Strategic Growth Opportunities

In addition to expanding our core clinical laboratory business through internal growth and pursuing our strategy to become a leading provider of medical information, we intend to continue to leverage our network in order to capitalize on targeted growth opportunities both inside and outside our core laboratory testing business. These opportunities include:

•  Gene-Based and Other Esoteric Tests: We intend to remain a leading innovator in the clinical laboratory industry by continuing to introduce new tests, technology and services. We estimate that the current United States market in esoteric testing, including gene-based testing, is $3 billion to $4 billion per year. We believe that we have the largest gene-based testing business in the United States, with greater than $500 million in net revenues during 2003, and that this business has been growing by more than 20% per year. We believe that the unveiling of the human genome, the discovery of new genes and the linkages of these genes with disease will result in more complex and thorough predictive, diagnostic and therapeutic testing. We believe that we are well positioned to realize this growth. We intend to focus on commercializing diagnostic applications of discoveries in the areas of functional genomics (the analysis of genes and their functions) and proteomics (the discovery of new proteins made possible by the human genome project).

•  Anatomic Pathology: While we are one of the leading providers of anatomic pathology services in the United States, we have traditionally been strongest in cytology, and specifically in the analysis of Pap tests to detect cervical cancer. During the last several years, we have led the industry in converting over 80% of our Pap smear business to the use of liquid-based technology for cervical cancer screening, a higher quality and more profitable product offering. We intend to continue to expand our anatomic pathology business into higher growth segments, including histology (tissue pathology), and actively participate in the emerging use of molecular testing as a screening tool in conjunction with Pap tests. We estimate that the current United States market for anatomic pathology services is approximately $6 billion per year. We estimate that cytology represents about $1 billion per year of this market, and that tissue pathology represents about $5 billion per year of this market. We generated approximately $500 million in net revenues from such services during 2003.

•  Information Technology: We continue to invest in the development and improvement of information technology products for customers and providers by developing differentiated products that will provide friendlier, easier access to ordering and resulting of laboratory tests and patient-centric information. In February 2003, we launched our proprietary eMaxx^® Internet portal to physicians nationwide. The eMaxx^® Internet portal enables doctors to order diagnostic tests and review laboratory results online, as well as check patients’ insurance eligibility in real time and view clinical information from many sources. In pilot markets, physicians are also able to use eMaxx^® to prescribe pharmaceuticals. This service allows us to replace older technology desktop products that we currently provide to many physicians and thereby streamline our support structure. Demand has been growing for our information technology solutions as physician offices have expanded their usage of the Internet. By the end of 2003, we were receiving approximately 25% of all test orders and delivering about 35% of all test results via the Internet.

The eMaxx^® Internet portal was developed by MedPlus Inc., or MedPlus, which we acquired in November 2001. MedPlus’ ChartMaxx^® and eMaxx^® patient record systems are designed to support the creation and management of electronic patient records, by bringing together in one patient-centric view information from various sources, including the physician’s records and laboratory and hospital data. We intend to expand the services offered through our portal over time as other strategic arrangements are realized, which will enhance our ability to introduce a broad range of electronic services to healthcare providers.

•  Selective Regional Acquisitions: The clinical laboratory industry remains highly fragmented. We expect to continue to acquire other regional clinical laboratories that can be integrated with our existing laboratories, thereby enabling us to reduce costs and improve efficiencies through the elimination of redundant facilities and equipment, and reductions in personnel (see “Recent Acquisitions” for a discussion of our recent acquisitions). We may also consider acquisitions of ancillary businesses as part of our overall growth strategy, such as our November 2001 acquisition of MedPlus, which develops clinical connectivity products designed to enhance patient care (see “Information Technology”).