Stratagene Reports Third Quarter Results

  
    
  
  
    
      Stratagene Corporation (Nasdaq: STGN), a developer, manufacturer and 
      marketer of specialized life science research and diagnostic products, 
      today released financial results for the third quarter of 2006 ended 
      September 30, 2006.
    
    
      For the third quarter of 2006, revenue was $23.2 million, compared with 
      revenue of $23.7 million in the third quarter of 2005. Revenues in the 
      third quarter of 2006 included slightly lower software products and 
      royalty revenues compared with the same quarter of 2005. Sales of QPCR 
      instruments and reagents grew 8.6% year-over-year and sales of allergy 
      diagnostic products grew 4.9% year-over-year. These increases were 
      offset by the continued and expected decline in sales of legacy products 
      associated with gene discovery and cloning systems.
    
    
      Third Quarter 2006 Highlights
    
    
      
        QPCR instrument and reagent growth of 8.6% year-over-year
      
      
        Entered into a joint development and license agreement with Rosetta 
        Inpharmatics, a subsidiary of Merck to develop an RNA purification 
        system to be used in molecular diagnostics applications
      
      
        Launched ArrayAssist® CopyNumber software 
        product; a guided workflow available to biologists for copy number 
        analysis
      
      
        Exercised option to license nucleic acid predictors for bladder cancer
      
      
        Participated in the Food and Drug Administrations MicroArray Quality 
        Control project with Stratagene’s Universal 
        RNA being chosen as a high-quality reference standard
      
      
        Entered into agreement with VWR International, Inc. to expand 
        distribution of research products in Canada
      
    
    
      “We were disappointed by the court’s 
      decision to enhance the damage award in the Invitrogen v. Stratagene 
      patent matter. The court had twice earlier found Stratagene to be not 
      liable due to non-infringement and invalidity of Invitrogen’s 
      patent,” said Joseph A. Sorge, M.D., President 
      and CEO of Stratagene. “Nevertheless, we are 
      expanding our QPCR instrument footprint, developing additional reagent 
      technology and entering into new strategic relationships with dynamic 
      partners. During the third quarter, we expanded our instrument installed 
      base to more than 2,000 units.”
    
    
      “As we have outlined in the past, the internal 
      development of our instrument and reagent platform is one key component 
      of our molecular diagnostics strategy,” 
      continued Dr. Sorge. “During the third 
      quarter we also executed on the other two legs of our strategy by 
      entering into a strategic agreement with Rosetta Inpharmatics, a 
      division of Merck, and by exercising an option to license a family of 
      gene expression predictors for bladder cancer that have been validated 
      in a multi-center European study. Furthermore, we also continued to work 
      closely with Bayer Diagnostics to continue to customize our Mx3005P 
      instrument system for the new platform they are developing for molecular 
      diagnostic tests. In addition, we are delighted that we now have a 
      relationship with Quest Diagnostics as a result of its acquisition of 
      Focus Diagnostics. We remain excited and confident that we are pursuing 
      a strategy that will allow us, over the long-term, to become a leader in 
      the molecular diagnostics space and we believe we have the talent, 
      intellectual property and partnerships to be successful.”
    
    
      For the third quarter of 2006, Stratagene recorded a net loss of $6.3 
      million. The net loss during the third quarter of 2006 included a $12.5 
      million pre-tax litigation charge related to a court judgment in a 
      patent litigation matter that the Company plans to appeal. The total 
      after-tax impact of the charge was $7.9 million or $0.35 per share. 
      Excluding this charge, the Company would have achieved net income of 
      $1.6 million or $.07 per share in the third quarter of 2006 compared 
      with $0.7 million, or $0.03 per share in the comparable quarter of 2005.
    
    
      The third quarter net loss was also impacted by approximately $269,000 
      before taxes or $0.01 per share, after income taxes, in non-cash 
      share-based compensation expense associated with the implementation of 
      FAS 123R “Share-Based Payments” 
      in 2006. The third quarter of 2005 was not impacted by the share-based 
      compensation expense.
    
    
      In the matter of Invitrogen vs. Stratagene, Stratagene intends to 
      file an appeal with the United States Court of Appeals for the Federal 
      Circuit in Texas and will post a civil supersedeas bond to stay payment 
      of the judgment. The final arrangements related to the bonding of the 
      judgment will be concluded later this week and as a result the Company 
      expects to file a Form 12b-25 extension with the SEC to allow five more 
      days to complete the necessary documentation and disclosures in its 
      Report on Form 10-Q for the third quarter of 2006.
    
    
      As of September 30, 2006, the Company had total cash and cash 
      equivalents of approximately $38.1 million of which approximately $16.6 
      million was unrestricted. The Company will utilize available cash 
      resources in connection with the posting of the appeal bond. The posting 
      of these two appeal bonds in 2006 will have a significant impact on the 
      cash resources of the Company because the appeal bonds require cash be 
      set aside for the full amount of the damage awards. The appeal bond 
      amounts do not consider the offsetting income tax benefit, which would 
      result in a refund of about one-third of the cash back to the Company in 
      the event of payment or settlement of these matters for cash. Stratagene 
      remains cash flow positive from its operating activities.
    
    
      Gross margin decreased to 63.0% of revenues for the third quarter of 
      2006 compared with 64.4% of revenues for the same quarter of 2005. The 
      lower gross margin in 2006 was primarily the result of higher royalty 
      expense associated with newly developed software solutions products. 
      This higher expense impacted the gross margin rate in the third quarter 
      of 2006 by approximately 1.4%.
    
    
      Research and development expenses were $2.8 million, consistent with the 
      same period a year ago.
    
    
      Selling and marketing expenses decreased 9.2% to $4.8 million in the 
      third quarter of 2006 compared with $5.3 million in the third quarter of 
      last year, primarily related to the reorganization of marketing efforts 
      earlier in 2006 compared with the same period in 2005.
    
    
      General and administrative expenses decreased 26.8% in the third quarter 
      to $4.3 million compared with $5.9 million in the third quarter of 2005. 
      General and administrative expenses in the third quarter of 2006 
      continued to be impacted by legal expenses associated with patent 
      litigation but to a lesser extent in 2006 than in 2005.
    
    
      The Company is updating its earnings guidance provided in August 2006 to 
      reflect the impact of the $12.5 million charge to earnings resulting 
      from a court judgment in a patent litigation matter and for additional 
      legal expenses and interest costs that are expected to be incurred 
      related to this matter in the remainder of 2006.
    
    
      2006 guidance is as follows:
    
    
      
        Revenue expected to be between $94 and $98 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 loss per share expected to range from a loss of $0.34 to $0.37 
        per share. This includes an expected $1.0 million pre-tax effect 
        ($0.03 per diluted share) from the implementation of FAS 123R in 2006 
        and the after-tax impact of the $0.57 per diluted share 
        litigation-related charge. The Company recorded $0.22 per share of 
        this charge in the second quarter of 2006 and the remainder in the 
        third quarter of 2006.
      
      
        Expected fully diluted share count of 22.4 million.
      
    
    
      Conference Call Today
    
    
      Stratagene will host a conference call and webcast today, Monday, 
      November 13, 2006, at 4:30 p.m. Eastern Time to discuss 
      the Company’s third quarter 2006 results, 
      outlook for 2006, and current corporate developments. The dial-in number 
      for the conference call is 800-218-8862 for domestic participants and 
      303-262-2142 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 11074147#. 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, manufacturer and marketer 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 as 
      well as 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 debt or equity financing for unexpected 
      litigation outcomes and for operating needs, 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.
    
    
      
        
          STRATAGENE CORPORATION AND SUBSIDIARIES
        
      
      
        
          (unaudited)
        
      
      
        
          (in thousands, except earnings per share)
        
      
      
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
        
        
        
        
        
        
        
      
      
        
        
        
        
        
          Three Months Ended
        
        
        
        
          Nine Months Ended
        
      
      
        
        
        
        
        
          September 30,
        
        
        
        
          September 30,
        
      
      
        
        
        
        
        
          2006 
        
        
        
        
          2005 
        
        
        
        
          2006 
        
        
        
        
          2005 
        
      
      
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          Revenues
        
        
        
        
          $ 23,200 
        
        
        
        
          $ 23,696 
        
        
        
        
          $ 70,859 
        
        
        
        
          $ 73,187 
        
      
      
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          Costs and expenses:
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
      
      
        
          Cost of product sales
        
        
        
        
          8,583 
        
        
        
        
          8,447 
        
        
        
        
          25,332 
        
        
        
        
          25,606 
        
      
      
        
          Research and development
        
        
        
        
          2,834 
        
        
        
        
          2,838 
        
        
        
        
          9,331 
        
        
        
        
          8,587 
        
      
      
        
          Selling and marketing
        
        
        
        
          4,827 
        
        
        
        
          5,318 
        
        
        
        
          15,950 
        
        
        
        
          15,732 
        
      
      
        
          General and administrative
        
        
        
        
          4,331 
        
        
        
        
          5,919 
        
        
        
        
          13,820 
        
        
        
        
          14,958 
        
      
      
        
          Litigation charges
        
        
        
        
          12,471 
        
        
        
        
          - 
        
        
        
        
          20,527 
        
        
        
        
          - 
        
      
      
        
          Impairment of long-lived assets
        
        
        
        
          1 
        
        
        
        
          - 
        
        
        
        
          70 
        
        
        
        
          20 
        
      
      
        
          Total operating costs and expenses
        
        
        
        
          33,047 
        
        
        
        
          22,522 
        
        
        
        
          85,030 
        
        
        
        
          64,903 
        
      
      
        
          Income (loss) from operations
        
        
        
        
          (9,847)
        
        
        
        
          1,174 
        
        
        
        
          (14,171)
        
        
        
        
          8,284 
        
      
      
        
          Other income and expenses:
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
      
      
        
          Loss on foreign currency transactions
        
        
        
        
          (41)
        
        
        
        
          (100)
        
        
        
        
          (94)
        
        
        
        
          (218)
        
      
      
        
          Other income (expense), net
        
        
        
        
          (46)
        
        
        
        
          3 
        
        
        
        
          (17)
        
        
        
        
          515 
        
      
      
        
          Interest expense
        
        
        
        
          (302)
        
        
        
        
          (52)
        
        
        
        
          (892)
        
        
        
        
          (210)
        
      
      
        
          Interest income
        
        
        
        
          398 
        
        
        
        
          13 
        
        
        
        
          989 
        
        
        
        
          23 
        
      
      
        
          Total other income (expense)
        
        
        
        
          9 
        
        
        
        
          (136)
        
        
        
        
          (14)
        
        
        
        
          110 
        
      
      
        
          Income (loss) before income taxes
        
        
        
        
          (9,838)
        
        
        
        
          1,038 
        
        
        
        
          (14,185)
        
        
        
        
          8,394 
        
      
      
        
          Income tax expense (benefit)
        
        
        
        
          (3,532)
        
        
        
        
          350 
        
        
        
        
          (5,237)
        
        
        
        
          2,633 
        
      
      
        
          Net income (loss)
        
        
        
        
          $ (6,306)
        
        
        
        
          $ 688 
        
        
        
        
          $ (8,948)
        
        
        
        
          $ 5,761 
        
      
      
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          Earnings per share:
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
      
      
        
          Basic
        
        
        
        
          $ (0.28)
        
        
        
        
          $ 0.03 
        
        
        
        
          $ (0.40)
        
        
        
        
          $ 0.26 
        
      
      
        
          Diluted
        
        
        
        
          $ (0.28)
        
        
        
        
          $ 0.03 
        
        
        
        
          $ (0.40)
        
        
        
        
          $ 0.26 
        
      
      
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          Weighted average shares:
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
      
      
        
          Basic
        
        
        
        
          22,411 
        
        
        
        
          22,142 
        
        
        
        
          22,373 
        
        
        
        
          22,077 
        
      
      
        
          Diluted
        
        
        
        
          22,411 
        
        
        
        
          22,281 
        
        
        
        
          22,373 
        
        
        
        
          22,203 
        
      
    
    
    
    
      
        
          
            CONDENSED CONSOLIDATED BALANCE 
            SHEETS
          
        
        
        
        
        
        
        
        
        
      
      
        
          
          
        
        
        
        
          Sept. 30,
        
        
        
        
          Dec. 31,
        
      
      
        
        
        
        
        
          2006 
        
        
        
        
          2005 
        
      
      
        
          Cash and cash equivalents, unrestricted
        
        
        
        
          $ 16,634 
        
        
        
        
          $ 40,508 
        
      
      
        
          Cash, restricted
        
        
        
        
          21,474 
        
        
        
        
          192 
        
      
      
        
          Other current assets
        
        
        
        
          45,217 
        
        
        
        
          38,440 
        
      
      
        
          Property and equipment, net
        
        
        
        
          11,016 
        
        
        
        
          11,267 
        
      
      
        
          Goodwill
        
        
        
        
          27,234 
        
        
        
        
          27,234 
        
      
      
        
          Other assets, net
        
        
        
        
          7,015 
        
        
        
        
          7,041 
        
      
      
        
          Total assets
        
        
        
        
          $ 128,590 
        
        
        
        
          $ 124,682 
        
      
      
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          Current portion of long-term debt
        
        
        
        
          $ 240 
        
        
        
        
          $ 5,740 
        
      
      
        
          Dividend payable
        
        
        
        
          - 
        
        
        
        
          5,571 
        
      
      
        
          Other current liabilities
        
        
        
        
          29,106 
        
        
        
        
          28,287 
        
      
      
        
          Litigation accruals
        
        
        
        
          41,800 
        
        
        
        
          20,600 
        
      
      
        
          Long-term debt, less current portion
        
        
        
        
          3,535 
        
        
        
        
          3,775 
        
      
      
        
          Other long-term liabilities
        
        
        
        
          2,400 
        
        
        
        
          2,219 
        
      
      
        
          Stockholders' equity
        
        
        
        
          51,509 
        
        
        
        
          58,490 
        
      
      
        
          Total liabilities and stockholders' equity
        
        
        
        
          $ 128,590 
        
        
        
        
          $ 124,682 
        
      
    
    
      
        
          CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
        
        
        
        
        
        
        
      
      
        
        
        
        
        
        
        
          Nine Months Ended
        
      
      
        
        
        
        
        
        
        
          September 30,
        
      
      
        
        
        
        
        
        
        
          2006 
        
        
        
        
          2005 
        
      
      
        
          Cash flows from operating activities:
        
        
        
        
        
        
        
        
        
        
        
      
      
        
          Net income (loss)
        
        
        
        
        
        
          $ (8,948)
        
        
        
        
          $ 5,761 
        
      
      
        
          Depreciation and amortization
        
        
        
        
        
        
          2,780 
        
        
        
        
          2,694 
        
      
      
        
          Stock-based compensation
        
        
        
        
        
        
          618 
        
        
        
        
          408 
        
      
      
        
          Other items, net
        
        
        
        
        
        
          15,832 
        
        
        
        
          2,133 
        
      
      
        
          Net cash provided by operating activities
        
        
        
        
        
        
          10,282 
        
        
        
        
          10,996 
        
      
      
        
          Cash flows from investing activities:
        
        
        
        
        
        
        
        
        
        
        
      
      
        
          Purchases of property and equipment
        
        
        
        
        
        
          (1,530)
        
        
        
        
          (1,207)
        
      
      
        
          Additions to intangible assets
        
        
        
        
        
        
          (1,024)
        
        
        
        
          (1,111)
        
      
      
        
          Changes in restricted cash
        
        
        
        
        
        
          (21,280)
        
        
        
        
          450 
        
      
      
        
          Other items, net
        
        
        
        
        
        
          - 
        
        
        
        
          130 
        
      
      
        
          Net cash used in investing activities
        
        
        
        
        
        
          (23,834)
        
        
        
        
          (1,738)
        
      
      
        
          Cash flows from financing activities:
        
        
        
        
        
        
        
        
        
        
        
      
      
        
          Principal payments on debt, net
        
        
        
        
        
        
          (5,740)
        
        
        
        
          (5,739)
        
      
      
        
          Dividend to shareholders
        
        
        
        
        
        
          (5,571)
        
        
        
        
          - 
        
      
      
        
          Other items, net
        
        
        
        
        
        
          774 
        
        
        
        
          545 
        
      
      
        
          Net cash used in financing activities
        
        
        
        
        
        
          (10,537)
        
        
        
        
          (5,194)
        
      
      
        
          Effects of foreign currency exchange rates on cash
        
        
        
        
        
        
          215 
        
        
        
        
          (165)
        
      
      
        
          Net decrease in cash and cash equivalents
        
        
        
        
        
        
          (23,874)
        
        
        
        
          3,899 
        
      
      
        
          Cash and cash equivalents at beginning of period
        
        
        
        
        
        
          40,508 
        
        
        
        
          4,890 
        
      
      
        
          Cash and cash equivalents at end of period
        
        
        
        
        
        
          $ 16,634 
        
        
        
        
          $ 8,789 
        
      
    
  
Stratagene Corporation (Nasdaq: STGN), a developer, manufacturer
and marketer of specialized life science research and diagnostic
products, today released financial results for the third quarter of
2006 ended September 30, 2006.

   For the third quarter of 2006, revenue was $23.2 million, compared
with revenue of $23.7 million in the third quarter of 2005. Revenues
in the third quarter of 2006 included slightly lower software products
and royalty revenues compared with the same quarter of 2005. Sales of
QPCR instruments and reagents grew 8.6% year-over-year and sales of
allergy diagnostic products grew 4.9% year-over-year. These increases
were offset by the continued and expected decline in sales of legacy
products associated with gene discovery and cloning systems.

   Third Quarter 2006 Highlights

   --  QPCR instrument and reagent growth of 8.6% year-over-year

   --  Entered into a joint development and license agreement with
        Rosetta Inpharmatics, a subsidiary of Merck to develop an RNA
        purification system to be used in molecular diagnostics
        applications

   --  Launched ArrayAssist(R) CopyNumber software product; a guided
        workflow available to biologists for copy number analysis

   --  Exercised option to license nucleic acid predictors for
        bladder cancer

   --  Participated in the Food and Drug Administrations MicroArray
        Quality Control project with Stratagene's Universal RNA being
        chosen as a high-quality reference standard

   --  Entered into agreement with VWR International, Inc. to expand
        distribution of research products in Canada

   "We were disappointed by the court's decision to enhance the
damage award in the Invitrogen v. Stratagene patent matter. The court
had twice earlier found Stratagene to be not liable due to
non-infringement and invalidity of Invitrogen's patent," said Joseph
A. Sorge, M.D., President and CEO of Stratagene. "Nevertheless, we are
expanding our QPCR instrument footprint, developing additional reagent
technology and entering into new strategic relationships with dynamic
partners. During the third quarter, we expanded our instrument
installed base to more than 2,000 units."

   "As we have outlined in the past, the internal development of our
instrument and reagent platform is one key component of our molecular
diagnostics strategy," continued Dr. Sorge. "During the third quarter
we also executed on the other two legs of our strategy by entering
into a strategic agreement with Rosetta Inpharmatics, a division of
Merck, and by exercising an option to license a family of gene
expression predictors for bladder cancer that have been validated in a
multi-center European study. Furthermore, we also continued to work
closely with Bayer Diagnostics to continue to customize our Mx3005P
instrument system for the new platform they are developing for
molecular diagnostic tests. In addition, we are delighted that we now
have a relationship with Quest Diagnostics as a result of its
acquisition of Focus Diagnostics. We remain excited and confident that
we are pursuing a strategy that will allow us, over the long-term, to
become a leader in the molecular diagnostics space and we believe we
have the talent, intellectual property and partnerships to be
successful."

   For the third quarter of 2006, Stratagene recorded a net loss of
$6.3 million. The net loss during the third quarter of 2006 included a
$12.5 million pre-tax litigation charge related to a court judgment in
a patent litigation matter that the Company plans to appeal. The total
after-tax impact of the charge was $7.9 million or $0.35 per share.
Excluding this charge, the Company would have achieved net income of
$1.6 million or $.07 per share in the third quarter of 2006 compared
with $0.7 million, or $0.03 per share in the comparable quarter of
2005.

   The third quarter net loss was also impacted by approximately
$269,000 before taxes or $0.01 per share, after income taxes, in
non-cash share-based compensation expense associated with the
implementation of FAS 123R "Share-Based Payments" in 2006. The third
quarter of 2005 was not impacted by the share-based compensation
expense.

   In the matter of Invitrogen vs. Stratagene, Stratagene intends to
file an appeal with the United States Court of Appeals for the Federal
Circuit in Texas and will post a civil supersedeas bond to stay
payment of the judgment. The final arrangements related to the bonding
of the judgment will be concluded later this week and as a result the
Company expects to file a Form 12b-25 extension with the SEC to allow
five more days to complete the necessary documentation and disclosures
in its Report on Form 10-Q for the third quarter of 2006.

   As of September 30, 2006, the Company had total cash and cash
equivalents of approximately $38.1 million of which approximately
$16.6 million was unrestricted. The Company will utilize available
cash resources in connection with the posting of the appeal bond. The
posting of these two appeal bonds in 2006 will have a significant
impact on the cash resources of the Company because the appeal bonds
require cash be set aside for the full amount of the damage awards.
The appeal bond amounts do not consider the offsetting income tax
benefit, which would result in a refund of about one-third of the cash
back to the Company in the event of payment or settlement of these
matters for cash. Stratagene remains cash flow positive from its
operating activities.

   Gross margin decreased to 63.0% of revenues for the third quarter
of 2006 compared with 64.4% of revenues for the same quarter of 2005.
The lower gross margin in 2006 was primarily the result of higher
royalty expense associated with newly developed software solutions
products. This higher expense impacted the gross margin rate in the
third quarter of 2006 by approximately 1.4%.

   Research and development expenses were $2.8 million, consistent
with the same period a year ago.

   Selling and marketing expenses decreased 9.2% to $4.8 million in
the third quarter of 2006 compared with $5.3 million in the third
quarter of last year, primarily related to the reorganization of
marketing efforts earlier in 2006 compared with the same period in
2005.

   General and administrative expenses decreased 26.8% in the third
quarter to $4.3 million compared with $5.9 million in the third
quarter of 2005. General and administrative expenses in the third
quarter of 2006 continued to be impacted by legal expenses associated
with patent litigation but to a lesser extent in 2006 than in 2005.

   The Company is updating its earnings guidance provided in August
2006 to reflect the impact of the $12.5 million charge to earnings
resulting from a court judgment in a patent litigation matter and for
additional legal expenses and interest costs that are expected to be
incurred related to this matter in the remainder of 2006.

   2006 guidance is as follows:

   --  Revenue expected to be between $94 and $98 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 loss per share expected to range from a loss of $0.34 to
        $0.37 per share. This includes an expected $1.0 million
        pre-tax effect ($0.03 per diluted share) from the
        implementation of FAS 123R in 2006 and the after-tax impact of
        the $0.57 per diluted share litigation-related charge. The
        Company recorded $0.22 per share of this charge in the second
        quarter of 2006 and the remainder in the third quarter of
        2006.

   --  Expected fully diluted share count of 22.4 million.

   Conference Call Today

   Stratagene will host a conference call and webcast today, Monday,
November 13, 2006, at 4:30 p.m. Eastern Time to discuss the Company's
third quarter 2006 results, outlook for 2006, and current corporate
developments. The dial-in number for the conference call is
800-218-8862 for domestic participants and 303-262-2142 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 11074147#. 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, manufacturer and marketer 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 as well as 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 debt
or equity financing for unexpected litigation outcomes and for
operating needs, 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 STATEMENTS OF OPERATIONS
-----------------------------------------------------
                                  Three Months Ended Nine Months Ended
                                    September 30,      September 30,
                                  ------------------ -----------------
                                    2006     2005     2006     2005
                                  --------- -------- -------- --------

Revenues                           $23,200  $23,696  $70,859  $73,187

Costs and expenses:
Cost of product sales                8,583    8,447   25,332   25,606
Research and development             2,834    2,838    9,331    8,587
Selling and marketing                4,827    5,318   15,950   15,732
General and administrative           4,331    5,919   13,820   14,958
Litigation charges                  12,471        -   20,527        -
Impairment of long-lived assets          1        -       70       20
                                  --------- -------- -------- --------
Total operating costs and
 expenses                           33,047   22,522   85,030   64,903
                                  --------- -------- -------- --------
Income (loss) from operations       (9,847)   1,174  (14,171)   8,284
Other income and expenses:
Loss on foreign currency
 transactions                          (41)    (100)     (94)    (218)
Other income (expense), net            (46)       3      (17)     515
Interest expense                      (302)     (52)    (892)    (210)
Interest income                        398       13      989       23
                                  --------- -------- -------- --------
Total other income (expense)             9     (136)     (14)     110
                                  --------- -------- -------- --------
Income (loss) before income taxes   (9,838)   1,038  (14,185)   8,394
Income tax expense (benefit)        (3,532)     350   (5,237)   2,633
                                  --------- -------- -------- --------
Net income (loss)                  $(6,306)    $688  $(8,948)  $5,761
                                  ========= ======== ======== ========

Earnings per share:
Basic                               $(0.28)   $0.03   $(0.40)   $0.26
Diluted                             $(0.28)   $0.03   $(0.40)   $0.26

Weighted average shares:
Basic                               22,411   22,142   22,373   22,077
Diluted                             22,411   22,281   22,373   22,203
*T

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CONDENSED CONSOLIDATED BALANCE SHEETS
--------------------------------------------------
                                                   Sept. 30, Dec. 31,
                                                     2006      2005
                                                   --------- ---------
 Cash and cash equivalents, unrestricted            $16,634   $40,508
 Cash, restricted                                    21,474       192
 Other current assets                                45,217    38,440
 Property and equipment, net                         11,016    11,267
 Goodwill                                            27,234    27,234
 Other assets, net                                    7,015     7,041
                                                   --------- ---------
  Total assets                                     $128,590  $124,682
                                                   ========= =========

 Current portion of long-term debt                     $240    $5,740
 Dividend payable                                         -     5,571
 Other current liabilities                           29,106    28,287
 Litigation accruals                                 41,800    20,600
 Long-term debt, less current portion                 3,535     3,775
 Other long-term liabilities                          2,400     2,219
 Stockholders' equity                                51,509    58,490
                                                   --------- ---------
       Total liabilities and stockholders' equity  $128,590  $124,682
                                                   ========= =========
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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
-----------------------------------------------------
                                                     Nine Months Ended
                                                       September 30,
                                                     -----------------
                                                       2006     2005
                                                     --------- -------
Cash flows from operating activities:
   Net income (loss)                                  $(8,948) $5,761
   Depreciation and amortization                        2,780   2,694
   Stock-based compensation                               618     408
   Other items, net                                    15,832   2,133
                                                     --------- -------
      Net cash provided by operating activities        10,282  10,996
                                                     --------- -------
Cash flows from investing activities:
   Purchases of property and equipment                 (1,530) (1,207)
   Additions to intangible assets                      (1,024) (1,111)
Changes in restricted cash                            (21,280)    450
   Other items, net                                         -     130
                                                     --------- -------
      Net cash used in investing activities           (23,834) (1,738)
                                                     --------- -------
Cash flows from financing activities:
   Principal payments on debt, net                     (5,740) (5,739)
Dividend to shareholders                               (5,571)      -
   Other items, net                                       774     545
                                                     --------- -------
      Net cash used in financing activities           (10,537) (5,194)
Effects of foreign currency exchange rates on cash        215    (165)
                                                     ========= =======
   Net decrease in cash and cash equivalents          (23,874)  3,899
Cash and cash equivalents at beginning of period       40,508   4,890
                                                     --------- -------
Cash and cash equivalents at end of period            $16,634  $8,789
                                                     ========= =======
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