

We believe that gross margin for future periods will be affected by the continuing integration of Life Technologies in addition to sales volumes, competitive conditions, royalty payments on licensed technologies, and foreign currency rates.

The functional currency of our foreign subsidiaries is generally the dominant currency in the respective country of residence of the subsidiary. The translation from the functional currency to the U.S. Dollar for revenue and expenses is based on the average exchange rate during the period. Large increases or decreases in the spread between currencies have affected and may continue to affect reported revenues, revenue growth rates, gross margins, and reported income or losses. Certain subsidiaries also conduct their business in the currencies of their significant customers. Exchange gains or losses arising from transactions denominated in these currencies are recorded in the consolidated statements of operations using the actual exchange rate differences on the date of the transaction. Large increases or decreases in these currency fluctuations could also have an impact on reported revenues, revenue growth rates, gross margins and reported income or losses.

Sales and Marketing. Sales and marketing expenses increased $18.6 million from $8.8 million for the three months ended September 30, 2000, to $27.4 million for 2001. As a percentage of revenues, sales and marketing expenses remained the same at 18% in both 2001 and 2000. For the nine months ended September 30, 2001, sales and marketing expenses increased $64.2 million from $19.1 million in 2000 to $83.3 million in 2001. As a percentage of revenues, sales and marketing expenses decreased from 19% in 2000 to 18% in 2001. The reduction as a percentage of revenues resulted from the addition of the Cell Culture segment from the Life Technologies merger which has a lower ratio of sales and marketing costs to revenues and to the closure of a distribution facility in the Netherlands. Additionally, the second quarter of 2000 included costs incurred for a new brand recognition program. The addition of Life Technologies accounted for the majority of the absolute increase for 2001.

Sales and marketing expenses for the three months and nine months ended September 30, 2001, for the Molecular Biology segment were $20.3 million and $61.9 million, or 20% of segment revenues for both periods, and for Cell Culture were $7.0 million and $20.9 million, or 13% of segment revenues for both periods.

General and Administrative. General and administrative expenses for the three months ended September 30 increased $14.3 million from $5.1 million in 2000 to $19.4 million in 2001. As a percentage of revenues for the same periods, general and administrative expenses increased from 11% to 12%.

General and administrative expenses for the nine months ended September 30 increased $37.6 million from $12.1 million in 2000 to $49.7 million in 2001. As a percentage of revenues for the same periods, general and administrative expenses decreased from 12% to 10%.

The absolute increase resulted from the addition of Life Technologies along with continued expansion of administrative resources to support our growth. The increase as a percentage of revenues for the three months ended September 30, 2001 resulted primarily from higher legal costs due to litigation to protect our patents and duplicate staffing at our Rockville and Carlsbad sites as we transition employees and functions to Carlsbad. The decline as a percentage of revenues on a year-to-date basis occurred as a fixed portion of our general and administrative expense was spread over a larger revenue base.

General and administrative expenses for the three months and nine months ended September 30, 2001 for the Molecular Biology segment were $11.8 million and $28.9 million, or 12% and 9% of segment revenues, respectively, and for Cell Culture were $2.7 million and $8.5 million, or 5% of segment revenues for both periods.

Research and Development. Research and development expenses increased $3.8 million from $5.3 million for the three months ended September 30, 2000, to $9.1 million for 2001. As a percentage of revenues, research and development expenses decreased from 11% in 2000 to 6% in 2001.

Research and development expenses increased $16.4 million from $12.7 million for the nine months ended September 30, 2000, to $29.1 million for 2001. As a percentage of revenues, research and development expenses decreased from 12% in 2000 to 6% in 2001.

The absolute increase in research and development expenses resulted primarily from the addition of Life Technologies, new collaborative research and development projects and expanded research and development facilities. The decline as a percentage of revenues also reflects the impact of Life Technologies, whose historical percentage has averaged 5% to 6% of revenues.

Research and development expenses for the three months and nine months ended September 30, 2001, for the Molecular Biology segment were $7.8 million and $24.8 million, or 8% of segment revenues for both periods and for Cell Culture were $1.3 million and $4.0 million, or 2% of segment revenues for both periods.

Goodwill and Other Purchased Intangibles Amortization. The increase in the amortization of intangible assets from $11.8 million for the three and nine months ended September 30, 2000, to $66.0 million and $204.8 million for the same periods in 2001, respectively, is due primarily to the amortization of intangible assets acquired with Life Technologies, which are amortized using the straight-line method primarily over periods ranging from five to thirteen years.

With the adoption of SFAS No. 141 and SFAS No. 142, effective January 1, 2002, we expect that the elimination of goodwill amortization would have a positive impact on reported net income for the year ended December 31, 2002, of approximately $194 million, based on the current values assigned to goodwill and assembled workforce. We are currently assessing the impacts of adoption of these two standards on other intangible assets and the respective impact on the consolidated results of operations, financial position and cash flows.

Merger Costs. Merger costs for the three months and nine months ended September 30, 2001, totaled $4.0 million and $9.0 million, respectively, and are for the restructuring and integration of the operations of Life Technologies and Invitrogen that are not part of the purchase price of the acquisition since the costs incurred benefit future operations of the combined companies. Due to the ongoing restructuring, additional integration costs are expected to be at least $2.0 million during the remaining three months of 2001.

Merger costs for the three months and nine months ended September 30, 2000, represent net costs associated with the NOVEX, Research Genetics and Ethrog mergers that are expensed under the pooling method of accounting and totaled $0.4 million and $7.0 million, respectively.

Interest Income. Interest income decreased slightly by $0.1 million from $5.3 million for the three months ended September 30, 2000, to $5.2 million for 2001. Interest income in 2000 was higher due to $192 million in restricted cash held for the sixteen days following the merger that was subsequently paid in October 2000 to the selling shareholders and to higher interest rates in 2000. For the nine months ended September 20, 2001, interest income increased by $4.8 from $11.2 million in 2000 to $16.0 million in 2001. The increase was mainly attributable to larger balances of cash and investments during the nine months ended September 30, 2001.

Interest Expense. Interest expense remained unchanged at $2.6 million for the three months ended September 30, 2000 and 2001. For the nine months ended September 30, interest expense increased $1.6 million from $6.3 million in 2000 to $8.0 million in 2001, due mainly to interest on the 5¹/2% Convertible Subordinated Notes that were issued in March 2000.

Other Income, net. Net other income increased by $0.7 million from net other expense of $0.3 million for the three months ended September 30, 2000, to net other income of $0.4 million for 2001 due mainly to net periodic pension income of $0.6 million from the Dexter Postretirement Health Benefit Program. Other income, net, increased to $3.3 million for the nine months ended September 30, 2001 from zero for the same period in 2000 due mainly to $1.9 million in net periodic pension income from the Dexter Postretirement Health Benefit Program, a $1.0 million gain on the sale of a facility in the Netherlands in the second quarter and a $1.3 million gain in the first quarter on the sale of a product line acquired in the merger with Life Technologies.

Provision for Income Taxes. The income tax provision for the nine months ended September 30, 2001, was $6.2 million on a pre-tax loss of $104.9 million. Included in the pre-tax loss are certain merger related costs and amortization expense of certain purchased intangibles that are not deductible for tax purposes. Excluding the impact of these costs and expense, our effective tax rate was 35.5% for the nine months ended September 30, 2001 compared with 35.3% for the full year 2000.

LIQUIDITY AND CAPITAL RESOURCES

Operating activities provided net cash of $79.9 million during the nine months ended September 30, 2001. The net reduction of $32.2 million in accrued expenses and other current liabilities from December 31, 2000, required significant cash payments for accrued merger costs and accrued payroll taxes from stock option exercises. Net cash from investing activities generated $37.9 million and reflects $55.8 million in net proceeds from the sales of facilities, $11.6 million in net cash proceeds from the sale of our BioSepra business and $10.3 million released from an escrow account acquired in the Dexter merger. These investing proceeds were reduced by $7.3 million in cash paid for the remaining 20% ownership in the Company's Japanese subsidiary and capital expenditures and payments for intangible assets during the nine months ended September 30, 2001, which totaled $25.1 million and $5.7 million, respectively. Net cash generated from financing activities totaled $27.5 million, and includes $25.9 million in net proceeds from stock issued under employee stock plans.

On September 14, 2000, we completed our mergers with Life Technologies and Dexter. Certain costs associated with the restructuring of existing Invitrogen operations and costs necessary to integrate the businesses of Invitrogen and Life Technologies that are expected to benefit future operations are estimated to be approximately $11.3 million in 2001. As of September 30, 2001, $9.1 million of these costs have been incurred and recognized as expense in merger costs in the consolidated statements of operations.

In May 2001, we sold our Rockville, Maryland facility and received $53.4 million in cash, net of closing costs. On July 31, 2001, the Company sold its BioSepra chromatography business for $13.2 million in cash, including $1.6 million in cash sold, to Ciphergen Biosystems, Inc. The Company did not recognize any gain or loss on these sales as the net assets sold were acquired in the Life

Technologies merger and, in accordance with purchase accounting rules, the costs assigned to the net assets in the consolidated balance sheet were adjusted to this fair market value. These adjustments, net of applicable taxes, were allocated to goodwill.

During the nine months ended September 30, 2001, we recorded a reduction in our current tax liability of $12.4 million representing amounts deductible for income tax purposes for non-qualified stock option exercises and disqualifying dispositions of our common stock by employees during the year. This benefit is reflected as additional paid-in-capital in the September 30, 2001, consolidated balance sheet.

The Company had $172.5 million principal amount of 5¹/2% convertible subordinated notes (the "Convertible Notes") due 2007, outstanding at September 30, 2001. Interest on the Convertible Notes is payable semi-annually on March 1st and September 1st. The Convertible Notes were issued at 100% of principal value and are convertible into 2.0 million shares of common stock at the option of the holder at any time at a price of $85.20 per share. The Convertible Notes may be redeemed, in whole or in part, at the Company's option on or after March 1, 2003, at a premium of 103.143% of principal value which declines annually to par value at maturity date.

As of September 30, 2001, we had cash and cash equivalents of $563.1 million, long-term investments of $0.7 million and working capital of $662.2 million, excluding restricted cash and investments. Our funds are currently invested in overnight money market accounts, time deposits, commercial paper, corporate debt, U.S. treasury obligations and government agency notes. As of September 30, 2001, foreign subsidiaries in France, Japan, New Zealand and Australia had available bank lines of credit denominated in local currency to meet short-term working capital requirements. The U.S. Dollar equivalent of these facilities total $5.3 million, of which $4.1 million was outstanding at September 30, 2001. There are no parent company guarantees associated with these facilities.

We expect that our current cash and cash equivalents, funds from operations and interest income earned thereon will be sufficient to fund our current operations for at least 12 months. Our future capital requirements and the adequacy of our available funds will depend on many factors, including future business acquisitions, scientific progress in our research and development programs, the magnitude of those programs, our ability to establish collaborative and licensing arrangements, the cost involved in preparing, filing, prosecuting, maintaining and enforcing patent claims and competing technological and market developments.

RECENT ACCOUNTING PRONOUNCEMENTS

Based on the current values assigned to goodwill and assembled workforce, we expect that the elimination of goodwill amortization would have a positive impact on reported net income for the year ended December 31, 2002, of approximately $194 million. We are currently assessing the impacts of adoption of SFAS No. 141 and SFAS No. 142 on other intangible assets and the respective impact on the consolidated results of operations, financial position and cash flows.

DERIVATIVE FINANCIAL INSTRUMENTS

We are exposed to market risk related to changes in foreign currency exchange rates, commodity prices, and interest rates, and selectively use financial instruments to manage these risks. We do not enter into financial instruments for speculation or trading purposes.

We use forward sale agreements to manage exposure to currency exchange rate risk on existing and anticipated transactions. We hedge currency exposures of firm commitments and specific assets and liabilities denominated in non-functional currencies to protect against the possibility of diminished cash flow and adverse impact on earnings. Our currency exposures vary, but are primarily concentrated in the Euro, British Pound Sterling, Australian Dollar and Japanese Yen. At September 30, 2001, we had $3.1 million in financial instruments outstanding as hedges of currency risk which expire on various dates through December 2001. Our exposure to commodity price changes relates to certain manufacturing operations that utilize certain commodities as raw materials. We manage our exposure to changes in those prices primarily through our procurement and sales practices.

These financial exposures are monitored and managed by us as an integral part of our overall risk management program, which recognizes the unpredictability of financial markets and seeks to reduce the potentially adverse effect on our results.

On January 1, 2001, we adopted SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities," as amended by SFAS No. 138, "Accounting for Certain Derivative Instruments and Certain Hedging Activities," and various related implementation pronouncements. SFAS No. 133, as amended, establishes accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts, and for hedging instruments. SFAS No. 133, as amended, requires an entity to recognize all derivatives as either assets or liabilities in the balance sheet and measure those instruments at fair value. Derivatives that do not qualify for hedge accounting must be adjusted to fair value through the statement of operations. If the derivative qualifies for hedge accounting, depending on the nature of the hedge, changes in fair value of the hedged assets, liabilities or firm commitments are recognized in other comprehensive income until the hedged item is recognized in earnings. The ineffective portion of a derivative's change in fair value will be immediately recognized in earnings. We do not enter into financial instruments for speculation or trading purposes. The implementation of SFAS No. 133, as amended, did not have a material impact on our consolidated financial statements for the periods presented in this Form 10-Q.

FOREIGN CURRENCY TRANSLATION AND TRANSACTIONS

The financial statements of our non-U.S. operations are translated to U.S. Dollars for consolidation using exchange rates at period end for assets and liabilities and average exchange rates during each reporting period for results of operations. Net exchange gains or losses resulting from the translation of foreign financial statements, the effect of exchange rate changes on intercompany transactions of a long-term investment nature, and net exchange rate gains and losses on foreign currency transactions that are designated as, and are effective as, economic hedges of the net investment in a foreign entity are recorded as a separate component of stockholders' equity. These adjustments will affect net income only upon sale or liquidation of the underlying non-U.S. investment.

Many of our reporting entities conduct a portion of their business in currencies other than the entity's functional currency. These transactions give rise to receivables or payables that are denominated in currencies other than the entity's functional currency. Changes in the exchange rates between the functional currency and the currency in which the transaction is denominated result in currency transaction gains and losses that are included in the determination of income. Net currency exchange losses realized on business transactions were $0.1 million and $0.9 million for the three months and nine months ended September 30, 2001, and $0.4 million and $0.4 for the same periods in 2000, respectively.

ISSUES RELATED TO THE EUROPEAN MONETARY CONVERSION

On January 1, 1999, certain member states of the European Economic Community (EEC) fixed their respective currencies to a new currency, the Euro. On that day, the Euro became a functional legal currency within these countries. During the three years beginning on January 1, 1999, business in these EEC member states are being conducted in both the Euro and the existing national currency, such as the Netherlands Guilder, French Franc or Deutsche Mark. Businesses are required to complete transition to the Euro and begin reporting and conducting their transactions in the Euro by January 1, 2002. On July 1, 2002, the existing national currencies will be withdrawn and will no longer be considered legal tender.

Companies operating in or conducting business in EEC member states will need to ensure that their financial and other software systems are capable of processing transactions and properly handling the existing currencies, as well as the Euro. During the third quarter of 2001, we successfully implemented the Euro compliant version of our European software system, and the conversion of the currencies will be completed in December 2001 in accordance with European Union requirements. The cost to upgrade the software was $0.3 million. To date we have spent immaterial amounts to comply with these statutory requirements. These assessments have not been independently verified. Also, we have not determined the costs related to any problems that may arise in the future due to the inability of any of our customers or vendors to comply with the statutory requirements. Any such problems may materially adversely affect our business, operating results and financial condition.

FORWARD-LOOKING STATEMENTS

Any statements in this Quarterly Report on Form 10-Q about our expectations, beliefs, plans, objectives, assumptions or future events or performance are not historical facts and are forward-looking statements. We often, but not always, make these statements through the use of words or phrases such as "believe," "anticipate," "should," "intend," "plan," "may," "will," "expect," "estimate," "project," "positioned," "strategy," "continue," "outlook" and similar expressions. Accordingly, these statements involve estimates, assumptions and uncertainties which could cause actual results to differ materially from the results expressed in the statements. Any forward-looking statements are qualified in their entirety by reference to the factors discussed below under "Risk Factors that May Affect Future Results" as well as other risks and uncertainties detailed in our Annual Report on Form 10-K, filed with the Securities and Exchange Commission on March 21, 2001. The following cautionary statements identify important factors that could cause our actual results to differ materially from those projected in the forward-looking statements made in this Quarterly Report on Form 10-Q. Among the key factors that have a direct impact on our results of operations are:

•: general economic and business conditions;
•: industry trends;
•: our assumptions about customer acceptance, overall market penetration and competition from providers of alternative products and services;
•: our actual funding requirements; and
•: availability, terms and deployment of capital.

Because the risk factors referred to in this document could cause actual results or outcomes to differ materially from those expressed in any forward-looking statements that we make, you should not unduly rely on any such forward-looking statements. Further, any forward-looking statement applies only as of the date on which it is made. We do not undertake any obligation to update any forward-looking statement to reflect events or circumstances after the date on which such statement is made or to reflect the occurrence of unanticipated events. New factors emerge from time to time, and it is not

possible for us to predict the factors that will arise. In addition, we cannot assess the impact of each factor on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements.

You should carefully consider the following risks, together with other matters described in this Quarterly Report on Form 10-Q or incorporated herein by reference, before making an investment in our securities. If any of the following risks occurs, our business, financial condition or operating results could be materially adversely affected. In such case, the trading price of our securities could decline, and you could lose all or part of your investment. The risks described below are not the only ones we face. Additional risks not presently known to us or that we currently deem immaterial may also impair our business operations.

RISK FACTORS THAT MAY AFFECT FUTURE RESULTS

Failure to Manage Growth Could Impair Our Business.

Our business has grown rapidly. Our net revenues increased from $55.3 million in 1997 to $246.2 million in 2000. During that same period we significantly expanded our operations in the United States, Europe and Asia-Pacific.

The number of our employees increased from approximately 272 at December 31, 1996, to approximately 2,800 at September 30, 2001.

It is difficult to manage this rapid growth and our future success depends on our ability to implement:

•: research and product development;
•: sales and marketing programs;
•: customer support programs;
•: operational and financial control systems; and
•: recruiting and training programs.

Our ability to offer products and services successfully and to implement our business plan in a rapidly evolving market requires an effective planning, reporting and management process. We expect that we will need to continue to improve our financial and managerial controls, reporting systems and procedures, and to expand and train our workforce worldwide. We will also need to continue to manufacture our products efficiently and to control or adjust the expenses related to research and development, marketing, sales and general and administrative activities in response to changes in revenues. If we are not successful in managing such expenses there could be an adverse impact on our earnings.

Our merger with Life Technologies will require additional investments in operations, product research and development, administration and sales and marketing. These are significant expenses. Our failure to manage successfully and coordinate the growth of the combined company could have an adverse impact on our revenues and profits.

Reduction in Research and Development Budgets and Government Funding May Affect Sales.

Our customers include researchers at pharmaceutical and biotechnology companies, academic institutions and government and private laboratories. Fluctuations in the research and development budgets of these researchers and their organizations could have a significant effect on the demand for our products. Research and development budgets fluctuate due to changes in available resources, mergers of pharmaceutical and biotechnology companies, spending priorities and institutional budgetary

policies. Our business could be seriously damaged by any significant decrease in life sciences research and development expenditures by pharmaceutical and biotechnology companies, academic institutions or government and private laboratories.

In recent years, the pharmaceutical industry has undergone substantial downsizing and consolidation. Additional mergers or corporate consolidations in the pharmaceutical industry could cause us to lose existing customers and potential future customers, which could have a material adverse effect on our business, financial condition and results of operations.

A significant portion of our sales have been to researchers, universities, government laboratories and private foundations whose funding is dependent upon grants from government agencies such as the U.S. National Institutes of Health (NIH) and similar domestic and international agencies. Although the level of research funding has increased during the past several years, we cannot assure you that this trend will continue. Government funding of research and development is subject to the political process, which is inherently fluid and unpredictable. Our revenues may be adversely affected if our customers delay purchases as a result of uncertainties surrounding the approval of government budget proposals. Also, government proposals to reduce or eliminate budgetary deficits have sometimes included reduced allocations to the NIH and other government agencies that fund research and development activities. A reduction in government funding for the NIH or other government research agencies could seriously damage our business.

Our customers generally receive funds from approved grants at particular times of the year, as determined by the U.S. federal government. In the past, grants have been frozen for extended periods or have otherwise become unavailable to various institutions without advance notice. The timing of the receipt of grant funds affects the timing of purchase decisions by our customers and, as a result, can cause fluctuations in our sales and operating results.

Failure to Integrate Successfully Life Technologies and Other Companies Into Our Operations Could Reduce Our Revenues and Profits.

We completed our merger with Life Technologies on September 14, 2000. In addition, since the beginning of 2000 we have acquired Dexter Corporation, Research Genetics, Inc. and Ethrog Biotechnologies, Ltd. Our integration of the operations of Life Technologies and these previously-acquired companies will continue to require significant efforts from each company, including the coordination of research and development and sales and marketing efforts. We may find it difficult to integrate the operations of these acquired companies. A number of Life Technologies employees have left Invitrogen or have been terminated, and others may leave or be terminated because of the merger. Some of these former employees had Change-In-Control Agreements pursuant to which we have made significant lump sum cash payments and are required to maintain certain benefits for a two-year period from the date of the merger. Additional employee terminations or resignations or facility closures may require us to make additional severance or other payments and may result in litigation.

Our U.S. headquarters and pre-merger operations are located in Carlsbad, California. As a result of the mergers, we have operations in Frederick, Maryland, Grand Island, New York, and Huntsville, Alabama, as well as locations throughout Europe and Asia-Pacific. We are in the process of relocating certain manufacturing, distribution, and R&D facilities from Maryland to Carlsbad, California and Grand Island, New York. Because our facilities are physically separated and we are relocating certain facilities it may be difficult for us to communicate effectively with, manage and integrate these companies' staffs and operations with the rest of Invitrogen. Such difficulties could significantly hurt our operations and consequently our financial results.

Management may have its attention diverted while trying to integrate Life Technologies and these other companies. Such diversion of management's attention or difficulties in the transition process

could have a material adverse impact on us. If we are not able to integrate the operations of all these companies successfully, we may not be able to meet our expectations of future results of operations.

Factors that will affect the success of the mergers include:

•: decrease in customer loyalty and product orders caused by dissatisfaction with the combined companies' product lines and sales and marketing practices;
•: competitive factors, including technological advances attained by competitors and patents granted to, or contested by competitors, which would result in increased efficiency in their ability to compete against us;
•: the ability of the combined company to increase sales of all such companies' products; and
•: the ability of the combined company to operate efficiently and achieve cost savings.

Even if the companies are able to integrate operations, we cannot assure you that we will be able to achieve synergies. Our failure to achieve synergies could have a material adverse effect on the business results of operations and financial condition of the combined company.

Failure to License New Technologies Could Impair Our New Product Development.

Our business model of providing products to researchers working on a variety of genetic and related projects requires us to develop a wide spectrum of products. To generate broad product lines it is advantageous sometimes to license technologies from the scientific community at large rather than depending exclusively on the inventions of our own employees. As a result, we believe our ability to in-license new technologies from third parties is and will continue to be critical to our ability to offer new products. A significant portion of our current revenues are from products manufactured or sold under licenses from third parties.

From time to time we are notified or become aware of patents held by third parties which are related to technologies we are selling or may sell in the future. After a review of these patents, we may decide to obtain a license for these technologies from such third parties. We are currently in the process of negotiating several such licenses and expect that we will also negotiate these types of licenses in the future. We cannot assure you that we will be able to negotiate such licenses on favorable terms, or at all.

Our ability to gain access to technologies that we need for new products and services depends in part on our ability to convince inventors and their agents or assignees that we can successfully commercialize their inventions. We cannot assure you that we will be able to continue to identify new technologies developed by others. Even if we are able to identify new technologies of interest, we may not be able to negotiate a license on favorable terms, or at all.

Loss of Licenses Could Hurt Our Performance.

Some of our licenses do not run for the length of the underlying patent. We may not be able to renew our existing licenses on favorable terms, or at all. If we lose the rights to a patented technology, we may need to stop selling these products and possibly other products, redesign our products or lose a competitive advantage. Potential competitors could in-license technologies that we fail to license and potentially erode our market share for these and other products.

Our licenses typically subject us to various commercialization, sublicensing and other obligations. If we fail to comply with these obligations we could lose important rights under a license, such as the right to exclusivity in a certain market. In some cases, we could lose all rights under a license. In addition, certain rights granted under the license could be lost for reasons out of our control. For example, the licensor could lose patent protection for a number of reasons, including invalidity of the

licensed patent. We typically do not receive indemnification from a licensor against third-party claims of intellectual property infringement in the practice of the licensed technology.

We Have a Significant Amount of Debt Which Could Adversely Affect Our Financial Condition.

In March 2000, we sold $172.5 million of convertible notes to qualified institutional buyers. As a result of this offering, we have a significant amount of debt and debt service obligations. If we are unable to generate sufficient cash flow or otherwise obtain funds necessary to make required payments on the convertible notes, including from cash and cash equivalents on hand, we will be in default under the terms of the indenture which could, in turn, cause defaults under our other existing and future debt obligations.

Even if we are able to meet our debt service obligations, the amount of debt we have could adversely affect us in a number of ways, including by:

•: limiting our ability to obtain any necessary financing in the future for working capital, capital expenditures, debt service requirements, or other purposes;
•: limiting our flexibility in planning for, or reacting to, changes in our business;
•: placing us at a competitive disadvantage relative to our competitors who have lower levels of debt;
•: making us more vulnerable to a downturn in our business or the economy generally; and
•: requiring us to use a substantial portion of our cash to pay principal and interest on our debt, instead of contributing those funds to other purposes such as working capital and capital expenditures.

Our Market Share Depends on New Product Introductions and Acceptance.

The market for certain of our products and services is only about fifteen years old. Rapid technological change and frequent new product introductions are typical for the market. For example, prepackaged kits to perform research in particular cell lines and already-isolated genetic material are only now coming into widespread use among researchers. Our future success will depend in part on continuous, timely development and introduction of new products that address evolving market requirements. We believe successful new product introductions provide a significant competitive advantage because customers make an investment of time in selecting and learning to use a new product, and are reluctant to switch thereafter. We spend significant resources on internal research and development as well as on technology developed elsewhere to support our effort to develop and introduce new products. To the extent that we fail to introduce new and innovative products, we could fail to obtain an adequate return on these investments and could lose market share to our competitors, which would be difficult or impossible to regain. An inability, for technological or other reasons, to develop successfully and introduce new products could reduce our growth rate or otherwise damage our business.

In the past we have experienced, and we are likely to experience in the future, delays in the development and introduction of products. We cannot assure you that we will keep pace with the rapid rate of change in life sciences research, or that our new products will adequately meet the requirements of the marketplace or achieve market acceptance. Some of the factors affecting market acceptance of new products include:

•: availability, quality and price as compared to competitive products;
•: the timing of introduction of the product as compared to competitive products;
•: scientists' opinions of the product's utility;

•: citation of the product in published research; and
•: general trends in life sciences research.

The expenses or losses associated with unsuccessful product development activities or lack of market acceptance of our new products could materially adversely affect our business, financial condition and results of operations.

Inability to Protect Our Technologies Could Affect Our Ability to Compete.

Our success depends to a significant degree upon our ability to develop proprietary products and technologies. However, we cannot assure you that patents will be granted on any of our patent applications. We also cannot assure you that the scope of any of our issued patents will be sufficiently broad to offer meaningful protection. We only have patents issued in selected countries. Therefore, third parties can make, use, and sell products covered by our patents in any country in which we do not have patent protection. In addition, our issued patents or patents we license could be successfully challenged, invalidated or circumvented so that our patent rights would not create an effective competitive barrier. We provide our customers the right to use our products under label licenses that are for research purposes only. These licenses could be contested and we cannot assure you that we would either be aware of an unauthorized use or be able to enforce the restrictions in a cost-effective manner. We have incurred substantial costs in enforcing our intellectual property rights in the past, primarily relating to H minus reverse trancriptase, which is the basis for our Superscript and related product lines, and we expect to incur such costs in the future for this and other technologies.

If a third party claimed an intellectual property right to technology we use, we might need to discontinue an important product or product line, alter our products and processes, defend our right to use such technology in court, pay license fees or cease certain activities. Although we might under these circumstances attempt to obtain a license to such intellectual property, we may not be able to do so on favorable terms, or at all.

Disclosure of Trade Secrets Could Aid Our Competitors.

We attempt to protect our trade secrets by entering into confidentiality agreements with third parties, our employees and consultants. However, these agreements can be breached and, if they are, there may not be an adequate remedy available to us. If our trade secrets become known we may lose our competitive position.

Intellectual Property or Other Litigation Could Harm Our Business.

Litigation regarding patents and other intellectual property rights is extensive in the biotechnology industry. We are aware that patents have been applied for and, in some cases, issued to others claiming technologies which are closely related to ours. As a result, and in part due to the ambiguities and evolving nature of intellectual property law, we periodically receive notices of potential infringement of patents held by others. We may not be able to resolve these types of claims successfully in the future.

We are currently involved in patent litigation, and in the event of additional intellectual property disputes we may be involved in further litigation. We are currently enforcing our intellectual property rights through patent litigation in several court actions, primarily relating to H minus reverse transcriptase, which is the basis for our Superscript and related product lines. In addition to court actions, patent litigation could involve proceedings before the U.S. Patent and Trademark Office or the International Trade Commission, as well as proceedings brought by affected third parties or by us. Intellectual property litigation can be extremely expensive, and such expense, as well as the consequences should we not prevail, could seriously harm our business. We may also be harmed if we do not prevail in our pending patent litigation relating to H minus reverse transcriptase because we may be unable to prevent third parties from using this technology in the commercial marketplace. Additionally, if our products are found to infringe a third party's intellectual property, we may be required to pay damages for past infringement, and lose the ability to sell certain products or receive licensing revenues. In addition to intellectual property litigation, other substantial, complex or extended litigation could cause us to incur large expenditures and distract our management. For example, lawsuits by employees, stockholders, collaborators, distributors, customers, or end-users of our products or services could be very costly and substantially disrupt our business. Disputes from time to time with such companies or individuals are not uncommon, and we cannot assure you that we will always be able to resolve such disputes out of court or on terms favorable to us.

In particular, in acquiring Dexter Corporation, we assumed certain of Dexter's liabilities, ongoing disputes and litigation. These include personal injury, workers' compensation, automobile, environmental, warranty and product liability claims, among others. Unexpected costs could exceed stated reserves and insurance, requiring us to allocate additional funds and other resources to address Dexter's liabilities.

Violation of Government Regulations or Voluntary Quality Programs Could Result in Loss of Sales and Customers.

Certain cell culture products that our Cell Culture segment manufactures are labeled for in vitro diagnostic use and as such are regulated by the U.S. Food and Drug Administration (FDA) as medical devices. As such, we must register with the FDA as a medical device manufacturer and comply with the Quality System Regulation (formerly known as current good manufacturing practice, or "GMP"). As a registered medical device manufacturer, we must also comply with other regulations such as regulations relating to Medical Device Reporting and Labeling. Failure to comply with these regulations can lead to sanctions by the FDA such as written observations made following inspections, warning letters, product recalls, fines, product seizures and consent decrees. If the FDA were to take such actions, the FDA's observations, warnings, etc. would be available to the public. Such publicity could affect our ability to sell products labeled for in vitro diagnostic use and our ability to sell products to industrial customers engaged in the manufacture of pharmaceuticals.

Additionally, some of our customers use our products in the manufacturing process for their drug and medical device products, and such end products are regulated by the FDA under GMP. Although the customer is ultimately responsible for GMP compliance for their products, it is also the customers' expectation that the materials sold to them will meet the GMP requirements.

ISO 9001 is an internationally recognized voluntary quality standard that requires compliance with a variety of quality requirements somewhat similar to the GMP requirements. The operations of our Cell Culture manufacturing facilities are intended to comply with ISO 9001. Failure to comply with this voluntary standard can lead to observations of non-compliance or even suspension of ISO certification by the certifying unit. If we lose ISO certification, this loss could cause some customers to purchase products from other suppliers.

Loss of Key Personnel Could Hurt Our Business.

Our products and services are highly technical in nature. In general, only highly qualified and trained scientists have the necessary skills to develop and market our products and provide our services. In addition, some of our manufacturing positions are highly technical as well. We face intense competition for these professionals from our competitors, customers, marketing partners and other companies throughout our industry. We do not generally enter into employment agreements requiring these employees to continue in our employment for any period of time. Any failure on our part to hire, train, and retain a sufficient number of qualified professionals would seriously damage our business. Additionally, some measures that we implement during the course of integrating Life Technologies into our operations may be disruptive to some of our key research and development personnel and cause them to leave us. Earlier this year we sold the headquarters of Life Technologies in Rockville, Maryland and are in the process of relocating the operations conducted there to our other facilities. Some of our employees have chosen to terminate their employment rather than relocate. If we were to lose a sufficient number of our research and development scientists, and were unable to replace them or satisfy our needs for research and development through outsourcing, it could seriously damage our business.

Competition in the Life Sciences Research Market Could Reduce Sales.

The markets for our products are very competitive and price sensitive. Other life science research product suppliers have significant financial, operational, sales and marketing resources, and experience in research and development. These and other companies may have developed or could in the future develop new technologies that compete with our products or even render our products obsolete. If a competitor develops superior technology or cost-effective alternatives to our kits and other products, our business, operating results, and financial condition could be materially adversely affected.

The markets for certain of our products, such as electrophoresis products, custom primers, certain amplification products (such as enzymes for polymerase chain reaction), and fetal bovine serum, are also subject to specific competitive risks. These markets are highly price competitive. Our competitors have competed in the past by lowering prices on certain products. Our competitors may lower prices on these or other products in the future and we may, in certain cases, respond by lowering our prices. This would reduce revenues and profits. Conversely, failure to anticipate and respond to price competition may hurt our market share.

We believe that customers in our markets display a significant amount of loyalty to their initial supplier of a particular product. Therefore, it may be difficult to generate sales to potential customers who have purchased products from competitors. To the extent we are unable to be the first to develop and supply new products, our competitive position will suffer.

Loss of Distributors May Hurt Our Sales, and Distributors May Force Us to Use More Expensive Marketing and Distribution Channels.

Certain of our customers have developed purchasing initiatives to reduce the number of vendors from which they purchase in order to lower their supply costs. In some cases these accounts have established agreements with large distributors, which include discounts and the distributors' direct involvement with the purchasing process. These activities may force us to supply the large distributors with our products at a discount to reach those customers. For similar reasons many larger customers, including the U.S. government, have requested and may in the future request, special pricing arrangements, including blanket purchase agreements. These agreements may limit our pricing flexibility, which could have an adverse impact on our business, financial condition and results of operations. Our pricing flexibility could particularly be affected with respect to electrophoresis products, custom oligonucleotides, certain amplification products (such as enzymes for polymerase chain reaction), and fetal bovine serum. For a limited number of customers we have made sales, at the

customer's request, through third-party Internet vendors. Although Internet sales through third parties have not had a significant impact to date, it is possible that this method of distribution could have a negative impact on our gross margins, because any commission paid on Internet sales would be an additional cost not incurred through the use of non-Internet vendors.

Failure to Obtain Products and Components From Third-party Manufacturers Could Affect Our Ability to Manufacture and Deliver Our Products.

We rely on third-party manufacturers to supply many of our raw materials, product components, and in some cases, entire products. In particular, we purchase all of the cassettes used in our pre-cast electrophoresis gels from two third-party manufacturers. Also, we have contracted with an outside vendor for the production of our PowerEase instrument products. Manufacturing problems may occur with these and other outside sources. If such problems occur, we cannot assure you that we will be able to manufacture our products profitably or on time.

International Unrest or Foreign Currency Fluctuations Could Adversely Affect Our Results.

Including subsidiaries and distributors, our products are currently marketed in approximately 70 countries throughout the world. Our international revenues, which include revenues from our non-U.S. subsidiaries and export sales, represented 39% of our product revenues in 2000 and 33% in both 1999 and 1998. We expect that international revenues will continue to account for a significant percentage of our revenues for the foreseeable future.

There are a number of risks arising from our international business, including:

•: general economic and political conditions in the markets in which we operate;
•: potential increased costs associated with overlapping tax structures;
•: potential trade restrictions and exchange controls;
•: more limited protection for intellectual property rights in some countries;
•: difficulties and costs associated with staffing and managing foreign operations;
•: uncertain effects of the adoption of unified currency in Europe;
•: slower growth in the European market before the unified currency is fully adopted;
•: unexpected changes in regulatory requirements;
•: the difficulties of compliance with a wide variety of foreign laws and regulations;
•: longer accounts receivable cycles in certain foreign countries; and
•: import and export licensing requirements.

A significant portion of our business is conducted in currencies other than the U.S. Dollar, which is our reporting currency. We recognize foreign currency gains or losses arising from our operations in the period incurred. As a result, currency fluctuations between the U.S. Dollar and the currencies in which we do business have caused and will continue to cause foreign currency transaction gains and losses. We cannot predict the effects of exchange rate fluctuations upon our future operating results because of the number of currencies involved, the variability of currency exposures, and the potential volatility of currency exchange rates. We engage in limited foreign exchange hedging transactions to manage our foreign currency exposure, but we cannot assure you that our strategies will adequately protect our operating results from the effects of exchange rate fluctuations.

The Asia-Pacific region, Europe, and South America have experienced somewhat unsteady economic conditions and significant devaluation in currencies in some countries. The economic

situation in these regions may result in slower payments of outstanding receivable balances. Our business could be damaged by weakness in the economies in these regions.

Absence of Dividends Could Reduce Our Attractiveness to Investors.

Some investors favor companies that pay dividends, particularly in market downturns. We have never declared or paid any cash dividends on our common stock. We currently intend to retain any future earnings for funding growth and, therefore, we do not currently anticipate paying cash dividends on our common stock in the foreseeable future.

Our Business was Detrimentally Affected by the Effects of the Terrorist Attacks on the United States on September 11, 2001, and We Remain Vulnerable to the Effects of Similar Types of Attacks in the Future.

The recent terrorist attacks of September 11, 2001 had an adverse impact on our business because of the resulting interference with the delivery of our products. Disruptions in air transportation affected delivery of many of our products and caused a reduction in our revenue for the third quarter of 2001. Any further occurrence of similar events could interfere with the delivery of our products, which may result in an adverse effect on our revenue. Additionally, as the government allocates funds to address the events surrounding the September 11, 2001 attacks, any shift of government spending away from funding of life sciences research and development may cause our customers to delay or forego purchases of our products, which would have a negative impact on our business.

If Our Customers or Vendors are Unable to Upgrade Their Financial Systems to Comply with the Statutory Requirements for Euro Compliance, our Business, Operating results and Financial Condition May be Adversely Affected.

Companies operating in or conducting business in European Economic Community (EEC) member states must ensure that their financial and other software systems are capable of processing transactions and properly handling the existing currencies, as well as the Euro. We are in the process of testing our financial and order processing systems for conversion routines to ensure that internal and external translations are handled properly. We anticipate being fully compliant with statutory requirements prior to the January 1, 2002 deadline set by the EEC. However, we have not determined the costs related to any problems that may arise in the future due to the inability of any of our customers or vendors to comply with the statutory requirements. Any such problems may materially adversely affect our business, operating results and financial condition.

The Market Price of Our Stock and Convertible Notes Could be Volatile.

The market price of our common stock has been subject to volatility and, in the future, the market price of our common stock and convertible notes may fluctuate substantially due to a variety of factors, including:

•: quarterly fluctuations in our operating income and earnings per share results;
•: technological innovations or new product introductions by us or our competitors;
•: economic conditions;
•: disputes concerning patents or proprietary rights;
•: changes in earnings estimates by market research analysts;
•: sales of common stock by existing holders;
•: loss of key personnel; and
•: securities class actions or other litigation.

The market price for our common stock and the convertible notes may also be affected by our ability to meet analysts' expectations. Any failure to meet such expectations, even slightly, could have an adverse effect on the market price of our common stock and the convertible notes. In addition, the stock market is subject to extreme price and volume fluctuations. This volatility has had a significant effect on the market prices of securities issued by many companies for reasons unrelated to the operating performance of these companies. In the past, following periods of volatility in the market price of a company's securities, securities class action litigation has often been instituted against that company. If similar litigation were instituted against us, it could result in substantial costs and a diversion of our management's attention and resources, which could have an adverse effect on our business, results of operations and financial condition.

Our Operating Results May Fluctuate in Future Periods.

The results of operations for any quarter are not necessarily indicative of results to be expected in future periods. Our operating results have in the past been, and will continue to be, subject to quarterly fluctuations as a result of a number of factors. These factors include, but are not limited to:

•: the integration of people, operations and products from acquired businesses and technologies;
•: our ability to introduce new products successfully;
•: market acceptance of existing or new products;
•: competitive product introductions;
•: currency rate fluctuations;
•: changes in customer research budgets which are influenced by the timing of their research and commercialization efforts and their receipt of government grants;
•: our ability to manufacture our products efficiently;
•: our ability to control or adjust research and development, marketing, sales and general and administrative expenses in response to changes in revenues; and
•: the timing of orders from distributors and mix of sales among distributors and our direct sales force.

Our Anti-Takeover Defense Provisions May Deter Potential Acquirors and May Depress Invitrogen's Stock Price.

Certain provisions of our certificate of incorporation, by-laws and Delaware law could be used by our incumbent management to make it substantially more difficult for a third party to acquire control of Invitrogen. These provisions include the following:

•: we may issue preferred stock with rights senior to those of our common stock;
•: we have adopted a stock purchase rights plan (a so-called "poison pill");
•: we have a classified board of directors;
•: our by-laws prohibit action by written consent by stockholders;
•: our Board of Directors has the exclusive right to fill vacancies and set the number of directors;
•: cumulative voting is not allowed;
•: we require advance notice for nomination of directors and for stockholder proposals; and
•: a number of our executives have agreements with us that entitle them to payments in certain circumstances under a change in control.

Accidents Related to Hazardous Materials Could Adversely Affect Our Business.

Portions of our operations require the controlled use of hazardous and radioactive materials. Although we are diligent in designing and implementing safety procedures to comply with the standards prescribed by federal, state, and local regulations, the risk of accidental contamination of property or injury to individuals from these materials cannot be completely eliminated. In the event of such an accident, we could be liable for any damages that result, which could adversely affect our business. Additionally, any accident could partially or completely shut down our research and manufacturing facilities and operations.

We generate waste that must be transported to approved landfills. The transportation and disposal of such waste are required to meet applicable state and federal statutes and regulations. The disposal of such waste potentially exposes us to environmental liability if, in the future, such transportation and disposal is deemed to have violated such statutes and/or regulations or if the landfills leak and are proved to have damaged the environment.

Furthermore, in acquiring Dexter, we assumed certain of Dexter's environmental liabilities, including clean-up of several hazardous waste sites. However, unexpected costs could exceed stated reserves and insurance. This may require us to allocate additional funds and other resources to address Dexter's environmental liabilities.

Potential Product Liability Claims Could Affect Our Earnings and Financial Condition.

We face a potential risk of liability claims based on our products or services. We carry product liability insurance coverage which is limited in scope and amount but which we believe to be adequate. We cannot assure you, however, that we will be able to maintain this insurance at reasonable cost and on reasonable terms. We also cannot assure you that this insurance will be adequate to protect us against a product liability claim, should one arise.

Failure to Manage Risks Related to Life Technologies Ongoing Operations Could Damage Our Business.

There are additional risks related to the ongoing operation of Life Technologies that differ in some respects from the risks we faced prior to the merger with Life Technologies. These risks include:

•: changes in pricing or availability of fetal bovine serum;
•: the possibility of adverse rulings by or adverse developments in negotiations with the government;
•: litigation risks;
•: potential environmental liabilities; and
•: other risks detailed in the filings by Life Technologies, Inc. with the Securities and Exchange Commission.

We cannot assure you that we will be able to manage these risks in such a manner as will not adversely affect our business.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

We are subject to interest rate risk. Our investment portfolio is maintained in accordance with our investment policy which defines allowable investments, specifies credit quality standards and limits the credit exposure of any single issuer. We do not utilize any form of interest rate swap agreements to manage our exposure to fluctuations in earnings due to changes in interest rates. As of September 30, 2001, the majority of our cash and cash equivalents are invested in securities with maturities of less than 90 days. Since the fair value of our cash and cash equivalents approximated carrying value due to the short-term nature of the investments, any increase in interest rates would not have a material impact on the ending value of our cash equivalents. We would, however, be at risk for lower earnings should interest rates decline dramatically.

PART II OTHER INFORMATION

Item 1. Legal Proceedings

None.

Item 2. Changes in Securities and Use of Proceeds

Not applicable.

Item 3. Defaults Upon Senior Securities

Not applicable.

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

None.

Item 5. Other Information

Not applicable.

Item 6. Exhibits and Reports on Form 8-K

(a): The following exhibits are filed as part of this report:

3.1		Restated Certificate of Incorporation of the Company, as amended(1)
3.2		Amended and Restated Bylaws of Invitrogen(2)
3.3		Certificate of Correction Dated February 21, 2001 to the Restated Certificate of Incorporation of Invitrogen(3)
10.1		Description of Non-Employee Director Compensation Arrangements adopted April 26, 2001
10.2		Letter to Mr. Raymond Dittamore dated November 5, 2001 regarding Non-Employee Director Compensation
10.3		2000 Nonstatutory Stock Option Plan, as amended and restated on July 19, 2001
10.4		Invitrogen Corporation 1997 Stock Option Plan, as amended and restated on July 19, 2001

(1): Incorporated by reference to the Registrant's Quarterly Report on Form 10-Q for the Quarterly Period Ended September 30, 2000 (File No. 000-25317).
(2): The Amended and Restated Bylaws are incorporated by reference to the Registrant's Registration Statement on Form S-1 (File No. 333-68665). A further amendment to the Bylaws adopted by a Resolution of the Board of Directors dated July 19, 2001 is incorporated by reference to the Registrant's Quarterly Report on Form 10-Q for the Quarterly Period Ended June 30, 2001 (File No. 000-25317).
(3): Incorporated by reference to the Registrant's Quarterly Report on Form 10-Q for the Quarterly Period Ended March 31, 2001 (File No. 000-25317).

(b): The following reports on Forms 8-K were filed during the quarter ended September 30, 2001:

None.

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.

		INVITROGEN CORPORATION
Date: November 8, 2001		By:		/s/ JAMES R. GLYNN James R. Glynn Executive Vice President and Chief Financial Officer (Principal Financial Officer and Authorized Signatory)

INDEX TO EXHIBITS

3.1		Restated Certificate of Incorporation of the Company, as amended(1)
3.2		Amended and Restated Bylaws of Invitrogen(2)
3.3		Certificate of Correction Dated February 21, 2001 to the Restated Certificate of Incorporation of Invitrogen(3)
10.1		Description of Non-Employee Director Compensation Arrangements adopted April 26, 2001
10.2		Letter to Mr. Raymond Dittamore dated November 5, 2001 regarding Non-Employee Director Compensation
10.3		2000 Nonstatutory Stock Option Plan, as amended and restated on July 19, 2001
10.4		Invitrogen Corporation 1997 Stock Option Plan, as amended and restated on July 19, 2001

(1): Incorporated by reference to the Registrant's Quarterly Report on Form 10-Q for the Quarterly Period Ended September 30, 2000 (File No. 000-25317).
(2): The Amended and Restated Bylaws are incorporated by reference to the Registrant's Registration Statement on Form S-1 (File No. 333-68665). A further amendment to the Bylaws adopted by a Resolution of the Board of Directors dated July 19, 2001 is incorporated by reference to the Registrant's Quarterly Report on Form 10-Q for the Quarterly Period Ended June 30, 2001 (File No. 000-25317).
(3): Incorporated by reference to the Registrant's Quarterly Report on Form 10-Q for the Quarterly Period Ended March 31, 2001 (File No. 000-25317).

QuickLinks

FORM 10-Q

PART 1 FINANCIAL INFORMATION Item 1. Financial Statements

INVITROGEN CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (Dollars in thousands, except par value data)
INVITROGEN CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (Amounts in thousands, except per share data)
INVITROGEN CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Dollars in thousands)
INVITROGEN CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

CAUTIONS REGARDING FORWARD-LOOKING STATMENTS
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Item 1. Legal Proceedings

Item 2. Changes in Securities and Use of Proceeds

Item 3. Defaults Upon Senior Securities

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

Item 5. Other Information

Item 6. Exhibits and Reports on Form 8-K

SIGNATURES
INDEX TO EXHIBITS

Positive
Negative
Uncertain
Constraining
Legalese
Litigous
Readability	8th grade Good

aTyr Pharma Inactive 10-Q2001 Q3 Quarterly report

Content analysis