Stratagene Reports First Quarter Results; Company Updates 2006 Financial Guidance

Stratagene Corporation (Nasdaq:STGN), a developer,
manufacturer and marketer of specialized life science research and
diagnostic products, today released financial results for the first
quarter of 2006 ended March 31, 2006.
   For the first quarter of 2006, revenue was $24.3 million, compared
with revenue of $24.6 million in the first quarter of 2005. Excluding
the impact of foreign currency exchange movements, which negatively
affected revenue in the first quarter of 2006, revenue for the first
quarter of 2006 increased 1.6% compared with the first quarter of
2005.
   "We have continued to execute our long-term strategy focused on
bringing innovative new products to the market that meet the emerging
needs of our customers," said Joseph A. Sorge, M.D., President and CEO
of Stratagene. "In the first quarter we launched three new software
solutions, which are gaining traction and have the ability to become
the standard for pathway and microarray analysis. In addition, we
enhanced our line-up of high-fidelity PCR enzymes and extended our
market leadership in phosphatase enzymes with a number of new product
introductions. Despite these successes, and as expected, our first
quarter year-over-year sales comparison was negatively impacted by a
decline in older products associated with gene discovery and cloning
systems and by the effects of the strengthening dollar on our foreign
sales. While we expected a decline in our older, legacy product sales,
the impact to the first quarter results was greater than expected. The
year-over-year decline in first quarter 2006 product sales was also
negatively impacted by an increase in product backlog. If this
increase in backlog were eliminated from the comparison and after
considering the foreign currency exchange movement, revenues would
have increased by 3.0% in the first quarter of 2006.
   "Looking ahead, we expect to devote a predominance of our product
development resources to growth opportunities in the areas of
molecular detection solutions for the molecular diagnostics market,"
continued Dr. Sorge. "To date, we have already developed a number of
innovative products and as a result, we expect sales related to gene
analysis products in the areas of quantitative PCR ("QPCR")
instruments and reagents to increase throughout 2006."
   In March 2006, Stratagene announced that Bayer Healthcare,
Diagnostics Division, a member of the Bayer Group (NYSE: BAY), will
purchase customized Mx3005P(TM) QPCR instrument systems for use by
Bayer in the worldwide molecular diagnostics marketplace.
   "Currently, we are customizing our Mx3005P instrument systems for
the new platform that Bayer is developing for performing molecular
diagnostics tests. During the development stage of the contract,
Stratagene will recognize contract revenues upon completion of
milestone activities," said Dr. Sorge. "Stratagene recognized $355,000
of revenues related to this development program in the first quarter
of 2006. Based upon current development timelines, we expect to
complete the development activities in 2006 and regulatory submission
activities for the customized instrument will continue in 2007. This
strategic relationship with Bayer for a custom QPCR instrument and our
strategic relationship with Focus Diagnostics for the development of
molecular diagnostics products demonstrate our progress toward
executing our molecular diagnostics strategy."
   "Within our clinical diagnostics business, our allergy product
line grew 12.9% in the first quarter of 2006 compared with the first
quarter of 2005. This part of our core business remains profitable and
contributes to our financial flexibility," concluded Dr. Sorge.
   For the first quarter of 2006, Stratagene generated net income of
$1.1 million, or $0.05 per diluted share, compared with $2.9 million,
or $0.13 per diluted share, in the comparable quarter of 2005.
Earnings in the first quarter of 2006 were negatively impacted by
approximately $1.1 million or $0.03 per diluted share after income
taxes for legal expenses associated with patent litigation matters
when compared with the same period of the prior year. Earnings in the
first quarter of last year also included $530,000 or $0.02 per diluted
share in other income from a litigation settlement payment received by
Stratagene and recorded in that period which was not repeated in the
first quarter of 2006.
   As of March 31, 2006, total cash and cash equivalents were
approximately $30.6 million and total assets were $115.5 million. The
total cash figure includes approximately $21 million set aside in
January 2006 in a restricted account as collateral for an appeal bond
while the Company appeals the district court judgment and damages
award in the matter of Third Wave Technologies, Inc. vs. Stratagene
Corporation. The bond will remain in place until the patent
infringement matter is concluded and Stratagene and the surety holder
are released from liability by the court or the amount of the final
judgment, if any, is paid. Stratagene currently has approximately $9.2
million in unrestricted cash which is not impacted by the bond
arrangements and Stratagene remains cash flow positive. The total
amount of outstanding long-term debt is approximately $4.0 million and
final payments on such long-term debt are due in 2022. Stratagene also
has a $9.0 million revolving line of credit in place which has a zero
balance currently outstanding.
   Gross margin decreased to 64.6% of revenues for the first quarter
of 2006 compared with 65.5% of revenues for the same quarter of 2005.
The gross margin in 2006 was affected by lower pricing on instruments
and certain legacy research product sales and by the affect of a
relatively high level of fixed manufacturing costs that were spread
over lower product sales in the first quarter of 2006 compared with
the first quarter of 2005. The gross margin percentage does not
consider the contract revenues recognized in the first quarter of
2006.
   Research and development expenses increased 17.3% to $3.4 million
in the first quarter of 2006 compared with $2.9 million in the first
quarter of 2005 primarily related to higher Mx(TM) instrument
development costs associated with the Bayer agreement and additional
costs incurred in developing the recently released biology-focused
pathway analysis software.
   Selling and marketing expenses increased 11.6% to $5.6 million in
the first quarter of 2006 compared with $5.0 million in the first
quarter of last year, primarily related to increased personnel costs
and additional marketing expenditures associated with new life science
product releases in late 2005 and early 2006.
   General and administrative expenses increased 21.9% in the first
quarter to $5.0 million compared with $4.1 million in the first
quarter of 2005. General and administrative expenses in the first
quarter of 2006 were impacted by the aforementioned higher legal
expenses of $1.1 million.
   Earnings in the first quarter of 2006 include approximately
$170,000, or approximately $0.01 per diluted share after income taxes
of non-cash share-based compensation expense associated with the
implementation on January 1, 2006 of FAS 123R "Share-Based Payments"
under the modified prospective method. The charges relate to
outstanding stock options granted by the Company and shares purchased
through the Employee Stock Purchase Plan. The first quarter of 2005
was not impacted by this accounting charge.
   "Based upon our first quarter results and our current outlook for
the remainder of 2006, we now believe that the faster-than-expected
decline in some of our legacy life science product sales will have a
meaningful impact on revenue and earnings this year," said Steve
Martin, Vice President and CFO of Stratagene. "As a result, we are
reducing our revenue guidance by $2 million and after adjusting
planned expenditures we expect a net impact to earnings per share of
approximately $0.07 to $0.08 for 2006. Despite the slowdown in revenue
growth, we will continue to invest in research and development focused
on furthering our innovative molecular diagnostics strategy and
bringing other innovative products to the market. This commitment is
expected to consequently increase our research and development
expenses as a percent of revenues to between 13% and 15%," concluded
Mr. Martin.

   Updated Outlook for the Full Year 2006

   --  Revenue expected to be between $98 and $102 million.

   --  Gross margin expected to range from 63% to 65% of revenues.

   --  Research and development expenses expected to range from 13%
        to 15% of revenues.

   --  GAAP earnings per share expected to range from $0.30 to $0.33
        per share. This includes the expected $1.1 million pre-tax
        affect ($0.03 per diluted share) from the implementation of
        FAS 123R in 2006

   --  Expected effective tax rate of 33%

   --  Expected fully diluted share count of 22.7 million.

   Conference Call Today

   Stratagene will host a conference call and webcast today,
Thursday, May 4, 2006, at 4:30 p.m. Eastern Time to discuss the
Company's first quarter 2006 results, outlook for 2006, and current
corporate developments. The dial-in number for the conference call is
800-366-7417 for domestic participants and 303-262-2191 for
international participants.
   A taped replay of the conference call will also be available
beginning approximately one hour after the call's conclusion and will
remain available for seven days. It can be accessed by dialing
800-405-2236 for domestic callers and 303-590-3000 for international
callers, using the passcode 11058663#. To access the live webcast of
the call, go to Stratagene's website at http://www.stratagene.com and
click on the Investors icon. An archived webcast will also be
available at http://www.stratagene.com.

   About Stratagene Corporation

   Stratagene is a developer, marketer and manufacturer of
specialized life science research and diagnostic products. The
Company's life science research unit supports advances in science by
inventing, manufacturing and distributing products that simplify,
accelerate and improve research. These products are used throughout
the academic, industrial and government research sectors in fields
spanning molecular biology, genomics, proteomics, drug discovery and
toxicology. The Company's diagnostic unit develops and manufactures
products for urinalysis, and high quality automated instrument and
reagent systems that use blood samples to test for more than 1,000
different allergies and autoimmune disorders. In addition, by
combining its expertise in diagnostics and molecular biology, as well
as its experience with FDA regulatory procedures, the Company is
pursuing opportunities to expand its product portfolio to include
molecular diagnostic kits and instrumentation. More information is
available at www.stratagene.com.

   Safe Harbor Statement

   Certain statements in this news release that are not historical
fact constitute "forward-looking statements" within the meaning of the
Private Securities Litigation Reform Act of 1995. Stockholders and
other readers are cautioned not to place undue reliance on these
forward-looking statements. Stratagene generally identifies
forward-looking statements by using words like "believe," "intend,"
"target," "expect," "estimate," "may," "should," "plan," "project,"
"contemplate," "anticipate," "predict" or similar expressions. You can
also identify forward-looking statements by discussions of strategies,
plans or intentions. Such forward-looking statements involve known and
unknown risks, uncertainties and other factors, which may cause the
actual results of Stratagene to be materially different from
historical results or from any results expressed or implied by such
forward-looking statements. Among the important factors that could
cause actual results to differ materially from those contained in or
implied by the forward-looking statements are risks associated with
the company's inability to sufficiently anticipate market needs and
develop products and product enhancements that achieve market
acceptance, the company's ability to compete effectively in the
diagnostics and life science research markets, variability of the
company's quarterly revenues and operating results, the failure of the
company to retain key employees, the company's ability to obtain
additional debt or equity financing, the possibility of declining
sales due in part to a reduction in research and development budgets
or government funding, the company's ongoing ability to protect its
own intellectual property rights and to avoid violating the
intellectual property rights of third parties, extended manufacturing
difficulties and currency fluctuations. For more information about
these and other factors that could cause actual results to differ
materially from those contained in or implied by the forward-looking
statements please see Item "1A. Risk Factors" included in Stratagene's
Annual Report on Form 10-K for the year ended December 31, 2005 and in
other reports filed by Stratagene from time to time with the
Securities and Exchange Commission, including Quarterly Reports on
Form 10-Q.
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                STRATAGENE CORPORATION AND SUBSIDIARIES
                              (unaudited)
               (in thousands, except earnings per share)

CONDENSED CONSOLIDATED INCOME STATEMENTS
--------------------------------------------------------------------


                                                 Three Months Ended
                                                      March 31,
                                                 -------------------
                                                     2006      2005
                                                 --------- ---------

Revenues                                          $24,256   $24,600

Costs and expenses:
Cost of product sales                               8,464     8,466
Research and development                            3,389     2,889
Selling and marketing                               5,570     4,993
General and administrative                          5,004     4,106
Other operating costs                                 171        20
                                                 --------- ---------
Total operating costs and expenses                 22,598    20,474
                                                 --------- ---------
Income from operations                              1,658     4,126
Other income and expenses:
Loss on foreign currency transactions                 (24)     (114)
Other income, net                                      48       533
Interest expense                                     (313)      (99)
Interest income                                       288         5
                                                 --------- ---------
Total other income (expense)                           (1)      325
                                                 --------- ---------
Income before income taxes                          1,657     4,451
Income tax expense                                    554     1,516
                                                 --------- ---------
Net income                                         $1,103    $2,935
                                                 ========= =========

Earnings per share:
Basic                                               $0.05     $0.13
Diluted                                             $0.05     $0.13

Weighted average shares:
Basic                                              22,325    22,031
Diluted                                            22,715    22,131


CONDENSED CONSOLIDATED BALANCE SHEETS             
-------------------------------------------------  Mar 31,  Dec. 31,
                                                     2006      2005
                                                 --------- ---------
 Cash and cash equivalents, unrestricted           $9,205   $40,508
 Cash, restricted                                  21,428       192
 Other current assets                              39,600    38,440
 Property and equipment, net                       11,116    11,267
 Goodwill                                          27,234    27,234
 Other assets, net                                  6,883     7,041
                                                 --------- ---------
  Total assets                                   $115,466  $124,682
                                                 ========= =========

 Current portion of long-term debt                   $249    $5,740
 Dividend payable                                       -     5,571
 Other current liabilities                         48,940    48,887
 Long-term debt, less current portion               3,775     3,775
 Other long-term liabilities                        2,273     2,219
 Stockholders' equity                              60,229    58,490
                                                 --------- ---------
       Total liabilities and 
        stockholders' equity                     $115,466  $124,682
                                                 ========= =========



CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
--------------------------------------------------------------------


                                                   Three Months Ended
                                                         March 31,
                                                      ----------------
                                                         2006    2005
                                                      -------- -------
Cash flows from operating activities:
   Net income                                          $1,103  $2,935
   Depreciation and amortization                          890     956
   Stock-based compensation                               252     179
   Other items, net                                    (1,029)   (623)
                                                      -------- -------
      Net cash provided by operating activities         1,216   3,447
                                                      -------- -------
Cash flows from investing activities:
   Purchases of property and equipment                   (427)   (392)
   Additions to intangible assets                        (141)   (321)
Changes in restricted cash                            (21,236)   (163)
   Other items, net                                         -     131
                                                      -------- -------
      Net cash used in investing activities           (21,804)   (745)
                                                      -------- -------
Cash flows from financing activities:
   Principal payments on debt, net                     (5,500) (3,750)
Dividend to shareholders                               (5,571)      -
   Other items, net                                       266      96
                                                      -------- -------
      Net cash used in financing activities           (10,805) (3,654)
Effects of foreign currency exchange rates on cash         90     (17)
                                                      ======== =======
   Net decrease in cash and cash equivalents          (31,303)   (969)
Cash and cash equivalents at beginning of period       40,508   4,890
                                                      -------- -------
Cash and cash equivalents at end of period             $9,205  $3,921
                                                      ======== =======
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