MOLECULAR DEVICES CORP, 424B4, 2000-05-25

MOLECULAR DEVICES CORP
424B4, 2000-05-25
LABORATORY ANALYTICAL INSTRUMENTS

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<PAGE> 1

Filed Pursuant to Rule 424(b)(4)
Registration No. 333-32734
PROSPECTUS

1,500,000 SHARES

MOLECULAR DEVICES LOGO
COMMON STOCK
-------------------------
Molecular Devices Corporation is selling 1,500,000 shares of common stock.
Our shares are listed for trading on the Nasdaq National Market under the symbol
"MDCC." On May 24, 2000, the last reported sale price of our common stock on the
Nasdaq National Market was $39.69 per share.

INVESTING IN OUR COMMON STOCK INVOLVES A HIGH DEGREE OF RISK.
SEE "RISK FACTORS" STARTING ON PAGE 7.

-------------------------

NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.

<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------
PER SHARE TOTAL
- --------------------------------------------------------------------------------------
<S> <C> <C>
Public Offering Price....................................... $38.50 $57,750,000
Underwriting Discounts and Commissions...................... 2.12 3,180,000
Molecular Devices' Proceeds................................. 36.38 54,570,000
- --------------------------------------------------------------------------------------
</TABLE>

The underwriters have the option to purchase up to an additional 225,000
shares from us and certain selling stockholders to cover over-allotments. The
underwriters expect to deliver the shares to purchasers on or about May 31,
2000.
ING BARINGS
BEAR, STEARNS & CO. INC.
THOMAS WEISEL PARTNERS LLC
UBS WARBURG LLC
-------------------------
MAY 25, 2000
<PAGE> 2

Under caption "Innovative Solutions for Drug Discovery":
We are a leading developer of high-performance, bioanalytical measurement
systems that accelerate and improve drug discovery and other life sciences
research.

Under picture of SPECTRAmax GEMINI XS instrument:
We are a leading provider of microplate readers with our MAXline family,
including the recently introduced SPECTRAmax GEMINI XS, which offers a high
level of versatility and sensitivity.

Under picture of FLIPR instrument:
Our FLIPR and CLIPR Cell Analysis systems help researchers screen and optimize
drug candidates at high throughput and ultra-high throughput rates. Our Cell
Analysis systems include proprietary reagent kits that are optimized for use on
our Cell Analysis instruments.

Molecular Devices, the Molecular Devices logo, FLIPR and SPECTRAmax are some of
our trademarks and service marks. Other trademarks, trade names and service
marks referred to in this prospectus are the property of their respective
owners.
<PAGE> 3

PROSPECTUS SUMMARY

This summary highlights selected information contained elsewhere in this
prospectus and may not contain all of the information that you should consider
before investing in our common stock. You should read carefully this entire
prospectus, including "Risk Factors" and our financial statements that are
incorporated by reference in this prospectus, before making an investment
decision. Unless the context requires otherwise, references in this prospectus
to "we," "us" and "our" refer to Molecular Devices Corporation and its wholly
owned subsidiaries.

MOLECULAR DEVICES CORPORATION

We are a leading developer of high-performance, bioanalytical measurement
systems that accelerate and improve drug discovery and other life sciences
research. Our systems enable pharmaceutical and biotechnology companies to
leverage advances in genomics and combinatorial chemistry by facilitating the
high throughput and cost effective identification and evaluation of drug
candidates. Our instrument systems are based on our advanced core technologies
which integrate our expertise in engineering, molecular and cell biology and
chemistry. Our systems are fundamental tools for drug discovery and life
sciences research, and our MAXline series of microplate readers and our FLIPR
Cell Analysis systems are market share leaders in their respective markets. Our
revenues were $62.0 million in 1999 and have increased at a compound annual rate
of 25% since 1995.

Advances in genomics and combinatorial chemistry have resulted in an
increasing number of new disease targets and drug candidates that can be
screened or evaluated in the drug discovery process. Researchers face severe
bottlenecks in the downstream phases of the drug discovery process, including
assay development, drug candidate screening and lead optimization, which require
more advanced and efficient evaluation technologies. Our products target these
phases of the drug discovery process and are designed to eliminate these
bottlenecks. Industry sources estimate that in 2000, pharmaceutical companies
will spend approximately $2.7 billion on third party drug discovery
instrumentation, reagents and services. We currently offer three product
families to serve this market.

- Our MAXline products include advanced microplate readers that are used to
acquire and process large quantities of biochemical and biological data
and are primarily used in assay development. Our MAXline strategy has
been to continue to introduce new products that include first-of-a-kind
features, as well as to offer varying feature sets and price points to
address different market segments. We have historically focused on the
premium end of the microplate reader market by offering products with
advanced capabilities. MAXline products represented 57% of our revenues
in 1999.

- Our Cell Analysis systems, which include FLIPR and CLIPR, are used to
study the response of live cells to drug candidates and primarily address
high throughput screening and lead optimization. Because our products
permit the analysis of live cells, they allow researchers to obtain more
biologically relevant information than can be obtained through the use of
traditional biochemical assays. FLIPR is the market leader in cellular
high throughput screening, and in 1999 we introduced the CLIPR system,
which provides live cell analysis at an ultra high throughput rate. Our
Cell Analysis systems represented 38% of our revenues in 1999.

- Our Threshold system, which is comprised of a detection instrument and
proprietary reagents, is used to quantify contaminants in the
manufacturing and quality control of bioengineered products. Threshold
system products represented 5% of our revenues in 1999.

We typically invest 10% to 12% of our revenues in research and development,
which has resulted in a track record of technological innovation. Over 70% of
our revenues in 1999 were derived from products that we introduced in the last
three years. We have sold over 13,000 instruments since the introduction of our
first microplate reader in 1987. In addition, over 70 customers have purchased
our FLIPR systems since introduction in 1996, including the 20 largest
pharmaceutical companies, several of which own five or more FLIPR systems. We
expect that increased sales of recently introduced products, including GEMINI
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<PAGE> 4

XS, FLIPR(384) and CLIPR, and revenues from new instrument introductions will
continue to drive our growth. We also believe that the introduction of reagent
kits optimized for our products represents a significant growth opportunity.

Our objective is to be the world's leading provider of innovative
bioanalytical systems and related consumable products for life sciences
research. We are focusing on the drug discovery market and, specifically, on
providing complete solutions that accelerate and improve the critical downstream
drug discovery processes of assay development, drug candidate screening and lead
optimization. Key elements of our strategy include:

- maintaining and advancing our technological leadership;

- leveraging our market leadership position;

- increasing recurring revenue from our consumable products;

- expanding worldwide distribution and support of our products; and

- acquiring complementary businesses and technologies.

Our executive offices are located at 1311 Orleans Drive, Sunnyvale,
California 94089. Our telephone number is (408) 747-1700 and our internet
address is www.moldev.com. The information on our website is not part of this
prospectus.

RECENT OPERATING RESULTS

On April 13, 2000, we announced our operating results for the quarter ended
March 31, 2000. Our total revenues for the quarter were $17.1 million, an
increase of 26% over revenues of $13.5 million for the same period in 1999. Our
operating income for the quarter ended March 31, 2000 was $3.8 million, an
increase of 38% over operating income of $2.8 million for the same period in
1999. Our operating margins for the quarter ended March 31, 2000 were 22.5%
compared with operating margins of 20.6% for the same period in 1999. Our net
income for the quarter ended March 31, 2000 was $2.6 million, an increase of 32%
over net income of $2.0 million for the same period in 1999. Our earnings per
share for the quarter ended March 31, 2000, on a fully diluted basis, were $0.25
per share compared with fully diluted earnings per share of $0.20 for the same
period in 1999.

4
<PAGE> 5

THE OFFERING

<TABLE>
<S> <C>
Common stock offered by Molecular Devices............. 1,500,000 shares

Common stock to be outstanding after this offering.... 11,245,251 shares

Use of proceeds....................................... To fund ongoing sales and marketing and
research and development activities, working
capital and other general corporate purposes,
which may include possible acquisitions of,
or investments in, complementary products,
technologies or businesses. See "Use of
Proceeds."

Nasdaq National Market symbol......................... MDCC
</TABLE>

The number of shares of common stock offered assumes that the underwriters'
over-allotment option to purchase 225,000 shares from us and certain selling
stockholders is not exercised. See "Underwriting."

The outstanding share information is based upon our shares of common stock
outstanding as of March 31, 2000 and assumes that no options have been exercised
since March 31, 2000. In addition, this information excludes:

- 1,743,888 shares of common stock reserved for issuance pursuant to
outstanding stock options as of March 31, 2000 at a weighted average
exercise price of $25.59 per share; and

- 606,935 shares of common stock reserved for future issuance under our
employee benefit plans as of March 31, 2000.

5
<PAGE> 6

SUMMARY CONSOLIDATED FINANCIAL DATA

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------
1995 1996 1997 1998 1999
------- ------- ------- ------- -------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF INCOME DATA:
Revenues......................................... $25,615 $30,926 $38,286 $47,798 $61,985
Cost of revenues................................. 10,416 11,741 14,426 17,716 22,745
------- ------- ------- ------- -------
Gross margin..................................... 15,199 19,185 23,860 30,082 39,240
Operating expenses:
Research and development....................... 3,639 4,581 4,721 5,686 7,363
Write-off of acquired in-process research and
development(1).............................. -- 4,637 -- 876 2,037
Selling, general and administrative............ 8,549 9,920 11,883 14,078 17,431
------- ------- ------- ------- -------
Total operating expenses............... 12,188 19,138 16,604 20,640 26,831
------- ------- ------- ------- -------
Income from operations........................... 3,011 47 7,256 9,442 12,409
Other income (expense), net...................... (33) 1,079 1,220 1,584 1,421
------- ------- ------- ------- -------
Income before income taxes....................... 2,978 1,126 8,476 11,026 13,830
Income tax provision (benefit)................... (1,081) (1,126) 3,174 4,245 5,325
------- ------- ------- ------- -------
Net income....................................... $ 4,059 $ 2,252 $ 5,302 $ 6,781 $ 8,505
======= ======= ======= ======= =======

Basic net income per share....................... $ 0.58 $ 0.26 $ 0.58 $ 0.72 $ 0.89
Diluted net income per share..................... $ 0.53 $ 0.24 $ 0.55 $ 0.70 $ 0.84

OTHER DATA:
Pro forma diluted net income per share(2)........ $ 0.24 $ 0.37 $ 0.55 $ 0.75 $ 0.97
</TABLE>

<TABLE>
<CAPTION>
DECEMBER 31, 1999
------------------------
ACTUAL AS ADJUSTED(3)
------- --------------
(IN THOUSANDS)
<S> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Cash and cash equivalents................................... $28,192 $ 81,766
Working capital............................................. 48,745 102,319
Total assets................................................ 64,751 118,325
Total stockholders' equity.................................. 56,784 110,358
</TABLE>

- -------------------------
(1) Our 1996 income from operations included a $4.6 million write-off for the
acquisition of in-process technology and acquisition costs related to our
acquisition of NovelTech Systems. Our 1998 income from operations included
an $876,000 write-off for the acquisition of in-process technology and
acquisition costs relating to our acquisition of certain technology rights
from Affymax Research Institute, a subsidiary of Glaxo Wellcome. Our 1999
income from operations included a $2.0 million write-off for the acquisition
of in-process technology and acquisition costs relating to our acquisition
of Skatron Instruments AS.

(2) We have excluded the impact of the write-offs of in-process technology and
acquisition costs in 1996, 1998 and 1999 described in footnote (1) above,
net of tax. We have also excluded the impact of the tax benefits we realized
in 1995 and 1996 from the utilization of net operating loss carryforwards
and included a provision for taxes at a 38.5% effective rate.

(3) Adjusted to give effect to the sale by us of 1,500,000 shares of common
stock in this offering (assuming no exercise of the underwriters'
over-allotment option) at a public offering price of $38.50 per share after
deducting the underwriting discounts and commissions and estimated expenses
of this offering.

6
<PAGE> 7

RISK FACTORS

This offering involves a high degree of risk. You should carefully consider
the following information about these risks, as well as the other information
contained or incorporated by reference in this prospectus, before you decide to
buy any shares of our common stock. Except for historical information, the
information contained or incorporated by reference in this prospectus are
"forward-looking" statements about our expected future business and performance.
Our actual operating results and financial performance may prove to be very
different from what we might have predicted as of the date of this prospectus.
The risks described below address some of the factors that may affect our future
operating results and financial performance.

VARIATIONS IN THE AMOUNT OF TIME IT TAKES FOR US TO SELL OUR PRODUCTS AND
COLLECT ACCOUNTS RECEIVABLE AND THE TIMING OF CUSTOMER ORDERS MAY CAUSE
FLUCTUATIONS IN OUR OPERATING RESULTS, WHICH COULD CAUSE OUR STOCK PRICE TO
DECLINE.

The timing of capital equipment purchases by customers is expected to be
uneven and difficult to predict. Our products represent major capital purchases
for our customers. We estimate that the average order price for our MAXline
products is $17,000, and that the average order price for our FLIPR products is
$350,000. Accordingly, our customers generally take a relatively long time to
evaluate our products, and a significant portion of our revenues is typically
derived from sales of a small number of relatively high-priced products.
Purchases are generally made by purchase orders and not long-term contracts.
Delays in receipt of anticipated orders for our relatively high priced products
could lead to substantial variability from quarter to quarter. Furthermore, we
have historically received purchase orders and made a significant portion of
each quarter's product shipments near the end of the quarter. If that pattern
continues, even short delays in the receipt of orders or shipment of products at
the end of a quarter could have a material adverse effect on results of
operations for that quarter.

We expend significant resources educating and providing information to our
prospective customers regarding the uses and benefits of our products. Because
of the number of factors influencing the sales process, the period between our
initial contact with a customer and the time when we recognize revenue from that
customer, if ever, varies widely. Our sales cycles typically range from three to
six months, but can be much longer. During these cycles, we commit substantial
resources to our sales efforts in advance of receiving any revenue, and we may
never receive any revenue from a customer despite our sales efforts.

The relatively high purchase price for a customer order contributes to
collection delays that result in working capital volatility. While the terms of
most of our purchase orders require payment within 30 days of product shipment,
in the past we have experienced significant collection delays. We cannot predict
whether we will continue to experience similar or more severe delays.

The capital spending policies of our customers have a significant effect on
the demand for our products. Those policies are based on a wide variety of
factors, including resources available to make purchases, spending priorities,
and policies regarding capital expenditures during industry downturns or
recessionary periods. Any decrease in capital spending by our customers
resulting from any of these factors could harm our business.

WE DEPEND ON ORDERS THAT ARE RECEIVED AND SHIPPED IN THE SAME QUARTER AND
THEREFORE HAVE LIMITED VISIBILITY OF FUTURE PRODUCT SHIPMENTS.

Our net sales in any given quarter depend upon a combination of orders
received in that quarter for shipment in that quarter and shipments from
backlog. Our products are typically shipped within 30 to 90 days of purchase
order receipt. As a result, we do not believe that the amount of backlog at any
particular date is indicative of our future level of sales. Our backlog at the
beginning of each quarter does not include all product sales needed to achieve
expected revenues for that quarter. Consequently, we are dependent on obtaining
orders for products to be shipped in the same quarter that the order is
received. Moreover, customers may reschedule shipments, and production
difficulties could delay shipments.

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<PAGE> 8

Accordingly, we have limited visibility of future product shipments, and our
results of operations are subject to significant variability from quarter to
quarter.

MANY OF OUR CURRENT AND POTENTIAL COMPETITORS HAVE SIGNIFICANTLY GREATER
RESOURCES THAN WE DO, AND INCREASED COMPETITION COULD IMPAIR SALES OF OUR
PRODUCTS.

We operate in a highly competitive industry and face competition from
companies that design, manufacture and market instruments for use in the life
sciences research industry, from genomic, pharmaceutical, biotechnology and
diagnostic companies and from academic and research institutions and government
or other publicly-funded agencies, both in the United States and abroad. We may
not be able to compete effectively with all of these competitors. Many of these
companies and institutions have greater financial, engineering, manufacturing,
marketing and customer support resources than we do. As a result, our
competitors may be able to respond more quickly to new or emerging technologies
or market developments by devoting greater resources to the development,
promotion and sale of products, which could impair sales of our products.
Moreover, there has been significant merger and acquisition activity among our
competitors and potential competitors. These transactions by our competitors and
potential competitors may provide them with a competitive advantage over us by
enabling them to rapidly expand their product offerings and service capabilities
to meet a broader range of customer needs. Many of our existing and potential
customers are large companies that require global support and service, which may
be easier for our larger competitors to provide.

We believe that competition within the markets we serve is primarily driven
by the need for innovative products that address the needs of customers. We
attempt to counter competition by seeking to develop new products and provide
quality products and services that meet customers' needs. We cannot assure you,
however, that we will be able to successfully develop new products or that our
existing or new products and services will adequately meet our customers' needs.

Rapidly changing technology, evolving industry standards, changes in
customer needs, emerging competition and frequent new product and service
introductions characterize the markets for our products. To remain competitive,
we will be required to develop new products and periodically enhance our
existing products in a timely manner. We are facing increased competition as new
companies entering the market with new technologies compete, or will compete,
with our products and future products. We cannot assure you that one or more of
our competitors will not succeed in developing or marketing technologies or
products that are more effective or commercially attractive than our products or
future products, or that would render our technologies and products obsolete or
uneconomical. Our future success will depend in large part on our ability to
maintain a competitive position with respect to our current and future
technologies, which we may not be able to do. In addition, delays in the launch
of our new products may result in loss of market share due to our customers'
purchases of competitors' products during any delay.

IF WE ARE NOT SUCCESSFUL IN DEVELOPING NEW AND ENHANCED PRODUCTS, WE MAY LOSE
MARKET SHARE TO OUR COMPETITORS.

The life sciences instrumentation market is characterized by rapid
technological change and frequent new product introductions. Over 70% of our
revenues in 1999 were derived from the sale of products that were introduced in
the last three years, and our future success will depend on our ability to
enhance our current products and to develop and introduce, on a timely basis,
new products that address the evolving needs of our customers. We may experience
difficulties or delays in our development efforts with respect to new products,
and we may not ultimately be successful in developing them. Any significant
delay in releasing new systems could adversely affect our reputation, give a
competitor a first-to-market advantage or cause a competitor to achieve greater
market share. In addition, our future success depends on our continued ability
to develop new applications for our existing products. If we are not able to
complete the development of these applications, or if we experience difficulties
or delays, we may lose our current customers and may not be able to attract new
customers, which could seriously harm our business and our future growth
prospects.

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<PAGE> 9

WE MUST EXPEND A SIGNIFICANT AMOUNT OF TIME AND RESOURCES TO DEVELOP NEW
PRODUCTS AND IF THESE PRODUCTS DO NOT ACHIEVE COMMERCIAL ACCEPTANCE, OUR
OPERATING RESULTS MAY SUFFER.

We expect to spend a significant amount of time and resources to develop
new products and refine existing products. In light of the long product
development cycles inherent in our industry, these expenditures will be made
well in advance of the prospect of deriving revenue from the sale of new
products. Our ability to commercially introduce and successfully market new
products is subject to a wide variety of challenges during this development
cycle that could delay introduction of these products. In addition, since our
customers are not obligated by long-term contracts to purchase our products, our
anticipated product orders may not materialize, or orders that do materialize
may be canceled. As a result, if we do not achieve market acceptance of new
products, our operating results will suffer. In particular, while FLIPR and
CLIPR reagent kits have recently been introduced to the market, they have had
only limited sales to date and have not yet been widely commercially accepted.
We cannot predict whether these or other new products that we expect to
introduce will achieve commercial acceptance. Our products are generally priced
higher than competitive products, which may impair commercial acceptance.

IF WE DELIVER PRODUCTS WITH DEFECTS, OUR CREDIBILITY WILL BE HARMED AND THE
SALES AND MARKET ACCEPTANCE OF OUR PRODUCTS WILL DECREASE.

Our products are complex and sometimes have contained errors, defects and
bugs when introduced. If we deliver products with errors, defects or bugs, our
credibility and the market acceptance and sales of our products would be harmed.
Further, if our products contain errors, defects or bugs, we may be required to
expend significant capital and resources to alleviate such problems. Defects
could also lead to product liability as a result of product liability lawsuits
against us or against our customers. We have agreed to indemnify our customers
in some circumstances against liability arising from defects in our products. In
the event of a successful product liability claim, we could be obligated to pay
damages significantly in excess of our product liability insurance limits.

THE RECENT ISSUANCE BY THE SEC OF AN ACCOUNTING BULLETIN RELATED TO REVENUE
RECOGNITION, SAB 101, MAY HAVE A MATERIAL ADVERSE IMPACT ON OUR FINANCIAL
PERFORMANCE.

In December 1999, the SEC issued Staff Accounting Bulletin No. 101, Revenue
Recognition in Financial Statements, referred to as SAB 101. SAB 101 summarizes
the SEC staff's views in applying generally accepted accounting principles to
revenue recognition in financial statements. We are currently in the process of
evaluating SAB 101 and what effect it may have on our financial statements.
Accordingly, we have not determined whether SAB 101 will have a material impact
on our financial position or results of operations. In the event that the
implementation of SAB 101 requires us to report a change in accounting
principles related to our revenue recognition policy, we would be required to
report such change no later than the quarter ending June 30, 2000. In addition
to other uncertain risks related to SAB 101, it is possible that SAB 101 will
result in increased fluctuations in our quarterly operating results and increase
the likelihood that we may fail to meet the expectations of securities analysts
for any period.

MOST OF OUR CURRENT AND POTENTIAL CUSTOMERS ARE FROM THE PHARMACEUTICAL AND
BIOTECHNOLOGY INDUSTRIES AND ARE SUBJECT TO RISKS FACED BY THOSE INDUSTRIES.

We derive a significant portion of our revenues from sales to
pharmaceutical and biotechnology companies. We expect that sales to
pharmaceutical and biotechnology companies will continue to be a primary source
of revenues for the foreseeable future. As a result, we are subject to risks and
uncertainties that affect the pharmaceutical and biotechnology industries, such
as pricing pressures as third-party payors continue challenging the pricing of
medical products and services, government regulation and uncertainty of
technological change, and reduction and delays in research and development
expenditures by companies in these industries.

In addition, our future revenues may be adversely affected by the ongoing
consolidation in the pharmaceutical and biotechnology industries, which will
reduce the number of our potential customers. Furthermore, we cannot assure you
that the pharmaceutical and biotechnology companies that are our customers will
not develop their own competing products or in-house capabilities.

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<PAGE> 10

OUR PRODUCTS COULD INFRINGE ON THE INTELLECTUAL PROPERTY RIGHTS OF OTHERS, WHICH
MAY CAUSE US TO ENGAGE IN COSTLY LITIGATION AND, IF WE ARE NOT SUCCESSFUL, COULD
ALSO CAUSE US TO PAY SUBSTANTIAL DAMAGES AND PROHIBIT US FROM SELLING OUR
PRODUCTS.

Third parties may assert infringement or other intellectual property claims
against us. We may have to pay substantial damages, including treble damages,
for past infringement if it is ultimately determined that our products infringe
a third party's proprietary rights. Further, any legal action against us could,
in addition to subjecting us to potential liability for damages, prohibit us
from selling our products before we obtain a license to do so from the party
owning the intellectual property, which, if available at all, may require us to
pay substantial royalties. Even if these claims are without merit, defending a
lawsuit takes significant time, may be expensive and may divert management
attention from other business concerns. There may be third-party patents that
may relate to our technology or potential products. Any public announcements
related to litigation or interference proceedings initiated or threatened
against us could cause our stock price to decline. We believe that there may be
significant litigation in the industry regarding patent and other intellectual
property rights. If we become involved in litigation, it could consume a
substantial portion of our managerial and financial resources.

WE MAY NEED TO INITIATE LAWSUITS TO PROTECT OR ENFORCE OUR PATENTS, WHICH WOULD
BE EXPENSIVE AND, IF WE LOSE, MAY CAUSE US TO LOSE SOME OF OUR INTELLECTUAL
PROPERTY RIGHTS, WHICH WOULD REDUCE OUR ABILITY TO COMPETE IN THE MARKET.

We rely on patents to protect a large part of our intellectual property and
our competitive position. In order to protect or enforce our patent rights, we
may initiate patent litigation against third parties, such as infringement suits
or interference proceedings. Litigation may be necessary to:

- assert claims of infringement;

- enforce our patents;

- protect our trade secrets or know-how; or

- determine the enforceability, scope and validity of the proprietary
rights of others.

Lawsuits could be expensive, take significant time and divert management's
attention from other business concerns. They would put our patents at risk of
being invalidated or interpreted narrowly and our patent applications at risk of
not issuing. We may also provoke third parties to assert claims against us.
Patent law relating to the scope of claims in the technology fields in which we
operate is still evolving and, consequently, patent positions in our industry
are generally uncertain. We cannot assure you that we will prevail in any of
these suits or that the damages or other remedies awarded, if any, will be
commercially valuable. During the course of these suits, there may be public
announcements of the results of hearings, motions and other interim proceedings
or developments in the litigation. If securities analysts or investors perceive
any of these results to be negative, it could cause our stock price to decline.

THE RIGHTS WE RELY UPON TO PROTECT OUR INTELLECTUAL PROPERTY UNDERLYING OUR
PRODUCTS MAY NOT BE ADEQUATE, WHICH COULD ENABLE THIRD PARTIES TO USE OUR
TECHNOLOGY AND WOULD REDUCE OUR ABILITY TO COMPETE IN THE MARKET.

Our success will depend in part on our ability to obtain commercially
valuable patent claims and to protect our intellectual property. Our patent
position is generally uncertain and involves complex legal and factual
questions. Legal standards relating to the validity and scope of claims in our
technology field are still evolving. Therefore, the degree of future protection
for our proprietary rights is uncertain.

The risks and uncertainties that we face with respect to our patents and
other proprietary rights include the following:

- the pending patent applications we have filed or to which we have
exclusive rights may not result in issued patents or may take longer than
we expect to result in issued patents;

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<PAGE> 11

- the claims of any patents which are issued may not provide meaningful
protection;

- we may not be able to develop additional proprietary technologies that
are patentable;

- the patents licensed or issued to us or our customers may not provide a
competitive advantage;

- other companies may challenge patents licensed or issued to us or our
customers;

- patents issued to other companies may harm our ability to do business;

- other companies may independently develop similar or alternative
technologies or duplicate our technologies; and

- other companies may design around technologies we have licensed or
developed.

In addition to patents, we rely on a combination of trade secrets,
nondisclosure agreements and other contractual provisions and technical measures
to protect our intellectual property rights. Nevertheless, these measures may
not be adequate to safeguard the technology underlying our products. If they do
not protect our rights, third parties could use our technology, and our ability
to compete in the market would be reduced. In addition, employees, consultants
and others who participate in the development of our products may breach their
agreements with us regarding our intellectual property, and we may not have
adequate remedies for the breach. We also may not be able to effectively protect
our intellectual property rights in some foreign countries. For a variety of
reasons, we may decide not to file for patent, copyright or trademark protection
or prosecute potential infringements of our patents. We also realize that our
trade secrets may become known through other means not currently foreseen by us.
Notwithstanding our efforts to protect our intellectual property, our
competitors or customers may independently develop similar or alternative
technologies or products that are equal or superior to our technology and
products without infringing on any of our intellectual property rights or design
around our proprietary technologies.

WE OBTAIN SOME OF THE COMPONENTS AND SUBASSEMBLIES INCLUDED IN OUR SYSTEMS FROM
A SINGLE SOURCE OR A LIMITED GROUP OF SUPPLIERS, AND THE PARTIAL OR COMPLETE
LOSS OF ONE OF THESE SUPPLIERS COULD CAUSE PRODUCTION DELAYS AND A SUBSTANTIAL
LOSS OF REVENUE.

We rely on outside vendors to manufacture many components and
subassemblies. Certain components, subassemblies and services necessary for the
manufacture of our systems are obtained from a sole supplier or limited group of
suppliers, some of which are our competitors. Additional components, such as
optical, electronic and pneumatic devices, are currently purchased in
configurations specific to our requirements and, together with certain other
components, such as computers, are integrated into our products. We maintain
only a limited number of long-term supply agreements with our suppliers.

Our reliance on a sole or a limited group of suppliers involves several
risks, including the following:

- we may be unable to obtain an adequate supply of required components;

- we have reduced control over pricing and the timely delivery of
components and subassemblies; and

- our suppliers may be unable to develop technologically advanced products
to support our growth and development of new systems.

For example, we currently rely on a single supplier of disposable plastic tips
used with our FLIPR(384) system, and we have in the past experienced delays and
customer dissatisfaction due to our supplier's inability to deliver an adequate
supply of tips. We cannot predict whether we will encounter additional similar
delays in the future. Our current supplier and known potential alternative
suppliers of disposable plastic tips used with our FLIPR(384) system are our
competitors.

Because the manufacturing of certain of these components and subassemblies
involves extremely complex processes and requires long lead times, we may
experience delays or shortages caused by suppliers. We believe that alternative
sources could be obtained and qualified, if necessary, for most sole and limited
source parts. However, if we were forced to seek alternative sources of supply
or to manufacture such components or subassemblies internally, we may be forced
to redesign our systems,
11
<PAGE> 12

which could prevent us from shipping our systems to customers on a timely basis.
Some of our suppliers have relatively limited financial and other resources. Any
inability to obtain adequate deliveries, or any other circumstance that would
restrict our ability to ship our products, could damage relationships with
current and prospective customers and could harm our business.

WE MAY ENCOUNTER MANUFACTURING AND ASSEMBLY PROBLEMS OR DELAYS, WHICH COULD
RESULT IN LOST REVENUE.

We assemble our systems in our manufacturing facilities located in
Sunnyvale, California and Norway. Our manufacturing and assembly processes are
highly complex and require sophisticated, costly equipment and specially
designed facilities. As a result, any prolonged disruption in the operations of
our manufacturing facilities could seriously harm our ability to satisfy our
customer order deadlines. If we cannot deliver our systems in a timely manner,
our revenues will likely suffer.

Our product sales depend in part upon manufacturing yields. We currently
have limited manufacturing capacity and experience variability in manufacturing
yields. We are currently manufacturing high throughput instruments in-house, in
limited volumes and with largely manual assembly. If demand for our high
throughput instruments increases, we will either need to expand our in-house
manufacturing capabilities or outsource to other manufacturers. If we fail to
deliver our products in a timely manner, our relationships with our customers
could be seriously harmed, and revenue would decline.

As we develop new products, we must transition the manufacture of a new
product from the development stage to commercial manufacturing. We have only
recently transitioned GEMINI XS and SPECTRAmax PLUS(384) from the development
stage to commercial manufacturing, and we have only recently begun the
transition process for the CLIPR system. We cannot predict whether we will be
able to complete these transitions on a timely basis and with commercially
reasonable costs. We cannot assure you that manufacturing or quality control
problems will not arise as we attempt to scale-up our production for any future
new products or that we can scale-up manufacturing and quality control in a
timely manner or at commercially reasonable costs. If we are unable to
consistently manufacture our products on a timely basis because of these or
other factors, our product sales will decline.

WE MAY HAVE DIFFICULTY MANAGING OUR GROWTH.

We expect to continue to experience significant growth in the number of our
employees and customers and the scope of our operations. This growth may
continue to place a significant strain on our management and operations. Our
ability to manage this growth will depend upon our ability to broaden our
management team and our ability to attract, hire and retain skilled employees.
Our success will also depend on the ability of our officers and key employees to
continue to implement and improve our operational and other systems, to manage
multiple, concurrent customer relationships and to hire, train and manage our
employees. Our future success is heavily dependent upon growth and acceptance of
new products. If we cannot scale our business appropriately or otherwise adapt
to anticipated growth and new product introductions, a key part of our strategy
may not be successful.

WE RELY UPON DISTRIBUTORS FOR PRODUCT SALES AND SUPPORT OUTSIDE NORTH AMERICA.

In 1999 approximately 17% of our sales were made through distributors. We
often rely upon distributors to provide customer support to the ultimate end
users of our products. As a result, our success depends on the continued sales
and customer support efforts of our network of distributors. The use of
distributors involves certain risks, including risks that distributors will not
effectively sell or support our products, that they will be unable to satisfy
financial obligations to us and that they will cease operations. Any reduction,
delay or loss of orders from our significant distributors could harm our
revenues. We also do not currently have distributors in a number of significant
international markets that we have targeted and will need to establish
additional international distribution relationships. There can be no assurance
that we will engage qualified distributors in a timely manner, and the failure
to do so could have a material adverse effect on our business, financial
condition and results of operations.

12
<PAGE> 13

IF WE CHOOSE TO ACQUIRE NEW AND COMPLEMENTARY BUSINESSES, PRODUCTS OR
TECHNOLOGIES INSTEAD OF DEVELOPING THEM OURSELVES, WE MAY BE UNABLE TO COMPLETE
THESE ACQUISITIONS OR MAY NOT BE ABLE TO SUCCESSFULLY INTEGRATE AN ACQUIRED
BUSINESS OR TECHNOLOGY IN A COST-EFFECTIVE AND NON-DISRUPTIVE MANNER.

Our success depends on our ability to continually enhance and broaden our
product offerings in response to changing technologies, customer demands and
competitive pressures. To this end, from time to time we have acquired
complementary businesses, products, or technologies instead of developing them
ourselves and may choose to do so in the future. We do not know if we will be
able to complete any acquisitions, or whether we will be able to successfully
integrate any acquired business, operate it profitably or retain its key
employees. Integrating any business, product or technology we acquire could be
expensive and time consuming, disrupt our ongoing business and distract our
management. In addition, in order to finance any acquisitions, we might need to
raise additional funds through public or private equity or debt financings. In
that event, we could be forced to obtain financing on terms that are not
favorable to us and, in the case of equity financing, that may result in
dilution to our shareholders. If we are unable to integrate any acquired
entities, products or technologies effectively, our business will suffer. In
addition, any amortization of goodwill or other assets or charges resulting from
the costs of acquisitions could harm our business and operating results.

WE DEPEND ON OUR KEY PERSONNEL, THE LOSS OF WHOM WOULD IMPAIR OUR ABILITY TO
COMPETE.

We are highly dependent on the principal members of our management,
engineering and scientific staff. The loss of the service of any of these
persons could seriously harm our product development and commercialization
efforts. In addition, research, product development and commercialization will
require additional skilled personnel in areas such as chemistry and biology,
software engineering and electronic engineering. Our corporate headquarters is
located in Sunnyvale, California, where demand for personnel with these skills
is extremely high and is likely to remain high. As a result, competition for and
retention of personnel, particularly for employees with technical expertise, is
intense and the turnover rate for these people is high. If we are unable to
hire, train and retain a sufficient number of qualified employees, our ability
to conduct and expand our business could be seriously reduced. The inability to
retain and hire qualified personnel could also hinder the planned expansion of
our business.

WE ARE DEPENDENT ON INTERNATIONAL SALES AND OPERATIONS, WHICH EXPOSES US TO
FOREIGN CURRENCY EXCHANGE RATE, POLITICAL AND ECONOMIC RISKS.

We maintain facilities in Norway, the United Kingdom and Germany, and sales
to customers outside the U.S. accounted for approximately 39% of our revenues in
1999. We anticipate that international sales will continue to account for a
significant portion of our revenues.

All of our sales to international distributors are denominated in U.S.
dollars. All of our direct sales in the United Kingdom, Germany and Canada are
denominated in local currencies and totaled $13.8 million (22% of total
revenues) in 1999. To the extent that our sales and operating expenses are
denominated in foreign currencies, our operating results may be adversely
affected by changes in exchange rates. Historically, foreign exchange gains and
losses have been immaterial to our results of operations. However, we cannot
predict whether these gains and losses will continue to be immaterial,
particularly as we increase our direct sales outside North America. Owing to the
number of currencies involved, the substantial volatility of currency exchange
rates, and our constantly changing currency exposures, we cannot predict the
effect of exchange rate fluctuations on our future operating results. We do not
engage in foreign currency hedging transactions.

Our reliance on international sales and operations exposes us to foreign
political and economic risks, including:

- political, social and economic instability;

- trade restrictions and changes in tariffs;

- import and export license requirements and restrictions;
13
<PAGE> 14

- difficulties in staffing and managing international operations;

- disruptions in international transport or delivery;

- difficulties in collecting receivables; and

- potentially adverse tax consequences.

If any of these risks materialize, our international sales could decrease and
our foreign operations could suffer.

OUR OPERATING RESULTS FLUCTUATE AND ANY FAILURE TO MEET FINANCIAL EXPECTATIONS
MAY DISAPPOINT SECURITIES ANALYSTS OR INVESTORS AND RESULT IN A DECLINE IN OUR
STOCK PRICE.

We typically experience a decrease in the level of sales in the first
calendar quarter as compared to the fourth quarter of the preceding year because
of budgetary and capital equipment purchasing patterns in the life sciences
industry. We also typically experience a decrease in revenues in the third
quarter compared to the second quarter, related to seasonality primarily
associated with lower European and academic sales during the summer months. See
also "The recent issuance by the SEC of an accounting bulletin related to
revenue recognition, SAB 101, may have a material adverse impact on our
financial performance" above.

Our quarterly operating results have fluctuated in the past, and we expect
they will fluctuate in the future as a result of many factors, some of which are
outside of our control. In particular, if sales levels in a particular quarter
do not meet expectations, we may not be able to adjust operating expenses
sufficiently quickly to compensate for the shortfall, and our results of
operations for that quarter may be seriously harmed. We manufacture our products
based on forecasted orders rather than to outstanding orders. Our manufacturing
procedures may in certain instances create a risk of excess or inadequate
inventory levels if orders do not match forecasts. In addition, our expense
levels are based, in part, on expected future sales, and we generally cannot
quickly adjust operating expenses. For example, research and development and
general and administrative expenses are not affected directly by variations in
revenue.

It is possible that in some future quarter or quarters, our operating
results will be below the expectations of securities analysts or investors. In
this event, the market price of our common stock may fall abruptly and
significantly. Because our revenue and operating results are difficult to
predict, we believe that period-to-period comparisons of our results of
operations are not a good indication of our future performance.

OUR STOCK PRICE IS VOLATILE, WHICH COULD CAUSE INVESTORS TO LOSE A SUBSTANTIAL
PART OF THEIR INVESTMENT IN OUR STOCK.

The stock market in general, and the stock prices of technology companies
in particular, have recently experienced volatility which has often been
unrelated to the operating performance of any particular company or companies.
Over the last twelve months, our stock price has ranged from $23.25 to $122.35.
Our stock price could decline regardless of our actual operating performance,
and investors could lose a substantial part of their investment as a result of
industry or market-based fluctuations. In the past, our stock has traded
relatively thinly. If a more active public market for our stock is not sustained
after this offering, it may be difficult for investors to resell shares of our
common stock. Because we do not anticipate paying cash dividends on our common
stock for the foreseeable future, stockholders will not be able to receive a
return on their shares unless they sell them.

THE MARKET PRICE OF OUR COMMON STOCK WILL LIKELY FLUCTUATE IN RESPONSE TO A
NUMBER OF FACTORS, INCLUDING THE FOLLOWING:

- our failure to meet the performance estimates of securities analysts;

- changes in financial estimates of our revenues and operating results or
buy/sell recommendations by securities analysts;
14
<PAGE> 15

- the timing of announcements by us or our competitors of significant
products, contracts or acquisitions or publicity regarding actual or
potential results or performance thereof; and

- general stock market conditions, other economic or external factors.

NEW INVESTORS IN OUR COMMON STOCK WILL EXPERIENCE IMMEDIATE AND SUBSTANTIAL
DILUTION.

The public offering price of the shares in this offering is substantially
higher than the book value per share of our common stock. Investors purchasing
common stock in this offering will, therefore, incur immediate dilution of
$28.79 in net tangible book value per share of common stock, based on a public
offering price of $38.50 per share and the net tangible book value per share as
of March 31, 2000. Investors will incur additional dilution upon the exercise of
outstanding stock options and warrants.

PROVISIONS OF OUR CHARTER DOCUMENTS AND DELAWARE LAW MAY INHIBIT A TAKEOVER,
WHICH COULD LIMIT THE PRICE INVESTORS MIGHT BE WILLING TO PAY IN THE FUTURE FOR
OUR COMMON STOCK.

Provisions in our certificate of incorporation and bylaws may have the
effect of delaying or preventing an acquisition, merger in which we are not the
surviving company or changes in our management. For example, our certificate of
incorporation gives our board of directors the authority to issue shares of
preferred stock and to determine the price, rights, preferences and privileges
and restrictions, including voting rights, of those shares without any further
vote or action by our stockholders. The rights of the holders of common stock
will be subject to, and may harmed by, the rights of the holders of any shares
of preferred stock that may be issued in the future. The issuance of preferred
stock may delay, defer or prevent a change in control, as the terms of the
preferred stock that might be issued could potentially prohibit our consummation
of any merger, reorganization, sale of substantially all of our assets,
liquidation or other extraordinary corporate transaction without the approval of
the holders of the outstanding shares of preferred stock. The issuance of
preferred stock could also have a dilutive effect on our stockholders. In
addition, because we are incorporated in Delaware, we are governed by the
provisions of Section 203 of the Delaware General Corporation Law. These
provisions may prohibit large stockholders, in particular those owning 15% or
more of the outstanding voting stock, from consummating a merger or combination
involving us. These provisions could limit the price that investors might be
willing to pay in the future for our common stock.

OUR MANAGEMENT WILL HAVE BROAD DISCRETION TO ALLOCATE THE NET PROCEEDS OF THIS
OFFERING AND THE PROCEEDS MAY NOT BE USED APPROPRIATELY.

Our management will retain broad discretion allocating the proceeds of this
offering. We estimate the net proceeds to us from this offering to be
approximately $53.6 million, or $61.1 million if the underwriters'
over-allotment option is exercised in full, after deducting estimated
underwriting discounts and commissions and estimated offering expenses. We have
no specific allocations for the net proceeds of this offering. The amount of
proceeds we will actually expend for any purpose will vary depending on a number
of factors, including the successful commercialization of our products, progress
in and scope of our research and development activities, costs and magnitude of
product, technology or business acquisitions and our need for manufacturing
capacity. Consequently, management will retain a significant amount of
discretion over the allocation of the net proceeds of this offering. Because of
the number and variability of factors that will determine the use of the net
proceeds of this offering, how we spend these proceeds may vary substantially
from our current intentions. If our management does not apply the net proceeds
effectively, our revenues could decrease and our stock price could fall.

OUR ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THOSE ANTICIPATED IN OUR
FORWARD-LOOKING STATEMENTS.

This prospectus, including the documents that we incorporate by reference,
contains forward-looking statements within the meaning of the federal securities
laws that relate to future events or our future financial performance. When used
in this prospectus, you can identify forward-looking statements by terminology
such as "anticipate," "believe," "continue," "estimate," "expect," "intend,"
"may," "plan,"

15
<PAGE> 16

"potential," "predict," "should," "will" and the negative of these terms or
other comparable terminology. These statements are only predictions. Our actual
results could differ materially from those anticipated in our forward-looking
statements as a result of many factors, including those set forth here under
"Risk Factors" and elsewhere in this prospectus.

Although we believe that the expectations reflected in our forward-looking
statements are reasonable, we cannot guarantee future results, levels of
activity, performance or achievements. Neither we nor any other person assumes
responsibility for the accuracy and completeness of these statements. We assume
no duty to update any of the forward-looking statements after the date of this
prospectus or to conform these statements to actual results.

16
<PAGE> 17

USE OF PROCEEDS

We estimate that the net proceeds we will receive from the sale of
1,500,000 shares of common stock offered by us will be approximately $53.6
million based upon a public offering price of $38.50 per share and after
deducting the underwriting discounts and commissions and estimated offering
expenses. We estimate that if the underwriters exercise their over-allotment
option in full, the net proceeds to us will be approximately $61.1 million. If
this option is exercised, we will not receive any proceeds from the shares sold
by the selling stockholders.

We expect to use the net proceeds from this offering for sales and
marketing and research and development activities, working capital and other
general corporate purposes. We may use a portion of the net proceeds to acquire,
or make investments in, complementary products, technologies or businesses when
the opportunity arises; however, we currently have no material commitments or
agreements with respect to any such transactions. As of the date of this
prospectus, we cannot specify with certainty the particular uses for the net
proceeds we will receive in this offering. Accordingly, our management will have
broad discretion in applying the net proceeds of this offering. Pending such
uses, the net proceeds of this offering will be primarily invested in investment
grade, interest-bearing securities.

DIVIDEND POLICY

We have never declared or paid any cash dividends on our common stock. We
currently intend to retain earnings to support the development of our business
and do not anticipate paying cash dividends for the foreseeable future. Any
future determination to pay dividends will be at the discretion of our board of
directors.

PRICE RANGE OF COMMON STOCK

Our common stock is listed on the Nasdaq National Market under the symbol
MDCC. The following table sets forth, for the periods indicated, the high and
low closing sale prices of our common stock as reported by the Nasdaq National
Market.

<TABLE>
<CAPTION>
HIGH LOW
------- ------
<S> <C> <C>
YEAR ENDED DECEMBER 31, 1998
First Quarter............................................... $ 22.38 $15.25
Second Quarter.............................................. 19.38 14.38
Third Quarter............................................... 18.50 12.12
Fourth Quarter.............................................. 21.75 16.00
YEAR ENDED DECEMBER 31, 1999
First Quarter............................................... $ 31.00 $20.50
Second Quarter.............................................. 37.50 21.75
Third Quarter............................................... 41.50 26.06
Fourth Quarter.............................................. 52.00 27.94
YEAR ENDING DECEMBER 31, 2000
First Quarter............................................... $113.12 $42.38
Second Quarter (through May 24, 2000)....................... 69.25 39.69
</TABLE>

On May 24, 2000, the last reported sale price of our common stock on the
Nasdaq National Market was $39.69 per share. As of March 31, 2000, there were
9,745,251 shares of our common stock outstanding.

17
<PAGE> 18

CAPITALIZATION

The following table sets forth our capitalization as of December 31, 1999:

- on an actual basis; and

- on an as adjusted basis after giving effect to the sale of the 1,500,000
shares of common stock we are offering at a public offering price of
$38.50 per share, after deducting the underwriting discounts and
commissions and estimated offering expenses.

You should read this table in conjunction with the consolidated financial
statements and notes incorporated by reference herein and the information under
"Selected Consolidated Financial Data."

<TABLE>
<CAPTION>
DECEMBER 31, 1999
----------------------
ACTUAL AS ADJUSTED
------- -----------
(IN THOUSANDS, EXCEPT
SHARE NUMBERS)
----------------------
<S> <C> <C>
Debt........................................................ $ -- $ --

Stockholders' Equity:
Preferred stock, no par value; 3,000,000 shares authorized;
no shares issued and outstanding, actual; no shares issued
and outstanding, as adjusted.............................. -- --
Common stock, $0.001 par value; 30,000,000 shares
authorized; 9,661,960 shares issued and outstanding,
actual; 11,161,960 shares issued and outstanding, as
adjusted.................................................. 10 11
Additional paid-in capital.................................. 44,661 98,234
Deferred compensation....................................... (154) (154)
Retained earnings........................................... 12,740 12,740
Accumulated other comprehensive loss........................ (473) (473)
------- --------
Total stockholders' equity................................ 56,784 110,358
------- --------
Total capitalization.............................. $56,784 $110,358
======= ========
</TABLE>

The number of shares outstanding excludes:

- 1,467,392 shares of common stock reserved for issuance pursuant to
outstanding stock options as of December 31, 1999 at a weighted average
exercise price of $10.19 per share; and

- 964,409 shares of common stock reserved for future issuance under our
employee benefit plans as of December 31, 1999.

18
<PAGE> 19

SELECTED CONSOLIDATED FINANCIAL DATA

The following selected consolidated financial data should be read in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and the consolidated financial statements and notes
thereto incorporated by reference herein. The selected consolidated financial
data set forth below with respect to our consolidated statement of income data
for the years ended December 31, 1997, 1998 and 1999 and with respect to the
consolidated balance sheet data at December 31, 1998 and 1999 have been derived
from audited consolidated financial statements incorporated by reference herein.
The consolidated statement of income data for the years ended December 31, 1995
and 1996 and the consolidated balance sheet data at December 31, 1995, 1996 and
1997 are derived from audited consolidated financial statements not included or
incorporated by reference herein.

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------------------
1995 1996 1997 1998 1999
------- ------- ------- ------- -------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF INCOME DATA:
Revenues................................. $25,615 $30,926 $38,286 $47,798 $61,985
Cost of revenues......................... 10,416 11,741 14,426 17,716 22,745
------- ------- ------- ------- -------
Gross margin............................. 15,199 19,185 23,860 30,082 39,240
Operating expenses:
Research and development............... 3,639 4,581 4,721 5,686 7,363
Write-off of acquired in-process
research and development(1)......... -- 4,637 -- 876 2,037
Selling, general and administrative.... 8,549 9,920 11,883 14,078 17,431
------- ------- ------- ------- -------
Total operating expenses............ 12,188 19,138 16,604 20,640 26,831
------- ------- ------- ------- -------
Income from operations................... 3,011 47 7,256 9,442 12,409
Other income (expense), net.............. (33) 1,079 1,220 1,584 1,421
------- ------- ------- ------- -------
Income before income taxes............... 2,978 1,126 8,476 11,026 13,830
Income tax provision (benefit)........... (1,081) (1,126) 3,174 4,245 5,325
------- ------- ------- ------- -------
Net income............................... $ 4,059 $ 2,252 $ 5,302 $ 6,781 $ 8,505
======= ======= ======= ======= =======

Basic net income per share............... $ 0.58 $ 0.26 $ 0.58 $ 0.72 $ 0.89
Diluted net income per share............. $ 0.53 $ 0.24 $ 0.55 $ 0.70 $ 0.84

OTHER DATA:
Pro forma diluted net income per
share(2)............................... $ 0.24 $ 0.37 $ 0.55 $ 0.75 $ 0.97
</TABLE>

<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------------------------------
1995 1996 1997 1998 1999
------- ------- ------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Cash and cash equivalents................ $20,379 $23,727 $26,773 $32,689 $28,192
Working capital.......................... 22,786 27,395 35,752 43,438 48,745
Total assets............................. 28,800 36,833 42,791 54,405 64,751
Total stockholders' equity............... 24,525 29,277 37,417 45,823 56,784
</TABLE>

- ---------------
(1) Our 1996 income from operations included a $4.6 million write-off for the
acquisition of in-process technology and acquisition costs related to our
acquisition of NovelTech Systems. Our 1998 income from operations included
an $876,000 write-off for the acquisition of in-process technology and
acquisition costs relating to our acquisition of certain technology rights
from Affymax Research Institute, a subsidiary of Glaxo Wellcome. Our 1999
income from operations included a $2.0 million write-off for the acquisition
of in-process technology and acquisition costs relating to our acquisition
of Skatron Instruments AS.

19
<PAGE> 20

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

OVERVIEW

We are a leading developer of high-performance, bioanalytical measurement
systems that accelerate and improve drug discovery and other life sciences
research. Our systems enable pharmaceutical and biotechnology companies to
leverage advances in genomics and combinatorial chemistry by facilitating the
high throughput cost effective identification and evaluation of drug candidates.
Our instrument systems are based on our advanced core technologies which
integrate our expertise in engineering, molecular and cell biology and
chemistry. Our systems are fundamental tools for drug discovery and life
sciences research, and our MAXline series of microplate readers and our FLIPR
Cell Analysis systems are market share leaders in their respective markets. Our
revenues were $62.0 million in 1999 and have increased at a compound annual rate
of 25% since 1995.

We typically invest 10% to 12% of our revenues in research and development,
which has resulted in a track record of technological innovation. Over 70% of
our revenues in 1999 were derived from products that we introduced in the last
three years. We have sold over 13,000 instruments since the introduction of our
first microplate reader in 1987. In addition, over 70 customers have purchased
our FLIPR systems since its introduction in 1996, including the 20 largest
pharmaceutical companies, several of which own five or more FLIPR systems. We
expect that increased sales of recently introduced products, including GEMINI
XS, FLIPR(384) and CLIPR, and revenues from new instrument introductions will
continue to drive our growth. We also believe that the introduction of reagent
kits optimized for our products represents a significant growth opportunity.

Our customers include small and large pharmaceutical, biotechnology and
industrial companies as well as medical centers, universities, government
research laboratories and other institutions throughout the world. No single
customer accounted for more than 5% of our consolidated revenues in 1999. We
recognize revenue on the sale of our products at the time of shipment either
directly to a customer or to a distributor. There are no significant customer
acceptance requirements or post shipment obligations on our part. Service
contract revenue is deferred at the time of sale and recognized ratably over the
period of performance. Total service revenue was less than 5% of total revenues
for all periods presented. In 1999, sales to foreign countries accounted for 39%
of total revenues and total sales denominated in foreign currencies accounted
for 22% of total revenues. We typically experience a decrease in the level of
sales in the first calendar quarter as compared to the fourth quarter of the
preceding year because of budgetary and capital equipment purchasing patterns in
the life sciences industry. We expect this trend to continue in future years.
However, see "Risk Factors -- The recent issuance by the SEC of an accounting
bulletin related to revenue recognition, SAB 101, may have a material adverse
impact on our financial performance."

RECENT OPERATING RESULTS

20
<PAGE> 21

RESULTS OF OPERATIONS

The following table summarizes our consolidated statement of income as a
percentage of revenues:

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------
1997 1998 1999
----- ----- -----
<S> <C> <C> <C>
Revenues.................................................... 100.0% 100.0% 100.0%
Cost of revenues............................................ 37.7 37.1 36.7
----- ----- -----
Gross margin................................................ 62.3 62.9 63.3
Research and development.................................... 12.3 11.9 11.9
Write-off of acquired in-process research and development... 0.0 1.8 3.3
Selling, general and administrative......................... 31.0 29.5 28.1
----- ----- -----
Income from operations...................................... 19.0 19.8 20.0
Other income, net........................................... 3.2 3.3 2.3
----- ----- -----
Income before income taxes.................................. 22.1 23.1 22.3
Income tax provision........................................ 8.3 8.9 8.6
----- ----- -----
Net income.................................................. 13.8% 14.2% 13.7%
===== ===== =====
Pro forma income from operations(1)......................... 19.0% 21.6% 23.3%
Pro forma net income(1)..................................... 13.8% 15.3% 15.7%
</TABLE>

- -------------------------
(1) Excludes the impact of the write-offs of acquired in-process research and
development recorded in 1998 and 1999. Pro forma net income is also net of
tax.

YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997

Revenues for 1999 increased by 30% to approximately $62.0 million from
approximately $47.8 million in 1998. This top-line growth was driven by strong
contributions from our MAXline and Cell Analysis product families, partially
offset by decreased performance of our Threshold product family. MAXline
revenues increased primarily due to the worldwide strength of the SPECTRAmax
GEMINI as well as our newly acquired Skatron liquid handling product line. Cell
Analysis growth was driven primarily by increased worldwide demand for new FLIPR
products introduced in late 1998, particularly FLIPR(384). Threshold revenues
declined primarily as a result of decreased demand from military customers
worldwide.

Revenues for 1998 increased by 25% to approximately $47.8 million from
approximately $38.2 million in 1997. All three product families showed increased
levels of revenue in 1998. MAXline revenues increased due to both greater sales
of the new SPECTRAmax products, including the SPECTRAmax PLUS, SPECTRAmax 190
and SPECTRAmax GEMINI, and increased penetration of MAXline products into our
European distribution channels. Cell Analysis revenues increased due to both the
introduction of FLIPR(384) and increased demand for other FLIPR products
worldwide. Threshold revenues increased due to greater volume shipments to
military customers worldwide.

Gross margin increased to 63.3% in 1999 from 62.9% in 1998 and 62.3% in
1997. Both year to year increases relate to increased sales of higher margin
products in both the MAXline and Cell Analysis product families, primarily the
SPECTRAmax GEMINI and FLIPR(384).

Research and development expenses for 1999 increased by 29% to
approximately $7.4 million from approximately $5.7 million in 1998 and by 20% in
1998 compared to approximately $4.7 million in 1997. The increased spending for
both periods is primarily the result of additional personnel as well as
increased expenditures on development activities required to support both the
introduction and on-going development of new MAXline and Cell Analysis products.

We recorded a charge of $2,037,000 during the second quarter of 1999 due to
the write-off of acquired in-process research and development related to our
acquisition of Skatron. We recorded an $876,000 charge during the third quarter
of 1998 due to the write-off of acquired in-process research and development
related to our acquisition of technology rights from Affymax Research Institute,
a subsidiary of Glaxo Wellcome.
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<PAGE> 22

Selling, general and administrative expenses for 1999 increased by 24% to
approximately $17.4 million from approximately $14.1 million in 1998 and by 18%
in 1998 compared to approximately $11.9 million in 1997. The increased spending
for both periods is primarily the result of additional spending on marketing,
sales and service related activities (including additional personnel) as we
continued our efforts to expand worldwide market coverage and introduce new
products. Selling, general and administrative expenses as a percentage of
revenues were 28.1% in 1999, 29.5% in 1998 and 31.0% in 1997, reflecting
improved operating leverage as our revenue base has grown.

Other income (net), consisting primarily of interest income, decreased by
10% in 1999 to approximately $1.4 million from approximately $1.6 million in
1998 due to a decreased average cash balance primarily as a result of the
Skatron acquisition. Other income (net) increased by 30% in 1998 to
approximately $1.6 million from approximately $1.2 million in 1997 due to
greater interest income earned resulting from higher average cash balances.

We recorded income tax provisions of approximately $5.3 million in 1999,
$4.2 million in 1998 and $3.2 million in 1997. These provisions reflected a
38.5% effective tax rate in 1999 and 1998 as compared to a 37.4% effective tax
rate in 1997. The higher effective tax rate for 1999 and 1998 reflects decreased
tax benefits from our foreign sales corporation.

LIQUIDITY AND CAPITAL RESOURCES

We had cash and cash equivalents of approximately $28.2 million at December
31, 1999 compared to $32.7 million at December 31, 1998. We have typically
financed operations primarily from cash flows provided by operating activities,
which contributed approximately $3.9 million in 1999, $6.9 million in 1998 and
$4.4 million in 1997. Cash provided by operations in these years was primarily
reflective of our earnings as offset by short-term working capital needs for
accounts receivable and inventory. Our requirements for inventory in 1999, in
particular, were greater than in previous years as a result of the Skatron
acquisition as well as the ramp up of production of new Cell Analysis systems.
Net cash used in investing activities was approximately $9.1 million in 1999,
$1.5 million in 1998 and $543,000 in 1997, and was used primarily for capital
expenditures, except for 1999 when approximately $7.1 million of cash was used
for the acquisition of Skatron. Net cash provided by financing activities was
$849,000 in 1999 and $521,000 in 1998 while net cash used in financing
activities was approximately $567,000 for 1997. The 1999 and 1998 proceeds
relate primarily to stock option exercises. The use of funds in 1997 reflects
repayment of a $1.5 million promissory note related to the 1996 acquisition of
NovelTech, partially offset by proceeds from stock option exercises.

We believe that our existing cash and investment securities and anticipated
cash flow from our operations together with our net proceeds of this public
offering will be sufficient to support our current operating plan for the
foreseeable future. Our forecast of the period of time through which our
financial resources will be adequate to support our operations is a
forward-looking statement that involves risks and uncertainties, and actual
results could vary as a result of a number of factors. We have based this
estimate on assumptions that may prove to be wrong. Our future capital
requirements will depend on many factors, including:

- the progress of our research and development;

- the number and scope of our research programs;

- market acceptance and demand for our products;

- the costs that may be involved in enforcing our patent claims and other
intellectual property rights;

- potential acquisition and technology licensing opportunities;

- manufacturing capacity requirements; and

- the costs of expanding our sales, marketing and distribution capabilities
both in the United States and abroad.

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<PAGE> 23

We have generated sufficient cash flow from operations to fund our capital
requirements since our initial public offering in 1995. However, we cannot
assure you that we will not require additional financing in the future to
support our existing operations or potential acquisition and technology
licensing opportunities that may arise. Therefore, we may in the future seek to
raise additional funds through bank facilities, debt or equity offerings or
other sources of capital.

Our cash and investments policy emphasizes liquidity and preservation of
principal over other portfolio considerations. We select investments that
maximize interest income to the extent possible given these two constraints. We
satisfy liquidity requirements by investing excess cash in securities with
different maturities to match projected cash needs and limit concentration of
credit risk by diversifying our investments among a variety of high
credit-quality issuers.

IMPACT OF YEAR 2000

In prior years, we discussed the nature and progress of our plans to become
Year 2000 ready. In late 1999, we completed our remediation and testing of
systems. As a result of those planning and implementation efforts, we
experienced no significant disruptions in mission critical information
technology and non-information technology systems and believe those systems
successfully responded to the Year 2000 date change. We expensed Year 2000
remediation costs as incurred. There were no significant incremental costs
incurred. We are not aware of any material problems resulting from Year 2000
issues, either with our products, our internal systems, or the products and
services of third parties. We will continue to monitor our mission critical
computer applications and those of our suppliers and vendors throughout the Year
2000 so that any latent Year 2000 matters that may arise are addressed promptly.

RECENT PRONOUNCEMENT

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<PAGE> 24

BUSINESS

OVERVIEW

INDUSTRY BACKGROUND

Life sciences research, particularly drug discovery, is currently
undergoing a revolution as a result of two converging trends. The worldwide
effort to sequence the human genome is beginning to identify a large number of
previously unknown natural molecules that play a role in disease and thus are
likely targets for new therapeutic products. Until recently, only a few hundred
disease targets were available to drug discovery researchers; today, large-scale
DNA sequencing efforts such as the Human Genome Project appear likely to
identify tens of thousands of such targets. At the same time, advances in
combinatorial chemistry have provided chemists with techniques that allow them
to synthesize a greater number of and diversity of compounds than ever before.
Pharmaceutical companies previously maintained "libraries" of hundreds of
thousands of compounds to test against disease targets to determine their
potential as drugs; in the near future, drug researchers most likely will have
access to millions of such compounds.

The identification of disease targets and synthesis of chemical compounds
are key first steps in the drug discovery process. After this, researchers
undertake additional steps to determine which compounds are the most promising
drug candidates prior to entering clinical development. Among the most important
downstream steps in the drug discovery process are assay development, drug
candidate screening and lead optimization.

Assay Development. Once a disease target has been identified, researchers
must develop a test, or assay, to determine whether a particular compound has a
desired effect on the target. Most assays involve creating a biochemical
reaction that takes place in a microplate, which is a plate containing an array
of small wells that are similar to miniature test tubes. The plate is inserted
into a microplate reader, which measures the light absorbed or emitted by the
sample in each well. Depending upon its underlying technology, the reader
detects light in the form of absorption, fluorescence or luminescence. The type
of assay developed depends upon the characteristics of the disease target and
the type of information the researcher is seeking. Two major categories of
assays are biochemical assays and cell-based assays. A cell-based assay measures
how a target on or inside a living cell responds to a compound; in a biochemical
assay, the target is isolated from the cell environment. Because they more
closely mimic the target's natural function, cell-based assays are generally
more valuable than biochemical assays in predicting how well a compound is
likely to function as a drug.

Drug Candidate Screening. Once an assay has been developed, it is performed
repeatedly to test the effects of a variety of compounds on the disease target,
a process known as screening. Primary screening identifies "hits," or compounds
that exhibit significant activity against a target; secondary screening gathers
more information on the hits to confirm and characterize their activity. Because
drug companies now have a rapidly increasing number of compounds to test, they
are interested in high throughput screening, or HTS, to reduce the amount of
time that is required for primary and secondary screening. Traditional
bioanalytical instruments and methods were not designed for high throughput
screening, which has contributed to the current bottleneck at this stage of the
drug discovery process.

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<PAGE> 25

Lead Optimization. Compounds that emerge from the secondary screening
process, now called "leads," are next subjected to successive rounds of
additional testing and chemical manipulations to make them even more suitable as
drug candidates. This process, known as lead optimization, involves a variety of
tests, such as cell-based assays, that yield a higher level of biological
information than screening assays. As drug companies generate increasing numbers
of leads, bottlenecks have emerged in this stage, resulting in demand for more
efficient lead optimization tools.

After optimization, a lead compound must pass a lengthy and expensive set
of pre-clinical and clinical trials before becoming a drug. Because of the
resources required to conduct such trials, the cost of failure is high; thus,
companies are interested in tools which allow more accurate assessment of a
compound's probability of success as early as possible in the drug discovery
process.

To reduce the length and cost of the drug discovery process, researchers
increasingly need tools that speed up the above steps and increase the value of
the information generated by them. Traditional bioanalytical instruments and
methods do not adequately address these needs because of several limitations,
including:

- Low sensitivity. One way to increase the speed of drug development is to
conduct assays in high-density microplates, such that many samples can be
analyzed in one equipment run. Microplates are now made in standard
formats with either 96, 384 or 1,536 wells; the more wells there are, the
smaller the sample volume in each well. Reading very small-volume samples
requires a higher level of sensitivity than is available in most
traditional detection equipment.

- Lack of automation. Throughput is often enhanced by incorporating a high
degree of automation into the drug discovery process. Some assays which
provide high levels of information, such as live cell-based assays,
require even more automation to run efficiently. For example, gaining
certain kinetic data from a live cell assay, which is valuable in lead
optimization, requires integrated liquid handling equipment so that
compounds can be added to the cells and the detector can read the result
of the assay almost instantaneously. Traditionally, many bioanalytical
instruments have not been designed to integrate easily with automation
equipment.

- Low information content. Many assays which provide a high level of
information about the activity of a compound against a target are
difficult to adapt to a high throughput mode of operation. The reasons
for this vary by the type of assay; for example, performing certain
cell-based assays in microplate wells requires a reader with a special
optical configuration and integrated liquid handling capability. Similar
technical hurdles have prevented researchers from performing other assays
with high information content quickly and efficiently.

The proliferation in disease targets and chemical compounds coupled with
the limitations of traditional technologies have created bottlenecks at each of
the downstream steps of the drug discovery process which our products are
specifically designed to address.

THE MOLECULAR DEVICES SOLUTION

We offer a full range of high-performance bioanalytical systems that
address the sensitivity, automation, and depth-of-information challenges
currently faced by researchers. Our major products possess levels of detection
sensitivity that enable the analysis of high-density microplates and thereby
increase throughput. These products also include, or are easily integrated with,
automation equipment to further enhance throughput and allow complex assays to
be performed with high efficiency. Additionally, we lead the industry in
providing technologies for performing information-rich live cell assays in high
throughput mode.

We currently offer three product families that address different segments
of the drug discovery market. Our MAXline family of microplate readers primarily
addresses the assay development market and offers the assay development
scientist seven differentiated microplate readers that include a wide range of
innovative and flexible feature sets. We are widely perceived as a leader in
microplate reader technology, and we believe that we have been the first to
offer a number of innovative features into the premium end
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<PAGE> 26

of the microplate reader market. Our Cell Analysis products, which include our
Fluorometric Imaging Plate Reader, or FLIPR, system, our new Chemiluminescence
Imaging Plate Reader, or CLIPR, system and our Cytosensor system, address
cell-based research in the high throughput screening and lead optimization
market segments. We believe that our FLIPR, CLIPR and Cytosensor systems provide
researchers with valuable information about the effect of potential drug
compounds on cells. Finally, our Threshold system is aimed at the
biopharmaceutical manufacturing and quality control process, and we believe that
the Threshold system is the only commercially available fully integrated system
that rapidly and reproducibly detects potential contaminants with picogram level
sensitivity.

STRATEGY

Our objective is to be the world's leading provider of innovative
bioanalytical systems and related consumable products for life sciences
research. We are focusing on the drug discovery market and, specifically, on
providing comprehensive solutions that accelerate and improve the critical
downstream drug discovery processes of assay development, drug candidate
screening and lead optimization. Key elements of our strategy include:

- MAINTAIN AND ADVANCE OUR TECHNOLOGICAL LEADERSHIP. Since our first
product introduction in 1987, we have consistently developed innovative,
technologically advanced tools to facilitate and enhance life sciences research.
In the past, we have often been the first company among our competitors to
introduce a new technology to the market. We continue to invest in new products
as well as in enhancements to our existing products, thereby sustaining or
increasing our technological edge over competitors. Maintaining and advancing
our track record of innovation will be a key element of our future success,
particularly as the needs of drug discovery customers change due to advances in
genomics, proteomics, combinatorial chemistry and other disciplines. To
accomplish this, we typically invest and we intend to continue to invest 10% to
12% of our revenues in research and development to build upon our leading-edge
technological expertise and customer application knowledge.

- LEVERAGE OUR MARKET LEADERSHIP POSITION. Our technologically advanced
products and significant field presence have allowed us to develop strong
relationships with a broad range of drug discovery and life sciences research
customers. We have a large direct sales force which, in combination with our
technical and applications support staffs, provides high quality customer
service and possesses an in-depth understanding of customer needs. Historically,
our strong customer relationships have contributed to our ability to introduce
innovative, well-accepted products to the market, and we believe that these
relationships will continue to be an important source of new product development
ideas. Our large installed product base and field presence also provide us with
the opportunity to sell new products and product enhancements to our customers
with less effort and investment than would otherwise be required.

- INCREASE RECURRING REVENUE FROM OUR CONSUMABLE PRODUCTS. In order to
increase the value of our existing products and enhance our market position, we
have launched a significant effort to develop reagent kits that are optimized
for use on our Cell Analysis instruments. We have historically developed and
produced reagent kits for our Threshold systems, and we recently began to sell
consumables for our installed base of Cell Analysis instruments with the
introduction of two kits for performing important assays on FLIPR and CLIPR. We
plan to introduce several additional kits this year, and we have recently
expanded our reagent manufacturing capacity. These products allow us to offer
complete assay systems (instruments and reagents) to our customers, to increase
our market share and to create a recurring revenue stream to balance the
inherent variability of our instrument revenue.

- EXPAND WORLDWIDE DISTRIBUTION AND SUPPORT. We maintain strong sales and
support organizations in North America and Europe and a network of selected
distribution partners to address regions that we do not serve directly. We
intend to enhance our market presence by expanding our existing direct sales
offices, opening new offices in attractive markets and forming additional
distribution relationships in new regions. We believe that building a direct
field presence in key markets in Asia and Europe will allow us to realize the
full potential of these markets in terms of increased sales, closer customer
relationships and improved competitive positioning.

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- ACQUIRE COMPLEMENTARY BUSINESSES AND TECHNOLOGIES. We intend to seek
businesses and technologies that will enhance our ability to provide complete,
innovative solutions to drug discovery and life sciences research customers. As
we identify these opportunities, we intend to seek acquisitions, partnerships
and licensing arrangements with companies that meet our selection criteria. We
will focus on acquisitions that allow us to gain access to novel technologies,
broaden our product offerings to existing customers and extend our reach to new
customers. For example, in 1998 we acquired the underlying technology for CLIPR,
and in 1999 we acquired a complementary product line through our acquisition of
Skatron. In addition to pursuing acquisitions, we intend to seek partnerships
and licensing arrangements to supplement our in-house research and development
efforts and add complementary products to our existing offerings.

OUR PRODUCTS

Our product lines include our MAXline family of microplate readers and
liquid handling systems, our Cell Analysis systems, which include the FLIPR,
CLIPR and Cytosensor systems, and our Threshold system.

<TABLE>
- -------------------------------------------------------------------------------------------------
DATE US LIST PRICE PRIMARY DRUG
PRODUCT INTRODUCED RANGE DISCOVERY APPLICATION
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
MAXLINE PRODUCTS
- -------------------------------------------------------------------------------------------------
Emax 1988 $ 5,000 - $ 7,195 Assay Development
- -------------------------------------------------------------------------------------------------
Vmax 1987 $ 6,900 - $ 8,695 Assay Development
- -------------------------------------------------------------------------------------------------
VERSAmax 1998 $ 9,825 - $ 13,800 Assay Development
- -------------------------------------------------------------------------------------------------
SPECTRAmax 340 PC 1998 $ 12,895 - $ 16,870 Assay Development
- -------------------------------------------------------------------------------------------------
SPECTRAmax 190 1998 $ 17,525 - $ 27,500 Assay Development
- -------------------------------------------------------------------------------------------------
SPECTRAmax PLUS(384) 2000 $ 23,000 - $ 29,000 Assay Development/HTS
- -------------------------------------------------------------------------------------------------
SPECTRAmax GEMINI XS 2000 $ 32,775 - $ 40,750 Assay Development/HTS
- -------------------------------------------------------------------------------------------------
Skatron Liquid Handling
Systems 1999 $ 5,990 - $ 39,500 Assay Development/HTS
- -------------------------------------------------------------------------------------------------
CELL ANALYSIS SYSTEMS
- -------------------------------------------------------------------------------------------------
FLIPR 1996 $265,000 Assay Development/HTS
- -------------------------------------------------------------------------------------------------
FLIPR(96) 1999 $320,000 - $410,000 HTS/Lead Optimization
- -------------------------------------------------------------------------------------------------
FLIPR(384) 1998 $370,000 - $460,000 HTS/Lead Optimization
- -------------------------------------------------------------------------------------------------
CLIPR 1999 $425,000 - $475,000 HTS/Lead Optimization
- -------------------------------------------------------------------------------------------------
Cytosensor 1992 $ 59,500 - $ 99,500 Lead Optimization
- -------------------------------------------------------------------------------------------------
Cell Analysis Reagent Kits 1999 $ 2,500 - $ 5,000 HTS
- -------------------------------------------------------------------------------------------------
THRESHOLD SYSTEM
- -------------------------------------------------------------------------------------------------
Threshold Instrument 1989 $ 49,500 Quality Control
- -------------------------------------------------------------------------------------------------
Threshold Reagent Kits 1989 $ 7,735 - $ 9,450 Quality Control
- -------------------------------------------------------------------------------------------------
</TABLE>

MAXLINE PRODUCTS

Our MAXline products, which represented 57% of total revenues in 1999,
consist primarily of advanced microplate readers. Microplate readers have become
one of the most fundamental tools used in life sciences research by addressing
the increasing need for the acquisition and processing of large quantities of
biochemical and biological data. Microplate readers provide scientists the
benefit of high throughput analysis in a standardized, multi-sample format.
Because of the productivity gains using a multi-sample format, microplates have
largely replaced test tubes and cuvettes for many life sciences applications.

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<PAGE> 28

A microplate is a disposable plastic vessel that is used with a microplate
reader to measure light. The basic principles of microplate readers are that
light from an appropriate source is directed to a wavelength selection device,
such as a monochromator, and its intensity is measured before and after passing
through each of the sample wells of a microplate. Application of a mathematical
formula to the light intensity measurements of each microplate well provides a
measure of the sample present in the well. The measurement, known as optical
density, relative fluorescence, or luminescence, is proportional to the
concentration of the substance that is being measured. Historically, the
standard microplate was comprised of 96 individual wells. As cost and throughput
have become increasingly important, however, the industry has begun to move to
higher density plates including 384 wells and 1536 wells. We believe that this
trend towards miniaturization will continue to be a significant factor affecting
the microplate reader market in the future.

Our MAXline strategy has been to continue to introduce new products that
include first-of-a-kind features, as well as to offer varying feature sets and
price points to address different market segments. We have historically focused
on the premium end of the microplate reader market through offering products
with advanced capabilities. Some of the first-of-a-kind features that we have
pioneered include the first reader and software capable of kinetic analysis, the
first monochromator-based reader that enabled continuous wavelength selection
and the first reader capable of performance comparable to a spectrophotometer.
In each case, we believe that the innovation helped expand the utility of
microplate readers and, more broadly, the available market for microplate
readers. Our MAXline family currently includes the following eight primary
products and product lines:

- Emax. This product is aimed at the market for traditional microplate
readers that do not require kinetic capability. We introduced it to
provide a reader for customers in academia and other customers with
restricted capital budgets.

- Vmax. This was the first microplate reader to offer kinetic read
capability and is designed to address the needs of biochemists.

- VERSAmax. The VERSAmax is our low cost variable wavelength offering that
provides kinetic capability and temperature control.

- SPECTRAmax 340PC. This product is a visible range microplate
spectrophotometer, offering tunability and the additional capability of
our patented PathCheck Sensor technology, which corrects common
variability problems across wells of microplates.

- SPECTRAmax 190. The predecessor to this product was the world's first
microplate reader that incorporated a monochromator for continuous
wavelength selection. Wavelength selection provides for enhanced
convenience and flexibility in assay design. In addition, the SPECTRAmax
190 also includes our patented PathCheck Sensor technology.

- SPECTRAmax PLUS(384). The SPECTRAmax PLUS, introduced in 1997, was our
first microplate reader aimed at the spectrophotometer market. It was the
industry's first microplate reader that was able to combine the high
throughput of a microplate reader with the performance of a cuvette based
spectrophotometer as a result of our patented PathCheck Sensor
technology. The SPECTRAmax PLUS was also the first microplate reader with
the ability to read wavelengths as short as 190 nanometers and as long as
1,000 nanometers, the equivalent range to a spectrophotometer. The
SPECTRAmax PLUS(384), introduced in 2000, addresses the needs of the high
throughput screening market by adding 384-well plate compatibility.

- SPECTRAmax GEMINI XS. SPECTRAmax GEMINI, introduced in late 1998, was the
world's first dual-scanning microplate spectrofluorometer. By
incorporating two scanning monochromators, the SPECTRAmax GEMINI allows
the user to automatically optimize the instrument setting for the
particular assay characteristics as well as for every fluorophore that is
in use today. GEMINI also was our first microplate reader capable of
multi-mode operation, in that the product is capable of fluorescence,
luminescence and time-resolved fluorescence measurements. The GEMINI XS
(Extra Sensitive), introduced in 2000, extends the GEMINI franchise by
significantly improving
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<PAGE> 29

sensitivity and adding well scanning capability which allows researchers
to perform more complex cell based assays.

- Skatron Liquid Handling Systems. We acquired a line of liquid handling
systems, primarily washers, through our acquisition of Skatron in 1999.
Washers are used to dispense and remove fluid from microwell plates and
are used as an integral step during the course of many assays. The
Skatron products bring a complete line of state-of-the-art microwell
plate washers and other related tools, including cell harvesters, to the
MAXline product family. These products include a variety of cell and
plate washers that offer 96, 384 and 1536 well washing capabilities.

CELL ANALYSIS SYSTEMS

Our Cell Analysis systems, which represented 38% of our total revenues in
1999, are used to study the response of live cells to drug candidates and are
primarily targeted toward high throughput screening and lead optimization. Many
therapeutic drugs are targeted to cell membrane receptors: special proteins that
function as control switches for cell activity and are triggered by the specific
binding of soluble natural substances to relay messages to the cell via "signal
transduction" mechanisms. Therapeutic drugs which act on receptors either mimic
or block the action of the natural receptor-specific substance. The therapeutic
potential of such drugs is, therefore, most appropriately studied using live
cell systems. These studies are inherently challenging, but a high value is
placed upon them by the pharmaceutical industry and the research community. We
focus on providing complementary tools for studying the response of live cells
to different compounds, both for research and for drug candidate screening
purposes.

FLIPR System

Our FLIPR system satisfies a key demand from pharmaceutical companies for
live cell analysis at a high throughput rate. Our FLIPR was the first instrument
to enable high throughput screening of live cells with high information content
on cellular activation. Over 70 customers have purchased our FLIPR systems since
introduction in 1996, including the 20 largest pharmaceutical companies, several
of which own five or more FLIPR systems. The primary applications for our FLIPR
system are the measurement of intracellular calcium ion flux and membrane
potential change, both of which provide critical information on the activation
of cells by test compounds.

In our FLIPR system, cells, along with appropriate fluorescent dyes, are
maintained in microplates in a humidified, thermally-controlled compartment
together with compound-addition plates. A laser light is then passed through the
wells to provide excitation illumination and fluorescence from cells on the
bottom of the wells. During the reading cycle, a built-in pipettor transfers
compound samples from the compound-addition plate to the cell plate and the
reaction is continuously monitored by an ultrasensitive charge coupled device, a
CCD camera, at intervals of less than one second. This strategy allows for
real-time monitoring of cells before and after compound addition, thus allowing
the measurement of rapid non-linear, response kinetics. Our FLIPR system's
limited depth-of-field fluorometry optical design is patented. We currently
offer three primary products based on our FLIPR technology platform.

- FLIPR. This product was introduced in 1996 and was our first entry into
the high throughput screening market. FLIPR is capable of simultaneously
analyzing each well of a 96 well plate and has a throughput of
approximately 10,000 samples per day. FLIPR will be discontinued in mid-
2000 and replaced with the FLIPR(96) described below.

- FLIPR(384). This product, introduced in 1998, was the second generation
FLIPR product. It combines all of the benefits of the original FLIPR
along with new automation capabilities and the ability to analyze samples
in 384 well microplates, as well as 96 well microplates. FLIPR(384) can
screen as many as 50,000 samples daily, and offers optional integrated
plate stacker and washer accessories which can dramatically reduce the
need for human intervention during sample processing. In addition, the
instrument also incorporates interfaces that enable it to integrate into
automated screening lines.

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<PAGE> 30

- FLIPR(96). This product is built on same chassis as the FLIPR(384) and is
capable of all of the automation benefits of the FLIPR(384). The primary
differentiation is that FLIPR(96) is not 384 well compatible, and
therefore will be targeted at lower throughput applications in lead
optimization. We also offer an upgrade package for the FLIPR(96) that
will enable 384 well capability.

CLIPR System

Our Chemiluminescence Imaging Plate Reader, or CLIPR, system was developed
based on telecentric lens luminometer technology licensed from Affymax Research
Institute in 1998. We introduced this system in the third quarter of 1999. It
satisfies a key demand from pharmaceutical companies for live cell analysis at
an ultra high throughput rate using luminescence technology. Our CLIPR can
support the analysis of over 200,000 samples in an eight hour day.

The system combines an ultra sensitive CCD camera with proprietary wide
field optics to achieve ultra high throughput by simultaneously imaging all of
the wells on a microplate. As a result of the simultaneous imaging, CLIPR is
compatible with any microwell plate format including 96, 384, 1536 and beyond.
Our CLIPR system can be integrated with a linear track robot, used in
workstation mode with an optional light-tight plate stacker module, or used in a
stand-alone mode.

The primary applications for CLIPR are cell-based and non-cell-based assays
such as reporter gene and SPA assays, which are important applications in the
drug discovery market. These applications complement the applications for our
FLIPR system, offering solutions for a wide range of cell-based assays.

Cytosensor System

We developed the Cytosensor system to provide a fast, reliable, single
assay system to investigate multiple cellular functions in numerous cell types.
Our Cytosensor system incorporates our core Light Addressable Potentiometric
Sensor, or LAPS, technology, a detection system capable of measuring a wide
variety of chemical reactions as they occur on the surface of a silicon based
sensor, into a patented system that permits researchers to conduct
microphysiometry (the study of cellular metabolism) without destroying the
cells. Cellular metabolism is the most fundamental and essential of all
physiological processes, and allows for the monitoring of cell activation,
stimulation, growth, toxicity and other biochemical events crucial to the
development of new therapeutics. We believe that the primary applications of the
Cytosensor system are receptor characterization, orphan receptor identification,
human cell pharmacological profiling and in vitro toxicology. We offer a
4-chamber Cytosensor system targeting customers with relatively low throughput
requirements and an 8-chamber system for customers who require higher
throughput.

Cell Analysis Reagents

We are expanding our reagent business by focusing on the internal
development of proprietary reagent kits optimized for our Cell Analysis
instruments. We have historically developed and produced reagent kits for our
Threshold systems, and we recently began to sell consumables for our installed
base of Cell Analysis instruments with the introduction of two kits for
performing important assays on FLIPR and CLIPR. During 1999, we hired a reagent
development and marketing team, built organic chemistry labs and expanded our
reagent production capacity. Our current Cell Analysis reagent offerings
include:

- FLIPR Calcium Assay Kit. This product will be officially released in the
second quarter of 2000, and we believe that it has the potential to
revolutionize the way FLIPR calcium assays are performed. The kit's
unique feature is that it enables researchers to eliminate a step in the
assay protocol, thereby saving up to 15 minutes of processing time for
each 384 well plate. This kit has the potential to significantly increase
throughput, reduce costs and increase screening efficiency.

- CLIPR Luciferase Assay Kit. This is optimized for 1536 well plates used
with the CLIPR system and targeted at reporter gene assay applications.

30
<PAGE> 31

THRESHOLD SYSTEM

Our Threshold system, which is comprised of a detection instrument and
proprietary reagents, represented 5% of our total revenues in 1999. Our
Threshold system incorporates our LAPS technology to quantitate a variety of
biomolecules such as DNA, proteins and mRNA rapidly and accurately. The demand
for systems which can quantitate contaminants in the manufacturing and quality
control of bioengineered products is in response to the growing number of
biopharmaceutical therapeutics both entering clinical trials and receiving
regulatory approval for commercial sale. The Threshold system emerged from a
need by biopharmaceutical companies for more sensitive and reproducible methods
to detect contaminants in biopharmaceuticals during the manufacturing and
quality control process. Traditional detection methods, such as DNA
hybridization, can be slow, difficult to use in a manner that provides
reproducible and transferable results, and often require the use of radioactive
materials for detection. We believe that the Threshold system is the only
commercially available, fully-integrated system capable of rapidly and
accurately quantitating DNA with picogram level sensitivity. The Threshold
family of products includes a workstation, software and consumable reagent kits.

- Threshold Instrument. The Threshold reader incorporates the proprietary
LAPS detection technology and proprietary software that collects and
analyzes the Threshold assay data.

- Threshold Reagents. We offer two Threshold reagent products. The Total
DNA Assay Kit allows for the detection of any DNA, and the ILA Kit is a
flexible format that can be used to detect and quantitate numerous
contaminants in the manufacture of bioengineered products.

SOFTWARE AND CUSTOMER SERVICE

In addition to instruments and consumable products, we also offer software
products and support services. All of our instrument products are used with
internally designed and developed software which are sold as an integral part of
the instrument system. We believe that our software is an important
differentiator for our instrument products relative to the competition based on
its ease-of-use and advanced data analysis capabilities.

Our service and support offerings include field service, customer support,
applications assistance and training through an organization of factory-trained
and educated service and application support personnel around the world. We
offer services to our installed base of customers on both a contract and time
and materials basis and we offer a variety of post-warranty contract options for
all our instrument offerings that customers may purchase. Our installed base
provides us with stable, recurring after-market service and support revenue, as
well as product upgrade and replacement opportunities.

RESEARCH AND DEVELOPMENT

Our research and development team included 44 full time employees as of
December 31, 1999. We typically invest 10% to 12% of our revenues in research
and development, which has resulted in a track record of technological
innovation. Over 70% of our revenues in 1999 were derived from products that we
introduced in the last three years. Our research and development expenditures
were approximately $7,363,000 in 1999, $5,686,000 in 1998 and $4,721,000 in
1997.

Our research and development activities are focused on:

- broadening our technology solution, including development of new
proprietary reagent kits;

- providing more sensitive quantitative evaluation of biological events;

- providing greater throughput capability, especially with smaller sample
volumes; and

- developing increasingly sophisticated data management and analysis
capability.

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<PAGE> 32

MARKETING AND CUSTOMERS

Our sales and marketing organization included 68 full time employees in
North America and Europe as of December 31, 1999. We distribute our products
primarily through direct sales representatives in North America. We have
subsidiaries in the United Kingdom and Germany responsible for selling and
servicing our products. Our direct sales effort is supported by a team of
service, technical and applications specialists employed by us. We also sell our
products through international distributors, most of which enter into
distribution agreements with us that provide for exclusive distribution
arrangements and minimum purchase targets. Such agreements also generally
prohibit the distributors from designing, manufacturing, promoting or selling
any products that are competitive with our products.

Our customers include leading pharmaceutical and biotechnology companies as
well as medical centers, universities, government research laboratories and
other institutions throughout the world. No single customer accounted for more
than 5% of our total 1999 revenues.

In 1999, sales to customers outside the United States accounted for 39% of
total revenues and total sales denominated in foreign currencies accounted for
22% of total revenues. We anticipate that international sales will account for
an increasing percentage of revenues in the future. We expect to continue
expanding our international operations in order to take advantage of increasing
international market opportunities resulting from worldwide growth in the life
sciences industry.

MANUFACTURING

We manufacture our products at our facilities in Sunnyvale, California and
Norway. Our California facility is ISO 9001 certified. We manufacture our own
components where we believe it adds significant value, but we rely on suppliers
for the manufacture of selected components and subassemblies, which are
manufactured to our specifications. We conduct all final testing and inspection
of our products. We have established a quality control program, including a set
of standard manufacturing and documentation procedures intended to ensure that,
where required, our instruments are manufactured in accordance with Good
Manufacturing Practices.

PATENTS AND PROPRIETARY TECHNOLOGIES

We protect our proprietary rights from unauthorized use by third parties to
the extent that our proprietary rights are covered by valid and enforceable
patents or are effectively maintained as trade secrets. Patents and other
proprietary rights are an essential element of our business. Our policy is to
file patent applications and to protect technology, inventions and improvements
to inventions that are commercially important to the development of our
business. As of December 31, 1999, we were maintaining 32 U.S. patents and other
corresponding foreign patents based on our discoveries that have been issued or
allowed. In addition, as of that date, we had 26 patent applications pending in
the United States and had filed several corresponding foreign patent
applications.

We are a party to various license agreements that give us rights to use
certain technologies. In particular, we have exclusive licenses for the
technologies on which our FLIPR and CLIPR are based. We pay royalties to the
parties from which we licensed or acquired the FLIPR and CLIPR core
technologies.

We also rely on trade secret, employee and third-party nondisclosure
agreements and other protective measures to protect our intellectual property
rights pertaining to our products and technology.

COMPETITION

The market for life sciences instrumentation is highly competitive, and we
expect competition to increase. We compete for the allocation of customer
capital funds with many other companies marketing capital equipment, including
those not directly competitive with any of our products. Some of our products
also compete directly with similar products from other companies.

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<PAGE> 33

The microplate reader market is characterized by intense competition among
a number of companies, including Bio-Tek Instruments, LJL Biosystems, Packard
BioScience, PerkinElmer, Tecan and Thermo BioAnalysis, that offer, or may in the
future offer, products with performance capabilities generally similar to those
offered by our products. We expect that competition is likely to increase in the
future, as several current and potential competitors have the technological and
financial ability to enter the microplate reader market. Our MAXline products
are generally priced at a premium to other microplate readers. We compete in the
microplate reader market primarily on the basis of performance and productivity.
Many companies, research institutions and government organizations that might
otherwise be customers for our products employ methods for bioanalytical
analysis that are internally developed.

The cell analysis instrument market is also characterized by intense
competition among a number of companies, including Amersham Pharmacia Biotech,
Aurora Biosciences, Cellomics, Packard BioScience, PE Biosystems and
PerkinElmer, that offer, or may in the future offer, products with performance
capabilities generally similar to those offered by our products. We believe that
the primary competitive factors in the market for our products are throughput,
quantitative accuracy, breadth of applications, ease-of-use, productivity
enhancement, quality, support and price/performance. We believe that we compete
favorably with respect to these factors.

Many of our competitors have significantly greater financial, technical,
marketing, sales and other resources than we do. In addition to competing with
us with respect to product sales, these companies and institutions compete with
us in recruiting and retaining highly qualified scientific and management
personnel.

GOVERNMENT REGULATION

In the United States, the development, manufacturing, distribution,
labeling and advertising of products intended for use in the diagnosis of
disease or other conditions is extensively regulated by the U.S. Food and Drug
Administration, known as the FDA. These products generally require FDA clearance
before they may be marketed, and also are subject to postmarket manufacturing,
reporting and labeling requirements. With the exception of certain of our
MAXline microplate readers, none of our products is intended for use in the
diagnosis of disease or other conditions, and, therefore, they are not currently
subject to FDA regulation. The MAXline readers intended for diagnostic uses are
the subject of an FDA marketing clearance. If we were to offer any of our other
products for diagnostic uses, those products would become subject to FDA
regulation.

PROPERTIES

We lease two facilities with approximately 115,000 square feet of
laboratory, manufacturing and administrative space in Sunnyvale, California. Our
leases expire in November 2001 and April 2003. We also lease a sales and service
office in the United Kingdom, a sales and technical office in Germany, and a
small manufacturing facility in Norway. We believe that our current facilities
will be sufficient for our operations through at least 2001.

EMPLOYEES

As of December 31, 1999, we employed 213 persons full time, including 44 in
research and development, 78 in manufacturing, 68 in marketing and sales and 23
in general administration and finance. Of these employees, 36 hold Ph.D. or
other advanced degrees. None of our employees is covered by collective
bargaining agreements, and we consider relations with our employees to be good.

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<PAGE> 34

MANAGEMENT

The following table sets forth information regarding our current directors
and executive officers as of March 31, 2000:

<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Joseph D. Keegan, Ph.D....................... 46 President, Chief Executive Officer and Director
Timothy A. Harkness.......................... 33 Vice President, Chief Financial Officer
Gillian M.K. Humphries, Ph.D................. 61 Vice President
Tony M. Lima................................. 41 Vice President
Robert J. Murray............................. 52 Vice President
John S. Senaldi.............................. 35 Vice President
Moshe H. Alafi............................... 71 Director
David L. Anderson............................ 56 Director
A. Blaine Bowman............................. 53 Director
Paul Goddard, Ph.D........................... 50 Director
Andre F. Marion.............................. 64 Director
Harden M. McConnell, Ph.D.................... 72 Director
J. Allan Waitz, Ph.D......................... 64 Director
</TABLE>

Joseph D. Keegan, Ph.D., has served as our President and Chief Executive
Officer since March 1998. From 1992 to 1998, Dr. Keegan served in various
positions at Becton Dickinson and Company, a research and diagnostic company,
including the positions of Vice President, Sales and Service, Vice President,
General Manager of the Immunocytometry Systems Division and, most recently,
President of the Worldwide Tissue Culture Business. From 1987 to 1992, he was
employed by LEICA, Inc., a microscope manufacturer, where he held various senior
management positions. Dr. Keegan holds a Ph.D. in Chemistry from Stanford
University.

Timothy A. Harkness has served as our Vice President, Finance and Chief
Financial Officer since July 1998. From 1997 to 1998, Mr. Harkness was Vice
President of Business Development at Vivra Specialty Partners, a physician
practice management company. Previously, Mr. Harkness was with Montgomery
Securities in the Health Care Investment Banking Group from 1994 to 1997 and
with Arthur Andersen & Co. from 1989 to 1992. Mr. Harkness holds an MBA from
Stanford University Graduate School of Business and is a CPA.

Gillian M.K. Humphries, Ph.D., has served as a Vice President of the
Company since March 1990. Dr. Humphries served as a consultant to the Company
since its inception in 1983. In 1984, Dr. Humphries joined the Company on a full
time basis as a research scientist and, from 1985 to 1990, she served as
Director of MAXline and Cytosensor Development. Dr. Humphries holds a Ph.D. in
Biochemistry from Stanford University and an MS in Biochemistry from San Jose
State University.

Tony M. Lima has served as Vice President, in charge of Worldwide Sales and
Service, of the Company since July 1998. Previously, Mr. Lima was Manager, Sales
and Marketing at Cavro Scientific Instruments during a portion of 1998,
President/CEO of Aydius, Inc. from 1996 to 1997, and Vice President, Customer
Services of Behring Diagnostics (formerly Syva Company) from May 1995 to March
1996. From 1981 to May 1995 he was employed by Syva Co., a global clinical
diagnostics company, where he held various senior management positions in
England, Belgium and the United States. Mr. Lima holds a higher TEC Degree in
Electronics from Kingston College London, England.

Robert J. Murray has served as a Vice President, in charge of Worldwide
Operations, since July 1995. Mr. Murray served as the Company's Director of
Operations from 1993 to 1995. During 1993, Mr. Murray was a consultant to Tandem
Computers, Incorporated, a computer manufacturer. From 1991 to 1993, Mr. Murray
was Vice President of Manufacturing at Electromer Corporation, an electronic
component company, and from 1989 to 1991, was Vice President and General Manager
of Comptronix Corp., a contract manufacturing company. Prior to joining
Comptronix Corp., Mr. Murray was Vice President of Gould, Inc., a diversified
conglomerate. Mr. Murray holds an MS in Electrical Engineering from San Jose
State University and a B.S. from the University of California at Davis.

John S. Senaldi has served as Vice President, in charge of Worldwide
Marketing of the Company since August 1998. From 1993 to 1998, Mr. Senaldi
served in various management positions at Becton

34
<PAGE> 35

Dickinson and Company, a research and diagnostic company, including the
positions of Director of Business Development and Senior Product Manager in both
Europe and North America for Becton's Diabetes Healthcare business. Most
recently, he was in a Program Management role for Becton's Immunocytometry
Systems Division. Prior to joining Becton Dickinson, Mr. Senaldi held various
management positions in manufacturing and marketing with General Electric
Company's Medical Systems Business Group and in engineering functions with
several start-up medical diagnostic companies. Mr. Senaldi holds an MBA from
Harvard Business School, an MSEE from Rensselaer Polytechnic Institute and a BS
in Engineering from Trinity College.

Moshe H. Alafi has been a director of the Company since 1985. Mr. Alafi has
been the general partner of Alafi Capital Company since January 1984.

David L. Anderson has been a director of the Company since 1983. Mr.
Anderson has been a general partner of Sutter Hill Ventures, a venture capital
firm, since 1974. Mr. Anderson is also a director of Dionex Corporation
("Dionex") and Broadvision.

A. Blaine Bowman has been director of the Company since 1985. Mr. Bowman
is, and has been since 1980, President, Chief Executive Officer and a director
of Dionex.

Paul Goddard, Ph.D., has been a director of the Company since September
1995. Dr. Goddard has served as President and Chief Executive Officer of Elan
Pharmaceuticals, a division of Elan PLC, since 1998. Dr. Goddard served as
Chairman, Chief Executive Officer and Director of Neurex Corporation from 1991
through 1998 when Neurex Corporation was acquired by Elan PLC. From 1976 through
February 1991, Dr. Goddard was employed by SmithKline Beecham Corp. and its
predecessors in various positions, most recently as Senior Vice President and
Director, Japan-Pacific. He is also a director of Onyx Pharmaceutical and
RibiImmunochem Research.

Andre F. Marion has been a director of the Company since September 1995.
Mr. Marion was a founder of Applied Biosystems, Inc., and served as its Chief
Operating Officer from 1983 to 1986, its President from 1985 to 1993, its Chief
Executive Officer from 1986 to 1993 and its Chairman of the Board from 1987 to
February 1993, when it merged with the Perkin-Elmer Corporation. Mr. Marion
served as Vice President of Perkin-Elmer Corporation and President of its
Applied Biosystems Division until his retirement in February 1995. Mr. Marion is
presently a management consultant and also a director of Applied Imaging Corp.,
Cygnus, Inc., Aclara Biosciences, Inc. and several private corporations.

Harden M. McConnell, Ph.D., founder of the Company, has been a director of
and a consultant to the Company since the Company's inception in July 1983. He
is the Robert Eckles Swain Professor of Physical Chemistry at Stanford
University and a member of the National Academy of Sciences. Dr. McConnell has
received many awards in recognition of his scientific work, most recently these
include the 1987 Pauling Medal for Chemistry and, in 1988, the National Academy
of Sciences Award in Chemical Sciences. Dr. McConnell has also received the Wolf
Prize (1984), the Wheland Medal (1988), the National Medal of Science (1989),
the Peter Debeye Award in Physical Chemistry (1990) and the Bruker Prize of the
Royal Society of Chemistry (1995). Dr. McConnell holds a Ph.D. degree from the
California Institute of Technology.

J. Allan Waitz, Ph.D., has been a director of the Company since 1990. Dr.
Waitz is currently retired. Until 1992, Dr. Waitz was President and Chief
Executive Officer of DNAX Research Institute of Molecular and Cellular Biology,
Inc., a subsidiary of Schering-Plough Corporation. From 1991 through December
1996, Dr. Waitz served as chairperson of the Area Committee on Microbiology of
the National Committee for Clinical Laboratory Standards. He is also a director
of TerraGen Diversity, Inc.

35
<PAGE> 36

PRINCIPAL STOCKHOLDERS

The following table sets forth information regarding beneficial ownership
of our common stock as of March 31, 2000, except as otherwise noted in the
footnotes, and as adjusted to reflect the sale of 1,500,000 shares of common
stock offered hereby for:

- each stockholder who is known by us to own beneficially more than 5% of
our common stock;

- each director and executive officer; and

- all of our directors and executive officers as a group.

<TABLE>
<CAPTION>
NUMBER OF PERCENTAGE OF SHARES
SHARES BENEFICIALLY OWNED(1)
BENEFICIALLY --------------------------------
NAME OF BENEFICIAL OWNER OWNED(1) BEFORE OFFERING AFTER OFFERING
------------------------ ------------ --------------- --------------
<S> <C> <C> <C>
Kopp Investment Advisors, Inc.(2)......................... 1,878,405 19.28% 16.70%
7701 France Ave. South, Ste. 500
Edina, Minnesota 55435
Chase Manhattan Corporation(2)............................ 985,075 10.11 8.76
270 Park Avenue, 35th Floor
New York, New York 10017-2070
Putnam Investments(2)..................................... 648,000 6.65 5.76
One Post Office Square
Boston, Massachusetts 02109
Pilgrim Baxter & Associates, Ltd.(2)...................... 590,900 6.06 5.25
825 Duportail Road
Wayne, Pennsylvania 19087
Moshe H. Alafi(3)......................................... 424,840 4.36 3.78
Harden M. McConnell, Ph.D.(4)............................. 356,600 3.66 3.17
David L. Anderson(5)...................................... 188,907 1.94 1.68
Joseph D. Keegan, Ph.D.(6)................................ 103,584 1.06 *
A. Blaine Bowman(7)....................................... 62,000 * *
Robert J. Murray(8)....................................... 55,759 * *
Gillian M.K. Humphries, Ph.D.(9).......................... 47,283 * *
Paul Goddard, Ph.D.(10)................................... 22,000 * *
J. Allan Waitz, Ph.D.(11)................................. 22,000 * *
Timothy A. Harkness(12)................................... 26,978 * *
Tony M. Lima(13).......................................... 18,469 * *
Andre F. Marion(14)....................................... 16,500 * *
John S. Senaldi(15)....................................... 16,017 * *
All directors and executive officers as a group (13
persons)................................................ 1,360,937(16) 13.97 12.10
</TABLE>

- -------------------------
* Less than one percent.

(1) Beneficial ownership is determined in accordance with the rules of the SEC
and generally includes voting or investment power with respect to
securities. Shares of common stock subject to options currently exercisable
or exercisable within 60 days of March 31, 2000 are deemed outstanding for
computing the percentage of the person holding such options but are not
deemed outstanding for computing the percentage of any other person.
Percentage of beneficial ownership is based on 9,745,251 shares of common
stock outstanding as of March 31, 2000, plus 1,500,000 shares to be sold by
us in this offering.

(2) Based on information as of December 31, 1999 reflected in Schedules 13D,
13F and 13G filed with the SEC.

36
<PAGE> 37

(3) Includes 402,840 shares beneficially owned by Alafi Capital Company, of
which Mr. Alafi, a director of the Company, is a general partner, and
22,000 shares that may be acquired within 60 days after March 31, 2000
pursuant to outstanding stock options.

(4) Consists of 351,100 shares held by the Harden M. McConnell and Sophia G.
McConnell Trust, of which Dr. McConnell is a co-trustee, and 5,500 shares
that may be acquired within 60 days after March 31, 2000 pursuant to
outstanding stock options.

(5) Includes 14,710 shares beneficially owned by Anvest, L.P., of which Mr.
Anderson is a general partner, and 22,000 shares that may be acquired
within 60 days after March 31, 2000 pursuant to outstanding stock options.

(6) Includes 80,500 shares that may be acquired within 60 days after March 31,
2000 pursuant to outstanding stock options and periodic stock grants.

(7) Includes 22,000 shares that may be acquired within 60 days after March 31,
2000 pursuant to outstanding stock options.

(8) Includes 55,165 shares that may be acquired within 60 days after March 31,
2000 pursuant to outstanding stock options. Mr. Murray has agreed to sell
up to 5,000 shares of common stock in the event the underwriters exercise
their over-allotment option. If this option were exercised in full, he
would beneficially own 50,759 shares of our common stock after this
offering.

(9) Includes 47,283 shares that may be acquired within 60 days after March 31,
2000 pursuant to outstanding stock options. Dr. Humphries has agreed to
sell up to 5,000 shares of common stock in the event the underwriters
exercise their over-allotment option. If this option were exercised in
full, she would beneficially own 42,283 shares of our common stock after
this offering.

(10) Includes 22,000 shares that may be acquired within 60 days after March 31,
2000 pursuant to outstanding stock options.

(11) Includes 22,000 shares that may be acquired within 60 days after March 31,
2000 pursuant to outstanding stock options.

(12) Includes 19,000 shares that may be acquired within 60 days after March 31,
2000 pursuant to outstanding stock options and periodic stock grants.

(13) Includes 17,500 shares that may be acquired within 60 days after March 31,
2000 pursuant to outstanding stock options. Mr. Lima has agreed to sell up
to 4,300 shares of common stock in the event the underwriters exercise
their over-allotment option. If this option were exercised in full, he
would beneficially own 14,169 shares of our common stock after this
offering.

(14) Includes 16,500 shares that may be acquired within 60 days after March 31,
2000 pursuant to outstanding stock options.

(15) Includes 13,700 shares that may be acquired within 60 days after March 31,
2000 pursuant to outstanding stock options. Mr. Senaldi has agreed to sell
up to 4,000 shares of common stock in the event the underwriters exercise
their over-allotment option. If this option were exercised in full, he
would beneficially own 12,017 shares of our common stock after this
offering.

(16) Includes 768,650 shares held by entities affiliated with certain directors
and 365,148 shares that certain directors and officers have the right to
acquire within 60 days after March 31, 2000 pursuant to the exercise of
outstanding stock options and/or periodic stock grant rights. See footnotes
(3) through (15).

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<PAGE> 38

UNDERWRITING

Subject to the terms and conditions of the underwriting agreement, the
underwriters named below have severally agreed to purchase from us the following
respective number of shares of common stock at the public offering price less
the underwriting discounts and commissions set forth on the cover page of this
prospectus:

<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITERS SHARES
------------ ----------
<S> <C>
ING Barings LLC............................................. 600,000
Bear, Stearns & Co. Inc..................................... 300,000
Thomas Weisel Partners LLC.................................. 300,000
UBS Warburg LLC............................................. 300,000
----------
Total............................................. 1,500,000
==========
</TABLE>

The underwriting agreement provides that the obligations of the
underwriters are subject to certain conditions precedent and that the
underwriters will purchase all shares of the common stock offered hereby if any
of the shares are purchased.

We have been advised by the underwriters that the underwriters propose to
offer the shares of common stock to the public at the public offering price set
forth on the cover page of this prospectus and to various dealers at that price
less a concession not in excess of $1.25 per share. The underwriters may allow,
and these dealers may reallow, a concession not in excess of $0.10 per share to
other dealers. After the public offering, the public offering price and other
selling terms may be changed by the underwriters.

The following table shows the underwriting discounts and commissions to be
paid to the underwriters by us and the selling stockholders in connection with
this offering. These amounts are shown assuming both no exercise and full
exercise of the underwriters' option to purchase additional shares of common
stock:

<TABLE>
<CAPTION>
PER SHARE NO EXERCISE FULL EXERCISE
--------- ----------- -------------
<S> <C> <C> <C>
Payable by Molecular Devices............................. $2.12 $3,180,000 $3,618,204
Payable by the selling stockholders...................... $2.12 $ 0 $ 38,796
</TABLE>

Other expenses of this offering (including the registration fees and the
fees of financial printers, counsel and accountants) to be paid by us are
expected to be approximately $1,000,000.

We and certain selling stockholders have granted the several underwriters
an option, exercisable not later than 30 days after the date of this prospectus,
to purchase up to 225,000 additional shares of common stock at the public
offering price less the underwriting discounts and commissions set forth on the
cover page of this prospectus. To the extent that the underwriters exercise this
option, each of the underwriters will have a firm commitment to purchase
approximately the same percentage of the additional shares that the number of
shares of common stock to be purchased by it shown in the table above bears to
1,500,000. To the extent the underwriters exercise this option, we and certain
selling stockholders will be obligated, pursuant to this option, to sell the
additional shares to the underwriters. The underwriters may exercise this option
only to cover over-allotments, if any, made in connection with the sale of the
common stock offered hereby. If purchased, the underwriters will offer the
additional shares on the same terms as those on which the 1,500,000 shares of
common stock are being offered.

In connection with this offering, certain underwriters may engage in
passive market making transactions in the common stock on Nasdaq immediately
prior to the commencement of sales in this offering in accordance with Rule 103
of Regulation M. Passive market making consists of displaying bids on Nasdaq
limited by the bid prices of independent market makers and making purchases
limited by these prices and effected in response to order flow. Net purchases by
a passive market maker on each day are limited to a specified percentage of the
passive market maker's average daily trading volume in the common stock during a
specified period and must be discontinued when this limit is reached. Passive

38
<PAGE> 39

market making may stabilize the market price of the common stock at a level
above that which might otherwise prevail and, if commenced, may be discontinued
at any time.

Subject to applicable limitations, the underwriters, in connection with
this offering, may place bids for or make purchases of the common stock in the
open market or otherwise, for long or short account, or cover short positions
incurred, to stabilize, maintain or otherwise affect the price of the common
stock, which may be higher than the price that might otherwise prevail in the
open market. We cannot assure you that the price of the common stock will be
stabilized, or that stabilizing, if commenced, will not be discontinued at any
time. Subject to applicable limitations, the underwriters may also place bids,
or make purchases on behalf of the underwriting syndicate, to reduce a short
position created in connection with this offering. The underwriters are not
required to engage in these activities and may end these activities at any time.

Other than in the United States, neither we nor the underwriters have taken
any action that would permit a public offering of the shares of common stock
offered hereby in any jurisdiction where action for that purpose is required.
The shares of common stock offered hereby may not be offered or sold, directly
or indirectly, nor may this prospectus or any other offering material or
advertisements in connection with the offer and sale of any of these shares be
distributed or published in any jurisdiction, except under circumstances that
will result in compliance with the applicable rules and regulations of such
jurisdiction. Persons into whose possession this prospectus comes are advised to
inform themselves about, and to observe, any restrictions relating to this
offering of the common stock and the distribution of this prospectus. This
prospectus is not an offer to sell or a solicitation of an offer to buy any
shares of common stock offered hereby in any jurisdiction in which such an offer
or solicitation is unlawful.

The underwriting agreement contains covenants of indemnity among us, the
selling stockholders and the underwriters against certain civil liabilities,
including liabilities under the Securities Act of 1933.

We, and each of our directors and executive officers and certain of our
stockholders, who in the aggregate will beneficially own, following this
offering (assuming no exercise of the over-allotment option), 1,643,103 shares
of common stock which includes options to purchase 365,148 shares of common
stock currently exercisable or exercisable within 60 days of March 31, 2000,
have agreed not to directly or indirectly, without the prior written consent of
ING Barings LLC, offer, sell, offer to sell, contract to sell, or otherwise
dispose of any shares of common stock or securities exchangeable for or
convertible into common stock for a period of 90 days after the date of this
prospectus, except that we may issue, and grant options to purchase, shares of
common stock under our current stock option and purchase plans.

Thomas Weisel Partners LLC, one of the underwriters, was organized and
registered as a broker-dealer in December 1998. Since December 1998, Thomas
Weisel Partners LLC has been named as a lead manager or co-manager on 168 filed
public offerings of equity securities, of which 114 have been completed, and has
acted as a syndicate member in an additional 95 public offerings of equity
securities. Thomas Weisel Partners LLC does not have any material relationship
with us or any of our officers, directors or other controlling persons, except
with respect to its contractual relationship with us pursuant to the
underwriting agreement entered into in connection with this offering.

LEGAL MATTERS

The validity of the shares of common stock being sold in this offering and
other legal matters relating to this offering will be passed upon for us by
Cooley Godward LLP, Palo Alto, California. The validity of the shares of our
common stock being sold in this offering will be passed upon for the
underwriters by Winthrop, Stimson, Putnam & Roberts, Stamford, Connecticut.

EXPERTS

Ernst & Young LLP, independent auditors, have audited our consolidated
financial statements and schedule at December 31, 1999 and for each of the three
years ended December 31, 1999, as detailed in their report. We have incorporated
by reference those consolidated financial statements and schedule in

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this prospectus in reliance on Ernst & Young LLP's report, given on their
authority as experts in accounting and auditing.

WHERE YOU CAN FIND MORE INFORMATION

A registration statement on Form S-3 with respect to the shares of common
stock offered hereby, together with any amendments, exhibits and schedules
thereto, has been filed with the SEC under the Securities Act of 1933. This
prospectus does not contain all of the information contained in the registration
statement on Form S-3, certain portions of which have been omitted pursuant to
the rules and regulations of the SEC. For further information with respect to
Molecular Devices and the shares offered hereby, reference is made to the
registration statement on Form S-3. The registration statement may be inspected
without charge at the SEC's principal office in Washington, D.C., and copies of
all or any part thereof may be obtained from the Public Reference Room of the
SEC, Washington, D.C., 20549, upon payment of prescribed fees.

We are a reporting company and file annual, quarterly and special reports,
proxy statements and other information with the SEC. You may inspect and copy
these materials at the Public Reference Room maintained by the SEC at Room 1024,
450 Fifth Street, N.W., Washington, D.C. 20549. Please call the SEC at
1-800-SEC-0330 for more information on the Public Reference Room. You can also
find our SEC filings at the SEC's website at www.sec.gov. You may also inspect
reports and other information concerning Molecular Devices at the offices of the
Nasdaq Stock Market at 1735 K Street, N.W., Washington, D.C. 20006.

The SEC allows us to incorporate by reference information into this
prospectus, which means we can disclose important information to you by
referring you to another document filed separately with the SEC. The information
incorporated by reference is considered to be part of this prospectus, except
for any information superseded by information in this prospectus. This
prospectus incorporates by reference the documents listed below, which we have
previously filed with the SEC. These documents contain important information
about us, our business and our finances:

- Annual Report on Form 10-K for the fiscal year ended December 31, 1999;

- Quarterly Report on Form 10-Q for the quarter ended March 31, 2000;

- Current Report on Form 8-K filed on April 14, 2000;

- Our definitive proxy statement, dated April 25, 2000, filed in connection
with our 2000 annual meeting of stockholders; and

- The description of our common stock in our Registration Statement on Form
8-A filed with the SEC on December 1, 1995 including any amendments or
reports filed for the purpose of updating such description.

Any documents we file pursuant to Sections 13(a), 13(c), 14 or 15(d) of the
Securities Exchange Act of 1934 after the date of this prospectus but before the
end of this offering will be deemed to be incorporated by reference.

If you request, either orally or in writing, we will provide to you a copy
of any or all documents which are incorporated by reference. We will provide
these documents to you free of charge, but will not include any exhibits, unless
those exhibits are incorporated by reference into the document. You should
address written requests for documents to: Molecular Devices Corporation, Attn:
Investor Relations, 1311 Orleans Drive, Sunnyvale, California 94089, (408)
747-1700.

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YOU SHOULD RELY ON THE INFORMATION CONTAINED IN THIS DOCUMENT OR TO WHICH
WE HAVE REFERRED YOU. WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH
INFORMATION THAT IS DIFFERENT. THE INFORMATION IN THIS DOCUMENT MAY ONLY BE
ACCURATE ON THE DATE OF THIS DOCUMENT. THIS DOCUMENT MAY BE USED ONLY WHERE IT
IS LEGAL TO SELL THESE SECURITIES.

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TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary.................... 3
Risk Factors.......................... 7
Use of Proceeds....................... 17
Dividend Policy....................... 17
Price Range of Common Stock........... 17
Capitalization........................ 18
Selected Consolidated Financial
Data................................ 19
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 20
Business.............................. 24
Management............................ 34
Principal Stockholders................ 36
Underwriting.......................... 38
Legal Matters......................... 39
Experts............................... 39
Where You Can Find More Information... 40
</TABLE>

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1,500,000 SHARES

[MOLECULAR DEVICES LOGO]
COMMON STOCK

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PROSPECTUS
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ING BARINGS
BEAR, STEARNS & CO. INC.
THOMAS WEISEL PARTNERS LLC
UBS WARBURG LLC
MAY 25, 2000
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