INVERNESS MEDICAL TECHNOLOGY INC/DE, S-3/A, 2000-11-01

INVERNESS MEDICAL TECHNOLOGY INC/DE
S-3/A, 2000-11-01
LABORATORY ANALYTICAL INSTRUMENTS

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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 1, 2000

REGISTRATION STATEMENT NO. 333-48510

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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

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AMENDMENT NO. 1

FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933

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INVERNESS MEDICAL TECHNOLOGY, INC.
(FORMERLY SELFCARE, INC.)
(Exact name of Registrant as specified in its charter)

<TABLE>
<S> <C>
DELAWARE 04-3164127
(State or other jurisdiction of (I.R.S. Employer
Incorporation or organization) Identification No.)
</TABLE>

200 PROSPECT STREET
WALTHAM, MASSACHUSETTS 02453
(781) 647-3900
(Address, including zip code, and telephone number, including area code of
Registrant's principal executive offices)
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RON ZWANZIGER, PRESIDENT AND CHIEF EXECUTIVE OFFICER
INVERNESS MEDICAL TECHNOLOGY, INC.
200 PROSPECT STREET
WALTHAM, MASSACHUSETTS 02453
(781) 647-3900
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
--------------------------

COPIES TO:

<TABLE>
<S> <C>
MARTIN CARMICHAEL III, P.C. PETER S. LAWRENCE, ESQ.
SCOTT F. DUGGAN, ESQ. R. MARK CHAMBERLIN, ESQ.
Goodwin, Procter & Hoar LLP Mintz Levin Cohn Ferris Glovsky & Popeo P.C.
Exchange Place One Financial Center
Boston, Massachusetts 02109-2881 Boston, Massachusetts 02111
(617) 570-1000 (617) 542-6000
</TABLE>

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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
AS SOON AS POSSIBLE AFTER THE EFFECTIVE DATE OF THIS REGISTRATION STATEMENT.
--------------------------

If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. / /

If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. / /

If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /

If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /

If delivery of the Prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /

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

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(a), MAY DETERMINE.

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THE INFORMATION IN THIS PRELIMINARY PROSPECTUS IS NOT COMPLETE AND MAY BE
CHANGED. WE MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED
WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PRELIMINARY
PROSPECTUS IS NOT AN OFFER TO SELL SECURITIES AND WE ARE NOT SOLICITING OFFERS
TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.

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SUBJECT TO COMPLETION, DATED NOVEMBER 1, 2000

3,600,000 SHARES

[LOGO]

(FORMERLY SELFCARE, INC.)

COMMON STOCK

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Inverness Medical Technology, Inc. is selling 3,350,000 shares of common
stock and the selling stockholders are selling 250,000 shares of common stock.
We will not receive any of the proceeds from the sale of shares being sold by
the selling stockholders.

Our shares are listed for trading on the American Stock Exchange under the
symbol "IMA." On October 30, 2000, the last reported sale price of our common
stock on the American Stock Exchange was $26.38 per share.

INVESTING IN OUR COMMON STOCK INVOLVES A HIGH DEGREE OF RISK.
SEE "RISK FACTORS" STARTING ON PAGE 6.

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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.

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PER
SHARE TOTAL
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<S> <C> <C>
Public Offering Price....................................... $ $
Underwriting Discounts and Commissions......................
Inverness' Proceeds.........................................
Selling Stockholders' Proceeds..............................
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</TABLE>

The underwriters have an option to purchase up to 150,000 additional shares
from us and up to 390,000 additional shares from the selling stockholders to
cover over-allotments. The underwriters expect to deliver the shares to
purchasers on or about , 2000.

JOINT BOOK-RUNNING MANAGERS

ING BARINGS UBS WARBURG LLC

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

SG COWEN GRUNTAL & CO., L.L.C.

The date of this prospectus is , 2000.

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[Graphic on a blue background which includes a background picture of our
researchers utilizing research equipment]

<TABLE>
<S> <C>
[Graphic: Our Logo consisting of a
'little man' represented by three Inverness
colored squares (arms and legs) and Medical
a colored circle (head)] Technology
</TABLE>

We develop, manufacture, and market innovative products focused primarily on
diabetes self-management.

[Graphic: A picture of the packages of our first and second generation
electrochemical blood glucose monitoring systems (marketed as ONE TOUCH(R) Fast
TAKE(R) and ONE TOUCH(R) Ultra) which consists of a blue box, with hands holding
ONE TOUCH(R) Fast TAKE(R) and ONE TOUCH(R) Ultra meters]

Our most advanced electrochemical systems utilize our proprietary biosensor test
strips which provide users with the option of sampling from the forearm, thus
avoiding the need for finger sticking.

[Graphic: Pictures of our first generation electrochemical system being used to
obtain blood sample from a user's forearm (picture of forearm with meter over
it) and a user's fingertip (picture of finger with meter pressed against it)]

Inverness Medical Technology and our "Little Man" logo are some of our
trademarks. ONE TOUCH-Registered Trademark- FastTAKE-Registered Trademark- and
ONE TOUCH-Registered Trademark- Ultra are trademarks of LifeScan, Inc., a
subsidiary of Johnson & Johnson. Other trademarks, trade names and service marks
referred to in this prospectus are the property of their respective owners.

<PAGE>
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 INVERNESS MEDICAL TECHNOLOGY, INC. AND ITS
WHOLLY-OWNED SUBSIDIARIES.

OUR BUSINESS

We introduced our first generation electrochemical system in early 1998 and
have shipped over 1.3 million meters. Meter shipments for this system more than
doubled in the nine months ended September 2000 as compared to the same period
in 1999. We believe that meter placements form the base for future sales of our
electrochemical test strips, thus providing us with a source of recurring
revenue. Our net sales of diabetes products were $80.0 million during the first
nine months of 2000, an increase of approximately 64% from the first nine months
of 1999.

We recently received FDA clearance for our second generation electrochemical
system, which we expect to begin shipping in the fourth quarter of 2000. This
system utilizes our latest proprietary test strip with a reduced blood sample
requirement of just one microliter, and features the fastest test time of any
commercially available system at five seconds, providing enhanced convenience
and comfort. We use our diabetes expertise to design and manufacture low-cost
alternative test strips for use in leading brand glucose meters made by other
manufacturers. We also market a full family of ancillary diabetes supplies such
as syringes, lancets, glucose tablets, and specialty skin creams. In addition to
our diabetes products, we sell women's health products, including home pregnancy
detection tests, ovulation prediction tests and a line of nutritional
supplements.

Our objective is to be the leading provider of innovative products that
provide a fully integrated and comprehensive approach to the self-management of
diabetes. Consistent with this objective, we continue to focus on the
development of pain-free, non-disruptive, continuous blood glucose monitoring
systems and other complementary diabetes self-management products. For example,
we signed a definitive agreement in October 2000 to purchase Integ Incorporated,
a company with proprietary

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interstitial fluid sampling technology. We believe that this acquisition will
supplement and accelerate our existing efforts to develop glucose monitoring
systems that do not require blood samples. More recently, we entered into a
development and license agreement with Debiotech, S.A. pursuant to which
Debiotech will seek to develop an externally-worn insulin pump using its
proprietary technology.

THE DIABETES MARKET

Diabetes is a chronic, life-threatening disease, for which there is no known
cure. In the United States, the disease currently affects between 6% and 7% of
the population or about 16 million people, and the annual cost of treatment is
$44 billion. The number of individuals diagnosed with diabetes continues to grow
by nearly 800,000 persons per year in the United States and will reach
23 million in just 10 years. A landmark multi-year study sponsored by the
National Institutes of Health showed that the onset or progression of eye,
kidney and nerve disease in people with Type 1 diabetes can be slowed by
intensive therapy to maintain blood glucose levels as close to normal as
possible. Recently completed studies in the United Kingdom and Japan found
similar results in people with Type 2 diabetes. These studies indicate that
control of blood glucose is the first step towards reducing diabetes-related
complications. The American Diabetes Association recommends that people with
diabetes test their blood glucose as frequently as four times per day.

Despite the proven benefits of frequent monitoring and intensive management
of glucose levels, a significant number of people with diabetes fail to test at
the recommended frequency, or at all. We believe that disruption of lifestyle
and discomfort are leading factors that discourage people from frequent testing.
We believe that blood glucose monitoring systems that provide increased
convenience and comfort will lead to significant growth in the frequency of
daily testing.

OUR STRATEGY

Our objective is to be the leading provider of innovative products that
provide a fully integrated and comprehensive approach to self-management of
diabetes. The key elements of our strategy for achieving this goal are to:

- continue to develop superior blood glucose monitoring products;

- maximize market penetration of our products through strategic partnerships
and through our wholesale and retail distribution networks;

- develop or acquire a comprehensive and integrated array of products for
diabetes self-management; and

- continue to manufacture high quality products in mass volumes at low cost.

RECENT DEVELOPMENTS

PENDING ACQUISITION OF INTEG INCORPORATED

On October 3, 2000, we entered into a definitive agreement to acquire Integ,
a publicly traded development stage company that has developed a proprietary
sampling technology to extract interstitial fluid from the top layers of the
skin. We may be able to use Integ's technology, supplemented by our additional
research and development efforts, to develop glucose monitoring systems that do
not require blood samples. The purchase price for Integ consists of 1.9 million
shares of our common stock in exchange for all of Integ's outstanding common
equity, and cash to redeem shares of Integ's preferred stock. We will record a
significant amount of intangible assets in connection with this acquisition and
will incur a significant charge in the quarter in which the acquisition is
completed to write off a portion of the purchase price as in-process research
and development. We anticipate that the acquisition will

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close early in the first quarter of 2001. However, our acquisition of Integ is
subject to various closing conditions, including approval by Integ's
stockholders, and may not be completed by this date, if at all.

DEVELOPMENT AND LICENSE AGREEMENT WITH DEBIOTECH, S.A.

On October 14, 2000, we entered into a development and license agreement
with Debiotech, S.A., pursuant to which Debiotech will seek to develop an
externally-worn insulin pump using its proprietary technology in exchange for a
$10 million fee. We also received an option, exercisable in certain
circumstances for an additional fee, for the exclusive right to commercialize an
implantable insulin pump which Debiotech may seek to develop using its
proprietary technology.

HOW TO CONTACT US

Our principal executive offices are located at 200 Prospect Street, Waltham,
Massachusetts 02453. Our telephone number is (781) 647-3900. Our web site is
http://www.invernessmedical.com. We do not intend for the information found on
our web site to be part of this prospectus.

Additional information regarding our Company, including our audited
financial statements and descriptions of our business, is contained in the
documents incorporated by reference in this prospectus. See "About This
Prospectus and Where You May Find More Information" on page 59.

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THE OFFERING

<TABLE>
<S> <C>
Common stock offered by Inverness......... 3,350,000 shares

Common stock offered by the selling
stockholders............................ 250,000 shares

Common stock outstanding after this
offering................................ 28,637,234 shares

American Stock Exchange symbol............ IMA

Use of Proceeds........................... For repayment of certain indebtedness, to fund a
portion of the consideration payable in our planned
acquisition of Integ, to pay a fee due under our
licensing arrangements with Debiotech, to fund the
redemption of preferred stock of a subsidiary and
for working capital and other general corporate
purposes, including other possible acquisitions. You
should read the discussion under the heading "Use of
Proceeds" for more information.
</TABLE>

The number of shares of common stock offered assumes that the underwriters'
over-allotment option to purchase up to 150,000 shares from us and up to 390,000
shares from the selling stockholders is not exercised. See "Underwriting."

The outstanding shares information is based upon our shares of common stock
outstanding as of September 30, 2000 and assumes that no options have been
exercised since September 30, 2000 other than options to purchase
199,258 shares which will be exercised by certain selling stockholders and sold
in the offering. In addition, this information excludes:

- an aggregate of 4,306,330 shares subject to outstanding options as of
September 30, 2000 at a weighted average exercise price of $3.93 per share
under our 1992 Stock Option and Grant Plan, 1994 Stock Option and Grant
Plan, Amended and Restated 1996 Stock Option and Grant Plan and our
Amended and Restated 2000 Stock Option and Grant Plan plus an additional
660,000 shares subject to outstanding options as of September 30, 2000 at
a weighted average exercise price of $4.45 issued outside of these Plans;

- an additional 1,058,421 shares reserved for issuance upon exercise of
options that may be granted subsequent to September 30, 2000 under our
1996 Option Plan and 2000 Option Plan;

- 600,248 shares reserved for issuance under our Employee Stock Purchase
Plan (Stock Purchase Plan); and

- 737,727 shares issuable upon exercise of warrants outstanding as of
September 30, 2000 at a weighted average exercise price of $6.69 per
share.

You should read the discussion under the heading "Capitalization" for more
information regarding the outstanding shares of our common stock, as well as
warrants and options to purchase our common stock.

4
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SUMMARY CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
HISTORICAL PRO FORMA(1)
-------------------------------------------------------------- ---------------------------------------
NINE MONTHS ENDED YEAR ENDED NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30, DECEMBER 31, SEPTEMBER 30,
------------------------------------ ------------------------ ------------- ------------------------
1997 1998 1999 1999 2000 1999 1999 2000
---------- ----------- ----------- ----------- ----------- ------------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>

Consolidated Statement of
Operations:

Net revenues.............. $ 52,250 $ 117,984 $ 125,873 $ 89,647 $ 121,318 $ 125,873 $ 89,647 $ 121,318

Cost of sales............. 26,277 77,081 83,246 60,957 70,595 83,246 60,957 70,595
---------- ----------- ----------- ----------- ----------- ----------- ----------- -----------

Gross profit.............. 25,973 40,903 42,627 28,690 50,723 42,627 28,690 50,723
---------- ----------- ----------- ----------- ----------- ----------- ----------- -----------

Operating expenses:

Research and
development........... 15,633 7,380 6,906 4,357 9,479 11,123 7,680 12,192

Selling, general and
administrative........ 25,805 36,290 35,390 26,839 28,910 39,987 30,105 30,816

Other expenses.......... 3,303 7,542 -- -- -- -- -- --
---------- ----------- ----------- ----------- ----------- ----------- ----------- -----------

Total operating
expenses............ 44,741 51,212 42,296 31,196 38,389 51,110 37,785 43,008
---------- ----------- ----------- ----------- ----------- ----------- ----------- -----------

Operating (loss)
income............ (18,768) (10,309) 331 (2,506) 12,334 (8,483) (9,095) 7,715
---------- ----------- ----------- ----------- ----------- ----------- ----------- -----------

Interest and other
expenses, net........... (5,746) (7,924) (9,157) (6,309) (4,658) (9,498) (6,551) (4,848)

(Loss) income before
income taxes...... (24,514) (18,233) (8,826) (8,815) 7,676 (17,981) (15,646) 2,867

Provision for income
taxes................... 196 545 246 349 435 246 349 435
---------- ----------- ----------- ----------- ----------- ----------- ----------- -----------

Net (loss) income... $ (24,710) $ (18,778) $ (9,072) $ (9,164) $ 7,241 $ (18,227) $ (15,995) $ 2,432
========== =========== =========== =========== =========== =========== =========== ===========

Net (loss) income per
common and potential
common share:(3)

Basic............... $ (3.36) $ (1.55) $ (0.66) $ (0.64) $ 0.30 $ (0.97) $ (0.87) $ 0.10
========== =========== =========== =========== =========== =========== =========== ===========

Diluted............. $ (3.36) $ (1.55) $ (0.66) $ (0.64) $ 0.26 $ (0.97) $ (0.87) $ 0.08
========== =========== =========== =========== =========== =========== =========== ===========
</TABLE>

<TABLE>
<CAPTION>
SEPTEMBER 30, 2000
------------------------ PRO FORMA
ACTUAL PRO FORMA(1) AS ADJUSTED(1)(2)(4)
-------- ------------- --------------------
<S> <C> <C> <C>
Balance Sheet Data:
Cash and cash equivalents................................. $ 6,140 $ 2,204 $ 35,410
Working capital........................................... (16,545) (22,206) 33,265
Total assets.............................................. 119,856 134,025 177,231
Debt obligations.......................................... 52,861 54,526 16,927
Preferred stock subject to redemption..................... 4,328 4,328 2,135
Total stockholders' equity................................ 33,359 45,342 128,338
</TABLE>

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(1) Reflects the effect of our pending acquisition of Integ, excluding a
non-recurring charge for the write-off of a portion of the purchase price as
in-process research and development.

(2) Reflects the receipt and application of the net proceeds from the sale of
3,350,000 shares of common stock by us at our assumed offering price of
$26.38 per share after the deduction assumed for underwriting discounts and
commissions and estimated offering expenses we expect to pay.

(3) Computed as described in our historical financial statements and related
notes incorporated by reference into this prospectus.

(4) Amounts do not include proceeds from options which may be exercised by
certain selling stockholders.

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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
CONSTITUTES "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 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.

WE DEPEND ON OUR RELATIONSHIP WITH LIFESCAN TO DISTRIBUTE CERTAIN OF OUR
EXISTING PRODUCTS, AS WELL AS FUTURE PRODUCTS.

We depend on our relationship with LifeScan to distribute certain of our
existing products, as well as future products. In 1995, we entered into a
worldwide distribution agreement with LifeScan, which was amended in June 1999.
Under the terms of our agreements with LifeScan, we develop and manufacture, and
LifeScan distributes, our electrochemical blood glucose monitoring systems. Our
first and second generation electrochemical systems are being marketed by
LifeScan under their brands, ONE TOUCH-Registered Trademark-
FastTAKE-Registered Trademark- and, ONE TOUCH-Registered Trademark- Ultra. We
commenced shipments of ONE TOUCH-Registered Trademark-
FastTAKE-Registered Trademark- in early 1998. ONE TOUCH-Registered Trademark-
FastTAKE-Registered Trademark- is currently the most successful product in our
diabetes line of business. LifeScan has exclusive rights to market ONE
TOUCH-Registered Trademark- FastTAKE-Registered Trademark- and ONE
TOUCH-Registered Trademark- Ultra, as well as any new electrochemical blood
glucose monitoring systems that we develop. However, LifeScan is not restricted
from selling other systems, including electrochemical systems, for blood glucose
monitoring. Accordingly, our future results of operations depend to a
substantial degree on LifeScan's continued marketing of our electrochemical
systems. Although the ONE TOUCH-Registered Trademark-
FastTAKE-Registered Trademark- product appears to be gaining acceptance, we
cannot assure you that the market will fully accept ONE
TOUCH-Registered Trademark- FastTAKE-Registered Trademark- or that any such
acceptance will continue. Additionally, under the terms of the agreement with
LifeScan, LifeScan has made and may continue to make additional funding
available to us when we reach certain milestones with our development of future
products for LifeScan. As we cannot assure the success of reaching such
milestones in the development of future products, we cannot guarantee that
LifeScan will make such additional funding available to us. Any failure by us to
produce, or failure by LifeScan to market and distribute our electrochemical
systems successfully, could have a material adverse effect on our business,
financial condition and results of operations.

WE RELY UPON OUR MANUFACTURING FACILITIES AS WELL AS FOREIGN CONTRACT
MANUFACTURING ARRANGEMENTS, AND MANUFACTURING PROBLEMS OR DELAYS COULD SEVERELY
AFFECT OUR BUSINESS.

TEST STRIPS

Our electrochemical blood glucose test strips are produced exclusively in
our manufacturing facility in Inverness, Scotland. Sales of these test strips
accounted for a significant portion of our net revenues for the nine months
ended September 30, 2000. Sales of test strips are expected to be our largest
source of revenues for the forseeable future. Our Inverness facility contains
highly specialized equipment and utilizes complicated manufacturing processes
developed over a number of years that would be difficult and time-consuming to
duplicate. Our ability to manufacture test strips could be disrupted wholly or
in part by technical problems, labor or raw material shortages, labor relations
problems, natural disasters, fire, sabotage or business accidents, among other
factors. Any prolonged disruption in the operations of our Inverness
manufacturing facility would seriously harm our ability to satisfy customer
orders for test strips. If we cannot deliver our test strips in a timely manner
or in sufficient quantities, our revenues will suffer and our reputation may be
harmed. In particular, LifeScan, under certain circumstances, would
automatically become entitled to produce the

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electrochemical test strips itself. Even though we carry manufacturing
interruption insurance policies, we may suffer losses as a result of business
interruptions that exceed the coverage available under our insurance policies.

In addition, our test strip revenues depend in part upon our manufacturing
yields. We believe that we currently have sufficient test strip manufacturing
capacity to satisfy contractual obligations, although we anticipate that actual
demand will exceed these obligations. We are currently expanding our production
capacity to meet projected demand. If we fail to complete these expansion
efforts in a timely manner, our relationships with our customers or our
reputation in the marketplace could be severely harmed.

BLOOD GLUCOSE METERS

We purchase all of the meters for our electrochemical blood glucose systems
from a contract manufacturer in the People's Republic of China. Our business
would likely be harmed if production at, or deliveries by, our contract
manufacturer were disrupted for a material amount of time or if the cost of
meters were significantly increased. Such disruptions or cost increases could
occur as the result of social or political strife, unforeseen economic or
production regulations, import, licensing or trade restrictions, natural
disasters or war or other unforeseen circumstances. If this supply relationship
were disrupted, we would need to identify other third-party contract
manufacturers and verify and validate the production processes used in the
manufacture of our electrochemical blood glucose meters. We cannot assure you
that we will be able to identify adequate substitute manufacturers to replace
the meters matching our specifications affected by such a disruption in a timely
manner or at comparable prices, if at all.

PREGNANCY AND OVULATION TESTS

We produce our pregnancy detection and ovulation prediction tests in our
manufacturing facilities located in Galway, Ireland. To produce these tests, we
rely significantly on our manufacturing facility in Galway, Ireland. Our
production processes are complex and require specialized and expensive
equipment. Even though we carry business interruption insurance policies, we may
suffer losses as a result of business interruptions that exceed the coverage
available under our insurance policies. Any event impacting our Galway facility
could have a significant negative impact on our operations and our revenues from
pregnancy detection and ovulation prediction tests would decline until such time
as we are able to put in place alternative contract manufacturers.

IF WE FAIL TO MEET STRICT REGULATORY REQUIREMENTS, WE COULD BE REQUIRED TO PAY
FINES OR EVEN CLOSE OUR FACILITIES.

Our facilities and manufacturing techniques generally must conform to
standards that are established by government agencies, including those of
European governments, as well as the United States Food and Drug Administration.
These regulatory agencies may conduct periodic inspections of our facilities to
monitor our compliance with applicable regulatory standards. If a regulatory
agency finds that we fail to comply with the appropriate regulatory standards,
it may impose fines on us or if such a regulatory agency determines that our
non-compliance is severe, it may close our facilities. Any adverse action by an
applicable regulatory agency would have a negative impact on our operations.

WE RECENTLY INTRODUCED SOME NEW PRODUCTS AND CANNOT BE CERTAIN THAT THEY WILL
GAIN MARKET ACCEPTANCE.

On September 17, 1999, we received notification of Federal Drug
Administration (FDA) clearance for our low cost alternative electrochemical
blood glucose monitoring test strip, Excel-Registered Trademark- G (formerly
Excel-Registered Trademark- GE) for use with Glucometer-Registered Trademark-
Elite-Registered Trademark- meters sold by Bayer Diagnostics. We commenced

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shipments of Excel-Registered Trademark- G in October 1999. Our future results
of operations depend to some extent on our ability to market and sell
Excel-Registered Trademark- G. Additionally, we cannot assure you that the
market will fully accept Excel-Registered Trademark- G.

In addition, in August 2000, we announced that we had received notification
of FDA clearance for the ONE TOUCH-Registered Trademark- Ultra electrochemical
blood glucose monitoring system to be marketed, sold and distributed by
LifeScan. We expect to commence shipment in the fourth quarter of 2000 and we
cannot assure you that the market will accept this new system or that any such
acceptance will not dilute market acceptance of our other electrochemical blood
glucose monitoring system.

IF WE DELIVER PRODUCTS WITH DEFECTS, OUR CREDIBILITY MAY BE HARMED, MARKET
ACCEPTANCE OF OUR PRODUCTS MAY DECREASE AND WE MAY BE EXPOSED TO LIABILITY IN
EXCESS OF OUR PRODUCT LIABILITY INSURANCE COVERAGE.

The manufacturing and marketing of medical diagnostic devices, such as our
blood glucose monitoring systems, involve an inherent risk of product liability
claims. In addition, our product development and production are extremely
complex and could expose our products to defects. Any such defects could harm
our credibility and decrease market acceptance of our products. LifeScan has
found through a limited number of customer comments that meters programmed for
millimole measurement of blood glucose concentration occasionally exhibit a
display error. Millimole is the measurement used in Canada and most European
countries. We are currently working with LifeScan in implementing the
appropriate corrective action for this occurrence. We do not believe that it
will be necessary to engage in any general recalls of these meters, but we may
choose to exchange some or all of them, and we cannot assure you that corrective
action with respect to this product, or any of our other products, will not
result in material cost to us or loss or damage to the reputation of our
products. In addition, our marketing of nutritional supplements may cause us to
be subjected to various product liability claims, including, among others,
claims that the nutritional supplements have inadequate warnings concerning side
effects and interactions with other substances. Potential product liability
claims may exceed the amount of our insurance coverage or may be excluded from
coverage under the terms of the policy. In the event that we are held liable for
a claim for which we are not indemnified, or for damages exceeding the limits of
our insurance coverage, such a claim could materially damage our business and
our financial condition.

WE HAVE HAD OPERATING LOSSES FOR MOST OF OUR HISTORY AND HAVE ONLY RECENTLY
GENERATED A PROFIT.

We had an accumulated deficit of approximately $93.3 million as of
September 30, 2000. We incurred losses from our inception until the quarter
ended December 31, 1999. We will in the future incur significant sales and
marketing, research and development and general and administrative expenses, and
may not have sufficent revenues to generate net income in light of these
expenditures. Further, although we generated net income in each of the last
three quarters, we may not be able to sustain or increase profitability on a
quarterly or annual basis in the future.

WE MAY HAVE DIFFICULTY MANAGING OUR GROWTH.

We expect to continue to experience significant growth in demand for our
products, 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 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.

8
<PAGE>
OUR FINANCIAL CONDITION OR RESULTS OF OPERATIONS MAY BE ADVERSELY AFFECTED BY
INTERNATIONAL BUSINESS RISKS.

A significant number of our employees, including sales, support and research
and development personnel, are located outside of the United States. Conducting
business outside of the United States is subject to numerous risks, including:

- decreased liquidity resulting from longer accounts receivable collection
cycles typical of foreign countries;

- decreased revenues on foreign sales resulting from possible foreign
currency exchange and conversion issues;

- lower productivity resulting from difficulties managing our sales, support
and research and development operations across many countries;

- lost revenues resulting from difficulties associated with enforcing
agreements and collecting receivables through foreign legal systems;

- lost revenues resulting from the imposition by foreign governments of
trade protection measures; and

- higher cost of sales resulting from import or export licensing
requirements.

INTENSE COMPETITION COULD REDUCE OUR MARKET SHARE OR LIMIT OUR ABILITY TO
INCREASE MARKET SHARE, WHICH COULD IMPAIR THE SALES OF OUR PRODUCTS AND HARM OUR
FINANCIAL PERFORMANCE.

The medical products industry is rapidly evolving and developments are
expected to continue at a rapid pace. Competition in this industry is intense
and expected to increase as new products and technologies become available and
new competitors enter the market. Our competitors in the United States and
abroad are numerous and include, among others, diagnostic testing and medical
products companies, universities and other research institutions. Our future
success depends upon our maintaining a competitive position in the development
of products and technologies in our areas of focus. Competitors may be more
successful in: (i) developing technologies and products that are more effective
than our products or that render our technologies or products obsolete or
noncompetitive; (ii) obtaining patent protection or other intellectual property
rights that would prevent us from developing our potential products; or
(iii) obtaining regulatory approval for the commercialization of their products
more rapidly or effectively than we are in doing so. Also, many of our existing
or potential competitors have or may have substantially greater research and
development capabilities, clinical, manufacturing, regulatory and marketing
experience and financial and managerial resources.

In addition, the market for the sale of nutritional supplements is highly
competitive. This competition is based principally upon price, quality of
products, customer service and marketing support. There are numerous companies
in the nutritional supplement industry selling products to retailers such as
mass merchandisers, drug store chains, independent drug stores, supermarkets and
health food stores. As most of these companies are privately held, we are unable
to obtain the information necessary to assess precisely the size and success of
these competitors. However, we believe that a number of our competitors,
particularly manufacturers of nationally advertised brand name products, are
substantially larger than we are and have greater financial resources.

9
<PAGE>
THE RIGHTS WE RELY UPON TO PROTECT THE 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. 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;

- 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; 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.
Despite 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.

CLAIMS BY OTHER COMPANIES THAT OUR PRODUCTS INFRINGE ON THEIR PROPRIETARY RIGHTS
COULD ADVERSELY AFFECT OUR ABILITY TO SELL OUR PRODUCTS AND INCREASE OUR COSTS.

Substantial litigation over intellectual property rights exists in our
industry. Our products are currently the subject of litigation alleging that we
are infringing on the intellectual property rights of others. We expect that our
products and products in our industry may be increasingly subject to third-
party infringement claims as the number of competitors grows and the
functionality of products and technology in different industry segments
overlaps. Third parties may currently have, or may eventually be issued, patents
on which our products or technology may infringe. Any of these third parties
might make a claim of infringement against us. Any litigation could result in
the expenditure of significant financial resources and the diversion of
management's time and resources. In addition, litigation in which we are accused
of infringement may cause negative publicity, have an impact on prospective
customers, cause product shipment delays, require us to develop non-infringing
technology or enter into royalty or license agreements, which may not be
available on acceptable terms, or at all. If a successful claim of infringement
were made against us and we could not develop non-infringing technology or

10
<PAGE>
license the infringed or similar technology on a timely and cost-effective
basis, our business could be significantly harmed and we could be exposed to
legal actions by our customers.

WE MAY NEED TO INITIATE LAWSUITS TO PROTECT OR ENFORCE OUR PATENTS AND OTHER
INTELLECTUAL PROPERTY RIGHTS, WHICH WOULD BE EXPENSIVE AND, IF WE LOSE, COULD
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. Litigation 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, our stock price could decline.

OUR PENDING ACQUISITION OF INTEG AND OUR DEVELOPMENT AND LICENSING ARRANGEMENTS
WITH DEBIOTECH MAY NOT YIELD PRODUCTS OR TECHNOLOGY THAT CAN BE COMMERCIALIZED.

On October 3, 2000, we entered into a definitive agreement to acquire Integ,
a development stage enterprise. We may not complete the acquisition. On
October 14, 2000, we entered into a development and license agreement with
Debiotech. The value of Integ to us may not be greater than or equal to the
purchase price which we have agreed to pay. Similarly, the amounts that we have
agreed to pay to Debiotech may not be equal to the ultimate value of the rights
that we have under our agreement with it. If we are unable to effectively
integrate the technologies of Integ and Debiotech into our research and
development efforts, our research and development efforts may suffer. Further,
we cannot guarantee that we will realize any of the benefits or strategic
objectives we are seeking to obtain by acquiring Integ or licensing technology
from Debiotech. In that regard, Integ has granted to a third party certain
rights in its intellectual property that survive our acquisition which will
permit this third party to utilize the technology that we will acquire to
further its future development efforts. In connection with accounting for the
acquisition of Integ, we will record a significant amount of intangible assets,
the amortization of which will adversely affect our results of operations in
future periods. In addition, we will also record a significant charge for the
write-off of a portion of the purchase price as in-process research and
development. For the purpose of preparing the pro forma information that is
included in summary form in this prospectus, we estimated the allocation of the
purchase price. The final purchase price allocation will be based, in part, on
an independent appraisal of the acquired intangible assets and the charge for
in-process research and development. The appraisal results and final allocation
of the purchase price could vary significantly from our original estimates,
which could result in a greater or lesser non-recurring charge for the write-off
of a portion of the

11
<PAGE>

purchase price as in-process research and development during the quarter in
which the acquisition of Integ is consummated.

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 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. Accordingly, 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.

DEVELOPMENT OF A CURE FOR DIABETES COULD MAKE OUR PRODUCTS OBSOLETE.

The medical devices industry, including the self-test industry, is subject
to rapid and substantial technological development and product innovations. To
be successful, we must be responsive to new products and technologies as well as
new applications of existing technologies in diabetes self-management. The
National Institute for Health and other supporters of diabetes research are
sponsoring significant programs to better understand the disease and to find
methods to prevent or cure it. If discovered and widely-available, any of these
methods would minimize or eliminate the need for our diabetes self-management
products and would require us to focus on other areas of our business, which
would have a material adverse effect on our financial condition and
profitability.

WE MAY BE UNABLE TO HIRE, RETAIN OR MOTIVATE KEY PERSONNEL, UPON WHOM THE
SUCCESS OF OUR BUSINESS WILL DEPEND.

We are highly dependent upon certain members of our management and
scientific staff. We believe that our future success will depend in large part
upon our ability to attract and retain highly skilled scientific, managerial and
marketing personnel. We face significant competition for such personnel from
other companies, research and academic institutions, government entities and
other organizations. We can not assure you that we will be able to retain our
key employees or attract, assimilate, retain or train other needed qualified
employees in the future. We do not have employment agreements with all of our
key employees. The loss of any of our key employees, including our scientists,
may have an adverse effect on our business.

WE MAY BE LIABLE FOR CONTAMINATION OR OTHER HARM CAUSED BY HAZARDOUS MATERIALS
THAT WE USE.

Our research and development processes involve the use of hazardous
materials. We are subject to federal, state and local regulation governing the
use, manufacture, handling, storage and disposal of hazardous materials. We
cannot completely eliminate the risk of contamination or injury resulting from
hazardous materials and we may incur liability as a result of any contamination
or injury. We may also incur expenses relating to compliance with environmental
laws. Such expenses or liability could have a significant negative impact on our
financial condition.

12
<PAGE>
VARIOUS FACTORS MAY CAUSE OUR OPERATING RESULTS TO FLUCTUATE.

Factors relating to our business make our future operating results uncertain
and may cause them to fluctuate from period to period. Such factors include:
(i) the timing of new product announcements and introductions by us and our
competitors; (ii) market acceptance of new or enhanced versions of our products;
(iii) changes in manufacturing costs or other expenses; (iv) competitive pricing
pressures; (v) the gain or loss of significant distribution outlets or
customers; (vi) the availability and extent of reimbursement for our products;
(vii) increased research and development expenses; or (viii) general economic
conditions.

OUR SHARE PRICE MAY BE VOLATILE DUE TO OUR OPERATING RESULTS, AS WELL AS FACTORS
BEYOND OUR CONTROL.

Our share price may be volatile due to our operating results, as well as
factors beyond our control. In addition, it is possible that in some future
periods the results of our operations will be below the expectations of the
public market. In any such event, the market price of our common stock could be
materially and adversely affected. Furthermore, the stock market may experience
significant price and volume fluctuations, which may affect the market price of
our common stock for reasons unrelated to our operating performance. The market
price of our common stock, which has ranged from less than $3 to more than $28
during the last twelve months, may be highly volatile and may be affected by
factors such as: (i) our quarterly operating results; (ii) changes in general
conditions in the economy, the financial markets, or the health care industry;
(iii) government regulation in the health care industry; (iv) changes in other
areas such as tax laws; (v) sales of substantial amounts of common stock or the
perception that such sales could occur; or (vi) other developments affecting us
or our competitors.

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;

- 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
$24.30 in net tangible book value per share of common stock, based on a public
offering price of $26.38 per share and the net tangible book value per share as
of September 30, 2000. Investors will incur additional dilution upon the
exercise of outstanding stock options and warrants and the issuance of shares
pursuant to the Integ acquisition.

13
<PAGE>
THE ABILITY OF OUR STOCKHOLDERS TO CONTROL OUR POLICIES AND EFFECT A CHANGE OF
CONTROL OF OUR COMPANY IS LIMITED, WHICH MAY NOT BE IN YOUR BEST INTERESTS.

There are provisions in our certificate of incorporation and bylaws which
may discourage a third party from making a proposal to acquire us, even if some
of our stockholders might consider the proposal to be in their best interests.
These provisions include the following:

- our certificate of incorporation provides for three classes of directors
with the term of office of one class expiring each year, commonly referred
to as a "staggered board." By preventing stockholders from voting on the
election of more than one class of directors at any annual meeting of
stockholders, this provision may have the effect of keeping the current
members of our board of directors in control for a longer period of time
than stockholders may desire; and

- our certificate of incorporation authorizes our board of directors to
issue shares of preferred stock without stockholder approval and to
establish the preferences and rights of any preferred stock issued, which
would allow the board to issue one or more classes or series of preferred
stock that could discourage or delay a tender offer or change in control.

Additionally, we are subject to Section 203 of the Delaware General
Corporation Law, which, in general, imposes restrictions upon acquirors of 15%
or more of our stock.

WE WILL HAVE BROAD DISCRETION AS TO THE USE OF THE PROCEEDS FROM THIS OFFERING
AND MAY USE THE PROCEEDS IN A MANNER WITH WHICH YOU DISAGREE.

Our board of directors and management will have broad discretion over the
use of the net proceeds of this offering. You may disagree with the judgment of
our board of directors and management regarding the application of the proceeds
of this offering.

BECAUSE WE DO NOT INTEND TO PAY DIVIDENDS, YOU WILL BENEFIT FROM AN INVESTMENT
IN OUR COMMON STOCK ONLY IF IT APPRECIATES IN VALUE.

We have never declared or paid any cash dividends on our common stock. We
currently intend to retain our future earnings, if any, to finance the expansion
of our business and do not expect to pay any cash dividends in the foreseeable
future. As a result, the success of your investment in our common stock will
depend entirely upon any future appreciation. There is no guarantee that our
common stock will appreciate in value after the offering or even maintain the
price at which you purchased your shares.

14
<PAGE>
SPECIAL STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

This prospectus contains forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. You can identify these statements
by forward-looking words such as "may," "will," "expect," "anticipate,"
"believe," "estimate," and "continue" or similar words. You should read
statements that contain these words carefully because they discuss our future
expectations, contain projections of our future results of operations or of our
financial condition, or state other "forward-looking" information. We believe
that it is important to communicate our future expectations to our investors.
However, there may be events in the future that we are not able to accurately
predict or control and that may cause our actual results to differ materially
from the expectations we describe in our forward-looking statements. Investors
are cautioned that all forward-looking statements involve risks and
uncertainties, and actual results may differ materially from those discussed as
a result of various factors, including those factors described in the "Risk
Factors" section of this prospectus. Some important additional factors that
could cause our actual results to differ materially from those projected in any
such forward-looking statements are as follows:

- economic factors, including inflation and fluctuations in interest rates
and foreign currency exchange rates and the potential effect of such
fluctuations on revenues, expenses and resulting margins;

- competitive factors, including technological advances achieved and patents
attained by competitors and generic competition;

- domestic and foreign healthcare changes resulting in pricing pressures,
including the continued consolidation among healthcare providers, trends
toward managed care and healthcare cost containment and government laws
and regulations relating to sales and promotion, reimbursement and pricing
generally;

- government laws and regulations, affecting domestic and foreign
operations, including those relating to trade, monetary and fiscal
policies, taxes, price controls, regulatory approval of new products and
licensing;

- manufacturing interruptions or delays, or capacity constraints, or lack of
availability of alternative sources for components for our products, that
we may experience;

- difficulties inherent in product development, including the potential
inability to successfully continue technological innovation, complete
clinical trials, obtain regulatory approvals in the United States and
abroad, gain and maintain market approval of products and the possibility
of encountering infringement claims by competitors with respect to patent
or other intellectual property rights which can preclude or delay
commercialization of a product;

- significant litigation adverse to us including product liability claims,
patent infringement claims, and antitrust claims;

- product efficacy or safety concerns resulting in product recalls or
declining sales;

- the impact of business combinations, including acquisitions and
divestitures, and organizational restructuring consistent with evolving
business strategies; and

- issuance of new or revised accounting standards by the American Institute
of Certified Public Accountants, the Financial Accounting Standards Board
or the Securities and Exchange Commission.

Readers should not place undue reliance on our forward-looking statements.
Before you invest in our common stock, you should be aware that the occurrence
of the events described in the "Risk

15
<PAGE>
Factors" section and elsewhere in this prospectus could harm our business,
prospects, operating results and financial condition.

USE OF PROCEEDS

We estimate that the net proceeds to us from the sale of our common stock in
this offering will be approximately $83.0 million, at an offering price of
$26.38 per share and after deducting the estimated underwriting discounts and
commissions and our estimated offering expenses. We intend to use the net
proceeds in the following approximate amounts:

- $18.2 million for the repayment of a portion of the indebtedness of one of
our subsidiaries under a loan agreement with Chase Manhattan Bank, which
currently bears interest at the rate of 9.41% per annum; under the terms
of this indebtedness, we are required to apply at least 25% of the net
proceeds of this offering to the repayment of the indebtedness;

- $19.3 million for the retirement of subordinated promissory notes which
bear interest at the rate of 12.5% per annum;

- $4.0 million for the retirement of subordinated notes payable to former
shareholders of an acquired company, including one of our directors and
officers, which bear interest at the rate of 6.9% per annum; $2.0 million
of this amount is outstanding as of September 30, 2000 and an additional
$2.0 million is potentially due and payable if certain conditions are met
upon the maturity of the subordinated notes payable in February, 2001; we
believe that such conditions will be met.

- $2.2 million to be contributed to Inverness Medical Limited, our
subsidiary in Inverness, Scotland, which the subsidiary will use to redeem
an equivalent amount of its 6.9% cumulative redeemable preference shares;

- $10.0 million for payment of a fee due under our license arrangement with
Debiotech, S.A., which is payable before the end of 2000;

- $5.5 million to fund the redemption of preferred stock of Integ, as part
of our pending acquisition of that company; and

- the $23.8 million balance of the net proceeds for general corporate
purposes, including working capital, capital expenditures and costs in
connection with acquisitions and strategic transactions, if and when
suitable opportunities arise.

We will not receive any proceeds from the sale of shares by selling
stockholders in this offering.

Due to the rapidly changing nature of the market in which we operate, the
amounts we actually spend for general corporate purposes will depend on a number
of factors, including revenue growth, if any, and the amount of cash we generate
from operations. As a result, we will retain broad discretion in the allocation
and use of a significant portion of the net proceeds of this offering. Until
allocated for specific use, we will invest these proceeds in government
securities and other short-term, investment-grade securities.

DIVIDEND POLICY

We have never declared or paid cash dividends on our common stock and we do
not intend to do so in the foreseeable future.

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<PAGE>
PRICE RANGE OF COMMON STOCK

Our common stock is listed on the American Stock Exchange under the symbol
"IMA." The following table sets forth, for the periods indicated, the high and
low closing sale prices of our common stock.

<TABLE>
<CAPTION>
HIGH LOW
-------- --------
<S> <C> <C>
YEAR ENDED DECEMBER 31, 1998
1st Quarter................................................. $ 11.13 $ 8.81
2nd Quarter................................................. 11.69 9.25
3rd Quarter................................................. 9.38 3.38
4th Quarter................................................. 3.81 1.63

YEAR ENDED DECEMBER 31, 1999
1st Quarter................................................. $ 5.50 $ 2.00
2nd Quarter................................................. 4.94 2.88
3rd Quarter................................................. 3.56 2.38
4th Quarter................................................. 4.31 2.56

YEAR ENDING DECEMBER 31, 2000
1st Quarter................................................. $ 10.25 $ 3.44
2nd Quarter................................................. 9.44 4.50
3rd Quarter................................................. 21.38 8.56
4th Quarter (through October 30, 2000)...................... 27.25 17.31
</TABLE>

On October 30, 2000, the last reported sale price of our common stock on the
American Stock Exchange was $26.38 per share. As of October 18, 2000, there were
25,876,510 shares of our common stock outstanding and we had 354 holders of
record of our common stock. We believe that the number of beneficial owners of
our common stock on that date was substantially greater.

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<PAGE>
CAPITALIZATION

The following table sets forth our actual capitalization as of
September 30, 2000 (unaudited), pro forma to give effect to our pending
acquisition of Integ, and pro forma as adjusted to give effect to our pending
acquisition of Integ and the receipt and application of the net proceeds from
the sale of 3,350,000 shares of common stock offered by us at an assumed
offering price of $26.38 per share, after deducting underwriting discounts and
commissions and estimated offering expenses we expect to pay. 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>
SEPTEMBER 30, 2000(2)
---------------------------------------
PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
-------- -------------- -----------
(IN THOUSANDS)
<S> <C> <C> <C>
Current portion of notes payable:........................... $ 33,966 $ 35,298 $ 13,033
======== ========= =========
Long-term liabilities:
Deferred revenue, net of current portion.................. $ 306 $ 306 $ 306
Other long-term liabilities............................... 139 139 139
Notes payable, net of current portion..................... 18,894 19,228 3,894
-------- --------- ---------
Total long-term liabilities............................. 19,339 19,673 4,339
-------- --------- ---------
Mandatorily redeemable preferred stock of a subsidiary...... 4,328 4,328 2,135
-------- --------- ---------
Stockholders' equity:
Common stock, $0.001 par value:
Authorized--40,000,000 shares
Issued--25,831,654 shares actual, 27,731,654 shares pro
forma and 31,280,912 shares pro forma as
adjusted(1)........................................... 26 28 31
Additional paid-in capital................................ 131,248 182,546 265,539
Less--Treasury stock, at cost, 743,678 shares............. (3,725) (3,725) (3,725)
Accumulated deficit....................................... (93,338) (132,655) (132,655)
Accumulated other comprehensive income.................... (852) (852) (852)
-------- --------- ---------
Total stockholders' equity............................ 33,359 45,342 128,338
-------- --------- ---------
Total capitalization.................................. $ 57,026 $ 69,343 $ 134,812
======== ========= =========
</TABLE>

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

(1) The pro forma and pro forma as adjusted share amounts include the issuance
of 1.9 million shares for the acquisition of Integ. The actual number of
shares to be issued may decrease based on the aggregate relative value of
the options to purchase Integ shares that we will assume upon consummation
of our acquisition of Integ. This value will depend upon the closing price
of our common stock prior to the consummation of the acquisition, as well as
the number of options that are actually assumed and such options' exercise
prices. The pro forma as adjusted amounts include 199,258 shares to be
issued upon the exercise of options by certain selling stockholders, which
shares will be sold in the offering.

(2) Amounts do not include proceeds from options which may be exercised by
certain selling stockholders.

The number of shares outstanding excludes:

- an aggregate of 4,306,330 shares subject to outstanding options as of
September 30, 2000 at a weighted average exercise price of $3.93 per share
under our 1992 Option Plan, 1994 Option Plan, 1996 Option Plan and 2000
Option Plan plus an additional 660,000 shares subject to options as of
September 30, 2000 at a weighted average exercise price of $4.45 issued
outside of those Plans;

- an additional 1,058,421 shares reserved for issuance upon exercise of
options that may be granted subsequent to September 30, 2000 under our
1996 Option Plan and 2000 Option Plan;

- 600,248 shares reserved for issuance under our Stock Purchase Plan; and

- 737,727 shares issuable upon exercise of warrants outstanding as of
September 30, 2000 at a weighted average exercise price of $6.69 per
share.

18
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA

You should read the following selected consolidated financial data in
conjunction with our consolidated financial statements and notes and the other
information contained in or incorporated by reference into this prospectus. The
selected consolidated balance sheet data as of December 31, 1998 and 1999 and
the selected consolidated statement of operations data for the years ended
December 31, 1997, 1998 and 1999 have been derived from our consolidated
financial statements that have been audited by Arthur Andersen, LLP, independent
public accountants, and are incorporated by reference into this prospectus. The
selected consolidated balance sheet data as of December 31, 1995, 1996 and 1997
and the selected consolidated statement of operations data for the years ended
December 31, 1995 and 1996 have been derived from our audited consolidated
financial statements not included or incorporated by reference in this
prospectus. The selected consolidated statement of operations data for the
nine-month periods ended September 30, 1999 and 2000 and the selected
consolidated balance sheet data at September 30, 2000 are derived from unaudited
consolidated financial statements included in this prospectus. The unaudited
consolidated financial statements for the nine-month periods have been prepared
on a basis consistent with our audited consolidated financial statements and, in
the opinion of management, include all adjustments, consisting only of normal
recurring adjustments, necessary for a fair presentation of our consolidated
financial position and consolidated results of operations for these periods. The
consolidated results of operations for the nine months ended September 30, 2000
are not necessarily indicative of results for the year ending December 31, 2000
or any future period. The pro forma information is not necessarily indicative of
either the results which would have actually been reported if the acquisition of
Integ occurred on January 1, 1999 or results which may be reported in the
future.

When you read this selected financial data, it is important that you also
read the historical financial statement and related notes and the unaudited pro
forma combined condensed financial statements and related notes incorporated by
reference into this prospectus, as well as the section of this prospectus
entitled "Management's Discussion and Analysis of Financial Condition and
Results of Operations." The historical results are not necessarily indicative of
future results.

19
<PAGE>

<TABLE>
<CAPTION>
HISTORICAL PRO FORMA(1)
-------------------------------------------------------------------------- -------------
NINE MONTHS ENDED YEAR ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30, DECEMBER 31,
---------------------------------------------------- ------------------- -------------
1995 1996 1997 1998 1999 1999 2000 1999
-------- -------- -------- -------- -------- -------- -------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF
OPERATIONS:
(IN THOUSANDS, EXCEPT PER
SHARE DATA)
Net revenues................ $ 7,239 $ 19,063 $ 52,250 $117,984 $125,873 $89,647 $121,318 $125,873
Cost of sales............... 5,565 10,958 26,277 77,081 83,246 60,957 70,595 83,246
-------- -------- -------- -------- -------- ------- -------- --------
Gross profit................ 1,674 8,105 25,973 40,903 42,627 28,690 50,723 42,627
-------- -------- -------- -------- -------- ------- -------- --------
Operating Expenses:
Research and development.. 1,532 6,643 15,633 7,380 6,906 4,357 9,479 11,123
Selling, general and
administrative.......... 5,702 14,713 25,805 36,290 35,390 26,839 28,910 39,987
Other expenses............ -- 4,397 3,303 7,542 -- -- -- --
-------- -------- -------- -------- -------- ------- -------- --------
Total operating
expenses................ 7,234 25,753 44,741 51,212 42,296 31,196 38,389 51,110
-------- -------- -------- -------- -------- ------- -------- --------
Operating (loss)
income................ (5,560) (17,648) (18,768) (10,309) 331 (2,506) 12,334 (8,483)
-------- -------- -------- -------- -------- ------- -------- --------
Interest expense, including
amortization of original
issue discount............ (4,481) (11,561) (5,487) (9,565) (8,093) (5,698) (5,731) (8,433)
Interest and other income
(expense) net............. -- 741 434 1,787 (532) (136) 2,256 (533)
-------- -------- -------- -------- -------- ------- -------- --------
(Loss) income before
dividends and
accretion on
mandatorily redeemable
preferred stock of a
subsidiary............ (10,041) (28,468) (23,821) (18,087) (8,294) (8,340) 8,859 (17,449)
Dividends and accretion on
mandatorily redeemable
preferred stock of
subsidiary................ (56) (110) (114) (146) (226) (169) (383) (226)
-------- -------- -------- -------- -------- ------- -------- --------
(Loss) income before
extraordinary loss and
income taxes.......... (10,097) (28,578) (23,935) (18,233) (8,520) (8,509) 8,476 (17,675)
Extraordinary loss on
modification and early
extinguishment of debt.... -- -- (579) -- (306) (306) (800) (306)
-------- -------- -------- -------- -------- ------- -------- --------
(Loss) income before
income taxes.......... (10,097) (28,578) (24,514) (18,233) (8,826) (8,815) 7,676 (17,981)
Provision for income
taxes..................... -- -- 196 545 246 349 435 246
-------- -------- -------- -------- -------- ------- -------- --------
Net (loss) income....... $(10,097) $(28,578) $(24,710) $(18,778) $ (9,072) $(9,164) $ 7,241 $(18,227)
======== ======== ======== ======== ======== ======= ======== ========
Net (loss) income per common
and potential common
share:(2)
Basic................... $ (1.66) $ (6.00) $ (3.36) $ (1.55) $ (0.66) $ (0.64) $ 0.30 $ (0.97)
======== ======== ======== ======== ======== ======= ======== ========
Diluted................. $ (1.66) $ (6.00) $ (3.36) $ (1.55) $ (0.66) $ (0.64) $ 0.26 $ (0.97)
======== ======== ======== ======== ======== ======= ======== ========

<CAPTION>
PRO FORMA(1)
-------------------
NINE MONTHS ENDED
SEPTEMBER 30,
-------------------
1999 2000
-------- --------
<S> <C> <C>
CONSOLIDATED STATEMENT OF
OPERATIONS:
(IN THOUSANDS, EXCEPT PER
SHARE DATA)
Net revenues................ $ 89,647 $121,318
Cost of sales............... 60,957 70,595
-------- --------
Gross profit................ 28,690 50,723
-------- --------
Operating Expenses:
Research and development.. 7,680 12,192
Selling, general and
administrative.......... 30,105 30,816
Other expenses............ -- --
-------- --------
Total operating
expenses................ 37,785 43,008
-------- --------
Operating (loss)
income................ (9,095) 7,715
-------- --------
Interest expense, including
amortization of original
issue discount............ (6,230) (6,036)
Interest and other income
(expense) net............. 154 2,371
-------- --------
(Loss) income before
dividends and
accretion on
mandatorily redeemable
preferred stock of a
subsidiary............ (15,171) 4,050
Dividends and accretion on
mandatorily redeemable
preferred stock of
subsidiary................ (169) (383)
-------- --------
(Loss) income before
extraordinary loss and
income taxes.......... (15,340) 3,667
Extraordinary loss on
modification and early
extinguishment of debt.... (306) (800)
-------- --------
(Loss) income before
income taxes.......... (15,646) 2,867
Provision for income
taxes..................... 349 435
-------- --------
Net (loss) income....... $(15,995) $ 2,432
======== ========
Net (loss) income per common
and potential common
share:(2)
Basic................... $ (0.87) $ 0.10
======== ========
Diluted................. $ (0.87) $ 0.08
======== ========
</TABLE>

<TABLE>
<CAPTION>
HISTORICAL
---------------------------------------------------- SEPTEMBER 30, 2000
DECEMBER 31, ---------------------
BALANCE SHEET DATA: ---------------------------------------------------- PRO
(IN THOUSANDS) 1995 1996 1997 1998 1999 ACTUAL FORMA(1)
------------------- -------- -------- -------- -------- -------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Cash and cash equivalents.......................... $ 7,395 $16,459 $15,670 $ 9,200 $ 5,234 $ 6,140 $ 2,204
Working capital.................................... 4,318 9,863 (2,282) 2,733 (8,673) (16,545) (22,206)
Total assets....................................... 13,692 41,089 95,372 115,077 114,837 119,856 134,025
Debt obligations................................... 10,500 8,833 59,903 62,481 60,375 52,861 54,526
Preferred stock subject to redemption.............. 1,644 1,754 11,141 14,257 9,054 4,328 4,328
Total stockholders' equity (deficit)............... $(5,230) $12,079 $ 5,441 $ 15,009 $ 18,120 $ 33,359 $ 45,342
</TABLE>

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

(1) Reflects the effect of our pending acquisition of Integ, excluding a
non-recurring charge for the write-off of a portion of the purchase price as
in-process research and development.

(2) Historical basic and diluted net (loss) income per common and potential
common share is computed as described in our historical financial statements
and related notes incorporated by reference into this prospectus.

20
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

OVERVIEW

From 1997 through 1999, our total revenues have grown from $52.3 million to
$125.9 million, representing a compound annual growth rate of more than 55%.
Total revenues for the first nine months of 2000 were $121.3 million. For the
first nine months of 2000, our sales of diabetes management products accounted
for $80.0 million, or 66% of total revenues. Total revenues associated with the
sales of women's health products for the nine month period ended September 30,
2000 were $33.3 million. We expect that our revenue growth in the foreseeable
future will be derived primarily from increased sales of our electrochemical
blood glucose test strips.

We have a global distribution agreement with LifeScan, a subsidiary of
Johnson & Johnson, with respect to our electrochemical blood glucose monitoring
systems, which they market as the ONE TOUCH-Registered Trademark-
FastTAKE-Registered Trademark- and ONE TOUCH-Registered Trademark- Ultra.
LifeScan, a leader in the blood glucose monitoring market, has publicly
announced its intention to shift its focus from its older photometric-based
systems to electrochemical systems. Currently, we are the only supplier of such
systems to LifeScan. Accordingly, we anticipate a significant increase in unit
sales of our meters and test strips and we are continuing to increase capacity
in order to meet anticipated demand. Based upon this anticipated demand, we
expect that LifeScan will become eligible for its last scheduled volume-based
price reduction in the first quarter of 2001 under the terms of our distribution
agreement, resulting in a decrease in our earnings in that quarter as compared
to the fourth quarter of 2000. We market our other products to consumers through
our own established retail distribution networks, including Wal-Mart, CVS and
Walgreens.

We intend to continue to invest heavily in research and development both
internally, as well as through targeted acquisitions and strategic
relationships.

RECENT DEVELOPMENTS

PENDING ACQUISITION OF INTEG INCORPORATED

On October 3, 2000, we entered into a definitive agreement to acquire Integ
Incorporated, a publicly traded development stage company. Integ, which was
incorporated in 1990 and is headquartered in Minnesota, has developed a
proprietary sampling technology which extracts interstitial fluid from the top
layers of the skin. We may be able to use Integ's technology, supplemented by
our internal research and development efforts, to develop products that are
complementary to our current product offerings in the areas of diabetes
management and medical diagnostics.

The purchase price for Integ consists of 1.9 million shares of our common
stock in exchange for all of Integ's common equity and approximately
$5.5 million in cash to redeem shares of Integ's preferred stock. We will record
a significant amount of intangible assets in connection with this acquisition
and will incur a significant charge in the quarter in which the acquisition is
completed to write off a portion of the purchase price as in-process research
and development. We anticipate that the acquisition will close early in the
first quarter of 2001. However, our acquisition of Integ is subject to various
closing conditions, including approval by Integ's stockholders, and may not be
completed by this date, if at all.

DEVELOPMENT AND LICENSE AGREEMENT WITH DEBIOTECH, S.A.

On October 14, 2000, we entered into a development and license agreement
with Debiotech, S.A., pursuant to which Debiotech will seek to develop an
externally-worn insulin pump using its patented Micro Electro-Mechanical Systems
technology in exchange for a $10 million fee. We also received an option,
exercisable in certain circumstances for an additional fee, for the exclusive
right to commercialize an implantable insulin pump which Debiotech may seek to
develop using its technology.

21
<PAGE>
RESULTS OF OPERATIONS

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

<TABLE>
<CAPTION>
NINE MONTHS
ENDED
YEARS ENDED DECEMBER 31, SEPTEMBER 30,
---------------------------------------------------- -------------------
CONSOLIDATED STATEMENT OF OPERATIONS: 1995 1996 1997 1998 1999 1999 2000
------------------------------------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Net revenues........................................ 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % 100.0 %
Cost of sales....................................... 76.9 57.5 50.3 65.3 66.1 68.0 58.2
------ ------ ------ ------ ------ ------ ------
Gross profit........................................ 23.1 42.5 49.7 34.7 33.9 32.0 41.8
------ ------ ------ ------ ------ ------ ------
Operating expenses:
Research and development.......................... 21.2 34.8 29.9 6.3 5.5 4.8 7.8
Selling, general, and administrative.............. 78.7 77.2 49.4 30.7 28.1 30.0 23.8
Other expenses.................................... -- 23.1 6.3 6.4 -- -- --
------ ------ ------ ------ ------ ------ ------
Total operating expenses.......................... 99.9 135.1 85.6 43.4 33.6 34.8 31.6
------ ------ ------ ------ ------ ------ ------
Operating (loss) income......................... (76.8) (92.6) (35.9) (8.7) 0.3 (2.8) 10.2
------ ------ ------ ------ ------ ------ ------
Interest expense, including amortization of original
issue
discount.......................................... (61.9) (60.6) (10.5) (8.1) (6.5) (6.4) (4.8)
Interest and other income (expense), net............ -- 3.9 0.8 1.5 (0.4) (0.1) 1.8
------ ------ ------ ------ ------ ------ ------
(Loss) income before dividends and accretion on
mandatorily redeemable preferred stock of a
subsidiary.................................... (138.7) (149.3) (45.6) (15.3) (6.6) (9.3) 7.2
Dividends and accretion on mandatorily redeemable
preferred stock of subsidiary..................... (0.8) (0.6) (0.2) (0.1) (0.2) (0.2) (0.3)
------ ------ ------ ------ ------ ------ ------
(Loss) income before extraordinary loss and
income taxes.................................. (139.5) (149.9) (45.8) (15.4) (6.8) (9.5) 6.9
Extraordinary loss on modification and early
extinguishment of debt............................ -- -- (1.1) -- (0.2) (0.3) (0.6)
------ ------ ------ ------ ------ ------ ------
(Loss) income before income taxes............... (139.5) (149.9) (46.9) (15.4) (7.0) (9.8) 6.3
Provision for income taxes.......................... -- -- 0.4 0.5 0.2 0.4 0.3
------ ------ ------ ------ ------ ------ ------
Net (loss) income............................... (139.5)% (149.9)% (47.3)% (15.9)% (7.2)% (10.2)% 6.0 %
====== ====== ====== ====== ====== ====== ======
</TABLE>

NINE MONTHS ENDED SEPTEMBER 30, 2000 COMPARED TO NINE MONTHS ENDED
SEPTEMBER 30, 1999

NET REVENUES. Net revenues increased $31.7 million, or 35%, to
$121.3 million for the nine months ended September 30, 2000 from $89.6 million
for the nine months ended September 30, 1999. The primary reason for the
increase in revenues was the increased sale of products for diabetes management,
especially the ONE TOUCH-Registered Trademark- FastTAKE-Registered Trademark-
blood glucose monitoring system, which is distributed by LifeScan. ONE
TOUCH-Registered Trademark- FastTAKE-Registered Trademark- sales were driven by
strong market acceptance. Net diabetes product sales were $80.0 million for the
nine months ended September 30, 2000, an increase of $31.1 million or 64% as
compared to net diabetes product sales of $48.9 million for the nine months
ended September 30, 1999. Net diabetes product sales accounted for 66% of net
revenues for the nine months ended September 30, 2000, compared to 55% of net
revenues for the nine months ended September 30, 1999. Net product sales from
our women's health segment increased $1.5 million or 5% to $33.3 million for the
nine months ended September 30, 2000 as compared to $31.8 million for the nine
months ended September 30, 1999. Although net women's health product sales
increased as compared to the prior periods, they only accounted for 27% of total
net revenues for the nine months ended September 30, 2000, compared to 35% of
total net revenues for the nine months ended September 30, 1999, as a result of
the significant increase in diabetes product sales. The primary factor in the
year-to-date increased sales of the women's health products was an increase in
sales of branded and private label pregnancy and ovulation tests. Net sales of
clinical diagnostic products decreased slightly by $566,000 for the nine months
ended September 30, 2000 as compared to the nine months ended September 30,
1999. Grant and other revenue were $247,000 for the nine months ended

22
<PAGE>

September 30, 2000, respectively, compared to $642,000 for the nine months ended
September 30, 1999.

GROSS PROFIT. Gross profit increased by $22.0 million or 77% to
$50.7 million for the nine months ended September 30, 2000 from $28.7 million
for the nine months ended September 30, 1999. Gross margin of net product sales
increased to 42% for the nine months ended September 30, 2000, compared to 32%
for the nine months ended September 30, 1999. The significant improvements in
gross profit and gross margin of net product sales primarily resulted from the
increase in sales of ONE TOUCH-Registered Trademark-
FastTAKE-Registered Trademark- systems and reductions in per unit manufacturing
costs attributed to lower material costs, improved yields and volume related
efficiency at our diabetes product manufacturing facility in Inverness,
Scotland.

RESEARCH AND DEVELOPMENT EXPENSE. Research and development expense
increased by $5.1 million or 118% to $9.5 million from $4.4 million for the nine
months ended September 30, 1999. The increase in research and development
expense resulted from research programs directed towards blood glucose
monitoring systems. We expect to continue to spend significant amounts on
research and development in the area of diabetes management.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSE. For the nine months ended
September 30, 2000, selling, general and administrative expense increased by
$2.1 million or 8% to $28.9 million from $26.8 million for the nine months ended
September 30, 1999. The increase in selling, general and administrative expense
resulted from higher marketing expenditures related to sales of our
Excel-Registered Trademark-G product and diabetes supplies, increased legal fees
related to the defense of the Abbott lawsuits against us and a one-time non-cash
compensation charge of $429,000 related to stock options granted to consultants.
Selling, general and administrative expense as a percentage of net revenues was
24% for the nine months ended September 30, 2000 compared to 30% for the nine
months ended September 30, 1999.

INTEREST EXPENSE. For the nine months ended September 30, 2000, we incurred
$5.7 million in interest expense, net of interest income, compared to
$5.7 million for the nine months ended September 30, 1999.

OTHER INCOME (EXPENSE). We incurred other income of $2.3 million for the
nine months ended September 30, 2000, compared to other expense of $135,000 for
the nine months ended September 30, 1999. Generally, other income or expense
represents foreign currency exchange transaction gains and losses. During the
nine months ended September 30, 2000, we recognized $562,000 in foreign exchange
gain as a result of the strong U.S. Dollar versus the British Pound Sterling on
loans from LifeScan, that is denominated in British Pounds Sterling.
Additionally, during the nine months ended September 30, 2000, we also recorded
a gain of $1.8 million from the sale of our holding of 8.6 million shares in
Theratase plc.

DIVIDENDS AND ACCRETION ON MANDATORILY REDEEMABLE PREFERRED STOCK OF A
SUBSIDIARY. Inverness Medical Limited (Inverness Scotland), our subsidiary in
Inverness, Scotland, accrued $383,000 for the nine months ended September 30,
2000 representing dividends payable and accretion on the outstanding cumulative
redeemable preference shares, as compared to $170,000 for the nine months ended
September 30, 1999. In June 2000, we recorded a one-time 15% accretion, which
amounted to 150,000 British Pound Sterling ($227,000), because we elected not to
redeem the first issue of such preferred shares within five years of its
original issue date, or June 23, 2000.

EXTRAORDINARY LOSS. In the second quarter of 2000, we recorded an
extraordinary loss of $800,000 ($486,000 of which was non-cash expense) for the
refinancing of our subordinated revenue royalty notes. In the first quarter of
1999, we recorded an extraordinary loss of $306,000 ($228,000 of which was
non-cash expense) for the modification of our then outstanding senior
subordinated convertible notes.

23
<PAGE>

INCOME TAXES. For the nine months ended September 30, 2000, we recorded
provisions of $435,000 for income taxes compared to $349,000 for the nine months
ended September 30, 1999. Substantially all of the income tax provisions reflect
certain state income taxes relating to our subsidiaries in the United States.

NET (LOSS) INCOME. For the nine months ended September 30, 2000, we
realized net income of $7.2 million compared to a net loss of $9.2 million for
the nine months ended September 30, 1999. Basic and diluted earnings per common
share for the nine months ended September 30, 2000 were $0.30 and $0.26,
respectively, compared to a basic and diluted loss per common share of $0.64 for
the nine months ended September 30, 1999. The results for the nine-month period
ending September 30, 2000 and 1999 included significant non-recurring, non-cash
charges and income as detailed above. Excluding the non-recurring and non-cash
charges and income, net income for the nine months ended September 30, 2000 was
$6.7 million compared to a net loss of $8.9 million for the nine months ended
September 30, 1999. Excluding non-recurring and non-cash charges and income,
basic and diluted earnings per common share were $0.28 and $0.24, respectively,
for the nine months ended September 30, 2000, compared to a basic and diluted
net loss per common share of $0.62 for the nine months ended September 30, 1999.

YEAR ENDED DECEMBER 31, 1999 COMPARED TO YEAR ENDED DECEMBER 31, 1998

NET REVENUES. Net revenues in 1999 increased $7.9 million or 7% to
$125.9 million from $118.0 million in 1998. The primary reason for the increase
in revenues was the increased sales of products for diabetes management,
especially the ONE TOUCH-Registered Trademark- FastTAKE-Registered Trademark-
blood glucose monitoring system. Net sales from our diabetes management segment
were $71.2 million in 1999, an increase of $14.0 million or 25% as compared to
net sales of $57.2 million in 1998. The net sales of products for diabetes
management accounted for 57% of our net revenues in 1999 compared to 48% of the
net revenues in 1998. Net sales from our women's health segment were
$42.8 million in 1999, an increase of $2.3 million or 6% as compared to
$40.5 million in 1998. Although the net sales of women's health products
increased from 1998, they accounted for the same percentage (34%) of our net
revenues due to the faster growth in the diabetes segment. The increase in the
women's health segment was attributable primarily to two factors. We experienced
a full year of sales of SoyCare-TM-, a line of nutritional supplements for
menopause and bone health introduced in July 1998. The second factor in the
increased net sales of the women's health segment was an increase in sales of
branded and private label pregnancy and ovulation tests. Other revenues were
derived from the net sales of clinical diagnostics products and the recognition
of deferred revenue. Net sales of the clinical diagnostic products for 1999 were
$11.1 million, a decrease of $4.8 million or 30% from net sales of
$15.9 million in 1998. The decrease in diagnostic product sales was primarily
due to our sale of the diagnostics business line of our wholly-owned subsidiary
in Ireland, Cambridge Diagnostics Ireland, Ltd. (Cambridge Diagnostics), in
September 1998. Additionally, a decline in sales of our wholly owned subsidiary
in Israel, Orgenics Ltd. (Orgenics), accounted for $2.1 million of the decline
in diagnostic product revenues. This was due primarily to a one time
non-recurring sale of HIV test kits for $1.6 million during 1998. Grant and
other revenue was approximately $742,000 in 1999, a decrease of $3.2 million or
81% from grant and other revenue of $3.9 million in 1998. In 1999, we recognized
$316,000 of revenue related to a $7.0 million success fee received from LifeScan
in October 1996, versus $2.7 million in 1998. The amortization of this success
fee was complete in March 1999. Approximately $398,000 of the revenues for 1999
was attributable to the amortization of deferred revenue associated with certain
development and capital grants relating to our manufacturing facility in
Inverness, Scotland. In 1998, we recognized $1.2 million revenue in connection
with development and capital grants, most of which related also to the Inverness
facility.

GROSS PROFIT. Total gross profit for 1999 increased $1.7 million or 4% to
$42.6 million from $40.9 million in 1998. However, gross profit on net product
sales for 1999 increased $4.9 million or

24
<PAGE>

13% to $41.9 million from $37.0 million in 1998. The increase in gross profit
was primarily attributable to the increase in sales of ONE
TOUCH-Registered Trademark- FastTAKE-Registered Trademark-. Gross profit
percentage of net product sales increased to 33% in 1999 from 32% in 1998. Gross
profit on net sales of the diabetes management segment was $14.8 million or 21%
of the net sales of the diabetes management segment for 1999 compared to
$7.8 million or 14% of the net sales of the diabetes management segment for
1998. Gross profit on the women's health segment was $20.9 million or 49% of the
net sales of women's health products in 1999 compared to $20.2 million or 50% of
the net sales of women's health products in 1998. The profit increase was
primarily due to higher sales of pregnancy and ovulation tests. Gross profit
from net sales of clinical diagnostics and other products, and the recognition
of deferred revenue was $6.9 million in 1999 compared to $12.8 million in 1998.
The decrease was primarily attributable to the decrease in revenue recognized on
the aforementioned LifeScan success fee received in 1996 and the sale of
Cambridge Diagnostics' diagnostics business in September 1998.

RESEARCH AND DEVELOPMENT EXPENSE. Research and development expense for 1999
decreased $474,000 or 6% to $6.9 million from $7.4 million in 1998. The decrease
was primarily due to our sale of the diagnostics business line of Cambridge
Diagnostics in September 1998. Research and development expenses related to
diabetes products at our subsidiary in Scotland, Inverness Medical Limited
(Inverness), increased by $1.0 million but were more than offset by a reduction
in research and development expenses of the clinical diagnostics business. We
expect to spend significant and increasing amounts on research and development
in the area of diabetes, and specifically glucose monitoring, throughout 2000.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSE. Selling, general and
administrative expense decreased $900,000 or 2% to $35.4 million from
$36.3 million in 1998. The decrease was primarily attributable to a reduction in
expenses associated with the clinical diagnostic business. Selling, general and
administrative expense as a percentage of net revenues decreased to 28% of net
revenues for 1999 from 31% of net revenues for 1998.

NET CHARGE ON BUSINESS DISPOSITION, ASSET IMPAIRMENT AND RESTRUCTURING
ACTIVITIES. There were no charges for business disposition, asset impairment or
restructuring activities in 1999. A loss on disposition of a business was
recorded in 1998. (See "Year Ended December 31, 1998 compared to Year Ended
December 31, 1997.")

INTEREST EXPENSE. Interest expense decreased $1.5 million to $8.1 million
in 1999 from $9.6 million in 1998. In 1999, we recognized $327,000 of non-cash
interest expense for the amortization of the original issue discount on
convertible notes and warrants compared to $1.8 million of non-cash interest
expense recognized in 1998 for the amortization of the original issue discount
on convertible notes and warrants.

INTEREST AND OTHER (EXPENSE) INCOME, NET. Interest income decreased by
$222,000 to $363,000 in 1999 from $585,000 in 1998, primarily due to the
decrease in cash balances. In addition, we incurred realized and unrealized
losses totaling $853,000 in 1999 due to foreign currency fluctuation. In 1998,
we recognized $1.5 million of non-cash income related to 155,724 shares of our
Common Stock received into treasury in connection with the settlement agreement
dated March 6, 1998 by and among us, Trinity Biotech plc (Trinity), Flambelle
Limited and Eastcourt Limited. We also recognized a $237,000 gain in 1998
related to our 29.9% equity in the net profit of Enviromed plc.

DIVIDENDS AND MINORITY INTEREST. In 1999, our subsidiary, Inverness,
accrued $226,000 representing a 6% dividend payable on its outstanding
cumulative redeemable preference shares, as compared to $146,000 for 1998. In
October 1998, an additional 1,000,000 shares of 6% cumulative redeemable
preference stock of Inverness were issued to Inverness & Nairn Local Enterprise
Company (INLEC), a development agency funded by the government of the United
Kingdom, for approximately $1.7 million. Minority interest in certain of our
subsidiaries was less than $1,000 in 1999 compared to $100,000 in

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<PAGE>
1998. We now own 100% of Orgenics, either directly or indirectly, as compared to
our prior year's 99.8% ownership.

EXTRAORDINARY LOSS. In the first quarter of 1999, we recorded an
extraordinary loss of approximately $306,000 ($228,000 of which is non-cash
expense) for the modification of the terms of the Senior Subordinated
Convertible Notes issued during October 1997 (see Note 16 of the "Notes to
Consolidated Financial Statements").

INCOME TAXES. In 1999, we recorded provisions of $245,000 for income taxes
compared to $544,000 in 1998. The provisions predominately reflect certain state
income taxes relating to our subsidiaries, Inverness Medical, Inc. (IMI) and
Can-Am Care Corporation (Can-Am), as well as capital gains taxes in Ireland
relating to the business disposition of Cambridge Diagnostics. In 1999, we also
recognized a $300,000 benefit related to the establishment of a state deferred
tax asset. See the discussion of Income Taxes under "Liquidity and Capital
Resources" below.

NET LOSS. Net loss for 1999 was approximately $9.1 million or $0.66 per
common share as compared to $18.8 million or $1.55 per common share for 1998.
The net loss in 1999 and 1998 includes non-recurring, non-cash charges and
income as described above. Excluding the non-recurring, non-cash charges and
income results in a net loss of $8.4 million or $0.62 per common share in 1999
as compared to $10.9 million or $0.91 per common share in 1998.

YEAR ENDED DECEMBER 31, 1998 COMPARED TO YEAR ENDED DECEMBER 31, 1997

NET REVENUES. Net revenues in 1998 increased $65.7 million or 126% to
$118.0 million from $52.3 million in 1997. The primary reason for the increase
in revenues was the addition of Can-Am acquired in February 1998 and the sales
of the ONE TOUCH-Registered Trademark- FastTAKE-Registered Trademark- system,
which we primarily started shipping in 1998. Net sales from our diabetes
management segment were $57.2 million in 1998, an increase of $56.8 million as
compared to net sales of $434,000 in 1997. The diabetes management net product
sales accounted for 48% of our net revenues in 1998 compared to just 1% of the
net revenues in 1997. Net sales from our women's health segment were
$40.5 million in 1998, an increase of $8.6 million or 27% as compared to
$31.8 million in 1997. Although the net sales of women's health products
increased from 1997, they accounted for a smaller percentage of our net revenues
due to the introduction of the diabetes management products. The women's health
product sales accounted for 34% of our total net revenues in 1998 compared to
61% of the total net revenues in 1997. The increase in the net sales in the
women's health segment is attributed primarily to three factors. First, in 1998,
we experienced the effect of a full year's net sales of our nutritional
supplements compared with 10 1/2 months of sales from the acquisition of this
product line in February, 1997. Secondly, we introduced SoyCare-TM-, a new line
of nutritional supplements for menopause and bone health, in July 1998. The
third factor in the increased net sales of the women's health segment was an
increase in sales of private label pregnancy and ovulation tests. Other revenues
were derived from the net sales of clinical diagnostics products and the
recognition of deferred revenue. Net sales of the clinical diagnostic products
for 1998 were $15.9 million, a decrease of $2.2 million or 13% from net sales of
$18.1 million in 1997. The decrease in diagnostic product sales was partly due
to our sale of the diagnostics business of Cambridge Diagnostics in
September 1998 in addition to a general decline in the sales of the clinical
diagnostics products. Grant and other revenue amounted to $3.9 million in 1998,
an increase of $2.5 million or 187% from grant and other revenue of
$1.4 million in 1997. In 1998, we recognized $2.7 million of revenue related to
a $7.0 million success fee received from LifeScan in October 1996. Approximately
$1.2 million of the revenues for 1998 were attributable to the amortization of
deferred revenue associated with certain development and capital grants relating
to the Inverness facility. In 1997, there was $1.1 million revenue recognized in
connection with the grants, most of which related to the Inverness facility.

26
<PAGE>

GROSS PROFIT. Gross profit for 1998 increased $14.9 million or 57% to
$40.9 million from $26.0 million in 1997. The increase in gross profit was
primarily attributable to the sales of ONE TOUCH-Registered Trademark-
FastTAKE-Registered Trademark- and the inclusion of the products sold by Can-Am
which we acquired in February 1998. Gross profit as a percentage of net revenues
decreased to 35% in 1998 from 50% in 1997. The decrease in the gross profit as a
percentage of net revenues is attributed to the sale of meters for the ONE
TOUCH-Registered Trademark- FastTAKE-Registered Trademark- system, which are
sold at cost. Gross profit on net sales of the diabetes management segment was
$7.8 million or 14% of the net sales of the diabetes management segment for
1998. Gross profit on the women's health segment was $20.2 million or 50% of the
net sales of women's health products in 1998 compared to $15.9 million or 50% of
the net sales of women's health products in 1997. The $4.3 million increase was
primarily due to increases in the sales of the nutritional supplements,
including sales of SoyCare-TM-, a new product introduced in 1998. Gross profit
from net sales of clinical diagnostics and other products, and the recognition
of deferred revenue was $12.8 million in 1998 compared to $10.4 million in 1997.
The increase was primarily attributable to the revenue recognized on the
aforementioned LifeScan success fee.

RESEARCH AND DEVELOPMENT EXPENSE. Research and development expense for 1998
decreased $8.2 million or 53% to $7.4 million from $15.6 million in 1997. The
decrease was primarily due to the transition in December 1997 of the ONE
TOUCH-Registered Trademark- FastTAKE-Registered Trademark- system from research
and development into production.

CHARGE FOR IN-PROCESS RESEARCH AND DEVELOPMENT. A portion of the purchase
price of our acquisition of Orgenics was allocated to in-process research and
development projects that did not achieve technological feasibility and did not
have future alternative uses. The total charge for in-process research and
development was $7.7 million of which $3.3 million was expensed in 1997. There
were no charges for in-process research and development in 1998.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSE. Selling, general and
administrative expense increased $10.5 million or 41% to $36.3 million from
$25.8 million in 1997. The increase was primarily attributable to the
acquisition of Can-Am and marketing efforts and the hiring of additional staff
to support the sales of the women's health products, especially SoyCare-TM-.
Additionally, legal expenses were higher in 1998 due to litigation. Selling,
general and administrative expense as a percentage of net revenues decreased in
1998 from 1997. Selling, general and administrative expense was 31% of net
revenues for 1998 compared to 49% for 1997.

NET CHARGE ON BUSINESS DISPOSITION, ASSET IMPAIRMENT AND RESTRUCTURING
ACTIVITIES. On September 30, 1998, we sold the clinical diagnostics business of
our subsidiary, Cambridge Diagnostics, to Trinity for consideration of 555,731
shares of our Common Stock, which was then owned by Trinity, $230,000 in cash
and other consideration valued at approximately $43,000. We recorded a gain of
approximately $1.2 million as a result of the sale of the assets. In the fourth
quarter of 1998, we recorded impairment charges totaling $7.8 million reflecting
the change in the fair value of certain assets that were no longer expected to
contribute to our profitability. In 1998, we also recorded a $810,000
restructuring charge related to the discontinuance of development and
manufacture of diabetes management products at Cambridge Diagnostics.

INTEREST EXPENSE. Interest expense increased $4.1 million to $9.6 million
in 1998 from $5.5 million in 1997. In 1998, we recognized $1.8 million of
non-cash interest expense for the amortization of the original issue discount on
convertible notes and warrants. In 1997, we recognized $498,000 of non-cash
interest expense for the amortization of the original issue discount on
convertible notes and warrants. The increase in interest expense was due to new
financing activities in 1998 and also due to a full year of interest expense on
the Subordinated Revenue Royalty Notes issued in mid-1997.

INTEREST AND OTHER (EXPENSE) INCOME, NET. Interest income decreased by
$383,000 to $585,000 in 1998 from $968,000 in 1997, primarily due to the
decrease in cash balances. We also recognized

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<PAGE>
$1.5 million of non-cash income related to 155,724 shares of our Common Stock
received into treasury in connection with the settlement agreement dated
March 6, 1998 by and among us, Trinity, Flambelle Limited and Eastcourt Limited.
We recognized a $237,000 gain in 1998 related to our 29.9% equity in the net
profit of Enviromed plc compared to a $327,000 loss recognized in 1997. We
incurred an unrealized loss of $717,000 in 1997 on the translation of
intercompany receivables. Fluctuations in foreign currency did not significantly
impact revenue performance measured in U.S. dollars for 1998. Substantially all
sales are paid in the functional currency of the selling entity.

DIVIDENDS AND MINORITY INTEREST. For 1998, our subsidiary, Inverness,
accrued $146,000 representing a 6% dividend payable on its outstanding
cumulative redeemable preference shares, as compared to $114,000 for 1997. In
October 1998, an additional 1,000,000 shares of 6% cumulative redeemable
preference stock of Inverness were issued to INLEC for approximately
$1.7 million. Minority interest in certain of our subsidiaries was $100,000 in
1998 and $181,000 in 1997.

EXTRAORDINARY LOSS. In 1997, we incurred a non-cash charge of $579,000 for
the extinguishment of debt related to the Cambridge Diagnostics Notes and EN PLC
Notes, which were exchanged for convertible notes.

INCOME TAXES. In 1998, we recorded provisions of $544,000 for income taxes
compared to $196,000 for 1997. The 1998 provision reflects certain state income
taxes relating to IMI and Can-Am, as well as capital gains taxes in Ireland
relating to the business disposition of Cambridge Diagnostics. Substantially all
of the 1997 provision relates to state income taxes.

NET LOSS. Net loss for 1998 was approximately $18.8 million or $1.55 per
common share as compared to $24.7 million or $3.36 per common share in 1997. The
net loss in 1998 and 1997 includes non-recurring, non-cash charges and income as
described above. Excluding the non-cash charges and income results in a net loss
of $10.9 million or $0.91 per common share in 1998 as compared to $20.0 million
or $2.50 per common share for 1997. These losses reflect continued spending on
research and development, expansion of our sales and marketing efforts, the
hiring of additional staff to support our operations and significant interest
expense on our debts.

QUARTERLY RESULTS OF OPERATIONS

The following table sets forth unaudited quarterly consolidated operating
results for each of our last six quarters. We have prepared this information on
a basis consistent with our audited consolidated financial statements and
included all adjustments, consisting only of normal recurring adjustments, that
we consider necessary for a fair presentation of the data. These quarterly
results are not necessarily indicative of future results of operations. This
information should be read in conjunction with our consolidated financial
statements and notes included elsewhere in this prospectus.

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<PAGE>

<TABLE>
<CAPTION>
THREE MONTHS ENDED
------------------------------------------------------------------------------------------
CONSOLIDATED STATEMENT OF OPERATIONS MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31, MARCH 31, JUNE 30, SEPTEMBER 30,
(IN THOUSANDS, EXCEPT PER SHARE DATA): 1999 1999 1999 1999 2000 2000 2000
-------------------------------------- --------- -------- ------------- ------------ --------- -------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net revenues................... $29,198 $27,303 $33,146 $36,226 $37,697 $40,607 $43,014
Cost of sales.................. 20,069 19,084 21,804 22,288 21,901 23,534 25,160
------- ------- ------- ------- ------- ------- -------
Gross profit................... 9,129 8,219 11,342 13,938 15,796 17,073 17,854
------- ------- ------- ------- ------- ------- -------
Operating expenses:
Research and development..... 1,225 1,358 1,774 2,550 3,168 3,020 3,291
Selling, general, and
administrative............. 9,286 8,163 9,390 8,551 9,121 9,907 9,882
Other expenses............... -- -- -- -- -- -- --
Total operating expenses..... 10,511 9,521 11,164 11,101 12,289 12,927 13,173
------- ------- ------- ------- ------- ------- -------
Operating (loss) income.... (1,382) (1,302) 178 2,837 3,507 4,146 4,681
------- ------- ------- ------- ------- ------- -------
Interest expense, including
amortization of original issue
discount..................... (1,800) (1,901) (1,997) (2,090) (2,150) (2,119) (1,462)
Interest and other (expense) income,
net.......................... (134) (59) 57 (700) 69 2,132 55
(Loss) income before dividends and
accretion on mandatorily
redeemable preferred stock of a
subsidiary............... (3,316) (3,262) (1,762) 47 1,426 4,159 3,274
Dividends and accretion on mandatorily
redeemable preferred stock of
subsidiary................... (56) (56) (57) (58) (55) (280) (48)
(Loss) income before extraordinary
loss and income taxes.... (3,372) (3,318) (1,819) (11) 1,371 3,879 3,226
Extraordinary loss on modification and
early extinguishment of debt... (306) -- -- -- -- (800) --
(Loss) income before income
taxes.................... (3,678) (3,318) (1,819) (11) 1,371 3,079 3,226
Provision (benefit) for income
taxes........................ 245 89 15 (102) 136 152 147
Net (loss) income.......... $(3,923) $(3,407) $(1,834) $ (91) $ 1,235 $ 2,927 $ 3,079
======= ======= ======= ======= ======= ======= =======
Net (loss) income per common and
potential common share:(1)
Basic...................... $ (0.32) $ (0.22) $ (0.01) $ (0.03) $ 0.05 $ 0.12 $ 0.12
======= ======= ======= ======= ======= ======= =======
Diluted.................... $ (0.32) $ (0.22) $ (0.01) $ (0.03) $ 0.04 $ 0.11 $ 0.11
======= ======= ======= ======= ======= ======= =======
</TABLE>

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

(1) Computed as described in our historical financial statements and related
notes incorporated by reference into this prospectus.

Our results of operations historically have fluctuated on a quarterly basis
and can be expected to continue to be subject to quarterly fluctuations.

LIQUIDITY AND CAPITAL RESOURCES

We have historically funded our business through operating cash flows,
proceeds from borrowings and the issuance of equity securities. During the first
nine months of 2000, we generated cash of $9.6 million from our operating
activities due primarily to net income of $11.4 million, adjusted for noncash
items. During the first nine months of 2000, we used cash of $1.8 million for
our investing activities, consisting of $5.1 million used primarily at Inverness
to purchase property and equipment offset by cash received of $3.3 million from
the sale of our investment in Theratase plc. During the first nine months of
2000, we used cash of $6.1 million for financing activities, including our
principal repayments on loans from Chase Manhattan Bank and LifeScan and net
proceeds paid for the refinancing of subordinated notes, which were partially
offset by a $542,000 capital grant received by us

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<PAGE>

and $2.4 million in proceeds received from the issuance of common stock. Working
capital deficit was $(16.5) million at September 30, 2000 compared to
$(8.7) million at December 31, 1999.

In February 1998, we acquired Can-Am, a leading supplier of diabetes care
products, for a combination of cash, notes and shares of common stock. At the
time, we entered into a $42 million credit agreement with Chase Manhattan Bank
to fund the cash portion of the purchase price and to repay outstanding
indebtedness under a prior credit facility. The Chase credit agreement consists
of a $37 million term loan and a $5 million revolving line of credit. Borrowings
under the Chase credit agreement are secured by the capital stock of one of our
subsidiaries, our assets and the assets of our subsidiaries. Our subsidiary is
required to make quarterly principal payments on the term portion of the loan
ranging from $1.2 million to $1.8 million through December 31, 2003. Our
subsidiary must also make mandatory prepayments on the term loan if it meets
certain cash flow thresholds, sells assets outside of the ordinary course of
business, issues or sells indebtedness or issues stock. During the first nine
months of 2000, our subsidiary has made quarterly interest payments and a
mandatory prepayment totaling $5.5 million. At September 30, 2000, the unused
balance of the revolving line of credit was approximately $2.1 million.

On January 8, 1999, we sold in a private placement 57,842 shares of
Series C convertible preferred stock, 3,030 shares of Series D convertible
preferred stock and 13,169 shares of Series E convertible preferred stock to
investors at an aggregate purchases price of $7.4 million. Of the gross
proceeds, we received approximately $4.9 million in advance during
December 1998.

We entered into amendments of our agreements with LifeScan in June 1999.
Under the amended agreements, we develop and supply to LifeScan additional
products for monitoring blood glucose in humans. Upon the execution of the
amended agreements, LifeScan provided us with an initial loan of L6,250,000
(approximately $9,900,000) to fund the increased costs related to the
anticipated production levels. LifeScan has also committed to make additional
loans of up to L8,125,000 (approximately $12,000,000) to us upon the
accomplishment of certain milestones relating to new products we are to develop
for LifeScan. Through September 30, 2000, we have received L2,031,250
(approximately $2,900,000) in additional loans from LifeScan. Interest on the
initial and additional loans accrues at 11% and is payable quarterly. The
aggregate principal amount of the initial and additional loans is to be repaid
by deducting L0.0125 (approximately $0.02) from the invoice price of each strip
we sell to LifeScan commencing on the date of the initial loan. On
September 30, 2000, the balance of the outstanding initial LifeScan loan and
additional LifeScan loans was approximately $6.6 million.

During June, July and August 2000, we sold units having an aggregate
purchase price of $19.3 million for the purpose of retiring certain outstanding
subordinated promissory notes and subordinated revenue royalty notes that were
issued in 1997 and 1998. Each unit consists of (i) $25,000 in principal amount
of a new subordinated promissory note and (ii) a warrant to acquire 123 shares
of our common stock. The new subordinated promissory notes were sold in
accordance with the maturity dates and prepayment dates of the notes being
retired. In the aggregate, we issued warrants to purchase 119,350 shares of our
common stock with exercise prices ranging from $7.94 to $15.38, calculated based
upon the average closing prices of our common stock for the ten days prior to
each closing. The new subordinated promissory notes are due on the first
anniversary of their date of issuance and the warrants may be exercised at any
time on or prior to the tenth anniversary of their date of issuance.

As of December 31, 1999, we had approximately $16.4 million and
$48.1 million of domestic and foreign net operating loss carryforwards,
respectively, and approximately $99,000 of research and development tax credit
carryforwards, which expire at various dates through 2019. These losses and tax
credits are available to reduce federal taxable income and federal income taxes,
respectively, in future years, if any. These losses and tax credits are subject
to review and possible adjustment by the Internal Revenue Service and may be
limited in the event of certain cumulative changes in ownership interests

30
<PAGE>
of significant shareholders over a three-year period in excess of 50%. We have
recorded a valuation allowance against substantially all of the deferred tax
asset to reflect uncertainties that might affect the realization of the deferred
tax asset.

Based upon our operating plans, we believe that our existing capital
resources will be adequate to fund our operations and scheduled debt obligations
for at least the next 12 months. We believe that we will be able to fund our
research and development activities related to products being designed and
developed for LifeScan out of existing funds and anticipated funding pursuant to
the Amended Agreements with LifeScan. Absent the proceeds from this offering, if
we were to encounter delays in achieving the milestones necessary for receiving
the funding from LifeScan, we would need to seek alternative financing
arrangements or delay the project spending. In addition, we may expand our
research and development of new technologies (beyond the aforementioned
activities related to LifeScan) and may pursue the acquisition of new products
and technologies, whether through licensing arrangements, business acquisitions,
or otherwise. No assurance can be given that additional capital will be
available, or, if available, that it will be available on acceptable terms. If
additional funds are raised by issuing equity securities, further dilution to
then existing stockholders will result. If adequate funds are not available, we
may not be able to pursue desirable research and development programs unless we
obtain funds through arrangements with collaborative partners or others that may
require us to relinquish rights to certain of our technologies or products which
we would otherwise pursue on our own.

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

In June 1998, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 133, "Accounting for
Derivative Instruments and Hedging Activities" (as amended by SFAS No. 138),
which establishes accounting and reporting standards for derivative instruments,
including certain derivative instruments embedded in other contracts, and for
hedging activities, SFAS No. 133 has subsequently been amended by SFAS No. 137,
issued in June 1999, which delays the effective date for implementation of SFAS
No. 133 until fiscal quarters of fiscal years beginning after June 15, 2000.
Management does not anticipate that the adoption of SFAS No. 133 will have
material effect on our consolidated financial statements because we do not
presently utilize derivative investments or engage in hedging activities.

In December 1999, the SEC issued Staff Accounting Bulletin No. 101, "Revenue
Recognition in Financial Statements." SAB 101 summarizes certain of the SEC's
views in applying generally accepted accounting principles to revenue
recognition in financial statements. We are required to adopt SAB 101 in the
fourth quarter of 2000. Management does not expect the adoption of SAB 101 to
have material effect on our financial condition or results of operations.

In March 2000, the FASB issued FASB Interpretation (FIN) No. 44, "Accounting
for Certain Transactions Involving Stock Compensation--an Interpretation of APB
Opinion No. 25." FIN 44 clarifies the application of APB Opinion No. 25 and,
among other issues clarifies the following: the definition of an employee for
purposes of applying APB Opinion No. 25; the criteria for determining whether a
plan qualifies as a non-compensatory plan; the accounting consequence of various
modifications to the terms of previously fixed stock options or awards; and the
accounting for an exchange of stock compensation awards in a business
combination. FIN 44 is effective July 1, 2000 but certain conclusions in FIN 44
cover specific events that occurred after either December 15, 1998 or
January 12, 2000. The application of FIN 44 has not had a material impact on our
financial position or results of operations.

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<PAGE>
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS

The following discussion about our market risk disclosures involves
forward-looking statements. Actual results could differ materially from those
discussed in the forward-looking statements. We are exposed to market risks
related to changes in interest rates and foreign currency exchange rates. We do
not use derivative financial instruments for speculative or trading purposes.

INTEREST RATE RISK

We are exposed to market risks from changes in interest rates primarily
through our investing and borrowing activities. In addition, our ability to
finance future acquisition transactions may be impacted if we are not able to
obtain appropriate financing at acceptable rates. Our investing strategy, to
manage interest rate exposure, is to invest in short-term, highly liquid
investments. Currently, our short-term investments are in money market funds
with original maturities of 90 days or less. At September 30, 2000, the fair
value of our short-term investments approximated market value. In
February 1998, our subsidiary, IMI, entered into a $42 million credit agreement
with Chase. The Chase credit agreement consists of a $37 million term loan and a
$5 million revolving line of credit. The term loan and revolving line of credit
allow IMI to borrow funds at varying rates, including options to borrow at an
alternate base rate plus a spread from 0.50% to 2.00% or the LIBOR rate plus a
spread from 2.00% to 3.50%. The spreads depend on IMI's ratio of senior funded
debt to EBITDA. IMI entered into an interest rate swap agreement with an
effective date of March 31, 1998. This agreement protects approximately 50% of
IMI's term loan against LIBOR interest rates rising over 7.5%. This agreement is
effective through March 30, 2001. If the LIBOR rate increases one percentage
point, as compared to the rate at September 30, 2000, we estimate an increase in
our interest expense of approximately $148,000 in the next twelve months. If the
LIBOR rate increases two percentage points, as compared to the rate at
September 30, 2000, we estimate an increase in our interest expense of
approximately $249,000 in the next twelve months.

FOREIGN CURRENCY RISK

We face exposure to movements in foreign currency exchange rates. These
exposures may change over time as business practices evolve and could have a
material adverse effect on our business, financial condition and results of
operation. For the nine months ended September 30, 2000, the net impact of
foreign currency changes was a gain of $516,000. We do not use derivative
financial instruments or other financial instruments to hedge economic exposures
or for trading. Historically, our primary exposures have been related to the
operations of our European subsidiaries. However, the sales of FastTAKE, our
lead diabetes management product, are denominated in the currency in which the
manufacturing costs are incurred. The loans received from LifeScan in June 1999
and September 2000 are denominated in British Pounds Sterling and therefore we
are exposed to fluctuations between the British Pound and U.S. Dollar. The Euro
was introduced as a common currency for members of the European Monetary Union
in 1999. We believe that in the near term the Euro will have minimal impact on
foreign exposure. We intend to hedge against fluctuations in the Euro if this
exposure becomes material. At September 30, 2000, our assets related to
non-dollar-denominated currencies amounted to approximately $36.1 million.

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<PAGE>
BUSINESS

OVERVIEW

We develop, manufacture and market innovative products focused primarily on
diabetes self-management. Our principal products are advanced electrochemical
blood glucose monitoring systems that are used by people with diabetes to
determine their glucose levels in order to manage their disease. Our systems are
accurate, small, fast and easy to use. They utilize our proprietary biosensor
test strips, which quickly draw blood into the strip, require only a small
sample and provide users with the option of sampling from the forearm, thus
avoiding the need for finger sticking. We believe that the increased convenience
and comfort offered by our systems will encourage more frequent blood glucose
testing, an essential element of effective diabetes self-management. Our systems
focus on the more than $3 billion worldwide blood glucose monitoring market. We
introduced our first generation electrochemical system in early 1998 and have
shipped over 1.3 million meters. Meter shipments for this system more than
doubled in the nine months ended September 30, 2000 as compared to the same
period in 1999. We believe that meter placements form the base for future sales
of our electrochemical test strips, thus providing us with a source of recurring
revenue. Our net sales of diabetes products were $80.0 million during the first
three quarters of 2000, an increase of approximately 64% from the first three
quarters of 1999.

We recently received FDA clearance for our second generation electrochemical
system, which we expect to begin shipping in the fourth quarter of 2000. This
system utilizes our latest proprietary test strip with a reduced blood sample
requirement of just one microliter, and features the fastest test time of any
commercially available system at five seconds, providing enhanced convenience
and comfort. We use our diabetes expertise to design and manufacture low cost
alternative test strips for use in leading brand glucose meters made by other
manufacturers. We also market a full family of ancillary diabetes supplies such
as syringes, lancets, glucose tablets, and specialty skin creams. In addition to
our diabetes products, we sell women's health products, including home pregnancy
detection tests, ovulation prediction tests and a line of nutritional
supplements.

We seek to maximize market penetration of our products through strategic
partnerships and through our wholesale and retail distribution networks. We have
a global distribution agreement with LifeScan, a subsidiary of Johnson &
Johnson, under which we develop and manufacture, and LifeScan markets, our
electrochemical blood glucose monitoring systems. Our first and second
generation electrochemical systems are being marketed by LifeScan as the ONE
TOUCH-Registered Trademark- FastTAKE-Registered Trademark- and ONE
TOUCH-Registered Trademark- Ultra. LifeScan is a leader in the worldwide blood
glucose monitoring market. LifeScan leads the North American blood glucose
monitoring market with a 38% market share. We believe that currently,
approximately 85% of LifeScan's strip sales are based on photometric technology
and 15% are electrochemical. By contrast, electrochemical systems now account
for 60% of the total world market for blood glucose monitoring systems, rising
from 33% five years ago. LifeScan has recently announced a shift in its
marketing focus to electrochemical blood glucose monitors from its historical
marketing efforts focused on photometric monitors. ONE
TOUCH-Registered Trademark- FastTAKE-Registered Trademark- electrochemical test
strips, which we supply to LifeScan, accounted for 5% of the strips sold in
drugstores throughout the United States during the six months ended June 2000.
Accordingly, we believe that our systems, which are the only electrochemical
systems offered by LifeScan, are well positioned to capture an increasing market
share. In addition, our agreement with LifeScan contemplates that we will
develop and manufacture, and LifeScan will market, additional electrochemical
blood glucose monitoring systems.

Our objective is to become the leading provider of innovative products that
provide a fully integrated and comprehensive approach to the self-management of
diabetes. Consistent with this objective, we continue to focus on the
development of pain-free, non-disruptive, continuous blood glucose monitoring
systems and other complementary diabetes self-management products. For example,
we signed a definitive agreement, in October 2000, to purchase Integ
Incorporated, a company with

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<PAGE>
proprietary interstitial fluid sampling technology. We believe that this
acquisition will supplement and accelerate our existing efforts to develop
glucose monitoring systems that do not require blood samples. More recently, we
entered into a development and license agreement with Debiotech, S.A. pursuant
to which Debiotech will develop an externally-worn insulin pump using its
patented Micro Electro-Mechanical Systems technology.

INDUSTRY OVERVIEW

OVERVIEW OF DIABETES

Diabetes is a chronic, life-threatening disease, for which there is no known
cure. Diabetes is not a single disease, but a cluster of disorders that share
certain common features, the most characteristic of which is elevated blood
sugar levels. Under normal conditions, the body responds to an increase in blood
glucose by releasing the hormone insulin. Insulin stimulates the storage and
metabolism of glucose, helping to return glucose levels toward normal. The two
most common forms of the disease are referred to simply as Type 1 and Type 2
diabetes.

Type 1 diabetes is an auto-immune disease in which the body does not produce
insulin. As a result, individuals with Type 1 diabetes require daily injections
of insulin to survive. Type 1 diabetes usually begins in childhood or early
adulthood, and thus was formerly called juvenile-onset diabetes, but recent
research has shown that it can occur at any age. Over 13,000 new cases of Type 1
diabetes are diagnosed each year in the U.S. in children and young adults under
age 20. Type 1 accounts for 5% to 10% of diabetes worldwide.

Type 2 diabetes is a metabolic disorder resulting from the body's inability
to make enough insulin or properly use insulin. Type 2 accounts for 90% to 95%
of diabetes, and is increasing at an alarming rate worldwide, approaching
epidemic proportions. This form of the disease is due in part to increasing
longevity, increasing obesity, a more sedentary lifestyle, and increased levels
of diagnosis. The form of the disease was thought to begin after the age of 40
and was formerly called adult-onset diabetes, but is now increasingly common
even in childhood, especially in minority populations.

There are also many other forms of diabetes. Gestational diabetes mellitus
occurs in 2% to 5% of pregnant women, mainly as a result of resistance to the
action of insulin created by the hormones produced during pregnancy. Up to 50%
of these women will develop Type 2 diabetes later in life. In addition, diabetes
can develop as part of the pattern created by other hormonal diseases, specific
genetic defects, or as a secondary effect of various stresses, including
infection, surgery, or drugs.

All of these different types of diabetes can produce similar dire
consequences including blindness, kidney failure, changes in the ability of the
nerves to function normally, heart attacks, strokes, peripheral vascular
insufficiency, and even periodontal disease and tooth loss.

In the United States, diabetes currently affects between 6% and 7% of the
population or about 16 million people, and the annual cost of treatment is
$44 billion. Of those affected, one-third do not even know they have the
disease. The number of individuals diagnosed with diabetes continues to grow by
nearly 800,000 persons per year in the United States and will reach 23 million
in just 10 years. According to the Centers for Disease Control, the percentage
of the population found to have diabetes jumped 33% nationally to 6.5% between
1990 and 1998. This percentage increased 70% amongst people in their 30's.

IMPORTANCE OF GLUCOSE MONITORING

Every person's glucose level varies during the course of a day depending
upon factors such as diet, insulin availability, exercise, stress and illness.
Normal blood glucose levels fluctuate between 80 and 120 milligrams per
deciliter, or mg/dL. For people with diabetes, these levels can fluctuate
dramatically from less than 20 mg/dL to more than 1,000 mg/dL. To successfully
manage glucose levels within the

34
<PAGE>
normal range, a person with diabetes must first measure his or her glucose level
and then manage this level by adjusting insulin intake, oral medication, diet
and exercise.

Today, the availability of compact, easy-to-use monitoring systems that
provide fast and accurate blood glucose measurements give people with diabetes a
tool to manage the disease more effectively, improve their quality of life, and
minimize the risk of long-term complications. The blood glucose monitoring
market, consisting of both glucose meters and test strips, is estimated to be
more than $3 billion worldwide and is expected to grow to more than $5 billion
by 2005.

The landmark multi-year study, Diabetes Control and Complications Trial, or
DCCT, sponsored by the National Institutes of Health showed that the onset or
progression of eye, kidney and nerve disease in people with Type 1 diabetes can
be slowed by intensive therapy to maintain blood glucose levels as close to
normal as possible. Studies in the United Kingdom and Japan found similar
results in people with Type 2 diabetes. These studies indicate that control of
blood glucose is the first step towards reducing diabetes-related complications.
The American Diabetes Association, or the ADA, recommends that people with
diabetes test their blood glucose as frequently as four times per day.

LIMITATIONS OF EXISTING GLUCOSE MONITORING PRODUCTS

Despite the proven benefits of frequent monitoring and intensive management
of glucose levels, a significant number of people with diabetes fail to test at
the recommended frequency, or at all. The ADA estimates that people with
diabetes test, on average, slightly more than once per day, compared to the
recommended four tests per day. We believe this under-testing is due to the
limitations of existing products including:

- DISRUPTION OF LIFESTYLE. The process of measuring glucose levels causes
significant disruption to the daily lifestyle of people with diabetes. To
obtain a sample, users are generally required to stick one of their
fingertips with a lancing device, which typically consists of a
spring-loaded needle that penetrates a measured distance into the finger.
Users must then draw a sample of blood from the finger, which often
requires squeezing of the fingertips and may require another finger stick
if a sufficient volume of blood is not obtained the first time. After
drawing a blood sample, users generally are required to apply the blood
sample on a disposable test strip. Blood glucose meters typically take
between 20 and 40 seconds to display the test result. In addition, the
need to obtain a large sample of blood from the user's fingertips is
inconvenient and causes discomfort. The length of time required to conduct
the test and the complexity of existing glucose systems discourage users
from frequent testing resulting in poor compliance.

- PERCEIVED PAIN AND SORE FINGERTIPS. Although fingertips provide a good
site to obtain a blood sample, they also contain many specialized sensory
nerve endings that experience pain from both the lancing and the
manipulation of the finger. Most of the blood glucose meters require users
to draw a sample size of between 2 and 10 microliters to accurately
measure blood glucose levels. The larger the blood sample required, the
more likely a user will require wider or deeper lancing in order to
successfully draw the sample, leading to more contact with sensitive nerve
endings and resulting in increased pain. Drawing a large enough sample of
blood may require squeezing the fingertips and cause incremental
discomfort. The level of pain and discomfort is compounded by the fact
that fingertips offer limited surface area, and therefore, tests are often
conducted in areas that are sore from repeated daily tests. Users may also
suffer pain or discomfort after the test is complete when the wound caused
by the lancing device is touched or disturbed during normal daily
activities. Additionally, many frequent testers develop calluses on their
fingertips that cause a loss of sensation, are unattractive and make
subsequent testing more difficult.

35
<PAGE>
We believe that blood glucose monitoring systems that provide increased
convenience and comfort will lead to significant growth in the frequency of
daily testing and will capture an increased share of the growing blood glucose
monitoring market.

OTHER SELF-TEST MARKETS

The market for women's health self-test products is comprised mostly of home
pregnancy detection tests, which represent 90% of the market, and ovulation
prediction tests, which represent 10% of the market.

There are numerous pregnancy self-tests on the market, which are typically
urine-based tests and provide results in less than five minutes. Pregnancy
self-tests are sensitive enough to indicate pregnancy within one or two days of
a missed menstrual period. Determinations of fertility are generally made using
ovulation prediction tests, most notably those based on the luteinizing hormone.
Approximately 15% of couples in the United States experience fertility problems.
We believe that increased awareness of the incidence of infertility, as well as
a desire on the part of couples to plan conception with more certainty, has led
to increasing demand for ovulation prediction tests. Ovulation prediction
urine-based tests are generally easy to use and are becoming widely accepted by
professional fertility care providers and the general public.

OUR STRATEGY

Our objective is to be the leading provider of innovative diabetes
self-management products that provide a fully-integrated and comprehensive
approach to self-management of diabetes. The key elements of our strategy for
achieving this goal are to:

CONTINUE TO DEVELOP SUPERIOR BLOOD GLUCOSE MONITORING PRODUCTS. We will
continue to focus our research and development efforts to expand our expertise
in diabetes management. These efforts enable us to improve upon our existing
monitoring systems which will result in increased convenience and comfort. Since
early 1998, we have introduced two generations of electrochemical systems that
are accurate, small, fast and easy to use. Both of these systems utilize our
proprietary test strips that provide users with the option of alternate site,
off-finger testing. We plan to continue to introduce new products as we strive
to achieve our goal of introducing pain-free, non-disruptive, continuous glucose
monitoring systems.

MAXIMIZE MARKET PENETRATION OF OUR PRODUCTS THROUGH STRATEGIC PARTNERSHIPS
AND THROUGH OUR WHOLESALE AND RETAIL DISTRIBUTION NETWORKS. We intend to build
upon our worldwide distribution relationship with LifeScan, in order to increase
our existing 5% share of the United States blood glucose test strip market, and
to gain significant market share in other countries. LifeScan presently has 38%
of the blood glucose test strip market in North America. Currently, 85% of the
test strips sold by LifeScan are photometric based and 15% are electrochemical.
Recently, LifeScan announced a shift in its marketing focus to electrochemical
blood glucose monitors from its historical marketing efforts based on
photometric monitors. We are currently the sole supplier of electrochemical
systems to LifeScan. We believe that the combination of our superior systems and
LifeScan's well-established "ONE TOUCH-Registered Trademark-" brand name,
promoted and sold by its 1,000 person global sales force, combined with its
worldwide distribution capabilities, provides a significant opportunity to
increase our market penetration. In addition, we market our low-cost alternative
blood glucose test strips for use in leading brand meters made by other
manufacturers through other strategic relationships with companies such as
Menarini Industrie Farmaceutical Riunite S.R.L. of Florence, Italy, B. Braun
Melsungen AG of Germany and Azupharma GmbH & Co., a unit of Novartis. Our other
products are sold primarily through our own wholesale and retail distribution
networks.

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<PAGE>
DEVELOP OR ACQUIRE A COMPREHENSIVE AND INTEGRATED ARRAY OF PRODUCTS FOR
DIABETES SELF-MANAGEMENT. We believe that we are well positioned to draw on our
industry knowledge, technical capabilities and market position to develop
additional innovative tools that people with diabetes can use to more
effectively manage their disease. We recently agreed to acquire Integ, which has
developed a proprietary sampling technology to extract interstitial fluid from
the top layers of the skin. In addition, we recently entered into a development
and license agreement with Debiotech, S.A. pursuant to which Debiotech will
develop an externally-worn insulin pump using Debiotech's patented Micro
Electro-Mechanical Systems technology. Through these and other selected
acquisitions and strategic partnerships, as well as our own ongoing research and
development efforts, we intend to develop and introduce products which will
offer people with diabetes and their health care professionals a comprehensive
and integrated approach to management of the disease and generate recurring
revenues for us.

CONTINUE TO MANUFACTURE HIGH-QUALITY PRODUCTS IN MASS VOLUMES AT LOW
COST. One of the most significant contributors to our growth has been and will
continue to be the build-up of manufacturing capacity for our proprietary
electrochemical blood glucose test strips. We have fully internalized this
aspect of our business by establishing and growing our high-quality, low-cost
and large-volume strip manufacturing capabilities at our Inverness, Scotland
facility. Currently, we have identified, and will continue to seek, those
portions of our operations that are outside of this core competency and will
continue to outsource those portions when appropriate.

OUR PRODUCTS

Our products consist of self-diagnostic tests which target diabetes
management and women's health, as well as nutritional supplements which are
targeted primarily to women.

DIABETES MANAGEMENT PRODUCTS

We develop, manufacture and market electrochemical blood glucose monitoring
systems, which include meters and associated test strips. The following chart
compares some of the characteristics of our first generation system, the ONE
TOUCH-Registered Trademark- FastTAKE-Registered Trademark-, relative to other
widely available electrochemical blood glucose monitoring systems being sold
today:

<TABLE>
<S> <C> <C>
COMPANY LIFESCAN, INC. ROCHE DIAGNOSTICS
ONE
TOUCH-Registered Trademark- Accu-Check-Registered Trademark-
CHARACTERISTIC/SYSTEM FastTAKE-Registered Trademark- Advantage-Registered Trademark-
<S> <C> <C>
Alternate site testing Yes No
(off-finger)
Sample size 1.5 4 (Comfort
(microliters) Curve-TM- Strip)
9
(Advantage-Registered Trademark-
Strip)
Test time (seconds) 15 40

<S> <C> <C>
COMPANY BAYER DIAGNOSTICS BAYER DIAGNOSTICS
Glucometer-Registered Trademark-
Elite-Registered Trademark-/Elite Glucometer-Registered Trademark-
CHARACTERISTIC/SYSTEM XL-Registered Trademark- DEX-Registered Trademark-
Alternate site testing No No
(off-finger)
Sample size 2/2 3-4
(microliters)
Test time (seconds) 30/30 30

<S> <C>
COMPANY MEDISENSE
Precision
CHARACTERISTIC/SYSTEM Q.I.D.-Registered Trademark-
Alternate site testing No
(off-finger)
Sample size 3.5
(microliters)
Test time (seconds) 20
</TABLE>

Our recently introduced second generation system, marketed by LifeScan as
the ONE TOUCH-Registered Trademark- Ultra, improves upon some of ONE
TOUCH-Registered Trademark- FastTAKE-REGISTERED TRADEMARK-'S industry leading
characteristics by offering even smaller sample sizes (one microliter) and
quicker test results (five seconds). In addition, ONE
TOUCH-Registered Trademark- Ultra, like ONE TOUCH-Registered Trademark-
FastTAKE-Registered Trademark-, provides alternate site, off-finger testing.

Both the ONE TOUCH-Registered Trademark- FastTAKE-Registered Trademark- and
ONE TOUCH-Registered Trademark- Ultra systems consist of an electrochemical
meter, with a large, easy to read visual display, and associated biosensor test
strips. To operate these systems, the strip is inserted into the meter, which
automatically activates in a standby

37
<PAGE>

mode. The user then applies a small blood sample to the end of the test strip,
which automatically initiates the test and displays results. Both systems
feature internal memory and data downloading capabilities to provide people with
diabetes information to more effectively manage their disease, either
individually or with their health care professionals. The ONE
TOUCH-Registered Trademark- FastTAKE-Registered Trademark- system has accounted
for the majority of our recent growth, and we expect the ONE
TOUCH-Registered Trademark- Ultra system will further enhance this growth.

We also produce and sell low-cost alternative blood glucose test strips for
use in other leading brand meters, such as our Excel-Registered Trademark- G
strips for use in the Bayer Glucometer-Registered Trademark-
Elite-Registered Trademark-. We distribute these low-cost alternative strips in
the United States and Europe. In addition, we distribute a comprehensive line of
ancillary diabetes care products, including lancets, glucose tablets, syringes
and specialty skin creams in the United States. Many of these products are sold
under store brand labels of retail drug store chains and mass merchandisers.

WOMEN'S HEALTH PRODUCTS

We market a variety of women's health products including pregnancy detection
and ovulation prediction tests, as well as nutritional supplement products, most
of which are marketed primarily to women.

Our pregnancy detection tests enable women to detect pregnancy at home
through urine sampling. These tests display visual results in approximately
three minutes. Substantially all of our pregnancy detection tests are
manufactured at our Galway, Ireland facility and are generally sold
over-the-counter by drug store chains and mass merchandisers under their own
store brand label, and increasingly we also market these products under our own
brand.

Our ovulation prediction tests, marketed as the Early Ovulation Predictor
under our brand name and under various store brand labels of retail drug chains
and mass merchandisers, are used by women to test for ovulation in their own
home as an aid to family planning and provide 24 to 48 hour notice of when
ovulation is likely to occur. Our tests are easy-to-use and provide clinically
accurate results in approximately three minutes. Substantially all of our
ovulation prediction tests are manufactured at our Galway facility.

We market a line of nutritional supplements through retail drug store chains
and mass merchandisers. Our nutritional supplement product line includes
SoyCare-TM-, Stresstabs-Registered Trademark-,
Ferro-Sequels-Registered Trademark- and Posture-Registered Trademark-.

MARKETING AND SALES

ELECTROCHEMICAL BLOOD GLUCOSE MONITORING SYSTEMS

All of our electrochemical blood glucose monitoring systems are marketed,
sold and distributed by LifeScan under our worldwide distribution agreement. We
established our relationship with LifeScan in 1995 and introduced our first
generation system in early 1998. LifeScan primarily markets, sells and
distributes our systems in North America and Europe and is expanding into
additional international markets, including Japan. LifeScan presently maintains
a global sales force of approximately 1,000 professionals who are focused
entirely on marketing their ONE TOUCH-Registered Trademark- family of blood
glucose monitoring systems, including ONE TOUCH-Registered Trademark-
FastTAKE-Registered Trademark- and ONE TOUCH-Registered Trademark- Ultra.
LifeScan has recently announced that it has shifted the primary focus of its
sales and marketing efforts to electrochemical based systems as part of its
broader strategy to increase market share. We are currently the sole supplier of
such systems to LifeScan.

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<PAGE>
LOW COST ALTERNATIVE BLOOD GLUCOSE TEST STRIPS FOR USE IN LEADING BRAND
METERS MADE BY OTHER MANUFACTURERS

We market and sell Excel-Registered Trademark- G, our low-cost alternative
test strip, for use in Bayer's Glucometer-Registered Trademark-
Elite-Registered Trademark- in the United States through our own wholesale and
retail distribution networks. In Europe, we market Excel-Registered Trademark- G
through a strategic partnership with Azupharma, a unit of Novartis. We also
utilize other strategic partnerships to market and sell additional alternative
test strips in Europe. We believe that these strategic partnerships allow us to
leverage the brand name, marketing and distribution strength of our partners in
their respective geographic area in order to enhance market penetration. For
example, we have a strategic partnership with Menarini under which Menarini
markets and sells test strips for use in its own electrochemical meter. We have
a similar arrangement with B. Braun which distributes another of our test strips
for use in its electrochemical meter.

OTHER ANCILLARY DIABETES CARE PRODUCTS

We market and sell our ancillary diabetes care products in the United
States, including lancets, glucose tablets, syringes and specialty skin creams.
We sell these products under our own brand names, as well as under store brands
of retail drug store chains, including CVS, Eckerd Drug, Walgreens and Rite-Aid,
and mass merchandisers, including Wal-Mart, Kmart and Target.

WOMEN'S HEALTH PRODUCTS

We market and sell our women's health products, including nutritional
supplements, under our own brand names, as well as under store brands of retail
drug store chains and mass merchandisers.

MANUFACTURING

Our principal manufacturing facilities are in Inverness, Scotland, where we
produce our electrochemical blood glucose test strips, and Galway, Ireland,
where we produce our pregnancy detection and ovulation prediction tests. In
addition, we utilize contract manufacturers to produce our electrochemical blood
glucose monitoring meters, ancillary diabetes care products, nutritional
supplements and other women's health products.

Since we opened our Inverness, Scotland facility in December 1995, we have
devoted substantial efforts to developing a technologically advanced production
facility that we believe gives us a competitive advantage. Our Inverness
facility is an FDA registered establishment which has been configured for highly
automated, low-cost production of advanced electrochemical biosensor test
strips. Currently consisting of 103,000 square feet, this facility integrates
manufacturing closely with our research and development efforts, to allow us to
produce mass volumes of test strips to the technical specifications set out by
our development teams. Our sophisticated manufacturing systems allow us to
automatically produce, cut and pack test strips in vials that consistently meet
the quality control standards which regulate our operation. These production
efforts permit us to commercialize and deliver innovative technology in a
consistent, high-quality and cost-effective manner. Although our existing
capacity at Inverness is sufficient to satisfy our contractual obligations, we
are currently expanding our production capacity to meet anticipated demand.

We produce our pregnancy detection and ovulation prediction tests at our
Galway, Ireland facility. Our Galway facility is an FDA registered establishment
which employs modern production techniques to produce consistent, high-quality
components that are assembled on-site and subsequently packaged by a third party
in the United States.

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STRATEGIC TRANSACTIONS

An important part of our business strategy is to enter into strategic
alliances and licensing arrangements with third parties, primarily medical
product companies, for the development and distribution of certain products. We
also pursue a strategy of selective acquisitions of companies, assets and
technologies which we believe will enhance our ability to deliver innovative
products to the marketplace at low cost.

WORLDWIDE DISTRIBUTION AGREEMENT WITH LIFESCAN

In 1995, we entered into an exclusive worldwide distribution agreement with
LifeScan, a subsidiary of Johnson & Johnson, which was amended in June 1999.
Under the terms of the agreements with LifeScan, we develop and manufacture, and
LifeScan distributes, our electrochemical blood glucose monitoring system, and
any new systems consisting of new meters and electrochemical strips to which we
and LifeScan agree. We commenced shipments of ONE TOUCH-Registered Trademark-
FastTAKE-Registered Trademark- in early 1998. We recently received FDA clearance
for our second generation electrochemical system which LifeScan is marketing as
the ONE TOUCH-Registered Trademark- Ultra and which we expect to begin shipping
in the fourth quarter of 2000. Our distribution agreement is scheduled to remain
in effect through December 31, 2010 and may be extended by LifeScan indefinitely
if its sales meet certain targets. The agreement also provides that we will be
LifeScan's exclusive supplier of the components of our electrochemical systems,
subject to certain rights of LifeScan to make or obtain components from others
if we fail to meet our supply obligations. The distribution agreement provides
for periodic forecasts by LifeScan of its planned purchases.

The price per test strip varies under the distribution agreement depending
on the volumes purchased by LifeScan. The price for certain meters is based upon
an agreed to schedule, which is volume and time dependent. The price for the
components other than test strips and these meters is our cost, including
appropriate allocations of overhead. If our sale of test strips to LifeScan
ceases to be profitable, the agreement provides that the price of test strips
will be increased to provide us with an amount that gives us a commercially
reasonable profit. If LifeScan's purchases of test strips fall below a certain
level following calendar year 2001, we may terminate the distribution agreement.
The distribution agreement does not otherwise require LifeScan to make any
purchases from us.

As part of our relationship, we are prohibited from selling components of a
complete electrochemical system to measure blood glucose, consisting of test
strips, instruments and related components. While LifeScan is not restricted
from selling other systems, including electrochemical systems, for blood glucose
monitoring, if LifeScan either (i) introduces such a system not sourced from us
prior to the end of 2001, or (ii) fails to purchase specified minimum annual
levels of test strips, we are released from our restriction from selling
complete electrochemical glucose measurement systems. If this restriction on us
terminates as a result of LifeScan's failure to purchase specified minimum
annual volumes of test strips, we will remain prohibited from supplying products
to any self-test business which has sales in excess of certain specified
amounts. Under certain circumstances, if we fail to supply products in the
volumes forecasted and ordered by LifeScan, LifeScan will automatically become
entitled to produce the products itself.

If we make a Section 510(k) Notification with respect to any electrochemical
system for the measurement of glucose in humans which does not use test strips
or which does not measure an in vitro fluid sample, we are required to provide
LifeScan with the opportunity to enter into a distribution agreement with us
with respect to the system in accordance with general terms previously agreed to
in connection with the existing arrangements.

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<PAGE>
AGREEMENT WITH MENARINI

In August 1996, we entered into an agreement with Menarini pursuant to which
we became a principal supplier of blood glucose test strips for blood glucose
meters distributed or to be distributed by Menarini in selected markets in
Europe and certain countries in other parts of the world. Under the agreement,
Menarini is subject to certain minimum purchases of products from us, and we
have agreed not to supply any third party with such products in the selected
markets for the term of the agreement. A significant part of the existing
business of Menarini is the supply of blood glucose test strips and meters.
Shipments under this agreement commenced in the second half of 1997. The blood
glucose test strips supplied to Menarini pursuant to this agreement are
manufactured at our Inverness, Scotland facility.

PENDING ACQUISITION OF INTEG INCORPORATED

On October 3, 2000, we entered into a definitive agreement to acquire Integ
Incorporated, a publicly traded development stage company. Integ has developed a
proprietary sampling technology to extract interstitial fluid from the top
layers of the skin. We may be able to use Integ's technology, supplemented by
our additional research and development efforts, to develop glucose monitoring
systems that do not require blood.

The purchase price for Integ consists of approximately 1.9 million shares of
our common stock in exchange for all of Integ's outstanding common equity and
cash to redeem shares of Integ's preferred stock. We will record a significant
amount of intangible assets in connection with this acquisition and will incur a
significant charge in the quarter in which the acquisition is completed to write
off a portion of the purchase price as in-process research and development. We
anticipate that the acquisition will close early in the first quarter of 2001.
However, our acquisition of Integ is subject to various closing conditions,
including approval by Integ's stockholders, and may not be completed by this
date, if at all.

DEVELOPMENT AND LICENSE AGREEMENT WITH DEBIOTECH, S.A.

On October 14, 2000, we entered into a development and license agreement
with Debiotech, S.A. pursuant to which Debiotech will seek to develop an
externally-worn insulin pump using its patented Micro Electro-Mechanical System
technology (MEMS). We have agreed to pay Debiotech a $10 million development and
license fee by December 30, 2000 and have received the exclusive right to
commercialize products using Debiotech's MEMS technology for the diagnosis,
prevention and treatment of diabetes. Under the terms of the agreement,
Debiotech is solely responsible for all expenditures necessary to complete the
development of the externally-worn insulin pump, and is obligated to assist us
in establishing large scale manufacturing of the pump. The development efforts
to be undertaken by Debiotech will be significant and we are uncertain when and
if a product which can be commercialized by us will emerge from these efforts.

The agreement also provides that we will pay Debiotech a royalty on future
sales of the externally-worn insulin pump that Debiotech has undertaken to
develop. We may, however, at any time after making the initial payment to
Debiotech, give notice to terminate our rights and obligations under the
license, which will then terminate six months after the delivery of the notice.
Under the agreement, we have the option to enter into a second agreement with
Debiotech to develop an insulin pump to be implanted under the skin. Debiotech
must give notice to us that it intends to commence a development program for the
implantable insulin pump, and we may then enter into an agreement with Debiotech
to develop and license the implantable pump on similar terms as the externally
worn pump.

RESEARCH AND DEVELOPMENT

We are focusing our research and development efforts primarily on the
development of our diabetes self-test diagnostic products, including
electrochemical blood glucose monitoring systems,

41
<PAGE>
alternative low-cost test strips and non-invasive and continuous blood glucose
measurement technologies. In addition, we devote a lesser degree of resources to
the development of new products and enhanced features for our line of women's
health products. Most of our research and development activities are carried out
in Inverness, Scotland, Waltham, Massachusetts, Galway, Ireland, and Yavne,
Israel. We supplement our internal research and development efforts with third
parties' efforts either through co-development or licensing arrangements, or
through product or technology acquisitions. In connection with our
co-development or licensing activities, we may provide financial development
assistance to these parties and may also utilize our own research and
development resources to design certain portions of such products.

Total research and development expenses for the nine months ended
September 30, 2000 and the years ended December 31, 1999 and 1998 were
$9.5 million, $6.9 million and $7.4 million, respectively. Portions of our
research and development expenditures were reimbursed by LifeScan through
milestone payments. We expect that we will spend a significant and increasing
amount on research and development efforts during the balance of 2000 and in
2001.

PATENTS AND PROPRIETARY TECHNOLOGY; TRADEMARKS

The medical products industry, including the diagnostic testing industry,
places considerable importance on obtaining patent and trade secret protection
for new technologies, products and processes. Our success will depend, in part,
on our ability to obtain patent protection for our products and manufacturing
processes, to preserve our trade secrets and to operate without infringing the
proprietary rights of third parties.

We hold certain patent rights, have certain patent applications pending and
expect to seek additional patents in the future. However, we can not assure you
as to the success or timeliness in obtaining any such patents or as to the
breadth or degree of protection that any such patents will afford us. The patent
position of medical products and diagnostic testing firms is often highly
uncertain and usually involves complex legal and factual questions. There is a
substantial backlog of patents at the United States Patent and Trademark Office.
No consistent policy has emerged regarding the breadth of claims covered in
medical product patents. Accordingly, we can not assure you that patent
applications relating to our products or technology will result in patents being
issued; that, if issued, such patents will afford adequate protection to our
products; or, if patents are issued to us, that our competitors will not be able
to design around such patents. In general, patents in blood glucose monitoring
have offered protection in the form of delaying competitors in their efforts to
develop and produce competitive systems rather than completely foreclosing a
competitor's ability to design, develop and produce a product that is
competitive. In that regard, a company's research and development efforts,
supplemented by the timing protection afforded by protective patents, are what
leads to a competitive advantage.

We believe our research and development efforts, supplemented by our patent
and other intellectual property protection efforts, have given us a competitive
advantage in the development of our innovative electrochemical blood glucose
monitoring products. Accordingly, although we have several significant patents
and patent applications covering relevant portions of our electrochemical blood
glucose monitoring technology, we believe that our continued research and
development efforts, and our intellectual property protection efforts for newly
developed technology, are most significant in achieving and maintaining a
position of technology and commercial leadership. In that regard, we have
recently agreed to acquire Integ which has developed technology to test glucose
through interstitial fluid samples. We believe that this technology is
innovative and may be viable for commercialization, although our continued
research and development efforts will be needed to move towards
commercialization. Although Integ's patents offer some protection from
competition, our further efforts will be required to realize the potential
benefits from these patents, which are also subject to certain third-party
licensing rights granted to another company that is in the diabetes management
business.

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The medical products industry, including the diagnostic testing industry,
historically has been characterized by extensive litigation regarding patents,
licenses and other intellectual property rights. We could and have incurred
substantial costs in defending ourself against patent infringement claims and in
asserting such claims against others, and will likely continue to do so. Under
our arrangements with LifeScan, we have agreed to indemnify LifeScan for any
claims that our electrochemical blood glucose monitoring products that they
market, sell and distribute infringes any patents. To determine the priority of
inventions, we may also have to participate in interference proceedings declared
by the U.S. Patent and Trademark Office, which could also result in substantial
costs to us. If the outcome of any such litigation is adverse to us, our
business could be materially adversely affected.

In addition, we are sometimes required to obtain licenses to patents or
other proprietary rights of third parties to market our products. We can not
assure you that licenses required under any such patents or proprietary rights
would be made available on terms acceptable to us, if at all. If we do not
obtain such licenses, we could encounter delays in product market introductions
while we attempt to design around such patents or other rights, or we may be
unable to develop, manufacture or sell such products in certain countries, or at
all.

We also seek to protect our proprietary technology, including technology
that may not be patented or patentable, in part through confidentiality
agreements and, if applicable, inventors' rights agreements with our
collaborators, advisors, employees and consultants. We can not assure you that
these agreements will not be breached, that we will have adequate remedies for
any breach or that our trade secrets will not otherwise be disclosed to, or
discovered by, competitors. Moreover, we may from time to time conduct research
through academic advisors and collaborators who are prohibited by their academic
institutions from entering into confidentiality or inventors' rights agreements.

Finally, we believe that certain of our trademarks in the nutritional
supplements product line are valuable assets and are important to the marketing
of the nutritional supplements. Substantially all of these trademarks have been
registered with the U.S. Patent and Trademark Office. We can not assure you,
however, that registrations will afford adequate protection to us and not be
challenged as unenforceable or invalid, or not be infringed. In addition, we
could incur substantial costs in defending suits brought against us or in
prosecuting suits in which we asserted rights under such registrations.

GOVERNMENT REGULATION

Our research, development and clinical programs, as well as our
manufacturing and marketing operations, are subject to extensive regulation by
numerous governmental authorities in the United States and other countries. Most
of our self-test products, require governmental approvals for commercialization.
New products may require pre-clinical and clinical trials. Manufacturing and
marketing of many of our products are subject to the rigorous testing and
approval process of the United States Food and Drug Administration and
corresponding foreign regulatory authorities. The regulatory process, which
includes pre-clinical and clinical testing of many of our products to establish
their safety and effectiveness, can take many years and require the expenditure
of substantial financial and other resources. Data obtained from pre-clinical
and clinical activities are susceptible to varying interpretations that could
delay, limit or prevent regulatory approval. In addition, delays or rejection
may be encountered based upon changes in, or additions to, regulatory policies
for device marketing authorization during the period of product development and
regulatory review. Delays in obtaining such approvals could adversely affect the
marketing of products developed by us and our ability to generate commercial
product revenues.

In addition, we are required to meet regulatory requirements in countries
outside the United States, which can change rapidly with relatively short
notice, resulting in our products being banned in certain countries with
consequent loss of revenues and income. Foreign regulatory agencies can also

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introduce test format changes which, if not quickly addressed by us, can result
in restrictions on sales of our products. Such changes are not uncommon due to
advances in basic research.

The manufacturing, processing, formulation, packaging, labeling and
advertising of our nutritional supplements is subject to regulation by one or
more federal agencies, including the FDA, the Federal Trade Commission (FTC) and
the Consumer Product Safety Commission. These activities are also regulated by
various agencies of the states, localities and foreign countries in which our
nutritional supplements are now sold or may be sold in the future. In
particular, the FDA regulates the safety, manufacturing, labeling and
distribution of dietary supplements, including vitamins, minerals and herbs, as
well as food additives, over-the-counter (OTC) and prescription drugs and
cosmetics. The Good Manufacturing Practices promulgated by the FDA are different
for nutritional supplement, drug and device products. In addition, the FTC has
overlapping jurisdiction with the FDA to regulate the promotion and advertising
of dietary supplements, OTC drugs, cosmetics and foods.

THIRD-PARTY REIMBURSEMENT

Self-monitoring of blood glucose is a standard of care in the United States
and other developed countries. The costs associated with the purchase of blood
glucose monitoring products such as meters and test strips are generally
reimbursed. Users of our systems are currently being reimbursed by Medicare,
Medicaid and a wide array of preferred provider organizations in the United
States. Currently, forty states have implemented legislation that requires
private health insurers and health maintenance organizations to reimburse people
with diabetes for the costs of blood glucose monitoring systems and supplies.
Reimbursement and health care payment systems in international markets vary
significantly by country, and include both government-sponsored health care and
private insurance.

COMPETITION

DIABETES MANAGEMENT PRODUCTS

The medical products industry, including the self-test industry, is rapidly
evolving and developments are expected to continue at a rapid pace. Competition
in this industry is intense and we expect it to increase as new products and
technologies become available and new competitors enter the market. Our
competitors in the United States and abroad are numerous and include, among
others, diagnostic testing and medical products companies, universities and
other research institutions. Our success depends, in part, upon developing and
maintaining a competitive position in the development of products and
technologies in our area of focus. Our competitors may succeed in developing
technologies and products that are more effective than those that have been or
are being developed by us or that render our technologies or products obsolete
or noncompetitive. Our competitors may also succeed in obtaining patent
protection or other intellectual property rights that would prevent us from
developing our potential products, or in obtaining regulatory approval for the
commercialization of their products more rapidly or effectively than us.
Finally, many of our existing or potential competitors have or may have
substantially greater research and development capabilities, clinical,
manufacturing, regulatory and marketing experience and financial and managerial
resources than us.

We market low cost alternative test strips that are used in other
manufacturers' electrochemical blood glucose monitoring systems. If we succeed
in the alternative strip market, others may attempt to enter this market with
similar products. In addition, the introduction of lower-priced alternative test
strips could lead the manufacturers of the systems, with which our low cost
alternative test strips are compatible, to lower their own test strip prices,
thereby reducing or eliminating our price advantage.

We are also aware of several of our competitors who are attempting to
develop non-invasive blood glucose monitoring technologies. Non-invasive blood
glucose monitoring involves methods for measuring blood glucose levels without
the need to draw blood and, in certain proposed configurations, without the need
to utilize disposable components, such as test strips. We and several other

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manufacturers are pursuing a number of different technological approaches to
non-invasive blood glucose monitoring. These include near-infrared spectroscopy,
which involves shining a beam of near-infrared light to penetrate the skin and
determine the amount of glucose in the blood, and reverse iontophoresis, which
utilizes a "patch" system to extract glucose through the skin for measurement by
an external meter. In addition, we and several other manufacturers are pursuing
minimally invasive approaches to glucose monitoring such as interstitial fluid
testing. The development and successful introduction of any such products by our
competitors could harm our business.

Four major medical products companies, Bayer Diagnostics, LifeScan, the
MediSense division of Abbott Laboratories and Roche Diagnostics, currently
account for more than 90% of worldwide sales of all blood glucose monitoring
systems. In addition, several smaller companies are in the process of developing
and rolling out blood glucose monitoring systems. We believe that people with
diabetes currently consider the following factors in selecting a blood glucose
monitoring system:

- brand name;

- recommendations by health care professionals;

- level of pain in use;

- size of the meter;

- ease and convenience of use;

- test time;

- accuracy and consistency;

- availability, cost and reimbursement status; and

- memory and data management.

In the ancillary diabetes care industry, which includes lancets, glucose
tablets, syringes, and specialty skin creams, competition is based principally
upon brand name recognition, price, quality of products, customer service and
marketing support. There are numerous companies in this industry selling
products to retailers. A number of these companies, particularly manufacturers
of nationally advertised brand name products, are substantially larger than us
and have greater financial resources.

WOMEN'S HEALTH PRODUCTS

Competition in the pregnancy detection and ovulation prediction market is
intense. Our competitors in the United States are numerous and include, among
others, large medical and consumer products companies as well as private label
manufacturers. For brand name companies, competition principally centers around
brand name recognition. For private label manufacturers, competition is based
primarily on delivering products with substantially the same features and
performance as brand name products, at a lower price. Many of our competitors
have substantially greater financial, production, marketing and distribution
resources than us. In the women's health market, we believe that we have
developed a significant market penetration with our private label and branded
pregnancy detection and ovulation prediction tests. We believe that we can
continue to compete effectively in the women's health market based on our
research and development capabilities, advanced manufacturing expertise and
established wholesale and retail distribution networks.

In the nutritional supplements industry, competition is based principally
upon brand name recognition, price, quality of products, customer service and
marketing support. There are numerous companies in this industry selling
products to retailers. A number of these companies, particularly manufacturers
of nationally advertised brand name products, are substantially larger than us
and have greater financial resources.

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EMPLOYEES

As of September 30, 2000, we had a total of 795 full-time employees, of
which 65 were located in the United States. In addition, we utilize the services
of a number of consultants specializing in research and development in our
targeted markets, regulatory compliance, strategic planning, marketing and legal
matters.

LEGAL PROCEEDINGS

ABBOTT LABORATORIES AND ABBOTT LABORATORIES, LIMITED V. LIFESCAN CANADA LTD.,
LIFESCAN, INC. AND SELFCARE, INC.

On November 23, 1999, Abbott Laboratories and Abbott Laboratories, Limited
(Abbott) commenced a lawsuit against us, LifeScan Canada Ltd. (LifeScan Canada)
and LifeScan in the Canadian Federal Court, Trial Division, Court No. T-2061-99.
The Statement of Claim alleges that LifeScan Canada sells electrode strips for
use in the ONE TOUCH-Registered Trademark- FastTAKE-Registered Trademark- blood
glucose monitoring system supplied by us to LifeScan. It is also alleged that
the sale of such electrode strips in Canada infringes Canadian Patent
No. 1,226,036 issued to Genetics International, Inc., an alleged predecessor in
title of Abbott. Abbott is seeking an injunction against the manufacture,
importing, offering for sale and selling of ONE TOUCH-Registered Trademark-
FastTAKE-Registered Trademark- electrode strips in Canada, as well as damages or
the profits of the defendants arising from the sales of such electrode strips in
Canada. In our Statement of Defense and Counterclaim, we deny infringement and
attack the validity of the patent on a number of grounds. Abbott has not filed a
defense to our Counterclaim, and the parties have not yet commenced documentary
discovery. At this stage of the litigation, it is not possible to predict the
outcome of the action. A final ruling adverse to us could have a material
adverse impact on our sales, operations or financial performance in Canada.

ABBOTT LABORATORIES V. LIFESCAN, INC. AND SELFCARE, INC.

In late October 1998, Abbott commenced a lawsuit against us and LifeScan in
the United States District Court for the District of Massachusetts. The
complaint alleges that the disposable test strips used in the ONE
TOUCH-Registered Trademark- FastTAKE-Registered Trademark- blood glucose
monitoring system supplied by us to LifeScan infringe U.S. Patent No. 5,820,551
(the Test Strip Patent) issued to Abbott on October 13, 1998. Abbott is seeking
damages and an injunction against sales in the United States. Abbott also sought
to enjoin LifeScan and us from the manufacture, use and sale of these blood
glucose test strips in the United States during the pendency of the infringement
litigation. On February 22, 1999, the court denied Abbott's motion for a
preliminary injunction and stated "...that Abbott is unlikely to succeed on the
merits of its claim of patent infringement...". Discovery in the case is
continuing. Although a final ruling against us could have a material adverse
impact on our sales, operations or financial performance, based on a review of
the Abbott claims by patent counsel and the aforementioned court ruling, we
believe that the ONE TOUCH-Registered Trademark- FastTAKE-Registered Trademark-
test strips do not infringe the Test Strip Patent and that Abbott's claims will
be proven to be without merit.

ABBOTT LABORATORIES V. SELFCARE, INC. AND PRINCETON BIOMEDITECH CORPORATION

In April 1998, Abbott commenced a lawsuit against us and Princeton
BioMeditech Corporation (PBM), which manufactured certain products for us, in an
action filed in the United States District Court for the District of
Massachusetts (District Court), asserting patent infringement arising from our
and PBM's manufacture, use and sale of products that Abbott claims are covered
by one or more of the claims of U.S. Patent Nos. 5,073,484 and 5,654,162 (the
Pregnancy Test Patents), to which Abbott asserts that it is the exclusive
licensee. Abbott claims that certain of our products relating to pregnancy
detection and ovulation prediction infringe the Pregnancy Test Patents. Abbott
is seeking an order finding that we and PBM infringe the Pregnancy Test Patents,
an order permanently enjoining us and

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PBM from infringing the Pregnancy Test Patents, compensatory damages to be
determined at trial, treble damages, costs, prejudgment and post-judgment
interest on Abbott's compensatory damages, attorneys' fees, and a recall of all
existing of our or PBM products found to infringe the Pregnancy Test Patents. On
August 5, 1998, the court denied Abbott's motion for a preliminary injunction.
On March 31, 1999, the District Court granted a motion by us, PBM, and
PBM-Selfcare LLC (the LLC), the joint venture between the two companies, filed
to amend their counterclaim against Abbott, asserting that Abbott is infringing
U.S. Patent Nos. 5,559,041 (the 041 patent) and 5,728,587 (the 587 patent),
which are owned by the LLC, and seeking a declaration that Abbott infringes the
patents, permanent injunctive relief, money damages and attorneys' fees. On
November 5, 1998, Abbott filed suit in the United States District Court for the
Northern District of Illinois seeking a declaratory judgment of
non-infringement, unenforceability and invalidity of the 041 patent and 587
patent. The Illinois court granted our motion to transfer the aforementioned
Illinois action to Massachusetts. We and our co-defendant moved for summary
judgment on our defense that the Abbott patents are invalid and on
September 29, 2000 the court granted partial summary judgment, holding that
certain key claims in Abbott's patents are invalid as a matter of law. The court
refused to grant summary judgment on Abbott's claims of infringement or our
remaining claims of invalidity, which will now go forward to trial. We believe
that we have strong defenses against the claims and will continue to defend the
case vigorously; however, a final ruling against us would have a material
adverse impact on our sales, operations or financial performance.

ABBOTT LABORATORIES ET ANOTHER V. CORBRIDGE GROUP PTY LTD AND SELFCARE PTY LTD.

In November 1999, Abbott Laboratories (Abbott) commenced a lawsuit against
our Australian subsidiary, Selfcare Pty Ltd. and Corbridge, its Australian
distributor, in the Federal Court of Australia. The complaint alleged that the
Selfcare-Registered Trademark- Excel-Registered Trademark- ET disposable test
strips (ET Test Strips) supplied by us to Corbridge infringe Australian Patent
No. 572,138 (the Test Strip Patent) issued to Abbott's predecessor in title on
May 5, 1988 (and assigned to Abbott only a few weeks prior to commencement of
the proceedings). These test strips are marketed in Australia for use with
Abbott's ExacTech brand sensor device. Abbott is seeking damages and an
injunction against supply of the test strips in Australia. Abbott also sought to
enjoin the defendants from the importation and supply of these blood glucose
test strips in Australia during the pendency of the infringement litigation. On
November 29, 1999, the court denied Abbott's motion for a preliminary injunction
and on December 17, 1999, ordered an unusually fast track preparation for a
final trial which commenced on April 26, 2000 in Sydney, Australia and was
completed in September 2000.

It is unlikely that any ruling against the Australian defendants could have
an adverse impact on our sales, operations or financial performance elsewhere in
the world, and based on a review of the Abbott claims by Australian counsel and
counsel's analysis of the course of the trial, including the judge's comments
and questions, we believe that the ET Test Strips are unlikely to be found to
infringe the Test Strip Patent and that Abbott's claims will be dismissed.
Furthermore, the Australian defendants have counterclaimed against Abbott
seeking revocation of the Test Strip Patent as well as damages and injunctive
relief for breaches of Australian antitrust law and misleading conduct
prohibitions. We continue to believe that its counter claims have good prospects
of success and that, under Australian law, Abbott will be required to pay a
large portion of the defendants' legal costs incurred in the proceedings.

We are now awaiting judgment on the issues of infringement, misleading
conduct and validity, with the hearing of our antitrust claims, and Abbott's
damages claim, deferred pending judgment on the issues that are the subject of
the initial trial.

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BECTON, DICKINSON AND COMPANY V. SELFCARE, INC. ET. AL.

On January 3, 2000, Becton, Dickinson and Company (Becton Dickinson) filed
suit against us in the U.S. District Court for the District of Delaware (Case
No: 00-001) alleging that certain pregnancy and ovulation test kits sold by us
infringe U.S. Patent Nos. 4,703,017 and 5,591,645. We were served with Becton
Dickinson's complaint in April 2000 and filed our answer on May 30, 2000.
Because both patents are currently involved in proceedings before the patent
office, we have moved to stay the litigation until those proceedings are
complete. That motion is pending without decision. While a final ruling against
us could have a material adverse impact on our sales, operations or financial
performance, we believe that we have strong defenses and intend to defend this
litigation vigorously.

CAMBRIDGE BIOTECH CORPORATION AND CAMBRIDGE AFFILIATE CORPORATION V. RON
ZWANZIGER, SELFCARE, INC., CAMBRIDGE DIAGNOSTICS IRELAND, LTD., TRINITY BIOTECH,
PLC AND PASTEUR SANOFI DIAGNOSTICS

On January 22, 1999, Cambridge Biotech Corporation (CBC) and Cambridge
Affiliate Corporation (CAC) filed suit (Civil Action No. 99-378) in the
Middlesex County Massachusetts Superior Court against us, our President, Ron
Zwanziger, Cambridge Diagnostics Ireland, Ltd. (Cambridge Diagnostics), Trinity
Biotech plc (Trinity) and Pasteur Sanofi Diagnostics (Pasteur). The complaint
alleges, among other things, that actions taken by Mr. Zwanziger as President of
CAC in connection with the sale by Cambridge Diagnostics of its diagnostics
business to Trinity were not properly authorized and that, as a result of the
actions, CBC may lose the benefit of valuable patent licenses from Pasteur.
CBC's requested relief is to have the CAC/Trinity manufacturing and sales
agreements declared null and void, the license between Pasteur and CBC declared
to be in full force, to recover damages allegedly caused by us and Mr.
Zwanziger, and to recover damages due to Pasteur's actions. CBC moved for a
preliminary injunction, seeking to enjoin us, Cambridge Diagnostics,
Mr. Zwanziger, and Trinity from acting pursuant to the CAC/Trinity agreements
and to enjoin Pasteur from terminating its license agreements with CBC.
Following a hearing on January 25, 1999, the Court denied CBC's motion.
Thereafter, Pasteur successfully moved for dismissal on grounds that the issues
between it and CBC should be litigated in France. The plaintiffs' appeal from
that ruling is pending. Trinity has moved for dismissal on grounds that the
issues between it and CBC should be litigated in Ireland or, instead, should be
arbitrated. The Court denied Trinity's motion. The parties are currently
conducting discovery. We believe that CBC's complaint against us, Mr. Zwanziger,
and Cambridge Diagnostics is without merit and intends to defend the action
vigorously. We have filed an Answer denying the material allegations of the
Complaint along with a Counterclaim to declare its actions lawful and valid and
to redress harm that may result if the court invalidates the sale of Cambridge
Diagnostics' diagnostics business to Trinity despite CBC's representations to us
that it had the right to make such a sale. We do not believe that an adverse
outcome would have a material impact on our sales, operations or financial
performance.

INTERVENTION, INC V. SELFCARE, INC. AND COMPANION CASES

In May 1999, Intervention, Inc., a California corporation, filed separate
suits in California Contra Costa County Superior Court against us, four of our
private label customers and its major competitors and their private label
customers alleging that, under Section 17200 of the California Business and
Professions Code, the defendants' labeling on their home pregnancy tests is
misleading as to the level of accuracy under certain conditions. The plaintiff
seeks restitution of profits on behalf of the general public, injunctive relief
and attorneys' fees. We are defending our private label customers under
agreement and believes that the actions are without merit and intend to defend
them vigorously. We do not believe that an adverse ruling against us would have
a material adverse impact on our sales, operations or financial performance.

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MATSUSHITA ELECTRIC INDUSTRIAL CO., LTD. V. SELFCARE, INC., INVERNESS
MEDICAL, INC. AND CAN-AM CARE CORPORATION

On March 2, 2000, Matsushita Electric Industrial Co., Ltd. (Matsushita)
filed suit (Case Number 00-143) in the United States District Court for the
District of Delaware against us and two of our subsidiaries. The complaint
alleges patent infringement of a patent used in connection with the manufacture
and distribution of our Excel-Registered Trademark- G test strips for use with
the Bayer Glucometer Elite-Registered Trademark- meter. We intend to defend the
action vigorously. Although a final ruling against us could have a material
adverse impact on the our sales, operations or financial performance, based on a
review of the Matsushita patent by our outside patent counsel, we believe that
its Excel-Registered Trademark- G test strips do not infringe the Matsushita
Patent. Matsushita has recently indicated that it may expand its suit to cover
an additional patent against an additional product but has yet to file
pleadings.

ROCHE DIAGNOSTICS CORPORATION VS. SELFCARE, INC. D/B/A INVERNESS MEDICAL
TECHNOLOGY, INC. ET. AL.

On July 6, 2000, we were served with a complaint filed in the federal court
in Indianapolis, Indiana by Roche Diagnostics Corporation against us and several
of our subsidiaries for patent infringement. The complaint alleges that the
Excel-Registered Trademark- G blood glucose test strips designed for use with
test meters marketed by Bayer Corporation infringe a United States patent owned
by Roche. We believe that the Excel-Registered Trademark- G strips do not
infringe the patent at issue but, because the case was only recently filed, have
not yet completed our testing and analysis. A final ruling against us could have
a material adverse impact on our sales, operations or financial performance.

In addition, we are also party to certain other legal proceedings in the
ordinary course of our business, the outcome of which we do not expect will harm
our business, financial condition or results of operations.

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MANAGEMENT

Our directors, executive officers and significant employees are as follows:

<TABLE>
<CAPTION>
NAME AGE POSITION
---- ------------------- --------
<S> <C> <C>
Ron Zwanziger............................. 46 President, Chief Executive Officer and
Chairman
Ernest A. Carabillo, Jr................... 62 Director
Carol D. Goldberg(1)...................... 69 Director
John F. Levy(2)........................... 53 Director
Robert M. Oringer......................... 40 Director and Executive Vice President
Edward B. Roberts, Ph.D.(2)............... 64 Director
Peter Townsend(2)......................... 66 Director
Willard L. Umphrey(1)..................... 59 Director
Kenneth D. Legg, Ph.D..................... 57 Executive Vice President and Secretary
John P. Alberico.......................... 42 Managing Director--Inverness Medical
Limited
Anthony Bernardo.......................... 48 Vice President of New Business Development
Duane L. James............................ 40 Vice President of Finance and Treasurer
Keith May, Ph.D........................... 46 Vice President, Research and Development
Inverness Medical Limited
Jerry McAleer, Ph.D....................... 47 Vice President of Research and
Development,
Inverness Medical Technology, Inc.
and Inverness Medical Limited
David Scott, Ph.D......................... 43 Chairman, Inverness Medical Limited
John Yonkin............................... 40 Vice President and General Manager,
Inverness Medical, Inc.
</TABLE>

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

(1) Member of the Compensation Committee

(2) Member of the Audit Committee

RON ZWANZIGER has served as our Chairman, Chief Executive Officer and
President since its inception in 1992. From 1981 until 1991, he was chairman and
chief executive officer of MediSense, a medical device company.

ERNEST A. CARABILLO, JR. has served on the Board of Directors since
September 2000. He is the founder and president of EXPERTech Associates, Inc.,
which provides regulatory, clinical and quality management consulting services
to medical device companies where he has served as president since 1990. He has
also served in management positions at Baxter Healthcare, C.R. Bard and the
medical device/pharmaceutical division of Union Carbide. Mr. Carabillo has
served as the head of three separate divisions of the Food and Drug
Administration and as Associate Director of Regulatory Affairs for the
President's Office of Drug Policy.

CAROL D. GOLDBERG has served on the Board of Directors since August 1992.
Since December 1989, she has served as president of the AVCAR Group, Ltd., an
investment and management consulting firm in Boston, Massachusetts.
Ms. Goldberg is a director of American Service Group, Inc., a managed healthcare
company, and The Gillette Company, a consumer products company.

JOHN F. LEVY has served on the Board of Directors since August 1996. Since
1993, he has been an independent consultant. Mr. Levy served as president and
chief executive officer of Waban, Inc., a warehouse merchandising company, from
1989 to 1993.

ROBERT M. ORINGER joined the Board of Directors in February 1998 upon the
consummation of our acquisition of Can-Am Care Corporation. He has served as
president of Can-Am since he first joined

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that company in 1989. Can-Am was engaged in the distribution of diabetes care
products, primarily to the U.S. market. He was appointed Executive Vice
President in October of 2000.

EDWARD B. ROBERTS has served on the Board of Directors since April 1992. He
is the David Sarnoff Professor of Management of Technology at the Massachusetts
Institute of Technology, where he has been a faculty member since 1963.
Mr. Roberts was General Partner of Zero Stage Capital and First Stage Capital
Equity Funds, two venture capital funds, from 1991 to 1999. Mr. Roberts was
co-founder and chairman of Pugh-Roberts Associates, an international management
consulting firm specializing in strategic planning and technology management,
now a division of PA Consulting Group. He co-founded and is a director of
Medical Information Technology, Inc., a producer of hospital information
systems. He is a director of Advanced Magnetics, Inc., a medical imaging
company, Pegasystems, Inc., a developer of customer management software, and
NETsilicon, Inc., a developer of semiconductor devices and software.

PETER TOWNSEND has served on the Board of Directors since August 1996.
Mr. Townsend served as chief executive officer and a director of Enviromed,
plc., a medical products company, from 1991 to 1995, when he retired.

WILLARD L. UMPHREY has served on the Board of Directors since
December 1992. He was the co-founder, chairman and CEO of the Quantitative Group
of Funds, an investment management company. He also served as president and
treasurer of U.S. Boston Capital Corporation, a broker-dealer, prior to
resigning in July 1999.

KENNETH D. LEGG, PH.D. became our Secretary and Vice President in charge of
U.S. Operations in November 1991. In May 1999, Dr. Legg assumed the position of
Executive Vice President.

JOHN P. ALBERICO, PH.D. joined Inverness Medical Limited in July 1999 to
serve as its Managing Director. From December 1998 to July 1999, Mr. Alberico
served as Vice President of Operations for Bionostics Inc., a privately held
biotechnology company based in Canada. Prior to December 1998, Mr. Alberico
served as Vice President of Manufacturing for Nova Biomedical Inc., another
biotechnology company. Nova Biomedical is a world technology leader in the
development of fast, whole blood analyzers and serves as a major contract
manufacturer for us.

ANTHONY BERNARDO became our Vice-President of New Business Development in
April 2000. He has served as Senior Vice President and Director of Operations
for a division of Polaroid Corporation from 1997 to the present. From 1991 to
1997, Mr. Bernardo was Vice President of Site Operations for Paramax Chemistry,
a unit of Dade Behring, Inc. During his tenure at Paramax, Mr. Bernardo oversaw
the acquisition and integration of an in vitro diagnostics business unit
purchased from DuPont.

DUANE L. JAMES has served as our Corporate Controller since February 1996
and our Chief Accounting Officer since August 1998. Mr. James became our
Treasurer and Vice President of Finance in October 2000. From June 1991 to
February 1996, he held positions at Aquila Biopharmaceutical, Inc. with
increasing management responsibility ranging from Accounting Manager to
Corporate Controller.

KEITH MAY, PH.D. joined Inverness Medical Limited in December 1999. Prior to
joining Inverness Medical, Dr. May served, since 1987, as Vice President of
Research and Development for Unipath, a leader in women's health products and
technologies. Unipath is a wholly owned subsidiary of Unilever, an international
consumer products conglomerate.

JERRY MCALEER, PH.D. became the Director of Development of Inverness Medical
Limited in 1995 and heads the development of the electrochemical glucose strips.
He recently became the Vice President of Research and Development for us and for
Inverness Medical Limited. Prior to joining us, Dr. McAleer held senior research
and development positions at MediSense from 1985 to 1993 and more recently, at
Ecossensors, Inc., an environmental research company, where he was responsible
for the development of electrochemically based assay systems.

51
<PAGE>
DAVID SCOTT, PH.D. has served as Managing Director of Inverness Medical
Limited from June 1995 to July 1999, when he assumed the position of Chairman.
Dr. Scott served as Managing Director from October 1993, to April 1995, of Great
Alarm Limited, a consulting company. Previously, Dr. Scott held several
positions from October 1984, to September 1993, at MediSense UK, most recently
as its managing director where he was responsible for managing product
development, as well as the mass manufacture of one of its principal products,
ExacTech.

JOHN YONKIN joined us in October of 1997 as Manager of Product Development.
In October of 1998, he was appointed Vice President of U.S. Sales and, in
January 2000, General Manager. From January 1995 to September 1998, Mr. Yonkin
was Director of National Accounts for Genzyme Genetics, a subsidiary of Genzyme,
Inc, a leader in genetic testing services for hospitals, physicians and managed
healthcare companies. Previously, Mr. Yonkin worked for MediSense, a medical
device company, in a number of marketing and sales capacities.

BOARD OF DIRECTORS

The Board of Directors currently consists of eight members and is divided
into three classes, each of whose members serve for a staggered three-year term.
At each annual meeting of shareholders, a class of directors is elected for a
three-year term to succeed the directors of the same class whose terms are then
expiring. Currently, Messrs. Oringer, Umphrey and Zwanziger serve as Class I
directors with terms expiring in 2002, Ms. Goldberg and Mr. Roberts serve as
Class II directors with terms expiring in 2003 and Messrs. Carabillo, Townsend
and Levy serve as Class III directors with terms expiring in 2001.

52
<PAGE>
PRINCIPAL AND SELLING STOCKHOLDERS

The following table sets forth information regarding the beneficial
ownership of our common stock as of September 30, 2000 and on an as adjusted
basis to reflect the sale of the common stock offered hereby by:

- all persons known by us to own beneficially 5% or more of the common
stock;

- each of our directors;

- each of our five most highly compensated executive officers;

- each stockholder selling shares in this offering;

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

- the exercise of the over-allotment option.

Unless otherwise indicated, each of the stockholders has sole voting and
investment power with respect to the shares of common stock beneficially owned
by the stockholder. The address for the listed stockholders is c/o Inverness
Medical Technology, Inc., 200 Prospect Street, Waltham, Massachusetts 02453. The
number of shares beneficially owned by each stockholder is determined under
rules issued by the Securities and Exchange Commission and includes voting or
investment power with respect to securities. Under these rules, beneficial
ownership includes any shares as to which the individual or entity has sole or
shared voting power or investment power and includes any shares as to which the
individual or entity has the right to acquire beneficial ownership within
60 days after September 30, 2000 through the exercise of any warrant, stock
option or other right. The inclusion in this prospectus of such shares, however,
does not constitute an admission that the named stockholder is a direct or
indirect beneficial owner of such shares.

<TABLE>
<CAPTION>
SHARES BENEFICIALLY OWNED
PRIOR TO THE OFFERING
------------------------- SHARES BENEFICIALLY OWNED
NUMBER OF AFTER THE OFFERING
(1) SHARES BEING --------------------------
NAME OF BENEFICIAL OWNER NUMBER PERCENT OFFERED NUMBER PERCENT
------------------------ ---------- --------- ------------ ---------- ---------
<S> <C> <C> <C> <C> <C>
Ron Zwanziger(2)...................... 2,559,698 9.29% 300,000 2,259,698 7.28%
Ernest A. Carabillo, Jr.(3)........... 23,084 * 23,084 *
Carol R. Goldberg(4).................. 242,963 * 242,963 *
John F. Levy(5)....................... 535,587 1.94% 535,587 1.73%
Robert M. Oringer(6).................. 381,114 1.38% 381,114 1.23%
Edward B. Roberts, Ph.D(7)............ 138,748 * 138,748 *
Peter Townsend(8)..................... 49,833 * 49,833 *
Willard L. Umphrey(9)................. 1,229,811 4.46% 1,229,811 3.96%
Kenneth D. Legg, Ph.D(10)............. 431,508 1.57% 123,100 308,408 *
John P. Alberico(11).................. 20,000 * 20,000 -- *
Duane L. James(12).................... 21,210 * 7,600 13,610 *
Keith May, Ph.D(13)**................. 21,250 * 10,000 11,250 *
Jerry McAleer, Ph.D(14)............... 251,657 * 75,000 176,657 *
David Scott, Ph.D(15)................. 430,872 1.56% 90,000 340,872 1.10%
Douglas Shaffer(16)**................. 19,163 * 7,500 11,663 *
John Yonkin(17)....................... 41,436 * 6,800 34,636 *
All executive officers and directors**
(14 persons)........................ 6,357,521 23.08% 622,500 5,735,021 18.47%
</TABLE>

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

* Represents less than 1%.

** Neither Keith May nor Douglas Shaffer is a director or an executive officer.

53
<PAGE>
(1) The number of shares of Common Stock outstanding used in calculating the
percentage for each listed person and the directors and executive officers
as a group includes the number of shares of common stock underlying options,
warrants and convertible securities held by such person or group that are
exercisable or convertible within 60 days from September 30, 2000, the date
of the above table, but excludes shares of common stock underlying options,
warrants or convertible securities held by any other person.

(2) Includes options and warrants that are currently exercisable, or exercisable
within 60 days of September 30, 2000 to purchase up to 1,069,676 shares of
common stock. Mr. Zwanziger disclaims beneficial ownership of the following
shares included in the table: (1) 109,754 shares of common stock owned by
his spouse, (2) 390,000 shares of common stock held in trust for the benefit
of his children where he, his spouse and an unrelated individual serve as
co-trustees, and (3) 191,916 shares of common stock all held in a trust for
the benefit of Mr. Zwanziger's children where his spouse is the sole
trustee. The table excludes 501,151 shares of common stock held in trust for
the benefit of Mr. Zwanziger's family where neither he nor his spouse serve
as trustee. Mr. Zwanziger holds options to purchase an additional 500,000
shares of common stock which will not be exercisable within 60 days of
September 30, 2000 and which are not included in the number of shares set
forth in this table.

(3) Represents options and warrants to purchase up to 23,084 shares of common
stock which are currently exercisable or exercisable within 60 days of
September 30, 2000. Mr. Carabillo holds options to purchase an additional
4,666 shares of common stock which will not be exercisable within 60 days of
September 30, 2000 and which are not included in the number of shares set
forth in this table.

(4) Includes options and warrants to purchase up to 124,836 shares of common
stock that are currently exercisable or exercisable within 60 days of
September 30, 2000. Ms. Goldberg holds options to purchase an additional
11,907 shares of common stock which will not be exercisable within 60 days
of September 30, 2000 and which are not included in the number of shares set
forth in this table.

(5) Includes options and warrants to purchase up to 30,696 shares of common
stock that are currently exercisable or exercisable within 60 days of
September 30, 2000. Mr. Levy holds options to purchase an additional 11,907
shares of common stock which will not be exercisable within 60 days of
September 30, 2000 and which are not included in the number of shares set
forth in this table.

(6) Mr. Oringer holds options to purchase an additional 6,000 shares of common
stock which will not be exercisable within 60 days of September 30, 2000 and
which are not included in the number of shares set forth in this table.

(7) Includes options to purchase up to 123,748 shares of common stock that are
currently exercisable or exercisable within 60 days of September 30, 2000.
Also includes 15,000 shares held in trust for the benefit of Mr. Roberts
three children, of which Mr. Roberts is a co-trustee. Mr. Roberts disclaims
beneficial ownership of all of the shares held in trust for the benefit of
his children. Mr. Roberts holds options to purchase an additional 11,907
shares of common stock which will not be exercisable within 60 days of
September 30, 2000 and which are not included in the number of shares set
forth in this table.

(8) Represents options to purchase up to 49,833 shares of common stock which are
currently exercisable or exercisable within 60 days of September 30, 2000.
Mr. Townsend holds options to purchase an additional 10,667 shares of common
stock which will not be exercisable within 60 days of September 30, 2000 and
which are not included in the number of shares set forth in this table.

(9) Includes options and warrants that are currently exercisable or exercisable
within 60 days of September 30, 2000 to purchase up to 167,231 shares of
common stock. Mr. Umphrey disclaims

54
<PAGE>

beneficial ownership of 149,346 shares of common stock and warrants to
purchase an additional 20,193 shares of common stock all owned by his
spouse. Mr. Umphrey also disclaims beneficial ownership of 195,909 shares of
common stock and warrants to purchase an additional 5,291 shares of common
stock held in a retirement account for the benefit of Mr. Leon Okurowski
where Mr. Umphrey is a co-trustee. Mr. Umphrey holds options to purchase an
additional 11,907 shares of common stock which will not be exercisable
within 60 days of September 30, 2000 and which are not included in the
number of shares set forth in this table.

(10) Includes options to purchase up to 221,446 shares of common stock that are
currently exercisable or exercisable within 60 days of September 30, 2000.
Mr. Legg holds options to purchase an additional 185,000 shares of common
stock which will not be exercisable within 60 days of September 30, 2000 and
which are not included in the number of shares set forth in this table.

(11) Represents options to purchase up to 20,000 shares of common stock which
are currently exercisable or exercisable within 60 days of September 30,
2000. Mr. Alberico holds options to purchase an additional 80,000 shares of
common stock which will not be exercisable within 60 days of September 30,
2000 and which are not included in the number of shares set forth in this
table.

(12) Includes options to purchase up to 16,723 shares of common stock which are
currently exercisable or exercisable within 60 days of September 30, 2000.
Mr. James holds options to purchase an additional 22,000 shares of common
stock which will not be exercisable within 60 days of September 30, 2000 and
which are not included in the number of shares set forth in this table.

(13) Includes options to purchase up to 21,250 shares of common stock which are
currently exercisable or exercisable within 60 days of September 30, 2000.
Mr. May holds options to purchase an additional 48,750 shares of common
stock which will not be exercisable within 60 days of September 30, 2000 and
which are not included in the number of shares set forth in this table.

(14) Includes options to purchase up to 221,500 shares of common stock that are
currently exercisable or exercisable within 60 days of September 30, 2000.
Mr. McAleer holds options to purchase an additional 235,000 shares of common
stock which will not be exercisable within 60 days of September 30, 2000 and
which are not included in the number of shares set forth in this table.

(15) Includes options and warrants to purchase up to 334,909 shares of Common
Stock that are currently exercisable or exercisable within 60 days of
September 30, 2000. Mr. Scott holds options to purchase an additional
285,000 shares of common stock which will not be exercisable within 60 days
of September 30, 2000 and which are not included in the number of shares set
forth in this table.

(16) Includes options to purchase up to 14,412 shares of common stock which are
currently exercisable or exercisable within 60 days of September 30, 2000.
Mr. Shaffer holds options to purchase an additional 21,750 shares of common
stock which will not be exercisable within 60 days of September 30, 2000 and
which are not included in the number of shares set forth in this table.

(17) Includes options to purchase up to 19,019 shares of common stock which are
currently exercisable or exercisable within 60 days of September 30, 2000.
Mr. Yonkin holds options to purchase an additional 30,000 shares of common
stock which will not be exercisable within 60 days of September 30, 2000 and
which are not included in the number of shares set forth in this table.

55
<PAGE>
UNDERWRITING

Subject to the terms and conditions of the underwriting agreement, the
underwriters named below have severally agreed to purchase from us and the
selling stockholders 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.............................................
UBS Warburg LLC.............................................
SG Cowen Securities Corporation.............................
Gruntal & Co., LLC..........................................
---------
Total....................................................... 3,600,000
=========
</TABLE>

The underwriting agreement provides that the obligations of the underwriters
to purchase and accept delivery of the shares offered by this prospectus are
subject to certain conditions contained in the underwriting agreement and that
the underwriters will purchase all shares of the common stock offered hereby if
any of the shares are purchased.

The underwriters have advised us that they 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 $ per share. The underwriters may allow, and these
dealers may reallow, a concession not in excess of $ per share to
other dealers. After the public offering, the underwriters may change the public
offering price and other selling terms without notice.

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 Inverness........................................ $ $ $
Payable by the selling stockholders......................... $ $ $
</TABLE>

We estimate that the other expenses of this offering (including the
registration fees and the fees of financial printers, counsel and accountants)
to be paid by us will be approximately $500,000.

We and the 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 150,000 and 390,000 additional shares, respectively, 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 3,600,000. To the extent the underwriters exercise this
option, we and the 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
3,600,000 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 the American Stock Exchange
immediately prior to the

56
<PAGE>
commencement of sales in this offering in accordance with Rule 103 of
Regulation M. Passive market making consists of displaying bids on AMEX 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
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, in connection with the offering, ING
Barings LLC, on behalf of the underwriters, may purchase and sell shares of
common stock in the open market. These transactions may include short sales,
syndicate covering transactions and stabilizing transactions. Short sales
involve syndicate sales of common stock in excess of the number of shares to be
purchased by the underwriters in the offering, which create a syndicate short
position. "Covered" short sales are sales of shares made in an amount up to the
number of shares represented by the underwriters' over-allotment option.
Transactions to close out the covered syndicate short position involve either
purchases of the common stock in the open market after the distribution has been
completed or the exercise of the over-allotment option. The underwriters may
also make "naked" short sales of shares in excess of the over-allotment option.
The underwriters must close out any naked short position by purchasing shares of
common stock in the open market. A naked short position is more likely to be
created if the underwriters are concerned that there may be downward pressure on
the price of the shares in the open market after pricing that could adversely
affect investors who purchase in the offering. Stabilizing transactions consist
of bids for or purchases of shares in the open market while the offering is in
progress. The underwriters also may impose a penalty bid. Penalty bids permit
the underwriters to reclaim a selling concession from a syndicate member when
ING Barings LLC, in covering syndicate short positions or making stabilizing
purchases, repurchases shares originally sold by that syndicate member.

Any of these activities may have the effect of preventing or retarding a
decline in the market price of the common stock. They may also cause the price
of the common stock to be higher than the price that would otherwise exist in
the open market in the absence of these activities. The underwriters may conduct
these transactions on the American Stock Exchange or otherwise. If the
underwriters commence any of these transactions, they may discontinue them 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 or contribution
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, executive officers and selling stockholders,
who in the aggregate will beneficially own, following this offering (assuming no
exercise of the over-allotment option), 6,109,823 shares of common stock which
includes options to purchase shares of common stock currently

57
<PAGE>

exercisable or exercisable within 60 days of September 30, 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.

LEGAL MATTERS

The validity of the common stock we are offering will be passed upon for us
by Goodwin, Procter & Hoar LLP, Boston, Massachusetts. Mintz, Levin, Cohn,
Ferris, Glovsky and Popeo, PC, Boston, Massachusetts is acting as counsel for
the underwriters in connection with various legal matters relating to the shares
of common stock offered by this prospectus. The president of a professional
corporation which is a partner in the firm of Goodwin, Procter & Hoar LLP
beneficially owns an aggregate of approximately 40,664 shares of common stock
and warrants to purchase up to 5,278 shares of common stock. The president of
another professional corporation which is a partner in the firm of Goodwin,
Procter & Hoar LLP beneficially owns 4,000 shares of common stock.

EXPERTS

The consolidated financial statements of Inverness Medical Technology, Inc.
(formerly Selfcare, Inc.) and subsidiaries as of December 31, 1999 and 1998, and
for each of the years in the three-year period ended December 31, 1999
incorporated by reference in this prospectus and elsewhere in the registration
statement have been audited by Arthur Andersen LLP, independent public
accountants, as indicated in their reports with respect thereto, and are
incorporated by reference herein upon the authority of said firm as experts in
giving said report.

The financial statements of Integ Incorporated as of December 31, 1999 and
1998, and for each of the years in the three-year period ended December 31, 1999
appearing in Inverness Medical Technology, Inc.'s Current Report on Form 8-K
dated November 1, 2000, have been audited by Ernst & Young LLP, independent
auditors, as set forth in their report thereon included therein and are
incorporated in this prospectus and elsewhere in the registration statement by
reference in reliance upon such report given on the authority of such firm as
experts in accounting and auditing.

58
<PAGE>
ABOUT THIS PROSPECTUS AND WHERE YOU MAY FIND MORE INFORMATION

We have filed with the Securities and Exchange Commission a Registration
Statement on Form S-3 under the Securities Act of 1933, as amended, with respect
to the shares of common stock offered under this prospectus. This prospectus is
part of the registration statement. This prospectus does not contain all of the
information contained in the registration statement because we have omitted
parts of the registration statement in accordance with the rules and regulations
of the Securities and Exchange Commission. For further information, we refer you
to the registration statement, which you may read and copy at the public
reference facilities maintained by the Securities and Exchange Commission at
Judiciary Plaza, 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549, and
at the Securities and Exchange Commission's Regional Offices at 7 World Trade
Center, 13th Floor, New York, New York 10048, and Citicorp Center, 500 W.
Madison Street, Suite 1400, Chicago, Illinois 60661-2511. You may also obtain
copies at the prescribed rates from the Public Reference Section of the
Securities and Exchange Commission at its principal office in Washington, D.C.
You may call the Securities and Exchange Commission at 1-800-SEC-0330 for
further information about public reference rooms. The Securities and Exchange
Commission maintains a web site that contains reports, proxy and information
statements and other information regarding registrants, including Inverness
Medical Technology, Inc. (formerly Selfcare, Inc.), that file electronically
with the Securities and Exchange Commission. You may access the Securities and
Exchange Commission's web site at http://www.sec.gov.

We are subject to the informational requirements of the Securities Exchange
Act of 1934, as amended, and we are required to file reports, proxy statements
and other information with the Securities and Exchange Commission. Such reports,
proxy statements and other information can be inspected and copied at the
locations described above. Our Securities and Exchange Commission file number is
000-20871. Copies of these materials can be obtained by mail from the Public
Reference Section of the Securities and Exchange Commission at Judiciary Plaza,
450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549, at prescribed rates.
Our common stock is listed on the American Stock Exchange under the symbol
"IMA."

The Securities and Exchange Commission allows us to incorporate by reference
the information that we file with them. Incorporation by reference means that we
can disclose important information to you by referring you to other documents
that are legally considered to be part of this prospectus, and later information
that we file with the Securities and Exchange Commission will automatically
update and supersede the information in this prospectus and the documents listed
below. We incorporate by reference the specific documents listed below and any
future filings we make with the Securities and Exchange Commission under
Section 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934 until
all of the shares of common stock offered under this prospectus are sold:

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

- our Quarterly Reports on Form 10-Q for the quarters ended March 31, 2000,
June 30, 2000 and September 30, 2000;

- our Current Reports on Form 8-K (and amendments thereto) filed on
October 6, 2000 and November 1, 2000; and

- the description of our common stock contained in our Registration
Statement on Form 8-A filed with the Securities and Exchange Commission
pursuant to the Securities Exchange Act of 1934, and all amendments and
reports updating the description.

You may request a copy of these filings, and any exhibits we have
specifically incorporated by reference as an exhibit in this prospectus, at no
cost, by writing or telephoning us at the following address: Inverness Medical
Technology, Inc., 200 Prospect Street, Waltham, Massachusetts 02453, Attention:
Corporate Secretary. Telephone requests may be directed to the Corporate
Secretary at (781) 647-3900.

59
<PAGE>
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------

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.

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

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
--------
<S> <C>
Prospectus Summary.................... 1
Risk Factors.......................... 6
Special Statement..................... 15
Use of Proceeds....................... 16
Dividend Policy....................... 16
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....................... 21
Business.............................. 33
Management............................ 50
Principal and Selling Stockholders.... 53
Underwriting.......................... 56
Legal Matters......................... 58
Experts............................... 58
Where You Can Find More Information... 59
</TABLE>

3,600,000 SHARES

[LOGO]

COMMON STOCK

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

PROSPECTUS

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

ING BARINGS
UBS WARBURG LLC
SG COWEN
GRUNTAL & CO., L.L.C.

, 2000

--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION. (1)

The following are the estimated expenses of the distribution of the shares
registered hereunder on Form S-3:

<TABLE>
<S> <C>
Registration Fee--Securities and Exchange Commission........ $ 28,179
AMEX Filing Fee............................................. 17,500
Accountants Fees and Expenses............................... 150,000
Blue Sky Fees and Expenses.................................. 15,000
Legal Fees and Expenses..................................... 150,000
Transfer Agent and Registrar Fees and Expenses.............. 10,000
Printing and Engraving Expenses............................. 65,000
Miscellaneous............................................... 64,321
------------
Total....................................................... $ 500,000
============
</TABLE>

ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.

The Company is a Delaware corporation. Reference is made to Section 145 of
the Delaware General Corporation Law (the "DGCL"), which enables a corporation
to eliminate or limit the personal liability of a director for monetary damages
for violations of the director's fiduciary duty, except for liability (i) for
any breach of the director's duty of loyalty to the company, (ii) for acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law, (iii) under to Section 145 or (iv) for any transaction from
which a director derived an improper personal benefit. The Company has adopted
such provisions in the company's Amended and Restated Bylaws (the "Bylaws").

The DGCL permits, but does not require, a corporation to indemnify its
directors, officers, employees or agents and expressly provides that the
indemnification provided for under the DGCL shall not be deemed exclusive of any
indemnification right under any bylaw, vote of stockholders or disinterested
directors, or otherwise. The DGCL permits indemnification against expenses and
certain other liabilities arising out of legal actions brought or threatened
against such persons for their conduct on behalf of the corporation, provided
that each such person acted in good faith and in a manner that he or she
reasonably believed was in or not opposed to the corporation's best interests
and in the case of a criminal proceeding, had no reasonable cause to believe his
or her conduct was unlawful. The DGCL does not allow indemnification of
directors in the case of an action by or in the right of the corporation
(including stockholder derivative suits) unless the directors successfully
defend the action or indemnification is ordered by the court. The Bylaws of the
company provide for indemnification to the fullest extent authorized by the DGCL
and, therefore, these statutory indemnification rights are available to the
directors, officers, employees and agents of the Companies. Insofar as
indemnification for liabilities arising under the Securities Act of 1933, as
amended (the "Securities Act") may be permitted to directors and officers of the
company pursuant to the foregoing provision or otherwise, the company has been
advised that, in the opinion of the Commission, such indemnification is against
public policy as expressed in the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), and is therefore, unenforceable.

The Company currently carries a directors' and officers' liability insurance
policy which provides for payment of expenses of the company's directors and
officers in connection with threatened, pending or completed actions, suits or
proceedings against them in their capacities as directors and officers, in
accordance with the Bylaws and the DGCL.

II-1
<PAGE>
ITEM 16. EXHIBITS.

<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
--------------------- -----------
<C> <S>
Exhibits (* documents filed herewith; + to be filed by amendment.)

1.1 Form of Underwriting Agreement by and among Inverness
Medical Technology, Inc., the Selling Stockholders and the
representative of the Underwriters.

2.1 Agreement and Plan of Merger by and among Inverness Medical
Technology, Inc., Terrier Acquisition Corp., and Integ
Incorporated, dated October 3, 2000 (incorporated by
reference to Exhibit 99.2 to the Company's current report on
Form 8-K filed October 4, 2000)

3.1 Amended and Restated Certificate of Incorporation
(incorporated by reference to Exhibit 3.1 to the Company's
registration statement on Form SB-2, No. 333-4830-NY)

3.2 Amended and Restated By-laws (incorporated by reference to
Exhibit 3.2 to the Company's registration statement on Form
SB-2, No. 333-4830-NY)

4.1 Specimen certificate for shares of Common Stock, par value
$0.001 per share, of the Company (incorporated by reference
to Exhibit 4.1 to the Company's Registration statement on
Form SB-2, No. 333-4830-NY)

*5.1 Opinion of Goodwin, Procter & Hoar LLP

9.1 Voting Agreement, dated May 13, 1996, by and among the
stockholders of Selfcare, Inc. who are signatories thereto
(incorporated by reference to Exhibit 9.1 to the Company's
(registration statement on Form SB-2, No. 333-4830-NY)

10.1 Amended and Restated Master Agreement, dated as of June 7,
1999, by and among Johnson & Johnson Development
Corporation, LifeScan, Inc. and Selfcare, Inc.
(incorporated by reference to Exhibit 10.1 to the Company's
quarterly (report on Form 10-Q for the quarter ended
June 30, 1999)

10.2 Amended and Restated Sales Distribution Agreement for
Testing System for Glucose in Humans, dated as of June 7,
1999, between LifeScan, Inc. and Selfcare, Inc.
(incorporated by reference to Exhibit 10.2 to the Company's
quarterly report on Form 10-Q for the quarter ended
June 30, 1999)

10.3 Investment Agreement, dated as of November 10, 1995, by and
between Johnson & Johnson and Selfcare, Inc. (incorporated
by reference to Exhibit 10.4 to the Company's registration
statement on Form SB-2, No. 333-4830-NY)

10.4 Guarantee of Selfcare, Inc., dated June 11, 1995, in favor
of Highlands and Islands Enterprises (incorporated by
reference to Exhibit 10.24 to the Company's registration
statement on Form SB-2, No. 333-4830-NY)

10.5 Guarantee of Selfcare, Inc., dated June 11, 1995, in favor
of Inverness and Nairn Enterprise Company (incorporated by
reference to Exhibit 10.25 to the Company's registration
statement on Form SB-2, No. 333-4830-NY)

10.6 Grant Agreement, dated February 21, 1992, among The
Industrial Development Authority of Ireland, Cambridge
Biotech Limited (Cambridge Diagnostics Ireland Limited) and
Cambridge Biotech Corporation (incorporated by reference to
Exhibit 10.28 to the Company's registration statement on
Form SB-2, No. 333-4830-NY)

10.7 Grant Agreement, dated October 2, 1992, among The Industrial
Development Authority of Ireland, Cambridge Biotech Limited
(Cambridge Diagnostics Ireland Limited) and Cambridge
Biotech Corporation (incorporated by reference to
Exhibit 10.29 to the Company's registration statement on
Form SB-2, No. 333-4830-NY)
</TABLE>

II-2
<PAGE>

<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
--------------------- -----------
<C> <S>
10.8 Grant Agreement, dated December 5, 1995, among The
Industrial Development Authority of Ireland, Cambridge
Biotech Limited (Cambridge Diagnostics Ireland Limited) and
Cambridge Biotech Corporation (incorporated by reference to
Exhibit 10.30 to the Company's registration statement on
Form SB-2, No. 333-4830-NY)

10.9 Employment Agreement, dated October 15, 1991, between
Superior Sensors, Inc. (Selfcare, Inc.) and Kenneth D.
Legg, Ph.D. (incorporated by reference to Exhibit 10.31 to
the Company's registration statement on Form SB-2,
No. 333-4830-NY)

10.10 Employment Agreement, dated November 13, 1994, between
Selfcare International GmbH and Otto Wahl (incorporated by
reference to Exhibit 10.33 to the Company's registration
statement on Form SB-2, No. 333-4830-NY)

10.11 Selfcare, Inc. 1992 Stock Plan (incorporated by reference to
Exhibit 10.34 to the Company's registration statement on
Form SB-2, No. 333-4830-NY)

10.12 Selfcare, Inc. 1994 Incentive and Non-qualified Stock Option
Plan (incorporated by reference to Exhibit 10.35 to the
Company's registration statement on Form SB-2,
No. 333-4830-NY)

10.13 Selfcare, Inc. Amended and Restated 1996 Stock Option and
Grant Plan (incorporated by reference to Exhibit 4.1 to the
Company's registration statement on Form S-8,
No. 333-15583)

10.14 First Amendment to the Selfcare, Inc. Amended and Restated
1996 Stock Option and Grant Plan dated May 20, 1999
(incorporated by reference to Exhibit 10.14 to the Company's
annual report on Form 10-K)

10.15 Selfcare, Inc. Employee Stock Purchase Plan (incorporated by
reference to Exhibit 10.37 to the Company's registration
statement on Form SB-2, No. 333-4830-NY)

10.16 Standard form Commercial Lease, dated July 15, 1992, between
Superior Sensors, Inc. (Selfcare, Inc.) and Nova Realty
Associates (incorporated by reference to Exhibit 10.38 to
the Company's registration statement on Form SB-2,
No. 333-4830-NY)

10.17 First Amendment to Lease Agreement between Selfcare, Inc.
(formerly, Superior Sensors, Inc.) and Nova Realty
Associates dated August 9, 1999 (incorporated by reference
to Exhibit 10.17 to the Company's annual report on
Form 10-K)

10.18 Form of lease between Highlands and Islands Enterprises and
Hebocraft Limited (Inverness medical Limited) (incorporated
by reference to Exhibit 10.40 to the Company's registration
statement on Form SB-2, No. 333-4830-NY)

10.19 Lease for Selfcare, Inc.'s facility in Brussels, Belgium
(incorporated by reference to Exhibit 10.42 to the Company's
registration statement on Form SB-2, No. 333-4830-NY)

10.20 Lease for Selfcare International GmbH's facility in Munich,
Germany (incorporated by reference to Exhibit 10.43 to the
Company's registration statement on Form SB-2,
No. 333-4830-NY)

10.21 Agreement between Inverness Medical Limited (formerly,
Hebocraft Limited) and Highlands and Islands Enterprise,
dated May 31, 1995 (incorporated by reference to
Exhibit 10.47 to the Company's registration statement on
Form SB-2, No. 333-4830-NY)

10.22 Agreement between Inverness Medical Limited (formerly,
Hebocraft Limited) and Inverness & Nairn Local Enterprise
Company, dated may 31, 1995 (incorporated by reference to
Exhibit 10.48 to the Company's registration statement on
Form SB-2, No. 333-4830-NY)
</TABLE>

II-3
<PAGE>

<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
--------------------- -----------
<C> <S>
10.23 Supply Agreement dated August 27, 1996, by and between
Selfcare, Inc., Selfcare International GmbH and A. Menarini
Industrie Parmaceutiche Riunite S.r.L. (incorporated by
reference to Exhibit 10.50 to the Company's quarterly report
on Form 10-QSB for the period ended September 30, 1996)

10.24 Form of Amendment to Agreement between Selfcare, Inc. and
Princeton BioMeditech Corporation dated August 6, 1997
(incorporated by reference to the Company's report on
Form 10-QSB for the period ending September, 30, 1997)

10.25 Form of Stock Purchase Agreement dated February 18, 1998, by
and among Can-Am Care Corporation, Selfcare, Inc., Selfcare
Consumer Products, Inc. (Inverness Medical, Inc.) and the
stockholders of Can-Am Care Corporation (incorporated by
reference to Exhibit 2.1 to the Company's report on
Form 8-K dated February 18, 1998)

10.26 Form of Supply Agreement dated as of February 18, 1998, made
by and between A.M.G. Medical Inc. and Can-Am Care
Corporation (incorporated by reference to Exhibit 10.74 to
Selfcare, Inc.'s Form 10-KSB for the year ended
December 31, 1997)

10.27 Form of Management Services Agreement dated February 18,
1998, made by and between A.M.G. Medical Inc. and Can-Am
Care Corporation (incorporated by reference to
Exhibit 10.75 to Selfcare, Inc.'s Form 10-KSB for the year
ended December 31, 1997)

10.28 Form of Employment Agreement dated February 18, 1998, made
by and between Selfcare Consumer Products, Inc. (Inverness
Medical, Inc.), Selfcare, Inc., and Herbert Cover
Corporation (incorporated by reference to Exhibit 10.76 to
Selfcare, Inc.'s Form 10-KSB for the year ended
December 31, 1997)

10.29 Form of Employment Agreement dated February 18, 1998, made
by and between Selfcare Consumer Products, Inc. (Inverness
Medical, Inc.), Selfcare, Inc., and Robert Oringer
(incorporated by reference to Exhibit 10.77 to
Selfcare, Inc.'s Form 10-KSB for the year ended
December 31, 1997)

10.30 Form of 6% Non-Negotiable Promissory Note, principal amount
$500,000, dated February 18, 1998, between Selfcare, Inc.
and Robert Oringer (incorporated by reference to
Exhibit 10.78 to Selfcare, Inc.'s Form 10-KSB for the year
ended December 31, 1997)

10.31 Form of 6% Non-Negotiable Promissory Note, principal amount
$500,000, dated February 18, 1998, between Selfcare, Inc.
and Cover Family Trust (incorporated by reference to
Exhibit 10.79 to Selfcare, Inc.'s Form 10-KSB for the year
ended December 31, 1997)

10.32 Form of Credit Agreement dated as of February 18, 1998,
among Selfcare Consumer Products, Inc. (Inverness
Medical, Inc.), as the Borrower, Selfcare, Inc., as the
Guarantor, Certain Financial Institutions, as the Lenders,
and The Chase Manhattan Bank, as the Agent for the Lenders
(incorporated by reference to Exhibit 10.80 to
Selfcare, Inc.'s Form 10-KSB for the year ended
December 31, 1997)

10.33 Form of Warrant to Purchase Shares of Common Stock of the
Company issued in connection with the Securities Purchase
Agreement dated June 26, 1998 (incorporated by reference to
Exhibit 10.2 to the Company's report on Form 10-Q for the
period ending June 30, 1998)

10.34 Form of Patent License Agreements, dated September 1, 1998,
between the Company and Becton, Dickinson and Company dated
September 1, 1998 (incorporated by reference to Exhibits
10.1 and 10.2 to the Company's report on Form 10-Q for the
period ending September, 30, 1998)
</TABLE>

II-4
<PAGE>

<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
--------------------- -----------
<C> <S>
11.1 Statement regarding computation of per share earnings
(included in the "Notes to Consolidated Financial
Statements" in the Company's 1999 Annual Report to
Shareholders, portions of which are filed herewith as
Exhibit 13.1)

13.1 Consolidated Financial Information of the Company's 1999
Annual Report to Shareholders (only those portions of the
Annual Report incorporated by reference in this document are
deemed filed) (incorporated by reference to Exhibit 13.1 to
the Company's annual report on Form 10-K)

13.2 Report of Independent Public Accountants, Arthur Andersen
LLP (included in the Company's 1999 Annual Report to
Shareholders, portions of which are filed herewith as
Exhibit 13.1)

21.1 List of Subsidiaries of Registrant as of March 28, 2000
(incorporated by reference to Exhibit 21.1 in the Company's
annual report on Form 10-K)

*23.1 Consent of Arthur Andersen LLP

*23.2 Consent of Ernst & Young, LLP

*23.3 Consent of Goodwin, Procter & Hoar LLP (included in
Exhibit 5.1 filed herewith)

24 Power of Attorney (included on signature page)

99.1 Voting Agreement by and between Inverness Medical
Technology, Inc. and certain shareholders of Integ
Incorporated, dated October 3, 2000 (incorporated by
reference to Exhibit 99.3 to the Company's current report on
Form 8-K, filed October 4, 2000)
</TABLE>

ITEM 17. UNDERTAKINGS.

(a) The undersigned Registrant hereby undertakes:

(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this Registration Statement:

(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act;

(ii) To reflect in the prospectus any facts or events arising after
the effective date of the Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth in
the Registration Statement. Notwithstanding the foregoing, any increase
or decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high and of the estimated maximum offering
range may be reflected in the form of prospectus filed with the
Commission pursuant to Rule 424(b) if, in the aggregate, the changes in
volume and price represent no more than a 20 percent change in the
maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement.

(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the Registration Statement or
any material change to such information in the registration statement.

PROVIDED, HOWEVER, that paragraphs (a)(1)(i) and (a)(1)(ii) do not apply if
the Registration Statement is on Form S-3, Form S-8 or Form F-3, and the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed with or furnished to the
Commission by the Registrant pursuant to Section 13 or 15(d) of the Exchange
Act that are incorporated by reference in the Registration Statement.

II-5
<PAGE>
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a
new registration statement relating to the securities offered therein, and
the offering of such securities at that time to be the initial BONA FIDE
offering thereof.

(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.

(b) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
Registrant's annual report pursuant to Section 13(a) or 15(d) of the Exchange
Act (and, where applicable, each filing of an employee benefit plan's annual
report pursuant to Section 15(d) of the Exchange Act) that is incorporated by
reference in the Registration Statement shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial BONA FIDE offering
thereof.

(c) Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers or persons controlling the
Registrant pursuant to the foregoing provisions, the Registrant has been
informed that in the opinion of the Commission such indemnification is against
public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Registrant of expenses incurred or
paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.

(d) Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to our directors, officers, and controlling persons
pursuant to the foregoing provisions, or otherwise, we have been advised that in
the opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Securities Act and is, therefor,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by us of expenses incurred or paid by a
director, officer, or controlling person of ours in the successful defense of
any action, suit, or proceeding) is asserted by such director, officer, or
controlling person in connection with the securities being registered, we will,
unless in the opinion of our counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.

(e) (1) For the purposes of determining any liability under the Securities
Act, the information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form of
prospectus filed by us pursuant to Rule 424(b)(1) or (4) or 497(h) under the
Securities Act shall be deemed to be part of the registration statement as of
the time it was declared effective.

(2) For the purposes of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus shall be
deemed to a new registration statement relating to the securities offered
therein, and the offering of such securities at the time shall be deemed to be
the initial bona fide offering thereof.

II-6
<PAGE>
SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Waltham, The Commonwealth of Massachusetts, on
November 1, 2000.

<TABLE>
<S> <C> <C>
INVERNESS MEDICAL TECHNOLOGY, INC.

By: /s/ RON ZWANZIGER
-----------------------------------------
Ron Zwanziger
CHAIRMAN, PRESIDENT AND CHIEF EXECUTIVE
OFFICER
</TABLE>

Pursuant to the requirements of the Securities Act of 1933, as amended, this
Amendment No. 1 to Registration Statement has been signed by the following
persons in the capacities and on the dates indicated.

<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
Chairman, President, Chief
/s/ RON ZWANZIGER Executive Officer and
------------------------------------------- Director (Principal November 1, 2000
Ron Zwanziger Executive Officer)

Vice President-Finance
/s/ DUANE L. JAMES (Principal Financial
------------------------------------------- Officer and Principal November 1, 2000
Duane L. James Accounting Officer)

*
------------------------------------------- Director November 1, 2000
Ernest A. Carabillo, Jr.

*
------------------------------------------- Director November 1, 2000
Carol R. Goldberg

*
------------------------------------------- Director November 1, 2000
John F. Levy

*
------------------------------------------- Director November 1, 2000
Robert Oringer
</TABLE>

II-7
<PAGE>

<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
------------------------------------------- Director
Edward B. Roberts

*
------------------------------------------- Director November 1, 2000
Peter Townsend

*
------------------------------------------- Director November 1, 2000
Willard Lee Umphrey
</TABLE>

<TABLE>
<S> <C> <C> <C>
*By: /s/ RON ZWANZIGER
--------------------------------------
Ron Zwanziger
AS ATTORNEY-IN-FACT
</TABLE>

II-8
<PAGE>
EXHIBIT INDEX

<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
--------------------- -----------
<C> <S>
Exhibits (* documents filed herewith; + to be filed by amendment.)

1.1 Form of Underwriting Agreement by and among Inverness
Medical Technology, Inc., the Selling Stockholders and the
representative of the Underwriters.

3.1 Amended and Restated Certificate of Incorporation
(incorporated by reference to Exhibit 3.1 to the Company's
registration statement on Form SB-2, No. 333-4830-NY)

3.2 Amended and Restated By-laws (incorporated by reference to
Exhibit 3.2 to the Company's registration statement on Form
SB-2, No. 333-4830-NY)

*5.1 Opinion of Goodwin, Procter & Hoar LLP

<PAGE>

10.11 Selfcare, Inc. 1992 Stock Plan (incorporated by reference to
Exhibit 10.34 to the Company's registration statement on
Form SB-2, No. 333-4830-NY)

10.12 Selfcare, Inc. 1994 Incentive and Non-qualified Stock Option
Plan (incorporated by reference to Exhibit 10.35 to the
Company's registration statement on Form SB-2,
No. 333-4830-NY)

10.13 Selfcare, Inc. Amended and Restated 1996 Stock Option and
Grant Plan (incorporated by reference to Exhibit 4.1 to the
Company's registration statement on Form S-8,
No. 333-15583)

10.15 Selfcare, Inc. Employee Stock Purchase Plan (incorporated by
reference to Exhibit 10.37 to the Company's registration
statement on Form SB-2, No. 333-4830-NY)

10.19 Lease for Selfcare, Inc.'s facility in Brussels, Belgium
(incorporated by reference to Exhibit 10.42 to the Company's
registration statement on Form SB-2, No. 333-4830-NY)

10.20 Lease for Selfcare International GmbH's facility in Munich,
Germany (incorporated by reference to Exhibit 10.43 to the
Company's registration statement on Form SB-2,
No. 333-4830-NY)

10.23 Supply Agreement dated August 27, 1996, by and between
Selfcare, Inc., Selfcare International GmbH and A. Menarini
Industrie Parmaceutiche Riunite S.r.L. (incorporated by
reference to Exhibit 10.50 to the Company's quarterly report
on Form 10-QSB for the period ended September 30, 1996)
</TABLE>

<PAGE>

<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
--------------------- -----------
<C> <S>
10.24 Form of Amendment to Agreement between Selfcare, Inc. and
Princeton BioMeditech Corporation dated August 6, 1997
(incorporated by reference to the Company's report on
Form 10-QSB for the period ending September, 30, 1997)

11.1 Statement regarding computation of per share earnings
(included in the "Notes to Consolidated Financial
Statements" in the Company's 1999 Annual Report to
Shareholders, portions of which are filed herewith as
Exhibit 13.1)

<PAGE>

<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
--------------------- -----------
<C> <S>
13.2 Report of Independent Public Accountants, Arthur Andersen
LLP (included in the Company's 1999 Annual Report to
Shareholders, portions of which are filed herewith as
Exhibit 13.1)

21.1 List of Subsidiaries of Registrant as of March 28, 2000
(incorporated by reference to Exhibit 21.1 in the Company's
annual report on Form 10-K)

*23.1 Consent of Arthur Andersen LLP

*23.2 Consent of Ernst & Young, LLP

*23.3 Consent of Goodwin, Procter & Hoar LLP (included in
Exhibit 5.1 filed herewith)

24 Power of Attorney (included on signature page)