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SECURITIES AND EXCHANGE COMMISSION

FORM 10-K

For the year ended December 31, 2002

o		Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from      to      
Commission file number 1-9957

Diagnostic Products Corporation

5700 West 96th Street
Los Angeles, California 90045
(Address of principal executive offices)
Registrant’s telephone number: (310) 645-8200

Securities registered pursuant to Section 12(b) of the Act:

     Indicate by check mark whether the registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2).
     [ YES  ü]    [NO  ]

     Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
     [ YES  ü]    [NO  ]

     Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.
     [  ]

     The aggregate market value of the voting stock held by non-affiliates of the registrant was approximately $827,477,000 as of June 30, 2002.

     The number of shares of Common Stock, no par value, outstanding as of March 6, 2003, was 28,623,309.

Documents Incorporated by Reference

Portions of the proxy statement for the 2003 Annual Shareholders Meeting are incorporated by reference into Part III of this report.

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PART I

ITEM 1. BUSINESS

     Diagnostic Products Corporation (“DPC’’ or the “Company’’) develops, manufactures, and markets immuno-diagnostic systems and immunochemistry kits, which are used throughout the world in hospital, reference and physicians’ office laboratories, as well as in veterinary, forensic, and research facilities.

     The test kits utilize state-of-the-art technology, derived from immunology and molecular biology, to obtain precise, rapid identification and measurement of medically significant chemical substances that are often present at infinitesimal concentrations. These include hormones, cytokines, vitamins, drugs, transport proteins, antibodies, and biochemical markers of viruses and other microorganisms.

     The main clinical applications of DPC’s immunoassays (test kits) relate to the diagnosis and management of thyroid, reproductive, and cardiac disorders; allergies, infectious diseases, anemia, diabetes, and certain types of cancer; bone metabolism disorders, and therapeutic drug administration. The testing is performed in vitro: that is, outside the body, in samples of blood, urine, or other bodily fluids and tissues.

     DPC’s IMMULITE^® systems consist of instrumentation and software for automating the Company’s immunoassays and for integrating this process with sample handling and data manipulation steps, to improve the accuracy, efficiency, and cost-effectiveness of in vitro diagnostic (IVD) testing in clinical laboratories, large and small.

     The Company, with manufacturing facilities in the United States, the United Kingdom, and China, markets its products through a national sales force and through a worldwide distribution network covering over 100 countries.

     Unless the context otherwise requires, the terms “DPC” and the “Company” include the Company’s consolidated subsidiaries. For information regarding forward-looking statements contained in this report and risks associated with the Company’s business, see “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations — Forward Looking Statements and Certain Risks.”

     DPC makes available free of charge on its internet website (www.dpcweb.com) its annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments thereto, as soon as reasonably practicable after filing with the SEC.

Automated Laboratory Systems

     A systems provider, DPC designs and manufactures laboratory instruments and software to automate the performance of immunodiagnostic assays, facilitating rapid, accurate results, while reducing labor and reagent costs.

     The Company has two principal immunoassay platforms. DPC’s IMMULITE 2000 addresses the needs of high-volume laboratories, while the IMMULITE serves lower volume facilities and niche markets. At the end of 2002, over 5,700 IMMULITE and over 2,300 IMMULITE 2000 systems had been shipped.

     The original IMMULITE system was first introduced in 1993. Computer-driven, it uses a patented solid-phase wash technology and chemiluminescent detection method, which together are capable of measurements at exceptionally low concentrations, as demonstrated by DPC’s state-of-the-art “third generation” assays for TSH and PSA — key tests related to thyroid disorders and prostate cancer, respectively. The system is totally automated with respect to sample and reagent handling, incubation, washing, and substrate addition. DPC’s IMMULITE has the capacity for walk-away processing of up to 120 samples per hour, on a random access basis — meaning that it can perform any test, or combination of tests, on any patient sample at any time.

     In 2002, the Company ceased manufacturing the IMMULITE and began manufacturing the IMMULITE 1000. This system has essentially the same operational features and runs the same tests as the IMMULITE, but it utilizes updated operating software and is capable of performing certain dilutions on-board. In addition, it has a new exterior appearance. Going forward, the Company will refer to the IMMULITE 1000 as the IMMULITE.

     The IMMULITE 2000, DPC’s next generation system, was introduced in the third quarter of 1998. It has a throughput of up to 200 tests per hour, offering the medium- to high-volume laboratory increased efficiency in streamlining its testing workload. The IMMULITE 2000 can run for a full shift without having to replenish on-board supplies. This increased throughput allows DPC to participate in a higher volume segment of the market where the average reagent use per instrument exceeds that of the original IMMULITE. The IMMULITE 2000 includes advanced features such as primary tube sampling and a proprietary autodilution capability. The system can also be interfaced with robotic laboratory sample-handling systems and can be connected to the customer’s computer system for specification of the tests to be run on each sample, as well as for reporting and archiving results. Another innovative feature is its remote diagnostic capability that permits DPC’s service facility to access any IMMULITE

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2000 worldwide for the purpose of diagnosing system problems. Enhancements introduced in September 2001 made it possible for laboratories to perform fully automated in vitro allergy testing.

     In 2002, as in the previous year, the growth of DPC’s business and the Company’s role as an IVD systems provider for high-volume facilities was driven primarily by ongoing demand for the IMMULITE 2000.

     In the first quarter of 2002, the Company obtained distribution rights from Medical Electronic Systems of Israel to a sperm analyzer that DPC will market under the name Spermalite SQA-V. The Spermalite is a stand-alone, benchtop high-performance analyzer that provides rapid reliable semen analysis in less than 75 seconds.

     In 2003, DPC expects to launch a major new instrument, the SMS (Sample Management System), that will provide additional flexibility to the IMMULITE 2000. The SMS will provide a bulk sample platform allowing as many as 220 samples to be loaded or unloaded at any one time. High-volume sample management improves workflow, flexibility, and productivity. The SMS will also eventually function as a universal robotic interface that can be linked to almost any of the workcell/automated systems available.

Immunodiagnostic Test Kits

     DPC manufactures over 400 immunodiagnostic test kits, exploiting several technologies and assay formats. The Company’s monoclonal antibody, molecular engineering, and other basic science capabilities play key roles in optimizing these immunoassays.

     Chemiluminescence-enhanced enzyme immunoassays are the basis for DPC’s automated IMMULITE and IMMULITE 2000 product lines. DPC also manufactures classic radioimmunoassays (RIAs), based on double-antibody, coated-tube, and IRMA formats, as well as enzyme immunoassays (EIAs) in microplate format. Allergy testing uses a proprietary liquid-allergen technology in tube and microplate formats; and it is now fully automated on the IMMULITE 2000. Many of DPC’s assays are available both as manual RIAs and as IMMULITE and IMMULITE 2000 assays.

     The automated, non-isotopic product lines represent the core of DPC’s business. IMMULITE and IMMULITE 2000 assays, instruments, and service represented 78%, 81%, and 85% of sales in 2000, 2001, and 2002, respectively, a trend that is expected to continue. In fiscal year 2002, DPC’s RIAs accounted for 9% of sales, while microplate allergy and other non-IMMULITE products accounted for 5%. (For additional information concerning sales by product line over the last three fiscal years, see “Notes to Consolidated Financial Statements — Note 12.”)

Breadth of Menu

     IMMULITE and IMMULITE 2000 are closed systems; they will not perform other manufacturers’ tests. Accordingly, a most important factor in the successful marketing of these systems is the ability to offer a broad menu of individual assays and assay groups, that is, tests which jointly represent decision-making panels for various disease states, such as thyroid disorders or infertility. Many of the relevant disease states represent either high-volume opportunities in the marketplace, or unique, under-served conditions that allow DPC to fill a market niche.

     During 2002, DPC released eight new assays on the IMMULITE and fourteen new assays on the IMMULITE 2000. As of December 31, 2002, DPC had 100 IMMULITE assays available in the international market, with 74 FDA-cleared for sale in the US. In addition, 70 out of a total of 85 of the most important assays on the second generation IMMULITE 2000 have been released for sale in the US.

     DPC believes that the IMMULITE and IMMULITE 2000 have the most extensive menus of any automated immunoassay systems on the market. The Company’s research and development activities continue to focus on expanding the menus, giving special attention to complete implementations of clinically important assay groups, as well as on developing new generations of instrumentation and software.

The Spectrum of Applications

     Major clinical applications of DPC’s immunoassays include the following areas, where DPC’s extensive and sometimes unique offerings on the IMMULITE and IMMULITE 2000 have enabled the Company to achieve a significant presence in various types of laboratories, large and small.

     Thyroid Disorders — For many hospital and clinical reference laboratories, thyroid testing is a mainstay of their routine immunoassay work. DPC offers a comprehensive spectrum of assays for assessing and monitoring thyroid status on both the IMMULITE and the IMMULITE 2000. The menus include not only assays for free and total thyroid hormones, but also assays with “third generation” capability for thyroid stimulating hormone (TSH) and assays for thyroid autoantibodies and other relevant analytes which are increasingly in demand. This combination represents a complete, high-quality solution for thyroid testing.

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     Therapeutic Drug Monitoring (TDM) — There is a large market for TDM assays: tests for the routine monitoring of certain therapeutic drugs. Nine of the ten most frequently monitored drugs are measured by immunoassay.

     Infertility, Pregnancy — DPC has been an innovator and longtime market leader in reproductive hormone testing, providing an unusually broad spectrum of assays for both routine and specialized laboratories, supplemented by studies to aid in the interpretation of results and software to facilitate data manipulation, when appropriate. Some of DPC’s assays reflect the special needs of fertility clinics and in vitro fertilization (IVF) centers. Others are important for the routine assessment of osteoporosis and hormone balance in postmenopausal women and aging men. DPC offers a comprehensive menu of immunoassays for maternal and fetal diagnosis, monitoring, and risk assessment. The Company’s growing menu relates to medical conditions in every phase of reproductive life in men, women, and children of all ages.

     Cancer — DPC has automated a large number of assays for “tumor markers” on the IMMULITE and IMMULITE 2000, more than any of our competitors. The Company has a number of unique offerings, including “third generation” assays capable of measuring the extremely low PSA concentrations encountered after radical prostatectomy. In partnership with Matritech, in 2002 DPC released the first automated assay for NMP22, a marker for bladder cancer.

     Infectious Diseases — Infectious disease testing is one of the fastest growing segments of the IVD market and one which has generally lagged behind in automation. DPC’s commitment in this area is reflected in its development of one of the broadest menus available on an automated platform; it includes some unique assays, e.g. for H. pylori, an organism responsible for stomach ulcers. In 2002, DPC received FDA approval for a total of 9 hepatitis B assays providing the most complete panel of automated assays available. In addition, the Company introduced assays for the Epstein-Barr virus and Chagas, further increasing its menu of infectious disease tests.

     Allergy — In vitro allergy testing, representing a worldwide market of approximately $200 million, has been dominated for the last 30 years by Pharmacia Corp. Traditionally, such testing has required special laboratory equipment and has been time- and labor-intensive, and somewhat error-prone due to the lack of full automation. With its patented liquid-allergen technology, DPC established itself as the second leading supplier of in vitro allergy test kits. In 2000, the Company introduced assays for selected allergy screening panels on the IMMULITE. Then, in September 2001, DPC introduced a broad spectrum of assays for individual allergens on the IMMULITE 2000, finally making it possible for laboratories to perform high-volume allergy testing along with other routine immunoassays on a fully automated system. The IMMULITE 2000 can provide tests for over 230 allergens, representing over 90% of allergy requests. DPC added 120 new allergens to the IMMULITE 2000 in 2002 and will continue to add assays in the future. As a complement to IMMULITE 2000 Allergy, DPC has developed a product line (AlaBLOT^®) of confirmatory Western blotting assays.

     Inflammatory Conditions — Cytokines, often referred to as “hormones of the immune system,” represent potentially important disease markers, which are being actively investigated in major centers throughout the world. In Europe and elsewhere, assays for clinically relevant cytokines are already in routine use, e.g. for the management of bacterial sepsis (blood poisoning) in intensive care units. DPC is the only company to offer a significant menu of cytokine assays in an automated format. Moreover, DPC offers some novel tests, having obtained, for example, exclusive rights from XOMA Ltd. to market an automated immunoassay for LBP (Lipopolysaccharide Binding Protein), a marker of inflammation reflecting systemic exposure to gram-negative bacteria.

     Cardiovascular Disease — This is the leading cause of morbidity and mortality in developed nations and represents a $300 million worldwide market, which continues to show very strong annual growth. Both on the IMMULITE and the IMMULITE 2000, DPC now offers the most comprehensive cardiac menu available on a single platform. The three principal assays required on an emergency basis due to their role in diagnosing acute myocardial infarction (Troponin I, CK-MB, and Myoglobin) have been implemented on the IMMULITE with Turbo software, which reduces the assay time to 15 minutes, along with other tests needed in an emergency room or intra-operative setting (HCG, PTH). Additional assays on DPC’s automated systems, including High Sensitivity CRP and Homocysteine, put the Company in an excellent position to address all aspects of cardiac testing, from diagnosis and patient management to risk assessment.

Research and Development Activities

     The Company devotes substantial resources to research and development to update and improve its existing products, as well as to develop new products and technologies. In addition to developing and adding allergy testing capabilities to the IMMULITE 2000, the Company’s research and development activities include the development of the next generation IMMULITE system and new operating software for both the IMMULITE and the IMMULITE 2000. R&D capabilities in the United States include fully staffed departments in organic synthesis, biochemistry,

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antisera/hybridoma, protein chemistry, molecular biology, and infectious disease, method development, instrumentation, software, and technology development. During the years ended December 31, 2000, 2001, and 2002, the Company spent $26,464,000, $31,447,000, and $36,817,000, respectively, on research and development.

     The Company is engaged in an aggressive development program for new instrument systems, including the Sample Management System, a robotic sample-handling device that enhances the functionality of the IMMULITE 2000; the IMMULITE 2500 (IMMULITE 2000XT), which incorporates the Turbo function into the IMMULITE 2000; the IMMULITE 3000, a very-high-throughput immunoassay system incorporating several new technologies to deliver optimal assay performance; and the IMMULITE 1500, a scaled-down version of the IMMULITE 3000. In addition, the Company continues to work in the area of molecular diagnostics.

Manufacturing and Service

     The Company’s principal test kit manufacturing facility is located in Los Angeles, California. Approximately 30% of test kit production is conducted at the EURO/DPC facility in the United Kingdom. The Company’s European manufacturing facilities enable the Company to improve its competitiveness in the European Economic Area (EEA) by minimizing import duties and freight charges. Certain kits are also manufactured by DPC in China.

     DPC’s instrument division in New Jersey designs and manufactures IMMULITE instrumentation and engages in software development. Component parts, such as computer hardware, are supplied by original equipment manufacturers. The Company provides a one-year warranty that covers parts and labor. Underwriter’s Laboratories Inc. (UL) list the IMMULITE systems. The Company’s and its distributors’ technical service personnel install new units, train customers in the use of the system, and provide maintenance and service for the instrumentation.

     The EURO/DPC Instrumentation Division in the United Kingdom manufactures certain components of the IMMULITE and IMMULITE 2000 instruments that are then assembled into the final instrument in New Jersey.

     DPC’s Los Angeles, New Jersey, and China facilities are International Standards Organization (ISO) 9001/9002 registered. Euro/DPC Limited, the Company’s wholly owned manufacturing subsidiary in Wales, was the first immunodiagnostics company in the world to be registered under British Standard (BS) 5750. EURO/DPC is also registered to ISO 9002 and the European EN 46002 standards.

     DPC provides technical support for all its products, including reagents, instruments, and software, via telephone and on-site service. In 2002 DPC introduced Real Time Service on the IMMULITE 2000 system. Real Time Service connects an installed IMMULITE instrument to DPC’s technical support department through a secure network connection to provide constant 24-hour monitoring and support. Should a particular system function begin to fail or degrade, an alert will be sent to a technical support representative.

Marketing and Sales

     The Company markets its products to hospital, clinical, forensic, research, reference, and veterinary laboratories, as well as doctors’ offices and U.S. government agencies. The Company markets its products in the United States directly to laboratories and hospitals through its own sales force. The Company sells to the U.S. doctors’ office market through independent distributors as well as through its own sales force. Sales personnel and distributors are trained to demonstrate the Company’s product line in the customer’s laboratory and are supported by the Company’s Los Angeles and New Jersey-based technical services departments.

     The Company’s products are sold on a worldwide basis through distributors in over 100 foreign countries. These distributors, including affiliated distributors, also sell other manufacturer’s products that are not directly competitive with the Company’s products. Foreign sales (including export sales, sales to non-consolidated foreign affiliates, and sales of consolidated subsidiaries) represented approximately 76% in 2000 and 72% in 2001 and 2002. Europe accounted for approximately 44% of total sales in 2000, 41% in 2001, and 40% in 2002. See Notes 5 and 12 of Notes to Consolidated Financial Statements for information regarding foreign operations.

     Sales of test kits to customers and distributors are made against individual purchase orders as well as through volume purchase arrangements. Products are shipped directly from the Company’s facilities in Los Angeles and Wales and are generally delivered domestically within 24 hours and overseas within 48 hours of receipt of order. The Company sells, leases, or rents the IMMULITE instrumentation to hospitals and reference laboratories that perform volume testing. The Company’s backlog at any date is usually insignificant and not a meaningful indicator of future sales.

     The Company’s foreign operations are subject to various risks, including exposure to currency fluctuations, political and economic instability, and trade restrictions. Because the Company’s consolidated foreign distributors’ sales are in the respective local currencies, the Company’s consolidated financial results are affected by foreign currency translation adjustments. In addition, the price competitiveness of the Company’s products abroad is

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impacted by the relative strength or weakness of the U.S. dollar. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and Note 1 of Notes to Consolidated Financial Statements.

Proprietary and Other Rights

     Substantially all of the Company’s products are based on proprietary technologies and know-how. The Company holds various U.S. and foreign patents, including patents on the washing process used in the IMMULITE system that expire in 2009 and patents on its novel liquid-based amplification methodology which forms the basis of the AlaSTAT product lines which expire in 2005. The Company also obtains licenses for chemical components and technologies used in certain of its assays.

     Patents that may be granted to others in the future could inhibit the Company’s expansion or entry into certain areas, or require it to pay royalty fees to do so. Because of rapid technological developments in the immunodiagnostic industry with concurrent extensive patent coverage and the rapid rate of issuance of new patents, certain of the Company’s products may involve controversy concerning infringement of existing patents or patents that may be issued in the future.

     The Company purchases certain chemical compounds that are key components in the IMMULITE system from Lumigen, Inc. and Tropix, Inc., the sole suppliers of these chemical compounds, pursuant to agreements that terminate in 2005. Tropix also supplies the Company with certain other chemical compounds for use in veterinary kits. Upon termination of these supply agreements, the Company will be required to enter into new supply agreements or use alternate technologies. If obtainable, such technology must have the same performance characteristics of the technology currently in use. The Company owns an 8% interest in Lumigen, Inc. and accounts for this interest using the equity method.

Government Regulation

     The Company’s business is affected by government regulations both in the United States and abroad, in particular Western Europe and Japan, aimed at containing the cost of medical services. These regulations have generally had the effect of inhibiting the growth rate of the immunodiagnostic industry. The Company believes that in vitro diagnostic (IVD) testing is an important tool for reducing health expenditures. By providing early diagnosis and therapy management, IVD tests can reduce the high costs of hospitalization, surgery, and recovery. In response to cost containment measures, hospitals, and laboratories have consolidated and have sought to increase productivity by replacing high cost labor with automated testing systems. The Company’s automated systems address these market needs. The Company also seeks to develop more rapid and sensitive tests, such as DPC’s Third Generation TSH assay, that can eliminate the need for redundant testing.

     Manufacturers of immunodiagnostic tests and other clinical products intended for use as human diagnostics are governed by FDA regulations as well as regulations of state agencies and foreign countries. A new in vitro diagnostic product that is “substantially equivalent’’ to one already on the market can generally be sold in the United States after it is cleared for marketing by the FDA. Most of the Company’s products fall within the “substantially equivalent” category. Certain medically critical in vitro diagnostic products and totally new in vitro diagnostic products, for which there are no equivalents on the market, must be approved by the FDA after in-depth review that normally takes about two years prior to marketing.

     The Company’s Los Angeles manufacturing facilities are licensed by the California Department of Health Services and must be operated in conformance with the FDA’s Good Manufacturing Practices governing medical devices. The Company is regulated by the California Department of Health Services with respect to its possession and use of radioactive substances and by the U.S. Drug Enforcement Agency with respect to the use and storage of controlled drugs and pharmaceuticals.

     Given the Company’s high proportion of sales to the European Union (EU) countries, the Company has undertaken the necessary steps to comply with the EU In Vitro Diagnostic Directive (IVDD). The Company was fully compliant with all relevant aspects of the EU IVDD on June 7, 2000 and therefore was qualified to apply the “CE Mark” to most of its IVD kits and instruments as mandated by the Directive. Many other countries outside of the EU have accepted the CE mark to fulfill their local requirements or are developing equivalent regulations. DPC is prepared to comply with these and future IVDD regulations.

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Competition

     The Company’s major competitors are broad-based health care companies such as Roche Diagnostics, Abbott Diagnostics (Abbott Laboratories), Bayer, Johnson & Johnson, Beckman Coulter, and Pharmacia/Upjohn (Sweden). The Company competes on a worldwide basis with a number of large corporations that sell diversified lines of products, including immunodiagnostic products, for laboratory, medical, and hospital use. The fact that these companies offer diversified products to the laboratories at times puts the Company at a competitive disadvantage.

     There are currently over 30 domestic suppliers of immunodiagnostic kits. The Company believes that competition in immunoassay testing is based on quality, service, product convenience, and price and that product innovation is an important source for change in market share.

     The principal competitive factors in automated systems are size of menu (the number of assays that can be performed on the system), ease of use, and price (equipment cost, service, and reagent cost). The Company’s IMMULITE system currently offers one of the widest menus of any automated system and the Company is focusing its development efforts on expanding this menu.

Employees

     As of December 31, 2002, the Company (including its consolidated subsidiaries) had 2,100 employees, including 739 in manufacturing, 353 in research and development, 724 in marketing and sales, and 284 in administration. None of the Company’s employees are represented by a labor union, and the Company considers its employee relations to be good. The Company has experienced no significant problems in recruiting qualified technical and operational personnel.

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ITEM 2. PROPERTIES

     The following is a list of significant properties owned and leased by the Company and its consolidated subsidiaries as of December 31, 2002:

(1)		Lease expires in 2004. See “Item 13. Certain Relationships and Related Transactions”
(2)		This new facility (opened in December 2001) can be expanded to 150,000 sq. ft. to meet future needs.

     The lease for the Company’s principal facilities in Los Angeles expires at the end of 2004. The Company’s ability to expand its operations at these premises is limited. Therefore, in the first quarter of 2003 the Company purchased a 170,000 sq. ft. building on nine acres of land for approximately $22 million in cash. It is anticipated that the building will be ready for occupancy by the beginning of 2004. At that time, the Company will vacate its leased sales office, and as people are moved from the existing corporate offices, the leased warehouse space will no longer be needed.

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ITEM 3. LEGAL PROCEEDINGS

     The Company is not involved in any material legal proceedings.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

     During the fourth quarter of the last fiscal year, no matter was submitted to a vote of the security holders.

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PART II

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

     The Common Stock of the Company is listed on the New York Stock Exchange and traded under the symbol DP.

     The following table sets forth the quarterly high and low price of the Company’s Common Stock and quarterly dividends per share paid during 2002 and 2001. All share and per share amounts in this report have been adjusted to reflect a 2 for 1 stock split effective June 1, 2001.

As of March 13, 2003, the Company had 247 holders of record of its Common Stock.

ITEM 6. SELECTED FINANCIAL DATA

(In Thousands, except per Share Data)

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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Forward Looking Statements and Certain Risks

     Except for the historical information contained herein, this report and the following discussion in particular contain forward-looking statements (identified by the words “estimate,” “project,” “anticipate,” “plan,” “expect,” “intend,” “believe,” “hope,” and similar expressions) which are based upon Management’s current expectations and speak only as of the date made. These forward-looking statements are subject to risks, uncertainties, and factors that could cause actual results to differ materially from the results anticipated in the forward-looking statements. These risks and uncertainties include -

	-		our ability to successfully market new and existing products;
	-		our ability to keep abreast of technological innovations and successfully incorporate them into new products;
	-		our current dependence on sole suppliers for key chemical components in the IMMULITE assays;
	-		the risks inherent in the development and release of new products, such as delays, unforeseen costs, technical difficulties, and regulatory approvals;
	-		competitive pressures, including technological advances and patents obtained by competitors;
	-		environmental risks related to substances regulated by various Federal, State, and international laws;
	-		currency risks based on the relative strength or weakness of the U.S. dollar;
	-		domestic and foreign governmental health care regulation and cost containment measures;
	-		political and economic instability in certain foreign markets including trade restrictions;
	-		changes in accounting standards promulgated by the Financial Accounting Standards Board, the Securities and Exchange Commission, or the American Institute of Certified Public Accountants; and
	-		the effects of governmental or other actions relating to the Chinese subsidiary’s payments.

Results of Operations

Sales

     The Company’s sales increased 15% in 2002 to $324.1 million compared to sales of $283.1 million in 2001, which was a 14% increase over 2000 sales of $247.6 million. 2002 sales of all IMMULITE products (instruments and reagents) were $276.8 million, a 20% increase over 2001. In 2001, sales of all IMMULITE products were $230.4 million, a 19% increase over 2000. Sales of IMMULITE products represented 85% of 2002 sales, 81% of 2001 sales, and 78% of 2000 sales.

     2002 sales of the Company’s original IMMULITE instrument, the IMMULITE One, related reagents, and service were $115.9 million, a 5% decrease from 2001. Sales of IMMULITE One reagents decreased 3% to $96.2 million, while instrument and service sales were down 12% to $19.7 million. In 2001, sales of the IMMULITE product line decreased 1% to $121.3 million. The decrease in IMMULITE sales is a result of IMMULITEs being replaced by IMMULITE 2000s, new IMMULITE replacements going into lower reagent volume environments, and a lower number of instruments being sold. The IMMULITE 2000 instrument had sales including reagents of $160.9 million in 2002, a 47% increase over 2001 sales of $109.1 million. Sales of IMMULITE 2000 reagents increased 55% to $129.3 million, while instrument sales and service increased 24% to $31.6 million. In 2001, sales of the IMMULITE 2000 product line increased 56%.

     In 2002, as in the previous year, the growth of DPC’s business was driven primarily by ongoing demand for the IMMULITE 2000. In the fourth quarter of 2002, the Company began shipping an updated version of the IMMULITE One. Demand for the original IMMULITE continues to be strong, and the Company believes that it remains an important complement to the higher throughput, state-of-the-art IMMULITE 2000. The IMMULITE 2000 has a longer sales process than the IMMULITE One due to the higher sales price. The Company has also experienced a longer time delay between instrument placement and the ramp-up of reagent sales with the IMMULITE 2000.

     As of December 31, 2002, 2001, and 2000, the Company had shipped on a cumulative basis approximately 8,000, 7,000, and 5,900 IMMULITE instruments, respectively. This installed base of instruments and an expanding test kit menu are expected to support continued growth in the coming years.

     Sales of the Company’s mature RIA or isotopic products, $29.9 million in 2002, were down 12% from $33.8 million in 2001. Sales in 2001 increased slightly from 2000. It is expected that these sales levels will decline in the future.

     Sales of other DPC products decreased 14% to $10.4 million in 2002, compared to $12.1 million in 2001. These sales were negatively impacted in 2002 due to the September 2001 introduction of a broad spectrum of allergy assays on the IMMULITE 2000, which has taken sales away from the Company’s microplate-based allergy system. The

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Company also experienced a slight increase in sales of non-DPC products through its consolidated international affiliates to $7.0 million in 2002 from $6.9 million in 2001. It is anticipated that sales of non-DPC products will decline in the future.

     Domestic sales increased 16% in 2002 over 2001, and 33% in 2001 over 2000, reflecting in part the Company’s continued success with larger customers and purchasing organizations and indirect distribution into smaller doctor’s office laboratories.

     Foreign sales (including U.S. export sales, sales to non-consolidated foreign subsidiaries, and sales of consolidated subsidiaries) as a percentage of total sales were approximately 72% in 2002 and 2001 and 76% in 2000. Europe, the Company’s principal foreign market, represented 40%, 41%, and 44% of sales in 2002, 2001, and 2000, respectively. Sales in Germany increased 22% to $40.6 million in 2002 from $33.3 million in 2001, and $30.1 million in 2000, reflecting the success of the IMMULITE 2000 product line. Sales in the Brazil region, which includes certain other Central and South American countries, accounted for approximately 9% of total sales, or $29.0 million, in 2002, compared to $29.6 million in 2001 and $29.5 million in 2000. Although sales rose in local currency, sales were flat in 2002 and declined in 2001 in dollars due to the devaluation of the Brazilian Real, relative to the dollar, which has fallen from less than 2:1 in 2000 to 3.5:1 at the end of 2002. The Company intends to continue to increase prices over time in Brazil, but it may not be able to fully compensate for continuing significant devaluations. To date the Company’s unit sales in Brazil have continued to increase in line with the Company’s overall sales increase.

     Due to the significance of foreign sales, the Company is subject to currency risks based on the relative strength or weakness of the U.S. dollar. In periods when the U.S. dollar is strengthening, the effect of the translation of the financial statements of consolidated foreign affiliates is that of lower sales and net income. In periods when the dollar is weakening, the impact is the reverse. Based on comparative exchange rates in the immediately preceding year, the translation adjustments due to the strong U.S. dollar had a 6% negative impact on 2001 sales and there was a 5% negative impact on 2000 sales. In 2002, the dollar weakened relative to the Euro and net of the negative impact of the Real the currency effect was a slight positive impact. The Company’s hedging strategy in 2002 reduced the positive impact of the strong Euro in the latter part of the year. The Company’s results should reflect the benefits of a strong Euro by the second half of 2003. Due to intense competition, the Company’s foreign distributors are generally unable to increase prices to offset the negative effect when the U.S. dollar is strong.

     In the fourth quarter of fiscal year 2002, the Company discovered internally that its Chinese subsidiary had made payments to certain customers in China that may have violated foreign and U.S. law, including the Foreign Corrupt Practices Act. The Company stopped the payments immediately, and the Board of Directors conducted an independent investigation of the nature of the payments, the involvement of Company personnel, and whether similar situations existed at the Company’s other foreign operations. Based on the results of the investigation, the audit committee concluded that senior management of the Company was not implicated in the payments and that there are no apparent similar issues with respect to the Company’s other foreign operations. The Company’s disclosure committee has conducted a comprehensive review of the Company’s other foreign operations and internal control procedures as they relate to these issues and additional policies and procedures have been implemented to ensure compliance with applicable laws. In 2002, the Company’s Chinese subsidiary had revenues of $9 million, less than 3% of the Company’s total sales. Depending on how these Chinese issues are resolved, the Company’s sales in China could be significantly impacted.

Cost of Sales

     Gross margin improved slightly to 57.5% in 2002 from 57.4% in 2001 and 55.5% in 2000. The improvement in gross margin was due in part to the shift in product mix toward IMMULITE reagents, the shift in customer mix toward domestic end users, and increased manufacturing efficiencies. Although the Company expects these mix trends to continue, it is also experiencing competitive pricing pressures that may negatively impact gross margins. All products manufactured in the United States are sold in Dollars, therefore a weakening Dollar could improve gross margins and a strengthening Dollar could weaken gross margins. Margins in 2002 were also negatively impacted by the devaluation of the Brazilian Real, the effects of which have not been fully overcome by price increases in that region. In 2003, the Company will relocate its Brazilian distribution center, which should result in reduced tariffs and improved gross margins for this region.

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Operating Expenses and Other

     Total operating expenses (Selling, Research and Development, and General and Administrative) as a percentage of sales fell to 37% in 2002, from 38% in 2001 and 39% in 2000, although all categories increased annually in absolute dollars to support the increased levels of sales. General and administrative expenses in 2002 included $1.5 million for costs incurred through year-end 2002 relating to the investigation of the Chinese payments and for estimated penalties and/or fines which the Company may incur to resolve issues relating to this matter.

     Equity in income of affiliates represents the Company’s share of earnings of non-consolidated affiliates, principally the 45%-owned Italian distributor. This amount increased 88% in 2001 relative to 2000 and 16% in 2002 relative to 2001, primarily due to increased earnings of the Italian distributor. In 2001 and 2002, equity in income of affiliates included a $500,000 permanent benefit and a $400,000 benefit, respectively, due to a change in the Italian tax laws.

     Net interest and other income (expense) represents the excess of interest income and interest earned on equipment contracts relating to IMMULITE placements over interest expense and other amounts of income and expense. Net interest income and other income was an expense of $1,220,000 in 2002 versus expense of $7,000 in 2001. The 2002 amount included approximately $500,000 in foreign exchange losses versus approximately $600,000 in 2001. In addition, the Company experienced a $400,000 increase in local tariffs in Brazil. The 2000 amount of $666,000 income included, among other things, a gain of $482,000 on the sale of a product line, a gain of $215,000 on the sale of a building, and foreign exchange losses of $500,000.

Income Taxes and Minority Interest

     The Company’s effective tax rate (31% in 2002 and 2001 and 30% in 2000) includes Federal, State, and foreign taxes. In the fourth quarter of 2002 the Company’s tax provision includes an accrual of $1.4 million relating to the possible non-deductibility of payments in China. The Company expects that its effective tax rate will be lower in 2003.

     Minority interest represents the 44% interest in the Company’s Brazilian distributor held by a third party. Increases or decreases in this amount reflect increases or decreases in the profitability of the Brazilian distributor.

Net Income

     2002 net income of $47.3 million ($1.60 per diluted share) increased 21% over 2001 net income of $39.0 million ($1.32 per diluted share), which was a 38% increase over 2000 net income. These increases were primarily due to increases in sales and gross profit that were greater than percentage increases in operating expenses. Excluding the non-recurring tax accrual of $1.4 million and $1.5 million general and administrative expense discussed above, net income in 2002 would have increased 27% over 2001 to $49.7 million or $1.68 per diluted share.

Critical Accounting Policies

     The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. These estimates and assumptions include, but are not limited to, allowance for bad debts, allowance for slow moving and obsolete inventories, useful lives selected for depreciating property, plant, and equipment, valuation allowances for deferred income taxes, and estimates used in the recoverability of long-lived assets. Management believes that the methodology it utilizes to determine these amounts results in the reporting of reasonable estimates and that the differences between the estimates and actual results are usually minor and are included in the consolidated financial statements by management as soon as they are known.

Liquidity and Capital Resources

     The Company has adequate working capital and sources of capital to carry on its current business and to meet its existing capital requirements. At December 31, 2002 and December 31, 2001, the Company had $54,284,000 and $31,834,000 in cash and cash equivalents, respectively. Included in the cash and cash equivalents at December 31, 2002 and 2001 is $42,5000,000 and $19,900,000, respectively, of short-term, high-quality, commercial paper.

     Net cash flows from operating activities were $69.0 million in 2002, consisting of $75.6 million provided by net income adjusted for depreciation and amortization and other non-cash items included in net income, less $6.6 million used in changes in operating assets and liabilities. The most significant elements of the net cash used in operating

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assets and liabilities were an $11.1 million increase in inventories, a $4.6 million increase in accounts receivable, partially offset by an $8.3 million increase in accrued liabilities. Net cash flows from operating activities were $61.7 million in 2001 and $41.7 in 2000. Net cash flows in 2001 consisted of $63.7 million provided by net income adjusted for depreciation and amortization and other non-cash items included in net income, less $2.0 million used in changes in operating assets and liabilities. The most significant elements of the net cash used in operating assets and liabilities were an $8.6 million increase in accounts receivable, a $3.6 million increase in inventories and a $3.2 million decrease in accounts payable, partially offset by a $5.5 million increase in income taxes payable.

     Cash flows used for investing activities consist principally of additions to property, plant and equipment, and increases in sales type and operating leases of IMMULITE instrument units.

     Additions to property, plant, and equipment in 2002 were $12.5 million compared to $27.3 million in 2001 and $9.6 million in 2000. Included in 2001 is approximately $9.0 million for the completion of a new manufacturing facility in New Jersey and approximately $4.0 million related the implementation of a new computer system in Los Angeles. Cash used for the placement of IMMULITE systems under sales-type and operating leases and as rentals (for periods of generally three to five years) increased to $31.4 million in 2002, from $28.0 million in 2001, reflecting a higher number of IMMULITE 2000 instruments being placed under operating leases rather than being sold. In 2000, the cash used for sales and operating type leases and rentals was $18.0 million.

     In 2000, the Company purchased land in New Jersey and in 2001 constructed an 89,000 square foot building for a total cost of $14.8 million. The Company moved into this new manufacturing facility in December 2001. The Company implemented its new computer system in Los Angeles in February 2002 at a capitalized cost of approximately $4.8 million. It is anticipated that the computer systems in the United Kingdom and New Jersey will be converted over the next several years. In the first quarter of 2003, the Company purchased a 170,000 sq. ft. building in Los Angeles for approximately $22 million cash. This building will be fitted out over the next four quarters and initial occupancy is anticipated in early 2004. It is anticipated that the cost of fitting out the building will be $7.0 to $9.0 million.

     The Company has a $20 million unsecured line of credit. Standby letters of credit under the line of credit totaled $386,000 at December 31, 2001 and 2000. There were no standby letters of credit outstanding at December 31, 2002. No other borrowings were outstanding at December 31, 2002, 2001, and 2000 under the line of credit. The Company had notes payable (consisting of bank borrowings by the Company’s foreign consolidated subsidiaries payable in the local currency, some of which are guaranteed by the U.S. parent company) of $19.7 million at December 31, 2002 compared to $17.0 million at December 31, 2001 and $15.6 million at December 31, 2000. The terms of the loans are described in “ITEM 7A. Quantitative and Qualitative Disclosures About Market Risk.”

     The Company’s foreign operations are subject to risks, such as currency devaluations, associated with political and economic instability.

     The Company has paid a quarterly cash dividend of $.06 per share, on a split-adjusted basis, since 1995.

Contractual Obligations and Commitments

     On April 1, 2002, the Company amended its lease relating to 116,000 square feet of its Los Angeles facility. The original lease expires on December 31, 2002. The amendment extends the term of the lease for two years through December 31, 2004 and increases the rent to approximately $.75 from $.70 per square foot, for a total annual rent of $1,035,000 effective January 1, 2003. The Company also has the option to extend the term for two years at $.79 per square foot. The lease is with a partnership comprised of Michael Ziering, CEO and director, and Ira Ziering, VP and director, Marilyn Ziering, VP, and other children of Mrs. Ziering who are shareholders of the Company. The rent was determined on the basis of an independent appraisal, and the terms of the lease amendment were approved unanimously by the non-interested members of the board of directors. The Company decided not to sign a long-term lease for this facility so that it will have the flexibility to consider all options to meet its future space requirements.

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     The following table discloses the Company’s obligations and commitments to make future payments under contractual obligations at December 31, 2002, which include the Company’s subsidiaries’ notes payable (see “Interest Rate Risks” in Item 7A below and “Note 6 – Notes Payable” of Notes to Consolidated Financial Statements.

New Accounting Pronouncements

     In June 2001, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards (“SFAS”) No. 141, “Business Combinations” and SFAS No. 142, “Goodwill and Other Intangible Assets.” SFAS No. 141 requires that the purchase method of accounting be used for all business combinations initiated after June 30, 2001. SFAS No. 142 changes the accounting for goodwill from an amortization method to an impairment-only approach. Amortization of goodwill ceased upon adoption of this statement. In addition, the standard includes provisions for the reclassification of certain existing recognized intangibles as goodwill, reassessment of the useful lives of existing recognized intangibles, reclassification of certain intangibles out of previously reported goodwill, and the identification of reporting units for purposes of assessing potential future impairments of goodwill. Under SFAS No. 142, goodwill and other intangibles are initially assessed for impairment upon adoption of the statements with subsequent assessments required annually and when there is reason to suspect that their values have been diminished or impaired, with any corresponding write-downs recognized as necessary.

     In connection with the adoption of SFAS No. 142, the Company evaluated its intangibles including goodwill and determined that reclassification of such balances was not necessary. Accordingly, the Company’s intangibles consist solely of goodwill generated in connection with the purchase of certain of its international distributors. Effective January 1, 2002, the Company adopted SFAS No. 142. Accordingly, amortization of goodwill ceased, effective January 2002, and would have been $282,000 in the fourth quarter and $1,117,000 for the year ended December 31, 2002 had the non-amortization provisions of SFAS No. 142 not been adopted. Pro forma net income for the quarter ended December 31, 2001, had the non-amortization provisions of SFAS No. 142 been applied to that period, would have been $11,619,000, or $.39 per diluted share, versus the $11,337,000 or $.38 per diluted share actually reported. Pro forma net income for the year 2001 would have been $40,146,000, or $1.36 per diluted share, versus the $39,029,000 or $1.32 per diluted share actually reported. Pro forma net income for the year ended December 31, 2000, had the non-amortization provisions of SFAS No. 142 been applied to that period, would have been $29,318,000, on an after-tax basis, or $1.04 per diluted share versus the $28,250,000 or $1.00 per diluted share actually reported. As required under SFAS No. 142, the Company has completed its annual impairment testing and does not believe impairment of its goodwill is necessary.

     In June 2001, the Financial Accounting Standards Board issued SFAS No. 143, “Accounting for Asset Retirement Obligations.” The Company does not believe the impact of SFAS No. 143 will be material to the Company’s consolidated position or results of operations.

     In August 2001, the Financial Accounting Standards Board issued SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets.” This Statement addresses financial accounting and reporting for the impairment or disposal of long-lived assets. This Statement supersedes SFAS No. 121, “Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of”, and the accounting and reporting provisions of Accounting Principles Board Opinion No. 30, “Reporting the Results of Operations—Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions,” for the disposal of a segment of a business. The Company adopted SFAS No. 144 effective January 1, 2002. The adoption of this standard did not have a material impact on the Company’s consolidated financial position or results of operations.

     In April 2002, the Financial Accounting Standards Board issued SFAS No. 145, “Rescission of FASB Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections.” SFAS No. 145 rescinds or amends, effective immediately, several other existing authoritative pronouncements to make various technical corrections, clarifying meanings, or describe their applicability under changed conditions. In July 2002, the Financial Accounting Standards Board issued SFAS No. 146, “Accounting for Costs Associated with Exit or Disposal Activities.” The standard requires companies to recognize costs associated with exit or disposal activities when they are incurred rather than at the date of a commitment to an exit or disposal plan. Examples of costs covered by the

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standard include lease termination costs and certain employee severance costs that are associated with a restructuring, discontinued operation, plant closing, or other exit or disposal activity. SFAS No. 146 is to be applied prospectively to exit or disposal activities initiated after December 31, 2002. The Company does not believe that SFAS Nos. 145 and 146 will have a material impact to its consolidated financial position or results of operations.

     During November 2002, the Financial Accounting Standards Board issued FASB Interpretation No. 45, “Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others,” which is an interpretation of FASB Statements No. 5, 57, and 107 and rescission of FASB Interpretation No. 34. The initial recognition and measurement provisions of this Interpretation are applicable on a prospective basis to guarantees issued or modified after December 31, 2002, and the disclosure requirements are effective for financial statements of periods ending after December 15, 2002. This Interpretation addresses the disclosures to be made by a guarantor in its interim, and annual financial statements about its obligations under guarantees, and also clarifies the requirements related to the recognition of a liability by a guarantor at the inception of a guarantee for the obligations the guarantor has undertaken in issuing that guarantee. The Company does not believe that FASB Interpretation No. 45 will have a material impact on its consolidated financial statements. The company does not currently provide any third party guarantees.

     In December 2002, the Financial Accounting Standards Board issued SFAS No. 148, “Accounting for Stock-Based Compensation —Transition and Disclosure, an amendment of FASB Statement No. 123,” which provides alternative methods of transition for a voluntary change to the fair value based method of accounting for stock-based employee compensation, and amends the disclosure requirements of SFAS No. 123 to require prominent disclosures in both annual and interim financial statements about the method of accounting for stock-based employee compensation and the effect of the method used on reported results. As of December 31, 2002, the Company has adopted the amended disclosure requirements of SFAS No. 148.

Euro Conversion

     The Company has significant sales to European countries (the “participating countries”) which converted to a common legal currency (the “Euro”) on January 1, 2002. The conversion to the Euro has eliminated currency exchange risk among the participating countries.

     The Company sells its products in the participating countries through affiliated and non-affiliated distributors that determine sales prices in their respective territories. The use of a single currency in the participating countries may affect this variable pricing in the various European markets because of price transparency. Nevertheless, other market factors such as local taxes, customer preferences, and product assortment may reduce the need for price equalization. The Euro conversion has not had a material impact on the Company’s business.

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ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     The Company is exposed to certain market risks arising from transactions in the normal course of its business, principally risk associated with interest rate and foreign currency fluctuations.

Interest Rate Risk

     The Company periodically invests its excess cash in short-term high-quality commercial paper. At December 31, 2002, the Company had $42,500,000 invested in such securities, which yielded an average annual return of approximately 1.10 %. The average maturity of these investments is less than one month.

     Additionally, the Company has debt obligations at its foreign subsidiaries that mature on various dates. Substantially all of the Company’s debt obligations are denominated in European currencies. The table below presents principal cash flows translated into US dollars and related interest rates by fiscal year of maturity:

Notes Payable Information December 31, 2002
(U.S. Dollars in Thousands)

Foreign Currency Risk

     The Company may periodically enter into foreign currency contracts in order to manage or reduce foreign currency market risk. The Company’s policies do not permit active trading of or speculation in derivative financial instruments. The Company’s policy is to hedge major foreign currency cash exposures through foreign exchange forward contracts. The Company enters into these contracts with only major financial institutions, which minimizes its risk of credit loss. A discussion of the Company’s primary market risk exposures and the management of those exposures is presented below.

     The Company generates revenues and costs that can fluctuate with changes in foreign currency exchange rates when transactions are denominated in currencies other than the local currency. The Company manufactures its products principally in the United States and the United Kingdom and sells product to distributors, many of which are owned by the Company, throughout the world. Products sold from the United States are denominated in US dollars and products sold from the United Kingdom are denominated in pounds sterling. The distributors in turn have foreign currency risk related to their product purchases. Many of the Company-owned distributors purchase forward currency contracts to offset currency exposures related to these purchase commitments.

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     The table below provides information as of December 31, 2002 concerning the Company’s forward currency exchange contracts related to certain commitments of its subsidiaries denominated in foreign currencies. The table presents the contractual amount, the weighted-average expiration date, the weighted-average contract exchange rates, and the values for its currency contracts outstanding.

Foreign Currency Exchange Contracts Outstanding December 31, 2002

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

See Item 15 for a listing of the consolidated financial statements and supplementary data filed with this report.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

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PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF REGISTRANT

     The information contained in the sections entitled “Election of Directors”; “Ownership of Common Stock – Section 16 (a) Beneficial Ownership Reporting Compliance”; and “Executive Officers” of the Company’s Proxy Statement for the 2003 Annual Shareholders Meeting is hereby incorporated herein by reference.

ITEM 11. EXECUTIVE COMPENSATION

     The information contained in the sections entitled “Election of Directors–Compensation of Directors,” “Executive Compensation,” and “Compensation Committee Interlocks and Insider Participation” of the Company’s Proxy Statement for the 2003 Annual Shareholders Meeting is hereby incorporated herein by reference.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     The information contained in the section entitled “Ownership of Common Stock” of the Company’s Proxy Statement for the 2003 Annual Shareholders Meeting is hereby incorporated herein by reference.

Equity Compensation Plan Information

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     The information contained in the section entitled “Related Transactions” of the Company’s Proxy Statement for the 2003 Annual Shareholders Meeting is hereby incorporated herein by reference.

ITEM 14. CONTROLS AND PROCEDURES

     Based on their evaluation of the Company’s disclosure controls and procedures as of a date within 90 days prior to the filing of this report, the Chief Executive Officer and Chief Financial Officer of the Company have concluded that such disclosure controls and procedures were effective to provide reasonable assurance that material information relating to the Company and its consolidated subsidiaries will be made known to them by others within those entities. Since the date of such evaluation, there have been no significant changes in internal controls or in other factors that could significantly affect internal controls, including any corrective action with regard to significant deficiencies and material weaknesses.

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     In the fourth quarter of fiscal year 2002, the Company discovered internally that its Chinese subsidiary had made payments to certain customers in China that may have violated foreign and U.S. law, including the Foreign Corrupt Practices Act. The Company stopped the payments immediately, and the Board of Directors conducted an independent investigation of the nature of the payments, the involvement of Company personnel, and whether similar situations existed at the Company’s other foreign operations. Based on the results of the investigation, the audit committee concluded that senior management of the Company was not implicated in the payments and that there are no apparent similar issues with respect to the Company’s other foreign operations. The Company’s disclosure committee has conducted a comprehensive review of the Company’s internal controls and procedures as they relate to these issues and additional policies and procedures have been implemented to ensure compliance with applicable laws.

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

(a)  Documents filed as part of Report:

	1.		Financial Statements:
			Independent Auditors’ Report
			Consolidated Balance Sheets as of December 31, 2002 and 2001.
			Consolidated Statements of Income for each of the three years in the period ended December 31, 2002.
			Consolidated Statements of Shareholders’ Equity for each of the three years in the period ended December 31, 2002.
			Consolidated Statements of Cash Flows for each of the three years in the period ended December 31, 2002.
			Notes to Consolidated Financial Statements
	2.		Supplementary Financial Data.
	3.		Exhibits – See “Exhibit Index” which appears after the signature page of this report.

(b)  Reports on Form 8-K – none filed in the fourth quarter of 2002.

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INDEPENDENT AUDITORS’ REPORT

The Board of Directors and Shareholders:

We have audited the accompanying consolidated balance sheets of Diagnostic Products Corporation and its subsidiaries (the “Company”) as of December 31, 2002 and 2001, and the related consolidated statements of income, shareholders’ equity, and cash flows for each of the three years in the period ended December 31, 2002. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of Diagnostic Products Corporation and its subsidiaries as of December 31, 2002 and 2001, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2002, in conformity with accounting principles generally accepted in the United States of America.

As discussed in Note 1 to the consolidated financial statements, effective January 1, 2002, the Company changed its method of accounting for goodwill and other intangible assets to conform to Statement of Financial Accounting Standards No. 142, “Goodwill and Other Intangible Assets.”

/s/ Deloitte & Touche LLP

Los Angeles, California
February 21, 2003

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CONSOLIDATED BALANCE SHEETS

SEE ACCOMPANYING NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS.

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CONSOLIDATED STATEMENTS OF INCOME

SEE ACCOMPANYING NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS

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CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY